<PAGE>   1
                                                                      EXHIBIT 13

FINANCIAL OVERVIEW

Selected Financial Data

The following selected financial data should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operation and the Financial Statements and related Notes contained herein. All
amounts are in thousands, except per share data.

<TABLE>
<CAPTION>

                                                                         YEAR ENDED AUGUST 31,
                                                   -------------------------------------------------------
STATEMENT OF OPERATION DATA:                          1994       1995        1996        1997       1998
----------------------------                       ---------   ---------   ---------  ----------- --------
                                                               As Restated
<S>                                                <C>         <C>         <C>        <C>         <C>     
Sales .........................................    $ 22,425    $ 19,042    $ 18,334   $ 21,960    $ 22,581
Gross Profit ..................................       2,749         926       3,398      5,128       5,484
Income (loss) from Operations .................       1,635        (976)      2,043      3,424       3,821
Interest Expense ..............................       1,415       1,589       1,670      1,211         244
Other Income ..................................         139         106         227         45           0
Other Expense .................................         532         160           0        406         132
Income (loss) before income taxes .............        (173)     (2,620)        600      1,851       3,445
Income Taxes (Benefits) .......................        (134)     (1,005)        204        667       1,240
                                                   --------    --------    --------   --------    --------
Net Income (loss) .............................         (39)     (1,615)        396      1,185       2,405
                                                   --------    --------    --------   --------    --------
Dividends .....................................          30          35          29          7         202
                                                   --------    --------    --------   --------    --------
Net Income (loss) available for common shares..    $    (69)   $ (1,650)   $    367   $  1,178    $  2,203
                                                   ========    ========    ========   ========    ========
Basic Earnings (loss)  per common share .......    $   (.05)   $  (1.13)   $    .25   $    .60    $    .86
                                                   ========    ========    ========   ========    ========
Basic common shares outstanding ...............       1,460       1,460       1,460      1,969       2,558
                                                   ========    ========    ========   ========    ========
Diluted Earnings (loss)  per common share .....    $   (.05)   $  (1.10)   $    .27   $    .60    $    .80
                                                   ========    ========    ========   ========    ========
Diluted common shares outstanding .............       1,460       1,460       1,460      1,966       2,988
                                                   ========    ========    ========   ========    ========
                                                 
OTHER DATA :                                     
------------
Depreciation & amortization ...................    $  1,214    $  1,438    $  1,272   $  1,298    $  1,292
                                                   ========    ========    ========   ========    ========

<CAPTION>

                                                                              AS OF AUGUST 31,                    
                                                          --------------------------------------------------------
BALANCE SHEET DATA:                                         1994         1995       1996        1997        1998
-------------------                                       ---------   ---------   ---------   ----------- --------
<S>                                                       <C>         <C>         <C>         <C>         <C>     
Working Capital .....................................     $ (4,273)   $ (7,149)   $ (6,851)   $  6,982    $ 11,297
                                                         
Total Assets ........................................       26,439      19,414      20,432      20,056      27,696
                                                         
Current Portion of Long-Term Debt & Capital  Leases..        3,129       2,256       1,336         650         877
                                                         
Revolving Line of Credit ............................        9,461       6,866      10,242       4,711       3,863
                                                         
Long-term Capital Leases & Term Debt, less current       
portion .............................................        2,715       1,830       1,002       3,142       4,334
                                                         
Redeemable Preferred Stock ..........................          109         111         139           0           0
                                                         
Common Stockholder's Equity .........................        4,770       3,120       3,487       9,722      15,882
</TABLE>                                             

                                       32
<PAGE>   2


The following table is derived from the Company's Statement of Operations and
sets forth, for the periods indicated, selected operating data as a percentage
of sales.

<TABLE>
<CAPTION>
                                                       FISCAL YEAR ENDED AUGUST 31,
                                                ---------------------------------------
STATEMENT OF OPERATION DATA:                     1994     1995     1996    1997    1998
----------------------------                    -----    -----    -----   -----   -----
<S>                                              <C>      <C>      <C>     <C>     <C> 
Net Sales ...................................    100%     100%     100%    100%    100%
Gross Margin ................................     12        5       19      23      24
Income (Loss)  from Continuing Operations ...      7       (5)      11      16      17
Interest Expense ............................      6        8        9       6       1
Other Income ................................     --       --        1      --      --
Other Expense ...............................      2       --       --       2      --
Income (loss) before income taxes ...........     (1)     (14)       3       8      16
Federal Income Tax (Benefit) ................     (1)      (5)       1       3       5
                                                ----     ----     ----    ----    ----
Net Income (Loss) ...........................     --%      (9)%      2%      5%     11%
                                                ----     ----     ----    ----    ----
Dividends ...................................     --       --       --      --       1
                                                ====     ====     ====    ====    ====
Net Income (Loss) available for Common 
   Shares ...................................     --%      (9)%      2%      5%     10%
                                                ====     ====     ====    ====    ====

OTHER DATA:
-----------
Depreciation and Amortization ...............      5%       8%       7%      6%      6%
                                                ====     ====     ====    ====    ====
</TABLE>

Quarterly Financial Data

The following is a condensed summary of quarterly results of operations for
1996, 1997 and 1998 (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                                                            BASIC                      DILUTED
                                                                       NET INCOME   -----------------------  -----------------------
                                                                        AVAILABLE    EARNINGS     COMMON      EARNINGS     COMMON
                                 GROSS       OPERATING        NET      FOR COMMON      PER        SHARES        PER        SHARES
                     REVENUES    PROFIT       INCOME         INCOME      SHARES       SHARE    OUTSTANDING     SHARE     OUTSTANDING
                     ---------  ----------  ---------      ---------- ------------- ---------  ------------- ---------   -----------
<S>                  <C>          <C>          <C>          <C>          <C>          <C>       <C>          <C>           <C>
  1996:   First..... $ 4,934      $   884      $   463      $    87      $    80      $   .06     1,460      $   .06         1,460
          Second....   4,629          947          546          127          120          .08     1,460          .09         1,460
          Third.....   4,458          957          505           79           72          .05     1,460          .05         1,460
          Fourth....   4,313          610          529          103           95          .06     1,460          .07         1,460
                     -------      -------      -------      -------      -------      -------   -------      -------       -------
             Total.. $18,334      $ 3,398      $ 2,043      $   396      $   367      $   .25     1,460      $   .27         1,460
                     =======      =======      =======      =======      =======      =======   =======      =======       =======

  1997:   First..... $ 5,480      $ 1,085      $   654      $   176      $   172      $   .12     1,460      $   .12         1,460
          Second....   5,405        1,105          666          159          157          .11     1,460          .06         1,460
          Third.....   5,001        1,085          730          247          244          .10     2,426          .10         2,470
          Fourth....   6,074        1,853        1,374          603          605          .24     2,485          .24         2,485
                     -------      -------      -------      -------      -------      -------   -------      -------       -------
             Total.. $21,960      $ 5,128      $ 3,424      $ 1,185      $ 1,178      $   .60     1,969      $   .60         1,966
                     =======      =======      =======      =======      =======      =======   =======      =======       =======

  1998:   First..... $ 5,444      $ 1,260      $   756      $   415      $   331      $   .16     2,067      $   .14         2,755
          Second....   6,096        1,662        1,103          526          408          .20     2,017          .17         3,065
          Third.....   6,878        1,846        1,297          714          714          .23     3,065          .23         3,065
          Fourth....   4,163          716          665          750          750          .25     3,065          .25         3,065
                     -------      -------      -------      -------      -------      -------   -------      -------       -------
             Total.. $22,581      $ 5,484      $ 3,821      $ 2,405      $ 2,203      $   .86     2,558      $   .79         2,988
                     =======      =======      =======      =======      =======      =======   =======      =======       =======
</TABLE>

                                       33
<PAGE>   3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF 
OPERATIONS

GENERAL OVERVIEW

    The Company is a leading designer and manufacturer of large scale, complex
stamping die systems used to form sheet metal parts. Most of the stamping die
systems sold by the company are used in the high-speed production of automobile
and truck body parts such as doors, door frames, structural components and
bumpers. A majority of the Company's sales are to Chrysler Corporation, Ford
Motor Company, General Motors Corporation and their tier one suppliers.


RESULTS OF OPERATIONS

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

FISCAL 1998 COMPARED TO FISCAL 1997

     Revenue. Total revenue for 1998 increased by 3% from approximately $21.9
million in 1997 to $22.6 million in 1998. The increase in 1998 sales was due to
the Company's increase in securing contracts awarded during 1998. Additionally,
the Company's August 31, 1998 contract backlog was 31% higher than as of August
31, 1997. These contracts will be completed and recognized as revenue during
fiscal years 1999 and 2000. The Company's contracts in process as of August 31,
1998 was approximately $7.3 million higher than as of August 31, 1997. These
contracts will be completed and recognized as revenue during fiscal years 1999
and 2000.

Cost of Goods Sold. Cost of goods sold increased from $16.8 million in 1997 to
$17.1 million in 1998, an increase of 2%. As a percent of sales, cost of goods
sold decreased from 76.6% for 1997 to 75.7% for 1998. Of the cost of goods sold,
direct costs were $10.4 million, 46.1% of sales, in 1998 as compared to $9.6
million, 43.6% of sales, in 1997. The largest direct cost increase was in the
outside machining services expense, $1.1 million or 4.9% of sales in 1998 as
compared to $321,000 or 1.5% of sales in 1997. This increase was largely due to
the Company rebuilding and upgrading its machining equipment during 1998, this
lowered the Company's internal machining capacity and resulted in increased
outsourced machining expense. Upon completion of the machining equipment rebuild
and upgrade, the Company's machining capacity and efficiency will improve. The
largest direct cost decreases in 1998 were in prototype parts purchased expense,
a decrease of $150,000 or .7% of sales, and direct labor expense, a decrease of
$131,600 or .6% of sales.

      Engineering expense was $1.7 million or 7.5% of sales in 1998 as compared
to $1.6 million or 7.1% of sales in 1997. The increase in engineering expense
was due to the Company increasing its engineering personnel to fulfill the
Company's increased engineering requirements.

      Manufacturing overhead was $5.1 million or 22.6% of sales in 1998 as
compared to $5.7 million or 26.0% of sales in 1997. This decrease of $.6 million
in 1998 as compared to 1997 was largely due to a $327,300 decrease in
depreciation expense in 1998 as compared to 1997. This was due to the Company
selling certain equipment during 1998 which was in service and depreciated for
all of 1997. Other decreases include, a $224,100 decrease in perishable tooling
expense in 1998 as a result of the Company improving its usage and purchase of
such tooling, a $84,400 decrease in equipment rentals, a $84,600 decrease in
machinery repairs and maintenance, a $28,900 decrease in workers compensation
expense and a $29,300 decrease in utilities expense.


Selling and Administrative Expense. Selling and administrative expense remained
consistent at $1.7 million per year for 1997 and 1998. As a percent of sales,
selling, general and administrative expense decreased from 7.8% in 1997 to 7.5%
in 1998. The largest administrative expense decreases in 1998 were in office
salaries ($187,900), legal and professional expense ($47,000), insurance expense
($35,500), computer maintenance ($22,600) and state tax expense ($147,900).
During 1998, increases in administrative expenses were in public company
expenses ($144,400), supervision salaries ($38,000), and Directors and Officers
insurance expense ($34,500). Selling expenses increases were in sales salaries
($80,900), travel expenses ($38,000), and sales commissions expense ($33,700).


                                     34
<PAGE>   4

      Interest Expense. Interest expense decreased from $1.2 million in 1997 to
$.2 million in 1998 and as a percent of sales, interest expense decreased from
5.5% in 1997 to 1.1% in 1998. This decrease was due to lower average debt levels
during 1998 as compared to 1997 and reduction in interest rates.


      Other Expense. Other expense during 1997 included $150,000 of bank fees
paid to the Company's former primary lender as well as $75,700 in debt
prepayment fees, $27,300 in tax agency penalties and $101,000 in late charges on
its facility lease. For 1998, other expense represents a negotiated settlement
for penalties and interest for late payment of 1995 and 1996 state income taxes.


FISCAL 1997 COMPARED TO FISCAL 1996

     Revenue. Total revenue for 1997 increased by 20% from approximately $18.3
million in 1996 to $21.9 million in 1997. This increase is due to the
realization of the 1996 contract backlog during 1997. Additionally, during the
second half of 1997, the Company had adequate financing resources which allowed
the Company to add additional sales contracts. Since March, 1997, the Company
has retained new contracts at an average rate of $3.0 million per month as
compared to an average rate of $2.0 million per month over the same period in
1996.

     Cost of Goods Sold. Cost of goods sold increased from $14.9 million in 1996
to $16.8 million in 1997, an increase of 13%. As a percent of sales, cost of
goods sold decreased from 81.5% for 1996 to 76.6% for 1997. Of the cost of goods
sold, direct costs were $9.6 million, 43.6% of sales, in 1997 as compared to
$8.2 million, 44.7% of sales, in 1996. The largest direct cost decreases were in
the outside prototype tooling and parts expense , $537,000 or 2.9% of sales in
1996 as compared to $168,500 or .76% of sales, in 1997 and outside pattern
services, $387,000 or 2.1% of sales in 1996 as compared to $236,300 or 1.1% of
sales in 1997.These decreases were due largely to the timing of expense and that
the Company outsourced less of this work and maintaining increased capacity
internally. The largest direct cost increases were in direct materials, $2.6
million or 14.2% of sales in 1996 as compared to $3.3 million or 15.0% in 1997,
outside machining services, $100,500 or .55% of sales in 1996 as compared to
$321,000 or 1.5% of sales in 1997 and direct labor, $4.2 million or 22.9% of
sales in 1996 as compared to $5.0 million or 22.8% of sales in 1997. These
increases were due to increased sales volume and performing more prototype
tooling work internally in 1997 as compared to outsourcing such work in 1996.

      Engineering expense was $1.5 million or 8.2% of sales in 1996 as compared
to $1.6 million or 7.3% of sales in 1997. The decrease in engineering expense as
a percent of sales was due to utilizing the Company's engineering capacity
without adding additional personnel. This utilization, in conjunction with the
20% increase in 1997 revenue, lowered engineering expense as a percent of sales.

      Manufacturing overhead was $5.7 million or 26.0% of sales in 1997 as
compared to $5.2 million or 28.4% of sales in 1996. This decrease, as a percent
of sales, was due to the increase in 1997 revenue which lowered the
manufacturing fixed overhead expense. The increase of $.5 million in 1997 as
compared to 1996 was due to a $96,200 increase in payroll tax expense in 1997 as
compared to 1996 as a result of the increase in direct labor expense in 1997
over 1996, a $206,000 increase in depreciation expense in 1997 over 1996, a
$90,800 increase in machinery repairs and maintenance expense in 1997 over 1996
and a $67,000 increase in perishable tooling expense in 1997 over 1996.

      Selling and Administrative Expense. Selling and administrative expense
increased from $1.4 million in 1996 to $1.7 million in 1997. As a percent of
sales, selling, general and administrative expense increased to 7.8% in 1997 as
compared to 7.4% in 1996. The largest increases were in legal and professional
expense, a $260,000 increase in 1997 over 1996, and public company expense,
$58,000 increase in 1997 over 1996.

      Interest Expense. Interest expense decreased from $1.7 million in 1996 to
$1.2 million in 1997. As a percent of sales, interest expense decreased from
9.1% in 1996 to 5.5% in 1997. This decrease was due to the decrease in debt for
the third and fourth quarters as a result of the payment of $5.1 million, from
the proceeds of the Company's initial public offering, to the Company's debt.
The remaining debt maintained during the same quarters was carried at an
interest rate of approximately 3.25% lower than during the first two quarters of
1997 and all of 1996.


                                       35
<PAGE>   5

      Other Expense. Other expense during 1997 included $150,000 of bank fees
paid during the first two quarters of 1997 charged by the Company's former
primary lender. The Company also incurred $75,700 in debt prepayment fees,
$27,300 in tax agency penalties and $101,000 in late charges on its facility
lease.


FEDERAL INCOME TAX.

    As of August 31, 1998, the Company had approximately $988,000 of net
operating loss carryforwards that expire 2010, investment tax credit
carryforwards of approximately $172,000 that expire 1999 through 2003, and
alternative minimum tax credits of approximately $250,000, the use of which does
not expire.


LIQUIDITY AND CAPITAL RESOURCES.

    The Company's needs for capital have been extensive over the period
presented. Bank borrowings have increased primarily to acquire fixed assets and
to finance the increase in trade accounts receivable and contracts in process,
as the OEMs typically do not make progress payments on tooling contracts. The
Company has financed these needs over the period presented through internally
generated funds, bank financing, various equity raising activities and various
capital and operating leases. Cash provided from (used in) operating activities
was ($977,133) in 1996, $304,954 for 1997 and ($20,022) for 1998. The capital
used by operations in 1998, was primarily due to the decrease in the Company's
Accounts Receivable ($3,306,271), an increase in Work-in-Process ($7,344,003)
and a decrease in Accounts Payable and Accrued Liabilities ($558,372).

    The Company utilized $319,308, $488,791 and $4,951,525 of Cash Flows from
Investing Activities in 1996, 1997 and 1998, respectively. For 1996, 1997, and
1998, the most significant items were the acquisition of $501,103, $792,580 and
$5,958,962 of machinery and equipment, respectively. During 1996, 1997 and 1998,
the Company received proceeds from sale of machinery and equipment of $205,800,
$25,200 and $1,084,356, respectively.

    Cash Flow From Financing Activities in 1996, the increase in the short-term
debt resulted from the increase in Contracts in Process and decrease in Accounts
Payable accounts, and the Company incurred $333,325 of initial public offering
costs which have been capitalized. For 1997, the Company reduced financial
institution debt and capital lease obligations (net of $4,726,990), received net
proceeds from issuance of 1,010,000 shares of Common Stock ($5,147,127),
redeemed 1,425 shares of 8% mandatory redeemable preferred stock ($142,500) and
paid a preferential common stock dividend ($90,000). For 1998, The Company
received proceeds from its equipment line of credit ($2,718,655), reduced
long-term debt ($1,497,852), received net proceeds from the issuance of 80,000
shares of 8% Cumulative Convertible Preferred Stock ($6,957,058), redeemed
730,000 shares of common stock at $4.11 per share ($3,000,000) and paid
preferred stock dividends ($202,108) from issuance of the 8% Cumulative
Convertible Preferred Stock (October, 1998) through conversion of these
preferred shares into common stock (February 11, 1998).

    The Company's total bank debt as of August 31, 1998, is $9,073,196, of which
$876,555 is short-term and the balance long-term. The Company has a $10.0
million Revolving Line of Credit and a $4.0 million Non-Revolving Equipment Line
of Credit. The interest rate on the financing is prime rate less .25 percent or
Libor plus 2.25%. The Company believes that the unused portion of this credit
line and the funds generated from operations, will be sufficient to cover
anticipated cash needs through 1999. However, depending on the level of future
sales, an expanded credit line may be necessary to finance increases in trade
accounts receivable and contracts in process. The Company believes it will be
able to obtain such expanded credit line, if required, on generally the same
terms as the existing credit line.


PRIOR PERIOD ADJUSTMENT.

      The Company's financial statements as of August 31, 1995 have been
restated to reflect an understatement of progressive billings on certain
contracts in process at August 31, 1995. The Company records progressive
billings on contracts in process as a reduction to costs and estimated gross
profit in excess of billings on contracts in process.

      The effect of the restatement at August 31, 1995 was to reduce the costs
and estimated gross profit in excess of billings on contracts in process by
$3,182,400 and reduce retained earnings by $2,100,400, which is net of
applicable income tax benefit of $1,082,000. The restatement had no effect on
the Company's net income for the years ended August 31, 1996, 1997 and 1998. 
The 


                                       36
<PAGE>   6

Company has also reflected the restatement on its Balance Sheet and Statement of
Common Shareholders' Equity for the years ended August 31, 1996, 1997 and 1998.


YEAR 2000 COMPLIANCE.

      The Company has reviewed its computer technology in order to ensure year
2000 compliance. The Company primarily utilizes computer technology in its CAD
design, Numerically Controlled programming and its manufacturing information
systems.

       The Company has recently replaced and upgraded both its CAD design and
Numerically Controlled programming computer systems. Although both these systems
are not date sensitive, these new systems are year 2000 compliant. The
manufacturing information systems utilize computer softwares which are
upgradable to eliminate any timing issues. In addition, the cost of such
upgrades are covered under maintenance contracts with the respective software
vendors. Management believes any other associated costs of such upgrades would
be insignificant. All of the Company's computer hardware equipment appears to be
able to integrate any software upgrades necessary in order to be year 2000
compliant. Moreover, the Company continues to review for any year 2000
compliance issues that customers or suppliers may encounter with their own
systems. Management believes that any customer or supplier year 2000 issues will
not be relevant to the Company's operations or to its interaction with such
persons.


INFLATION.

    The Company has no long-term, fixed price contracts. Historically, the
Company has been able to reflect increases in the prices of labor and material
in its selling prices. The Company expects that this will continue to be the
case.


                                       37
<PAGE>   7

                              Riviera Tool Company
                                  Balance Sheet

<TABLE>
<CAPTION>

                                                                              August 31
                                                                   ----------------------------
              ASSETS                                      Note         1997            1998
                                                         ------    -------------   ------------
                                                                    (As Restated)
<S>                                                        <C>    <C>              <C>       
Current Assets
Cash ..............................................                $        --      $     4,206
  Accounts receivable:
    Trade .........................................         3        4,614,257        1,609,272
    Related party .................................                    201,286               --
  Costs and estimated gross profit in excess
    of billings on contracts in process ...........         5        3,955,958       11,299,961
  Inventories .....................................         6          468,740          405,566
  Prepaid expenses and other current assets                            267,554          172,054
                                                                   -----------      -----------
         Total current assets .....................                  9,507,795       13,491,059
Property, Plant and Equipment, net ................         7        9,640,330       13,237,501
Perishable Tooling ................................                    572,585          743,966
Deferred income tax asset .........................         9          147,600               --
Other Assets ......................................                    187,843          223,869
                                                                   -----------      -----------
         Total assets .............................                $20,056,153      $27,696,395
                                                                   ===========      ===========

<CAPTION>

                 LIABILITIES AND
              STOCKHOLDERS' EQUITY

<S>                                                         <C>    <C>              <C>        
Current Liabilities
  Notes payable ...................................                $        --      $        --
  Current portion of long-term debt ...............         8          650,000          876,555
  Accounts payable ................................                  1,241,243        1,113,113
  Accrued liabilities .............................                    634,924          204,682
                                                                   -----------      -----------
         Total current liabilities ................                  2,526,167        2,194,350

Long-Term Debt ....................................         8        7,202,393        8,196,641
Accrued Lease Expense .............................        11          605,660          643,040
Deferred Tax Liability ............................         9               --          780,376
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 ............         2               --               --
Common Stockholders' Equity
  Common stock -- No par value,
    Authorized -- 9,798,575 shares
    Issued and outstanding -- 2,485,000 shares at
     August 31, 1997 and 3,065,499 at 
       August 31, 1998 ............................         2        9,539,879       13,496,937
    Retained earnings .............................        17          182,054        2,385,051
                                                                   -----------      -----------
         Total Common Stockholders' equity ........                  9,721,933       15,881,988
                                                                   -----------      -----------
Total liabilities and stockholders' equity ........                $20,056,153      $27,696,395
                                                                   ===========      ===========
</TABLE>

                        See Notes to Financial Statements


                                       38
<PAGE>   8
                              Riviera Tool Company
                               Statement of Income

<TABLE>
<CAPTION>
                                                                                 Year Ended August 31
                                                                   --------------------------------------------------
                                                          Note         1996               1997               1998
                                                        ------     -------------      -------------      ------------
<S>                                                      <C>       <C>                <C>                <C>
Sales
   Trade.............................................     4        $ 16,379,909       $ 21,108,195       $ 22,203,755
   Related party ....................................                 1,954,184            851,979            377,433
                                                                   ------------       ------------       ------------
Total Sales .........................................                18,334,093         21,960,174         22,581,188

Cost of Sales .......................................                14,936,514         16,831,905         17,096,967
                                                                   ------------       ------------       ------------

Gross Profit ........................................                 3,397,579          5,128,269          5,484,221

Selling and Administrative Expenses .................                 1,354,112          1,703,884          1,663,340
                                                                   ------------       ------------       ------------
Income From Operations ..............................                 2,043,467          3,424,385          3,820,881

Other Income (Expense):
    Interest expense ................................                (1,670,414)        (1,211,287)          (244,231)
    Other Expense ...................................                        --           (406,368)          (101,871)
    Gain/(Loss) on asset sales ......................                   226,710             44,651            (29,698)
                                                                   ------------       ------------       ------------
Total Other Expense-- Net ...........................                (1,443,704)        (1,573,004)          (375,800)
                                                                   ------------       ------------       ------------
Income-- Before taxes on income .....................                   599,763          1,851,381          3,445,081
                                                                   ------------       ------------       ------------
Income Tax Expense ..................................                   204,000            666,600          1,039,976
                                                                   ------------       ------------       ------------
Net Income ..........................................                   395,763          1,184,781          2,405,105
                                                                   ------------       ------------       ------------
Dividends and Accretion on Preferred Stock...........   14,15            28,535              7,228            202,108
                                                                   ------------       ------------       ------------
Net Income Available for Common Shares ..............              $    367,228       $  1,177,553       $  2,202,997
                                                                   ============       ============       ============

Basic Earnings Per Common Share .....................              $        .25       $        .60       $        .86
                                                                   ============       ============       ============

Basic Common Shares Outstanding......................     2           1,460,000          1,968,750          2,558,263
                                                                   ------------       ------------       ------------
Diluted Earnings Per Common Share ...................              $        .25       $        .60       $        .80
                                                                   ============       ============       ============
Diluted Common Shares Outstanding....................     2           1,460,000          1,966,479          2,988,129
</TABLE>

                        See Notes to Financial Statements


                                       39
<PAGE>   9
                              Riviera Tool Company
                    Statement of Common Shareholders' Equity

<TABLE>
<CAPTION>
                                                                                                
                                                                        Common Stock                 Retained              Total
                                                              -------------------------------        Earnings/         Shareholders'
                                                                 Shares             Amount           (Deficit)            Equity
                                                              ------------       ------------       ------------       ------------
<S>                                                           <C>                <C>                <C>                <C>          
         Balance-- August 31, 1995, as restated
            (Note 17)...................................         1,460,000       $  4,392,752       $ (1,272,727)      $  3,120,025
                                                              ------------       ------------       ------------       ------------

         Increase to redeemable preferred stock ........                --                 --            (28,535)           (28,535)

         Net Income ....................................                --                 --            395,763            395,763
                                                              ------------       ------------       ------------       ------------

         Balance-- August 31, 1996 .....................         1,460,000       $  4,392,752       $   (905,499)      $  3,487,253
                                                              ------------       ------------       ------------       ------------

         Increase to redeemable preferred stock ........                --                 --             (7,228)            (7,228)

         Preferential Common Stock Dividend (Note 14)...                --                 --            (90,000)           (90,000)

         Sale of Common Stock (Note 2) .................         1,025,000          5,147,127                 --          5,147,127

         Net Income ....................................                --                 --          1,184,781          1,184,781
                                                              ------------       ------------       ------------       ------------
         Balance-- August 31, 1997 .....................         2,485,000       $  9,539,879       $    182,054       $  9,721,933
                                                              ------------       ------------       ------------       ------------

         Conversion of 8% Cumulative
           Convertible Preferred Stock (Note 2) ........         1,310,499          6,957,058                 --          6,957,058


         Purchase of Common Stock (Note 2) .............          (730,000)        (3,000,000)                --         (3,000,000)

         Preferred Stock Dividends (Note 14) ...........                --                 --           (202,108)          (202,108)
         Net Income ....................................                --                 --          2,405,105          2,405,105
                                                              ------------       ------------       ------------       ------------
         Balance-- August 31, 1998 .....................         3,065,499       $ 13,496,937       $  2,385,051       $ 15,881,988
                                                              ------------       ------------       ------------       ------------
</TABLE>

                        See Notes to Financial Statements



                                       40
<PAGE>   10
                              Riviera Tool Company
                             Statement of Cash Flows

<TABLE>
<CAPTION>
                                                                                         Year Ended August 31
                                                                           --------------------------------------------------
                                                                               1996               1997               1998
                                                                           ------------       ------------       ------------
<S>                                                                       <C>                <C>               <C>           
Cash Flows from Operating Activities
  Net income ........................................................     $     395,763      $   1,184,781      $   2,405,105
                                                                           ------------       ------------       ------------
  Adjustments to reconcile net income to net cash from operating
  activities:
      Depreciation and amortization .................................         1,272,366          1,298,200          1,291,611
      Loss (gain) on sale of machinery and equipment ................           (77,908)            16,889             26,717
      Amortization of deferred gain .................................          (148,802)           (61,540)                --
      Deferred taxes ................................................           204,000            538,700            927,976
      Bad debt expense ..............................................           175,000            (75,000)          (100,000)
      (Increase) decrease in assets:
         Accounts receivable ........................................           100,214            528,654          3,306,271
         Costs and estimated gross profit in
         excess of billings on contracts in  process ................        (2,270,334)        (1,588,535)        (7,344,003)
         Inventories ................................................           116,237            (23,267)            63,174
         Perishable Tooling .........................................            77,102            186,673           (171,381)
         Prepaid expenses and other current assets ..................            34,468            (17,344)            95,500
      Increase (decrease) in liabilities:
         Accounts payable ...........................................        (1,039,644)        (1,672,635)          (128,130)
         Accrued lease expense ......................................            56,065             46,725             37,380
         Accrued liabilities ........................................           128,340            (57,347)          (430,242)
                                                                           ------------       ------------       ------------
          Net cash provided by (used in) operating activities .......          (977,133)           304,954            (20,022)
                                                                           ------------       ------------       ------------

Cash Flows from Investing Activities
  Proceeds from sale of machinery and equipment .....................           205,800             25,200          1,084,356
  (Increase) decrease in other assets ...............................           (24,005)           278,589            (76,919)
  Additions to property, plant and equipment ........................          (501,103)          (792,580)        (5,958,962)
                                                                           ------------       ------------       ------------
          Net cash used in investing activities .....................          (319,308)          (488,791)        (4,951,525)
                                                                           ------------       ------------       ------------

Cash Flows from Financing Activities
  Net proceeds from (repayments of) short-term debt .................         3,375,333        (10,241,503)                --
  Principal payments under capital lease obligations ................          (493,943)          (528,030)                --
  Proceeds from issuance of long-term debt ..........................                --          9,904,848          2,718,655
  Principal payments on long-term debt ..............................        (1,254,812)        (3,862,305)        (1,497,852)
  Redemption of Preferred Stock .....................................                --           (142,500)                --
  Sale of Common Stock ..............................................                --          5,147,127                 --
  Sale of convertible preferred stock ...............................                --                 --          6,957,058
  Redemption of common stock ........................................                --                 --         (3,000,000)
  Capitalized refinancing costs .....................................          (333,325)                --                 --
  Common Stock dividends paid .......................................                --            (90,000)                --
  Preferred Stock dividends paid ....................................                --             (3,800)          (202,108)
                                                                           ------------       ------------       ------------
         Net cash provided by financing activities ..................         1,293,253            183,837          4,975,753
                                                                           ------------       ------------       ------------

Net Increase (Decrease) in Cash .....................................            (3,188)                --              4,206
                                                                           ------------       ------------       ------------
Cash -- Beginning of Period .........................................             3,188                 --                 --
Cash -- End of Period................................................     $          --      $          --      $       4,206
                                                                           ============       ============       ============
</TABLE>

                        See Notes to Financial Statements



                                       41
<PAGE>   11
                              Riviera Tool Company
                          Notes to Financial Statements


NOTE 1 -- NATURE OF BUSINESS

Nature of Business -- 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 Chrysler Corporation, Ford Motor Company and General
Motors Corporation and their tier one suppliers of sheet metal stamped parts and
assemblies.

Reporting Entity -- In October 1996, the Company executed an agreement and plan
of merger. Under the provisions of the agreement, Riviera Die & Tool, Inc.,
merged with and into Riviera Tool Company, owner of 100% of its Common Stock, as
the survivor corporation. Concurrently with such merger, the By-Laws and
Articles of Incorporation have been amended to provide updated language on
officer and director indemnification and the authorized capital stock of the
Company was amended to increase the availability of unissued shares of common
and preferred stock. The following two classes of preferred stock existed after
the merger:

    - Redeemable Preferred Stock -- no par value, authorized 1,425 shares, 1,425
      shares issued and outstanding. 
    - Non-Redeemable Preferred Stock -- no par value, authorized 200,000 shares,
      no shares issued and outstanding.

These two entities have been reported on a consolidated basis for more than five
years prior to the merger. Therefore, the merger has no effect on the balance
sheet, statement of income, statement of common stockholders' equity or cash
flows. The stockholders' equity section of this report reflects the impact of
this merger on authorized, issued and outstanding shares of stock.


NOTE 2 -- STOCKHOLDERS INVESTMENT

In March, 1997, the Company sold 1,010,000 shares of Common Stock through an
initial public offering on the American Stock Exchange, at a price of $7.00 per
share (the "Offering"). The Company received net proceeds of approximately $5.1
million from the Offering. The net proceeds were used to reduce previously
incurred debt. In June, 1997, the Company sold 15,000 shares of common stock in
connection with a consulting agreement entered into with a financial consultant.

In October, 1997, the Company issued and sold 80,000 shares of 8% Cumulative
Convertible Preferred Stock (the "Preferred Shares") at $100.00 per share. The
company received net proceeds of approximately $6.9 million, net of offering
costs, from this offering. With a portion of the proceeds from this sale, the
Company exercised its option to purchase and retired all 730,000 shares of
common stock held by Motor Wheel Corporation for $3.0 million or $4.11 per
share.

The holders of the 8% Cumulative Convertible Preferred Stock possessed no voting
rights. Cumulative dividends were to be paid at an annual rate of 8% payable
quarterly, in arrears, at a rate of $2.00 per share per quarter, commencing
December 31, 1997. Of the 80,000 Preferred Shares issued, 67,500 preferred
shares were convertible into Common Stock at any time, and from time to time, in
whole or in part, for the number of shares of Common Stock per share equal to
$100 divided by $6.00. The remaining 12,500 preferred shares were convertible
into Common Stock at any time, and from time to time, in whole or in part, for
the number of shares of Common Stock per share equal to $100 divided by $6.7375.
All the Preferred Shares outstanding were automatically converted into Common
Stock when the average closing price for the Common Stock on the American Stock
Exchange for 10 consecutive trading days is equal to or greater than $10 per
share. The Company was not required to issue fractional shares in connection
with any conversion and a cash payment shall be made in lieu thereof. On January
9, 1998, the Company registered 1,461,529 shares of Common Stock under the
Securities Act of 1933. These common shares were issuable upon conversion of the
8% Cumulative Convertible Preferred Stock. On January 10, 1998, the Company sent
notice to all holders of the 8% Cumulative Convertible Preferred Stock that all
such preferred shares outstanding would be automatically converted into Common
Stock on or before February 11, 1998, under the mandatory conversion provision
requiring mandatory conversion when the average closing price for the Common
Stock on the American Stock Exchange is $10.00 per share (which occurred during
the trading period of November 20 and December 4, 1997). On February 11, 1998,
all 80,000 shares of 8% Cumulative Convertible Preferred Stock was converted
into 1,310,499 shares of registered Common Stock.


NOTE 3 -- SIGNIFICANT ACCOUNTING POLICIES 

Basic Earnings per common Share -- Basic earnings per common share is based on
net income available for Common Stockholders divided by the weighted average
number of common shares outstanding during the period. The number of common
shares outstanding has been adjusted to reflect the impact of the merger and
recapitalization as referred to in Reporting Entity in Note 1.



                                       42
<PAGE>   12
                              Riviera Tool Company
                          Notes to Financial Statements

NOTE 3 -- ACCOUNTING POLICIES --CONTINUED

Diluted Earnings per common share -- Diluted earnings per common share is based
on net income before dividends divided by the actual weighted number of common
shares plus diluted potential common shares outstanding during the period.

Use of Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported 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. 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 at year
end. Management's best estimate of costs to complete is based on costs incurred
subsequent to year end, 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
will ultimately incur could differ from the amounts estimated based on the
various factors.

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
except for insignificant items 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, 1997 and 1998, the Company reserved
$100,000 and $0, respectively, for uncollectible accounts receivable, and had
approximately $765,000 and $0, respectively, of unbilled accounts receivables.

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 principally using the straight-line method over
the useful life of the asset for financial reporting purposes and accelerated
methods for tax purposes.

Perishable Tooling -- Certain perishable tools are gradually used up over
extended periods of time. These inventory items, which are reported as
non-current assets in the balance sheet, are recorded at cost less a valuation
allowance to reflect the loss in value resulting from gradual use.

NOTE 4 -- SALES TO MAJOR CUSTOMERS

Nature of Business -- 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 those customers which
represent more than 10% of the annual sales, in the particular year presented,
of the Company (in 000's):

<TABLE>
<CAPTION>

                                                               August 31
                               ---------------------------------------------------------------------------
                                   1996         %           1997          %             1998         %
                               ----------- -----------  ----------------------      ----------- ----------
<S>                            <C>          <C>           <C>          <C>           <C>          <C>
Chrysler Corporation .......   $ 4,622           25%      $ 8,890           40%      $ 2,363           10%
Ford Motor Company .........     2,061           11         3,411           16            62           --
General Motors .............     2,297           13           886            4         5,285           23
Mayflower Vehicle Systems...     2,678           15            --           --            --           --
Motor Wheel Corporation ....     1,954           11           852            4           378            2
Dana-Parish ................       984            5         1,293            6            49           --
Flex-n-Gate ................        --           --         3,193           15         3,230           14
A.G. Simpson ...............        --           --            --           --         2,605           12
Autodie International ......        --           --            --           --         4,191           19
Others .....................     3,738           20         3,435           15         4,418           20
                               -------      -------       -------      -------       -------      -------
     Total Sales ...........   $18,334          100%      $21,960          100%      $22,581          100%
                               =======      =======       =======      =======       =======      =======
</TABLE>

Outstanding accounts receivable from three of these customers represented
approximately 76 percent at August 31, 1997 and three of these customers
represented approximately 51 percent at August 31, 1998.



                                       43
<PAGE>   13
                              Riviera Tool Company
                          Notes to Financial Statements

NOTE 5 -- COSTS AND BILLING ON CONTRACTS IN PROCESS

<TABLE>
<CAPTION>

                                                                            August 31
                                                                   ----------------------------
Costs and billings on contracts in process are as follows:             1997            1998
                                                                   -----------      -----------
<S>                                                               <C>              <C>
Costs incurred on contracts in process under the
 percentage-of-completion method ...............................  $  9,008,594     $ 14,949,213
Estimated gross profit .........................................     1,325,000        1,450,000
                                                                   -----------      -----------
     Total .....................................................    10,333,594       16,399,213
Less progress payments received and progress billings to date...     6,391,200        5,099,252
Plus costs incurred on contracts in process under
  The completed contract method ................................        13,564               --
                                                                   -----------      -----------
Costs and estimated gross profit in excess of billings on
contracts in process ...........................................  $  3,955,958     $ 11,299,961
                                                                   ===========      ===========
</TABLE>

Included in estimated gross profit for 1997 and 1998 are jobs with estimated
losses accrued of $55,629 and $309,565, respectively.


NOTE 6 -- INVENTORIES

Inventories consist of the following:

<TABLE>
<CAPTION>

                                                           August 31          
                                                    -----------------------
                                                      1997         1998
                                                    ----------   ----------
<S>                                                <C>          <C>           
Raw material stock................................ $  256,867   $  234,424    
Small tools and supplies..........................    211,873      171,142
                                                    ----------   ----------
         Total.................................... $  468,740   $  405,566    
                                                    ==========   ==========
</TABLE>

                                                   
                                                  
NOTE 7 -- PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

<TABLE>
<CAPTION>


                                                                          August 31             
                                                                ------------------------------
                                                                    1997             1998
                                                                -------------    -------------
<S>                                                            <C>              <C>          
Land and leasehold improvements............................    $   1,560,668    $   1,453,539
Office furniture and fixtures..............................          137,236          203,514
Machinery and equipment....................................       13,703,823       11,594,436
Computer equipment and software............................        1,243,048        1,518,214
Transportation equipment...................................          115,971          126,365
Construction in process....................................          374,328        5,283,903
                                                                -------------    -------------
     Total cost............................................       17,135,074       20,179,971
Accumulated depreciation and  amortization.................        7,494,744        6,942,470
                                                                -------------    -------------
     Net carrying amount...................................    $   9,640,330    $  13,237,501
                                                                =============    =============
Annual depreciation & amortization  expense................    $   1,257,307    $   1,250,718
                                                                =============    =============
</TABLE>

                                                           
As of August 31, 1998, the Company had $5,283,903 of construction in process.
These costs represent costs related to the installation of four large stamping
presses and other machinery. The Company has machinery and equipment commitments
of approximately $2,000,000 at August 31, 1998 which will be incurred during the
subsequent August 31, 1999 year. During year ended August 31, 1998, the Company
capitalized interest of approximately $310,000 at the prevailing borrowing
interest rate at the time these costs were incurred.



                                       44

<PAGE>   14


                              Riviera Tool Company
                          Notes to Financial Statements

NOTE 8 -- TERM DEBT

The Company's long-term debt consist of the following:

<TABLE>
<CAPTION>
                                                                                            August 31             
                                                                                  ------------------------------
                  Long-Term Debt                                                      1997             1998
                  --------------                                                  -------------    -------------
<S>                                                                               <C>              <C>         
                  Revolving bank working capital credit line, collateralized by   
                  substantially all assets of the Company. The agreement          
                  provides for borrowing, subject to certain collateral           
                  requirements of up to $10.0 million, and bears interest,        
                  payable monthly, at .25% above the bank's prime rate as of      
                  August 31, 1997 (an effective rate of 8.75%), and .25% below    
                  the bank's prime rate or Libor plus 2.25% as of August 31,      
                  1998 (an effective rate of 8.25%), due January 1, 2000. The     
                  Agreement is subject to certain loan covenants discussed below  
                  and requires a commitment  fee of .25%  per  annum on the       
                  average daily unused portion of the revolving credit            
                  line..........................................................  $  4,710,726     $  3,862,874
                                                                                  
                  Note payable to bank, collateralized by substantially all       
                  assets of the Company, payable in monthly installments of       
                  $54,166.67 plus interest of .25% above the bank's prime rate    
                  as of August 31, 1997 (an effective rate of 8.75%) and .25%     
                  below the bank's prime rate or Libor plus 2.25% as of August    
                  31, 1998 (an effective rate of 8.25%), due June,  2002.  The  
                  Agreement  is subject  to certain  loan covenants discussed 
                  below.........................................................     3,141,667        2,491,667
                                                                                  
                  Revolving equipment credit line, collaterlized by specific      
                  assets of the Company. The agreement provides for borrowing up  
                  to $4.0 million, in $500,000 increments, and bears interest at  
                  .25% above the bank's prime rate as of August 31, 1997 (an      
                  effective rate of 8.75%) and .25% below the bank's prime rate   
                  or Libor plus 2.25% as of August 31, 1998 (an effective rate    
                  of 8.25%), due in monthly installments over six years from      
                  date of borrowing increment. As of August 31, 1998,             
                  amortization of this loan has not  occurred.  The Agreement is
                  subject to certain loan covenants discussed below.............            --        2,718,655
                                                                                  -------------    -------------
                           Total long-term debt.................................     7,852,393        9,073,196
                           Less current portion.................................       650,000          876,555
                                                                                  -------------    -------------
                           Long-term debt-- Net.................................  $  7,202,393     $  8,196,641  
                                                                                  =============    =============
</TABLE>

                                                                                
Minimum scheduled principal payments on long-term debt to maturity as of August
31, 1998, are as follows (assuming the Revolving Equipment Line of Credit
amortizes effective March 1, 1999):

<TABLE>

<S>                                                                               <C>         
                           1999.................................................  $    876,555
                           2000.................................................     4,965,984
                           2001.................................................     1,103,110
                           2002.................................................       994,774
                           2003 ................................................       453,110
                           2004 and after.......................................       679,663
                                                                                  -------------
                             Total..............................................  $  9,073,196
                                                                                  =============
</TABLE>


As of August 31, 1997 and 1998, the Company has agreed to certain covenants. The
agreements require the Company to maintain certain ratios/levels of tangible net
worth, working capital, liabilities to tangible net worth, earnings before
interest, taxes, depreciation and amortization to debt service and prohibit the
payment of common stock cash dividends. The company was in compliance at August
31, 1998 with all these covenants.


                                       45

<PAGE>   15


                              Riviera Tool Company
                          Notes to Financial Statements

NOTE 9 -- FEDERAL INCOME TAXES

The provision for federal income taxes is as follows:

<TABLE>
<CAPTION>
                                                                            August 31
                                                                    ---------------------------
                                                                      1997            1998
                                                                    ---------      ------------
<S>                                                                <C>            <C>         
            Current expense....................................    $ 127,900      $    112,000
            Deferred expense...................................      538,700           927,976
                                                                    ---------      ------------
                          Total tax expense....................    $ 666,600      $  1,039,976
                                                                    =========      ============
</TABLE>


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

<TABLE>
<CAPTION>
                                                                           August 31
                                                                    --------------------------
                                                                       1997           1998
                                                                    -----------    -----------
<S>                                                                 <C>            <C>  
            Federal statutory tax rate.........................        34.0%          34.0%
            Increase (reduction) in income taxes relating to:        
            Effect of recording and changing valuation                   --           (6.0)
            allowance..........................................
            Effect of providing for deferred taxes at
               rates less than statutory rates and other items.         2.0            2.0
                                                                    -----------    -----------
                      Effective tax rate.......................        36.0%          30.0%
                                                                    ===========    ===========
</TABLE>


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

<TABLE>
<CAPTION>
                                                                               August 31
                                                                    ------------------------------
                                                                        1997             1998
                                                                    -------------    -------------
<S>                                                                <C>              <C>           
            Deferred tax liabilities:                                                 
              Depreciation.......................................  $  (2,020,600)   $  (1,798,676)
                                                                    -------------    -------------
            Deferred tax assets:
              Net operating loss carryforward....................      1,672,900          335,800
              Investment tax credit carryforward.................        204,900          171,800
              Alternative minimum tax credit carryforward........        208,600          250,000
              Accrued lease expense..............................        205,900          218,600
              Allowance for doubtful accounts....................         34,000               --
              Deferred Compensation and other items..............         46,800           42,100
                                                                    -------------    -------------
                          Total deferred tax assets..............      2,373,100        1,018,300
            Valuation allowance recognized for deferred tax            (204,900)               --
            assets...............................................   -------------    -------------
                          Net deferred tax asset (liability).....  $     147,600    $    (780,376)     
                                                                    =============    =============
</TABLE>


The details of the deferred tax expense are as follows:

<TABLE>
<CAPTION>
                                                                            August 31
                                                                    -------------------------
                                                                       1997           1998
                                                                    -----------   -----------
<S>                                                                <C>           <C>        
            Net operating loss carryforward......................  $  847,100    $ 1,337,100
            Accrued lease........................................     (15,900)       (12,700)
            Depreciation.........................................    (116,400)      (221,924)
            Deferred compensation................................       8,000         (3,900)
            Deferred revenue.....................................      20,900             --
            Other items..........................................      (2,400)         8,600
            Change in valuation allowance........................     (41,800)      (204,900)
            Allowance for doubtful accounts......................     (34,000)        34,000
            Investment tax credit................................      41,800         33,100
            Alternative minimum tax credit.......................    (168,600)       (41,400)
                                                                    -----------   -----------
                                Deferred tax expense.............  $  538,700    $   927,976
                                                                    ===========   ===========
</TABLE>



                                       46




<PAGE>   16


                              Riviera Tool Company
                          Notes to Financial Statements

NOTE 9 -- FEDERAL INCOME TAXES--CONTINUED

As of August 31, 1998, the Company had the following applicable carry forwards
to be applied against future taxable income:

<TABLE>
<CAPTION>
                                                                                      Net     
                                                                 Investment        Operating  
                                                                     Tax             Loss     
                                                                    Credit        Carryforward
                                                                 ------------    --------------
<S>                                                               <C>           <C>          
            1999..............................................    $    4,300    $          --
            2000..............................................        19,600               --
            2001..............................................        22,400               --
            2002..............................................        28,000               --
            2003..............................................        97,500               --
            2004..............................................            --               --
            2005..............................................            --               --
            2006..............................................            --               --
            2007..............................................            --               --
            2008..............................................            --               --
            2009..............................................            --               --
            2010..............................................            --          987,800
                                                                    ---------    --------------
                              Total...........................    $  171,800    $     987,800
                                                                    =========    ==============
</TABLE>


The Company also has approximately $250,000 of alternative minimum tax credits
that do not expire.


NOTE 10 -- CASH FLOWS

Cash paid or refunded during the years ended August 31, 1997 and 1998, for
interest and income taxes is summarized as follows:

<TABLE>
<CAPTION>
                                                                             August 31
                                                                    -------------------------
                                                                       1997          1998
                                                                    -----------    ----------

<S>                                                                <C>            <C>       
            Interest paid........................................  $ 1,253,563    $  557,334
            Income taxes paid....................................        1,871       429,583
</TABLE>



NOTE 11 -- OPERATING LEASES

The Company has entered into a noncancellable operating lease agreement for
manufacturing and office facilities with a lease term that expires in October
2009. The agreement provides for annual lease payments plus an escalation of the
base rent of 1 percent in each of the first 10 years and 2 percent in each of
the second 10 years. The Company has an option to renew this lease for two
additional 10-year terms at a rate to be negotiated and has an option to acquire
the facility at fair market value, commencing November 1996. The 1998 annual
rent was $,1007,702. 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
years ended August 31, 1996, 1997 and 1998, accrued lease expense exceeded cash
payments made by $56,065, $46,725 and $37,380, respectively.

On May 25, 1994, the Company entered into a sublease agreement with an unrelated
company. The agreement commenced August 1, 1994, and expired on July 31, 1998.
The agreement provided for annual lease payments ranging from $216,000 to
$224,724 plus a pro-rata share (33.7 percent) of the facility's operating costs.
The agreement also contains two options to renew the lease for up to five years,
with annual lease payments ranging from $231,468 to $268,332. During the year
ended August 31, 1998, the tenant exercised the first option to extend the
sublease until July 31, 2000. The Company exercised its option to terminate the
sublease agreement on July 31, 2000.

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 year ended August 31, 1996, 1997 and 1998
amounted to $1,164,855, $1,134,625 and $960,636, respectively.



                                       47
<PAGE>   17


                              Riviera Tool Company
                          Notes to Financial Statements


NOTE 11 -- OPERATING LEASES-- CONTINUED

The following is a schedule of future minimum rent payments and noncancellable
sublease income required under operating leases that have initial or remaining
noncancellable lease terms in excess of one year as of August 31, 1998:

<TABLE>
<CAPTION>
                                                                        Lease         Sub-Lease        Net Lease
                                                                      Payments        Receivable        Payment
                                                                    -------------   -------------    -------------
<S>                                                                <C>             <C>              <C>          
            1999..............................................     $   1,031,486   $     219,468    $     812,018
            2000..............................................         1,034,180         238,412          795,768
            2001..............................................         1,052,870              --        1,052,870
            2002..............................................         1,071,560              --        1,071,560
            2003..............................................         1,090,250              --        1,090,250
            2004 and after....................................         7,134,908              --        7,134,908
                                                                    -------------   -------------    -------------
            Total minimum payments required...................     $  12,415,254   $     457,880    $  11,957,374   
                                                                    =============   =============    =============
</TABLE>


NOTE 12 -- RETIREMENT PLANS

The Company has a profit-sharing plan that covers substantially all employees.
The plan includes a 401(k) deferred-compensation option. The Company's policy is
to fund profit-sharing costs accrued on an annual basis. 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, 1996, 1997, and 1998.

The Company also matches and contributes up to 15 percent of the employees'
contributions, up to 2% of the employee's annual wage, to the 401(k)
deferred-compensation plan. The Company's contributions to the plan for the
years ended August 31, 1996, 1997 and 1998, amounted to $80,438, $90,879 and
$78,984, respectively.


NOTE 13 -- RELATED-PARTY TRANSACTIONS

On October 10, 1997, the Company exercised its option to purchase all 730,000
shares of common stock owned by Motor Wheel Corporation for $3.0 million or
$4.11 per share.


NOTE 14 -- DIVIDENDS

The Company, on October 31, 1996, declared a preferential dividend on the shares
of common stock of the Company owned by Riviera Holding Company to pay the
income tax payable by Riviera Holding Company as a result of the lapse of
options by Motor Wheel Corporation to purchase common stock owned by Riviera
Holding Company and as a result of the dividend itself. In May, 1997 the Company
paid this $90,000 dividend to Riviera Holding Company.

In October, 1997, the Company issued and sold 80,000 shares of 8% Cumulative
Convertible Preferred Stock (the "Preferred Shares") at $100.00 per share. The
Company, on February 11, 1998, converted all 80,000 shares of the 8% Cumulative
Convertible Preferred Stock into 1,310,499 of common stock. The dividend expense
for the year ended August 31, 1998 represents the dividends paid on the 80,000
shares of 8% Cumulative Convertible Preferred Stock between the issuance date
and the conversion date.


NOTE 15 -- STOCK OPTION PLAN

The Company's 1996 Stock Option Plan (the "Option Plan") was adopted by the
Board of Directors and approved by the shareholders on October 31, 1996. Under
the Option Plan, 250,000 shares of Common Stock are reserved for issuance and
are intended to qualify as incentive stock options under the Internal Revenue
Code of 1986, as amended. During the year ended August 31, 1997, no stock
options were issued under the Option Plan. Subsequent to august 31, 1998, the
Company granted stock options for 45,000 shares to certain personnel under the
option plan.



                                       48
<PAGE>   18


                              Riviera Tool Company
                          Notes to Financial Statements

NOTE 16 -- LEGAL PROCEEDINGS AND CLAIMS

The Company is a plaintiff and counter-defendant in an action against two
individuals and a corporation, with the owners of the Company and a related
corporation affiliated through common ownership as co-plaintiffs, filed July 22,
1994. In July 1992, the Company contributed machinery, equipment, inventory,
work in process and receivables that were related to the business of building
plastic injection molds to a joint venture that then operated as a mold builder
and injection molder. The Company contributed assets valued at $5.4 million,
assigned debts in the amount of $3.7 million, and received $1.7 million of
preferred stock in the new entity. Defendants in this action contributed all of
the stock of a mold builder then known as Leap Technologies, Inc. In November
1993, the joint venture was liquidated, and the Company's preferred stock in the
entity and receivables from such entity were written off. These write-offs were
reflected in the financial statements for the year ended August 31, 1993. The
Company alleges that the status of the business contributed by the defendants
was fraudulently represented, and the defendants are, therefore, liable to the
Company for all losses sustained as a result of the failure of the venture. The
Company is asking for the return of its investment plus additional damages it
incurred in the process of liquidating the venture. One defendant has
counterclaimed for breach of representations by the Company without specifying
any amount of damages. The Company is not currently involved in other legal
proceedings other than ordinary and routine proceedings incidental to its
operations. In the opinion of management, no existing proceedings, including the
matter involving Leap Technologies, Inc., would have a significant effect on the
financial condition, results of operations and cash flows of the Company if
determined against the Company.


NOTE 17 -- PRIOR PERIOD ADJUSTMENT

The Company's financial statements as of August 31, 1995 have been restated to
reflect an understatement of progressive billings on certain contracts in
process at August 31, 1995. The Company records progressive billings on
contracts in process as a reduction to costs and estimated gross profit in
excess of billings on contracts in process.

The effect of the restatement at August 31, 1995 was to reduce the costs and
estimated gross profit in excess of billings on contracts in process by
$3,182,400 and reduce retained earnings by $2,100,400, which is net of
applicable income tax benefit of $1,082,000. The restatement had no effect on
the Company's net income for the years ended August 31, 1996, 1997 and 1998.

The Company has also reflected the restatement on its Balance Sheet and
Statement of Common Shareholders' Equity for the years ended August 31, 1996,
1997 and 1998.


NOTE 18 -- FAIR FINANCIAL INSTRUMENTS

A summary of the methods and significant assumptions used to estimate the fair
value of financial instruments is as follows:

Short-term Financial Instruments - The fair value of short-term financial
instruments, including cash, trade accounts receivable and payable and cost and
earnings in excess of billings on uncompleted contracts, approximates their
carrying amounts in the financial statements due to the short maturity of such
instruments.

Notes Payable and long-term debt - The estimated fair value of the Company's
notes payable and long-term debt approximates its carrying amount because the
interest rate fluctuates with market rates.



                                       49
<PAGE>   19


Report of Management


The management of Riviera Tool Company is responsible for the preparation of the
accompanying financial statements in conformity with generally accepted
accounting principles appropriate in the circumstances. Management is also
responsible for the determination of estimates and judgments used in the
financial statements, and the preparation of other financial information
included in this annual report to shareholders. The financial statements have
been audited by Plante & Moran LLP, independent auditors.

The management of the Company is responsible for and maintains an accounting
system and related internal controls that it believes are sufficient to provide
reasonable assurance that assets are safeguarded against unauthorized
acquisition, use or disposition, that transactions are executed and recorded in
accordance with management's authorization and that the financial records are
reliable for preparing financial statements. The concept of reasonable assurance
is based on the recognition that the cost of a system of internal control must
be related to the benefits derived and that the balancing of those factors
requires estimates and judgments. The system is evaluated by the independent
auditors in connection with their annual audit. Management responds to all
significant recommendations of the independent auditors and makes changes to the
systems where appropriate.

The Board of Directors has an Audit Committee of Directors who are not members
of management. The committee meets with management and the independent auditors
in connection with its review of matters relating to the company's annual
financial statements; the Company's system of internal controls, and the
services of the independent auditors. The Committee also periodically meets with
independent auditors, without management present, to discuss appropriate
matters. In addition, the independent auditors have full and free access to meet
with the Committee, with or without management representatives present, to
discuss the results of their audit, the adequacy of internal controls and the
quality of financial reporting.



/s/ Kenneth K. Rieth
--------------------
Kenneth K. Rieth
President and Chief Executive Officer


/s/ Peter C. Canepa
-------------------
Peter C. Canepa
Treasurer and Chief Financial Officer



                                       50
<PAGE>   20


Independent Auditors' Report


Board of Directors and Stockholders
Riviera Tool Company

We have audited the accompanying balance sheet of Riviera Tool Company, as of
August 31, 1997 and 1998, and the related statements of income, common
stockholders' equity and cash flows for the years ended August 31, 1996, 1997
and 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Riviera Tool Company at August
31, 1997 and 1998, and the results of its operations and cash flows for the
years ended August 31, 1996, 1997 and 1998, in conformity with generally
accepted accounting principles.

PLANTE & MORAN, LLP

/s/ Plante & Moran, LLP
-----------------------
Grand Rapids, Michigan
October  19, 1998



                                       51
<PAGE>   21


Board of Directors and Officers
Riviera Tool Company

BOARD OF DIRECTORS

THOMAS H. HIGHLEY
Chief Executive Officer and President
The Empire Company, Inc.

JOHN C. KENNEDY
Chairman, President and Director
Autocam Corporation

KENNETH K. RIETH
Chairman, Chief Executive Officer and President
Riviera Tool Company

DANIEL W. TERPSMA
Senior Vice President
Old Kent Bank

LEONARD H. WOOD
Vice President and General Manager
Riviera Tool Company

OFFICERS

KENNETH K. RIETH
Chairman, Chief Executive Officer and President
Riviera Tool Company

PETER C. CANEPA
Chief Financial Officer, Secretary and Treasurer
Riviera Tool Company

LEONARD H. WOOD
Vice President and General Manager
Riviera Tool Company

SHAREHOLDER INFORMATION

Annual Meeting
The annual meeting will be held Wednesday, December 16, 1998, 4:00 p.m. (EST),
at Rembrandt's at Bridgewater , 333 Bridge Street, NW, Grand Rapids, Michigan
49504.

Form 10-K and Financial  Information
A copy of the Company's annual report filed with the Securities and Exchange
Commission is available without charge to shareholders. Requests should be
addressed to Riviera Tool Company, Peter C. Canepa, CFO, 5460 Executive Parkway
SE, Grand Rapids, Michigan 49512.

Common Stock
Traded on the American Stock Exchange - AMEX, under the symbol of RTC.

Corporate Headquarters
Riviera Tool Company
5460 Executive Parkway SE
Grand Rapids, Michigan  49512  U.S.A.
Phone 616.698.2100



                                       52