Edgar Filing: RIVIERA TOOL CO

FILED PURSUANT TO RULE 424(b)(2)
REGISTRATION NO. 333-126659

SUBJECT TO COMPLETION, DATED AUGUST 11, 2006

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.

SUBJECT TO COMPLETION
DATED AUGUST 11, 2006

PROSPECTUS

RIVIERA TOOL COMPANY

3,256,791 SHARES OF COMMON STOCK

(NO PAR VALUE)

----------

This prospectus relates to the sale by Laurus Master Fund, Ltd.
("Laurus") of up to 3,256,791 shares of our common stock consisting of:

- 1,204,820 shares of our common stock issuable by us to Laurus
upon exercise by Laurus of the outstanding conversion rights
pursuant to a convertible minimum borrowing note,

- 1,401,971 shares of common stock issuable by us to Laurus upon
exercise by Laurus of the outstanding conversion rights pursuant
to a convertible term note; and

- 650,000 shares of our common stock issuable by us to Laurus upon
exercise by Laurus of the outstanding option rights.

The methods of sale of the common stock offered hereby are described
under the heading "Plan of Distribution" on page 37. Except with respect to the
exercise of the outstanding option rights during the exercise period, we will
receive none of the proceeds from the sale of any of the common stock to which
this prospectus relates. See "Use of Proceeds and Expenses of the Offering" on
page 9. Except for brokerage expenses, fees, discounts and commissions, which
will all be paid by Laurus, we will pay all expenses incurred in connection with
the offering described in this prospectus.

The prices at which Laurus may sell the shares of common stock that
are part of this offering will be determined by the prevailing market price for
the shares at the time the shares are sold, a price related to the prevailing
market price, at negotiated prices or prices determined, from time to time, by
Laurus. See "Plan of Distribution" on page 37.

Our common stock is listed on the American Stock Exchange (Symbol:
RTC). On August 9, 2006, the closing price of the shares was $ .49 per share.
See "Market Prices of Riviera Tool Common Stock" on page 11.

THE SHARES OF OUR COMMON STOCK OFFERED OR SOLD UNDER THIS PROSPECTUS
INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 4.

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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

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PROSPECTUS DATED AUGUST 11, 2006

TABLE OF CONTENTS

THE OFFERING.............................................................. 1
THE COMPANY............................................................... 2
SUMMARY FINANCIAL DATA.................................................... 4
CAPITALIZATION............................................................ 5
RISK FACTORS.............................................................. 6
FORWARD-LOOKING INFORMATION............................................... 9
WHERE YOU CAN FIND MORE INFORMATION....................................... 9
USE OF PROCEEDS AND EXPENSES OF THE OFFERING.............................. 10
MARKET PRICES OF RIVIERA TOOL COMMON STOCK................................ 10
OUR BUSINESS.............................................................. 12
DESCRIPTION OF PROPERTY................................................... 15
LEGAL PROCEEDINGS......................................................... 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.......................................................... 16
MANAGEMENT................................................................ 25
EXECUTIVE COMPENSATION.................................................... 26
COMPENSATION COMMITTEE REPORT............................................. 27
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS.................................................... 29
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS........ 30
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................ 30
SELLING SECURITYHOLDERS................................................... 32
DESCRIPTION OF RIVIERA TOOL COMMON STOCK.................................. 33
PLAN OF DISTRIBUTION...................................................... 35
LEGAL MATTERS............................................................. 36
EXPERTS................................................................... 36
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE............................................................. 36
INDEX TO FINANCIAL STATEMENTS............................................. F-1

WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE
ANY INFORMATION OR MAKE ANY REPRESENTATIONS THAT DIFFER FROM WHAT IS CONTAINED
IN THIS PROSPECTUS. YOU SHOULD NOT RELY ON ANY UNAUTHORIZED INFORMATION. THIS
PROSPECTUS DOES NOT OFFER TO SELL OR SEEK OFFERS TO BUY ANY SHARES IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL. THE INFORMATION IN THIS PROSPECTUS IS
CURRENT ONLY AS OF ITS DATE.

THE OFFERING

GENERAL

The registration statement of which this prospectus is a part relates
to the sale of shares of our common stock issuable to Laurus Master Fund, Ltd.
("Laurus"). Specifically, the shares of our common stock included in this
offering consist of:

- 1,204,820 shares of our common stock issuable upon conversion of the
convertible minimum borrowing note, issued to Laurus with a conversion
price of $1.66 per share;

- 1,401,971 shares of our common stock issuable upon conversion of the
convertible term note, issued to Laurus with a conversion price of
$1.66 per share; and

- 650,000 shares of our common stock issuable upon exercise of an
option, issued to Laurus with an exercise price of $0.01 per share.

On May 17, 2005, Laurus entered into a securities purchase agreement
(the "Securities Purchase Agreement") and a security agreement (the "Loan
Agreement", and together with the Securities Purchase Agreement, the
"Agreements") with us pursuant to which Laurus may convert, subject to certain
limitations, the term loan and the revolving loans made thereunder into our
common stock at Laurus' option any time up to maturity at a conversion price of
$1.66 per share. Further pursuant to the Securities Purchase Agreement, we
agreed to issue Laurus the option to purchase 650,000 shares of our common stock
at an exercise price of $0.01 per share.

On December 9, 2005, we entered into an Omnibus Amendment with Laurus
amending the term "Fixed Conversion Price" with respect to the convertible
minimum borrowing note. The term "Fixed Conversion Price," with respect solely
to the convertible minimum borrowing note, was amended as follows:

"The initial Fixed Conversion Price means $1.66; provided,
however, that in respect of the first $150,000 of aggregate
principal amount (the "Initial Converted Amount") of the Term
Note converted into shares of our common stock, the Fixed
Conversion Price in respect of such Initial Converted Amount (and
the interest and fees associated therewith to the extent
converted) shall be equal to $0.55."

Accordingly, on December 9, 2005, 277,727 shares of our common stock
were issued to Laurus in connection with such conversion of principal under the
convertible minimum borrowing note.

Had Laurus exercised its conversion rights and option rights in full
on August 10, 2006 it would have received 3,256,791 shares of our common stock
representing 43% of our outstanding shares of common stock, and been able to
offer for resale a total of 3,256,791 shares of our common stock. Under the
terms of the Agreements, the number of shares to be obtained by Laurus upon
exercise of the conversion rights and option rights held by Laurus cannot exceed
the number of shares that, when combined with all other shares of common stock
and securities then owned by Laurus, would result in Laurus owning more than
4.99% (212,454 shares) of our outstanding common stock at any given point of
time (or 19.99%, or 851,094 shares, in the event that such limitation is
suspended upon the occurrence of an "event of default" as defined under the
Agreements or any other related agreements). See "Recently Issued Securities" on
page 10.

We received net proceeds at the closing in the amount of
$1,212,526.90, after extinguishing indebtedness owed to Comerica Bank
("Comerica") and The HillStreet Fund II, L.P. ("HillStreet") and deducting
certain legal fees and expenses associated with the Laurus transactions. We will
not receive any of the proceeds from the sale of the shares offered by Laurus.
We will receive a maximum of approximately $6,500 from the exercise of the
option rights, assuming all of the options are exercised for cash and in full,
of which there can be no assurance. Any proceeds received by us in connection
with the exercise of the option rights will be used for working capital and
general corporate purposes.

Neither Laurus nor any of its officers, directors or affiliates is an
officer, director or affiliate of us, and none of our officers or directors are
related to, or, except in connection with the revolving credit facility, has any
business relationship with, Laurus.

The conversion and exercise prices for the conversion and option
rights issued by us were a function of the market price for our common stock at
or about the time each transaction was consummated, computed on the basis of the
average high and low prices per share of our common stock on the American Stock
Exchange for the ten days ending on May 16, 2005, as quoted on Bloomberg, and
arms length negotiations with Laurus.

The conversion rights and option rights are exercisable at any time
until the maturity date of the term loan and revolving loans. Adjustments in the
price and number of common shares issued to Laurus pursuant to the conversion
rights and option rights may be made under any of the following circumstances:

- if we, at any time while the conversion rights and option rights are
unexpired and not exercised in full, by reclassification or otherwise,
change the common stock into the same or a different number of
securities of any class or classes;

- if we, at any time while the conversion rights and option rights are
unexpired and not exercised in full, subdivide outstanding shares of
our common stock into a greater number of shares;

- if we, at any time while the conversion rights and option rights are
unexpired and not exercised in full, combine outstanding shares of our
common stock into a smaller number of shares of common stock; and

- if we, at any time while the conversion rights and option rights are
unexpired and not exercised in full, issue any shares of our common
stock or securities convertible into common stock to a person other
than Laurus (except as listed in the bullet points above or pursuant
to options that may be issued under any employee incentive stock
option and/or any qualified stock option plan adopted by us).

In addition, the exercise price of each of the conversion rights and
option rights shall be adjusted for any dilutive issuances whereby the exercise
price shall be reduced to the weighted average per share offering price of such
dilutive issuance.

On July 7, 2005, we received approval from the American Stock Exchange
for listing of an additional 754,492 shares of our common stock, such shares
representing the maximum number of shares of our common stock currently issuable
to Laurus. We will seek American Stock Exchange approval for the balance of
shares issuable in connection with the Agreements at an appropriate time in the
future.

Right of First Refusal

Prior to the incurrence of any additional indebtedness convertible
into common stock, and/or the sale or issuance of any convertible equity
interests by us, Laurus shall have a right of first refusal with regard to
providing such financing on similar terms. Such right of first refusal shall be
implemented in accordance with the Agreements.

Registration Rights

In connection with the Agreements, we entered into a Registration
Rights Agreement with Laurus on May 17, 2005 (the "Registration Rights
Agreement") pursuant to which we agreed to provide Laurus with registration
rights for their shares of our common stock. Under the terms of the Registration
Rights Agreement, we are obligated to file an additional registration statement
registering the resale of shares of the common stock issuable upon the exercise
of conversion rights granted pursuant to an additional minimum borrowing note
evidencing an aggregate principal amount of up to $2,000,000 of loans made
pursuant to an additional minimum borrowing note. If the registration statement
is not filed within 60 days following the date of the funding of such additional
tranches of loans, or declared effective within 60 days thereafter, or if the
registration is suspended other than as permitted in the Registration Rights
Agreement, we are obligated to pay Laurus certain fees and certain obligations
may be deemed to be in default.

4.99% Limitation

Under the terms of our Agreements with Laurus, the number of shares to
be obtained upon exercise of the conversion rights or option rights cannot
exceed the number of shares that, when combined with all other shares of common
stock and securities then owned by Laurus, would result in Laurus owning more
than 4.99% of our outstanding common stock at any given point of time (or 19.99%
in the event that such limitation is suspended upon the occurrence of an "event
of default" under any of the Agreements or any other transaction agreements).

THE COMPANY

GENERAL

Riviera Tool Company is a designer and manufacturer of large scale,
complex stamping die systems used to form sheet metal parts. Most of the
stamping die systems sold by us are used in the production of automobile and
truck body parts such as roofs, hoods,

fenders, doors, doorframes, structural components and bumpers. We were
originally incorporated in 1967, and were incorporated in our present form in
1988, under the laws of the State of Michigan. We maintain our executive offices
at 5460 Executive Parkway, SE, Grand Rapids, Michigan 49512. Our telephone
number is (616) 698-2100

RECENT DEVELOPMENTS

Change in Independent Auditors

On January 13, 2006, Deloitte & Touche LLP ("D&T") informed us that
D&T was resigning as our independent outside auditor. We immediately began our
process to find another suitable independent outside auditor and D&T agreed to
assist us in our transition to such new independent auditor.

The reports of D&T on our financial statements for each of the two
fiscal years ended August 31, 2005 and 2004 did not contain an adverse opinion,
disclaimer of opinion nor was qualified or modified as to uncertainty, audit
scope, or accounting principles, except for the reports were modified to reflect
substantial doubt as to our ability to continue as a going concern. In
connection with the audits of our financial statements for each of the two
fiscal years ended August 31, 2005 and 2004, and through the filing of our
Quarterly Report on Form 10-Q for the first quarter of fiscal 2006, there were
(1) no disagreements with D&T on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure,
which, if not resolved to the satisfaction of D&T, would have caused D&T to make
reference to the matter in its reports and (2) no reportable events. During each
of the two fiscal years ended August 31, 2005 and 2004, and through the filing
of our Quarterly Report on Form 10-Q for the first quarter of fiscal 2006, no
information is required to be reported under Item 304(a)(1)(v) of Regulation
S-K.

On February 14, 2006, our Board of Directors announced the appointment
of BDO Seidman, LLP as our independent auditor.

American Stock Exchange Notification

On February 10, 2006, we received notice from the American Stock
Exchange ("Amex") that a review of our Form 10-Q for the first quarter ended
November 30, 2005 indicated that we did not meet certain of the Amex's continued
listing standards, and we have, therefore, become subject to the procedures and
requirements of Section 1009 of the Company Guide. Specifically, we are not in
compliance with Section 1003(a)(ii) of the Company Guide with shareholders'
equity of less than $4,000,000 and losses from continuing operations and/or net
losses in three of our four most recent fiscal years.

On March 13, 2006, we advised the Amex of action we had taken, or will
take, that would bring us into compliance with the continued listing standards
identified within a maximum of 18 months of receipt of the notice. The Listing
Qualifications Department evaluated the plan and granted us a listing extension
enabling us to continue our listing during the plan period up to August 9, 2007.
During such time we will be subject to periodic review to determine whether we
are making progress consistent with the plan. If we do not show progress
consistent with the plan, the Amex will review the circumstances and may
immediately commence delisting proceedings.

SUMMARY FINANCIAL DATA

The following selected financial data has been derived from our
audited financial statements for each of the years ended August 31, 2001, 2002,
2003, 2004 and 2005. For the operating results for each of the nine-month
periods ended May 31, 2005, and 2006 the information is unaudited. In the
opinion of management, all necessary adjustments, which consist only of normal
and recurring accruals, have been included to fairly present the unaudited
quarterly results. The following data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in this prospectus and the financial statements and notes
thereto included in this prospectus.

(amounts in thousands, except per share data)

FISCAL YEAR ENDED NINE MONTHS ENDED
AUGUST 31, MAY 31,
----------------------------------------------- -----------------
2001 2002 2003 2004 2005 2005 2006
------- ------- ------- ------- ------- ------- -------

STATEMENT OF OPERATIONS DATA:
Sales ............................... $12,047 $14,050 $34,084 $24,689 $19,274 $14,221 $19,152
Gross Profit (Loss) ................. (3,062) (630) 3,377 (5,349) 2,292 1,924 2,742
Income (Loss) from Operations ....... (4,712) (2,289) 1,687 (7,363) (498) (183) 907
Interest Expense .................... 725 653 779 872 1,643 1,140 1,321
Other (Income)/Expense .............. 5 59 8 6 361 345 144
Income (Loss) before Income Taxes ... (5,442) (3,002) 900 (8,241) (2,502) (1,668) (558)
Income Tax Expense (Benefit) ........ (1,538) -- -- -- -- -- --
Net Income (Loss) available for
common shares .................... $(3,904) $(3,002) $ 900 $(8,241) $(2,502) $(1,668) $ (558)
Basic and Diluted Earnings (Loss)
per common share ................. $ (1.16) $ (.89) $ .27 $ (2.18) $ (.65) $ (.44) $ (.13)
Basic and Diluted common shares
outstanding ...................... 3,379 3,379 3,379 3,774 3,836 3,786 4,153

OTHER DATA :
Depreciation and amortization
expense .......................... $ 1,952 $ 1,913 $ 1,840 $ 1,758 $ 1,673 $ 1,283 $ 1,414

AS OF NINE MONTHS ENDED
AUGUST 31, MAY 31,
------------------------------------------------ -----------------
2001 2002 2003 2004 2005 2005 2006
------- ------- ------- ------- ------- ------- -------

BALANCE SHEET DATA:
Working Capital (Deficit) ........... $ 5,176 $(3,513) $ 7,762 $(6,954) $ 1,539 $(1,048) $ 3,891
Total Assets ........................ 25,146 24,984 33,751 27,898 21,217 19,779 23,507
Current Portion of Long-Term Debt ... 1,876 3,855 639 15,735 3,288 3,594 3,437
Revolving Line of Credit ............ 3,143 6,500 5,982 9,850 6,535 4,031 8,930
Long-term Debt, less current
portion .......................... 3,384 -- 2,418 -- 2,335 1,927 1,313
Common Stockholders' Equity ......... 14,812 11,810 12,710 5,780 3,982 4,817 3,574

The following table presents a condensed summary of quarterly results
of operations for 2004, 2005 and the first three quarters of 2006 (in thousands,
except per share data). The information for each of these periods is unaudited.

NET BASIC
INCOME/ AND
(LOSS) DILUTED
AVAILABLE EARNINGS BASIC AND
GROSS OPERATING FOR (LOSS) DILUTED
PROFIT/ INCOME/ COMMON PER SHARES
SALES (LOSS) (LOSS) SHARE SHARES OUTSTANDING
------- ------- --------- --------- -------- -----------

2004: First ........ $ 8,311 $ 850 $ 446 $ 238 $ .07 3,379
Second ....... 8,293 840 335 212 .06 3,379
Third ........ 7,597 867 387 239 .06 3,774
Fourth ....... 488 (7,906) (8,531) (8,930) (2.37) 3,774
------- ------- ------- ------- ------ -----
Total ..... $24,689 $(5,349) $(7,363) $(8,241) $(2.18) 3,774
======= ======= ======= ======= ====== =====
2005: First ........ $ 4,553 $ 514 $ (65) $ (465) $ (.12) 3,774
Second ....... 4,981 829 (38) (428) (.11) 3,774
Third ........ 4,687 580 (80) (776) (.20) 3,807
Fourth ....... 5,053 369 (315) (833) (.22) 3,836
------- ------- ------- ------- ------ -----
Total ..... $19,274 $ 2,292 $ (498) $(2,502) $ (.65) 3,836
======= ======= ======= ======= ====== =====
2006: First ........ $ 6,063 $ 596 $ 30 $ (441) $ (.11) 3,985
Second ....... 6,953 967 369 (135) (.03) 4,258
Third ........ 6,136 1,179 508 18 -- 4,153
------- ------- ------- ------- ------ -----
Total ..... $19,152 $ 2,742 $ 907 $ (558) $ (.13) 4,153
======= ======= ======= ======= ====== =====

CAPITALIZATION

The following table sets forth as of May 31, 2006 our actual
capitalization and pro forma capitalization after giving effect to the issuance
of 2,606,791 shares of common stock upon conversion of $4,327,273 of convertible
debt at an assumed conversion price of $1.66 per share and the issuance of
650,000 shares of common stock upon exercise of option rights at an assumed
exercise price of $0.01 per share. The following should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operation" and the financial statements and the notes thereto included elsewhere
in the prospectus.

AS OF MAY 31, 2006
---------------------------
ACTUAL PRO-FORMA
------------ ------------

Cash and cash equivalents .......................... $ 18,900 $ 25,400
============ ============
Convertible revolving note ......................... $ 8,930,250 $ 6,930,250
Secured Convertible term note ...................... 2,327,273 --
Overformula ........................................ 2,000,000 2,000,000
Note payable to bank ............................... 873,237 873,237
Other .............................................. 6,851 6,851
------------ ------------
Total long-term debt, including current
installments .................................... 14,137,611 9,810,338

Stockholders' equity:
Common stock ....................................... 17,280,483 21,614,256
Retained earnings (accumulated deficit) ............ (13,706,500) (13,706,500)
------------ ------------
Total stockholders' equity ......................... 3,573,983 7,907,756
------------ ------------
Total capitalization ............................... $ 17,711,594 $ 17,718,094
============ ============

RISK FACTORS

You should carefully consider the risks described below before
deciding whether to invest in shares of our common stock. Any investment in our
common stock involves a high degree of risk. The risks and uncertainties
described below are not the only ones we face. Additional risks and
uncertainties not presently known to us may also impair our operations and
business.

If we do not successfully address any of the risks described below,
there could be a material adverse effect on our financial condition, operating
results and business, and the trading price of our common stock may decline and
you may lose all or part of your investment. We cannot assure you that we will
successfully address these risks.

WE HAVE A HISTORY OF OPERATING LOSSES, ANTICIPATE INCURRING LOSSES FOR THE
FORESEEABLE FUTURE AND MAY NEVER BECOME PROFITABLE.

For the fiscal year ending August 31, 2005, we had an operating loss
of approximately $2,502,000. For each of the quarterly periods ending November
30, 2005 and February 28, 2006, we had operating losses of approximately
$441,000 and $135,000, respectively. For the three-month and nine-month periods
ended May 31, 2006, we had net income of $18,000 and net loss of $558,000,
respectively.

The report of our auditors with respect to their examination of our
financial statements for the year ended August 31, 2005 contains an explanatory
paragraph relating to the preparation of our financial statements on a "going
concern" basis, and states that we were not in compliance with our loan
agreements, have suffered losses from operations and have a retained deficit
that raise a substantial doubt about our ability to continue as a going concern.
At August 31, 2005 and May 31, 2006, we had an accumulated deficit of
approximately $13,149,000 and $13,706,000, respectively. While our management is
addressing those conditions which have left substantial doubt about our ability
to continue as a going concern, there is no certainty that we will be successful
in implementing any of the plans of management to restore us to profitability or
to otherwise ensure that we will be able to continue as a going concern.

SHAREHOLDERS MAY SUFFER DILUTION FROM THE EXERCISE OF EXISTING OPTIONS, WARRANTS
AND CONVERSION RIGHTS.

Our common stock may become diluted if warrants and options to
purchase our common stock are exercised or additional shares are issued upon
conversion pursuant to conversion rights by our Senior Lender, Laurus Master
Fund, Ltd. ("Laurus"). The number of shares of our common stock that can
currently be purchased upon exercise of warrants is 10,000, upon exercise of
options is 831,000 (650,000 of these options are those granted to Laurus) and
pursuant to conversion rights is 2,606,791. Under the terms of our Agreements
with Laurus, the number of shares to be obtained upon exercise of options or
pursuant to conversion rights held by Laurus cannot exceed the number of shares
that, when combined with all other shares of common stock and securities then
owned by Laurus, would result in Laurus owning more than 4.99% of our
outstanding common stock at any given point of time (or 19.99% in the event that
such limitation is suspended upon the occurrence of an "event of default" under
any of the Agreements or any other transaction agreements). See "The Offering"
on page 1 for a more complete description of our agreements with Laurus.

These shares, as well as the eligibility for additional restricted
shares to be sold in the future, either pursuant to future registrations under
the Securities Act, or an exemption such as Rule 144 under the Securities Act,
may have a dilutive effect on the market price of our common stock. The terms
upon which we will be able to obtain additional equity capital could also be
adversely affected. In addition, the sale of common stock offered by this
prospectus, or merely the possibility that these sales could occur, could have
an adverse effect on the market price of our common stock.

THE INABILITY TO OBTAIN NECESSARY ADDITIONAL CAPITAL IN THE FUTURE ON ACCEPTABLE
TERMS COULD DELAY US FROM EXECUTING OUR BUSINESS PLAN OR PREVENT US FROM DOING
SO ENTIRELY.

We expect to need additional capital in the future to fund our
operations, finance investments in equipment and corporate infrastructure,
expand our domestic and global sub-supplier network, increase the range of
services we offer and respond to competitive pressures and perceived
opportunities. Cash flow from operations and cash on hand may not be sufficient
to cover our operating expenses and capital investment needs. We cannot assure
you that additional financing will be available on terms acceptable to us, if at
all. A failure to obtain additional funding could prevent us from making
expenditures that are needed to allow us to grow or maintain our operations.
Increases in business can temporarily reduce our working capital due to cash
flow lags.

If we raise additional funds by selling equity securities, the
relative equity ownership of our existing investors could be diluted or the new
investors could obtain terms more favorable than previous investors. If we raise
additional funds through debt financing, we could incur significant borrowing
costs. The failure to obtain additional financing when required could result in
us being unable to grow as required to maintain profitable operations.

WE HAVE SIGNIFICANT OUTSTANDING INDEBTEDNESS AND DEBT SERVICE OBLIGATIONS.

In order to finance our operations we have incurred indebtedness. Our
credit facility with Laurus is secured by substantially all of our assets. In
addition to certain limited financial covenants, our credit facility restricts
our ability to incur additional indebtedness or to pledge our assets. As of
August 31, 2005 and May 31, 2006, we are in compliance with all of the terms of
our credit facility with Laurus. There can be no assurance, however, that we
will be able to comply with the terms of this credit facility in the future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on page 16 for additional information on our outstanding
indebtedness.

Our business is subject to all of the risks associated with
substantial leverage, including the risk that available cash may not be adequate
to make required payments. Our ability to satisfy outstanding debt obligations
from cash flow will be dependent upon our future performance and will be subject
to financial, business and other factors, many of which will be beyond our
control. In the event that we do not have sufficient cash resources to satisfy
our repayment obligations, we would be in default, which would have a material
adverse effect on our business. To the extent that we are required to use cash
resources to satisfy interest payments to the holders of outstanding debt
obligations, we will have fewer resources available for other purposes. There is
no assurance that we will not increase our leverage in the future, whether as a
result of operational or financial performance, acquisition or otherwise.

AN INCREASE IN INTEREST RATES WOULD INCREASE THE COST OF SERVICING OUR DEBT AND
COULD REDUCE OUR PROFITABILITY.

Borrowings under our secured credit facility with Laurus bear or will
bear interest at variable rates and expose us to interest rate risk. If interest
rates increase, whether because of an increase in market interest rates or an
increase in our own cost of borrowing, our debt service obligations for our
variable rate indebtedness would increase even though the amount of borrowings
remained the same, and our net income could be materially adversely affected. As
of August 31, 2005, our total outstanding debt of approximately $15.8 million
included interest rate sensitive debt of approximately $11.7 million (by its
original terms), which had a weighted average interest rate of approximately
8.7% per annum. As of May 31, 2006, outstanding interest rate sensitive debt
totaled approximately $13.3 million, with a weighted average interest rate of
approximately 9.7% per annum.

OUR REVENUE WOULD DECLINE SIGNIFICANTLY IF WE LOSE ONE OR MORE OF OUR MOST
SIGNIFICANT CUSTOMERS WHICH COULD HAVE A SIGNIFICANT ADVERSE IMPACT ON US.

A significant portion of our revenues are concentrated among a few
large customers. For the year ended August 31, 2005, our largest customer
represented approximately $3.4 million or 18% of total revenue, while the next
three largest customers represented approximately $4.8 million or 25% of total
revenue. Our three largest customers represented 84% and 63% of total revenue
for each of the fiscal years ended 2005 and 2004, respectively. For the three
and nine months ended May 31, 2006, our three largest customers represented
approximately 60% and 52%, respectively, of total revenues. The loss of any of
the foregoing customers could have a significant adverse impact on us.

THERE IS NO ASSURANCE THAT WE WILL REMAIN LISTED ON AN ACTIVE TRADING MARKET.

Although our common stock is quoted on the American Stock Exchange
("Amex"), there can be no assurance that we will, in the future, be able to meet
all the requirements for continued quotation thereon. Amex recently approved a
plan submitted by us to regain compliance with our continued listing
requirements by August 9, 2007. Although we believe we can achieve our plan,
there can be no assurance that we can successfully do so. In the absence of an
active trading market or if our common stock cannot be traded on the American
Stock Exchange, our common stock could instead be traded on the Electronic
Bulletin Board or on the Pink Sheets. In such event, the liquidity and stock
price in the secondary market may be adversely affected. In addition, in the
event our common stock was delisted, broker-dealers have certain regulatory
burdens imposed upon them, which may discourage broker-dealers from effecting
transactions in our common stock, further limiting the liquidity of our common
stock.

OUR STOCK PRICE IS VOLATILE.

Our stock price, like that of other small cap companies, is subject to
significant volatility because of factors such as quarterly variations in our
operating results, changes in revenue or earnings estimates by the investment
community and speculation in the press or investment community. In addition, our
stock price is affected by unfavorable global economic and market conditions. If
such conditions deteriorate, our stock price could decline.

WE DEPEND ON OUR SENIOR MANAGEMENT, THE LOSS OF WHOM WOULD HAVE AN ADVERSE
IMPACT ON US.

We presently are dependent upon the executive abilities of our
President and Chief Executive Officer, Kenneth K. Rieth, our Chief Financial
Officer, Peter C. Canepa, and our other executive officers. Our business and
operations to date chiefly have been implemented under the direction of these
individuals, who presently are, and in the future will be, responsible for the
implementation of our anticipated plans and programs. The loss or unavailability
of the services of one or more of our principal executives would have an adverse
effect on us. Given our present financial condition, we may encounter difficulty
in our ability to recruit and ultimately hire any replacement or additional
executive officers having similar background, experience and qualifications as
those of our current executive officers.

THE MARKETS SERVED BY US ARE HIGHLY CYCLICAL AND OUR BUSINESS COULD BE
MATERIALLY ADVERSELY AFFECTED AS A RESULT OF GENERAL ECONOMIC AND MARKET
CONDITIONS.

We are subject to the effects of general global economic and market
conditions. The automotive industry is highly cyclical and dependent on consumer
spending. Economic factors adversely affecting automotive production and
consumer spending could adversely impact our business. If economic and market
conditions deteriorate, our business, results of operations or financial
condition could be materially adversely affected. An economic downturn may also
impact substantially leveraged companies, such as ourselves, more than similarly
situated companies with less leverage.

LABOR INTERRUPTIONS COULD HAVE AN ADVERSE IMPACT ON OUR BUSINESS.

Within the automotive supply industry substantially all of the hourly
employees of the OEMs and many Tier I suppliers are represented by labor unions,
and work pursuant to collective bargaining agreements. The failure of any of our
significant customers to reach agreement with a labor union on a timely basis,
resulting in either a work stoppage or strike, could have an adverse impact on
our business.

OUR BUSINESS COULD BE MATERIALLY ADVERSELY AFFECTED AS A RESULT OF WAR OR ACTS
OF TERRORISM.

Terrorist acts or acts of war may cause damage or disruption to our
employees, facilities, customers and partners, which could have a material
adverse effect on our business, results of operations or financial condition.
Such conflicts may also cause damage or disruption to transportation and
communication systems and to our ability to manage logistics in such an
environment, including receipt of materials and distribution of products.

WE ARE SUBJECT TO ENVIRONMENTAL REGULATION, WHICH COULD HAVE AN ADVERSE IMPACT
ON US.

We are subject to the requirements of federal, state and local
environmental and occupational health and safety laws and regulations. Although
we have made and will continue to make expenditures to comply with environmental
requirements, these requirements are constantly evolving, and it is impossible
to predict whether compliance with these laws and regulations may have a
material adverse effect on us in the future. If a release of hazardous
substances occurs on or from our property or from any of our disposals at
offsite disposal locations, or if contamination is discovered at any or our
current or former properties, we may be held liable, and the amount of such
liability could be material.

FORWARD-LOOKING INFORMATION

Some of the statements contained in or incorporated by reference in
this prospectus discuss our plans and strategies for our respective businesses
or state other forward-looking statements, as this term is defined in the
Private Securities Litigation Reform Act of 1995. The words "anticipate,"
"believe," "estimate," "expect," "plan," "intend," "should," "seek," "will," and
similar expressions are intended to identify these forward-looking statements,
but are not the exclusive means of identifying them. These forward-looking
statements reflect the current views of our management. However, various risks,
uncertainties and contingencies could cause our actual results, performance or
achievements to differ materially from those expressed in, or implied by, these
statements, including the following:

- our success or failure to implement our business strategies; and

- other factors discussed under the heading "Risk Factors;" and

- elsewhere in this prospectus.

We assume no obligation to update any forward-looking statements
contained in this prospectus, whether as a result of new information, future
events or otherwise. For a discussion of important risks of an investment in our
securities, including factors that could cause actual results to differ
materially from results referred to in the forward-looking statements, see "Risk
Factors" on page 4. You should carefully consider the information set forth
under the caption "Risk Factors." In light of these risks, uncertainties and
assumptions, the forward-looking events discussed in or incorporated by
reference in this prospectus might not occur.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Commission a registration statement under the
Securities Act of 1933, as amended, with respect to the shares of common stock
offered hereby on Form S-1. This prospectus is a part of that registration
statement. The rules and regulations of the Commission allow us to omit some
information included in the registration statement from this document.

In addition, we file reports, proxy statements and other information
with the Commission under the Securities Exchange Act of 1934, as amended.
Please call the Commission at 1-800-SEC-0330 for further information on the
public reference rooms. You may read and copy this information at the following
location of the Commission:

Public Reference Section
Room 1024
450 Fifth Street, N.W.
Judiciary Plaza
Washington D.C. 20549

The Commission maintains an Internet World Wide Web site
(http://www.SEC.gov) that contains our reports, proxy statements and other
information about us and other companies who file electronically with the
Commission.

OUR COMMON STOCK IS TRADED ON THE AMERICAN STOCK EXCHANGE.

We have not authorized anyone to give any information or make any
representation about us that differs from, or adds to, the information in this
document or in our documents that are publicly filed with the Commission.
Therefore, if anyone does give you different or additional information, you
should not rely on it.

If you are in a jurisdiction where it is unlawful to offer to exchange
or sell, or to ask for offers to exchange or buy, the securities offered by this
document or to ask for proxies, or if you are a person to whom it is unlawful to
direct these activities, then the offer presented by this document does not
extend to you.

The information contained in this document speaks only as of its date
unless the information specifically indicates that another date applies.

USE OF PROCEEDS AND EXPENSES OF THE OFFERING

We will not receive any of the proceeds from the sale of the shares
offered by Laurus. We will receive a maximum of approximately $6,500 from the
exercise of the option rights, assuming all of the options are exercised for
cash and in full, of which there can be no assurance. Any proceeds received by
us in connection with the exercise of the option rights will be used for working
capital and general corporate purposes. With the exception of any brokerage fees
and commission, which are the obligation of Laurus, we are responsible for the
fees, costs and expenses of this offering, which are estimated to be $75,000,
inclusive of our legal and accounting fees, printing costs and other
miscellaneous fees and expenses.

The conversion and exercise of the conversion and options rights
hereunder will result in the discharge of indebtedness under the Agreements to
the extent debt outstanding under the convertible minimum borrowing notes,
convertible revolving note, or convertible term note is reduced thereby. Debt
outstanding under the convertible term note accrues interest at the prime rate
(as published in the Wall Street Journal from time to time) plus 4% and debt
outstanding under the convertible minimum borrowing notes and convertible
revolving note accrues interest at the prime rate (as published in the Wall
Street Journal from time to time) plus 1.25%; provided, however, that in each
instance such interest rates shall not be less than 6.50%. Each of the notes
will mature on May 17, 2008. The proceeds received in connection with the debt
incurred pursuant to the Agreements were used as follows:

PROCEEDS RECIPIENT AMOUNT
------------------ -------------

Riviera Tool Company (working capital and general corporate purposes) $1,212,526.90
Comerica Bank (extinguishment of debt) $4,290,847.73
Laurus Capital Management, L.L.C. (Management Fees) $ 475,200.00
The HillStreet Fund II, L.P. (extinguishment of debt) $3,208,166.67
HillStreet Capital II (extinguishment of debt) $ 6,758.70
Laurus Capital Management, L.L.C. (Due Diligence and Documentation Fees) $ 35,000.00

MARKET PRICES OF RIVIERA TOOL COMMON STOCK

Our common stock is listed and traded on the American Stock Exchange.
Our common stock commenced trading on the American Stock Exchange on March 7,
1997, through an initial public offering of our common stock. Prior to that
date, there was no public market for our common stock. The following table sets
forth the high and low closing bid quotations per share on the American Stock
Exchange, based upon information supplied by The Wall Street Journal.

MARKET PRICE
---------------
FISCAL PERIOD HIGH LOW
------------- ------ ------

2003:
- First Quarter $1.49 $1.04
- Second Quarter 2.45 1.01
- Third Quarter 3.55 1.75
- Fourth Quarter 5.10 2.81

2004:
- First Quarter $5.10 $3.10
- Second Quarter 5.70 3.66
- Third Quarter 4.99 3.16
- Fourth Quarter 3.70 1.86

2005:
- First Quarter $2.60 $1.75
- Second Quarter 2.05 1.05
- Third Quarter 1.69 1.05
- Fourth Quarter 1.55 0.85

2006:
- First Quarter $0.96 $.050
- Second Quarter 1.00 0.51
- Third Quarter 0.83 0.53

On August 9, 2006, the last reported sale price of our common stock
on the American Stock Exchange was $.49.

We have not historically paid cash dividends on our common stock. The
payment of common stock cash dividends is within the discretion of our Board of
Directors, with prior written consent of Laurus; however, in view of the current
working capital needs and in order to finance future growth, it is unlikely that
we will pay any cash dividends on our common stock in the foreseeable future.

OUR BUSINESS

GENERAL

We are a designer and manufacturer of large scale, complex stamping die
systems used to form sheet metal parts. Most of the stamping die systems sold by
us are used in the production of automobile and truck body parts such as roofs,
hoods, fenders, doors, door frames, structural components and bumpers. The
following table sets forth our sales (in millions) and percentage of total sales
by major customers, DaimlerChrysler, Ford Motor Company, General Motors
Corporation, Mercedes-Benz and BMW (the "OEM's") in fiscal years 2003, 2004 and
2005.

YEAR ENDED AUGUST 31,
------------------------------------------
CUSTOMER 2003 2004 2005
-------- ------------ ------------ ------------
AMOUNT % AMOUNT % AMOUNT %
------ --- ------ --- ------ ---

Suppliers of Mercedes-Benz ............. $19.2 56% $20.8 84% $ 5.7 29%
BMW ....................................... 0.3 1 -- -- -- --
- Suppliers of BMW ..................... 3.0 10 -- -- -- --
DaimlerChrysler AG ........................ 1.9 6 0.2 1 1.4 7
- Suppliers of DaimlerChryslerAG ....... 1.0 1 0.3 1 5.0 26
Ford Motor Company ........................ 0.9 1 -- -- -- --
- Suppliers of Ford Motor Co. .......... 2.4 7 -- -- -- --
General Motors Corporation ................ 0.5 2 0.9 4 3.4 18
- Suppliers of General Motors
Corporation ......................... 0.2 -- 0.5 2 1.6 8
Other auto and truck manufacturers
and their suppliers .................... 4.7 16 2.0 8 2.2 12
----- --- ----- --- ----- ---
Total Sales ............................ $34.1 100% $24.7 100% $19.3 100%
===== === ===== === ===== ===

We were originally incorporated in 1967 and were incorporated in our
present form in 1988, under the laws of the State of Michigan.

INDUSTRY TRENDS

The principal factor affecting tooling demand is the level of capital
spending by our customers on manufacturing equipment for use in the production
of new products or models and, in our case, predominantly the automotive
industry. The market for U.S. produced tooling has both cyclical and structural
factors that create tooling product demand.

The cyclical factors are associated with the consumer demand levels as
well as capital spending in various end-use sectors. Generally, tooling sales
are less dependent on the level of automotive unit sales, but are more dependent
on the introduction of new and updated product designs into the marketplace. The
introduction of a new automotive model creates a demand for new tooling. This
new tooling then creates the product parts that are assembled into the new
models. Some slight variations in the production platform, such as changes to
the drive train of an automobile, may involve no new tooling but may entail
slight modifications in existing tooling in order to allow the production of
components with these minor modifications. For the most part, the vast majority
of new models require completely new tooling.

The structural factors affecting automotive tooling demand include the
OEMs trend to shorter product cycles (30-36 month product cycle) as well as
compressed tooling lead times (9-12 months). Additionally, the implementation of
globalized manufacturing strategies, including the increasing competitiveness of
foreign toolmakers, as well as the capture of domestic industry production share
by offshore-based firms, affect domestic automotive tooling demand.

PRODUCTS AND SERVICES

Dies. Our dies are used in the high-speed production of sheet metal stamped
parts and assemblies. Production of such parts is a multiple step process
involving a series of dies. Typically, the first die is used to cut the
appropriate size metal blank from a sheet or coil of steel. The next die draws
the metal blank into its primary shape and subsequent dies are used to bend
edges or corners, create flanges, trim-off excess metal and pierce assembly
holes. A customer usually orders only one series of dies for each separate part.
Normally, the dies do not require replacement due to usage because the life of
well-maintained dies is sufficient to carry production to the point when styling
changes dictate production of new dies. The dies manufactured by us generally
include automation features,

adding to the complexity of design and construction. These automation features
facilitate rapid introduction and removal of the work piece or raw material into
and out of the die, thereby increasing production speeds and reducing labor cost
for part manufacturers.

Engineering of Product and Process. As the OEMs continue their efforts to
reduce lead times of new model launches, we produce concurrently, rather than
sequentially, many of our tool designs and manufacturing processes. In certain
instances, before the final design by the customer is complete, we already have
ordered many of the raw materials, such as steel, and may have begun various
machining operations. Typically, we will receive part data or descriptions in
the form of electronic files, which the customer wants us to use in developing a
tool to produce that part. The tool design is then created by us, utilizing
computer aided-design ("CAD") software. We then utilize computer software that
simulates the metal-forming process within the die. This simulation data is then
utilized in final die design to reduce the need for expensive and time-consuming
reworking of the die during the tryout process. Upon completion of tool design,
we develop the computer programs (computer-aided-manufacturing ("CAM") software)
which drive the cutter paths on the machine tools. These machine tools fabricate
many components for the tool. A variety of machine tools are utilized to cut and
polish the various parts and surfaces of the tool, including our high-speed
machining centers and 5-axis machining centers, all of which are
computer-numerically-controlled ("CNC"). The process of utilizing high-speed CNC
machining centers reduces the traditional requirement for expensive and
time-consuming hand finishing. After the tool components are produced or
purchased, they are assembled and fitted together.

Prototype Tooling and Parts. Prototype tooling and parts are utilized
during the design phase of new models. The automobile manufacturers validate the
fit and function of the respective components and assemblies and the
repeatability of the respective production processes using these tools. The
parts manufactured from prototype tools are also often used in crash testing.

Typically, prototype tools associated with the primary metal forming
operations are manufactured from an alloy casting or mild steel and subsequently
machined using the mathematical database and related CNC programs. After
machining, the prototype tools are assembled and tested to validate the
integrity and repeatability of the final manufacturing process. The results of
the validation process are incorporated into the mathematical database, which
will then be used to manufacture the final production tools. After testing the
primary forming operations, prototype parts are manufactured using special
means, such as computerized laser-cutting machines, to trim off excess scrap and
to incorporate various slots and holes. These parts are then sent to the
automobile manufacturers for further testing and evaluation. The results of this
testing and evaluation may require the incorporation of additional design and
manufacturing process modifications prior to construction of the production
tooling.

MANUFACTURING

The manufacturing process starts when we are awarded a tooling
contract. The engineering process commences when an electronic "model" of the
part to be produced is transmitted to us as a mathematical database or
electronic files. Our engineers use the mathematical database to generate
computer-aided die designs and die face cutter path programs. These cutter path
programs are used by the machine tools to manufacture the inner workings of the
die. Most material is removed and the cutting is done by CNC machine tools,
which utilize the computer-generated cutter path programs to cut and polish the
various parts of the tool. After the tool components are produced or purchased,
they are assembled and fitted together. Finally, after the die is constructed,
we produce a "tryout" or run of parts. These parts are then evaluated
statistically for process repeatability and dimensional validation on our
coordinate measuring machine. During this automated validation process, the tool
is statistically compared to the mathematical database.

On average, 10 months elapse from the time we are awarded a contract
until the final set of dies is shipped to the customer.

QS 9000/TE CERTIFICATION

We are certified under the Tooling and Equipment Supplement ("TE
Supplement") QS-9000 and ISO-9000 Quality Standards. The TE Supplement/QS-9000
standard was developed jointly by DaimlerChrysler, Ford, and General Motors to
establish a single set of quality requirements for their tooling suppliers. ISO
9000 is an international quality standard for all industries.

The TE Supplement has become the international standard of all quality
systems in the tooling industry, designed to ensure that systems are in place to
prevent defects from occurring in the design, manufacturing and validation
phases of our processes. We, by receiving the TE Supplement/QS-9000
certification, have demonstrated that our quality systems are in place to meet
customer requirements.

RAW MATERIALS

The steel, castings and other components utilized by us in the
manufacturing process are available from many different sources and we are not
dependent on any single source. We typically purchase our raw materials on a
purchase order basis as needed and have generally been able to obtain adequate
supplies of raw materials for our operations.

MARKETING AND SALES

Our marketing emphasis is on DaimlerChrysler (including Mercedes
Benz), Ford, General Motors, and BMW and their respective tier one suppliers. We
maintain relationships with DaimlerChrysler (including Mercedes-Benz), Ford,
General Motors, and BMW that directly accounted for approximately 25%, in the
aggregate, of our revenues in 2005. For the year ended August 31, 2005,
DaimlerChrysler, Ford, General Motors, Mercedes-Benz, BMW and their respective
tier one suppliers accounted for approximately 88%, in the aggregate, of our
revenues. For the year ended August 31, 2004, DaimlerChrysler, Ford, General
Motors, Mercedes-Benz and BMW and their respective tier one supplier directly
accounted for 92%, in the aggregate, of our revenues.

We typically sell our tooling systems to either OEMs directly or to
manufacturers of products under contract with such OEMs (tier one suppliers).
Sales efforts are conducted primarily by our Vice President of Sales, President,
senior management and project management personnel. Frequent contact is made
with domestic and foreign automobile manufacturers, their purchasing agents, and
platform managers and tier one suppliers. Typically, our sales process begins
when a package or request for quotation is received from the tier one supplier
or OEM. Generally, we recommend process and design changes to improve the cost
and quality of a product. We maintain a computer database with historical
information regarding dies we have previously manufactured. This database
assists us in quoting prices for dies and enables us to respond to most
quotation requests quickly and accurately. If a customer decides to accept our
quotation, a purchase order is issued subject to price adjustments for
engineering changes as requested by the customer. Bids generally are awarded
based on technological capability, price, quality and past performance.

BACKLOG AND SEASONALITY

Our backlog of awarded contracts, which are all believed to be firm,
was approximately $9.2 million and $11.0 million as of May 31, 2006 and May 31,
2005, respectively. We expect all backlog contracts will be reflected in sales
during fiscal years ended August 31, 2006 and 2007. Our sales of stamping dies
do not follow a seasonal pattern; however, the timing of new model introductions
and existing model restyling tooling programs are dependent on DaimlerChrysler,
Ford, General Motors, Mercedes-Benz, BMW and their respective introduction of
new models.

COMPETITION

Large, complex automotive stamping dies are manufactured primarily by
three supplier groups: a) domestic independent tool and die manufacturers, b)
foreign independent tool and die manufacturers, and c) captive or in-house tool
and die shops owned and operated by OEMs.

The independent tool and die manufacturer industry has significant
barriers to entry, which can reduce competition in the large-scale die market.
These barriers include the highly capital intensive and technically complex
requirements of the industry. Additionally, attracting and retaining employees
skilled in the use of advanced design and manufacturing technology is a
multi-year process. A new competitor most likely would lack much of the
credibility and historical customer relationships that take years to develop.

Finally, the OEMs maintain in-house, captive tool and die capacity in
order to meet a portion of their needs. General Motors, for example, maintains
the largest captive capacity and, based on estimates from various trade
publications, supplies an estimated 75-80% of their own die construction needs.
Ford produces approximately 50% and DaimlerChrysler 25% of their own respective
needs. Independent suppliers, like us, tend to have a competitive advantage over
the OEMs' in-house die shops due to the OEMs' higher cost structure.

With the advent of simultaneous engineering in the automobile
industry, proximity of the OEMs' design engineers may influence the placement of
contracts. However, foreign competition may have certain advantages over
domestic die manufacturers including lower capital costs, currency exchange
advantages, government assistance and lower labor costs.

SIGNIFICANT CUSTOMERS

We maintain relationships with DaimlerChrysler (including
Mercedes-Benz), Ford, General Motors, and BMW, which directly accounted for
approximately 25%, in the aggregate, of our revenues in 2005. For the year ended
August 31, 2005, DaimlerChrysler, Ford, General Motors, Mercedes-Benz and BMW
and their respective tier one suppliers accounted for approximately 88%, in the
aggregate, of our revenues.

EMPLOYEES

Our work force consists of approximately 135 full-time employees, of
which approximately 30 are managerial and engineering personnel. The balance
consists of hourly employees engaged in manufacturing and indirect labor
support. Included among these hourly workers are approximately 85 skilled
tradesmen who are either journeymen tool and die makers or machinists. None of
our employees are covered by a collective bargaining agreement. We have not
experienced any work stoppages and consider our relations with our employees to
be good. We have a discretionary contribution 401(K) plan. We have no pension
liabilities arising from any defined benefit plan.

ENVIRONMENTAL MATTERS

We are subject to environmental laws and regulations concerning
emissions to the air, discharges to waterways, and generation, handling,
storage, transportation, treatment and disposal of waste materials. We also are
subject to other Federal and state laws and regulations regarding health and
safety issues. We believe that we are currently in material compliance with
applicable environmental and health and safety laws and regulations.

DESCRIPTION OF PROPERTY

Our facilities are located in Grand Rapids, Michigan, and consist of
approximately 177,000 square feet of space, of which 28,000 square feet is
utilized for office, engineering and employee service functions. Constructed in
1989, the facility is leased with a lease term expiring in 2018. The facility
lease provides for annual payments of $944,847 plus an escalation of base rent
of approximately $.14 per square foot. We have an option to renew this lease for
an additional ten-year term at a rate based upon the then prevailing market
rates for similar properties. We believe our facilities are modern, well
maintained, adequately insured and suitable for their present and intended uses.

LEGAL PROCEEDINGS

We are not presently a party to any legal proceeding.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The matters discussed in this Management's Discussion and Analysis of
Financial Condition and Results of Operations contain certain forward-looking
statements. For this purpose, any statements contained in this report that are
not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the foregoing, words such as "may", "will",
"expect", "believe", "anticipate", or "continue", the negative or other
variation thereof, or comparable terminology, are intended to identify
forward-looking statements. These statements by their nature involve substantial
risks and uncertainties, and actual results may differ materially depending upon
a variety of factors, including continued market demand for the types of
products and services produced and sold by us.

GENERAL OVERVIEW

We are a designer and manufacturer of large scale, complex stamping
die systems used to form sheet metal parts. Most of the stamping die systems,
sold by us, are used in the high-speed production of automobile and truck body
parts such as doors, frames, structural components and bumpers. A majority of
our sales are to DaimlerChrysler (including Mercedes-Benz), Ford Motor Company,
General Motors Corporation, BMW and their tier one suppliers of sheet metal
stamped parts and assemblies.

RECENT DEVELOPMENTS

Change in Independent Auditors

On February 14, 2006, our Board of Directors announced the appointment
of BDO Seidman, LLP as our independent accountant.

Amex Notification

On February 10, 2006, we received notice from the Amex that a review
of our Form 10-Q for the first quarter ended November 30, 2005 indicated that we
did not meet certain of the Amex's continued listing standards, and we have,
therefore, become subject to the procedures and requirements of Section 1009 of
the Company Guide. Specifically, we are not in compliance with Section
1003(a)(ii) of the Company Guide with shareholders' equity of less than
$4,000,000 and losses from continuing operations and/or net losses in three of
our four most recent fiscal years.

CRITICAL ACCOUNTING POLICIES

Management's Discussion and Analysis of Financial Condition and Results of
Operations is based upon our Financial Statements. These financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States of America. These principles require the use of estimates
and assumptions that affect amounts reported and disclosed in the financial
statements and related notes. The accounting policies that may involve a higher
degree of judgment, estimates and complexity include revenue recognition using
percentage of completion estimates and the assessment of asset impairments. We
use the following methods and assumptions in our estimates.

- Revenue recognition - We recognize revenue on time and material
contracts utilizing the completed-contract method. Revenue is
recognized on all other contracts utilizing the
percentage-of-completion method. Under the completed-contract method,
the contract is considered complete when all costs except for
insignificant items have been incurred and the customer has approved
the project. Under the percentage-of-completion method, estimated
contract earnings are based on total estimated contract profits
multiplied by the ratio of labor hours incurred to total estimated
labor hours on the contract. Provisions for total estimated losses on
contracts in process are recognized in the period such losses are
determined. Changes in job performance, conditions and estimated
profitability may result in revisions to costs and income and are
recognized in the period such revisions are determined.

- Net book value of long-lived assets - We review long-lived assets for
impairment if changes in circumstances or the occurrence of events
suggest the remaining value may not be recoverable. This review is
performed using estimated future cash flows. If the carrying value of
a long-lived asset is considered to be impaired, an impairment charge
is recorded for the amount that the carrying value of the long-lived
asset exceeds its fair value.

NEW ACCOUNTING STANDARDS

In December, 2004, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 123 (R), "Share-Based
Payments" that requires compensation costs related to share-based payment
transactions to be recognized in the financial statements. With limited
exceptions, the amount of compensation cost will be measured based on the grant
date fair value of the equity or liability instruments issued. In addition,
liability awards will be re-measured each reporting period. Compensation costs
will be recognized over the period that an employee provides services in
exchange for the award. SFAS No. 123 (R) replaces SFAS No. 123, "Accounting for
Stock-Based Compensation", and supercedes Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees", and related interpretations.
SFAS No. 123 (R) became effective on September 1, 2005 and was not material.

BASIS OF PRESENTATION

The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. During 2005, we sustained a loss
from operations of $498,282 and a net loss of $2,502,248. This loss resulted in
an accumulated deficit of $13,148,735 as of August 31, 2005. These factors,
among other things, raise substantial doubt about our ability to continue as a
going concern. The financial statements do not include any adjustments relating
to the recoverability and classification of recorded asset amounts or the
amounts and classification of liabilities that might be necessary should we be
unable to continue as a going concern.

We believe that the revolving line of credit and the funds generated from
operations, will be sufficient to cover anticipated cash needs through fiscal
2006. However, depending on our level of future sales, terms of such sales,
financial performance and cash flow of existing contracts, such financing may
not be sufficient to support operations. Therefore, we may be required to seek
additional sources of funding.

IMPAIRMENT OF LONG-LIVED ASSETS

We review long-lived assets for impairment if changes in circumstances or the
occurrence of events suggest the remaining value may not be recoverable. An
asset is deemed impaired and written down to its fair value if estimated related
total future undiscounted cash flows are less than its book (carrying) value. In
performing our evaluation of long-lived assets for impairment, we utilized
undiscounted cash flows based on the assets estimated remaining useful lives. In
developing the projections, we estimated revenues for each year and estimated
resulting margins based upon various assumptions including future market pricing
trends and historical financial costs. The analysis concluded that the estimated
total undiscounted future cash flows were in excess of the carrying value of
long-lived assets. Had the

analysis concluded that the total undiscounted future cash flows been below the
carrying value, an impairment charge of the difference between the carrying
value and the lower of the total discounted cash flows or fair value would have
been recorded.

RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with
our Financial Statements and the Notes thereto included elsewhere herein.

COMPARISON OF THE THREE MONTHS ENDED MAY 31, 2006 TO THE THREE MONTHS ENDED MAY
31, 2005.

REVENUES - Revenues for the three months ended May 31, 2006 totaled $6.1 million
as compared to $4.7 million for the three months ended May 31, 2005, an increase
of $1.4 million or 30%. This was a result of our beginning the third quarter of
2006 with a contract backlog of $11.2 million as compared to a $10.1 million
contract backlog in 2005, an increase of 11%. This increased backlog resulted in
our experiencing a 21% increase in direct labor hours during the third quarter
of 2006, as compared to 2005, resulting in an increase in third quarter
revenues.

Our backlog of awarded contracts, which are all believed to be firm, was
approximately $9.2 million and $11 million as of May 31, 2006 and May 31, 2005
respectively. We expect all backlog contracts to be reflected in sales during
fiscal years ending August 31, 2006 and 2007.

COST OF SALES - Cost of goods sold increased from $4.1 million for the third
quarter of fiscal 2005 to $5.0 million for 2006 however as a percent of sales,
decreased from 87.6% for 2005 to 80.8% for 2006. Direct costs (materials and
labor) increased by $800,000, from $1.8 million for 2005 to $2.6 million for
2006. Engineering expense decreased by $64,000 from $596,000 for 2005 to
$532,000 for 2006. Lastly, of the cost of goods sold, manufacturing overhead
increased by $100,000 from $1.7 million for 2005 to $1.8 million for 2006.
Additional details of these changes in cost of sales for the third quarter of
fiscal 2005 and 2006 are as follows:

- Direct materials expense remained at $0.5 million for 2006 and as a
percent of sales decreasing from 14.1% in 2005 to 10.9%. The decrease
in percent of sales was largely due to higher contract volume
requirements and related revenues. Outside services expense increased
from $0.1 million for 2005 to $0.5 million for 2006 and as a percent
of sales from 2.0% to 8.2%. This was largely due to us incurring
expenses related to our outsourced revenue during the third quarter of
2006. The balance of the outside services expense decrease was due to
higher sales volumes and corresponding increases in outsourcing
certain design services.

- Direct labor expense increased from $1.1 million for 2005 to $1.5
million for 2006 and as a percent of sales from 22.8% to 24.2%. This
change was a result of us incurring a 21% increase in direct labor
hours, from 59,000 hours in 2005 to 71,500 in 2006. Of the total
direct labor expense, regular or straight time increased by $211,000
however decreased a percent of sales from 16.4% for 2005 to 16.0% for
2006. Overtime expense increased from $303,000 for 2005 to $503,000
for 2006 and as a percent of sales from 6.4% for 2005 to 8.2% for
2006.

- Engineering expense decreased from $596,000, 12.7% of sales, for 2005
to $532,000, and 8.7% of sales, for 2006. This was due to us
maintaining lower project management personnel during 2006 as compared
to 2005.

- Manufacturing overhead was $1.7 million or 35.9% of sales for 2005 as
compared to $1.8 million or 28.9% of sales for 2006. During 2006,
increases in manufacturing overhead were largely due to a $37,000
increase in payroll taxes, a $23,000 increase in medical insurance
expense, a $22,000 increase in perishable tooling expense, a $14,000
increase in utilities expense and an $11,000 increase in indirect
labor. These were offset by a decrease of $30,000 in depreciation
expense. The increase of approximately 6.0% of manufacturing overhead
was largely due to the increase in sales volumes.

SELLING AND ADMINISTRATIVE EXPENSE. Selling and administrative expense increased
slightly from $660,000 for the third quarter of 2005 to $670,000 for 2006. As a
percent of sales, selling and administrative expense decreased from 14.1% for
2005 to 10.9% for 2006. This decrease was a result of higher sales volume and
decreases in certain professional advisory fees. The largest selling and
administrative expense increases included $73,000 in bad debt expense, $71,000
in public company expenses and $25,000 in the State of Michigan Single Business
tax. These increases were offset by a decrease of $140,000 in professional and
legal fees expense and $7,000 in insurance expense.

The decrease in professional and legal expenses related to our former primary
lender requiring us to retain the services of a consulting company and the
lender's legal counsel at our expense during the second quarter of 2005. During
the third quarter of 2005, such expenses totaled approximately $158,000.

INTEREST EXPENSE. Interest expense increased from $348,000 for the third quarter
of 2005, to $431,000 for 2006. This increase was largely due to our increased
debt levels during the third quarter of 2006 as compared to 2005. For the third
quarter of 2006, we utilized $76,387 of cash in operating activities as compared
to utilizing cash of $1,103,008 in 2005 (financed with borrowings on revolving
line of credit).

COMPARISON OF THE NINE MONTHS ENDED MAY 31, 2006 TO THE NINE MONTHS ENDED MAY
31, 2005.

REVENUES - Revenues for the nine months ended May 31, 2006 totaled $19.1 million
as compared to $14.2 million for the nine months ended May 31, 2005, an increase
of $4.9 million or 35%. This was a result of us beginning fiscal 2006 with a
contract backlog of $13.7 million as compared to $2.4 million in 2005, an
increase of 471%. This increased backlog resulted in us incurring approximately
217,000 shop floor hours in 2006 as compared to 186,000 during the same period
of 2005, an increase of 31,000 hours or 17%.

COST OF SALES - Cost of goods sold increased from $12.3 million for the nine
months ended May 31, 2005 to $16.4 million for the nine months ended May 31,
2006 however, as a percent of sales, cost of goods sold decreased from 86.5% for
2005 to 85.7% for 2006. Direct costs (materials and labor) increased by $3.8
million, from $5.7 million for 2005 to $9.5 million for 2006. Engineering
expense increased by $45,000 from $1.55 million for 2005 to $1.6 million for
2006. Lastly, of the cost of goods sold, manufacturing overhead increased by
$300,000 from $5.0 million for 2005 to $5.3 million for 2006. Additional details
of these changes in cost of sales for the nine months ended May 31, 2005 and May
31, 2006 are as follows:

- Direct materials expense increased from $1.5 million to $3.2 million
for the first three quarters of 2005 and 2006, respectively. The
increase in direct materials was a result of increased contract
backlog and revenues in 2006. Outside services expense increased from
$0.5 million for 2005 to $2.0 million for 2006 and as a percent of
sales from 3.7% to 10.4%. The increase in outside services is a result
of our placing or subcontracting certain construction portions of
contracts to other suppliers.

- Direct labor expense increased from $3.6 million for 2005 to $4.3
million for 2006 however, as a percent of sales, direct labor expense
decreased from 25.6% to 22.3%. This change was a result of our
incurring a 17% increase in direct labor hours, from 186,000 hours in
2005 to 217,000 in 2006. Of the total direct labor expense, regular or
straight time increased by $342,000 however, as a percent of sales, it
decreased from 16.8% for 2005 to 14.3% for 2006. Overtime expense
increased from $1.3 million for 2005 to $1.5 million for 2006, as a
percent of sales, decreasing from 8.8% for 2005 to 8.0% for 2006.

- Engineering expense increased from $1.5 million, 11.0% of sales, for
2005 to $1.6 million, and 8.4% of sales, for 2006. This increase was
due to our increasing the level of engineering personnel staffing
required to fulfill the design and project management portions of
contracts.

- Manufacturing overhead was $5.0 million or 35.4% of sales for 2005 as
compared to $5.3 million or 27.6% of sales for 2006. During 2006,
increases in manufacturing overhead were largely due to a $106,000
increase in manufacturing supplies expense, a $65,000 increase in
supervisor salaries and indirect labor expense, a $52,000 increase in
perishable tooling expense, a $52,000 increase in medical insurance
premiums, a $42,000 increase in payroll tax expense and a $40,000
increase in utilities expense. These increases were offset by a
$92,000 decrease in depreciation expense.

SELLING AND ADMINISTRATIVE EXPENSE - Selling and administrative expense
decreased from $2.1 million for the first three quarters of 2005 to $1.8 million
for 2006. As a percent of sales, selling and administrative expense decreased
from 14.8% for 2005 to 9.6% for 2006. During 2006, increases in selling and
administrative expense were largely due to an $156,000 increase in public
company expenses, a $65,000 increase in the State of Michigan Single Business
tax, a $59,000 increase in bad debt expense and a $38,000 increase in director
fees expense. These increases were offset by a $523,000 decrease in legal and
professional expenses, a $30,000 decrease in travel expenses and a $40,000
decrease in supervisor salaries expense.

The decrease in professional and legal expenses related to our former primary
lender requiring us to retain the services of a consulting company and the
lender's legal counsel at our expense during 2005. During the first three
quarters of 2005, such expenses totaled approximately $511,000.

INTEREST EXPENSE - Interest expense increased from $1.1 million for 2005 to $1.3
million for 2006. This increase was largely due to our increased debt levels
during the first three quarters of 2006 as compared to 2005. For the first three
quarters of 2006, we utilized $1.7 million of cash in operating activities
(financed with borrowings on revolving line of credit) as compared to generating
cash of $6.8 million in 2005 (utilized to reduce revolving line of credit).

FEDERAL INCOME TAXES - For the nine months ended May 31, 2006, we recorded a
valuation allowance of approximately $190,000 to reduce our deferred tax assets
resulting from income tax benefit. For the three months ended May 31, 2006, we
recorded a decrease in the deferred tax asset valuation allowance of
approximately $6,000 to offset the income tax benefit.

LIQUIDITY AND CAPITAL RESOURCES - During the nine-month period ended May 31,
2006 our cash used in operating activities was $1.7 million. This largely
resulted from an increase of $3.8 million in account receivables and a $1.1
million increase in accounts payable and accrued liabilities. From investing
activities, we incurred a decrease in other assets of $135,000 and utilized
$111,000 for additions to property, plant and equipment. We financed our
increase in working capital requirements with $2.4 million of borrowings on our
revolving line of credit, net of $1.0 million utilized to reduce other debt (of
which $150,000 was term debt, which was converted to common stock).

We believe that the revolving line of credit and the funds generated from
operations will be sufficient to cover anticipated cash needs for the
foreseeable future. However, depending on our level of future sales, terms of
such sales, financial performance and cash flow of existing contracts, such
financing may not be sufficient to support operations. Therefore, we may be
required to seek additional sources of funding.

FISCAL 2005 COMPARED TO FISCAL 2004

REVENUE.

Total revenue decreased from approximately $24.7 million in 2004 to $19.3
million in 2005, a decrease of 22%. This decrease was a result of us
experiencing a low contract backlog of $2.5 million as of August 31, 2004, which
resulted in a decrease of 22% in shop floor hours and lower sales in fiscal
2005.

Our backlog of awarded contracts, which are all believed to be firm, was
approximately $13.7 million and $2.5 million as of August 31, 2005 and 2004,
respectively, an increase of 448%. We expect all backlog contracts will be
reflected in sales during fiscal years ending August 31, 2006 and 2007.

COST OF GOODS SOLD.

Cost of goods sold decreased from $30.0 million for 2004 to $17.0 million for
2005 and, as a percent of sales, decreasing from 122% for 2004 to 88% for 2005.
Direct costs (materials and labor) decreased by $12.3 million, from $20.6
million for 2004 to $8.3 million for 2005. Engineering expense decreased by $0.2
million from $2.4 million for 2004 to $2.2 million for 2005. Lastly, of the cost
of goods sold, manufacturing overhead decreased by $0.5 million from $7.0
million for 2004 to $6.5 million for 2005. Additional details of these changes
in cost of sales for 2004 and 2005 are as follows:

- Direct materials expense decreased from $4.2 million for 2004 to $2.8
million for 2005 and as a percent of sales from 17% to 15%. This
decrease was largely due to lower contract material requirements
during 2005 as compared to 2004. During 2005, our contract mix
included an increase in die component machining work for the OEMs.
Such contacts have lower direct material requirements as compared to
construction contracts as the materials are supplied by the customer.
Outside services expense

decreased from $9.7 million for 2004 to $0.4 million for 2005 and as a
percent of sales from 39% to 2%. This decrease was largely due to us
incurring $7.2 million of expense related to our outsourced projects
in 2004. The balance of the outside services expense was due to lower
sales volumes and internalizing of certain machining work, which was
historically outsourced.

- Direct labor expense decreased by 26% from $6.7 million for 2004 to
$5.0 million for 2005 and, as a percent of sales, decreasing from 27%
to 26%. This change was a result of us incurring a 22% decrease in
direct labor hours, from 318,000 hours in 2004 to 249,000 in 2005. Of
the total direct labor expense, regular or straight time decreased 24%
or $1.1 million and, as a percent of sales, decreased from 18% for
2004 to 17% for 2005. Overtime expense decreased 30% or $0.7 million,
from $2.3 million for 2004 to $1.6 million for 2005 and, as a percent
of sales, decreasing from 9% for 2004 to 8% for 2005.

- Engineering expense decreased from $2.4 million, or 10% of sales, for
2004 to $2.2 million, or 11% of sales, for 2005. This decrease was
largely as a result of a $0.2 million decrease in engineering salaries
and related payroll taxes expense.

- Manufacturing overhead was $6.5 million or 34% of sales for 2005 as
compared to $7.0 million or 28% of sales for 2004. During 2005,
decreases in manufacturing overhead were largely attributed to
decreases of $154,000 in labor and payroll tax expenses, $148,000 in
manufacturing supplies expense, $86,000 in health and workers
compensation insurance expense, $77,000 in depreciation expense and
$52,000 in building maintenance and supplies expense. The increase of
approximately 6% of manufacturing overhead, as a percent of sales, was
largely due to lower overhead absorption resulting from lower sales
volumes in 2005.

SELLING AND ADMINISTRATIVE EXPENSE.

Selling and administrative expense for 2005 increased to $2.8 million or 15% of
sales, from $2.0 million or 8% of sales in 2004. This increase was largely a
result of us incurring an additional $0.7 million in legal and professional fees
during 2005. The largest increase related to our former primary lender, Comerica
Bank, requiring us to retain the services of a consulting company and reimburse
the lender's legal counsel. Such expenses totaled approximately $0.5 million.
The remaining increases in legal and professional expenses were incurred in
regards to our litigation, refinancing and S-1 filing.

INTEREST EXPENSE.

Interest expense increased from $0.9 million for 2004 to $1.6 million for 2005.
During the first three quarters of 2005 we were under a Forbearance Agreement
with our then primary lender - Comerica Bank. Under such agreement we were
charged a higher interest rate on our debt (from prime plus 1.25% in 2004 to
prime plus 4% in 2005) as well as an additional $0.1 million in forbearance fees
during 2005.

OTHER EXPENSE - SUBORDINATED DEBT FINANCING COSTS.

During the third quarter of 2005, we retired our $3.0 million subordinated debt
with Hillstreet Capital. This subordinated debt was paid prior to the scheduled
retirement and resulted in us expensing approximately $0.3 million of debt
issuance costs during 2005. These debt issuance costs were originally
capitalized at the time of the transaction (fiscal 2004) and were being
amortized over the original repayment schedule.

FISCAL 2004 COMPARED TO FISCAL 2003

REVENUE.

Total revenue decreased from approximately $34 million in 2003 to $25 million in
2004, a decrease of 28%. This decrease was a result of us completing our
significant tooling programs for a major European automaker for a sports utility
vehicle and a new "crossover" vehicle to be manufactured in the United States.
Our customer for these vehicles is the Tier 1 supplier to Mercedes-Benz for
these particular vehicles. During the fourth quarter of 2004, we had significant
difficulties in completing the contracts, which had a severe negative effect on
revenue, cost of sales, and related earnings. We, due to many various
circumstances, incurred significant cost overruns on many of the parts under the
contracts. Many of these cost overruns involve customer timing changes, material
specification changes and us outsourcing the completion of many dies to meet
customer deadlines. All of the aforementioned issues resulted in us incurring
approximately $4.0 million in additional outsourcing costs and $3.5 million in
additional labor costs. We accrued $5.2 million of estimated losses on these
contracts and others as of August 31, 2004. The outsourcing costs were incurred
as a result of us having certain "bottlenecks" in our production. These
bottlenecks were a result of changes to material specifications combined with an
increase in the number of engineering changes required. The material
specification changes involved customer changes from a grade of steel we had
previous experience with to a new grade of high-strength steel which, not only
had we had no

experience working with, was also new to the customer. As a result of this new
material, we could not simulate the flow of the steel in the dies. Due to the
lack of historical data as to the material flow, we, in some cases, had to
re-cut the dies up to eight times to get the part within specifications with
this material. This created capacity constraints in our machining and tryout
areas. As a result of these constraints, the customer required that we utilize
specified outside die shops to complete certain dies, which were constructed
internally. The customer decided that our internal capacity had become
overburdened as a result of the rework being performed by us to obtain part
specifications with the new high-strength steel. Had we not outsourced this
work, the customer may have cancelled the contracts and charged us for all of
the added costs incurred. In addition, the customer may have discontinued the
scheduled progress payments, which would have caused severe cash-flow problems
for us. Management took the position that by outsourcing this work directly, the
added costs were better controlled and prevented potential cash-flow
difficulties.

Despite the aforementioned fourth quarter problems, we did realize an overall
profit on these two programs. The total amount of revenue on these contracts was
$43.0 million with a net margin of $0.2 million.

COST OF GOODS SOLD.

Cost of goods sold decreased from $30.7 million for 2003 to $30.0 million for
2004. However, as a percent of sales, cost of goods sold increased from 90% for
2003 to 122% for 2004. Direct costs (materials and labor) decreased by $0.8
million, from $21.4 million for 2003 to $20.6 million for 2004. Engineering
expense remained consistent at $2.4 million for both 2003 and 2004. Lastly, of
the cost of goods sold, manufacturing overhead remained consistent at $7.0
million for 2004 versus $6.9 million for 2003. Additional details of these
changes in cost of sales for 2003 and 2004 are as follows:

- Direct materials expense decreased from $6.4 million for 2003 to $4.2
million for 2004 and as a percent of sales from 19% to 17%. This
decrease was largely due to lower contract material requirements
during 2004 as compared to 2003. Outside services expense increased
from $9.4 million for 2003 to $9.7 million for 2004 and increased as a
percent of sales from 27% to 39%. Of the outsourced services expense
for 2004, approximately $4.0 million of the $9.7 million was in excess
of amounts estimated for certain jobs and created extensive cost
overruns on those particular jobs as described in the aforementioned
Revenue section.

- Direct labor expense increased from $5.7 million for 2003 to $6.7
million for 2004 and as a percent of sales, direct labor increased
from 17% to 27%. This change was a result of us incurring a 4%
increase in direct labor hours, from 304,000 hours in 2003 to 318,000
in 2004. Of the total direct labor expense, regular or straight time
increased by $0.7 million and as a percent of sales increased from 11%
for 2003 to 18% for 2004. Overtime expense increased from $1.9 million
for 2003 to $2.3 million for 2004 and as a percent of sales increased
from 6% for 2003 to 9% for 2004. We incurred added labor costs of
approximately $3.5 million related to the construction and buy-off
difficulties noted above.

SELLING AND ADMINISTRATIVE EXPENSE.

Selling and administrative expense for 2004 increased by $0.3 million to $2.0
million as compared to $1.7 million for 2003. As a percent of sales, selling and
administrative expense increased from 5% for 2003 to 8% for 2004. This largely
consisted of increases of $141,000 in administrative and sales salaries, $79,000
in State of Michigan Single Business Tax, $50,000 in deferred compensation
expense and $38,000 in public company expenses.

INTEREST EXPENSE.

Interest expense increased from $0.8 million for 2003 to $0.9 million for 2004.
This increase was largely due to us incurring additional interest expense
related to issuance of $3.0 million subordinated debt during the fourth quarter
of 2004.

FEDERAL INCOME TAX.

Our effective income tax rates were 0% for the years ended August 31, 2003, 2004
and 2005. We had approximately $164,000 of alternative minimum tax credits as of
August 31, 2005, the use of which does not expire, and federal net operating
loss carryforwards of $7,304,000, which expire, if unused, in fiscal 2022, 2023
and 2025. We have a valuation allowance of $3,737,000 and $4,615,000 at August
31, 2004 and 2005, respectively, for net deferred tax assets, which may not
ultimately be realized.

LIQUIDITY AND CAPITAL RESOURCES.

For the fiscal year ended August 31, 2005, our cash flow generated from
operating activities was $3.5 million. This largely resulted from a decrease of
$7.8 million in accounts receivable, net of allowance for uncollectible accounts
receivable, a $2.2 million increase in contracts in process and a $1.4 million
decrease in accounts payable. From investing activities, we incurred $0.2
million in additions to property, plant and equipment and a $0.6 million
decrease in other assets consisting largely of debt financing costs, which were
expensed prior to the scheduled amortization due to retirement of the related
debt. We used net cash in financing activities of

$3.6 million. The cash used in financing activities included our May 17, 2005
new senior financing with gross proceeds of $9.2 million. We applied $4.3
million to retire our previous senior debt facility with Comerica Bank, $3.2
million to retire our subordinated debt with Hillstreet, and $0.5 million in
fees to Laurus (new lender). The net remaining funds, $1.2 million, were
utilized for general working capital purposes. Subsequent to this financing, we
have borrowed $2.5 million under the Convertible Revolving Working Capital
Credit Line to finance the increase in our contracts in process.

On May 17, 2005, we entered into a new senior loan facility agreement with
Laurus as evidenced by the Agreements. Pursuant to these Agreements, we received
a Term Loan in the aggregate principal amount of $3.2 million as well as a
Revolving Credit Facility with a maximum availability of $10.0 million. Each of
the Term Loan and any loans under the Revolving Facility shall be convertible by
Laurus into shares of our common stock at a rate of $1.66 per share. In
addition, as part of the agreement, we issued an option to purchase 650,000
shares of our Common Stock at an exercise price of $.01.

We, in issuing an option for 650,000 shares at $.01 per share, triggered price
protection provisions in previously issued warrants. Under the previous warrant
agreements, if we issued warrants or options below the strike price of the
warrants, the exercise price of the outstanding warrants would adjust to the
lower exercise price. We had previous warrants for 315,792 shares of common
stock with 157,896 shares priced at an exercise price of $5.07 per share and
157,896 priced at $5.53 per share. During 2005, certain warrant holders
exercised such warrants at the adjusted price and we issued an additional
210,528 shares of common stock.

We believe that the revolving line of credit and the funds generated from
operations, will be sufficient to cover anticipated cash needs through fiscal
2006. However, depending on the level of future sales, and the terms of such
sales, an expanded credit line or other financial instruments may be necessary
to finance increases in trade accounts receivable and contracts in process. We
believe we will be able to obtain such expanded credit line and/or other
financing, if required.

The table below presents our significant contractual obligations as of August
31, 2005:

LESS THAN 1 MORE THAN 5
TOTAL YEAR 1-3 YEARS 3-5 YEARS YEARS
----------- ----------- ----------- ---------- -----------

Debt(1) ................. $12,755,555 $3,430,704 $ 9,324,851 $ -- $ --
Operating Lease ......... 15,192,322 988,298 2,052,467 2,154,899 9,996,658
Deferred Compensation ... 42,160 42,160 -- -- --
Capital Lease ........... 12,703 7,367 5,336 -- --
----------- ---------- ----------- ---------- ----------
Total Obligations .... $28,002,740 $4,468,529 $11,382,654 $2,154,899 $9,996,658
=========== ========== =========== ========== ==========

(1) Interest obligations on the outstanding debt facilities are generally
variable in nature. Our fixed interest rate obligations apply to debt
totaling $1,008,124.

The table below presents our significant contractual obligations as of May 31,
2006:

LESS THAN 1 MORE THAN 5
TOTAL YEAR 1-3 YEARS 3-5 YEARS YEARS
----------- ----------- ----------- ---------- -----------

Debt(1) ................ $14,130,760 $3,429,645 $10,701,115 $ -- $ --
Operating Lease ........ 14,452,034 1,006,954 2,090,869 $2,195,372 $9,158,839
Capital Lease .......... 6,851 6,851 -- -- --
----------- ---------- ----------- ---------- ----------
Total Obligations ... $28,589,645 $4,443,450 $12,791,984 $2,195,372 $9,158,839
=========== ========== =========== ========== ==========

(1) Interest obligations on the outstanding debt facilities are generally
variable in nature. Our fixed interest rate obligations apply to debt
totaling $872,237.

The following table provides information on our debts that are sensitive to
changes in interest rates.

AMOUNT
AS OF MAY 31, 2006: OUTSTANDING MATURITY DATE
------------------- ----------- -------------

CONVERTIBLE REVOLVING NOTE:
Variable rate revolving credit line at an interest rate of prime rate plus
1.25% (as of May 31, 2006, an effective rate of 9.25%)........................ $8,930,250 May 17, 2008

SECURED CONVERTIBLE TERM NOTE:
At an interest rate of prime plus 4.00% (as of May 31, 2006, an effective rate
of 9.25%)..................................................................... $2,327,273 May 17, 2008

OVERFORMULA:
At an interest rate of prime plus 1.25% (as of May 31, 2006, an effective rate
of 12%)....................................................................... $2,000,000 April 1, 2007

AMOUNT
AS OF AUGUST 31, 2005: OUTSTANDING MATURITY DATE
---------------------- ----------- ----------------

CONVERTIBLE REVOLVING NOTE:
Variable rate revolving credit line at an interest rate of prime rate plus
1.25% (as of August 31, 2005, an effective rate of 8.0%)...................... $6,534,727 May 18, 2008

SECURED CONVERTIBLE TERM NOTE:
At an interest rate of prime plus 4.00% (as of August 31, 2005, an effective
rate of 10.75%)............................................................... $3,200,000 May 18, 2008

OVERFORMULA:
At an interest rate of prime plus 1.25% (as of August 31, 2005, an effective
rate of 8.0%)................................................................. $2,000,000 January 31, 2006

We are exposed to market risk from changes in interest rates on our debt
obligations. We do not currently use any derivative financial instruments to
manage our interest rate risk.

INFLATION

We have no long-term, fixed price supply contracts. Although the average set of
dies takes approximately ten months from inception to shipment, any significant
direct material costs are incurred at the beginning of the die manufacturing
process. Historically, we have been able to reflect increases in the prices of
labor and material in our selling prices, however under current industry pricing
pressures, we are unsure if this will continue to be the case in the future.

MANAGEMENT

DIRECTORS

Listed below are the names of our Directors, the year in which such
Director's respective term expires, and a brief account of the business
experience of each Director during the past five years.

TERM
NAME POSITION EXPIRES AGE
---- -------- ------- ---

Kenneth K. Rieth... President and Chief Executive Officer 2008 47
Dr. Jay S. Baron... Director 2007 40
James V. Gillette.. Director 2008 49
J.DannEngels....... Director 2006 50

KENNETH K. RIETH. Mr. Rieth has been Chief Executive Officer and President of
Riviera Tool Company since 1980.

DR. JAY S. BARON. Dr. Jay S. Baron has been a Director of Riviera Tool Company
since 2002. Dr. Baron holds a Ph.D. and Master's Degree in Industrial and
Operations Engineering. Dr. Baron currently is Director of Manufacturing Systems
for Altarum - Center for Automotive Research. Previously, Dr. Baron was the
Manager of Manufacturing Systems for the University of Michigan's OSAT
department.

JAMES V. GILLETTE. Mr. Gillette has been a Director of Riviera Tool Company
since January 2004. Mr. Gillette currently is Director of Supplier Analysis of
CSM Worldwide, a provider of specialized global automotive industry advice to
commercial and investment banks, private equity firms, investment analysts and
others. Previously, Mr. Gillette spent thirteen years as vice president of
automotive forecasting at IRN, Inc.

J. DANN ENGELS. Mr. Engels has been a Director of Riviera Tool Company since
January 2005. Mr. Engels holds Bachelor degrees in Letters and Engineering
Industrial and Operations Engineering. In addition, he holds Masters' Degrees in
both Mechanical Engineering and Industrial and Operations Engineering. Mr.
Engels is the founder and director of Global Rush, an international automotive
parts and tooling sourcing strategist, Optiprise, a lean manufacturing
consulting business, and ISC Software, a materials handling software developer.

EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES

NAME POSITION AGE
---- -------- ---

Kenneth K. Rieth... President, CEO and Director 47
Peter C. Canepa.... Secretary, Treasurer and CFO 47
Thomas J. Winters.. Vice President of Sales 64

Mr. Rieth's biography is set forth above.

PETER C. CANEPA. Mr. Canepa has been our Chief Financial Officer, Secretary and
Treasurer since March 1994.

THOMAS J. WINTERS. Mr. Winters has been our Vice President of Sales since 1997.

EXECUTIVE COMPENSATION

Directors who are employees of Riviera Tool Company receive no
additional compensation for serving on the board of directors. On an annual
basis, a non-employee director receives a fee of $5,000.

The following table provides information about the compensation of our
Chief Executive Officer and two other most highly compensated executive officers
at fiscal years ended August 31, 2003, 2004, and 2005. Two additional tables
provide detailed information about the employees' stock options.

SUMMARY COMPENSATION TABLE

OTHER RESTRICTED SECURITIES ALL
NAME AND PRINCIPAL FISCAL ANNUAL COMPENSATION ANNUAL STOCK UNDERLYING LTIP OTHER
POSITION YEAR SALARY BONUS(1) COMPENSATION AWARD OPTIONS SARS PAYOUTS COMPENSATION
------------------- ------ -------- ------------ ------------ ---------- ------------ ------- ------------

EXECUTIVE OFFICERS

Kenneth K. Rieth.... 2005 $250,000 $ -- $-- -- -- -- $--
President, CEO and 2004 $250,000 -- -- -- -- -- --
Director 2003 $250,000 $31,500 -- -- -- -- --

Peter C. Canepa..... 2005 $140,000 $20,000 $-- -- -- -- $--
Secretary, Treasurer 2004 $140,000 -- -- -- -- -- --
and CFO 2003 $140,000 -- -- -- -- -- --

OTHER EMPLOYEE

Thomas J. Winters... 2005 $140,000 $ -- $-- -- -- -- $--
Vice President of 2004 $140,000 -- -- -- -- -- --
Sales 2003 $140,000 -- -- -- -- -- --

(1) Does not include any value that might be attributable to job-related
personal benefits, the annual value of which has not exceeded the lesser of
10% of annual salary plus bonus or $50,000 for each executive officer.

OPTION GRANTS TABLE

No stock options were granted during the fiscal year ended August 31,
2005.

OPTION EXERCISES TABLE

The following table provides information on the value of options held by
each of our executive officers at August 31, 2005 measured in terms of the
closing price of our Common Shares on that day. There were no options exercised
by any officer during the year.

Number of Securities Value of Unexercised
Shares Underlying Unexercised Options In-the- Money
Acquired Value Options/SARs at August Options at August 31,
Name and Principal Position on Exercise Realized 31, 2005 Exercisable 2005
--------------------------- ----------- -------- ----------------------- ---------------------
(shares)

Kenneth K. Rieth - President,
C.E.O. & Chairman......... -- -- 100,000(1) $0
Peter C. Canepa - Secretary,
Treasurer and CFO......... -- -- 30,000(2) $0
Thomas J. Winters
Vice President of Sales... -- -- 30,000(2) $0

(1) On November 2, 1998, Mr. Rieth was granted a stock option for 50,000
shares, exercisable at $6.625 per share under the 1998 Key Employee Stock
Option Plan, expiring November 2, 2008. On November 24, 2000, Mr. Rieth was
granted a stock option for 50,000 shares, exercisable at $3.75 per share
after November 24, 2000 and expires November 2, 2009.

(2) On November 2, 1998, Messrs. Winters and Canepa were granted stock options
for 10,000 shares each, exercisable at $6.625 per share under the 1996
Incentive Employee Stock Option Plan, as amended, expiring November 2,
2008. On November 24, 2000, Messrs. Winters and Canepa were granted stock
options for 20,000 shares each, exercisable at $3.75 per share after
November 24, 2000 and expire November 2, 2009.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The members of the compensation committee during the fiscal year ended
2005 were J. Dann Engels, James V. Gillette and Dr. Jay S. Baron. Neither
Messrs. Engels, Gillette nor Dr. Baron were ever an officer or employee of us or
any of our subsidiaries, and none of them had any relationship requiring
disclosure by us under Item 404 of Regulation S-K for the fiscal year ended
2005.

COMPENSATION COMMITTEE REPORT

The duty of the Committee is to recommend to the Board of Directors
the remuneration arrangements for Kenneth K. Rieth, our President and Chief
Executive Officer, as well as grant stock options under our 1996 Incentive Stock
Option Plan, as amended, and the 1998 Key Employee Stock Option Plan. Our Board
of Directors has given Mr. Rieth the authority to set the compensation for
senior management.

COMPENSATION PROGRAMS

BASE SALARY

The Committee reviews each officer's salary annually. In determining
appropriate salary levels, consideration is given to scope of responsibility,
experience, Company and individual performance as well as pay practices of other
companies relating to executives with similar responsibility.

In addition, with respect to the base salary of Mr. Rieth, the
Compensation Committee has acknowledged the longevity of Mr. Rieth's service and
our belief that Mr. Rieth is an excellent representative within the industry. In
assessing Mr. Rieth's compensation, the committee engaged an independent firm to
perform a review of his proposed compensation. Upon completion of such review,
the Board of Directors established Mr. Rieth's base salary on April 25, 2003.
This base compensation consists of a regular payroll payment of $250,000 per
year plus an annual bonus equal to 3.5% of our income from operations before
such bonus expense. Mr. Canepa received a base salary of $140,000 for fiscal
2005.

BONUS AWARDS

Our officers may be considered for annual cash bonuses, which are
awarded to recognize and reward corporate and individual performance based on
meeting specified goals and objectives. The plan in effect for fiscal 2005 for
Mr. Rieth did not provide a bonus to Mr. Rieth. In determining a bonus to Mr.
Rieth, the Committee reviews compensation levels and financial results available
to it for chief executive officers for similarly sized companies as well as
those located near our headquarters. Mr. Rieth recommends to the Committee Mr.
Canepa's bonus based on his review of corporate and his individual performances
as well as the performance bonus the management team awards to our employees
other than Messrs. Canepa and Rieth.

STOCK OPTIONS

Under our 1996 Incentive Stock Option Plan, as amended, stock options
may be granted to our key employees including Messrs. Rieth and Canepa. The
number of options granted is determined by the subjective evaluation of the
person's ability to influence our long-term growth and profitability. For fiscal
2005, no stock options were issued under such plan.

Under our 1998 Key Employee Stock Option Plan, stock options may be
granted to our key employees and directors including Messrs. Rieth, Baron,
Engels, Gillette and Canepa. The number of options granted is determined by the
subjective evaluation of the person's ability to influence our long-term growth
and profitability. For fiscal 2005, no stock options were issued under such
plan.

Stock options are granted with an exercise price equal to the market price
of the Common Shares on the date of grant. Since the value of an option bears a
direct relationship to our stock price, it is an effective incentive for
employees to create value for shareholders. The Committee therefore views stock
options as an important component of our future compensation policy.

The Compensation Committee

James V. Gillette
Jay S. Baron, Secretary
J. Dann Engels

STOCK PERFORMANCE GRAPH

The following line graph compares the cumulative total shareholder return
for our Common Shares with the cumulative total return of the Standards & Poors
500 Composite Index and an index of our peer companies.

The comparison assumes $100 was invested on August 31, 2000 in our Common
Shares, the S & P 500 Composite Index and the peer group. The companies in the
peer group, all of which are in the automotive industry, are as follows:

Dana Corporation Hayes Lemmerz International Inc. Spartan Motors Inc.
Gentex Corporation Magna International Inc. Tower Automotive Inc
Superior Industries International Inc.

INDEXED RETURNS
Years Ending
BASE ----------------------------------------------------
PERIOD Cumulative Total Return
-------- ----------------------------------------------------
Aug. 31, Aug. 31, Aug. 31, Aug. 31, Aug. 31, Aug. 31,
Company Name/Index 2000 2001 2002 2003 2004 2005
------------------ -------- -------- -------- -------- -------- --------

RIVIERA TOOL COMPANY $100 $ 48.97 $ 47.67 $159.32 $ 67.91 $ 30.36
S & P 500 $100 $ 75.61 $ 62.01 $ 69.49 $ 77.45 $ 87.17
PEER GROUP $100 $116.14 $117.20 $129.39 $128.20 $110.48

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG RIVIERA TOOL COMPANY, THE S & P 500 INDEX
AND A PEER GROUP

(PERFORMANCE GRAPH)

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS

The following table sets forth information with respect to the
beneficial ownership of the our common stock as of May 31, 2006 with respect to
(i) each stockholder known by us to be the beneficial owner of 5% of our common
stock: (ii) each of our directors; (iii) each Executive Officer or Significant
Employee listed in the Summary Compensation Table under the heading "Executive
Compensation" and (iv) all directors and executive officers as a group. On May
31, 2006, for purposes of calculating the percentages reflected in the table,
4,257,601 shares of common stock were issued and outstanding. Unless otherwise
indicated, all persons named as beneficial owners of common stock have sole
voting power and sole investment power with respect to the shares indicated as
beneficially owned.

BENEFICIAL OWNERSHIP TABLE

COMMON
SHARES PERCENTAGE OF
NAME OF BENEFICIAL BENEFICIALLY TOTAL COMMON
HOLDER ADDRESS OWNED SHARES
------------------ ------- ------------ -------------

Kenneth K. Rieth ... 5460 Executive Parkway SE, Grand Rapids, MI 49512 769,216(1) 18.1%
J. Dann Engels...... 112 Waukazoo Drive, Holland, MI 49424 -- --
Dr. Jay S. Baron.... 1000 Victors Way, Suite 200, Ann Arbor, MI 48108 -- --
James V. Gillette... 2851 Charlevoix Drive, Grand Rapids, MI 49546 1,000 *
Peter C. Canepa..... 5460 Executive Parkway SE, Grand Rapids, MI 49512 35,512(2) 0.8%
Thomas J. Winters... 5460 Executive Parkway SE, Grand Rapids, MI 49512 20,000(2) 0.5%
------- ----
ALL DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEE AS A GROUP (6
PERSONS) 824,828 19.4%
======= ====

(1) Riviera Holding Company, 100% owned by Kenneth K. Rieth, President and CEO
of Riviera Tool Company, owns 635,250 shares of the Common Shares of
Riviera Tool Company. Amount also includes 2,100 shares of Common Shares
owned by Mr. Rieth as custodian for his minor children and 100,000 shares,
which Mr. Rieth has the right to acquire through exercise, of stock options
granted under the 1998 Key Employee Stock Option Plan.

(2) Amount includes 20,000 and 30,000 shares of which Mr. Winters and Mr.
Canepa, respectively, each have the right to acquire through exercise of a
stock option grant under the 1996 Incentive Stock Option Plan.

* Beneficial ownership of less than 0.1% of the class.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

EQUITY COMPENSATION PLAN INFORMATION
AS OF MAY 31, 2006

NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
NUMBER OF SECURITIES TO BE WEIGHTED-AVERAGE EXERCISE FUTURE ISSUANCE UNDER
ISSUED UPON EXERCISE OF PRICE OF OUTSTANDING EQUITY COMPENSATION PLANS
OUTSTANDING OPTIONS, OPTIONS, WARRANTS AND (EXCLUDING SECURITIES
WARRANTS AND RIGHTS RIGHTS REFLECTED IN COLUMN (A))
PLAN CATEGORY (a) (b) (c)
------------- -------------------------- ------------------------- -------------------------

Equity compensation plans
approved by security holders 0 $ 0 0
Equity compensation plans not
approved by security holders 181,000 shares $5.04 269,000 shares
Total 181,000 shares $5.04 269,000 shares

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None of our directors or officers, nor any proposed nominee for
election as a director, nor any person who beneficially owns, directly or
indirectly, shares carrying more than 10% of the voting rights attached to all
of our outstanding shares, nor any promoter, nor any relative or spouse of any
of the foregoing persons has any material interest, direct or indirect, in any
transaction since our incorporation or in any presently proposed transaction
which, in either case, has or will materially affect us.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The following table provides information on our debts that are sensitive to
changes in interest rates.

AMOUNT
AS OF MAY 31, 2006: OUTSTANDING MATURITY DATE
------------------- ----------- -------------

SECURED CONVERTIBLE TERM NOTE:
At an interest rate of prime plus 4.00% (as of May 31, 2006, an effective rate
of 9.25%) ................................................................. $2,327,273 May 17, 2008

OVERFORMULA:
At an interest rate of prime plus 1.25% (as of May 31, 2006, an effective rate
of 12%) ................................................................... $2,000,000 April 1, 2007

AMOUNT
AS OF AUGUST 31, 2005: OUTSTANDING MATURITY DATE
---------------------- ----------- ----------------

CONVERTIBLE REVOLVING NOTE:
Variable rate revolving credit line at an interest rate of prime rate plus
1.25% (as of August 31, 2005, an effective rate of 8.0%) ................ $6,534,727 May 18, 2008

SECURED CONVERTIBLE TERM NOTE:
At an interest rate of prime plus 4.00% (as of August 31, 2005, an effective
rate of 10.75%) ......................................................... $3,200,000 May 18, 2008

OVERFORMULA:
At an interest rate of prime plus 1.25% (as of August 31, 2005, an effective
rate of 8.0%) ........................................................... $2,000,000 January 31, 2006

We are exposed to market risk from changes in interest rates on our debt
obligations. We do not currently use any derivative financial instruments to
manage our interest rate risk.

SELLING SECURITYHOLDER

Laurus may from time to time offer and sell pursuant to this
prospectus any or all of the shares of common stock listed below. When we refer
to "Laurus" in this prospectus, we mean those persons listed in the table below,
as well as the pledgees, donees, assignees, transferees, successors and others
who later hold any of Laurus' interests. In the event that Laurus enters into a
transaction with a pledgee, donee, assignee, transferee or successor, we will
amend or supplement this prospectus to specifically name such individual as a
"Selling Securityholder".

We have agreed to file a registration statement, of which this
prospectus is a part, to register the shares of Laurus set forth in the table
below in order to permit Laurus to sell these shares from time to time as
described in "Plan of Distribution" on page 37.

We cannot determine the actual number of shares of our common stock
that we will issue, because of the variables discussed in this prospectus.
Shares of our common stock sold to Laurus will not be freely tradeable by Laurus
until they are registered under applicable securities laws or an exemption from
such registration is available. However, we are required to register for sale
all shares of our common stock issued or issuable to Laurus in connection with
the Agreements.

The table below sets forth the number of shares being registered for
sale as of the date of this prospectus and sets forth the number of shares of
common stock known by us to be beneficially owned by Laurus as of May 31, 2006.
Laurus has not had a material relationship with us within the past three years
other than as a result of the ownership of our shares of common stock or other
securities as described in this prospectus and other than in connection with
providing the credit facility discussed in this prospectus. The shares offered
by this prospectus may be offered from time to time by Laurus. The percent of
beneficial ownership for Laurus is based on 4,257,601 shares of our common stock
outstanding as of May 31, 2006. Laurus may have acquired, sold or transferred,
in transactions exempt from registration requirements of the Securities Act of
1933, as amended, some or all of their common stock since the date as of which
the information in the table is presented. We are not making any representation
that any shares covered by this prospectus will or will not be offered for
resale. Laurus reserves the right to accept or reject, in whole or in part, any
proposed sale of shares.

Information about Laurus may change over time. Any changed information
will be set forth in prospectus supplements. From time to time, additional
information concerning ownership of our common stock may rest with certain
holders thereof not named in the table below and of whom we are unaware.

NUMBER OF SHARES OF
NUMBER OF SHARES OF COMMON STOCK PERCENT OF COMMON STOCK
COMMON STOCK NUMBER OF SHARES OF BENEFICIALLY OWNED BENEFICIALLY OWNED AFTER
SELLING SECURITYHOLDER BENEFICIALLY OWNED (1) COMMON STOCK TO BE SOLD AFTER OFFERING OFFERING
---------------------- ---------------------- ----------------------- -------------------- ------------------------

Laurus Master Fund, Ltd. (2) 3,256,791 3,256,791 -0- *

* Less than one percent (1%).

(1) The figures for the number of shares and the percentage of shares
beneficially owned by Laurus after the offering are based on the assumption
that Laurus will sell all of the shares registered for sale hereby. Because
Laurus may offer all, some or none of the shares pursuant to this
prospectus, and because there are currently no agreements, arrangements or
understandings with respect to the sale of any of the shares, no estimate
can be given as to the number of shares that will be held by Laurus after
completion of the sale of shares hereunder. See "Plan of Distribution" On
page 37.

(2) The number of shares being offered in this prospectus represent the maximum
number of shares issuable in connection with the exercise of the conversion
rights having exercise prices of $1.66 per share and option rights having
an exercise price of $0.01 per, as such number may be adjusted upon the
occurrence of dilutive events in accordance with Rule 416 under the
Securities Act.

Laurus has not informed us of its current plans with respect to the
disposition of shares of our common stock which are covered by this prospectus.

DESCRIPTION OF RIVIERA TOOL COMMON STOCK

The following summary of our common stock is subject in all respects
to applicable Michigan law, our articles of incorporation and our by-laws. See
"Where You Can Find More Information" on page 3.

General

The authorized capital stock of Riviera Tool consisted of 9,798,575
shares of common stock and 205,000 shares of preferred stock, no par value. As
of May 31, 2006, 4,257,601 shares of common stock were issued and outstanding
and no shares of preferred stock were issued and outstanding. Our shares of
common stock, when issued in accordance with the various conversion rights and
option rights, will be validly issued and outstanding and will be fully paid and
non-assessable.

Transfer Agent and Registrar

Continental Stock Transfer & Trust, 17 Battery Place, New York, New
York 10064 is the transfer agent and registrar of our common stock.

Board of Directors

Our by-laws provide that the Board of Directors is divided into three
classes with each class elected for a three-year term. The Board currently
consists of four members.

Dividends

We have never declared or paid any cash dividends on our common stock.
We presently intend to retain all future earnings for use in our business and do
not anticipate paying any cash dividends on our common stock in the foreseeable
future.

Michigan Anti-Takeover Laws

Under Chapter 7A of the Michigan Business Corporation Act, "business
combinations" (defined to include, among other transactions, mergers,
consolidations, certain dispositions of assets or shares, and certain
recapitalizations) between certain corporations or their domestic subsidiaries
and an "interested shareholder" (defined as the direct or indirect beneficial
owner of at least 10% of the voting power of a covered corporation's outstanding
shares or an affiliate of the corporation which had such 10% ownership within
the preceding two years) can only be consummated if approved by at least 90% of
the votes of each class of the corporation's shares entitled to vote thereon and
by at least two-thirds of such votes not held by the interested shareholder or
its affiliates, unless certain price and other conditions imposed by Chapter 7A
are satisfied. The board of directors may elect to exempt business combinations
with a particular interested shareholder from the requirements of Chapter 7A at
any time before the interested shareholder attains that status.

Under Chapter 7B of the Michigan Business Corporation Act, "control
shares" (defined to mean shares, which when added to all other shares of the
corporation owned by a person or with respect to which that person may exercise
or direct the exercise of voting power, would entitle that person, immediately
after the acquisition of the shares, to exercise or direct the exercise of
voting power in the election of directors in excess of threshold levels of 20%,
33 1/2% or a majority of all voting power) acquired in a "control share
acquisition" (defined to include the acquisition, directly or indirectly, by any
person of ownership of or the power to exercise the voting power with respect
to, issued and outstanding control shares) have the same voting rights as were
accorded the shares before the control share acquisition only to the extent
granted by resolution approved by the shareholders of the corporation. To have
such a resolution considered by the shareholders of the corporation, the
acquiring person must deliver an "acquiring person statement" to the corporation
and the Michigan Department of Commerce, Corporations, Securities and Land
Development Bureau. To be approved by the shareholders, the resolution must be
approved by a majority of the votes cast by the holders of the common stock and
a majority of the votes cast by the holders of shares of each class or series
entitled to vote thereon, excluding "interested shares" (defined to include
shares held by the acquiring person or member of his group, an officer of the
corporation and any director who is also an employee of the corporation). The
practical effect of Chapter 7B of the Michigan Business Corporation Act is to
require that a person making a tender offer for shares of a corporation
condition the offer on shareholder approval of the person's right to vote the
shares to be acquired.

If authorized by a corporation's articles of incorporation or bylaws,
control shares acquired in a control share acquisition with respect to which no
acquiring person statement has been filed may be redeemed by the corporation at
any time more than 60 days after the end of the control share acquisition at
"fair value." If authorized by the corporation's articles of incorporation or
bylaws, control shares acquired in a control share acquisition which are not
accorded full voting rights may be redeemed by the corporation at "fair value."
Unless otherwise provided in the corporation's articles of incorporation or
bylaws, in the event that control shares acquired in a control share acquisition
are accorded full voting rights and the acquiring person has acquired a majority
of all voting power of the corporation, the shareholders of the corporation,
other than the acquiring person, have dissenters' rights. "Fair value" means a
value not less than the highest price paid per share by the acquiring person in
the control share acquisition.

The provisions of Chapter 7B automatically apply to us, although our
board of directors or our shareholders may elect to remove us from the
application of Chapter 7B. Our board of directors has no plans to elect to
remove such application and is not aware of any plans or proposals to do so.
Further, none of the provisions discussed above has been included in our
Articles of Incorporation or Bylaws.

The foregoing discussion concerning the provisions of the Michigan
Business Corporation Act is qualified in its entirety by reference to such
Michigan Business Corporation Act provisions.

Securities and Exchange Commission on Indemnification

Our by-laws provide for a broad right for indemnification for any
person who is or was involved in any manner in any threatened, pending, or
completed investigation, claim, action, suit, or proceeding by reason of the
fact that the person had agreed to become a director, officer, employee, or
agent of our company.

Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been informed that in the opinion of the Commission this type of
indemnification is against public policy as expressed in the Act and is,
therefore unenforceable. In the event that a claim for indemnification against
liabilities arising under the Securities Act (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 any 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 Securities
Act and will be governed by the final adjudication of the submitted issue.

Voting Rights

Each share of common stock is entitled to one vote in the election of
directors and other matters. Common stockholders are not entitled to preemptive
or cumulative voting rights.

Registration Rights

PLAN OF DISTRIBUTION

Laurus and any of our pledgees, assignees and successors-in-interest
may, from time to time, sell any or all of their shares of common stock on any
stock exchange, market or trading facility on which the shares are traded or in
private transactions. These sales may be at fixed or negotiated prices. Laurus
may use any one or more of the following methods when selling shares:

- ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;

- block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;

- purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;

- an exchange distribution in accordance with the rules of the
applicable exchange;

- privately negotiated transactions;

- broker-dealers may agree with Laurus to sell a specified number
of such shares at a stipulated price per share;

- a combination of any such methods of sale;

- through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise;
or

- any other method permitted pursuant to applicable law.

Laurus may also sell shares under Rule 144 under the Securities Act of
1933, if available, rather than under this prospectus.

Broker-dealers engaged by Laurus may arrange for other brokers-dealers
to participate in sales. Broker-dealers may receive commissions or discounts
from Laurus (or, if any broker-dealer acts as agent for the purchaser of shares,
from the purchaser) in amounts to be negotiated. Laurus does not expect these
commissions and discounts relating to its sales of shares to exceed what is
customary in the types of transactions involved.

In connection with the sale of our common stock or interests therein,
Laurus may enter into hedging transactions with broker-dealers or other
financial institutions. Laurus may also enter into option or other transactions
with broker-dealers or other financial institutions or the creation of one or
more derivative securities which require the delivery to such broker-dealer or
other financial institution of shares offered by this prospectus, which shares
such broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).

Laurus and any broker-dealers or agents that are involved in selling
the shares may be deemed to be "underwriters" within the meaning of the
Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Laurus has informed us that it does not have
any agreement or understanding, directly or indirectly, with any person to
distribute our common stock.

We have agreed to indemnify Laurus against certain losses, claims,
damages and liabilities, including liabilities under the Securities Act.

Because Laurus may be deemed to be an "underwriter" within the meaning
of the Securities Act, they will be subject to the prospectus delivery
requirements of the Securities Act. In addition, any securities covered by this
prospectus which qualify for sale pursuant to Rule 144 under the Securities Act
may be sold under Rule 144 rather than under this prospectus. Laurus has advised
us that it has not entered into any agreements, understandings or arrangements
with any underwriter or broker-dealer regarding the sale of the shares. There is
no underwriter or coordinating broker acting in connection with the proposed
sale of the shares by Laurus.

We agreed to keep this prospectus effective until the earlier of (i)
the date on which all the shares have been sold or (ii) the date on which the
shares may be sold immediately without registration under the Securities Act and
without volume restrictions pursuant to Rule 144(k), as determined by our
counsel. The resale shares will be sold only through registered or licensed
brokers or dealers if required under applicable state securities laws. In
addition, in certain states, the resale shares may not be sold unless they have
been registered or qualified for sale in the applicable state or an exemption
from the registration or qualification requirement is available and is complied
with.

Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the shares may not simultaneously engage
in market making activities with respect to our common stock for a period of two
business days prior to the commencement of the distribution. In addition, Laurus
will be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including Regulation M, which may limit the timing of
purchases and sales of shares of our common stock by Laurus or any other person.
We will make copies of this prospectus available to Laurus and have informed
them of the need to deliver a copy of this prospectus to each purchaser at or
prior to the time of the sale.

We will pay all expenses associated with filing and maintaining the
effectiveness of this registration statement. With the exception of any
brokerage fees and commission which are the obligation of Laurus, we are
responsible for the fees, costs and expenses of this offering which are
estimated to be $75,000, inclusive of our legal and accounting fees, printing
costs, "blue sky," filing and other miscellaneous fees and expenses.

LEGAL MATTERS

Certain legal matters with respect to the validity of our common stock
will be passed upon for us by Law Weathers & Richardson, P.C., 800 Bridgewater
Place, 333 Bridge Street N.W., Grand Rapids, Michigan, 49504. Law Weathers &
Richardson, P.C. does not have any interests in us and has never been employed
by us on a contingent basis.

EXPERTS

The financial statements as of August 31, 2005 and 2004, and for each
of the three years in the period ended August 31, 2005, included in this
prospectus have been audited by Deloitte & Touche LLP, an independent registered
public accounting firm, as stated in their report appearing herein (which report
expresses an unqualified opinion on the financial statements and includes an
explanatory paragraph referring to matters that raise a substantial doubt our
ability to continue as a going concern) and have been so included in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

We have had no disagreements on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedures with
any of our accountants for the year ended August 31, 2005.

On February 14, 2006, our Board of Directors announced the appointment
of BDO Seidman, LLP as our independent auditor.

RIVIERA TOOL COMPANY

FINANCIAL STATEMENTS

CONTENTS

Page
----

Unaudited Financial Statements

Condensed Balance sheets as of May 31, 2006 and August 31, 2005 F-2

Condensed Statements of Operations for the three month and nine month
periods ended May 31, 2006 and May 31, 2005 F-3

Condensed Statements of Cash Flows for the three month and nine month
periods ended May 31, 2006 and May 31, 2005 F-4

Notes to Unaudited Condensed Financial Statements dated May 31, 2006 F-5

Report of Independent Registered Public Accounting Firm F-8

Audited Financial Statements

Balance Sheets as of August 31, 2005 and 2004 F-9

Statements of Operations for each of the years in the three-year
period ended August 31, 2005 F-10

Statements of Common Shareholder's Equity for each of the years in the
three-year period ended August 31, 2005 F-11

Statements of Cash Flows for each of the years in the three-year
period ended August 31, 2005 F-12

Notes to Financial Statements F-13

F-1

RIVIERA TOOL COMPANY
FINANCIAL STATEMENTS

CONDENSED BALANCE SHEETS

AUGUST 31,
NOTE MAY 31, 2006 2005
---- ------------ ------------

ASSETS
CURRENT ASSETS
Cash ................................................... $ 18,900 $ 239,475
Accounts receivable, net ............................... 9,036,878 5,232,138
Costs in excess of billings on contracts in process .... 2 2,926,447 2,844,444
Inventories ............................................ 236,437 236,437
Prepaid expenses and other current assets .............. 391,587 453,597
------------ ------------
Total current assets ............................. 12,610,249 9,006,091

PROPERTY, PLANT AND EQUIPMENT, NET ........................ 3 9,822,687 10,902,845
PERISHABLE TOOLING ........................................ 610,016 708,319
OTHER ASSETS .............................................. 463,986 599,344
------------ ------------
Total assets ..................................... $ 23,506,938 $ 21,216,599
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Current portion of long-term debt ...................... 4 $ 3,436,496 $ 3,287,510
Accounts payable ....................................... 4,492,764 3,517,578
Accrued liabilities .................................... 790,046 661,833
------------ ------------
Total current liabilities ........................ 8,719,306 7,466,921

LONG-TERM AND SUBORDINATED DEBT, NET OF
UNAMORTIZED DISCOUNT ...................................... 4 10,242,865 8,870,045
ACCRUED LEASE EXPENSE ..................................... 970,784 897,885
------------ ------------
Total liabilities ................................ 19,932,955 17,234,851
------------ ------------
PREFERRED STOCK - no par value,
$100 mandatory redemption value:
Authorized - 5,000 shares
Issued and outstanding - no shares .................. -- --

STOCKHOLDERS' EQUITY:
Preferred stock - no par value,
Authorized - 200,000 shares
Issued and outstanding - no shares .................. -- --
Common stock - No par value:
Authorized - 9,785,575 shares
Issued and outstanding - 4,257,601 shares and
3,984,874 shares as of May 31, 2006 and August 31,
2005, respectively .................................. 17,280,483 17,130,483
Retained deficit ....................................... (13,706,500) (13,148,735)
------------ ------------
Total stockholders' equity ....................... 3,573,983 3,981,748
------------ ------------
Total liabilities and stockholders' equity ................ $ 23,506,938 $ 21,216,599
============ ============

See notes to condensed financial statements

F-2

RIVIERA TOOL COMPANY
CONDENSED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED ENDED
----------------------- -------------------------
MAY 31, MAY 31, MAY 31, MAY 31,
2006 2005 2006 2005
---------- ---------- ----------- -----------

SALES ............................................. $6,136,378 $4,687,278 $19,152,162 $14,220,838
COST OF SALES ..................................... 4,957,607 4,106,830 16,410,546 12,297,177
---------- ---------- ----------- -----------
GROSS PROFIT ................................... 1,178,771 580,448 2,741,616 1,923,661
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES ........................ 670,472 660,103 1,834,002 2,106,934
---------- ---------- ----------- -----------
INCOME/(LOSS) FROM OPERATIONS .................. 508,299 (79,655) 907,614 (183,273)
OTHER EXPENSE
INTEREST EXPENSE ............................ 431,408 391,737 1,321,210 1,139,822
OTHER EXPENSE ............................... 58,500 304,424 144,168 345,198
---------- ---------- ----------- -----------
TOTAL OTHER EXPENSE ............................ 489,908 696,161 1,465,378 1,485,020
INCOME/(LOSS) BEFORE INCOME TAXES ................. 18,391 (775,816) (557,764) (1,668,293)
---------- ---------- ----------- -----------
INCOME TAXES ...................................... -- -- -- --
---------- ---------- ----------- -----------
NET INCOME/(LOSS) ................................. $ 18,391 $ (775,816) $ (557,764) $(1,668,293)
========== ========== =========== ===========
BASIC AND DILUTED INCOME/(LOSS) PER COMMON SHARE .. $ -- $ (.20) $ (.13) $ (.44)
========== ========== =========== ===========
WEIGHTED-AVERAGE BASIC AND DILUTED
COMMON SHARES OUTSTANDING ...................... 4,257,601 3,807,527 4,152,706 3,785,569
========== ========== =========== ===========

See notes to condensed financial statements

F-3

RIVIERA TOOL COMPANY
CONDENSED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED ENDED
------------------------- -------------------------
MAY 31, MAY 31, MAY 31, MAY 31,
2006 2005 2006 2005
----------- ----------- ----------- -----------

CASH FLOWS FROM OPERATING ACTIVITIES
Net income/(loss) ...................................... $ 18,390 $ (775,816) $ (557,764) $(1,668,293)
Adjustments to reconcile net income/(loss) to net cash
From operating activities:
Depreciation and amortization ....................... 471,489 427,701 1,414,467 1,283,103
(Increase) decrease in assets:
Accounts receivable .............................. (1,040,564) 311,319 (3,804,740) 10,458,316
Costs in excess of billings on contracts in
process ....................................... 70,156 (833,342) (82,003) (2,736,016)
Perishable tooling ............................... 75,016 23,614 98,303 (7,426)
Prepaid expenses and other current assets ........ (21,365) 337,272 62,010 298,787
Increase (decrease) in liabilities:
Accounts payable ................................. 486,046 (617,115) 975,186 (1,040,451)
Accrued lease expense ............................ 47,873 23,292 72,899 69,876
Accrued liabilities .............................. (30,654) 67 128,213 326,353
Deferred compensation ............................ -- -- -- (166,474)
----------- ----------- ----------- -----------
Net cash provided by/(used in) operating activities ....... $ 76,387 $(1,103,008) $(1,693,429) $ 6,817,775
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease/(increase) in other assets .................... 49,670 (55,163) 135,358 24,291
Deletions/(additions) to property, plant and
equipment ........................................... (55,260) (7,074) (111,262) (254,163)
----------- ----------- ----------- -----------
Net cash provided by/(used in) investing activities ....... $ (5,590) $ (62,237) $ 24,096 $ (229,872)
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repayments) on revolving credit line ... 69,750 -- 2,395,523 --
Proceeds from sale common of stock ..................... -- 3,158 150,000 3,158
Deferred interest ...................................... -- (141,500) -- (141,500)
Principal payments on notes payable/overformula ........ (375,327) -- (1,090,912) (42,300)
Proceeds from issuance of convertible debt ............. -- 3,200,000 -- 3,200,000
Proceeds from issuance of convertible revolving note ... -- 4,031,127 -- 4,031,127
Proceeds from overformula note ......................... -- 2,000,000 -- 2,000,000
Debt issuance costs .................................... -- (579,491) -- (579,491)
Repayments of bank revolving note ...................... -- (2,595,878) -- (9,849,532)
Repayments of bank term debt ........................... -- (1,589,777) -- (1,835,100)
Repayments of subordinated debt ........................ -- (3,000,000) -- (3,000,000)
Decrease of capital lease .............................. (1,983) (1,984) (5,853) (5,853)
----------- ----------- ----------- -----------
Net cash provided by/(used in) financing activities ....... $ (446,124) $ 1,325,655 $ 1,448,758 $(6,219,491)
----------- ----------- ----------- -----------
NET INCREASE/(DECREASE) IN CASH ........................... $ (375,327) $ 160,410 $ (220,575) $ 368,412
CASH - Beginning of Period ................................ 394,227 209,202 239,475 1,200
----------- ----------- ----------- -----------
CASH - End of Period ...................................... $ 18,900 $ 369,612 $ 18,900 $ 369,612
=========== =========== =========== ===========

See notes to condensed financial statements

F-4

RIVIERA TOOL COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS

MAY 31, 2006

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited interim condensed financial statements (the
"Financial Statements") of Riviera Tool Company (the "Company") have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Accordingly, the Financial Statements do
not include all the information and footnotes normally included in the annual
financial statements prepared in accordance with generally accepted accounting
principles. The August 31, 2005 amounts are derived from the audited financial
statements as of and for the year ended August 31, 2005 contained herein on page
F-8

In the opinion of management, the Financial Statements reflect all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
such information in accordance with generally accepted accounting principles.
The Financial Statements should be read in conjunction with the financial
statements and footnotes thereto included in the Company's Form 10-K dated
November 30, 2005, for the fiscal year ended August 31, 2005.

The Financial Statements have been prepared on a going concern basis, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. During fiscal 2005, the Company sustained a loss
from operations of $498,282 and a net loss of $2,502,248. This loss resulted in
an accumulated deficit of $13,148,735 as of August 31, 2005. These factors,
among other things, raise substantial doubt about the Company's ability to
continue as a going concern. For the three-month and nine-month periods ended
May 31, 2006, the Company had net income of $18,390 and a net loss of $557,764,
respectively. The financial statements do not include any adjustments relating
to the recoverability and classification of recorded asset amounts or the
amounts and classification of liabilities that might be necessary should the
Company be unable to continue as a going concern.

The Company believes that the revolving line of credit and the funds generated
from operations, will be sufficient to cover anticipated cash needs for the
foreseeable future. However, depending on the Company's level of future sales,
terms of such sales, financial performance and cash flow of existing contracts
such financing may not be sufficient to support operations. Therefore, the
Company may be required to seek additional sources of funding.

The results of operations for the three-month and nine-month periods ended May
31, 2006 may not be indicative of the results to be expected for the full year.

NOTE 2 - COSTS AND BILLINGS ON CONTRACTS IN PROCESS

Costs and billings on contracts in process are as follows:

MAY 31, AUGUST 31,
2006 2005
----------- ----------

Costs incurred on contracts in process under the percentage
of completion method ....................................... $12,995,257 $7,042,817
Estimated gross profit/(loss) ................................. 444,000 (25,000)
----------- ----------
Total ..................................................... 13,439,257 7,017,817
Less progress payments received and progress billings to
date ...................................................... 10,512,810 4,173,373
----------- ----------
Costs in excess of billings on contracts in process ....... $ 2,926,447 $2,844,444
----------- ----------

Included in estimated gross profit as of May 31, 2006 and August 31, 2005, are
jobs with losses accrued of $659,516 and $190,430, respectively.

F-5

RIVIERA TOOL COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS

MAY 31, 2006

NOTE 3 - PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net consist of the following:

MAY 31, AUGUST 31,
CATEGORY 2006 2005
-------- ----------- -----------

Leasehold improvements .......................... $ 1,923,740 $ 1,489,302
Office furniture and fixtures ................... 99,931 174,524
Machinery and equipment ......................... 21,109,657 23,135,344
Computer equipment and software ................. 1,255,233 2,854,788
Transportation equipment ........................ 102,036 109,782
----------- -----------
Total cost ................................... 24,490,597 27,763,740
Less Accumulated depreciation and amortization .. 14,667,910 16,860,895
----------- -----------
Net carrying amount .......................... $ 9,822,687 $10,902,845
----------- -----------

NOTE 4 - LONG-TERM AND SUBORDINATED DEBT

Long-term and Subordinated debt consists of the following:

MAY 31, AUGUST 31,
DEBT TYPE 2006 2005
--------- ---------- ----------

CONVERTIBLE REVOLVING NOTE

The convertible revolving working capital
credit line is collateralized by substantially
all assets of the Company and provides for
borrowings, subject to certain collateral
requirements, up to $11 million. The credit
line is due May 17, 2008, and bears interest,
payable monthly, at 1.25% above prime rate (as
of May 31, 2006, an effective rate of 9.25%)... $8,930,250 $6,534,727

OVERFORMULA

The overadvance loan is payable in monthly
installments of $191,667 commencing April 1,
2006, plus interest at 1.25% above prime rate
(as of May 31, 2006, an effective rate of
9.25%), due April 1, 2007...................... 2,000,000 2,000,000

SECURED CONVERTIBLE TERM NOTE

The convertible term note is payable in
monthly installments of $96,970, plus interest
at prime rate plus 4%, (as of May 31, 2006, an
effective rate of 12%), due May 17, 2008....... 2,327,273 3,200,000

F-6

RIVIERA TOOL COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS

MAY 31, 2006

NOTE 4 - LONG-TERM AND SUBORDINATED DEBT - CONTINUED

MAY 31, AUGUST 31,
DEBT TYPE 2006 2005
--------- ----------- -----------

NOTES PAYABLE TO BANK

Subordinated note payable to bank, payable in
monthly installments of $31,000, including interest at
11%, due January 1, 2008 .............................. 873,237 1,008,124

OTHER

Other .................................................... 6,851 12,704
----------- -----------
Total long-term and subordinated debt ................. 14,137,611 12,755,555
----------- -----------
Less: unamortized debt discount ....................... 458,250 598,000
Less: current portion of long-term debt and unamortized
debt discount ...................................... 3,436,496 3,287,510
----------- -----------
Long-term and subordinated debt, net of unamortized
discount ........................................ $10,242,865 $ 8,870,045
=========== ===========

On December 9, 2005, the Company agreed to convert $150,000 of principal of its
Convertible Term Note into 272,727 shares of common stock at a conversion rate
of $.55 per share. Under such conversion, the Company was not required to pay
the Convertible Term Note monthly installment for January 2006 ($96,970) with
the balance ($53,030) being applied towards the February payment.

F-7

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
Riviera Tool Company
Grand Rapids, Michigan

We have audited the accompanying balance sheets of Riviera Tool Company (the
"Company") as of August 31, 2005 and 2004, and the related statements of
operations, common stockholders' equity and cash flows for each of the three
years in the period ended August 31, 2005. 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 standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, 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, such financial statements present fairly, in all material
respects, the financial position of Riviera Tool Company as of August 31, 2005
and 2004, and the results of its operations and its cash flows for each of the
three years in the period ended August 31, 2005 in conformity with accounting
principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that Riviera
Tool Company will continue as a going concern. As discussed in Note 2 to the
financial statements, at August 31, 2005, the Company has significant current
debt, was not in compliance with certain terms of its debt agreements, and had
losses from operations and a retained deficit that raise substantial doubt about
its ability to continue as a going concern. Management's discussion concerning
these matters are also described in Note 2. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

/s/ DELOITTE & TOUCHE LLP

Grand Rapids, Michigan
November 30, 2005

F-8

RIVIERA TOOL COMPANY

BALANCE SHEETS

AUGUST 31
---------------------------
NOTE 2004 2005
---- ------------ ------------

ASSETS

CURRENT ASSETS
- Cash .......................................................... $ 1,200 $ 239,475
- Accounts receivable, net ...................................... 13,075,285 5,232,138
- Costs in excess of billings on contracts in process ........... 4 669,143 2,844,444
- Inventories ................................................... 5 238,301 236,437
- Prepaid expenses and other current assets ..................... 235,203 453,597
------------ ------------
Total current assets ......................................... 14,219,132 9,006,091

- Property, plant and equipment, net ............................ 6 12,328,746 10,902,845
- Perishable tooling ............................................ 726,704 708,319
- Other assets .................................................. 623,635 599,344
------------ ------------
Total assets ................................................. $ 27,898,217 $ 21,216,599
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
- Current portion of long-term debt ............................. 7 $ 15,742,669 $ 3,287,510
- Accounts payable .............................................. 4,908,893 3,517,578
- Accrued liabilities ........................................... 521,193 661,833
------------ ------------
Total current liabilities .................................... 21,172,755 7,466,921

- Long-term and subordinated debt, net of unamortized discount .. 7 12,703 8,870,045
- Accrued lease expense ......................................... 9 740,894 897,885
- Deferred compensation ......................................... 10 166,474 --
- Deferred interest ............................................. 25,500 --
------------ ------------
Total liabilities ............................................ 22,118,326 17,234,851
Preferred Stock
- Preferred stock -- no par value,
$100 mandatory redemption value:
Authorized-5,000 shares, Issued and
outstanding- no shares ....................................... -- --
- Preferred stock -- no par value,
Authorized -- 200,000 shares
Issued and outstanding -- no shares .......................... -- --
Common stockholders' equity
- Common stock -- no par value,
Authorized -- 9,798,575 shares
Issued and outstanding -- 3,774,346 shares at
August 31, 2004 and 3,984,874 at August 31, 2005 ............. 16,426,378 17,130,483
- Retained deficit .............................................. (10,646,487) (13,148,735)
------------ ------------
Total common stockholders' equity ............................ 5,779,891 3,981,748
------------ ------------
Total liabilities and stockholders' equity ................ $ 27,898,217 $ 21,216,599
============ ============

See Notes to Financial Statements

F-9

RIVIERA TOOL COMPANY

STATEMENTS OF OPERATIONS

YEAR ENDED AUGUST 31
---------------------------------------
2003 2004 2005
----------- ----------- -----------

SALES ............................................... $34,084,111 $24,689,221 $19,273,505
COST OF SALES ....................................... 30,707,447 30,038,654 16,981,201
----------- ----------- -----------
GROSS PROFIT (LOSS) ................................. 3,376,664 (5,349,433) 2,292,304
SELLING AND ADMINISTRATIVE EXPENSES ................. 1,689,192 2,013,594 2,790,586
----------- ----------- -----------
INCOME (LOSS) FROM OPERATIONS ....................... 1,687,472 (7,363,027) (498,282)

OTHER INCOME (EXPENSE):
- INTEREST EXPENSE ............................... (779,074) (871,900) (1,643,299)
- OTHER .......................................... (8,348) (6,551) (15,469)
- SUBORDINATED DEBT FINANCING COSTS .............. -- -- (345,198)
----------- ----------- -----------
TOTAL OTHER EXPENSE, NET ............................ (787,422) (878,451) (2,003,966)
INCOME (LOSS) -- BEFORE INCOME TAX BENEFIT .......... 900,050 (8,241,478) (2,502,248)
----------- ----------- -----------
INCOME TAX BENEFIT .................................. -- -- --
----------- ----------- -----------
NET INCOME (LOSS) AVAILABLE FOR COMMON SHARES ....... $ 900,050 $(8,241,478) $(2,502,248)
=========== =========== ===========
BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE .. $ 0.27 $ (2.18) $ (.65)
=========== =========== ===========
WEIGHTED-AVERAGE BASIC AND DILUTED
COMMON SHARES OUTSTANDING ........................ 3,379,609 3,774,346 3,835,750

See Notes to Financial Statements

F-10

RIVIERA TOOL COMPANY

STATEMENTS OF COMMON STOCKHOLDERS' EQUITY

COMMON STOCK TOTAL
----------------------- RETAINED STOCKHOLDERS'
SHARES AMOUNT DEFICIT EQUITY
--------- ----------- ------------ -------------

Balance -- August 31, 2002 .. 3,379,609 $15,115,466 $ (3,305,059) $11,810,407
========= =========== ============ ===========
- Net income ............. -- -- 900,050 900,050
Balance -- August 31, 2003 .. 3,379,609 $15,115,466 $ (2,405,009) $12,710,457
========= =========== ============ ===========
- Sale of Common Stock ... 394,737 1,310,912 -- 1,310,912
- Net loss ............... -- -- (8,241,478) (8,241,478)
========= =========== ============ ===========
Balance -- August 31, 2004 .. 3,774,346 $16,426,378 $(10,646,487) $ 5,779,891
========= =========== ============ ===========
- Sale of Common Stock ... 210,528 2,105 -- 2,105
- Issuance of Options .... -- 702,000 -- 702,000
- Net loss ............... -- -- (2,502,248) (2,502,248)
--------- ----------- ------------ -----------
Balance -- August 31, 2005 .. 3,984,874 $17,130,483 $(13,148,735) $ 3,981,748
========= =========== ============ ===========

See Notes to Financial Statements

F-11

RIVIERA TOOL COMPANY

STATEMENTS OF CASH FLOWS

YEAR ENDED AUGUST 31
---------------------------------------
2003 2004 2005
----------- ----------- -----------

CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ....................................... $ 900,050 $(8,241,478) $(2,502,248)
Adjustments to reconcile net income (loss) to net cash
from operating activities:
- Depreciation and amortization ......................... 1,839,801 1,757,862 1,673,470
- Issuance of options ................................... -- -- 104,000

Decrease (increase) in assets:
- Accounts receivable ................................... (4,110,964) (6,065,246) 7,843,147
- Costs in excess of billings on contracts in
process ............................................ (8,220,320) 11,539,523 (2,175,301)
- Inventories ........................................... 2,010 10,258 1,864
- Perishable tooling .................................... (69,116) (108,982) 18,385
- Prepaid expenses and other current assets ............. (109,830) 58,940 (218,394)

Increase (decrease) in liabilities:
- Accounts payable ...................................... 3,325,775 (111,662) (1,391,315)
- Accrued outsourced contracts payable .................. 5,903,930 (5,903,930) --
- Accrued lease expense ................................. (12,275) 100,204 156,991
- Accrued liabilities ................................... (35,045) 85,297 140,690
- Deferred compensation ................................. -- 166,475 (166,474)
----------- ----------- -----------
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES ....... (585,984) (6,712,739) 3,484,815

CASH FLOWS FROM INVESTING ACTIVITIES
- (Increase) decrease in other assets ................... (22,138) (298,437) 603,732
- Purchases of property, plant and equipment ............ (414,211) (1,040,319) (247,569)
----------- ----------- -----------
NET CASH USED IN INVESTING ACTIVITIES ................ (436,349) (1,338,756) 356,163

CASH FLOWS FROM FINANCING ACTIVITIES
- Proceeds from issuance of convertible term debt ....... -- -- 3,200,000
- Proceeds from issuance of convertible revolving
note ............................................... -- -- 6,534,727
- Proceeds from overformula note ........................ -- -- 2,000,000
- Debt issue costs ...................................... -- -- (579,491)
- Net borrowings (repayments) on revolving credit
line ............................................... (517,640) 3,867,172 (9,849,532)
- Proceeds from issuance of long-term debt .............. -- 435,100 --
- Principal payments on long-term debt .................. (797,770) (606,059) (1,877,646)
- Proceeds from issuance of subordinated debt ........... -- 3,000,000 --
- Repayment of subordinated debt ........................ -- -- (3,000,000)
- Increase/ (decrease) of capital lease ................. -- 20,070 (7,366)
- Deferred interest ..................................... -- 25,500 (25,500)
- Proceeds from sale of common stock .................... -- 1,310,912 2,105
----------- ----------- -----------
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES ....... (1,315,410) 8,052,695 (3,602,703)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH ......................... (2,337,743) 1,200 238,275
----------- ----------- -----------
Cash -- beginning of year ............................... 2,337,743 -- 1,200
Cash -- end of year ..................................... $ -- $ 1,200 $ 239,475
=========== =========== ===========
Interest paid ........................................... $ 788,496 $ 481,900 $ 1,414,728

See Notes to Financial Statements

F-12

RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS

NOTE 1 -- NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS.

Riviera Tool Company (the "Company") designs, develops and manufactures
custom and complex large scale metal stamping die systems used in the
high-speed production of sheet metal stamped parts and assemblies for the
automotive industry. These systems are mainly sold to DaimlerChrysler, Ford
Motor Company, General Motors Corporation, Mercedes-Benz, BMW and their
tier one suppliers of sheet metal stamped parts and assemblies.

USE OF ESTIMATES.

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Although
management believes the estimates are reasonable, actual results could
differ from those estimates.

SIGNIFICANT ESTIMATES.

The most significant estimates made by the Company are in the determination
and recognition of revenue on contracts in process. Management's best
estimates of costs to complete are based on costs incurred, engineers' cost
projections, experience with customers or particular die systems and other
analyses. Although management's estimates are not expected to materially
change in the near term, the costs the Company could ultimately incur could
differ from the amounts estimated.

REVENUE RECOGNITION.

The Company recognizes revenue on time and material contracts utilizing the
completed-contract method. Revenue is recognized on all other contracts
utilizing the percentage-of-completion method. Under the completed-contract
method, the contract is considered complete when all costs have been
incurred and the project has been approved by the customer. Under the
percentage-of-completion method estimated contract earnings are based on
total estimated contract profits multiplied by the ratio of labor hours
incurred to total estimated labor hours on the contract. Provisions for
total estimated losses on contracts in process are recognized in the period
such losses are determined. Changes in job performance, conditions and
estimated profitability may result in revisions to costs and income and are
recognized in the period such revisions are determined.

ACCOUNTS RECEIVABLE.

As of August 31, 2004 and 2005, the Company had a $0 and $153,124 reserve
for estimated uncollectible accounts receivable, and had $162,795 and
$84,365 of unbilled accounts receivable (completed contracts for which
revenue earned exceeds amounts billed), respectively.

INVENTORIES.

Inventories are recorded at the lower of cost (first-in, first-out method)
or market.

PROPERTY, PLANT AND EQUIPMENT.

Property, plant and equipment are recorded at cost. Depreciation is
computed using the straight-line method over the useful life of the asset
for financial reporting purposes as follows:

F-13

RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS

NOTE 1 -- NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

PROPERTY, PLANT AND EQUIPMENT - CONTINUED

ASSET USEFUL LIVES
----- ------------

- Leasehold Improvements ............................. 7-20
- Office Furniture and Fixtures ...................... 3-10
- Machinery and Equipment ............................ 5-20
- Computer Equipment and Software .................... 5-20
- Transportation Equipment ........................... 5-10

Expenditures for maintenance and repairs are charged to expense as
incurred. The Company capitalizes interest cost associated with
construction in process. There was no capitalized interest in 2003, 2004
and 2005.

IMPAIRMENT OF LONG-LIVED ASSETS.

The Company reviews long-lived assets for impairment if changes in
circumstances or the occurrence of events suggest the remaining value may
not be recoverable. An asset is deemed impaired and written down to its
fair value if estimated related total future undiscounted cash flows are
less than its book (carrying) value. The Company, in performing its
evaluation of long-lived assets for impairment, utilized financial
projections for five future years including total undiscounted cash flow.
The analysis concluded that the estimated total undiscounted future cash
flows were in excess of the carrying value of long-lived assets. Had the
analysis concluded that the total undiscounted future cash flows been below
the carrying value, an impairment charge of the difference between the
carrying value and the lower of the total discounted cash flows or fair
value would have been recorded.

PERISHABLE TOOLING.

Perishable tools are generally used up over five years, reported at cost as
non-current assets in the balance sheet and amortized evenly over their
useful lives.

INCOME TAXES.

Deferred income tax assets and liabilities are computed for differences
between the financial statement and tax bases of assets and liabilities
that will result in taxable or deductible amounts in the future. Such
deferred income tax asset and liability computations are based upon enacted
tax laws and rates applicable to periods in which the differences are
expected to affect taxable income. Valuation allowances are established
when necessary to reduce deferred tax assets to the amounts expected to be
realized. Income tax expense is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax assets
and liabilities.

EARNINGS PER SHARE.

Basic earnings per share ("EPS) excludes dilution and is computed by
dividing earnings/(loss) available to common stockholders by the
weighted-average common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised. Diluted EPS is computed by
increasing the weighted average number of shares outstanding by the
dilutive effect, if any, of the issuance of common stock for options
outstanding under the 1996 Incentive Employee Stock Option Plan, as
amended, 1998 Key Employee Stock Option Plan, convertible debt and the
other non-employee options. Weighted average shares issuable upon the
exercise of stock options that were not included in the (loss) earnings per
share calculations were 650,000 in the period ended August 31, 2005.

STOCK-BASED COMPENSATION.

The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-based Compensation," and as
permitted by this standard, will continue to apply the recognition and
measurement principles prescribed under Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees", to its stock-based
compensation (see Note 10). No stock-based compensation cost is

F-14

RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS

NOTE 1 -- NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

STOCK-BASED COMPENSATION - CONTINUED.

reflected in net income (loss), as all options granted under its plan had
an exercise price equal to the market value of the underlying common stock
on the date of grant. Had the Company applied the fair value recognition
principles of SFAS No. 123, there would be no impact on net income (loss)
as of August 31, 2003, 2004 and 2005.

BUSINESS SEGMENT REPORTING.

Based on the nature of its operations and products, the Company considers
its business to be a single operating segment.

NEW ACCOUNTING STANDARDS.

In December, 2004, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 123 (R),
"Share-Based Payments" that will require compensation costs related to
share-based payment transactions to be recognized in the financial
statements. With limited exceptions, the amount of compensation cost will
be measured based on the grant date fair value of the equity or liability
instruments issued. In addition, liability awards will be re-measured each
reporting period. Compensation costs will be recognized over the period
that an employee provides services in exchange for the award. SFAS No. 123
(R) replaces SFAS No. 123, "Accounting for Stock-Based Compensation", and
supercedes Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees", and related interpretations. SFAS No. 123 (R)
becomes effective at the beginning of our fiscal year ending August 31,
2006. We expect that the impact of adopting SFAS No. 123 (R) will not be
material.

NOTE 2 -- BASIS OF PRESENTATION

The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. During 2005, the Company sustained
a loss from operations of $498,282 and a net loss of $2,502,248. This loss
resulted in an accumulated deficit of $13,148,735 as of August 31, 2005. These
factors, among other things, raise substantial doubt about the Company's ability
to continue as a going concern. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts or the amounts and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern.

The Company believes that the revolving line of credit and the funds generated
from operations, will be sufficient to cover anticipated cash needs through
fiscal 2006. However, depending on Company's primary lenders' willingness to
extend the due date of the overadvance facility as well as the level of future
sales, terms of such sales, financial performance and cash flow of existing
contracts such financing may not be sufficient to support operations. Therefore,
the Company may be required to seek additional sources of funding.

NOTE 3 -- SALES TO MAJOR CUSTOMERS

The nature of the Company's business is such that a limited number of customers
comprise a majority of its business in any given year, even though the specific
customers will differ from year to year. The following table summarizes the
Company's sales to customers that represent more than 10% of the annual sales,
in the particular year presented, of the Company (in 000's):

F-15

RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS

NOTE 3 -- SALES TO MAJOR CUSTOMERS - CONTINUED

AUGUST 31
---------------------------------------------
CUSTOMER 2003 % 2004 % 2005 %
-------- ------- --- ------- --- ------- ---

- General Motors ...... $ 450 1% $ 938 4% $ 3,425 18%
- L+W Engineering ..... -- -- -- -- 2,429 13%
- DaimlerChrysler AG .. 1,925 6% 209 1% 1,372 7%
- Oxford Automotive ... 19,152 56% 18,640 75% 1,022 5%
- Others .............. 12,557 37% 4,902 20% 11,026 57%
------- --- ------- --- ------- ---
Total Sales ........ $34,084 100% $24,689 100% $19,274 100%

Outstanding account receivables from three of these customers represented
approximately 90 percent and 60 percent at August 31, 2004 and 2005 of the total
accounts receivable, respectively.

During the year ended August 31, 2005, Gestamp Alabama ("Gestamp"), the alleged
successor to Oxford Automotive, Inc. ("Oxford") and Mercedes-Benz U.S.
International, Inc. ("MBUSI") brought a civil action against the Company. On
August 1, 2005, the Company reached a Settlement Agreement and Mutual Release
with Gestamp and MBUSI. Under such settlement, Gestamp and MBUSI paid certain
claims against the Company by its' subcontactors and the Company has agreed to
provide certain services to Gestamp and MBUSI over the next three years. The
value of such services total $1.8 million which was accrued and expensed in
fiscal 2004 and is recorded as a liability of the Company on its August 31, 2005
balance sheet.

NOTE 4 -- COSTS AND BILLINGS ON CONTRACTS IN PROCESS

Costs and billings on contracts in process are as follows:

AUGUST 31
------------------------
2004 2005
----------- ----------

- Costs incurred on contracts in process under the
percentage-of-completion method ...................... $22,265,744 $7,042,817
- Estimated net gross loss .............................. (4,250,000) (25,000)
----------- ----------
Total ................................................ 18,015,744 7,017,817

- Less progress payments received and billings to date 17,586,991 4,173,373
- Plus costs incurred on contracts in process under the
completed contract method ............................ 240,390 --
----------- ----------
Costs in excess of billings on contracts in
process ........................................... $ 669,143 $2,844,444

Included in estimated gross loss for 2004 and 2005 are contracts with estimated
losses accrued of $5,190,491 and $190,430, respectively.

NOTE 5 -- INVENTORIES

Inventories consist of the following:

AUGUST 31
-------------------
2004 2005
-------- --------

- Raw material stock........ $140,513 $122,933
- Small tools and supplies.. 97,788 113,504
-------- --------
Total.................... $238,301 $236,437
======== ========

F-16

RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS

NOTE 6 -- PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

AUGUST 31
-------------------------
2004 2005
----------- -----------

- Leasehold improvements ...................... $ 1,367,908 $ 1,489,302
- Office furniture and fixtures ............... 169,129 174,524
- Machinery and equipment ..................... 23,080,863 23,135,344
- Computer equipment and software ............. 2,788,489 2,854,788
- Transportation equipment .................... 109,782 109,782
----------- -----------
Total cost ................................. 27,516,171 27,763,740
- Accumulated depreciation and amortization ... 15,187,425 16,860,895
----------- -----------
Property, plant and equipment, net ......... $12,328,746 $10,902,845
=========== ===========
- Depreciation & amortization expense ......... $ 1,757,862 $ 1,673,470

NOTE 7 -- LONG-TERM AND SUBORDINATED DEBT

The Company's long-term and subordinated debt, which is subject to certain
covenants discussed below, consists of the following:

AUGUST 31,
-----------------------
DEBT TYPE 2004 2005
--------- ---------- ----------

CONVERTIBLE REVOLVING NOTE

- The convertible revolving working capital
credit line is collateralized by
substantially all assets of the Company and
provides for borrowing, subject to certain
collateral requirements, up to $10 million.
The credit line is due May 17, 2008, and
bears interest, payable monthly, at 1.25%
above prime rate (as of August 31, 2005, an
effective rate of 8.0%) ....................... $ -- $6,534,727

OVERFORMULA

- The overadvance loan is due January 31, 2006
and bears interest at prime rate plus 1.25%
(as of August 31, 2005, an effective rate of
8.0%) ......................................... -- 2,000,000

REVOLVING WORKING CAPITAL CREDIT LINE

- The credit line was repaid on May 17, 2005 .... 9,849,532 --

SECURED CONVERTIBLE TERM NOTE

- The convertible term note, payable in monthly
installments of $96,969.70 commencing
September 1, 2005, plus interest at prime
rate plus 4%, (as of August 31, 2005, an
effective rate of 10.75%) commencing
August 1, 2005, due May 17, 2008 .............. -- 3,200,000

NOTES PAYABLE TO BANK

- Note payable to bank repaid on May 17, 2005 ... 1,835,100 --

F-17

RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS

NOTE 7 -- LONG-TERM AND SUBORDINATED DEBT - CONTINUED

AUGUST 31,
-------------------------
DEBT TYPE 2004 2005
--------- ----------- -----------

- Subordinated note payable to bank, payable in
monthly installments of $31,000, including
interest at 11%, due January 1, 2008 1,050,670 1,008,124

SUBORDINATED DEBT

- Subordinated note payable repaid on May 17,
2005. 3,000,000 --

OTHER

- Other 20,070 12,704
----------- -----------
Total debt ............................................... 15,755,372 12,755,555
----------- -----------
Less: long-term portion of unamortized debt discount -- 598,000
Less: current portion of long-term debt and unamortized
debt discount .......................................... 15,742,669 3,287,510
----------- -----------
Long-term debt, net of unamortized discount ............ $ 12,703 $ 8,870,045
=========== ===========

On May 17, 2005, the Company executed a new senior loan facility agreement with
Laurus Master Fund LTD. ("Laurus"). Under such financing, the Company entered
into a Securities Purchase Agreement and a Security Agreement (collectively, the
"Agreements"). Pursuant to these agreements, the Company received a Secured
Convertible Term Loan (the "Term Loan") in the aggregate principal amount of
$3.2 million as well as a Revolving Credit Note (the "Revolving Facility") with
a maximum availability of $10.0 million. The Agreement is subject to certain
restrictions and various covenants, including a borrowing base formula of ninety
percent of eligible accounts receivable and fifty percent of the lesser of
work-in-process inventory or $5 million. The Term Loan monthly installments may
be paid in Company common stock if the average closing price of the Company's
common stock for five trading days prior to due date is greater or equal to 115%
of the fixed conversion price ($1.66) and the amount of such conversion does not
exceed 25% of the aggregate trading dollar volume of the Company's common stock
for the period of 22 trading days immediately preceding such amortization date.
The Revolving Facility shall be convertible by Laurus into shares of the
Company's common stock at a rate of $1.66 per share. In addition, the Company
issued an option to purchase 650,000 shares of its Common Stock at an exercise
price of $.01.

Laurus has agreed that it shall not convert either the Term Loan or any loans
under the Revolving Facility into shares of the Company's Common Stock in
amounts that would cause it to obtain an aggregate beneficial ownership of the
Company's Common Stock exceeding 4.99% at any given time (or 19.99% in the event
such limitation is suspended upon the occurrence of an "event of default" under
any of the Agreements or any other transaction agreements). The Company and
Laurus agreed to customary terms and conditions including, but not limited to,
the filing of a registration statement within 60 days from the date of the
Agreements of shares of the Company's Common Stock issuable (i) upon exercise of
the Option, (ii) upon conversion of the Term Loan, and (iii) upon conversion of
up to $2.0 million under the Revolving Facility. The Company has an obligation
to register an additional $2.0 million under the Revolving Facility upon
issuance by the Company of an additional note evidencing such indebtedness.

The Company used the proceeds from the Term Loan, Revolving Facility and
Overformula to extinguish, in full, its indebtedness owed to Comerica Bank, its
former secured lender, and The HillStreet Fund II, L.P., its subordinated
secured lender, as well as for general working capital purposes. In connection
with the transactions described herein, Laurus received fees and was reimbursed
by the Company for its expenses in the aggregate amount of $510,200.

The Company, in issuing an option for 650,000 shares at $.01 per share,
triggered price protection in relationship to previously issued warrants. Under
the previous warrant agreements, if the Company issued warrants or options

F-18

RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS

NOTE 7 -- LONG-TERM AND SUBORDINATED DEBT - CONTINUED

below the strike price, the exercise price of the outstanding warrants would
adjust to the lower exercise price. The Company had previous warrants for
315,792 shares of common stock with 157,896 shares priced at an exercise price
of $5.07 per share and 157,896 priced at $5.53 per share. Of these warrants,
210,528 shares were exercised during 2005.

Effective November 10, 2005, the company received a waiver of noncompliance with
Section 3 of its security agreement with its lender such that the overadvance
loan shall not trigger an event of default and extending the overadvance loan
through January 31, 2006.

Minimum scheduled principal payments on long-term debt to maturity as of August
31, 2005, are as follows:

FISCAL YEAR ENDED AUGUST 31, AMOUNT
---------------------------- -----------

- 2006 ..................... $ 3,430,704
- 2007 ..................... 1,445,612
- 2008 ..................... 7,713,710
- 2009 ..................... 165,529
- 2010 ..................... --
-----------
Total ................... $12,755,555
===========

The estimated fair value of the Company's notes payable approximates its
carrying amount.

NOTE 8 -- FEDERAL INCOME TAXES

The provision for federal income taxes is as follows:

AUGUST 31
-----------------------
2003 2004 2005
---- --------- ----

- Current expense ............................ $-- $-- $--
- Deferred expense (benefit) ................. -- -- --
--- --- ---
Income tax expense (benefit) .............. $-- $-- $--
=== === ===

The difference between the federal statutory tax rate and the Company's
effective rate was:

AUGUST 31
------------------
2003 2004 2005
---- ---- ----
- Federal statutory tax rate ................. 34% (34%) (34%)
- Effect of valuation allowance .............. (36%) 34% 34%
- Other items ................................ 2% -- --
--- --- ---
Effective tax rate ........................ -- -- --
=== === ===

The details of the net deferred tax liability are as follows:

AUGUST 31
-------------------------
2004 2005
----------- -----------

Deferred tax liabilities:
- Depreciation .................................. $(3,323,376) $(3,287,537)
----------- -----------

Deferred tax assets:
- Alternative minimum tax credit carryforward ... 160,978 164,288
- Accrued lease expense ......................... 251,904 305,281
- Deferred compensation and other items ......... 136,255 128,867
- Net operating loss carryforward ............... 6,510,818 7,303,721
----------- ----------
Total deferred tax assets .................... 7,059,955 7,902,157
- Valuation allowance recognized for
deferred tax assets .......................... (3,736,579) (4,614,620)
----------- -----------
Net deferred tax liability ................... $ -- $ --
=========== ===========

The net operating loss carryforward arising in fiscal 2003, 2004 and 2005 will
expire, if unused, in fiscal 2023, 2024 and 2025, respectively.

F-19

RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS

NOTE 9 -- OPERATING LEASES

On June 26, 2003, the Company renegotiated its operating lease for its
manufacturing and office facilities. The new noncancellable lease began November
1, 2003 and expires on October 31, 2018. The agreement provides for annual lease
payments plus an escalation of approximately $.14 per square foot for the lease
term. The Company has an option to renew this lease for an additional 10-year
term at a rate based upon the then prevailing market rates for similar-type
properties.

Generally accepted accounting principles require that rent expense related to
this type of lease be recognized ratably over the term of the lease. The
difference between the rent payments made and the amount of expense recognized
has been recorded as accrued lease expense (a liability). For the year ended
August 31, 2003, the cash payments made exceeded the lease expense by $35,045.
For the years ended August 31, 2004 and 2005, the lease expense exceeded the
cash payments by $100,204 and $156,990, respectively. The Company has various
operating leases, including the noncancellable operating lease noted above, for
facilities that expire during the next 15 years. Rent expense under these leases
for the years ended August 31, 2003, 2004 and 2005 amounted to $1,120,250,
$1,098,955, and $1,155,522, respectively.

The following is a schedule of future minimum rent payments required under
operating leases that have initial or remaining noncancellable lease terms in
excess of one year as of August 31, 2005.

LEASE
YEAR ENDED AUGUST 31, PAYMENTS
--------------------- -----------

- 2006 ................................ $ 988,298
- 2007 ................................ 1,013,135
- 2008 ................................ 1,039,332
- 2009 ................................ 1,064,351
- 2010 ................................ 1,090,548
- 2011 and after ...................... 9,996,658
-----------
Total minimum payments required .... $15,192,322
===========

NOTE 10 -- RETIREMENT PLANS

The Company has a profit-sharing plan that covers substantially all employees.
The plan includes a 401(k) deferred-compensation option. The plan, as
established, allows for discretionary contributions as determined annually by
the Company's Board of Directors. No discretionary contribution was made for the
years-ended August 31, 2003, 2004, and 2005. The Company also matches and
contributes up to 15 percent of the employees' contributions, up to 2% of an
employee's annual wage. Effective January 1, 2002, the Company, until further
notice, suspended its matching share of the employees' contribution.

The Company has an Executive Deferred Compensation Plan with an officer who
retired December 31, 2004. Under the plan, upon the earlier of death or
termination of executive's employment with the Company on or after attainment of
age 65, the Company shall pay to the executive, his heirs and assignees a
retirement benefit equal to $50,000 per year for five years. The retirement
benefit will commence on the first day of the second month following the death
or termination of his employment with the Company on or after attainment of age
65. The retirement benefit shall continue with four additional payments of
$50,000 each. Death of the executive after the commencement of payments shall
not reduce or eliminate subsequent payments due. At the time of retirement, the
Company had a key-man life insurance policy for $250,000 on such executive.
During fiscal 2005, the Company transferred such policy to the retired
individual based upon a value of $100,000. In addition, the Company paid
$107,840 during fiscal 2005 to such retiree and is scheduled to retire the
remaining liability of $42,160 in fiscal 2006.

F-20

RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS

NOTE 11 -- STOCK OPTION PLANS

The Company's 1996 Stock Option Plan (the "Option Plan") was adopted by the
Board of Directors and approved by the stockholders on October 31, 1996. Under
the Option Plan, 250,000 shares of Common Stock were reserved for issuance and
are intended to qualify as incentive stock options under the Internal Revenue
Code of 1986, as amended. Stock options granted to Company personnel under the
option plan are at exercise prices equal to the market value of the stock on the
date of grant. The options vest one year from the date of option grant and the
recipients must be employed by the Company at the time of exercise.

The Company's 1998 Key Employee Stock Option Plan (the "Key Option Plan") was
adopted by the Board of Directors and approved by the stockholders on December
16, 1998. Under the Key Option Plan, 200,000 shares of Common Stock were
reserved for issuance and do not qualify as incentive stock options under the
Internal Revenue Code of 1986, as amended. Stock options granted to Company
personnel and Directors under the option plan are at exercise prices equal to
the market value of the stock on the date of grant. The options vest one year
from the date of option grant and recipients must be employed by the Company at
the time of exercise.

As permitted by SFAS No. 123, "Accounting for Stock-based Compensation," the
Company continues to apply the provisions of Accounting Principles Board Opinion
No. 25, which recognizes compensation expense under the intrinsic value method.
The compensation cost, estimated under the fair value-based method defined in
SFAS No. 123, was not significant.

A summary of the status of the Option Plan and Key Option Plan during the years'
presented is as follows (no stock options were granted previous to fiscal 1999
under the 1996 Stock Option Plan and the 1998 Key Employee Stock Option Plan):

WEIGHTED AVERAGE
OPTION PLAN SHARES EXERCISE PRICE
----------- ------ ---------------
1996 STOCK OPTION PLAN, AS AMENDED

Outstanding at end of year, August 31, 2002 110,000 $ 4.83
======= ======
Fiscal Year Ended August 31, 2003
- Stock options granted ...................... -- --
------- ------
Outstanding at end of year, August 31, 2003 110,000 $ 4.83
======= ======
Fiscal Year Ended August 31, 2004
- Stock options granted ...................... -- --
------- ------
Outstanding at end of year, August 31, 2004 110,000 $ 4.83
======= ======
Fiscal Year Ended August 31, 2005
- Stock options forfeited .................... (10,000) $6.625
- Stock options forfeited .................... (20,000) $ 3.75
------- ------
Outstanding at end of year, August 31, 2005 80,000 $ 4.83
======= ======

1998 KEY EMPLOYEE STOCK OPTION PLAN
Outstanding at end of year, August 31, 2002 107,000 $ 5.20
======= ======
Fiscal Year Ended August 31, 2003
- Stock options forfeited .................... (2,000) $ 3.75
- Stock options forfeited .................... (2,000) $6.625
------- ------
Outstanding at end of year, August 31, 2003 103,000 $ 5.20
======= ======
Fiscal Year Ended August 31, 2004
- Stock options granted ...................... -- --
------- ------
Outstanding at end of year, August 31, 2004 103,000 $ 5.20
======= ======
Fiscal Year Ended August 31, 2005
- Stock options forfeited .................... (1,000) $ 3.75
- Stock options forfeited .................... (1,000) $6.625
------- ------
Outstanding at end of year, August 31, 2005 101,000 $ 5.20
======= ======

F-21

RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS

NOTE 12 -- WARRANTS AND OPTION

On March 16, 2004, the Company sold 394,737 shares of common stock in a private
placement with four accredited investors for $1,500,000. In connection with this
purchase, the Company issued Series A Warrants for eighty percent warrant
coverage of the initial shares purchased (315,792 shares) with half of such
warrants having an exercisable price of 110% of the average of the 20
consecutive Closing Prices immediately prior to the March 16, 2004 (exercise
price of $5.07 per share) and the other half with an exercise price of 120% of
the average of the 20 consecutive Closing Prices immediately prior to the March
16, 2004 (exercise price of $5.53 per share). Such Series A Warrants are
exercisable for five years commencing six months from the Closing date. In
addition, the Company issued Series A Warrants to purchase up to 20,000 shares
of common stock at the same price to the broker of the transaction.

In conjunction with the May 17, 2005 senior loan facility agreement, the Company
issued options to purchase 650,000 shares at $.01 per share. The issuance of the
650,000 share option triggered a price protection clause related to the above
issued warrants. Such price protection was to expire in September of 2005. Under
the warrant agreements, if the Company issued warrants or options below the
strike price ($5.07 and $5.53), the exercise price of the outstanding warrants
would adjust to the lower exercise price. Of these warrants, 210,528 shares were
exercised during 2005.

F-22

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3,256,791 SHARES

RIVIERA TOOL COMPANY

COMMON STOCK
(NO PAR VALUE)

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PROSPECTUS

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AUGUST 17, 2006

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