<PAGE>

                                 FORM 10-KSB/A
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For the fiscal year ended: December 31, 2001

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                         Commission file number 1-14244

                         GLAS-AIRE INDUSTRIES GROUP LTD.
--------------------------------------------------------------------------------
                 (Name of small business issuer in its charter)

            Nevada                                        84-1072256
---------------------------------           ------------------------------------
(State or other jurisdiction                (I.R.S. Employer Identification No.)
of incorporation or organization)

                             3137 Grandview Highway
                         Vancouver, B.C. V5M 2E9 Canada
                ------------------------------------------------
                (Mailing address of principal executive offices)

Issuer's telephone number       (604) 435-8801

Securities registered under Section 12(b) of the Exchange Act:

     Title of each class               Name of each exchange on which registered
Common Stock, $0.01 par value                    Pacific Stock Exchange
-----------------------------          -----------------------------------------

Securities registered under Section 12(g) of the Exchange Act:        None
                                                               -----------------
                                                                (Title of class)

Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes[ ] No [X]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]

State issuer's revenues for its most recent fiscal year: $11,735,690

As of March 31, 2002, the aggregate market value for the 1,123,345 shares of the
common stock, $0.01 par value per share, held by non-affiliates was
approximately $1,123,345.

The number of shares of common stock of the registrant outstanding as of March
31, 2002 were 3,887,587, excluding 1,375,677 shares of treasury stock held by
the Company.

Transitional Small Business Disclosure Format. Yes[ ] No [X]
<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                               PAGE
<S>                                                                            <C>
PART I

   Item 1.    Description of Business........................................    1
   Item 2.    Description of Property........................................   19
   Item 3.    Legal Proceedings..............................................   20
   Item 4.    Submission of Matters to a Vote of Security Holders............   21

PART II

   Item 5.    Market for Common Equity and Related Stockholder Matters.......   21
   Item 6.    Management's Discussion and Analysis or Plan of Operation......   23
   Item 7.    Financial Statements...........................................   35
   Item 8.    Changes in and Disagreements With Accountants on
                 Accounting and Financial Disclosure.........................   35

PART III

   Item 9.    Directors, Executive Officers, Promoters and Control
                 Persons; Compliance with Section 16(a) of the Exchange Act..   35
   Item 10.   Executive Compensation.........................................   39
   Item 11.   Security Ownership of Certain Beneficial Owners and
                 Management..................................................   43
   Item 12.   Certain Relationships and Related Transactions.................   45

PART IV

   Item 13.   Exhibits and Reports on Form 8-K...............................   46

SIGNATURES...................................................................   47
</TABLE>
<PAGE>

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

GENERAL

     Glas-Aire Industries Inc. ("Glas-Aire" or the "Company") was incorporated
on September 29, 1992, pursuant to the laws of the State of Nevada. Glas-Aire
designs, develops, manufactures and markets sunroof wind deflectors, hood
protectors, rear air deflectors and door visors for cars, light trucks and vans.
The Company uses plastics (as the major raw material) and thermoforming
technology to produce these products.

     In December 2001, Glas-Aire Industries Ltd. ("Glas-Aire" or the "Company")
acquired Wonder Tool, Inc. ("Wonder Tool"), a wholly-owned subsidiary of Cyclo
Manufacturing Company ("Cyclo"). Under current accounting rules, the acquisition
of Wonder Tool must be accounted for as a reverse acquisition. Wonder Tool
manufactures orbital polishers for use on aircraft and automobiles. The Company
acquired all of Wonder Tool's machinery, equipment, inventory and intellectual
property rights including one patent and three trademarks.

     The acquisition of Wonder Tool by the Company was conducted pursuant to a
Merger Purchase Agreement on December 21, 2001. Immediately prior to the merger,
Cyclo transferred certain assets associated with its orbital polishing
operations into Wonder Tool in exchange for 1000 shares of Wonder Tool's common
stock. Cyclo received 1,250,000 shares of Glas-Aire's common stock (which
constituted approximately 50.7% of the Company's total outstanding voting stock)
in exchange for 1,000 shares of Wonder Tool's common stock. As a consequence of
the acquisition, Wonder Tool became a wholly-owned subsidiary of the Company.
The Wonder Tool acquisition has been accounted for as a reverse acquisition,
because the shareholders of Wonder Tool became controlling shareholders of the
Company. Immediately following the consummation of the acquisition, Cyclo
transferred the Glas-Aire shares it received in the acquisition to Robert C.
Johnson ("Johnson") and Raymond J. Gherardini ("Gherardini"). Hence, Johnson and
Gherardini each own 625,000 shares of the Company and together control a
majority of Glas-Aire's voting stock. Under these circumstances, United States
Generally Accepted Accounting Principles ("GAAP") requires that Wonder Tool be
identified as the accounting acquirer. Accordingly, this annual report and the
accompanying financial statements reflect, both prior and subsequent to the
acquisition, the business of the acquired entity, Wonder Tool. The financial
information for Glas-Aire for periods prior to the date of the reverse
acquisition (December 21, 2001) has been included, because Glas-Aire is
considered the predecessor for accounting purposes.

Previous Change of Fiscal Year End

     In August 2000, Glas-Aire changed its fiscal year end from January 31 to
December 31. Unless otherwise indicated, information in this Form 10-KSB which
refers to: (i) the fiscal year or period ended January 31, 2000, is for the
twelve month period then ended, (ii) the fiscal year or period ended December
31, 2000 is for the 11 month transition period then ended, and (iii) the fiscal
year or period ended December 31, 2001, is for the twelve month period then
ended.

                                      -1-
<PAGE>

BUSINESS DIVISIONS

     Glas-Aire operates two business divisions - Automotive Accessories and
Orbital Polishing. The operations of each of these divisions are conducted in
separate subsidiary companies. Management believes that both of these divisions
provide superior product quality to customers who are leaders within their
industries.

     AUTOMOTIVE ACCESSORIES. The Company's Automotive Accessories Division
manufactures and markets sunroof wind deflectors, hood protectors, rear air
deflectors and door visors for cars, light trucks and vans.

     ORBITAL POLISHING. The recently acquired Orbital Polishing Division
manufactures and distributes a twin-head aircraft and automobile orbital
polisher as well as polishing and detailing compounds, pads and additional
supplies.

BUSINESS STRATEGY

     Management's strategies for future operations and expansion are as follows:

     INTEGRATION OF ORBITAL POLISHING DIVISION AND IMPLEMENTATION OF MARKETING
STRATEGY TO INCREASE SALES. The Company will integrate the Orbital Polishing
Division into the Company's business operations. Integration will include moving
the orbital polishing operations from Denver, Colorado to the Company's facility
in Vancouver, B.C., and development and execution of a marketing strategy to
increase sales, both domestically and internationally. Management believes that
effective integration of the orbital polishing operations in Canada should
result in reduced costs and improved margins. Further, management is optimistic
that the Company will be able to increase sales of the orbital polishers into
the aircraft and automotive industries.

     INCREASING PRODUCTION CAPACITY/EFFICIENCY. The Company plans to enhance its
production capacity by the use of additional capital equipment in a larger
premises which will double the manufacturing area. To this end, the lease on a
new building has been recently executed and some major capital equipment has
been received. Further, the Company has engaged a experienced firm to help in
the layout and construction management of the new building, and to enhance
production efficiency by combining the "cell manufacturing" concept with the
proprietary thermoforming process (Matched Compression Moulding or MCM)
developed by the Company. The cell method of manufacturing is utilized by many
large Japanese and American manufacturers. This concept involves conduct of the
entire manufacturing process in units or cells on a flow basis in order to avoid
delays related to staging. This concept provides for the layout of machines of
different types performing different operations in a tight sequence to permit
single piece flow and flexible deployment of human effort. A product proceeds
from design to launch, order to delivery, and into the hands of customers with
reduction of scrap, reduction of labor costs or no backflows or stoppages.

                                      -2-
<PAGE>

     INCREASING SALES TO AUTOMOBILE MANUFACTURERS. Virtually all of the
Automotive Accessories Division's sales are to automobile manufacturers.
Management believes that increased sales to automobile manufacturers can be
accomplished through sales of existing and new products to current as well as
potential new clients in North America, Japan, South America and Europe.

     DEVELOPMENT OF NEW PROCESSES. Management believes that a key to the
Company's future success is the development of new products and complimentary
processes to meet the demands and needs of its clients. The Company conducts
active research and development ("R&D") activities to enhance its existing
products, design new ones and develop associated manufacturing processes. Often,
the Company's clients participate in the development of the product as well as
the process in which it is developed.

     INVESTMENT IN OR ACQUISITION OF COMPLEMENTARY BUSINESSES, TECHNOLOGIES OR
PRODUCT LINES. Recently, the Company acquired Wonder Tool Inc. of Denver,
Colorado that manufactures specialized polishers for the aircraft and automotive
industries, to exploit the market synergies between these polishers and its own
products. The Company will continue to evaluate such opportunities for growth or
expansion of its business through investment in or acquisition of complementary
businesses, current or emerging technologies or product lines. Management
believes that opportunities to expand will be available to the Company and
intends to investigate opportunities that are consistent with the Company's
goals and expertise.

     INFRASTRUCTURE STRENGTHENING. Over the last several years, the Company has
been customizing and deploying integrated, computerized business systems to
facilitate effective control functions, and to facilitate running a much larger
organization. This activity will be maintained and enhanced through the use of
appropriate third party consultants. Management believes that solid controls
combined with the Company's basic organizational design and expertise will
ensure an infrastructure suitable to run a much larger business.

INDUSTRY OVERVIEW

     AUTOMOTIVE ACCESSORIES

     Glas-Aire's automotive accessories products are used in a diverse and
growing market, comprised of all automotive aftermarket accessories,
dealer-installed accessories, car care products and other products purchased by
consumers for the purpose of improving their vehicles' appearance and/or
performance. The automotive industry association involved in this particular
market segment is referred to as "SEMA" (Specialty Equipment Market
Association). Manufacturer's sales of specialty automotive products increased
from $2.35 billion in 1985 to $8.6 billion in 2000. During this period, retail
sales increased from $4.35 billion to $24.86 billion. The Company's products
compete in the accessory/appearance segment of this market, estimated to be
approximately $4.83 billion at the manufacturers' level in 2000. SEMA estimates
that accessories/appearance products represent 55.6% of the total specialty
equipment market. According to SEMA data, accessories/appearance is the only
segment of products that have shown increased market share over the years going
form 51.1% in 1996 to 55.6% in 2000. The

                                      -3-
<PAGE>

following table shows the industry market share trend from 1990 to 2000 based
upon the SEMA 2001 Market Study.

--------------------------------------------------------------------------------
                      Industry Segment Market Share Trend*
--------------------------------------------------------------------------------
Segment                            2000    1999    1998    1997    1996    1990
--------------------------------------------------------------------------------
Accessories and                    55.6%   54.3%   53.2%   52.4%   51.1%   42.5%
Appearance
--------------------------------------------------------------------------------
Racing and                         20.0%   21.2%   22.2%   22.9%   24.1%   30.6%
Performance
--------------------------------------------------------------------------------
Wheels, Tires and                  24.4%   24.5%   24.6%   24.7%   24.4%   26.9%
Suspension
--------------------------------------------------------------------------------
*    Source SEMA 2001 Market Study
--------------------------------------------------------------------------------

     According to SEMA, during the period from 1990 to 2000, the
accessory/appearance segment grew by 99.8%. Sales went from $4.35 billion in
1990 to $8.69 billion in 2000.

     Glas-Aire operates in the original equipment manufacturer ("OEM") portion
of the SEMA market segment, providing products to the automotive manufacturers
that then distribute these products to consumers through their dealer networks.
Management believes that the parts accessory business has become an increasingly
important profit center for the automotive manufacturers at their dealer level,
and this trend is accelerating. With a strong interest in providing additional
profit opportunities for their vast dealer networks, the manufacturers are
increasing their own involvement in developing new and enhanced accessory
products. These products are often included in "special trim packages" and
offered during the sale of the vehicle, taking advantage of a natural sales
channel (i.e. dealers) as well as vehicle financing which covers the accessory
products with only a negligible increase in monthly payments. Management's
studies indicate that the vast number of strategically located dealers (e.g. GM
has approximately 8,000 dealers in North America), their background in
parts/accessories, installation expertise and ability to offer almost instant
financing will increase their market share at the expense of aftermarket
channels. Through this the Company has continued to increase its market share.

     ORBITAL POLISHERS

     The random-orbit polisher dates back to the mid 1950's when Cyclo
Manufacturing Company invented and developed the dual head orbital polisher. The
original patents for single, dual and the triple head orbital polishers came
from Cyclo. The orbital polisher plays a key role in the aircraft and automotive
polishing and detailing industry by offering an alternative to polishing by
hand. For over forty-five years major airlines and the military have utilized
the Company's aircraft polisher in the appearance and maintenance of aircraft,
missiles and ground support equipment. The Company's polishers are a reliable
tool for car dealerships, service stations, car washes and detail shops.

                                      -4-
<PAGE>

PRODUCTS

     Our product lines within our two primary operating divisions, Automotive
Accessories and Orbital Polishing, are set forth below.

     AUTOMOTIVE ACCESSORIES

          The table set forth below shows sales of the Company's Automotive
Accessories on a percentage basis by type of product sold during each of the
periods indicated. Door Visors have not been included because the sales volume
has not been significant to date.

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

                                                           Year Ended
     Product Line                                         December 31,
--------------------------------------------------------------------------
                                                     2001   2000*   2000**
--------------------------------------------------------------------------
Sunroof Wind Deflectors                               54%    60%     56%
--------------------------------------------------------------------------
    Hood Protectors                                   33%    31%     32%
--------------------------------------------------------------------------
  Rear Air Deflectors                                 13%     9%     12%
--------------------------------------------------------------------------
*    For the eleven month transition period
**   For the year ended January 31,
--------------------------------------------------------------------------------

          SUNROOF WIND DEFLECTORS. Sunroof wind deflectors reduce the noise and
ear discomfort resulting from air turbulence created by open sunroofs. The
Company manufactures sunroof wind deflectors for passenger cars, sport-utility
vehicles and mini-vans equipped with electric sliding sunroofs. The Company
markets its sunroof wind deflectors in the United States, Canada, Japan and the
United Kingdom.

          HOOD PROTECTORS. Hood protectors are designed both to enhance the
appearance of a vehicle and to protect the windshield and hood from insects,
stones and other road debris. The Company manufactures hood protectors for
sport-utility vehicles, light-duty pickup trucks and mini-vans. The Company
markets its hood protectors in the United States, Canada and Japan.

          REAR AIR DEFLECTORS. Rear air deflectors are mounted on the roof of a
sport-utility vehicle or mini-van over the rear hatchback door. This product is
designed to reduce dust and grime buildup on the rear window and improve
visibility. The Company manufactures rear wind deflectors for sport-utility
vehicles and mini-vans. The Company markets its rear air deflectors in the
United States and Canada.

          DOOR VISORS. Door visors allow for air circulation, keep out elements
and reduce wind noise when windows are open.

          NEW PRODUCTS. In order to build on its basic product groups (i.e.
sunroof wind deflectors, hood protectors, rear air deflectors and doorvisors),
the Company will continue

                                      -5-
<PAGE>

development of new products in order to address its clients' and prospective
clients' demands. The Company intends to continue producing its products on a
cost-effective basis with unique designs, superior finishes, alternate
attachment mechanisms and dimensional accuracy. This strategy is expected to
increase the Company's competitiveness and help expand its target markets. As
new models of automobiles are brought to market the Company must design, develop
and deploy its products to meet the design specifications of the new models.

          OBSOLESCENCE/DESIGN CHANGES. Due to automobile design changes by
automobile manufacturers, the Company's automotive products will become obsolete
and/or require modification. Continued utilization of the Company's products by
the OEMs is substantially dependent upon the Company's ability to quickly and
reliably adjust the design of its products to conform to design changes by the
automobile manufacturers. The Company will continue improving its lead times by
using more efficient design software and innovative prototype tools fabricated
in-house, and changes in the design process in keeping with the Cell
Manufacturing method. This process will further reduce lead times by
facilitating remote fittings of prototypes anywhere in the world.

     ORBITAL POLISHING

          ORBITAL POLISHERS. The Company's newly acquired aircraft and
automobile polishers have been manufactured by Cyclo under the name "Wonder
Tool" since 1953. Management believes that the Company is one of the leading
manufacturers of orbital polishers sold into the aircraft maintenance and
automobile detailing markets. The polisher features dual orbital action heads, a
lightweight balanced design and 4" heads to manage large areas and hard to reach
contours with equal efficiency. The polisher, is versatile allowing the quick
change of bonnets, discs, pads, and brushes to perform a variety of finishing
jobs. The Company produces a variety of polishers including electric and
pneumatic versions.

          POLISHING SUPPLIES. The company also manufactures polishing and
detailing compounds, pads and additional supplies for use with its orbital
polisher. The supplies include bonnets, Velcro disks, pads, brushes, and a
complete line of deoxidizing and polishing compounds.

MARKETING AND SALES

     The Company promotes itself and its products primarily through personal
contact, brochures, attendance at trade shows, press releases, etc. These
functions are primarily performed by management of the Company. Management also
intends to provide access to information on the Company's filings with the
United States Securities and Exchange Commission and its products on its WEB
site.

     AUTOMOTIVE ACCESSORIES

     During the year ended December 31, 2001, approximately 99% of the
Automotive Accessories Division's sales were to automobile manufacturers. The
Company's clients/joint product development partners include DaimlerChrysler
Corporation, Daewoo Motor America

                                      -6-
<PAGE>

Inc., Daihatsu Motor Co., General Motors Corporation, Gulf States Toyota, Inc.,
Honda Access America, Inc., Hyundai Motor America, KIA Motors America, Inc.,
Mazda North America Corporations, Nissan Canada, Inc., Nissan North America,
Inc., Saturn Corp., Southeast Toyota Distributors, Inc., Subaru of America,
Inc., Toyota Canada Inc., Ltd. and others. The Company manufactures products
according to specifications either developed jointly with or provided by its
clients, who in turn market the products, on a retail basis, under their own
brand names through their dealership and distribution networks. Management
believes that the Company offers its customers high quality product design and
development capabilities.

     The Company has received a number of awards from its customers and various
business associations during the last ten years. The latest award was the
"Valued Partner 2001" award from KIA Motors America Inc.

     The Company sells its automotive accessories products in the United States,
Canada and Japan. Net export sales to customers by geographic area consisted of
the following for each of the two years ended December 31, 2000 and 2001.

---------------------------------------------------------------
                                            December 31,
                                            (in 000's)
                                    ---------------------------
                                        2001           2000*
---------------------------------------------------------------
United States                       $10,229   87%  $9,217   84%
---------------------------------------------------------------
Canada                              $ 1,106   10%  $1,364   12%
---------------------------------------------------------------
Japan                               $   286    2%  $  340    3%
---------------------------------------------------------------
Other                               $   115    1%  $    9    1%
---------------------------------------------------------------
* For the eleven month transition period
---------------------------------------------------------------

     ORBITAL POLISHERS

     The Company Orbital Polishing Division's focus is on continued expansion
into the United States and foreign markets. On March 1, 2002, the Company
entered into a Manufacturer's Representative Contract with AG Group Worldwide,
Inc. ("AG Group") of Roseville, Michigan. Through its sales force, AG Group will
market the Company's orbital polishing and detailing products through their
network of contacts in the aircraft industry and automotive detailing industry.
AG Group will act as the worldwide sales representatives for the Orbital
Polishing Division's products. Management is optimistic that AG Group will be
able to assist the Company in developing and sustaining an increased volume of
sales. AG Group will be compensated on a commission basis and must meet yearly
sales goals to maintain the contract. The contract establishes first year
minimum sales of $1,000,000. The Company and AG Group also intend to introduce
the product line to the marine industry. The duration of the contract is one
year, and automatically renews each year with a 10% increase in minimum sales
over the previous year. Should AG Group fail to meet the minimum sales, the
Company has the right to cancel the contract.

                                      -7-
<PAGE>

DISTRIBUTION

     AUTOMOTIVE ACCESSORIES

     The Company generally sells and ships its products "F.O.B. factory" and
most of its customers are responsible for the transportation of finished
products from the Company's factory or warehouse facility to their final
destination and bear the risk of loss during transportation. The Company
commonly bulk-ships the ordered parts to the customers' parts distribution
centers within a mutually acceptable lead time, varying from 59 minutes to 30
days.

     In the U.S. and Canada, Glas-Aire ships its products to customer's parts
distribution centers and vehicle processing centers. For the Japanese market,
the OEMs generally have one centralized distribution center. With General
Motors, Glas-Aire drop ships the ordered parts on behalf of its client, directly
to the General Motors network of 8,000 dealers.

     The Company has Electronic Data Interchange ("EDI") capability which
facilitates receipt of orders from customers and transmission of invoices to
customers electronically after receipt of purchase orders from customers.

     The Company has contracts with two sales representative companies in the
United States who have established relationships with large automobile
manufacturers in North America as well as Japan. As the Automotive Accessories
Division's sales increase, the Company may hire additional personnel or may
contract with other sales representatives.

     Management plans to expand the Company's product offerings by increasing
the number and type of products that it offers for sale, to expand its customer
base and to penetrate into new market segments. (See "Item 1. Description of
Business--Business Strategy.") Management's strategy to achieve these objectives
is described below:

     .    Representatives of the Company will continue traveling to the United
          States, Japan, Europe, South America, China, etc. to present the
          Company and its products to prospects as well as new distributors or
          other potential strategic partners.

     .    The Company will continue increasing its presence (attendance or
          participation) in major trade shows in North America, Europe and Japan
          associated with its products.

     .    Management will continue to evaluate opportunities for growth or
          expansion of the Company's business through investment in or
          acquisition of complementary businesses, current or emerging
          technologies or product lines. Management believes that opportunities
          to expand will be available to the Company and intends to investigate
          opportunities that are consistent with the Company's goals and its
          expertise. In line with this strategy, the Company recently acquired
          Wonder Tool.

                                      -8-
<PAGE>

     ORBITAL POLISHERS

     The Company sells its orbital polisher directly to the airline industry.
The Company directly fulfills orders placed with the Company and sells to the
auto detail industry via distributors and mail order catalogues. The Company
ships on either a prepayment basis or on a purchase order with terms for larger,
more established customers.

MAJOR CUSTOMERS

     AUTOMOTIVE ACCESSORIES

     The Company's Automobile Accessories Division sells principally to
automobile manufacturers in the United States, Canada and Japan. For the year
ended December 31, 2001, sales in the US accounted for 87% of the Company's
Automotive Accessories revenues (including sales to US subsidiaries of foreign
automobile manufacturers), sales in Canada accounted for 10% and sales in other
countries accounted for 3%.

     For most of its customers, particularly the importer and Japanese auto
makers, Glas-Aire engages in a simultaneous design/sales process with the OEM's
engineering and purchasing organizations that normally results in a series of
purchase orders geared to coincide with the release of a particular car model.

     As reflected below, the Company has three major customers who, together,
accounted for 69% or more of the Automotive Accessories Division's sales during
the last fiscal year:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
                                                          Period Ended
-----------------------------------------------------------------------------------------------
    Customer                 Products                December 31,   December 31,    January 31,
    --------                 --------                   2001           2000*          2000
--------------   ---------------------------------   ------------   ------------   ------------
<S>              <C>                                 <C>            <C>            <C>
Nissan North     Sunroof  wind  deflectors, hood         25%            34%            30%
America, Inc.    protectors and rear air
                 deflectors
--------------   ---------------------------------   ------------   ------------   ------------
Honda Access     Sunroof wind deflectors                 21%            15%            17%
America, Inc.
--------------   ---------------------------------   ------------   ------------   ------------
General Motors   Hood protectors and rear air            23%            29%            29%
(USA & CDN)      deflectors
-----------------------------------------------------------------------------------------------
        *  For the eleven month transition period
-----------------------------------------------------------------------------------------------
</TABLE>

     The Company manufactures accessories for the majority of its customers on a
purchase order/invoice basis. For General Motors Corporation in the U.S., the
Company has a virtual just-in-time drop shipment program utilizing its operating
and warehouse facilities in Bellingham, WA. The Company warrants its products to
coincide with the automobile warranty provided by the automobile manufacturer to
the consumer, or in the case of replacement parts and accessories, for the
balance of the life of the new vehicle warranty or a minimum of 36 months or
36,000 miles after the date of installation on the vehicle, whichever is
greater. The Company

                                      -9-
<PAGE>

is obligated to reimburse its OEM customers for all legitimate quality related
warranty claims paid by them.

     ORBITAL POLISHERS

     The Company sells the majority of its orbital polisher product line
directly to its major customers in the airline, auto detailing and car washing
industry. The Company has no contracts with any of its major customers. The
Company also has multiple distributors of its orbital polisher products and a
total of over 3,000 customers worldwide. Additionally, the Company has entered
into an agreement with AG Group to act as a manufacturer's representative to
market its orbital polishing products.

     The Orbital Polisher Division has one customer who accounted for 18% of
sales during the last fiscal year:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------

                                                           Fiscal Year Ended
---------------------------------------------------------------------------------
                                                       December 31   December 31,
------------------   -------------------------------   -----------   ------------
      Customer                   Products                 2001          2000
      --------                   --------                 ----          ----
------------------   -------------------------------   -----------   ------------
<S>                  <C>                               <C>           <C>
Autosmart            Orbital Polishers and supplies        18%           24%
International
------------------   -------------------------------   -----------   ------------
</TABLE>

COMPETITION

     AUTOMOTIVE ACCESSORIES

     The Company has several competitors in the Automotive Accessories Division
which have substantially greater technical, financial and marketing resources
than the Company. For the sunroof wind deflector market, the primary competitor
has been Plastic Form, a subsidiary under the umbrella of Masco Tech. In the
hood protector and rear air deflector market, our major competitor is Autotron,
a subsidiary of LUND International Holdings ("Lund"). Autoventshade a subsidiary
of Lund and EGR, produce hood protectors and door visors in competition with the
Company.

     Management believes that the principal competitive factors facing the
Company in the automobile accessories industry, in order of importance, are
quality, customer service and price. Management of the Company believes that the
Company can effectively compete with its competitors because of the high quality
of the Company's products and its commitment to customer service and product
innovation.

     ORBITAL POLISHERS

     The Company faces several competitors in the orbital polishing industry.
Management believes that its primary competitors are Gem Industries, Inc. and
Waxcoa/Chamberlain, who both market only a single head orbital polisher.
Further, management believes it can compete

                                      -10-
<PAGE>

with these competitors because of Wonder Tools' reputation for producing a high
quality orbital polisher and related orbital polisher supplies.

MANUFACTURING

     The Company currently manufactures its automotive accessories products at
its plant in Vancouver, B.C., Canada. Orbital polishing products are being
manufactured in Denver, Colorado; however, the Company anticipates moving that
manufacturing operation to Vancouver, B.C., Canada, prior to the end of the
third quarter.

     AUTOMOTIVE ACCESSORIES

     The Company's automotive accessories manufacturing operation consists of
three major functions: (i) thermoforming; (ii) machining; and (iii) finishing.
Thermoforming involves heating a sheet of acrylic to soften it and then molding
the softened acrylic into the desired shape. The Company is able to meet auto
manufacturers' stringent surface requirements by using proprietary thermoforming
processes (e.g. Matched Compression Moulding) and production tooling (including
milled aluminum tools), in a clean-air facility. The Company currently utilizes
slide-tray and state-of-the-art in-line thermoformers, plus a three-station
rotary thermoformer that performs several functions simultaneously without
operator intervention. Machining operations are performed with three-axis as
well as five-axis Computer Numeric Control ("CNC") routers to shape the blades
of the wind deflectors. Finishing includes (a) polishing the edges of the
blades; (b) stamping identifying marks on the product; (c) application of
gasket/extrusion/brackets; (d) labeling; (e) cleaning; and (f) boxing.

          RAW MATERIALS AND SUPPLIERS. Acrylic is the single most expensive raw
material used in manufacturing the Company's products. The Company currently
purchases its acrylic from Acrylco Manufacturing Ltd. (a Canadian distributor
for Mitsubishi Canada Limited), Aristech Acrylics LLC in Florence, Kentucky and
Laird Plastics (a Canadian distributor for Atofina Chemicals, Inc. in
Pennsylvania). The Company does not have a long-term contract with any of these
suppliers. If these suppliers should become unavailable in the future, it is
expected that other suppliers would be readily available.

     The principal components purchased by the Company are extrusions (long
plastic strips used in mounting the deflector blades to vehicles), gaskets for
sealing deflector blades onto vehicles' roofs and corrugated boxes. Supplies of
these components are readily available from various suppliers. The Company is
exploring the possibility of acquiring supply sources for its major components,
and is investigating development of its own manufacturing capability for certain
of its major components.

          QUALITY ASSURANCE. The Company is ISO9001/QS9000 certified and these
international quality standards control virtually all of the Company's business
practices as well as its operations.

     The Company's mission includes providing its clients with quality products
on time and cost-effectively based on innovative engineering solutions and
manufacturing processes. The

                                      -11-
<PAGE>

fitness-for-use of products/services is the vital principle that guides all
activities of the Company. Further, the application of this principle is
demanded from all suppliers. A primary objective of the Company is to support
the need of its employees as well as suppliers to foster this principle.

     Although the Company's level of defective products has traditionally
represented approximately 1% of annual net sales, during the last fiscal year it
was approximately 4%. The increase was primarily the result of a defective
component sourced from one of the Company's suppliers. The Company is now
negotiating with this supplier and management is optimistic that the Company
will be able to enter into a favorable settlement with the supplier or that the
Company will prevail against this supplier if litigation is necessary. During
the fiscal year ended December 31, 2001, the Company accrued approximately
$390,000 of expense relating to warranty claims, and accrued approximately
$151,000 of expense for warranty claims in the eleven month period ending
December 31, 2000.

     Generally, the Company warrants its products to coincide with the
automobile warranty provided by the automobile manufacturer to the consumer, and
is obligated to reimburse the automobile manufacturer for all legitimate quality
related warranty claims paid by the manufacturer.

     ORBITAL POLISHERS

     The Company currently manufactures its orbital polishing products in
Denver, Colorado. However, the Company intends to move its manufacturing
facility to a new facility in Richmond, British Columbia to effectively
integrate this Division with its Automotive Accessory Division. "Item 2 -
Description of Property."

     The Company's orbital polisher manufacturing process consists of machining,
polishing, installation, finishing, assembling and testing of the orbital
polisher. The Company also manufactures in-house the majority of its chemical
product line as well as its bonnets and other orbital polisher accessories.

          RAW MATERIALS AND SUPPLIERS. The Company purchases components
including unfinished aluminum castings, gears, bearings, electrical cords and
motors used in the manufacturing process of its orbital polisher and foam disks,
wool pile and raw rubber used in the manufacturing of bonnets. The Company does
not have any contracts with any of its suppliers. If these suppliers should
become unavailable in the future, it is expected that other suppliers would be
readily available.

          QUALITY CONTROL. The Company has manufactured the orbital polisher for
over 45 years and has internally set its own specifications and high quality
standards. The Company has a testing procedure in place to conduct individual
inspections of each polisher to ensure proper functioning and compliance with
its specifications. The Company has not experienced any significant problems
with it orbital polishing products.

                                      -12-
<PAGE>

RESEARCH AND DEVELOPMENT AND PRODUCT DESIGN

     Management believes that its product development capabilities are important
to the future success of the Company's business. The Company has 16 permanent
employees engaged in R&D at its Vancouver facility. They conduct activities
associated with development of new products, improvements to existing products
and the development of new manufacturing processes. Management expects that
spending on research and development activities will continue to support
increased business. The Company expended $489,000 on research and development
activities during the 11 months ended December 31, 2000, and $469,000 during the
twelve months ended December 31, 2001.

     AUTOMOTIVE ACCESSORIES

     The Company has all the necessary soft and hard engineering tools to meet
the exacting standards for product design imposed by its automobile manufacturer
clients. Management is also optimistic that the Company will continue to shorten
the product development cycle through more efficient design processes as well as
simplified tooling. The Company will continue improving its lead times by using
more efficient design software and innovative prototype tools fabricated
in-house, and changes in the design process in keeping with the Cell
Manufacturing method.

     When the design of a vehicle model changes configuration, the Company must
retool its products to insure proper fit of its products. Although frequent
model or configuration changes would increase the Company's costs, tooling costs
generally are not substantial and frequently are passed on to the customer,
often over a two-year period. Successful deployment of the new production
process now under development is expected to result in improved tooling costs.

     ORBITAL POLISHER

     The Company performs tests to determine if improvements can be made to
either the orbital polisher or in the manufacturing and assembly process for the
orbital polisher. Further, the Company also tests alternative components such as
motors, bearings and pads to improve upon the performance of its orbital
polisher and related accessories. Management continuously tests adhesives to
ensure orbital pads remain intact throughout their use with the orbital
polisher.

SEASONALITY

     The Company's products are not subject to significant seasonal variation.
The Company's backlog as of any given date is not a meaningful measure of the
Company's future business, because the Company's customers generally require
rapid shipment of orders.

                                      -13-
<PAGE>

PATENTS, TRADEMARKS, LICENCESS, FRANCHISES, CONCESSIONS OR ROYALTY AGREEMENTS

     AUTOMOTIVE ACCESSORIES

     Currently, the Company does not hold any patents on any of its automotive
accessories products, nor does it have any licenses, trademarks, franchises,
concessions or royalty agreements. However, during the period ended December
2000, the Company filed patent applications for a proprietary moulding process
(Matched Compression Moulding known as MCM). The Company also filed a trademark
application for "MCM."

     POLISHING DIVISION

     In connection with the acquisition of Wonder Tool, the Company acquired one
patent and three trademarks.

     DOUBLE DRUM POLISHER, United States Patent No. 5,040,339. The Double Drum
Polisher contains a pair of counter rotating polishing drums on its head. The
Double Drum Polisher is used for polishing the fuselage and wings of aircraft as
well as large surfaces associated with other types of vehicles including tank
trucks and railcars. This patent was issued on August 20, 1991

     FREE-FLITE, United States Trademark No. 1,604,284. FREE-FLIGHT is the
trademark of a metal cleaner and polisher marketed by the Company, which has
carried a military approval since 1954. This trademark was issued on July 3,
1990.

     SOIL-ZORB, United States Trademark No. 1,456,016. SOIL-ZORB is the
trademark of a cleaning agent with emulsifying properties for use on rugs and
carpeting marketed by the Company. This trademark was issued on September 8,
1987.

     SOLV-IT, United States Trademark No. 1,456,015. SOLV-IT is the trademark of
a dry cleaning solution for upholstery, rugs and carpeting marketed by the
Company. This trademark was issued on September 8, 1987.

     Existing copyright and trade secret laws offer only limited protection. The
Company relies on a combination of trade secret laws, employee and third party
disclosure agreements and other intellectual property protection methods to
protect its proprietary rights. Although the Company's competitive position may
be adversely affected by unauthorized use of its proprietary information,
management believes that the ability to fully protect its intellectual property
is less significant to the Company's success than are other factors, such as the
knowledge, ability and experience of its employees and its ongoing product
development and customer support activities. There can be no assurance that the
protections in place by the Company will be adequate.

     There can be no assurance that third parties will not assert infringement
or other claims against the Company with respect to any existing or future
products, or that licenses would be

                                      -14-
<PAGE>

available if any Company technology or products were successfully challenged by
a third party, or if it became desirable to use any third-party technology to
enhance the Company's products. Litigation to protect the Company's proprietary
information or to determine the validity of any third-party claims could result
in significant expense to the Company and divert the efforts of the Company's
technical and management personnel, whether or not such litigation is determined
in favor of the Company.

     While the Company does not believe that it is infringing upon the
proprietary rights of any third party, there can be no assurance that such
claims will not be asserted in the future with respect to existing or future
products. Any such assertion by a third party could require the Company to pay
royalties, to participate in costly litigation and defend licensees in any such
suit pursuant to indemnification agreements, or to refrain from selling an
alleged infringing product or service.

GOVERNMENT/ENVIRONMENT REGULATION

     The Company, like all manufacturers of consumer products, is liable to
federal state and local regulations concerning consumer products and
occupational safety and health. The Company believes that its operations
currently comply in all material respects with these laws and regulations. In
general, the Company has not experienced any difficulty complying with such
regulations and compliance has not had a material effect on the Company's
business.

     The Company is subject to various federal, provincial and local
environmental laws and regulations. Management believes that the Company's
operations currently comply in all material respects with applicable laws and
regulations. Management of the Company believes that the trend in environmental
litigation and regulation is toward stricter standards, and that these stricter
standards may result in higher costs for the Company and its competitors. Such
changes in the laws and regulations may require the Company to make additional
capital expenditures which, while not presently estimable with certainty, are
not presently expected to be material to the Company. Costs for environmental
compliance and waste disposal have not been material to the Company in the past.

EMPLOYEES

     As of March 30, 2002, the Company employed 214 production workers, 16
research and development personnel, 10 clerical/administrative staff and 3
management staff members.

     The Company attempts to maintain amiable and communicative relations with
its employees. None of the employees are represented by a labor union, nor is
the Company a party to any labor contracts or collective bargaining agreements.
The Company has never experienced labor slowdowns or stoppages, and management
believes that relations with its employees are satisfactory. The Company
believes there is an adequate supply of suitable labor, as well as
professionals, available.

                                      -15-
<PAGE>

FACTORS THAT MAY AFFECT OUR FUTURE RESULTS

     You should carefully consider the following risks, together with all other
information included in this Annual Report. The realization of any of the risks
described below could have a material adverse effect on our business, results of
operations and future prospects.

     Important Factors related to Forward-Looking Statements and Associated
Risks. This Report contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, and the Company intends that such forward-
looking statements be subject to the safe harbors created thereby. These
forward-looking statements include the plans and objectives of management for
future operations, including plans and objectives relating to the products and
future economic performance of the Company. The forward-looking statements
included herein are based on current expectations that involve a number of risks
and uncertainties. These forward-looking statements are based on assumptions
that the Company will continue to develop, market and ship products on a timely
basis, that competitive conditions within either the automotive or airline
industries will not change materially or adversely, that demand for the
Company's products will remain strong, that the Company will retain existing
customers and key management personnel, that the Company's forecasts will
accurately anticipate market demand and that there will be no material adverse
change in the Company's operations or business. Assumptions relating to the
foregoing involve judgments with respect to, among other things, future
economic, competitive and market conditions and future business decisions, all
of which are difficult or impossible to predict accurately and many of which are
beyond the control of the Company. Although the Company believes that the
assumptions underlying the forward-looking statements are reasonable, any of the
assumptions could prove inaccurate and, therefore, there can be no assurance
that the results contemplated in forward-looking information will be realized.
In addition, the business and operations of the Company are subject to
substantial risks that increase the uncertainty inherent in such forward-looking
statements. In light of the significant uncertainties inherent in the forward-
looking information included herein, the inclusion of such information should
not be regarded as a representation by the Company or any other person that the
objectives or plans of the Company will be achieved.

     In addition, as disclosed elsewhere under other risk factors, our business
and operations are subject to substantial risks, which increase the uncertainty
inherent in such forward-looking statements. In light of the significant
uncertainties inherent in the forward-looking information included herein, the
inclusion of such information should not be regarded as a representation by us
or any other person that our objectives or plans will be achieved. The Private
Securities Reform Act of 1995 contains a safe harbor for forward-looking
statements on which we rely in making such disclosures. In connection with this
safe harbor we are hereby identifying important factors that could cause actual
results to differ materially from those contained in any forward-looking
statements made by or on our behalf. Any such statement is qualified by
reference to the cautionary statements included in this Annual Report.

     DEPENDENCE UPON MAJOR CUSTOMERS. The Company's Automotive Accessory
Division has three customers, which, together, accounted for approximately 69%
of its sales during the year ended December 31, 2001. The Company's Orbital
Polisher Division

                                      -16-
<PAGE>

has one customer who accounted for approximately 18% of its sales during the
year ended December 31, 2001. See "Item 1. Description of Business - Major
Customers." There can be no assurance that these customers will continue to
purchase the Company's products at these levels in the future. The loss of any
one of these major customers, or a significant reduction in their purchases from
the Company, would have a material adverse effect upon the Company and its
operations.

     DEPENDENCE UPON INDUSTRIES

     AUTOMOTIVE ACCESSORY DIVISION. The Company's Automotive Accessory Division
current products consist exclusively of automobile accessories, specifically
sunroof wind deflectors, hood protectors, rear air deflectors and doorvisors,
which are sold to OEMs. Accordingly, the market for the Company's products is
tied to the success of the automobile industry, and the success of the Company
is dependent upon that single industry. A significant decline in the automobile
industry, in general, over which the Company would have no control, could have a
serious adverse effect on the Company and its business. In addition, economic
factors adversely affecting automobile production and discretionary consumer
spending could have a material adverse effect on the Company's results of
operations.

     ORBITAL POLISHING DIVISION. The Company's Orbital Polishing Division is
tied to the airline, general aviation and air cargo industries. Since the events
of September 11, 2001, this industry has been extremely volatile. Due to poor
financial situations several carriers have been threatened with bankruptcy. A
significant decline in the travel or cargo industry or airline bankruptcy could
have an effect on the Company and its business. Additionally, the Orbital
Polishing Division is also tied to the automotive industry. Deteriorating
economic conditions could reduce the amount spent on air travel and automotive
detailing. A significant decline in these industries could also have an adverse
effect on the Company and its business.

     DEPENDENCE UPON AUTOMOBILE MANUFACTURERS IN JAPAN AND RELATED RISKS. A
significant percentage of the Company's Automobile Accessories Division sales
have been to Japanese automobile manufacturers in the United States or Canadian
subsidiaries of Japanese automobile manufacturers. The passage of protectionist
legislation, including increased import tariffs, or public sentiment against
imports could result in a decrease in sales of Japanese automobiles which would
have a direct negative impact on the Automotive Accessories Division's sales. In
addition, the economic problems experienced in Japan could have a material and
adverse effect upon the Company's Japanese customers, which could materially and
adversely affect the Company. Further, the devaluation of the Japanese yen could
result in Japanese automobile manufacturers looking to Japanese suppliers of
automobile accessories that also could have a serious negative impact on the
Automotive Accessories Division's sales.

     DEPENDENCE UPON KEY PERSONNEL. The Company's future performance will depend
to a significant extent upon the efforts and abilities of certain members of
senior management as well as upon the Company's ability to attract and retain
qualified engineering, technical, design, marketing and production personnel. In
particular, the Company is dependent upon the experience and abilities of Craig
Grossman (Chief Executive Officer), Omer Esen

                                      -17-
<PAGE>

(Chief Operating Officer) and Linda Kwan (Chief Financial Officer). Accordingly,
the loss of the services of Mr. Grossman, Mr. Esen, Mrs. Kwan or other key
personnel could have a material adverse effect on the Company and its future
operations. If Mr. Grossman, Mr. Esen or Mrs. Kwan were to be unavailable for
any reason, there can be no assurance that the Company would be able to employ a
qualified person or persons on terms suitable to the Company.

     COMPETITION. The Company's Automotive Accessories Division sales and
profitability should be considered in light of the competitive environments in
which the Company operates. The Company's Automotive Accessories Division
operates in an industry that is highly competitive, and many of its competitors,
both local and international, have substantially greater technical, financial
and marketing resources than the Company. The principal factors that determine
the Company's competitive position include quality, customer care and price.
Management believes that its research and development capabilities,
concentration on increased production efficiencies and commitment to customer
service and product innovation will enable the Company to continue to compete
effectively. However, there can be no assurance that the Company's products will
be competitive in the face of advances in product technology developed by the
Company's competitors or by automobile manufacturers themselves. In addition,
there are no significant technological or manufacturing barriers to entry into
the automobile accessories business in which the Company operates.

     CURRENCY FLUCTUATION. The Company's automotive division sales are
principally transacted in United States dollars, whereas its labor, overhead and
most component costs are paid in Canadian dollars. The Orbital Polishing
Division's sales and expenses are principally transacted in United States
dollars. Fluctuations in the value of the United States dollar versus other
currencies (primarily the Canadian dollar and the Japanese yen), and
fluctuations in the relative values of those currencies, may have an impact on
the Company's financial performance. The Company does not engage in hedging
activities with respect to currency fluctuations. Although, to date, the Company
has avoided significant losses from currency fluctuations, there can be no
assurance that the Company will be able to avoid such losses from currency
fluctuations in the future.

     DEPENDENCE ON COMPONENT AND RAW MATERIALS SUPPLIERS. The Company purchases
raw materials, primarily acrylic and certain metal components used in the
manufacture of its orbital polishing products from various suppliers. Although
the Company has long term relationships with its key suppliers it does not have
long-term supply agreements. The Company does not anticipate significant delays
or disruption in the manufacture and delivery of its raw materials or
components, but there can be no assurance that delays or disruptions will not
occur. The loss or breakdown of the Company's relationships with its suppliers
could subject the Company to delays in the delivery of its product to customers
and loss of customers. In addition, increased prices for raw materials or
component parts could have a material adverse effect on the Company's
profitability.

     MANUFACTURING RISKS. The Company's business is subject to many of the risks
inherent in manufacturing, including risks associated with production equipment
failure, fluctuating costs of raw materials and component parts, shortages of
raw materials, changes in governmental regulations, labor shortages, work
stoppages and other labor difficulties. Any

                                      -18-
<PAGE>

significant interruption of manufacturing activities could have a material
adverse effect on the Company's operations.

     AUTOMOTIVE ACCESSORIES PRODUCT OBSOLESCENCE AND DESIGN CHANGES. Due to
automobile design changes by automobile manufacturers, the Company's products
will become obsolete and/or require modification. Continued utilization of the
Company's products by the OEMs is substantially dependent upon the Company's
ability to quickly and reliably adjust the design of its products to conform to
design changes by the automobile manufacturers. Design changes and product
obsolescence could have a material adverse effect on the Company's
profitability.

     DEPENDENCE ON A LIMITED NUMBER OF PRODUCTS. The Company's Automotive
Accessories Division manufactures and sells sunroof wind deflectors, hood
protectors, rear air deflectors and doorvisors for cars, light trucks and vans.
The Company's sales of each of these products are dependent on the popularity of
the type of vehicle or the vehicle accessory to which the product relates. For
example, a decline in popularity of sunroofs would result in decreased sales of
sunroof wind deflectors, while a decline in popularity of light trucks (which
includes sport-utility vehicles as well as pickup trucks) and mini-vans would
result in decreased sales of hood protectors and rear air deflectors. Although
not anticipated in the foreseeable future, such events could have a material
adverse effect on the Company's business. The Company's Orbital Polishing
Division manufactures polishers and related supplies used in the aircraft and
automotive industry. A decline in the amount of air travel and detailing of
automobiles would result in decreased sales of the orbital polisher and related
supplies. Such events could have an adverse effect on the Company's business.

     MAJOR CHANGES IN BUSINESS STRATEGY OF KEY AUTOMOTIVE ACCESSORIES CLIENT.
During April 2000 and April 2002, a major client of the Company demanded price
reductions on existing products from all its suppliers (worldwide) in three
stages. These reductions became effective in April 2000 and the 3rd stage
started in April 2002. In turn, the Company has been assured future business.
Management agreed to the reductions, planning to compensate for them via value
engineering activities expected from the deployment of the newly developed
processes and the less expensive materials these processes will allow. However,
since the Company has had limited commercial experience with these processes, at
this time no assurance can be given that the price reductions can be
counterbalanced with the use of these new processes plus the less expensive
materials.

ITEM 2. DESCRIPTION OF PROPERTY

Vancouver, British Columbia

     The Company has been leasing 27,777 square feet of factory, warehouse and
office space located at 3137 Grandview Highway, Vancouver, B.C., Canada V5M 2E9,
from Rockmore Investments Ltd. The lease term is five years and is due to expire
in September 2004. The current total rent is CDN$13,270 (i.e., US $8,294 based
upon current exchange rates) per month. The lease is a triple net lease, and the
Company is responsible for its share of common area expenses and maintenance.
Management is optimistic that the Company will be able to sublease

                                      -19-
<PAGE>

this space for an amount that is at least equal to the required lease payments
after moving to the new facility described below in Richmond. To the extent that
the Company is unable to sublease the property, the Company will be obligated to
continue the rental payments until the end of the lease.

     The property at 3137 Grandview Highway is listed for sublet with a
reputable real estate agent.

Richmond, British Columbia

     On April 5, 2002, the Board of Directors approved a lease of a 52,080
square feet office and warehouse space located at 7791 Alderbridge Way,
Richmond, B.C., Canada. Management has signed a 7 year lease at CDN$22,785 (i.e.
US $14,754) per month during the first two years of the lease period. This
larger building should allow the Company to expand its business and increase
productivity through a more effective factory layout. The move from the existing
premises to the new one is expected to start in April 2002 and completed as soon
as possible. An important objective will be adherence to the shipping schedules.
The total rent per month is CDN$22,785 (i.e., US $14,754) based upon current
exchange rates) per month. The lease term is seven years, and is renewable for a
five year term.

Bellingham, Washington

     The Company also rents on a month-to-month basis 5,000 square feet of
warehouse space in Bellingham, Washington, at a rental of US$1,800 per month.
This facility is used primarily for warehousing products for distribution to
certain US customers.

ITEM 3. LEGAL PROCEEDINGS

     Following his termination for cause from his position as President of the
Company on September 12, 2001, Alex Ding, a former director of the Company and
the Company's former President filed a Writ of Summons on September 13, 2001, in
the Supreme Court of British Columbia. Mr. Ding's claims were made against the
Company, Multicorp Holdings Inc., Glas-Aire Industries Ltd., William R.
Ponsoldt, Craig Grossman, Todd Garrett, Mark Baldinger, Regency Affiliates, Inc.
and Speed.com, Inc. (collectively the "Defendants"). Mr. Ding asserted among
other things that the redemption transaction involved a breach of agreements
with HSBC Bank Canada ("Bank"), securities laws, corporate laws, and fiduciary
duties owed by the Defendants to the Company's shareholders. Mr. Ding asserted
that the court should enjoin various actions relating to the redemption and
grant other relief. Mr. Ding has not served all of the Defendants personally,
and has not filed a Statement of Claim. The Company discussed the redemption
with its Canadian Counsel prior to effecting the redemption, and determined that
proceeding with the redemption would not be in violation of a court order or
otherwise prohibited. Further, the Bank reviewed the proposed redemption
transaction with both outside counsel and an outside accounting firm. After
completion of these reviews, the Bank loaned the Company the funds necessary to
effect the redemption. The Company intends to vigorously contest Mr. Ding's
claims and believes that they are without merit. No hearing or trial date has
been set. The Company and the individual Defendants believe that they have
substantial defenses

                                      -20-
<PAGE>

to claims alleged. However, there are no assurances that the resolution of this
case will not have a material adverse effect on the company. The Company is
advancing the Defendants' costs of defense. These costs may be material to the
Company.

     On November 14, 2001, the Company filed a Writ of Summons with a Statement
of Claim against Mr. Ding in the Supreme Court of British Columbia alleging that
Mr. Ding had breached his fiduciary duty of loyalty to the Company. The
Statement of Claim alleges that Mr. Ding violated his fiduciary duty after he
was terminated for cause by making false statements to HSBC Canada that the
Company would be rendered insolvent by proceeding with the redemption and would
be unable to repay the funds advanced by the Bank. Further, the Company alleges
that as a result of Mr. Ding's actions the Company was forced to incur
additional expense with the Bank for a separate accounting firm and the Bank's
attorneys to review the proposed redemption transaction. Further, Mr. Ding after
his dismissal retained a laptop computer that had been provided to him by the
Company for approximately one week and during that time he improperly deleted
communications to and from the Company's customers and other information that
was on the laptop computer ("Data"). The Data deleted was important and
sensitive information owned by the Company and critical to the ongoing
operations of the Company. The Company alleges that it was temporarily deprived
of the laptop computer, and permanently deprived of the Data since there are not
other copies of the Data in the Company's files. The Company alleges that Mr.
Ding's actions were in breach of his fiduciary duties to the Company and that
the Company has suffered damages as a result of Mr. Ding's actions. The Company
is seeking (i) an order that Mr. Ding return all copies of the Data that he
retained; (ii) damages and costs, and (iii) other relief. Mr. Ding has filed a
counterclaim against the Company for wrongful dismissal.

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

     No matters were submitted by us to a vote of our security holders through
the solicitation of proxies or otherwise, during the fourth quarter of the
fiscal year covered by this Annual Report.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

     The Company's common stock was traded in the over-the-counter market on the
NASDAQ Small Cap Market under the symbol "GLAR" and on the Pacific Stock
Exchange under the Symbol GLA until it was delisted from the NASDAQ SmallCap
Market in March 2002. The Company's common stock was delisted from the NASDAQ
SmallCap Market for failure to comply with the requirement to hold an annual
meeting of the Company's shareholders during the fiscal year ended December 31,
2001, and for failure to obtain the approval of the Company's shareholders for
the consummation of the acquisition of Wonder Tool. The

                                      -21-
<PAGE>

Company's Common Stock is currently traded in the over-the-counter market on the
NASDAQ Electronic Bulletin Board.

     The table set forth below presents the range, on a quarterly basis, of high
and low sales prices per share of common stock, as reported by Nasdaq.

Year Ended December 31, 2001                     High      Low
                                               -------    ------

January 1, 2001 through March 31, 2001         $ 2.563    $1.375
April 1, 2001 through June 31, 2001            $  3.10    $ 1.01
July 1, 2001 through September 31, 2001        $  1.97    $ 1.10
October 1, 2001 through December 31, 2001      $  1.35    $  .77

Transition Period Ended December 31, 2000

February 1 through April 30, 2000              $13.655    $3.450
May 1 through July 31, 2000                    $ 5.235    $3.171
August 1 through October 31, 2000              $ 3.415    $1.875
November 1, 2000 through December 31, 2000     $ 3.000    $1.391

     The closing price of the common stock on April 12, 2002, was $.35 per
share. As of March 31, 2002, the Company had approximately 34 shareholders of
record and estimates that its common stock was beneficially owned by more than
500 shareholders based upon ownership in "street name."

RECENT SALES OF UNREGISTERED SECURITIES

     On December 21, 2001, the Company consummated a reverse merger transaction
whereby it acquired 100% of the issued and outstanding stock of Wonder Tool Inc.
("Wonder Tool") for 1,250,000 shares of the Company's common stock. Prior to the
merger, Wonder Tool's common stock was held by Cyclo, a private company owned by
two shareholders each of whom management believes is an "accredited investor."
Cyclo then distributed the Glas-Aire shares to its shareholders. As a result of
this transaction, the owners of Cyclo acquired 50.7% of the Company's
outstanding voting stock. The acquisition was a privately negotiated
transaction, and management believes that this transaction was exempt from the
registration provisions of the Securities Act of 1933, as amended (the "1933
Act") pursuant to Section 4(2) of the 1933 Act.

DIVIDENDS

     On November 11, 1999, the Company announced the payment of four 2.5%
quarterly stock dividends. In addition, on February 9, 2000, the Company
announced that a special stock dividend of 18.5% would be paid to stockholders
of record on March 10, 2000, concurrent with the Company's second 2.5% quarterly
stock dividend. The special stock dividend was declared to assist the Company in
meeting the Nasdaq National Market System listing criteria of 1.1 million
publicly held shares. The two additional 2.5% quarterly stock dividends were
paid in

                                      -22-
<PAGE>

June and September of 2000. No dividends were declared or paid during the fiscal
year ended December 31, 2001. Although the Board of Directors may elect to
declare stock dividends in the future, there are no present plans, arrangements,
understandings or commitments to do so.

     The payment of cash dividends is within the discretion of the Board of
Directors. The Board of Directors have advised that they do not anticipate
declaring and paying cash dividends in the foreseeable future.

PROCEEDS OF OFFERING

     The Company received net proceeds from a registered public offering
amounting to approximately $2,773,000 in May 1996. The registration statement
for that offering was declared effective on May 1, 1996, and the SEC File No.
was 33-99258-LA. Approximately $450,000 of the net proceeds of that offering
have not been utilized by the Company.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

GLAS-AIRE INDUSTRIES GROUP LTD. SELECTED FINANCIAL DATA (SUBSEQUENT TO REVERSE
ACQUSITION OF WONDER TOOL INC.)

     The selected financial information set forth below is derived from the
audited consolidated financial statements of Wonder Tool, because the
acquisition of Wonder Tool must be accounted for as a reverse acquisition with
Wonder Tool as the acquiring entity for accounting purposes. Accordingly, this
annual report and the accompanying financial statements reflect, both prior and
subsequent to the acquisition, the business of the acquired entity, Wonder Tool.
The financial information for Glas-Aire for periods prior the date of the
reverse acquisition (December 21, 2001) has been included, because Glas-Aire is
considered the predecessor for accounting purposes. The Wonder Tool financial
statements are prepared in accordance with generally accepted accounting
principles in the United States of America and stated in United States dollars.
The financial information for the periods ended December 31, 2001 and December
20, 2001, are derived from audited financial statements. The selected
consolidated financial data is qualified in its entirety by reference to, and
should be read in conjunction with, the Consolidated Financial Statements,
related Notes and the information set forth below under this Item 6.

SELECTED FINANCIAL DATA
                                                   December 31,   December 20,
Balance Sheet Data                                     2001         2001/(a)/
                                                   ------------   ------------

Total Current Assets                                $3,652,589      $864,622
Total Assets                                        $4,937,649      $864,722
Total Current Liabilities                           $2,675,449      $ 57,784
Stockholder's Equity                                $1,368,021      $806,938

----------
/(a)/ Represents the financial position of Wonder Tool Inc. at acquisition

                                      -23-
<PAGE>

<TABLE>
<CAPTION>
                                                Period from January 1,    Year Ended
                                                 2001 to December 20,    December 31,
Income Statement Data                                 2001/(a)/           2000/(a)/
                                                ----------------------   ------------
<S>                                             <C>                      <C>
Sales                                                 $  822,386          $  947,234
Cost of sales                                            593,588             587,721
                                                      ----------          ----------
Gross profit                                             228,798             359,513
                                                      ----------          ----------
Selling and distribution                                   8,085              11,198
General and administrative                                42,051              42,682
                                                      ----------          ----------
Income from operations                                   178,662             305,633
Net income (loss) for the period                         178,662             305,633
Pro Forma Income Taxes                                    60,745             103,915
Pro Forma Net Income (loss) for the period               117,917             201,718
(Loss) earnings per share-basic and diluted                 0.09                0.16
Weighted average number of shares outstanding          1,250,000           1,250,000
</TABLE>

----------
/(a)/ Represents the results of operations of Wonder Tool Inc. which includes
its predecessor Orbital Polishing Operations.

Results of Operations

     The following table sets forth selected income data as a percentage of net
sales for the periods indicated.

                                  Period from January 1,    Year Ended
                                  2001 to December 20,     December 31,
Income Statement Data                   2001/(a)/           2000 /(a)/
                                  ----------------------   ------------
Net sales .....................          100.0%               100.0%
Cost of sales .................           72.2%                62.0%
Gross profit ..................           27.8%                38.0%
Selling and distribution ......            1.0%                 1.2%
General and administrative ....            5.1%                 4.5%
Income from operations ........           21.7%                32.3%

----------
/(a)/ Represents the results of operations of Wonder Tool Inc. which includes
its predecessor Orbital Polishing Operations.

Management's Discussion and Analysis of Financial Condition and Results of
Operations

     This section contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under Item 1 - "Description of Business--Special Risk
Factors." The following discussion and analysis should be read in conjunction
with Item 8 - "Selected Financial Data" and the Consolidated Financial
Statements and notes thereto appearing elsewhere in this Annual Report.

                                      -24-
<PAGE>

Overview

     Wonder Tool derives its revenues from the sale of aircraft and automobile
orbital polishers and related accessories. The Companies sales decreased to
$822,386 for the period ended December 20, 2001, from $947,234 for the year
ended December 31, 2000. Management believes that revenue decreased because of a
deteriorating economy during the year ended December 31, 2001. Additionally, the
event of September 11, 2001, had a significant effect on Wonder Tool's sales to
the airline industry. Wonder Tool is closely linked to the airline industry, See
Item 1 - "Risk Factors." As a result of the economic slow down during 2001 and
the September 11, 2001 tragedy, Wonder Tool's gross profit decreased to $228,798
for the period ended December 20, 2001 from $359,513 for the year ended December
31, 2000, a decline of 36.4%. For the same reasons listed above, Wonder Tool's
net income declined from $305,633 for the period ended December 20, 2000, to
$178,662 for the year ended December 31, 2001. Management is optimistic that it
will be able to increase both gross profit and net income in future periods by
integrating the Orbital Polishing Division into Glas-Aire's manufacturing
operations in Canada so that labor costs may be reduced, and by decreasing both
raw material and component costs. Increased revenue in the future periods is
dependent upon the Company's ability to increase market penetration in both the
domestic and foreign airline markets, and in the automotive detailing industry.
Management believes that its new Manufacturing Representatives agreement with AG
Group will lead to greater sales to foreign airlines. Investors are cautioned
there can be no assurance that sales will be increase or that either gross
profit margins or net income will increase in future periods.

Period from January 1, 2001 to December 20, 2001 Compared to the Year Ended
December 31, 2000

     Sales. Wonder Tool's sales decreased by 13.2% from $947,234 for the year
ended December 31, 2000 to $822,386 for the period ended December 20, 2001.
Wonder Tool's largest customer accounted for approximately 18% of Wonder Tool's
revenues.

     Gross Profit. Gross profit decreased from $359,513 for the year ended
December 31, 2000 to $228,798 for the period ended December 20, 2001. This net
decrease of 36.4% was due primarily to the economic slowdown during the year
ended December 31, 2001 and the events of September 11, 2001.

     Selling and Distribution. Selling and distribution expenses decreased from
$11,198 for the year ended December 31, 2000 to $8,085 for the period ended
December 20, 2001. This net decrease of 27.8% was primarily due to a decrease in
freight out and advertising. Commissions increased from $0 for the year ended on
December 31, 2000 to $1,149 for the period ended on December 20, 2001.

     General and Administrative. General and administration expenses decreased
1.5% from $42,682 for the year ended December 31, 2000 to $42,051 for the period
ended December 20, 2001.

                                      -25-
<PAGE>

     Net Income. Wonder Tool's net income decreased 41.5% from $305,633 for the
year ended December 31, 2000 to $178,662 for the year ended December 31, 2001.
This decrease in income was primarily due to the economic slowdown during the
year ended December 31, 2001 and the events of September 11, 2001.

Capital Resources and Liquidity

     At December 31, 2001, as compared to December 31, 2000, Wonder Tool's
current assets increased 24.8 % from $693,065 to $864,622. Management believes
its current assets plus anticipated cash flow from operations will be adequate
to cover the Division's future financial needs.

GLAS-AIRE INDUSTRIES GROUP LTD. SELECTED FINANCIAL DATA (PRIOR TO REVERSE
ACQUSITION OF WONDER TOOL INC.)

     The selected financial information set forth below is derived from the
audited consolidated financial statements of Glas-Aire Industries Group Ltd.,
which are prepared in accordance with generally accepted accounting principles
in the United States of America and stated in United States dollars. The
consolidated financial statements for the period ended December 20, 2001 and for
the eleven months ended December 31, 2000 have been audited by BDO Dunwoody,
Chartered Accountants. The financial statements and BDO Dunwoody's report
thereon appear elsewhere herein. The selected consolidated financial data is
qualified in its entirety by reference to, and should be read in conjunction
with, the Consolidated Financial Statements, related Notes and the information
set forth below under this Item 6.

                                                December 20,   December 31,
Balance Sheet Data                                  2001           2000
                                                ------------   ------------
                      (In thousands of United States dollars, except share data)

Working capital                                    $  862         $2,399
Total assets                                        5,757          9,841
Obligation under capital lease and
   long term debt                                     830             93
Deferred income taxes                                 410            644
Shareholders' equity                               $1,558         $7,744

                                      -26-
<PAGE>

<TABLE>
<CAPTION>
Income Statement Data:                                                 Eleven Months
                                                         Period Ended      Ended        Year Ended
(In thousands of United States dollars, except per       December 20,  December 31,     January 31,
 share data)                                                 2001          2000            2000
                                                         -----------   -------------   ------------
<S>                                                      <C>            <C>             <C>
Sales                                                    $   11,736     $  10,930       $    9,726
Cost of sales                                                 8,566         7,913            6,845
                                                         ----------    ----------       ----------
Gross profit                                                  3,170         3,017            2,881
                                                         ----------    ----------       ----------
Research and development                                        469           489              426
Selling and distribution                                      1,114           769              749
General and administrative                                    1,004           923              812
                                                         ----------    ----------       ----------
Income from operations                                          584           836              894
Interest income                                                  46            34               84
Interest expense                                                (53)          (21)             (22)
                                                         ----------    ----------       ----------
Income before income from equity investment and income
   tax expense                                                  577           849              956
Income from equity investment                                   211           392              254
(Loss) on write off of equity investment                     (4,234)
                                                         ----------    ----------       ----------
Income (loss) before income taxes                            (3,446)        1,241            1,209
Income taxes                                                     70           556              397
                                                         ----------    ----------       ----------
Net income (loss) for the period                         $   (3,516)   $      685       $      812
                                                         ==========    ==========       ==========
(Loss) earnings per share/basic and diluted              $    (1.64)   $     0.30       $     0.36
                                                         ==========    ==========       ==========
Weighted average number of
   shares outstanding                                     2,150,024     2,306,905        2,229,522
</TABLE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations

Overview

     Glas-Aire derives its revenues from the sale of manufactured automotive
accessories. Glas-Aires's sales increased from $10,929,775 for the eleven month
period ended December 31, 2000 to $11,735,690 for the period ended December 20,
2001. Glas-Aire had a net loss of $3,516,066 for the period ended December 20,
2001, as compared to the net income of $685,769 for the eleven month period
ended December 31, 2000. As a result of the redemption of the Company's shares
and a decline in the market value of Regency's common stock, Glas-Aire

                                      -27-
<PAGE>

recorded a loss of $4,233,835 on its investment in 4,040,375 shares of Regency
Affiliates Inc.'s common stock. For additional information, please see "Item 11,
Security Ownership of Certain Beneficial Owners and Management--Change of
Control," "Item 12, Certain Relationships and Related Transactions-Regency
Redemption," "Item 12, Certain Relationships and Related Transactions-Wonder
Tool Acquisition," and Footnote 3 to Glas-Aire's Financial Statements. Gross
profit margins decreased from 27.6% for the eleven month period ended December
31, 2000 to 27.0% for the period ended December 20, 2001. This decrease was
primarily due to a 6.5% price reduction effective July 2001, imposed by
Glas-Aire's largest customer and to increases in direct labor and overhead
costs. However, management believes that it will be able to increase gross
profit and net income in future periods by increasing Glas-Aire's production
capacity and production efficiency. Increased revenue in future periods will
depend on Glas-Aire's ability to strengthen its customer base through the
development of new products, increasing the number of customers and expanding
into additional geographic markets and distribution channels, while maintaining
or increasing sales of its existing products to current customers. Management
intends to increase production capacity and production efficiency through the
purchase of additional equipment and machinery. Further, management also intends
to focus its efforts upon improving the sales to overhead ratio and increasing
Glas-Aire's gross margin by focusing upon cost reduction, the use of more
effective tools and better utilization of resources. Investors are cautioned
that there can be no assurance that gross profit and net income will, in fact,
increase in future periods. See "Item 1. Description of Business--Business
Strategy."

Results of Operations

     The following table sets forth selected income data as a percentage of net
sales for the periods indicated.

                                                                   Eleven month
                                                    Period ended   period ended
                                                    December 20,   December 31,
                                                        2001           2000
                                                    ------------   ------------
Net sales ......................................       100.0%         100.0%
Cost of sales ..................................        73.0           72.4
Gross profit ...................................        27.0           27.6
Research and development .......................         4.0            4.5
Selling and distribution .......................         9.5            7.0
General and administrative .....................         8.6            8.4
Income from operations .........................         5.0            7.6
Interest income ................................         0.4            0.3
Interest expense ...............................        (0.5)          (0.2)
                                                       -----          -----
Income before income from equity investment
   and income tax expense ......................         4.9            7.8
Income from equity investment ..................         1.8            3.6
Loss on sale of equity investment ..............       (36.1)           0.0
Income taxes ...................................         0.6            5.1
                                                       -----          -----
Net income (loss) ..............................       (30.0)           6.3
                                                       -----          -----

                                      -28-
<PAGE>

Period Ended December 20, 2001 Compared to Eleven Month Period Ended December
31, 2000

     The following information compares information for the eleven month period
ended December 31, 2000 (i.e., the transition period resulting from a change in
Glas-Aire's fiscal year end) with the financial information for Glas-Aire for
the period ended December 20, 2001, prior to the reverse acquisition of Wonder
Tool.

     Sales. Glas-Aire's sales increased by 7.37% from $10,929,775 for the year
ended December 31, 2000 to $11,735,690 for the period ended December 20, 2001.
This increase resulted primarily from (i) a general increase in automotive
sales, (ii) the addition of new customers, (iii) sales of new parts, and (iv)
additional orders from existing customers. Revenues from Glas-Aire's three major
customers accounted for approximately 69% of Glas-Aire's sales during the period
ended December 20, 2001.

     Gross Profit. Gross profit margins, expressed as a percentage of sales,
decreased slightly from 27.6% for the eleven month period ended December 31,
2000 to 27.0% for the period ended December 20, 2001. This net decrease of 0.6%
was due primarily to, (i) a 6.5% price reduction as requested by Glas-Aire's
largest customer effective July 2001, (ii) an increase in direct labor and
overhead costs of 2.2%, (iii) an increase in consulting fees for the Worker's
Compensation Board safety requirements of 2.36%, (iv) a decrease in material
costs of 3.63%, and (v) a decrease of 0.33% in operating costs and cash
discounts.

     Research and Development. Expenses for research and development decreased
by 4.10% from $488,576 for the year ended December 31, 2000 to $468,501 for the
period ended December 20, 2001. This decrease was primarily due to research and
development for the Matched Compression Molding activities which included (i) a
decrease of $39,453 or 8.07% in labor, consultant, research and development
supplies, (ii) a decrease of $12,235 or 2.5% for patent and trade mark
applications, and (iii) an increase in ordinary research and development
activities attributed from (i) an increase of $37,459 or 7.67% in the number of
engineering personnel conducting in-house activities, (ii) an increase of $8,155
or 1.67% in engineering supplies, (iii) a decrease of $9,698 or 1.98% in the
usage of outside contractors to accommodate a decrease in research and
development activities, and (iv) a decrease of $4,304 or 0.9% in travel expenses
to customers relative to new designs.

     Selling and Distribution. Selling and distribution expenses increased by
44.89%, from $768,557 for the eleven months ended December 31, 2000 to
$1,113,534 for the period ended December 20, 2001. This increase was primarily
due to (i) an increase of $24,358 or 3.17% in commission expenses resulting from
volume increase in sales, (ii) an increase in warranty claims of $334,511 or
43.52% due to a major design change requested by Glas-Aire's largest customer
and claims of defective material (extrusion) from one of our suppliers, (iii) an
increase of $7,911 or 1.03% in travel and promotion expenses, and (iv) an
increase of $1,111 or 0.15% resulting from other operating costs, and (v) a
decrease of $22,914 or 2.98% in consulting and other operating costs due to cost
reduction from the closing of Glas-Aire's office in Japan.

                                      -29-
<PAGE>


     General and Administrative. General and administration expenses increased
by 8.78% from $922,750 for the eleven month period ended December 31, 2000 to
$1,003,740 for the period ended December 20, 2001. This was a result of (i) a
decrease of $24,007 or 2.60% due to a deferral of bonus to employees, (ii) a
decrease of $90,015 or 9.76% in consulting fee related to public relations,
(iii) an increase of $129,432 or 14.03% in legal, consultant, and accounting
fees related to potential acquisitions, (iv) an increase of $140,292 of 15.20%
in travel, administration cost related to Glas-Aire's reorganization, (v) a gain
on foreign exchange of $65,160 or 7.06%, (vi) a decrease of $14,750 or 1.60%
related to the preparation of annual reports to investors and annual general
meetings, and (vii) an increase of $5,198 or 0.57% in other operating costs.

     Interest Expense. Interest expense increase by 152.38% from $20,968 for the
eleven months ended December 31, 2000 to $53,378, This resulted from increased
borrowing to fund the redemption of Glas-Aire's common stock from Regency
Affiliates, Inc. For additional information concerning the redemption, please
see "Item 12, Certain Relationships and Related Transactions-Regency
Redemption."

     Income from Operations. Glas-Aire's income from operations decreased by
30.14% from $836,521 for the eleven months ended December 31, 2000 to $584,019
for the period ended December 20, 2001. This decrease in income was primarily
due to (i) a 6.5% price reduction as requested by Glas-Aire's largest customer
effective April 2000, (ii) higher warranties claim, (iii) higher administration
costs, and (iv) higher interest expenses.

     Interest Income. Interest income increased by 35.29% from $34,066 for the
eleven months ended December 31, 2000 to $45,594 for the period ended December
20, 2001, as a result of interest earnings on temporary term deposit, and
delayed payments to suppliers.

     Income/Loss from Equity Investment. Income accrued from the equity
investment decreased by 46.12% from $392,356 for the eleven months ended
December 31, 2000 to $211,420 for the period ended December 20, 2001. Equity
income accrued as a result of Glas-Aire's investment in Regency Affiliates, Inc.
Glas-Aire wrote off its equity investment in Regency Affiliates, Inc. in
connection with the redemption of its common stock on October 1, 2001. As a
result Glas-Aire will not realize income or loss in the future from that
investment. For further information concerning the redemption please see, "Item
11. Security Ownership of Certain Beneficial Owners and Management--Change of
Control," "Item 12, Certain Relationships and Related Transactions-Regency
Redemption," and Footnote 3 to Glas-Aire's Financial Statements. Further, as a
result of redemption transaction and a decline in the market value of Regency's
common stock, Glas-Aire recorded a loss of $4,233,835 on its investment in
4,040,375 shares of Regency Affiliates Inc. 's common stock. Please see "Item
12, Certain Relationships and Related Transactions-Regency Redemption." The
redemption was consummated on October 1, 2001.

     Income Taxes. Glas-Aire provided for income taxes of $69,886 for the period
ended December 20, 2001, a decrease of 87.41%, as a result of higher expenses
and the loss.

                                      -30-
<PAGE>

Eleven Month Period Ended December 31, 2000 Compared to Year Ended January 31,
2000

     Sales. The Company's sales increased by 12.38% from $9,725,611 for the year
ended January 31, 2000 to $10,929,775 for the eleven month period ended December
31, 2000. This increase resulted primarily from (i) a general increase in
automotive sales, (ii) the addition of new customers, (iii) sales of new parts,
and (iv) additional orders from existing customers. Revenues from the Company's
three major customers accounted for approximately 79% of the Company's sales
during the eleven month period ended December 31, 2000.

     Gross Profit. Gross profit margins, expressed as a percentage of sales,
decreased slightly from 29.62% for the year ended January 31, 2000 to 27.6% for
the eleven month period ended December 31, 2000. This net decrease of 2.02% was
due primarily to, (i) a 10% price reduction as requested by the Company's
largest customer effective April 2000, (ii) an increase in material costs of
1.25%, (ii) an increase in direct labor and overhead costs of 1.09%, (iii) an
increase in depreciation of 0.09% due to the placement of new equipment in
service, and (iv) a decrease of 0.41% in operating costs and cash discounts.

     Research and Development. Expenses for research and development increased
by 14.69% from $425,990 for the year ended January 31, 2000 to $488,576 for the
eleven month period ended December 31, 2000. This increase was primarily due to
research and development relative to Matched Compression Molding activities
which included (i) an increase of $60,295 or 14.16% in labor cost, (ii) an
increase of $12,235 or 2.87% for patent and trade mark applications, and (iii)
an increase of $18,848 or 4.42% in research and development supplies, as well as
ordinary research and development activities which included (i) an increase of
$24,777 or 5.82% in the number of engineering personnel conducting in-house
activities, (ii) an increase of $4,897 or 1.15% in engineering supplies, (iii) a
decrease of $50,636 or 11.89% in the usage of outside contractors to accommodate
a decrease in research and development activities, and (iv) a decrease of $7,830
or 1.84% in travel expenses to customers relative to new designs.

     Selling and Distribution. Selling and distribution expenses increased by
2.67%, from $748,596 for the year ended January 31, 2000 to $768,557 for the
eleven month period ended December 31, 2000. This increase was primarily due to
(i) an increase of $10,211 or 1.37% in commission expenses resulting from volume
increase in sales, (ii) an increase in warranty claims of $10,638 or 1.42% due
to a major design change requested by the Company's largest customer, (iii) a
decrease of $5,345 or 0.71% in travel and promotion expenses, and (iv) an
increase of $4,458 or 0.59% resulting from a new employment contract and other
operating cost.

     General and Administrative. General and administrative expenses increased
by 15% from $811,608 for the year ended January 31, 2000 to $922,750 for the
eleven month period ended December 31, 2000, as a result of (i) an increase of
$80,501 or 8.7% in consulting fees related to public relations, (ii) an increase
of $43,500 or 4.7% in directors' fees, (iii) an increase of $10,238 or 1.1% in
consulting and travel expenses related to the Company's M & A (Merger &
Acquisition), (iv) an increase of $10,000 or 1.08% in audit fees, (v) a decrease
of $18,830 or 2.04% related to the preparation of annual reports to investors
and annual general meetings, (vi) a decrease of $12,000 or 1.3% due to the
cancellation of management contracts, (vii) a decrease of $7,595 or .80% in
other miscellaneous administration costs, and (viii) an increase in provision

                                      -31-
<PAGE>

for profit sharing of $5,327 or .59%. Provision for Profit Sharing. Provision
for profit sharing increased by 4.99% from $106,684 for the year ended January
31, 2000 to $112,011 for the eleven month period ended December 31, 2000. This
increase was a result of the higher profitability of the Company.

     Interest Expense. Interest expense decreased by 6.66% from $22,463 for the
year ended January 31, 2000 to $20,968 for the eleven month period ended
December 31, 2000, as a result of decreased borrowings.

     Income from Operations. The Company's income from operations decreased 6.4%
from $894,110 for the year ended January 31, 2000 to $836,521 for the eleven
month period ended December 31, 2000. This decrease in income was primarily due
to (i) a 10% price reduction as requested by the Company's largest customer
effective April 2000, (ii) higher research and development costs, (iii) higher
administration costs, and (iv) the eleven month reporting period.

     Interest Income. Interest income decreased by 59.2% from $83,573 for the
year ended January 31, 2000 to $34,066 for the eleven month period ended
December 31, 2000, as a result of the reduction in the Company's liquid assets
earning interest. The Company substantially reduced its liquid assets earning
interest when it invested a significant amount of the Company's liquid assets in
the common stock of Regency Affiliates, Inc.

     Income from Equity Investment. Income accrued from the equity investment
increased by 55% from $253,719 for the year ended January 31, 2000 to $392,356
for the eleven month period ended December 31, 2000. Equity income accrues as a
result of the Company's investment in Regency Affiliates, Inc. See "Item 11.
Security Ownership of Certain Beneficial Owners and Management--Change of
Control" and Footnote 3 to the Company's Financial Statements.

     Income Taxes. The Company provided for income taxes of $556,206 for the
eleven month period ended December 31, 2000. The Company's effective tax rate
for the eleven month period ended December 31, 2000 was 44.8% compared to 32.8%
for the fiscal year ended January 31, 2000.

     Net Income. Net income decreased by 15.6% from $812,332 for the year ended
January 31, 2000 to $685,769 for the eleven month period ended December 31,
2000. This decrease in income resulted primarily from the recording of income
taxes on equity earnings related to the Company's investment in Regency
Affiliates, Inc., its parent company.

Liquidity and Capital Resources

     On December 31, 2000, Glas-Aire's working capital was approximately
$2,399,000 as compared to $862,000 on December 20, 2001. This decline occurred
primarily as the result of the use of available liquid resources to fund the
$2,500,000 cash payment made to Regency in connection with the redemption.
Glas-Aire expects that working capital requirements and capital additions will
continue to be funded through a combination of Glas-Aire's existing funds,
internally generated funds and existing bank facilities and capital leases.
Glas-Aire's working

                                      -32-
<PAGE>

capital requirements are expected to increase in line with the growth of Glas-
Aire's business, and it either has or will generate sufficient working capital
to meet Glas-Aire's requirements during this fiscal year. During the current
fiscal year, Glas-Aire anticipates making total capital expenditures of
approximately $650,000 as follows: (1) $50,000 for mechanized material handing,
(2) $200,000 for thermoforming equipment to facilitate the recently developed
Matched Compression Molding process, (3) $130,000 for design/upgrade software
and related hardware, (4) $250,000 for moving expenses and for leasehold
improvements to enable capacity increases and to accommodate new processes in a
bigger building, and (5) $20,000 for QS9000 audits by QMI (Quality Management
Institute), which will be expensed as incurred.

Impact of Inflation

     Glas-Aire believes that inflation has not had a material effect on its
business. Although the cost to Glas-Aire of certain raw materials used in the
manufacture of its products, primarily acrylic, has increased over the past few
years, Glas-Aire has been able to increase the prices of its products
accordingly.

Exchange Rates

     The Company sells most of its products to international customers. The
Company's principal markets are the United States and Japan. The Company sells
most of its products in United States dollars, but pays for its material
components and labor principally in Canadian dollars. The Company has never
engaged in exchange rate hedging activities and management does not believe that
such activities are necessary. Management will continue to evaluate this issue
and, if management deems it necessary in the future, it may implement some
hedging techniques to minimize the Company's foreign exchange exposure.

     Exchange rates between the United States and Canadian dollar for the eleven
month period ended December 31, 2000, and the year ended December 31, 2001,
including the average exchange rate for the period, are as follows:

Fiscal period ended        Exchange Rate           for Period
-------------------        -------------           ----------

 December 31, 2001     1.U.S.$: 1.5873 Cdn.$   1 U.S.$: 1.5443Cdn.$
 December 31, 2000     1.U.S.$: 1.4995 Cdn.$   1 U.S.$: 1.4820Cdn.$

Significant Accounting Policies and Estimates

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

                                      -33-
<PAGE>

Revenue Recognition

     The Company recognizes revenue on the sale of products at the time the
products are shipped to its customers.

Research and Development

     Research and development costs are expensed as incurred.

Recently Issued Accounting Standards

     SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" is effective for all fiscal quarters of fiscal years beginning after
June 15, 2000. SFAS No. 133 requires companies to recognize all derivative
contracts as either assets or liabilities in the balance sheet and to measure
them at fair value. If certain conditions are met, a derivative may be
specifically designated as a hedge, the objective of which is to match the
timing of gain or loss recognition on the hedging derivative with the
recognition of (i) the changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk or (ii) the earnings effect
of the hedged forecasted transaction. For a derivative not designated as a
hedging instrument, the gain or loss is recognized in income in the period of
change. Historically, the Company has not entered into derivative contracts
either to hedge existing risks or for speculative purposes. Accordingly,
adoption of the new standards on January 1, 2001 did not have any effect on its
financial statements.

     In June 2001, SFAS No. 141 "Business Combinations" was issued. SFAS No. 141
requires that all business combinations be accounted for using the purchase
method and that one of two specified criteria be met in identifying intangible
assets apart from goodwill. Additional disclosures are required in respect to
the primary reasons for the business combination and the allocation of the
purchase price paid to the assets acquired and liabilities assumed by major
balance sheet caption. SFAS No. 141 applies to all business combinations
initiated after June 30, 2001. The Company applied the provisions of SFAS No.
141 for the reverse acquisition that took place subsequent to December 20, 2001.

     In June 2001, SFAS No. 142 "Goodwill and Other Intangible Assets" was
issued. Under the provisions of SFAS No. 142 goodwill and other intangible
assets with an indefinite life are no longer amortized but will be tested at
least annually for impairment. The statement provides a two step process for
estimating fair value of the reporting units and measuring the amount of
impairment, if any, of goodwill and other intangible assets. SFAS No. 142 is
effective for fiscal years beginning after December 15, 2001.

     The Company does not expect SFAS No. 142 to have a material impact on its
financial statements because it does not have any recorded goodwill or other
intangible assets.

     In August 2001, SFAS No. 144 "Accounting for the Impairment or Disposal of
Long-Lived Assets" was issued. This statement establishes a single model based
upon SFAS No. 121 for accounting for the impairment or disposal of long lived
assets. It supersedes FASB Statement No. 121 and the reporting provisions of APB
Opinion No. 30 for the disposal of a

                                      -34-
<PAGE>

segment of a business and also amends certain provisions of ARB No. 51. SFAS No.
144 is effective for financial statements issued for fiscal years beginning
after December 15, 2001. Management believes that the adoption of SFAS No. 144
will have no material effect on the Company's financial statements.

ITEM 7.  FINANCIAL STATEMENTS

     Included beginning at page F-1.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

     Not  Applicable.

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT

     The directors, executive officers and one of the key employees of Glas-Aire
Industries Group Ltd. are as follows:

       Name           Age              Position
       ----           ---              --------

William R. Ponsoldt    60   Chairman of the Board of Directors

Craig Grossman         39   President, Chief Executive Officer and
                            Director

Robert C. Johnson      57   Director

Raymond Gherardini     56   Director

Omer Esen              59   Chief Operating Officer

Linda Kwan             56   Chief Financial Officer

Marc Baldinger         46   Director

Todd M. Garrett        36   Director

Chris G. Mendrop       49   Director

                                      -35-
<PAGE>

     William R. Ponsoldt. Mr. Ponsoldt has served as the Chairman of the Board
of Directors of the Company since April 16, 1999 and as the Company's Chief
Executive Officer from April 16, 1999 until December 4, 2001. Mr. Ponsoldt has
been a director of Regency since June 1996, and has been the Chairman of the
Board since August 1996, and President and Chief Executive Officer since June
1997. During the past five years, Mr. Ponsoldt has served as the portfolio
manager for several hedge funds.

     Craig Grossman. Mr. Grossman has served as a director of the Company since
May 21, 1999. From September 12, 2001, until December 4, 2001, Mr. Grossman
served as the acting President of the Company. On December 4, 2001, the Board of
Directors appointed Mr. Grossman the Chief Executive Officer and President of
the Company. From 1999 to the present Mr. Grossman has been the President of
Allied Conservancy Group, Inc., a private hedge fund. Since 1999, Mr. Grossman
has served as the managing partner of Tallman Gulch Development Group, LLC, an
investment group funding a 500-acre residential land development in Douglas
County, Colorado. From 1993 to 2001, he served as the Vice-President of
Saddleback Mountain Development, an investment group funding an 1800-acre
residential development in Evergreen, Colorado. From 1998 to 1999, Mr. Grossman
served as the Chief Executive Officer of On-line Mortgage Service, a licensed
retail mortgage broker doing business in eleven states. From 1994 to 1995, Mr.
Grossman also served as the President and a Director of Regency Affiliates, Inc.
Mr. Grossman has extensive experience in finance and in planning and developing
complex projects.

     Robert C. Johnson. Mr. Johnson has served as a director of the Company
since December 21, 2001. Mr. Johnson is currently the President and Chief
Operating Officer of Cyclo Manufacturing Company, Denver Colorado. Mr. Johnson
is also Chairman, Chief Executive Officer and principal owner of Summit Mattress
Co. in Denver, Colorado. He graduated as a petroleum engineer from the Colorado
School of Mines in Golden, Colorado and attended the University of Virginia
Management School in 1980. Prior to acquiring Cyclo in 1989, Mr. Johnson spent
twenty-three (23) years in the oil and gas industry. Mr. Johnson joined Amoco
Production Co. after graduation in 1966 and served in various managerial,
operating, technical, and financial capacities over his nineteen (19) year
tenure.

     Raymond Gherardini. Mr. Gherardini has served as a director of the Company
since December 21, 2001. Mr. Gherardini is currently Vice President for
Sales/Marketing at Cyclo Manufacturing Co. Mr. Gherardini attended Colorado
State University in Fort Collins, Colorado and majored in Business
Administration. He is also Chairman of the Board of Shanghai-Cyclo, Cyclo's
Chinese joint venture. Mr. Gherardini has thirty-four (34) years experience in
the automotive industry. Mr. Gherardini has developed sales and marketing
programs aimed at the automotive chain stores, automotive warehouse
distributors, mass merchant chain accounts and automotive dealer networks. Mr.
Gherardini has handled the diverse classes of automotive trades either on a
direct basis or through factory representatives. Immediately prior to acquiring
Cyclo, Mr. Gherardini was Vice President of Sales and Marketing for Turbo Tek
Enterprises, Inc., a California marketing firm with 1989 sales of $30MM. Mr.
Gherardini was founder of Turbo Tek in 1984 and was responsible for its
successful sales and marketing programs in the

                                      -36-
<PAGE>

United States and overseas. Mr. Gherardini was a member of APAA for many years
and is currently a member of SEMA through his company.

     Omer Esen. Mr. Esen has served as Vice President of Operations for the
Company from 1995 - 1997, assumed the additional position of Chief Financial
Officer from 1996 - 2001, appointed as the General Manager from 1997 - 2001,
2001 was appointed as the Chief Operating Officer. In that position, Mr. Esen
plans, organizes, directs and controls all operations including production,
research and development, customer service, purchasing/inventory control,
quality assurance and management information systems. From 1992 until 1995, Mr.
Esen was employed as Vice President of Operation for West Bay Sonship Yachts
Ltd. (Vancouver), one of the world's leading manufacturers of 58 to 100 foot
yachts, where he managed manufacturing operations as well as developed and
installed various computerized business control systems. During Mr. Esen's
tenure, the Company's revenues grew from $2 million to $15 million. From 1988
until 1992, Mr. Esen was Director of Operations for DBA Communication Systems
Inc. in Vancouver, a design and manufacturing firm for small business
telecommunications equipment and systems. Mr. Esen holds a bachelor's degree in
electrical engineering from Faraday House Engineering College in London, England
and a diploma in business administration from the University of British
Columbia.

     Linda Kwan. Mrs. Kwan has been appointed as the Chief Financial Officer of
the Company in 2001. In 1996 she has assumed the position of Controller. From
1995 until 1996 she has served as the Accounting Manager. Mrs. Kwan is a member
of the Certified Management Accountants of Canada. From 1992 to 1995, Mrs. Kwan
operated as a private consultant, providing accounting consulting services to
small businesses and individuals. From 1983 to 1992, Ms. Kwan has worked with
York-Hanover Developments, Ltd., a large real estate developer located in
Toronto. While with York Hanover Group, Mrs. Kwan held a number of positions,
eventually rising to the position of Corporate Controller with responsibility
for all of the firm's accounting functions. Ms. Kwan graduated from Hong Kong
Technical College with a degree in commercial business and accounting.

     Marc Baldinger. Mr. Baldinger has served as a director of the Company since
April 16, 1999. Mr. Baldinger is the Chief Financial Officer of Regency
Affiliates, Inc., and until late in 2001, was a Senior Officer in Financial
Services for Riverside National Bank ("Riverside") located in Palm City,
Florida, and was responsible for portfolio management, asset allocation and
investment selection for Riverside's Trust Department. He commenced employment
with Riverside in November 1996. From January 1994 to November 1996 Mr.
Baldinger was employed as a Certified Financial Planner for American Express
Financial Advisors, Inc. and Linsco Private Ledger. Mr. Baldinger has a broad
background in financial management and planning. Prior to entering the financial
planning business, Mr. Baldinger was the President of Supreme Petroleum Company,
which was a petroleum trading company.

     Todd M. Garrett. Mr. Garrett has served as a director of the Company since
May 21, 1999. Since November 2001, Mr. Garrett has been employed as a Vice
President-Financial Advisor at The Seidler Companies Incorporated. From January
2001 to October 2001Mr. Garrett was employed by US Bancorp Piper Jaffray in
Newport Beach, California, as a Vice President, Investments . From 1996 to
January 2001 he worked as an investment advisor in the Private

                                      -37-
<PAGE>

Client Department in the corporate headquarters of Cruttenden Roth, Incorporated
in Newport Beach. Mr. Garrett specializes in formulating investment strategies
through the selection of optimal investment combinations tailored to client
needs and objectives. His managed portfolios comprise both high net worth
individuals and institutional investors. Mr. Garrett has worked in the
investment industry for more than nine years. Furthermore, he has worked for
several investment banks that include Kidder Peabody & Co., Lehman Brothers,
Fidelity Investments and Sutro & Co. Mr. Garrett holds a Bachelor of Arts degree
in Business Economics from San Diego State University with an emphasis in
finance and accounting. Mr. Garrett is currently pursuing the Certified
Financial Planner (CFP) designation.

     Chris G. Mendrop. Mr. Mendrop has been a director of the Company since its
inception. He is currently self-employed as a financial consultant. From their
inceptions in January, March and July 1998, respectively, until March 2001, he
served as the Chief Executive Officer of Blake Street Group LLC, Blake Street
Securities LLC and Blake Street Advisors LLC (collectively the "Blake Street
Group"). From July 1992 until January 1998, Mr. Mendrop was the Chief Executive
Officer of Corporate Development Capital, Inc., an investment advisory and
financial consulting firm located in Denver, Colorado. Mr. Mendrop holds a
Bachelor of Science degree in economics from Colorado State University and a
Masters of Business Administration degree in finance from the University of
Colorado.

     The directors of the Company are elected annually and serve until their
successors take office or until their death, resignation or removal. The
executive officers serve at the pleasure of the Board of Directors.

     Pursuant to an underwriting agreement between the Company and Global
Financial Group, Inc. ("Global") entered into on May 1, 1996, the Company
granted Global the right to designate one person to either serve on the Board of
Directors of the Company or to attend Board of Directors meetings as an
observer. Global has never designated any such person, and no representative of
Global has attended any of the Board of Directors Meetings since 1999.

     At the present time no family relationship exists among any of the named
directors and executive officers. No arrangement or understanding exists between
any of these directors or officers and any other persons pursuant to which any
director or executive officer was elected as a director or executive officer of
the Company. The directors of the Company are elected annually and serve until
their successors take office or until their death, resignation or removal. The
executive officers serve at the pleasure of the board of directors of the
Company.

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

     The Company believes with respect to each person that served during fiscal
2001 as an officer or director of the Company that there were no transactions
that occurred during the Company's most recent fiscal year end which required
the filing of a Form 5.

                                      -38-
<PAGE>

BOARD COMMITTEES

     The Board of Directors maintains a Compensation Committee and an Audit
Committee. The members of the Compensation Committee are Messrs. Grossman and
Mendrop. Mr. Grossman is the Company's Chief Executive Officer and a director
and Mr. Mendrop is a non-management directors. The members of the Audit
Committee are Messrs. Mendrop and Baldinger, both of whom are non-management
directors. The Compensation Committee did not have any formal meetings during
the last fiscal year. The Audit Committee met via telephone conference three (3)
times during the last fiscal year.

ITEM 10.  EXECTIVE COMPENSATION

     The following table summarizes all compensation paid to the former Chief
Executive Officer, the new President and Chief Executive Officer, and the former
President and Chief Operating Officer of the Company (together, the "Named
Executive Officers") for services rendered to the Company during the last three
fiscal years. The amount of compensation paid to each of the other executive
officers as total annual salary and bonus does not exceed $100,000.

<TABLE>
<CAPTION>
                                                      Annual Compensation
                                       -----------------------------------------------------
                                       Fiscal year
                                           ended       Annual                      Other
Name and principal position            December 31,    Salary      Bonus        Compensation
---------------------------            ------------   -------   -------------   ------------
<S>                                      <C>          <C>       <C>             <C>
Craig Grossman                           2001                   $100,000/(1)/   $ 6,000/(2)/
 President and Chief Executive           2000/(3)/                              $11,000/(2)/
 Officer                                 1999/(4)/                              $ 2,250/(2)/

William R. Ponsoldt                      2001                                   $ 6,000/(2)/
 Chairman of the Board and               2000/(3)/                              $11,000/(2)/
 former Chief Executive Officer          1999/(4)/                              $ 2,250

Alex Y. W. Ding                          2001         $77,066                   $ 2,500
 Former President , Chief Operating      2000/(3)/    $82,659   $ 22,046/(5)/   $11,000/(2)/
 Officer, Treasurer                      1999/(4)/    $83,170   $ 13,528/(5)/   $ 2,250/(2)/
 and Director
</TABLE>

----------
     /(1)/Mr. Grossman was paid this bonus for management services he provided
          to the Company for the year ended December 31, 2001.

    /(2)/ Represents fees paid in connection with services as a director of the
          Company.

    /(3)/ The Company changed its fiscal year end from January 31 to December 31
          effective December 31, 2000, so that the information presented is
          actually for the 11 months ended December 31, 2000.

    /(4)/ The Company changed its fiscal year end from January 31 to December 31
          effective December 31, 2000, so that the information presented is
          actually for the 12 months ended January 31, 2000.

    /(5)/ Represents bonuses paid pursuant to the Company's profit sharing
          program described below.

                                      -39-
<PAGE>

OPTION GRANTS IN THE LAST FISCAL YEAR

     The following table sets forth information concerning options granted
during fiscal 2001 to the Named Executive Officers.

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
                        Number of          % of Total
                        Securities      Options Granted
                        Underlying      to Employees in   Exercise
Name                  Options Granted     Fiscal Year     Price      Expiration Date
-------------------------------------------------------------------------------------
<S>                       <C>                 <C>            <C>     <C>
William R. Ponsoldt       10,000              50%            $1.00   December 3, 2006
-------------------------------------------------------------------------------------
Craig Grossman            10,000              50%            $1.00   December 3, 2006
-------------------------------------------------------------------------------------
</TABLE>

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

     During the fiscal year ended December 31, 2001, there were no options
exercised by any officers, directors, or employees of the Company. Further, on
December 31, 2001, the exercise prices of all existing options were in excess of
the market value of those options. The following table sets forth information
concerning the number of shares that may be acquired on the exercise of options
and exercisable and unexercisable stock options at the end of fiscal 2001 for
the Named Executive Officers and the directors.

--------------------------------------------------------------------------------
                                                Number of Securities Underlying
                                                Unexercised Options at Year End
--------------------------------------------------------------------------------
NAME                                            Exercisable        Unexercisable
--------------------------------------------------------------------------------
William R. Ponsoldt                               20,000                0
--------------------------------------------------------------------------------
Craig Grossman                                    20,000                0
--------------------------------------------------------------------------------
Marc Baldinger                                    20,000                0
--------------------------------------------------------------------------------
ToddGarrett                                       20,000                0
--------------------------------------------------------------------------------
Chris Mendrop                                     20,000                0
--------------------------------------------------------------------------------

     EMPLOYMENT AGREEMENTS. Effective August 1, 2000, the Company entered into
amended and restated employment agreements with Omer Esen and Linda Kwan. The
agreements are for two-year terms. Under those employment agreements, Messrs.
Esen and Ms. Kwan are each entitled to base annual compensation of $67,480(US).
Messrs. Esen and Ms. Kwan are paid in Canadian dollars and the US dollar figures
in the preceding sentence are based upon conversion at the average exchange rate
during the year. In addition to base compensation and the minimum bonuses as
provided in the agreements, Messrs. Esen and Ms. Kwan will be entitled to
participate in the profit sharing program described below.

     The Board of Directors has authorized the Company to enter into two
employment agreements with Mr. Craig Grossman, the Company's Chief Executive
Officer and a member of the Board of directors. One employment agreement is
between Mr. Grossman and the Company

                                      -40-
<PAGE>

and the other agreement is between Mr. Grossman and the Company's Canadian
operating subsidiary Glas-Aire Industries Ltd. The principal terms of the
employment agreements are summarized below. The employment agreements are to be
retroactively effective as of January 1, 2002, and terminate on December 31,
2005, unless earlier terminated by the Company or Mr. Grossman. The employment
agreements are automatically renewable for three year terms. The employment
agreements provide for aggregate annual salary of $213,000, a car allowance of
$11,400 per year, medical insurance in both the United States and Canada for Mr.
Grossman and his family, and an annual bonus. The annual bonus shall be equal to
10% of the increase in net shareholder's equity over the net shareholder's
equity for the previous fiscal year with any incremental increase in
shareholder's equity resulting from the issuance of any shares of preferred or
common stock for cash or other property excluded in calculating the annual
bonus. If a change of control occurs as defined in the agreement, Mr. Grossman
may at his option elect to treat the change of control as termination for other
than cause and be paid a severance payment equal to 18 months of his
compensation. In addition, Mr. Grossman was granted warrants to acquire 255,000
shares of the Company's common stock at an exercise price of $0.01 per share,
which expire on April 12, 2012, and contain customary anti-dilution provisions.
The Warrants were granted on April 12, 2002, and vest as follows: 85,000 shares
of the Company's common stock vested immediately upon signing of the agreement,
with warrants to acquire an additional 85,000 shares vesting on the first
anniversary of the date of the agreement provided that Mr. Grossman is employed
by the Company, and warrants to acquire an additional 85,000 shares vesting on
the second anniversary of the date of the agreement provided that Mr. Grossman
is employed by the Company.

     DIRECTORS. The Company paid $6,000 in cash to five directors and $2,500 to
Mr. Alex Ding during the fiscal year ended December 31, 2001, and granted each
of the directors options to acquire 10,000 shares of Glas-Aire's common stock at
an exercise price of $1.00 per share which expire on December 31, 2006. The
company paid $5,000 and issued 1,996 shares of common stock valued at $5,000 to
each of six directors (employee and non-employee) during the fiscal year ended
December 31, 2000 as compensation for serving as directors. The Company did not
hold an annual meeting in 2001, and as a result, the directors were not issued
any shares.

     At the Annual Meeting on November 4, 1999, the shareholders approved a
directors' compensation plan that provides for the following:

     .    An annual retainer for directors of $10,000, payable one-half in cash
          and one-half in Glas-Aire common stock, such stock to be valued at the
          average bid price for the common stock for the 30 days preceding their
          election to the Board.

     .    A cash fee of $125 per hour for each Board, committee or shareholders
          meeting attended; provided that multi-day meetings and specific
          consultations with Glas-Aire's executive management lasting at least
          eight hours are compensated on a flat per diem rate of $1,000.

     .    An annual award of an option to purchase 10,000 shares of Glas-Aire's
          common stock, at fair market value on date of grant. Options granted
          under this provision

                                      -41-
<PAGE>

          expire five years from the date of grant, are exercisable in cash and
          contain anti-dilution provisions.

     PROFIT SHARING PROGRAM. The Company has adopted a profit sharing program
that provides that an amount equal to 10% of the Company's income before income
taxes (subject to some adjustments) may be distributed to officers and employees
of the Company. Distributions pursuant to the plan for the year ended December
31, 2001 aggregated approximately $117,209.

     EXECUTIVE INCENTIVE COMPENSATION PLAN. On August 1, 2000, the Compensation
Committee of the Board of Directors approved and established an Executive
Incentive Compensation Plan (the "Executive Compensation Plan"). The purpose of
this Executive Compensation Plan is to help the Company employ and retain key
executive officers. The Executive Compensation Plan has three components--base
salary, cash incentive, and an incentive stock option award. The cash incentive
portion is based upon the Company achieving annual earnings goals ("Incentive
Goal") based upon earnings before income taxes including only the earnings
derived from the Company and its consolidated subsidiaries. If 100% of the
Incentive Goal is achieved then the eligible executives each will receive a cash
bonus equal to 38.5% of their base salary. If 125% of the Incentive Goal is
achieved then each will receive a cash bonus equal to 57.75% of their base
salary, and if 150% of the Incentive Goal is achieved then each will receive a
cash bonus equal to 77% of their base salary. Under no circumstances will actual
bonuses for any fiscal year exceed 25% of the Company's Net Income (after taxes)
or Earnings Applicable to Common Stock (as appropriate). The Incentive Stock
Option Award portion of the Executive Compensation Plan provides for the award
of incentive options to the eligible executive officers based upon the Company
achieving 100% of the Incentive Goal. If the Incentive Goal is achieved, then
the Compensation Committee shall cause to be set aside options equal to 5% of
the Company's outstanding shares for awards to employees, with 70% of those
options being available to the eligible executive officers. 10% of the entire
option pool is available for issuance to the Chairman provided that the Chairman
is not compensated by a salary. Any options granted will vest as follows: one-
third (1/3) on the date of grant, one-third (1/3) on the first anniversary of
the date of grant, and one-third (1/3) on the second anniversary of the date of
grant.

     OPTION PLANS. The Board of Directors of the Company has adopted an
Incentive Stock Option Plan (the "Qualified Plan") which provides for the grant
of options to purchase an aggregate of not more than 160,000 shares of the
Company's common stock. The purpose of the Qualified Plan is to make options
available to management and employees of the Company in order to provide them
with a more direct stake in the future of the Company and to encourage them to
remain with the Company. The Qualified Plan provides for the granting to
management and employees of "incentive stock options" within the meaning of
Section 422 of the Internal Revenue Code of 1986 (the "Code").

     The Board of Directors of the Company has adopted a Non-Qualified Stock
Option Plan (the "Non-Qualified Plan") which provides for the grant of options
to purchase an aggregate of not more than 160,000 shares of the Company's common
stock. The purpose of the Non-Qualified Plan is to provide certain key
employees, independent contractors, technical advisors and directors of the

                                      -42-
<PAGE>

Company with options in order to provide additional rewards and incentives for
contributing to the success of the Company. These options are not incentive
stock options within the meaning of Section 422 of the Code.

     The Qualified Plan and the Non-Qualified Plan (the "Stock Option Plans")
will be administered by a committee (the "Committee") appointed by the Board of
Directors which determines the persons to be granted options under the Stock
Option Plans and the number of shares subject to each option. No options granted
under the Stock Option Plans will be transferable by the optionee other than by
will or the laws of descent and distribution and each option will be
exercisable, during the lifetime of the optionee, only by such optionee. Any
options granted to an employee will terminate upon his ceasing to be an
employee, except in limited circumstances, including death of the employee, and
where the Committee deems it to be in the Company's best interests not to
terminate the options.

     The exercise price of all incentive stock options granted under the
Qualified Plan must be equal to the fair market value of such shares on the date
of grant as determined by the Committee, based on guidelines set forth in the
Qualified Plan. The exercise price may be paid in cash or (if the Qualified Plan
shall meet the requirements of rules adopted under the Securities Exchange Act
of 1934) in common stock or a combination of cash and common stock. The term of
each option and the manner in which it may be exercised will be determined by
the Committee, subject to the requirement that no option may be exercisable more
than 10 years after the date of grant. With respect to an incentive stock option
granted to a participant who owns more than 10% of the voting rights of the
Company's outstanding capital stock on the date of grant, the exercise price of
the option must be at least equal to 110% of the fair market value on the date
of grant and the option may not be exercisable more than five years after the
date of grant. The exercise price of all stock options granted under the Non-
Qualified Plan must be equal to at least 80% of the fair market value of such
shares on the date of grant as determined by the Committee, based on guidelines
set forth in the Non-Qualified Plan.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth as of March 31, 2002, the beneficial
ownership of the Company's common stock by each person known to the Company to
own beneficially more than 5% of the Company's common stock and by the officers
and directors of the Company, individually and as a group. Unless otherwise
stated below, each such person has sole voting and investment power with respect
to all such shares of common stock.

   Name and Address of              Amount and Nature of
    Beneficial Owner                 Beneficial Ownership      Percent of Class
------------------------------      ---------------------      ----------------
Raymond Gherardini                        625,000                   24.79%
2452 South Chase Lane
Lakewood, Colorado 80227

                                      -43-
<PAGE>

Robert C. Johnson                         625,000                   24.79%
7085 West Belmont Dr.
Littleton, Colorado 80123

William R. Ponsoldt                        21,489/(3)/               0.84%
729 South Federal Highway #307
Stuart, Florida 34994

Alex Ding                                 124,093/(2)/               4.88%
3137 Grandview Highway
Vancouver, B.C.
Canada V5M 2E9

Chris G. Mendrop                           21,489/(3)/               0.84%
1860 Blake Street #500
Denver, Colorado 80202

Marc Baldinger                             21,489/(3)/               0.84%
850 Lighthouse Drive
Palm City, Florida 34990

Todd M. Garrett                            21,489/(3)/               0.84%
201 Marsala Drive
Newport Beach, California 92660

Craig Grossman                             21,489/(3)/               0.84%
3137 Grandview Highway
Vancouver, B.C.
Canada V5M 2E9

Omer Esen                                  10,945                    0.43%
3137 Grandview Highway
Vancouver, B.C.
Canada V5M 2E9

Linda Kwan                                  8,350                    0.33%
3137 Grandview Highway
Vancouver, B.C.
Canada V5M 2E9

Rabideau Family Trust                     145,100                    5.75%
8101 E. Kalil Drive
Scottsdale, AZ 85260

                                      -44-
<PAGE>

Directors and executive officers
as a group (9 persons)                  1,376,740/(2)//(3)/         52.53%

----------
/(1)/ Excludes 320,000 shares of Common Stock reserved for issuance under the
     Company's Stock Option Plans.
/(2)/ Includes 87,572 shares sold by the numbered company controlled by Alex
     Ding in September 1998 to his mother, Ms. Sik Chun Fei. Mr. Ding may be
     deemed to be the beneficial owner, although not the record owner, of those
     shares.
/(3)/ Includes options to purchase 10,000 shares granted to each of the
     directors on November 4, 1999, and options to purchase10,000 shares granted
     to each of the directors on December 4, 2001.

CHANGE IN CONTROL

     The transactions described below under ITEM 12 - CERTAIN RELATIONSHIIPS AND
RELATED TRANSACTIONS-REGENCY REDEMPTION and ITEM 12 - CERTAIN RELATIONSHIIPS AND
RELATED TRANSACTIONS-WONDER TOOL ACQUISITION each involved a "Change in
Control." For further information please see ITEM 12 - CERTAIN RELATIONSHIIPS
AND RELATED TRANSACTIONS.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     REGENCY REDEMPTION

     On October 1, 2001, the Company completed a transaction for the repurchase
of all of its shares of common stock owned by Regency Affiliates, Inc. and its
wholly-owned subsidiary, Speed.com, Inc. The Company's Chairman of the Board of
Directors, William Ponsoldt, is the Chairman of the Board, Chief Executive
Officer and President of Regency Affiliates, Inc. Prior to the transaction,
Regency owned 1,215,105 shares of Glas-Aire's common stock and Glas-Aire owned
4,040,375 shares of Regency's common stock. Glas-Aire acquired 1,215,105 shares
of its common stock representing approximately 50% of the issued and outstanding
shares of Glas-Aire for $2,500,000 in cash plus 4,040,375 of Regency's common
stock, representing approximately 23% of the issued and outstanding shares of
Regency.

     WONDER TOOL ACQUISITION

     On December 21, 2001, in connection with the Wonder Tool acquisition among
Glas-Aire, Glas-Aire Acquisition Corporation, a Colorado corporation and
wholly-owned subsidiary of the Company, Cyclo and Wonder Tool, Wonder Tool and
Glas-Aire Acquisition Corporation merged. Cyclo received 1,250,000 shares of
Glas-Aire's common stock (which constituted approximately 50.7% of the Company's
total outstanding voting stock) in exchange for 1,000 shares of Wonder Tool's
common stock which it owned. As a consequence of the merger, Wonder Tool became
a wholly-owned subsidiary of the Company. After the closing, Cyclo transferred

                                      -45-
<PAGE>

the shares to Johnson and Gherardini. Hence, Johnson and Gherardini each own
625,000 shares of the Company and together control a majority of Glas-Aire's
voting stock. Both Johnson and Gherardini have been elected to serve on
Glas-Aire's board of directors.

     OTHER TRANSACTIONS

     On December 4, 2001, the Board of Directors approved a cash bonus of
$100,000 to Mr. Craig Grossman, as compensation for his management services to
the Company during the year ended December 31, 2001.

                                     PART IV

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

     Documents filed as part of this Form 10-K:

     (a) List of Exhibits.

          i.   Financial Statements: The financial statements listed by the
               Registrant on the accompanying Financial Statements (see pages
               F-1 through F-54) are filed as part of this Annual Report on
               Form 10-KSB.

          ii.  Other Exhibits

               10.1 Grossman Canadian Employment Contract

               10.2 Grossman American Employment Contract

               10.3 New Lease

     (b)  Reports on Form 8-K: Three Reports on Form 8-K were filed by the
          Company during the forth quarter ended December 31, 2001. The Company
          filed a Report of Form 8-K on October 10, 2001 and Form 8-K/A on
          October 12, 2001 and December 28, 2001 reporting its stock redemption
          with Regency Affiliates, Inc.

                                      -46-
<PAGE>

SIGNATURES

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

                                  GLAS-AIRE INDUSTRIES GROUP LTD.


Date:  May 10, 2002              By: /s/ Craig Grossman
                                     -------------------------------------------
                                      Craig Grossman, Chief Executive Officer,
                                      President and Director

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.


Date: May 10, 2002
                                  ----------------------------------------------
                                  Willam R. Ponsoldt, Sr. Chairman of the Board


Date: May 10, 2002
                                  ----------------------------------------------
                                  Robert C. Johnson, Director


Date: May 10, 2002
                                  ----------------------------------------------
                                  Raymond Gherardini, Director


Date: May 10, 2002                /s/ Linda Kwan
                                  ----------------------------------------------
                                  Linda Kwan, Chief Financial Officer


Date: May 10, 2002                /s/ Chris G. Mendrop
                                  ----------------------------------------------
                                  Chris G. Mendrop, Director


Date: May 10, 2002                /s/ Marc Baldinger
                                  ----------------------------------------------
                                  Marc Baldinger, Director


Date: May 10, 2002                /s/ Todd M. Garrett
                                  ----------------------------------------------
                                  Todd M. Garrett, Director

                                      -47-
<PAGE>

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)

                                               CONSOLIDATED FINANCIAL STATEMENTS

                        FOR THE PERIOD FROM JANUARY 1, 2001 TO DECEMBER 20, 2001
                      (ACQUISITION DATE, NOTE 13), THE ELEVEN-MONTH PERIOD ENDED
                           DECEMBER 31, 2000 AND THE YEAR ENDED JANUARY 31, 2000
                                                        (STATED IN U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                                        Contents
--------------------------------------------------------------------------------
<S>                                                                     <C>
INDEPENDENT AUDITORS' REPORT                                                F-2

INDEPENDENT AUDITORS REPORT                                                 F-3

CONSOLIDATED FINANCIAL STATEMENTS

    Balance Sheets                                                          F-4

    Statements of Operations                                                F-5

    Statements of Stockholders' Equity and Comprehensive (Loss) Income      F-6

    Statements of Cash Flows                                                F-7

    Summary of Significant Accounting Policies                              F-9

    Notes to Financial Statements                                          F-14
</TABLE>
<PAGE>

================================================================================

                                                    INDEPENDENT AUDITORS' REPORT

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


TO THE DIRECTORS AND STOCKHOLDERS OF
GLAS-AIRE INDUSTRIES GROUP LTD.


We have audited the accompanying consolidated balance sheets of Glas-Aire
Industries Group Ltd. (Predecessor Company) as at December 20, 2001 (acquisition
date) and December 31, 2000 and the related consolidated statements of
operations, stockholders' equity and comprehensive (loss) income and cash flows
for the period from January 1, 2001 to December 20, 2001, the eleven-month
period ended December 31, 2000 and the year ended January 31, 2000. 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 did not audit the financial statements of Regency Affiliates,
Inc. as of December 31, 2000 and for the two years then ended, the investment
which was reflected in the accompanying financial statements using the equity
method of accounting. The investment in Regency Affiliates, Inc. represents
approximately 41% of consolidated total assets as of December 31, 2000 and 100%
of the income from equity investment for the eleven-month period ended December
31, 2000 and the year ended January 31, 2000. The financial statements of
Regency Affiliates, Inc. were audited by other auditors whose report had been
furnished to us, and our opinion, insofar as it relates to the amounts included
for Regency Affiliates, Inc., is based solely on the report of the other
auditors.

We conducted our audits in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance 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 and the report of the other auditors
provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report of other auditors, these
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Glas-Aire Industries Group Ltd.
(Predecessor Company) as at December 20, 2001 (acquisition date) and December
31, 2000 the results of its operations and its cash flows for the period from
January 1, 2001 to December 20, 2001, the eleven-month period ended December 31,
2000 and the year ended January 31, 2000 in conformity with U.S. generally
accepted accounting principles.



/s/ BDO Dunwoody LLP

Chartered Accountants

Langley, Canada
March 21, 2002

                                                                             F-2
<PAGE>


                                Rosenberg Rich
                                 Baker Berman
                                 ------------
                                   & Company
                                     -------
                         A professional association of
                         CERTIFIED PUBLIC ACCOUNTANTS
         380 Foothill road o P.O. Box 6483 Bridgewater, NJ 08807--0483
                    Phone: 908-231-1000 . FAX: 908-231-6894
                 Website: www.rrbb.com . E-Mail: info@rrbb.com
                          ------------           -------------

                         Independent Auditor's Report



To the Board of Directors and Stockholders
of Regency Affiliates, Inc. and Subsidiaries


We have audited the consolidated balance sheet of Regency Affiliates, Inc. and
Subsidiaries as of December 31, 2000 and the related consolidated statements of
operations, retained earnings, and cash flows for the year then end. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Regency
Affiliates, Inc. and Subsidiaries as of December 31, 2000 and the results of its
consolidated operations and its cash flows for the year ended in conformity with
accounting principles generally accepted in the United States of America.



/s/ Rosenberg, Rich, Baker, Berman & Co. CPA

Bridgewater, New Jersey
March 27, 2001



                                                                             F-3
<PAGE>

================================================================================

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                                     CONSOLIDATED BALANCE SHEETS
                                                        (STATED IN U.S. DOLLARS)


<TABLE>
<CAPTION>
                                                                               DECEMBER 20       December 31
                                                                                   2001(A)              2000
------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>              <C>
ASSETS
CURRENT
    Cash and equivalents                                                     $     561,801    $     805,743
    Accounts receivable, net of allowance for doubtful accounts
        of $21,588 (2000 - $22,621) (Note 4)                                     2,075,474        1,754,092
    Inventories (Notes 1 and 4)                                                    985,154        1,130,007
    Prepaid expenses                                                               148,847           44,094
    Income taxes receivable                                                              -           24,556
    Deferred income taxes (Note 9)                                                  50,654                -
                                                                             -------------------------------
                                                                                 3,821,930        3,758,492
FIXED ASSETS, net (Note 2)                                                       1,935,419        2,059,860
INVESTMENT IN PARENT COMPANY (Note 3)                                                    -        4,022,415
                                                                             -------------------------------
                                                                             $   5,757,349    $   9,840,767
============================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
    Bank indebtedness (Note 4)                                               $     536,756    $           -
    Accounts payable                                                               981,368          833,600
    Accrued liabilities                                                          1,128,240          470,065
    Income taxes payable                                                            29,876           13,054
    Current portion of long-term debt (Note 5)                                     256,499                -
    Current portion of obligations under capital lease (Note 6)                     26,775           42,971
                                                                             -------------------------------
                                                                                 2,959,514        1,359,690

LONG-TERM DEBT (Note 5)                                                            766,445                -
OBLIGATIONS UNDER CAPITAL LEASE (Note 6)                                            63,111           93,283
DEFERRED INCOME TAXES (Note 9)                                                     410,446          643,678
                                                                             -------------------------------
                                                                                 4,199,516        2,096,651
                                                                             -------------------------------

CONTINGENCIES (Note 14)

STOCKHOLDERS' EQUITY
    Common stock (Note 7)                                                           25,900           25,940
    Additional paid-in capital                                                   7,763,229        7,782,039
    (Accumulated deficit) retained earnings                                     (3,128,066)         369,150
    Treasury stock                                                              (2,842,234)        (339,573)
    Accumulated other comprehensive loss
        - foreign currency translation adjustment                                 (260,996)         (93,440)
                                                                             -------------------------------
                                                                                 1,557,833        7,744,116
                                                                             -------------------------------
                                                                             $   5,757,349    $   9,840,767
============================================================================================================
</TABLE>

(a) Acquisition date (Note 13)

The accompanying summary of significant accounting policies and notes are an
integral part of these consolidated financial statements.


                                                                             F-4
<PAGE>

================================================================================

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                           CONSOLIDATED STATEMENTS OF OPERATIONS
                                                        (STATED IN U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                            PERIOD FROM       Eleven-month
                                                        JANUARY 1, 2001       period ended         Year ended
                                                         TO DECEMBER 20        December 31         January 31
                                                                2001(A)               2000               2000
-------------------------------------------------------------------------------------------------------------
<S>                                                     <C>                  <C>                   <C>
SALES (Note 11)                                            $  11,735,690     $  10,929,775      $  9,725,611
COST OF GOODS SOLD                                             8,565,896         7,913,371         6,845,307
                                                           --------------------------------------------------
GROSS PROFIT                                                   3,169,794         3,016,404         2,880,304
                                                           --------------------------------------------------
EXPENSES
    Research and development                                     468,501           488,576           425,990
    Selling and distribution                                   1,113,534           768,557           748,596
    General and administrative                                 1,003,740           922,750           811,608
                                                           --------------------------------------------------
                                                               2,585,775         2,179,883         1,986,194
                                                           --------------------------------------------------
INCOME FROM OPERATIONS                                           584,019           836,521           894,110
                                                           --------------------------------------------------
OTHER INCOME (EXPENSE)
    Interest income                                               45,594            34,066            83,573
    Interest expense                                             (53,378)          (20,968)          (22,463)
                                                           --------------------------------------------------
                                                                  (7,784)           13,098            61,110
                                                           --------------------------------------------------

INCOME BEFORE INCOME (LOSS) FROM EQUITY
    INVESTMENT AND INCOME TAX EXPENSE                            576,235           849,619           955,220
INCOME FROM EQUITY INVESTMENT (Note 3)                           211,420           392,356           253,719
LOSS ON WRITE-OFF OF EQUITY INVESTMENT (Note 3)               (4,233,835)                -                 -
                                                           --------------------------------------------------
(LOSS) INCOME BEFORE INCOME TAXES                             (3,446,180)        1,241,975         1,208,939
INCOME TAXES (Note 9)                                             69,886           556,206           396,607
                                                           --------------------------------------------------
NET (LOSS) INCOME FOR THE PERIOD                           $  (3,516,066)    $     685,769      $    812,332
=============================================================================================================
(LOSS) EARNINGS PER SHARE - BASIC AND DILUTED              $       (1.64)    $        0.30      $       0.36
=============================================================================================================
WEIGHTED AVERAGE SHARES OUTSTANDING                            2,150,024         2,306,905         2,229,522
=============================================================================================================
</TABLE>

(a) Acquisition date (Note 13)

The accompanying summary of significant accounting policies and notes are an
integral part of these consolidated financial statements.

                                                                             F-5
<PAGE>

================================================================================

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE (LOSS) INCOME
                                                        (STATED IN U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                                             (Accumulated                 Accumulated
                                                                 Additional      Deficit)                       Other          Total
                                                   Common Stock     Paid-in      Retained     Treasury  Comprehensive  Stockholders'
                                               Stock     Amount     Capital      Earnings        Stock  Income (Loss)         Equity
------------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>        <C>       <C>         <C>           <C>          <C>            <C>
Balance, February 1, 1999                   1,593,469  $ 15,935  $3,475,695  $  1,546,730  $  (339,573)  $  (117,957)     4,580,830
Net income                                          -         -           -       812,332            -             -        812,332
Stock issued (Note 7(g))                      403,820     4,038   1,439,574             -            -             -      1,443,612
Stock dividend (Note 7(f))                     49,441       494     271,432      (271,926)           -             -              -
Foreign currency translation adjustment             -         -           -             -            -        94,282         94,282
                                         -------------------------------------------------------------------------------------------
Balance, January 31, 2000                   2,046,730    20,467   5,186,701     2,087,136     (339,573)      (23,675)     6,931,056
Net income                                          -         -           -       685,769            -             -        685,769
Income from equity investment,
    net of income taxes (Note 3)                    -         -           -        32,340            -             -         32,340
Stock issued (Note 7(d))                       31,510       315     164,401             -            -             -        164,716
Stock dividend (Note 7(e))                    515,758     5,158   2,430,937    (2,436,095)           -             -              -
Foreign currency translation adjustment             -         -           -             -            -       (69,765)       (69,765)
                                         -------------------------------------------------------------------------------------------
Balance, December 31, 2000                  2,593,998    25,940   7,782,039       369,150     (339,573)      (93,440)     7,744,116
Net loss                                            -         -           -    (3,516,066)           -             -     (3,516,066)
Share redemption (Note 7(c))                        -         -           -             -   (2,500,000)            -     (2,500,000)
Stock repurchased (Note 7(b))                       -         -           -             -       (2,661)            -         (2,661)
Stock dividend reversal (Note 7(h))            (3,972)      (40)    (18,810)       18,850            -             -              -
Foreign currency translation adjustment             -         -           -             -            -      (167,556)      (167,556)
                                         -------------------------------------------------------------------------------------------
Balance, December 20, 2001
    (Acquisition date, Note 13)             2,590,026  $ 25,900  $7,763,229  $ (3,128,066) $(2,842,234)  $  (260,996)   $ 1,557,833
====================================================================================================================================

<CAPTION>
Comprehensive (loss) income consists of the following:
                                                                                           PERIOD FROM
                                                                                            JANUARY 1,  Eleven-month
                                                                                               2001 to  period ended     Year ended
                                                                                           DECEMBER 20   December 31     January 31
                                                                                                  2001          2000           2000
                                                                                           -----------------------------------------
<S>                                                                                        <C>           <C>            <C>
Net (loss) income                                                                          $(3,516,066)  $   685,769    $   812,332
Foreign currency translation adjustment                                                       (167,556)      (69,765)        94,282
                                                                                           -----------------------------------------
Comprehensive (loss) income                                                                $(3,683,622)  $   616,004    $   906,614
                                                                                           =========================================
</TABLE>

The accompanying summary of significant accounting policies and notes are an
integral part of these consolidated financial statements.

                                                                             F-6
<PAGE>

================================================================================

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                        (STATED IN U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                            PERIOD FROM    Eleven-month
                                                        JANUARY 1, 2001    period ended      Year ended
                                                         TO DECEMBER 20     December 31      January 31
                                                                2001(A)            2000            2000
-------------------------------------------------------------------------------------------------------
<S>                                                     <C>               <C>              <C>
CASH FLOWS FROM:
OPERATING ACTIVITIES
    Net (loss) income for the period                      $  (3,516,066)  $     685,769    $    812,332
    Adjustments to reconcile net (loss) income
      to cash provided by operating activities
        Depreciation                                            264,408         251,475         237,124
        Deferred income taxes                                  (283,886)        199,328          88,322
        Gain on sale of fixed assets                             (1,186)           (742)              -
        Loss on write-off of equity investment                4,233,835               -               -
        Non-cash compensation expense and
        investment services (Note 7(d))                               -         164,716          84,273
        Income from equity investment (Note 3)                 (211,420)       (392,356)       (253,719)
    (Increase) decrease in assets
        Accounts receivable, net                               (363,733)         44,730        (835,246)
        Inventories                                              84,046        (331,118)       (154,456)
        Prepaid expenses                                       (108,272)        104,507         (64,457)
    Increase (decrease) in liabilities
        Accounts payable                                        139,101           1,299         437,207
        Accrued liabilities                                     697,901          63,779               -
        Income taxes payable, net                                68,650        (123,993)         11,383
                                                          ---------------------------------------------

    Net cash provided by operating activities                 1,003,378         667,394         362,763
                                                          ---------------------------------------------

  FINANCING ACTIVITIES
    Redemption of shares                                     (2,502,661)              -               -
    Proceeds from long-term debt                              1,096,033               -               -
    Repayment of long-term debt                                 (40,937)              -               -
    Increase (decrease) in bank indebtedness                    553,628        (115,357)        115,070
    Repayment of obligations under capital lease                (39,595)        (52,984)        (57,849)
                                                          ---------------------------------------------

    Net cash (used in) provided by financing activities        (933,532)       (168,341)         57,221
                                                          ---------------------------------------------

  INVESTING ACTIVITIES
    Payment of note receivable                                        -               -         506,806
    Investment in Regency Affiliates, Inc.                            -               -      (1,968,000)
    Proceeds from sale of fixed assets                           12,498           9,983               -
    Purchase of fixed assets                                   (271,401)       (343,744)       (439,375)
                                                          ---------------------------------------------

    Net cash used in investing activities                      (258,903)       (333,761)     (1,900,569)
                                                          ---------------------------------------------
FOREIGN CURRENCY TRANSLATION ADJUSTMENT EFFECT
    ON CASH BALANCES                                            (54,885)         (9,567)         20,068
                                                          ---------------------------------------------
(DECREASE) INCREASE IN CASH AND EQUIVALENTS
    DURING THE PERIOD                                          (243,942)        155,725      (1,460,517)

CASH AND EQUIVALENTS, beginning of period                       805,743         650,018       2,110,535
                                                          ---------------------------------------------
CASH AND EQUIVALENTS, end of period                       $     561,801   $     805,743    $    650,018
=======================================================================================================
</TABLE>

(a) Acquisition date (Note 13)

The accompanying summary of significant accounting policies and notes are an
integral part of these consolidated financial statements.

                                                                             F-7
<PAGE>

================================================================================

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                                                        (STATED IN U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                             PERIOD FROM     Eleven-month
                                                         JANUARY 1, 2001     period ended         Year ended
                                                          TO DECEMBER 20      December 31         January 31
                                                                 2001(A)             2000               2000
------------------------------------------------------------------------------------------------------------

SUPPLEMENTAL INFORMATION:
<S>                                                      <C>                <C>               <C>
    Interest received                                       $     48,843    $      34,754     $      113,020

    Interest paid                                           $     57,297    $      20,079     $       22,458

    Income taxes paid                                       $    312,394    $     478,957     $      291,409

NON-CASH INVESTING AND FINANCING ACTIVITIES

    Increase in obligations under capital lease             $          -    $       5,683     $      129,875

    Common stock issued in exchange for
    common stock in parent (Note 3)                         $          -    $           -     $    1,359,340

    Common stock issued in exchange for
    compensation (Note 7(d)(iii and iv))                    $          -    $      54,007     $       18,413

    Common stock issued in exchange for
    investment services (Note 7(d)(i and ii))               $          -    $     110,709     $       65,860
============================================================================================================
</TABLE>

(a) Acquisition date (Note 13)

The accompanying summary of significant accounting policies and notes are an
integral part of these consolidated financial statements.

                                                                             F-8
<PAGE>

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

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DECEMBER 20, 2001
--------------------------------------------------------------------------------

NATURE OF BUSINESS            The company is a Nevada, USA corporation and was
                              incorporated on September 29, 1992. The Company
                              manufactures and distributes wind deflector
                              products to automobile manufacturers in the United
                              States, Canada and Japan. The Company's corporate
                              office and manufacturing facility, comprising all
                              fixed assets, are located in Vancouver, Canada.

BASIS OF PRESENTATION         These financial statements include the accounts of
                              the Company and its wholly-owned subsidiaries,
                              Multicorp Holdings Inc., Glas-Aire Industries
                              Ltd., Glas-Aire Industries Inc., and 326362 B.C.
                              Ltd. All inter-company transactions and accounts
                              have been eliminated.

                              These financial statements have been prepared in
                              accordance with accounting principles generally
                              accepted in the United States. As a result of a
                              purchase transaction that took place on December
                              21, 2001, to which reverse acquisition accounting
                              is applicable, these financial statements present
                              the financial position of the Company as at
                              December 20, 2001 and results of its operations
                              for the period from January 1, 2001 to December
                              20, 2001 (Note 13).

INVENTORIES                   Inventories are recorded at the lower of cost, on
                              a first-in, first-out basis, or market value.
                              Market value for raw materials is defined as
                              replacement cost and for work-in-process and
                              finished goods as net realizable value.

FIXED ASSETS                  Fixed assets are recorded at cost less accumulated
                              depreciation. With the exception of leasehold
                              improvements, depreciation is calculated using the
                              declining-balance method, at the following annual
                              rates over the estimated useful lives:

                              Office equipment                      -  10%
                              Manufacturing equipment               -  10%
                              Computer equipment                    -  15%
                              Dies and molds                        -  10%
                              Automotive                            -  30%
                              Equipment under capital lease         -  10%

                              All the dies and molds are owned by the Company.
                              For leasehold improvements, depreciation is
                              calculated using the straight-line method over the
                              shorter of the estimated economic life or the
                              lease term.

                                                                             F-9
<PAGE>

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

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DECEMBER 20, 2001
--------------------------------------------------------------------------------

LONG-TERM INVESTMENT          The Company's investment in its parent company was
                              accounted for using the equity method of
                              accounting. During 2001, the Company disposed of
                              all of its investment in its parent company.

PER SHARE INFORMATION         The Company has adopted Finanical Accounting
                              Standards Board ("FASB") Statement of Financial
                              Accounting Standards ("SFAS") No. 128, Earnings
                              Per Share ("EPS") which requires dual presentation
                              of basic EPS and diluted EPS on the face of all
                              income statements. Basic EPS is computed as net
                              income divided by the weighted average number of
                              shares of common stock outstanding during the
                              period. Diluted EPS reflects the potential
                              dilution that could occur if securities or other
                              contracts were exercised. For the Company, stock
                              options to purchase 180,000 shares (December 31,
                              2000 - 120,000, January 31, 2000 - 60,000) of the
                              Company's common stock were anti-dilutive.
                              Warrants outstanding at December 31, 2000 expired
                              in April 2001. Warrants to purchase 68,000 shares
                              at December 31, 2000 and January 31, 2000 were
                              also anti-dilutive. As such, dilutive EPS amounts
                              are the same as basic EPS for all periods
                              presented. EPS has been restated for stock
                              dividends. Treasury stock held by the Company
                              (Note 7(c)) is not included in the number of
                              shares outstanding, for earnings per share
                              purposes.

STOCK DIVIDENDS               The Company accounts for stock dividends in
                              accordance with Accounting Research Bulletin No.
                              43, which requires a transfer of an amount equal
                              to the fair value of the stock issued from
                              retained earnings to additional paid-in capital as
                              permanent capitalization. Where the fair value of
                              the stock dividend exceeds cumulative retained
                              earnings at measurement date, the balance is
                              accounted for as a distribution at par value of
                              the stock issued.

CASH EQUIVALENTS              Cash equivalents consist of short-term deposits
                              with maturity of ninety days or less.

RESEARCH AND DEVELOPMENT      Research and development costs are expensed as
                              incurred.

INCOME TAXES                  The Company accounts for income taxes in
                              accordance with SFAS No. 109, which requires the
                              liability method of accounting for income taxes.
                              The liability method requires the recognition of
                              deferred tax assets and liabilities for the future
                              tax consequences of temporary differences between
                              the financial statement basis and the tax basis of
                              assets and liabilities.

                                                                            F-10
<PAGE>

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

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DECEMBER 20, 2001
--------------------------------------------------------------------------------

STOCK BASED COMPENSATION      The Company applies Accounting Principles Board
                              ("APB") Opinion No. 25, "Accounting for Stock
                              Issued to Employees", and related interpretations
                              in accounting for stock option plans. Under APB
                              Opinion No. 25, compensation cost is recognized
                              for stock options granted at prices below market
                              price of the underlying common stock on date of
                              grant.

                              SFAS No. 123, "Accounting for Stock-Based
                              Compensation", requires the Company to provide pro
                              forma information regarding net income and
                              earnings per share as if compensation cost for the
                              Company's stock options granted to employees had
                              been determined in accordance with the fair value
                              based method prescribed in SFAS No. 123.

                              Stock options granted to non-employees are
                              accounted for in accordance with SFAS No. 123.
                              There were no stock options granted to non-
                              employees during the periods covered by these
                              financial statements.

FOREIGN CURRENCY TRANSLATION
    AND TRANSACTIONS          The Company conducts business in both Canada and
                              the United States and uses the U.S. dollar as its
                              reporting currency. The functional currency of the
                              Canadian subsidiaries is the Canadian dollar. The
                              financial statements of the Canadian subsidiaries
                              have been translated under SFAS No. 52. Assets and
                              liabilities are translated at the rate of exchange
                              at the balance sheet date and revenues and
                              expenses are translated at the average exchange
                              rates during the year. The resulting exchange
                              gains and losses are shown as a separate component
                              of stockholders' equity.

                              Transactions conducted in foreign currencies are
                              translated as follows:

                              At the transaction date, each asset, liability,
                              revenue and expense is translated by the use of
                              the exchange rate in effect at that date. At the
                              period end date, monetary assets and liabilities
                              are translated by using the exchange rate in
                              effect at that date. The resulting foreign
                              exchange gain and losses are included in income in
                              the current period.

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

                                                                            F-11
<PAGE>

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

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DECEMBER 20, 2001
--------------------------------------------------------------------------------

FINANCIAL INSTRUMENTS         The Company's financial assets and liabilities
                              consist of cash and equivalents, accounts
                              receivable, bank indebtedness, accounts payable,
                              accrued liabilities and long-term debt. Unless
                              otherwise noted, it is management's opinion that
                              the Company is not exposed to significant
                              interest, currency or credit risks arising from
                              these financial instruments. The fair value of
                              these financial instruments, excluding long-term
                              debt, approximate their carrying values due to the
                              short-term nature of these instruments. The
                              carrying value of long-term debt approximates fair
                              value because these interest rates float with
                              market rates.

CONCENTRATION OF
    EXCHANGE RISK             As a Canadian manufacturer, the Company has a
                              significant volume of expense transactions
                              denominated in Canadian currency.

CONCENTRATION OF CREDIT RISK  As a manufacturer of automotive accessories, the
                              Company grants credit to customers exclusively
                              within the automotive manufacturing industry.

REVENUE RECOGNITION           The Company recognizes revenue on the sale of
                              products at the time the products are shipped to
                              its customers.

NEW ACCOUNTING
    PRONOUNCEMENTS            SFAS No. 133, "Accounting for Derivative
                              Instruments and Hedging Activities" is effective
                              for all fiscal quarters of fiscal years beginning
                              after June 15, 2000. SFAS No. 133 requires
                              companies to recognize all derivative contracts as
                              either assets or liabilities in the balance sheet
                              and to measure them at fair value. If certain
                              conditions are met, a derivative may be
                              specifically designated as a hedge, the objective
                              of which is to match the timing of gain or loss
                              recognition on the hedging derivative with the
                              recognition of (i) the changes in the fair value
                              of the hedged asset or liability that are
                              attributable to the hedged risk or (ii) the
                              earnings effect of the hedged forecasted
                              transaction. For a derivative not designated as a
                              hedging instrument, the gain or loss is recognized
                              in income in the period of change. Historically,
                              the Company has not entered into derivative
                              contracts either to hedge existing risks or for
                              speculative purposes. Accordingly, adoption of the
                              new standards on January 1, 2001 did not have any
                              effect on the Company's financial statements.

                                                                            F-12
<PAGE>

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

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DECEMBER 20, 2001
--------------------------------------------------------------------------------

NEW ACCOUNTING
    PRONOUNCEMENTS (CONTINUED)     In June 2001, SFAS No. 141 "Business
                                   Combinations" was issued. SFAS No. 141
                                   requires that all business combinations be
                                   accounted for using the purchase method and
                                   that one of two specified criteria be met in
                                   identifying intangible assets apart from
                                   goodwill. Additional disclosures are required
                                   in respect to the primary reasons for the
                                   business combination and the allocation of
                                   the purchase price paid to the assets
                                   acquired and liabilities assumed by major
                                   balance sheet caption. SFAS No. 141 applies
                                   to all business combinations initiated after
                                   June 30, 2001. The Company applied the
                                   provisions of SFAS No. 141 for the reverse
                                   acquisition that took place subsequent to
                                   December 20, 2001 (Note 13).

                                   In June 2001, SFAS No. 142 "Goodwill and
                                   Other Intangible Assets" was issued. Under
                                   the provisions of SFAS No. 142 goodwill and
                                   other intangible assets with an indefinite
                                   life are no longer amortized but will be
                                   tested at least annually for impairment. The
                                   statement provides a two step process for
                                   estimating fair value of the reporting units
                                   and measuring the amount of impairment, if
                                   any, of goodwill and other intangible assets.
                                   SFAS No. 142 is effective for fiscal years
                                   beginning after December 15, 2001.

                                   The Company does not expect SFAS No. 142 to
                                   have a material impact on its financial
                                   statements because it does not have any
                                   recorded goodwill or other intangible assets.

                                   In August 2001, SFAS No. 144 "Accounting for
                                   the Impairment or Disposal of Long-Lived
                                   Assets" was issued. This statement
                                   establishes a single model based upon SFAS
                                   No. 121 for accounting for the impairment or
                                   disposal of long-lived assets. It supersedes
                                   FASB Statement No. 121 and the reporting
                                   provisions of APB Opinion No. 30 for the
                                   disposal of a segment of a business and also
                                   amends certain provisions of Accounting
                                   Research Bulletin No. 51. SFAS No. 144 is
                                   effective for financial statements issued for
                                   fiscal years beginning after December 15,
                                   2001. Management believes that the adoption
                                   of SFAS No. 144 will have no material effect
                                   on the Company's financial statements.

                                                                            F-13
<PAGE>

================================================================================

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. Dollars)

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

1.    INVENTORIES

<TABLE>
<CAPTION>
                                                                               DECEMBER 20      December 31
                                                                                      2001             2000
                                                                           --------------------------------
<S>                                                                       <C>                 <C>
      Raw materials and supplies                                          $        735,131    $     775,929
      Work-in-process                                                              121,487          252,761
      Finished goods                                                               128,536          101,317
                                                                          ---------------------------------
                                                                          $        985,154    $   1,130,007
                                                                          =================================
</TABLE>

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

2.    FIXED ASSETS

<TABLE>
<CAPTION>
                                                       DECEMBER 20, 2001                 December 31, 2000
                                       --------------------------------------------------------------------
                                                             ACCUMULATED                        Accumulated
                                                   COST     DEPRECIATION              Cost     Depreciation
                                       --------------------------------------------------------------------
<S>                                    <C>                  <C>              <C>               <C>
      Office equipment                 $        286,354     $     93,992     $     272,506     $     77,647
      Manufacturing equipment                 1,428,323          651,739         1,429,835          618,216
      Computer equipment                        233,749          156,919           230,832          142,767
      Dies and molds                            986,411          471,366           942,786          402,798
      Automotive                                 17,589            1,319            16,251            1,219
      Leasehold improvements                    252,241          101,933           247,438           82,650
      Equipment under capital
         lease                                  275,156           67,136           292,273           46,764
                                       --------------------------------------------------------------------
      Total                            $      3,479,823     $  1,544,404     $   3,431,921     $  1,372,061
                                       ====================================================================
      Net book value                                        $  1,935,419                       $  2,059,860
                                                            ============                        ===========
</TABLE>

                                                                            F-14
<PAGE>

================================================================================

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

3.    INVESTMENT IN PARENT COMPANY

      During the year ended January 31, 2000, Regency Affiliates, Inc.
      ("Regency") acquired a 51% controlling interest in the Company. The
      Company disposed of its investment in Regency in 2001.

      On July 31, 1999, the Company exchanged 288,000 of its common stock for
      1,188,000 common stock of Regency. This exchange was valued at $1,045,440
      ($3.63 per share). On August 6, 1999, the Company acquired an additional
      2,852,375 common stock of Regency by exchanging 86,000 shares (valued at
      $313,900 or $3.65 per share) of its common stock and cash of $1,968,000.
      The values were determined based on share exchanges between independent
      parties. Total value of common stock exchanged on the above transactions
      was $1,359,340 (Note 7(h)(i)). As at August 6, 1999, the Company had
      acquired a 26% interest in Regency. At December 31, 2000 the interest in
      Regency was approximately 23.5%.

      The Company accounted for its investment in Regency as an asset using the
      equity method of accounting. The income from the Company's equity share of
      earnings of Regency net of amortization of goodwill of $5,500 (December
      31, 2000 - $10,100, January 31, 2000 - $5,500) for the period ended
      December 20, 2001 was $211,420 (December 31, 2000 -$441,356, January 31,
      2000 - $253,719). As the Company was only reported on an eleven-month
      period at December 31, 2000, its share of earnings was reduced by $49,000
      reflecting the Company's share of one month of earnings. This amount, net
      of deferred taxes of $16,660 has been credited directly to equity.
      Goodwill of $165,635 resulted from the acquisition and was being
      depreciated on a straight-line basis over a period of 15 years.
      Accumulated depreciation at December 31, 2000 was $15,600 (January 31,
      2000 - $5,500).

      The effect of the investment transaction and equity earnings are
      summarized as follows:

<TABLE>
<CAPTION>
                                                                               DECEMBER 20      December 31
                                                                                      2001             2000
                                                                          ---------------------------------
<S>                                                                       <C>                 <C>
      Equity in net assets of Regency Affiliates, Inc.                    $              -    $   3,161,705
      Goodwill                                                                           -          165,635
      Cumulative equity earnings, net of cumulative
         depreciation of goodwill of $15,600                                             -          695,075
                                                                          ---------------------------------
                                                                          $              -    $   4,022,415
                                                                          =================================
</TABLE>

                                                                            F-15
<PAGE>

================================================================================

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

3.    INVESTMENT IN PARENT COMPANY (continued)

      On October 1, 2001, the Company disposed of its investment in Regency as
      part of the consideration to reacquire the Company's common stock owned by
      Regency (see Note 7(c)). The carrying value of the investment prior to the
      transaction was $4,233,835. Included in the carrying value of the
      investment is equity income of $211,420 recognized in 2001. Upon return of
      the shares to Regency, the carrying value was written off.

      Summarized financial information of Regency is as follows:

<TABLE>
<CAPTION>
                                                                               DECEMBER 20       December 31
                                                                                      2001              2000
                                                                          ----------------------------------
<S>                                                                       <C>                <C>
      Consolidated Balance Sheet data ('000)

         Assets                                                           $              -   $        37,017
                                                                          ==================================
         Liabilities                                                                     -            20,941

         Stockholders' Equity                                                            -            16,076
                                                                          ----------------------------------
                                                                          $              -   $        37,017
                                                                          ==================================
      Consolidated Statement of Operations data ('000)

         Sales                                                            $              -   $        14,343
                                                                          ==================================
         Loss from operations                                                            -              (814)
                                                                          ==================================
         Net income                                                       $              -   $         2,155
                                                                          ==================================
</TABLE>

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

4.    BANK INDEBTEDNESS

<TABLE>
<CAPTION>
                                                                               DECEMBER 20      December 31
                                                                                      2001             2000
                                                                          ---------------------------------
<S>                                                                       <C>                 <C>
      Revolving bank loan                                                 $        169,462    $           -
      Cheques issued in excess of deposit                                          367,294                -
                                                                          ---------------------------------
                                                                          $        536,756    $           -
                                                                          =================================
</TABLE>

      The revolving bank loan is a Cdn. $2,000,000 overdraft facility, which is
      due on demand and bears interest at Canadian bank prime rate (4.0% -
      December 20, 2001; 6.5% - December 31, 2000) plus 1/2%. This line of
      credit is renewable annually in April of each year. At December 20, 2001,
      the Company had undrawn credit capacity under this facility of Cdn.
      $1,145,061 (U.S. $718,904).

                                                                            F-16
<PAGE>

================================================================================

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

4.    BANK INDEBTEDNESS (continued)

      The following have been provided as collateral for the overdraft facility
      and long-term debt:

      (a)  general assignment of accounts receivable and inventories;

      (b)  a Cdn. $2,000,000 demand debenture granting a first fixed charge on
           certain equipment and a floating charge over all other assets of the
           Company;

      (c)  an unlimited guarantee by the Company and its subsidiaries, Glas-Aire
           Industries Ltd. and Multicorp Holdings Inc.


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

5.    LONG-TERM DEBT

<TABLE>
<CAPTION>
                                                                                  DECEMBER 20       December 31
                                                                                         2001              2000
                                                                                  -----------------------------
<S>                                                                               <C>               <C>
      HSBC loan payable - interest at prime plus 1%, due
      September 28, 2005, monthly principal payments
      of $18,314 plus interest                                                    $   842,335       $         -

      HSBC loan payable - interest at prime plus 0.5%, due
      November 14, 2006, monthly principal payments
      of $3,061 plus interest                                                         180,609                 -
                                                                                  -----------------------------
                                                                                    1,022,944                 -

      Less current portion                                                            256,499                 -
                                                                                  -----------------------------
                                                                                  $   766,445       $         -
                                                                                  =============================
</TABLE>

      The Company has a Cdn. $1,000,000 equipment purchase facility and a Cdn.
      $1,400,000 acquisition facility. These facilities bear interest at
      Canadian bank prime rate plus1/2% to 1%. At December 20, 2001, the Company
      had undrawn credit capacity under these facilities of Cdn. $712,328 (U.S.
      $447,221) for equipment purchases and Cdn. $58,340 (U.S. $36,627) for
      acquisitions.

      The collateral provided for the HSBC loans payable is described in Note 4.

                                                                            F-17
<PAGE>

================================================================================

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

5.    LONG-TERM DEBT (continued)

      Principal payments required on long-term debt over the remaining terms of
      the debt are as follows:

                                   YEAR                               AMOUNT

                                   2002                     $        256,499
                                   2003                              256,499
                                   2004                              256,499
                                   2005                              219,776
                                   2006                               33,671
                                                            ----------------
                                                            $      1,022,944
                                                            ================

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

6.    OBLIGATIONS UNDER CAPITAL LEASE

      The minimum annual lease payments required under capital leases of
      manufacturing equipment expiring in December 2004 together with the
      balance of the obligation are as follows:

                                   YEAR                               AMOUNT

                                   2002                          $    34,515
                                   2003                               34,329
                                   2004                               34,234
                                                                 -----------
      Total minimum lease payments                                   103,078
      Less amounts representing interest at 8.6%
         per annum                                                    13,192
                                                                 -----------
      Present value of minimum lease payments                         89,886
      Less current portion                                            26,775
                                                                 -----------
                                                                 $    63,111
                                                                 ===========

                                                                            F-18
<PAGE>

================================================================================

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

7.    COMMON STOCK

      (a)  Authorized

               30,000,000  Common shares with a par value of $0.01 each

                1,000,000  Preferred stock with a par value of $0.01 each

<TABLE>
<CAPTION>
                                                                               DECEMBER 20       December 31
           Issued                                                                     2001             2000
                                                                               -----------------------------
       <S>                                                                     <C>               <C>
                2,590,026  Common stock
       (December 31, 2000 - 2,593,998)                                         $    25,900       $   25,940
                                                                               ============================
</TABLE>


           On March 6, 2000, the Company amended its articles of incorporation
           to reflect an increase in its authorized share capital from 3,000,000
           shares of common stock at $0.01 par value to 30,000,000 shares of
           common stock at $0.01 par value and 1,000,000 shares of preferred
           stock at $0.01 par value.

      (b)  During the period ended December 20, 2001, the Company repurchased
           1,700 shares of common stock at prices between $1.51 and $1.85 per
           share, amounting to $2,661. These shares were acquired at fair market
           value and are accounted for as treasury stock until reissued or
           retired. The purchase of the stock reduced stockholders' equity.

      (c)  On October 1, 2001, the Company repurchased 1,215,105 shares of
           common stock with a fair market value (based on market price) of
           approximately $2,000,000, representing at that time, approximately
           50% of the issued and outstanding stock of the Company for $2,500,000
           cash plus 4,040,375 shares of stock of its parent company, Regency
           Affiliates, Inc. These shares have been ascribed a value of
           $2,500,000 reflecting a 25% premium to reacquire control and are
           accounted for as treasury stock until reissued or retired. The
           purchase of the stock reduced stockholders' equity.

           Shares of common stock held in treasury at December 20, 2001 totaled
           1,375,677 (December 31, 2000 - 158,872).


                                                                            F-19
<PAGE>

================================================================================

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

7.    COMMON STOCK (continued)

      (d)  The Company issued 31,510 shares of common stock during the year
           ended December 31, 2000 for services and compensation. The shares
           were valued at fair market value on the date of issuance and were
           charged to expense in the year incurred.


<TABLE>
<CAPTION>
                                                                                Additional
                                                          Common Stock             Paid-in
                                                        Stock     Amount           Capital             Total
                                                        ----------------------------------------------------
            <S>                                         <C>       <C>            <C>              <C>
           (i)   Stock issued to an investor
                 relations company in return
                 for services                            12,300   $   123        $   77,748       $   77,871

           (ii)  Stock issued to an investor
                 relations company in return
                 for services                             2,875        29        $   32,809           32,838

           (iii) Stock issued to certain
                 employees as part of their
                 compensation                             7,839        78        $   23,929           24,007

           (iv)  Stock issued to directors
                 as part of their compensation            8,496        85        $   29,915           30,000

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

                                                         31,510   $   315        $  164,401       $  164,716
                                                        ====================================================
</TABLE>

                                                                            F-20
<PAGE>

================================================================================

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)
--------------------------------------------------------------------------------

     7.   COMMON STOCK (continued)

          (e)  Pursuant to a stock dividend announced October 28, 1999 and
               subsequent revision March 6, 2000, the Company issued 515,758
               shares of common stock during the period ended December 31, 2000.
               The Company has accounted for the stock dividends in part by a
               transfer of $2,436,095 from retained earnings to additional paid-
               in capital.

<TABLE>
<CAPTION>
                                      Total                   Common                                                     Additional
                                    Common Stock               Stock                Total Common Stock      Paid-in        Retained
                                    Outstanding    %   Trading Price   Fair Value     Stock    Amount       Capital        Earnings
                                    ------------------------------------------------------------------------------------------------
               <S>                  <C>           <C>  <C>            <C>            <C>       <C>       <C>           <C>
               March 10, 2000       1,899,061     21.0      $ 10.880   $ 4,338,977   398,803   $ 3,988    $ 2,156,438  $ (2,160,426)

               June 12, 2000        2,306,360      2.5         4.438       255,891    57,659       577         93,468       (94,045)

               September 11, 2000   2,371,858      2.5         3.063       181,624    59,296       593        181,031      (181,624)
                                    ------------------------------------------------------------------------------------------------

                                                                                     515,758   $ 5,158    $ 2,430,937  $ (2,436,095)
                                                                                     ===============================================
</TABLE>

                                                                            F-21
<PAGE>

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

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

7.   COMMON STOCK (continued)

     (f)  On October 28, 1999, the Company announced a stock dividend to be
          issued in a series of 2.5% increments. The stock dividend was
          determined on a cumulative basis on the total outstanding common stock
          on the following dates of record: December 10, 1999, March 10, 2000,
          June 12, 2000 and September 11, 2000. On December 10, 1999, 49,441
          shares of common stock were issued representing 2.5% of 1,977,289
          common stock outstanding. On December 10, 1999, the common stock was
          trading at $5.50 for a total fair value of $271,926.

     (g)  The Company issued 403,820 shares of common stock during the year
          ended January 31, 2000. This total consists of the following:

<TABLE>
<CAPTION>
                                                                               Additional
                                                           Common Stock         Paid-in
                                                          Stock    Amount       Capital          Total
                                                      ----------------------------------------------------
          <S>                                         <C>                    <C>              <C>
          (i)      Stock issued in exchange for
                   stock in parent company on the
                   following dates (Note 3):

                      - July 31, 1999                    288,000  $  2,880   $  1,042,560     $  1,045,440
                      - August 6, 1999                    86,000       860        313,040          313,900
                                                      ----------------------------------------------------
                                                         374,000     3,740      1,355,600        1,359,340
          (ii)     Stock issued to certain
                   employees as part of their
                   compensation.                           9,820        98         18,314           18,412

          (iii)    Stock issued to an investor
                   relations company in return for
                   services.                              20,000       200         65,660           65,860
                                                      ----------------------------------------------------
                                                         403,820  $  4,038   $  1,439,574     $  1,443,612
                                                      ====================================================
</TABLE>

     (h)  During the eleven-month period ended December 31, 2000, shares were
          issued in error, pursuant to a stock dividend, on treasury stock
          outstanding. These shares were cancelled in 2001.

     (i)  At December 31, 2000 and January 31 2000, there were warrants
          outstanding to purchase 68,000 shares of the Company. These warrants
          expired in April 2001.

                                                                            F-22
<PAGE>

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

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

8.   STOCK OPTIONS

     INCENTIVE AND NON-QUALIFIED PLANS
     During the year ended January 31, 1997, the Company's Board of Directors
     approved an Incentive Stock Option Plan and a Non-Qualified Stock Option
     Plan. Each plan provides for granting options to purchase not more than
     160,000 shares of the Company's common stock. The Incentive Stock Option
     Plan is to be available to management and employees of the Company. The
     Non-Qualified Stock Option Plan is to be available to certain key
     employees, independent contractors, technical advisors and directors of the
     Company. Vesting for both plans will be determined at the date of grant.
     Upon granting, the options will have a five year life.

     DIRECTOR COMPENSATION
     On November 4, 1999, December 4, 2000, and December 4, 2001 the Company
     issued 60,000 common stock options at the exercise prices of $4.50, $2.75
     and $1 respectively to the directors in accordance with the director's
     compensation program approved by the stockholders. The 1999 options vested
     on May 4, 2000, the 2000 options vested on June 4, 2001 and the 2001 option
     vests on June 4, 2002, are exercisable until November 3, 2004, December 3,
     2005 and December 3, 2006 respectively.

     Under the accounting provisions of SFAS No. 123, pro forma information
     regarding Net Income and Earnings Per Share is required as if the Company
     had accounted for the stock options under the fair value method.

     The fair value of each grant is estimated at the date of grant using a
     Black-Scholes option pricing model.

     On November 4, 1999 the weighted average fair value of options granted was
     $4.04 using the following weighted average assumptions: no dividends, a
     risk-free interest rate of 5.64%, volatility factor of the expected market
     price of the Company's common stock of 216% and a weighted average expected
     life of the options of 36 months. The options vested on May 4, 2000 and
     expire on November 3, 2004.

     On December 4, 2000 the weighted average fair value of options granted was
     estimated to be $1.73 using the following weighted average assumptions: no
     dividends, a risk-free interest rate of 5.61%, volatility factor of the
     expected market price of the Company's common stock of 96% and weighted
     average expected life of the options of 36 months. The options vested on
     June 4, 2001 and expire on December 3, 2005.

     On December 4, 2001 the weighted average fair value of options granted was
     estimated to be $0.53 using the following weighted average assumptions: no
     dividends, a risk-free interest rate of 3.03%, volatility factor of the
     expected market price of the Company's common stock of 100% and weighted
     average expected life of the options of 24 months. The options vest on June
     4, 2002 and expire on December 3, 2006.

                                                                            F-23
<PAGE>

================================================================================

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

8.   STOCK OPTIONS (continued)

     Under SFAS No. 123, the Company's Net Income and Earnings Per Share would
     have decreased to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                          PERIOD FROM                   Eleven-month
                                         JANUARY 1 to                   period ended                      Year ended
                                          DECEMBER 20                    December 31                      January 31
                                                 2001                           2000                            2000
                                          AS REPORTED      Pro Forma     As reported      Pro forma      As reported      Pro forma
                                        -------------------------------------------------------------------------------------------
<S>                                     <C>             <C>            <C>             <C>             <C>             <C>
Net (loss) income for the period        $  (3,516,066)  $ (3,604,991)  $     685,769   $    545,769    $     812,332   $    629,447
(Loss) earnings per share -
  basic and diluted                             (1.64)         (1.67)           0.30           0.24    $        0.36   $       0.28

A summary of the status of the Company's stock options outstanding as of December 20, 2001 is as follows:

<CAPTION>

                                                                                                            Weighted
                                                                           Number of       Exercise          Average
                                                                             Options          Price       Fair Value
                                                                         -------------------------------------------
<S>                                                                      <C>           <C>             <C>
Granted - November 4, 1999                                                    60,000   $       4.50    $        4.04
Granted - December 4, 2000                                                    60,000   $       2.75    $        1.73
Granted - December 4, 2001                                                    60,000   $       1.00    $        0.53
                                                                         -------------------------------------------
                                                                             180,000
                                                                         ===========
</TABLE>

                                                                            F-24
<PAGE>

================================================================================

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

9.   INCOME TAXES

     The provision for income taxes in the consolidated statements of operations
     consists of:

<TABLE>
<CAPTION>
                                                      PERIOD FROM    Eleven-month
                                                  JANUARY 1, 2001    period ended    Year ended
                                                   TO DECEMBER 20     December 31    January 31
                                                             2001            2000          2000
                                                  ---------------------------------------------
<S>                                               <C>              <C>             <C>
     Current                                      $       353,772  $      356,878  $    308,285
     Deferred (recovery)                                 (283,886)        199,328        88,322
                                                  ---------------------------------------------
                                                  $        69,886  $      556,206  $    396,607
                                                  =============================================
</TABLE>

     A reconciliation of expected income taxes using the federal U.S. statutory
     tax rate to the tax expense recorded in these finacial statements is as
     follows:

<TABLE>
<CAPTION>
                                                            PERIOD FROM      Eleven-month
                                                        JANUARY 1, 2001      period ended        Year ended
                                                         TO DECEMBER 20       December 31        January 31
                                                                   2001              2000              2000
                                                        --------------------------------------------------
<S>                                                    <C>                   <C>                <C>
     Federal tax at the U.S. federal statutory rate     $    (1,171,701)      $   422,271       $  411,039
     Federal tax of income taxed at a lower rate                (14,250)           (9,996)          (2,378)
     Canadian income taxes at a higher rate                      58,944            45,246           43,188
     Permanent differences for non-deductible
        expenses                                                 69,334             9,683            2,715
     Over (under) accruals                                       (3,737)           89,002          (57,957)
     Increase in valuation allowance                          1,131,296                 -                -
                                                        --------------------------------------------------
                                                        $        69,886       $   556,206       $  396,607
                                                        ==================================================
</TABLE>

     The Company evaluates its valuation allowance requirements based on
     projected future operations. When circumstances change and this causes a
     change in management's judgement about the recoverability of future tax
     assets, the impact of the change in the valuation allowance is reflected in
     current income.

                                                                            F-25
<PAGE>

================================================================================

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

9.   INCOME TAXES (continued)


     The components of deferred taxes are as follows:

<TABLE>
<CAPTION>
                                                            DECEMBER 20                        December 31
                                                                   2001                               2000
                                      --------------------------------------------------------------------
                                                              TEMPORARY                          Temporary
                                            DIFFERENCE       TAX EFFECT        Difference       Tax Effect
                                      --------------------------------------------------------------------
<S>                                   <C>                 <C>               <C>               <C>
     Deferred tax assets
        Accrued liabilities           $        148,982    $      50,654     $           -     $          -
        Stock compensation                     189,528           64,440           189,528           64,440
        Capital loss carry forward           3,327,340        1,131,296                 -                -
                                      --------------------------------------------------------------------
                                             3,665,850        1,246,390           189,528           64,440
        Valuation allowance                 (3,327,340)      (1,131,296)                -                -
                                      --------------------------------------------------------------------

                                               338,510          115,094           189,528           64,440
                                      --------------------------------------------------------------------
     Deferred tax liabilities
        Fixed Assets                         1,227,096          474,886         1,207,950          466,488
        Investment in Parent
         Company - equity
         earnings                                    -                -           710,675          241,630
                                      --------------------------------------------------------------------

                                      $      1,227,096    $     474,886     $   1,918,625     $    708,118
                                      --------------------------------------------------------------------
     Net deferred tax liability                           $     359,792                       $    643,678
                                                          =============                       ============
</TABLE>

                                                                            F-26
<PAGE>

================================================================================

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

10.  COMMITMENTS

     The Company is committed to minimum lease payments of $110,155 for each of
     the next three years with a five year renewal option, under an operating
     lease for its current premises. Rent expense was $177,284 for the period
     from January 1, 2001 to December 20, 2001, $165,393 for the eleven-month
     period ended December 31, 2000 and $113,514 for the year ended January 31,
     2000. The Company is in the process of subletting its current premises in
     order to occupy its new premises.

     The Company has entered into an operating lease agreement for new premises
     commencing May 1, 2002 for a term of seven years with a five year renewal
     option. The landlord has provided the first three months of the lease rent
     free. The company is committed to the following minimum lease payments plus
     proportionate common costs:

                                   YEAR                          AMOUNT

                                   2002                     $     73,774
                                   2003                          177,057
                                   2004                          182,678
                                   2005                          185,488
                                   2006                          185,488
                             Thereafter                          449,668
                                                            ------------
                                                            $  1,254,153
                                                            ============

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

11.  SALES INFORMATION ('000)

     (a)  Sales figures include sales to customers who are located in the
          following countries:

<TABLE>
<CAPTION>
                                                             PERIOD FROM    Eleven-month
                                                         JANUARY 1, 2001    period ended     Year ended
                                                          TO DECEMBER 20     December 31     January 31
                                                                    2001            2000           2000
                                                         ----------------------------------------------
<S>                                                      <C>                <C>              <C>
           United States                                 $        10,229      $    9,217      $   8,207
           Canada                                                  1,106           1,364          1,231
           Japan and other                                           401             349            287
                                                         ----------------------------------------------
                                                         $        11,736      $   10,930      $   9,725
                                                         ==============================================
</TABLE>

                                                                            F-27
<PAGE>

================================================================================

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

11.  SALES INFORMATION ('000) (continued)

     (b)  Sales to customers who each accounted for more than 10% of the
          Company's sales are as follows:

<TABLE>
<CAPTION>
                                                            PERIOD FROM    Eleven-month
                                                        JANUARY 1, 2001    period ended     Year ended
                                                         TO DECEMBER 20     December 31     January 31
                                                                   2001            2000           2000
                                                        ----------------------------------------------
<S>                                                     <C>                <C>              <C>
          Customer 1                                    $         2,924    $      3,718      $   2,930
          Customer 2                                              2,431           1,607          1,640
          Customer 3                                              2,647           3,215          2,853
          Customer 4                                                  -               -            994
                                                        ----------------------------------------------
                                                        $         8,002    $      8,540      $   8,417
                                                        ==============================================
</TABLE>

     (c)  Sales figures are comprised of sales in the following product lines:

<TABLE>
<CAPTION>
                                                            PERIOD FROM      Eleven-month
                                                        JANUARY 1, 2001      period ended       Year ended
                                                         TO DECEMBER 20       December 31       January 31
                                                                   2001             2000              2000
                                                        --------------------------------------------------
<S>                                                     <C>                  <C>                <C>
          Sunroof wind deflectors                       $         6,411       $     6,558        $   5,446
          Hood protectors                                         3,894             3,388            3,112
          Rear air deflectors                                     1,431               984            1,167
                                                        --------------------------------------------------
                                                        $        11,736       $    10,930        $   9,725
                                                        ==================================================
</TABLE>

                                                                            F-28
<PAGE>

================================================================================

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

12.  RELATED PARTY TRANSACTIONS

     The Company had the following transactions with related parties that were
     not disclosed elsewhere in these financial statements:

<TABLE>
<CAPTION>
                                                            PERIOD FROM      Eleven month
                                                        JANUARY 1, 2001      period ended       Year ended
                                                         TO DECEMBER 20       December 31       January 31
                                                                   2001              2000             2000
                                                        --------------------------------------------------
<S>                                                     <C>                  <C>               <C>
     Fees paid to directors/stockholders for
        ongoing consulting services                     $        57,500      $     52,500       $   15,000
</TABLE>

     The transactions were in the normal course of operations and are measured
     at the exchange value, which is the amount of consideration established and
     agreed to by the related parties.

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

13.  ACQUISITION OF WONDER TOOL INC.

     Effective December 21, 2001, the Company closed a Merger Purchase Agreement
     to acquire all of the issued and outstanding shares of Wonder Tool Inc.
     ("WTI"), in exchange for 1,250,000 shares of the Company's common stock.
     WTI manufactures and distributes a twin-head orbital polisher, known as the
     Wonder Tool, for the automotive and aircraft industry. The transaction was
     accounted for using accounting principles applicable to reverse
     acquisitions. Under reverse acquisition accounting, even though the Company
     is the legal acquirer, WTI is considered the acquirer for accounting
     purposes. Following reverse acquisition accounting, financial statements
     subsequent to the closing date are presented as a continuation of WTI.
     These financial statements present the financial position and results of
     operation of the Company to the date of acquisition, as the predecessor
     corporation, as it will continue to be the main operating entity.

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

14.  CONTINGENCIES

     Following his termination for cause from his position as President of the
     Company on September 12, 2001, the Company's former president filed a Writ
     of Summons on September 13, 2001 in the Supreme Court of British Columbia.
     The former president asserted among other things that the repurchase of
     company shares involved a breach of agreements with HSBC Bank of Canada,
     securities and corporate laws. The former president has not filed a
     Statement of Claim. The Company intends to vigorously contest the writ and
     believes that it is without merit. In the opinion of management, the
     outcome of this case is not determinable. Should any loss result from the
     resolution of this writ, such loss will be charged to operations in the
     year of resolution.

                                                                            F-29
<PAGE>

================================================================================

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

15.  PROFIT SHARING PROGRAM

     In 1994, the Company adopted a profit sharing program which provides that
     10% of the Company's income before income taxes and provision for profit
     sharing may be distributed to officers and employees of the Company. Profit
     sharing expenses were $117,209 for the period from January 1, 2001 through
     December 20, 2001, $112,011 for the eleven-month period ended December 31,
     2000 and $106,684 for the year ended January 31, 2000.

                                                                            F-30
<PAGE>

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.

                                               CONSOLIDATED FINANCIAL STATEMENTS

                      FOR THE PERIOD FROM DECEMBER 21, 2001 TO DECEMBER 31, 2001
                                                        (STATED IN U.S. DOLLARS)



                                                                        CONTENTS
--------------------------------------------------------------------------------

INDEPENDENT AUDITORS' REPORT                                                F-32

INDEPENDENT AUDITORS' REPORT                                                F-33

INDEPENDENT AUDITORS' REPORT                                                F-34

CONSOLIDATED FINANCIAL STATEMENTS

    Balance Sheets                                                          F-35

    Statements of Operations                                                F-36

    Statements of Stockholders' Equity and Comprehensive Loss               F-37

    Statements of Cash Flows                                                F-38

    Summary of Significant Accounting Policies                              F-40

    Notes to Financial Statements                                           F-46
<PAGE>

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

                                                    INDEPENDENT AUDITORS' REPORT

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


TO THE DIRECTORS AND STOCKHOLDERS OF
GLAS-AIRE INDUSTRIES GROUP LTD.

We have audited the accompanying consolidated balance sheet of Glas-Aire
Industries Group Ltd. as at December 31, 2001 and the related consolidated
statements of operations, stockholders' equity and comprehensive loss and cash
flows for the period from December 21, 2001 to December 31, 2001. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, these consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Glas-Aire
Industries Group Ltd. as at December 31, 2001 and the results of its operations
and its cash flows for the period from December 21, 2001 to December 31, 2001 in
conformity with U.S. generally accepted accounting principles.

/s/ BDO Dunwoody LLP

Chartered Accountants

Langley, Canada
March 21, 2002

                                                                           F-32
<PAGE>


                            Zarlengo Wilkins & Co.
                          A Professional Corporation



                         INDEPENDENT AUDITOR'S REPORT



Board of Directors
Cyclo Manufacturing Company
1438 S. Cherokee Street
Denver, CO 80223-3211

We have audited the accompanying balance sheet of Orbital Polisher Operation (A
division of Cyclo Manufacturing Company, and S corporation) as of December 20,
2001 and the related statements of operations and divisional net assets, and
cash flows for the eleven and half months then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Orbital Polisher Operation (A
division of Cyclo Manufacturing Company, an S Corporation) as of December 20,
2001, and the results of its operations and its cash flows for the eleven and
half months then ended in conformity with accounting principles generally
accepted in the United States of America.


/s/ Zarlengo Wilkins and Co., P.C.

Zarlengo Winkins and CO., P.C.
Wheat Ridge, Colorado
February 18, 2002

                                                                            F-33

<PAGE>

                            Zarlengo Wilkins & Co.
                          A Professional Corporation



                         INDEPENDENT AUDITOR'S REPORT



Board of Directors
Cyclo Manufacturing Company
1438 S. Cherokee Street
Denver, CO 80223-3211

We have audited the accompanying balance sheet of Orbital Polisher Operation (A
division of Cyclo Manufacturing Company, and S corporation) as of December 31,
2000 and the related statements of operations and divisional net assets, and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Orbital Polisher Operation (A
division of Cyclo Manufacturing Company, an S Corporation) as of December 31,
2000, and the results of its operations and its cash flows for the year then
ended in conformity with accounting principles generally accepted in the United
States of America.


/s/ Zarlengo Wilkins and Co., P.C.

Zarlengo Wilkins and CO., P.C.
Wheat Ridge, Colorado


February 18, 2002

                                                                            F-34

<PAGE>

================================================================================

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                                     CONSOLIDATED BALANCE SHEETS
                                                        (STATED IN U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                                               DECEMBER 31       December 20
                                                                                      2001            2001(a)
------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>               <C>
ASSETS
CURRENT
    Cash and equivalents                                                      $    465,193      $          -
    Accounts receivable, net of allowance for doubtful accounts
        of $21,588 (Note 4)                                                      1,836,077            61,004
    Inventories (Notes 2 and 4)                                                  1,209,058           223,904
    Prepaid expenses                                                               142,261                 -
    Deferred income taxes (Note 9)                                                  50,654                 -
                                                                              ------------------------------
                                                                                 3,703,243           284,908
FIXED ASSETS, net (Note 3)                                                       1,285,060                 -
ADVANCE TO HEAD OFFICE                                                                   -           579,714
GOODWILL                                                                                 -               100
                                                                              ------------------------------
                                                                              $  4,988,303      $    864,722
============================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
    Bank indebtedness (Note 4)                                                $    409,316      $          -
    Accounts payable                                                               776,584            57,784
    Accrued liabilities                                                          1,205,859                 -
    Income taxes payable                                                               416                 -
    Current portion of long-term debt (Note 5)                                     256,499                 -
    Current portion of obligations under capital lease (Note 6)                     26,775                 -
                                                                              ------------------------------
                                                                                 2,675,449            57,784

LONG-TERM DEBT (Note 5)                                                            748,131                 -
OBLIGATIONS UNDER CAPITAL LEASE (Note 6)                                            63,111                 -
DEFERRED INCOME TAXES (Note 9)                                                     133,591                 -
                                                                              ------------------------------
                                                                                 3,620,282            57,784
                                                                              ------------------------------
CONTINGENCIES (Note 12)

STOCKHOLDERS' EQUITY
    Common stock (Note 7)                                                           24,643                 -
    Additional paid-in capital                                                   1,389,343                 -
    Accumulated deficit                                                            (48,010)                -
    Divisional equity                                                                    -           806,938
    Accumulated other comprehensive income
        - foreign currency translation adjustment                                    2,045                 -
                                                                              ------------------------------
                                                                                 1,368,021           806,938
                                                                              ------------------------------
                                                                              $  4,988,303      $    864,722
============================================================================================================
</TABLE>

(a)  Represents the financial position of the Wonder Tool Inc. predecessor
Orbital Polishing Operations at the acquisition date (Note 1).

The accompanying summary of significant accounting policies and notes are an
integral part of these consolidated financial statements.

                                                                            F-35
<PAGE>

================================================================================

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                           CONSOLIDATED STATEMENTS OF OPERATIONS
                                                        (STATED IN U.S. DOLLARS)


<TABLE>
<CAPTION>
                                                             PERIOD FROM       Period from
                                                       DECEMBER 21, 2001   January 1, 2001        Year ended
                                                          TO DECEMBER 31    to December 20       December 31
                                                                  2001(B)           2001(a)           2000(a)
------------------------------------------------------------------------------------------------------------
<S>                                                    <C>                 <C>                  <C>
SALES (Note 11)                                            $      53,774      $    822,386      $    947,234
COST OF GOODS SOLD                                                46,440           593,588           587,721
                                                           -------------------------------------------------
GROSS PROFIT                                                       7,334           228,798           359,513
                                                           -------------------------------------------------
EXPENSES
    Research and development                                      12,694                 -                 -
    Selling and distribution                                         594             8,085            11,198
    General and administrative                                    70,070            42,051            42,682
                                                           -------------------------------------------------
                                                                  83,358            50,136            53,880
                                                           -------------------------------------------------
(LOSS) INCOME FROM OPERATIONS                                    (76,024)          178,662           305,633
                                                           -------------------------------------------------
OTHER INCOME (EXPENSE)
    Interest income                                                2,722                 -                 -
    Interest expense                                              (4,168)                -                 -
                                                           -------------------------------------------------
                                                                  (1,446)                -                 -
                                                           -------------------------------------------------

(LOSS) INCOME BEFORE INCOME TAXES                                (77,470)          178,662           305,633

INCOME TAX RECOVERY - CURRENT (Note 9)                           (29,460)                -                 -
                                                           -------------------------------------------------
NET (LOSS) INCOME                                                (48,010)          178,662           305,633

PRO FORMA INCOME TAXES (unaudited)                                     -            60,745           103,915
                                                           -------------------------------------------------
PRO FORMA NET (LOSS) INCOME FOR THE PERIOD(c)              $     (48,010)     $    117,917      $    201,718
============================================================================================================
(LOSS) EARNINGS PER SHARE - BASIC AND DILUTED(c)           $       (0.02)     $       0.09      $       0.16
============================================================================================================
WEIGHTED AVERAGE SHARES OUTSTANDING                            2,464,349         1,250,000         1,250,000
============================================================================================================
</TABLE>

(a)  Represents the results of operations of the Wonder Tool Inc. predecessor
     Orbital Polishing Operations (Note 1).
(b)  Represents the results of operations of Wonder Tool Inc. and Glas-Aire
     Industries Group Ltd. for the period December 21, 2001 (date of
     acquisition) to December 31, 2001 (Note 1).
(c)  The net (loss) income and (loss) earnings per share are unaudited for all
     periods except for the period from December 21, 2001 (date of acquisition)
     to December 31, 2001, and are on a pro forma basis.

The accompanying summary of significant accounting policies and notes are an
integral part of these consolidated financial statements.

                                                                            F-36
<PAGE>

================================================================================

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE LOSS
                                                        (STATED IN U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                                                                       Accumulated
                                                                      Additional                             Other            Total
                                                 Common  Stock           Paid-in      Accumulated    Comprehensive    Stockholders'
                                               Stock      Amount         Capital          Deficit           Income        Equity(a)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>            <C>           <C>            <C>             <C>              <C>
Inception of Wonder Tool Inc. at
December 21, 2001                              1,000    $  223,904   $         -     $          -    $           -    $     223,904
Recapitalization of Wonder Tool Inc.       1,249,000      (211,404)      211,404                -                -                -
Adjustment for reverse acquisition
Glas-aire Industries Group Ltd.            1,214,349        12,143     1,177,939                -                -        1,190,082
Net loss                                           -             -                        (48,010)               -          (48,010)
Foreign currency translation adjustment            -             -             -                -            2,045            2,045
                                         ------------------------------------------------------------------------------------------
Balance, December 31, 2001                 2,464,349    $   24,643   $ 1,389,343     $    (48,010)   $       2,045    $   1,368,021
===================================================================================================================================
Comprehensive loss consists of the following:
                                                                                                                               2001
                                                                                                                      -------------
Net loss                                                                                                              $     (48,010)
Foreign currency translation adjustment                                                                                       2,045
                                                                                                                      -------------
Comprehensive loss                                                                                                    $     (45,965)
                                                                                                                      =============
</TABLE>

(a)  The divisional equity for 2000 and 2001 increased by the amount of net
     income recorded and there were no distrubutions of divisional equity.

The accompanying summary of significant accounting policies and notes are an
integral part of these consolidated financial statements.

                                                                            F-37
<PAGE>

================================================================================

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                        (STATED IN U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                            PERIOD FROM        Period from
                                                      DECEMBER 21, 2001    January 1, 2001        Year ended
                                                         TO DECEMBER 31     to December 20       December 31
                                                                2001(B)            2001(a)           2000(a)
------------------------------------------------------------------------------------------------------------
<S>                                                     <C>                  <C>                <C>
CASH FLOWS FROM:
OPERATING ACTIVITIES
    Net (loss) income for the period                         $   (48,010)    $     178,662     $    305,633
    Adjustment to reconcile net (loss) income
      to net cash provided by operating activities
        Depreciation                                               6,014                 -                -
    Decrease in assets
        Accounts receivable, net                                 247,726            57,497           22,974
        Inventories                                                    -            30,461           26,768
        Prepaid expenses                                           6,723                 -                -
    Increase (decrease) in liabilites
        Accounts payable                                        (211,738)           (7,105)          22,321
        Accrued liabilities                                       79,726                 -                -
        Income taxes payable, net                                (29,460)                -                -
                                                             -----------------------------------------------
    Net cash provided by operating activities                     50,981           259,515          377,696
                                                             -----------------------------------------------

FINANCING ACTIVITIES
    Advance to head office                                             -          (259,515)        (377,696)
    Repayment of long-term debt                                  (18,889)                -                -
    Decrease in bank indebtedness                               (131,447)                -                -
                                                             -----------------------------------------------
    Net cash used in financing activities                       (150,336)         (259,515)        (377,696)
                                                             -----------------------------------------------

INVESTING ACTIVITIES
    Cash acquired on reverse acquisition                         561,801                 -                -
                                                             -----------------------------------------------
FOREIGN CURRENCY TRANSLATION ADJUSTMENT EFFECT ON
    CASH BALANCES                                                  2,747                 -                -
                                                             -----------------------------------------------
INCREASE IN CASH AND EQUIVALENTS DURING THE PERIOD               465,193                 -                -

CASH AND EQUIVALENTS, beginning of period                              -                 -                -
                                                             -----------------------------------------------
CASH AND EQUIVALENTS, end of period                          $   465,193     $           -    $           -
============================================================================================================
</TABLE>

(a)  Represents the cash flows of the Wonder Tool Inc. predecessor Orbital
     Polishing Operations (Note 1).
(b)  Represents the cash flows of Wonder Tool Inc. and Glas-Aire Industries
     Group Ltd. for the period from December 21, 2001 (date of acquisition) to
     December 31, 2001 (Note 1).

The accompanying summary of significant accounting policies and notes are an
integral part of these consolidated financial statements.

                                                                            F-38
<PAGE>

================================================================================

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                                                        (STATED IN U.S. DOLLARS)


<TABLE>
<CAPTION>
                                                            PERIOD FROM        Period from
                                                      DECEMBER 21, 2001    January 1, 2001        Year ended
                                                         TO DECEMBER 31     to December 20       December 31
                                                                2001(B)            2001(a)           2000(a)
------------------------------------------------------------------------------------------------------------
<S>                                                    <C>                 <C>                  <C>
SUPPLEMENTAL INFORMATION:

    Interest received                                    $        2,722      $           -       $         -

    Interest paid                                        $        4,168      $           -       $         -

NON-CASH INVESTING AND FINANCING ACTIVITY:

    Net assets of Glas-Aire Industries
    Group Ltd. on reverse acquisition (Note 1)           $    1,190,082      $           -       $         -
============================================================================================================
</TABLE>

(a)  Represents the cash flows of the Wonder Tool Inc. predecessor Orbital
     Polishing Operations (Note 1).
(b)  Represents the cash flows of Wonder Tool Inc. and Glas-Aire Industries
     Group Ltd. for the period from December 21, 2001 (date of acquisition) to
     December 31, 2001 (Note 1).

The accompanying summary of significant accounting policies and notes are an
integral part of these consolidated financial statements.

                                                                            F-39
<PAGE>

================================================================================

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DECEMBER 31, 2001
--------------------------------------------------------------------------------

NATURE OF BUSINESS                 The company is a Nevada, USA corporation and
                                   was incorporated on September 29, 1992. The
                                   Company manufactures and distributes wind
                                   deflector products to automobile
                                   manufacturers in the United States, Canada
                                   and Japan. The Company's corporate office and
                                   manufacturing facility, comprising all fixed
                                   assets, are located in Vancouver, Canada.

BASIS OF PRESENTATION              These financial statements have been prepared
                                   in accordance with accounting principles
                                   generally accepted in the United States.
                                   These financial statements include the
                                   accounts of the Company and its wholly-owned
                                   subsidiaries, Wonder Tool Inc. ("WTI"),
                                   Multicorp Holdings Inc., Glas-Aire Industries
                                   Ltd., Glas-Aire Industries Inc., and 326362
                                   B.C. Ltd.

                                   The Company acquired 100% of the voting stock
                                   of WTI on December 21, 2001. WTI was
                                   previously owned by Cyclo Manufacturing
                                   Company ("Cyclo"). Just prior to the
                                   acquisition, Cyclo had transferred certain
                                   assets of its Orbital Polishing Operations
                                   division ("Orbital") into WTI and
                                   concurrently sold its shares of WTI to the
                                   Company. The assets transferred included
                                   inventory, fixed assets, patents and
                                   trademarks. The assets were recorded by WTI
                                   on a carry over basis because of common
                                   control. The only asset with any carry over
                                   value was inventory valued at $223,904. The
                                   amounts receivable from head office, trade
                                   accounts receivable and goodwill were not
                                   included as part of this transaction. Upon
                                   consummation of this transaction the former
                                   stockholders of WTI obtained 50.7% voting
                                   rights of the Company. Although the Company
                                   is the legal acquirer, the transaction has
                                   been accounted for as a reverse acquisition
                                   and WTI is considered the acquirer for
                                   accounting purposes. Accordingly, the
                                   financial statements for the Company for the
                                   periods prior to the acquisition are those of
                                   WTI (and its predecessor Orbital). As WTI and
                                   its predecessor Orbital were taxed under the
                                   provisions of Subchapter S of the Internal
                                   Revenue Code, no income taxes were payable.
                                   For purposes of the comparative statement of
                                   operations income taxes have been provided on
                                   a pro forma basis at 34%. All inter-company
                                   transactions and accounts have been
                                   eliminated.

                                   The financial statements of Orbital, prior to
                                   December 21, 2001, include an amount that
                                   management considers to be a reasonable
                                   allocation of general corporate expenses.
                                   Direct expenses for such periods were
                                   allocated based upon the ratio of Orbital's
                                   gross sales to total consolidated sales.
                                   General and administrative expenses were
                                   allocated based on a rate of 5%.

                                                                            F-40
<PAGE>

================================================================================

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DECEMBER 31, 2001
--------------------------------------------------------------------------------

INVENTORIES                        Inventories are recorded at the lower of
                                   cost, on a first-in, first-out basis, or
                                   market value. Market value for raw materials
                                   is defined as replacement cost and for work-
                                   in-process and finished goods as net
                                   realizable value.

FIXED ASSETS                       Fixed assets are recorded at cost less
                                   accumulated depreciation. With the exception
                                   of leasehold improvements, depreciation is
                                   calculated using the declining-balance
                                   method, at the following annual rates over
                                   the estimated useful lives:

                                   Office equipment                 -   10%
                                   Manufacturing equipment          -   10%
                                   Computer equipment               -   15%
                                   Dies and molds                   -   10%
                                   Automotive                       -   30%
                                   Equipment under capital lease    -   10%

                                   All the dies and molds are owned by the
                                   Company. For leasehold improvements,
                                   depreciation is calculated using the
                                   straight-line method over the shorter of the
                                   estimated economic life or the lease term.

PER SHARE INFORMATION              The Company has adopted Financial Accounting
                                   Standards Board ("FASB") Statement of
                                   Financial Accounting Standards ("SFAS") No.
                                   128, Earnings Per Share ("EPS") which
                                   requires dual presentation of basic EPS and
                                   diluted EPS on the face of all income
                                   statements. Basic EPS is computed as net
                                   income divided by the weighted average number
                                   of shares of common stock outstanding during
                                   the period. Diluted EPS reflects the
                                   potential dilution that could occur if
                                   securities or other contracts were exercised.
                                   For the Company, stock options to purchase
                                   180,000 shares of the Company's common stock
                                   were anti-dilutive during the period ended
                                   December 31, 2001. Treasury stock held by the
                                   Company (Note 7) is not included in the
                                   number of shares outstanding, for earnings
                                   per share purposes.

CASH EQUIVALENTS                   Cash equivalents consist of short-term
                                   deposits with maturity of ninety days or
                                   less.

RESEARCH AND DEVELOPMENT           Research and development costs are expensed
                                   as incurred.

                                                                            F-41
<PAGE>

================================================================================

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DECEMBER 31, 2001
--------------------------------------------------------------------------------

INCOME TAXES                           The Company accounts for income taxes in
                                       accordance with SFAS No. 109, which
                                       requires the liability method of
                                       accounting for income taxes. The
                                       liability method requires the recognition
                                       of deferred tax assets and liabilities
                                       for the future tax consequences of
                                       temporary differences between the
                                       financial statement basis and the tax
                                       basis of assets and liabilities.

STOCK BASED COMPENSATION               The Company applies Accounting Principles
                                       Board ("APB") Opinion No. 25, "Accounting
                                       for Stock Issued to Employees", and
                                       related interpretations in accounting for
                                       stock option plans. Under APB Opinion No.
                                       25, compensation cost is recognized for
                                       stock options granted at prices below
                                       market price of the underlying common
                                       stock on date of grant.

                                       SFAS No. 123, "Accounting for Stock-Based
                                       Compensation", requires the Company to
                                       provide pro forma information regarding
                                       net income and earnings per share as if
                                       compensation cost for the Company's stock
                                       options granted to employees had been
                                       determined in accordance with the fair
                                       value based method prescribed in SFAS No.
                                       123.

                                       Stock options granted to non-employees
                                       are accounted for in accordance with SFAS
                                       No. 123. There were no stock options
                                       granted to non-employees during the
                                       periods covered by these financial
                                       statements.

FOREIGN CURRENCY TRANSLATION
    AND TRANSACTIONS                   The Company conducts business in both
                                       Canada and the United States and uses the
                                       U.S. dollar as its reporting currency.
                                       The functional currency of the Canadian
                                       subsidiaries is the Canadian dollar. The
                                       financial statements of the Canadian
                                       subsidiaries have been translated under
                                       SFAS No. 52. Assets and liabilities are
                                       translated at the rate of exchange at the
                                       balance sheet date and revenues and
                                       expenses are translated at the average
                                       exchange rates during the year. The
                                       resulting exchange gains and losses are
                                       shown as a separate component of
                                       stockholders' equity.

                                       Transactions conducted in foreign
                                       currencies are translated as follows:

                                       At the transaction date, each asset,
                                       liability, revenue and expense is
                                       translated by the use of the exchange
                                       rate in effect at that date. At the
                                       period end date, monetary assets and
                                       liabilities are translated by using the
                                       exchange rate in effect at that date. The
                                       resulting foreign exchange gains and
                                       losses are included in income in the
                                       current period.

                                                                            F-42
<PAGE>

================================================================================

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DECEMBER 31, 2001
--------------------------------------------------------------------------------

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

FINANCIAL INSTRUMENTS                  The Company's financial assets and
                                       liabilities consist of cash and
                                       equivalents, accounts receivable, bank
                                       indebtedness, accounts payable, accrued
                                       liabilities and long-term debt. Unless
                                       otherwise noted, it is management's
                                       opinion that the Company is not exposed
                                       to significant interest, currency or
                                       credit risks arising from these financial
                                       instruments. The fair value of these
                                       financial instruments, excluding long-
                                       term debt, approximate their carrying
                                       values due to the short-term nature of
                                       these instruments. The carrying value of
                                       long-term debt approximates fair value
                                       because these interest rates float with
                                       market rates.

CONCENTRATION OF
    EXCHANGE RISK                      As a Canadian manufacturer, the Company
                                       has a significant volume of expense
                                       transactions denominated in Canadian
                                       currency.

CONCENTRATION OF CREDIT RISK           As a manufacturer of automotive
                                       accessories, the Company grants credit to
                                       customers exclusively within the
                                       automotive manufacturing industry.

REVENUE RECOGNITION                    The Company recognizes revenue on the
                                       sale of products at the time the products
                                       are shipped to its customers.

                                                                            F-43
<PAGE>

================================================================================

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DECEMBER 31, 2001
--------------------------------------------------------------------------------

NEW ACCOUNTING
    PRONOUNCEMENTS                     SFAS No. 133, "Accounting for Derivative
                                       Instruments and Hedging Activities" is
                                       effective for all fiscal quarters of
                                       fiscal years beginning after June 15,
                                       2000. SFAS No. 133 requires companies to
                                       recognize all derivative contracts as
                                       either assets or liabilities in the
                                       balance sheet and to measure them at fair
                                       value. If certain conditions are met, a
                                       derivative may be specifically designated
                                       as a hedge, the objective of which is to
                                       match the timing of gain or loss
                                       recognition on the hedging derivative
                                       with the recognition of (i) the changes
                                       in the fair value of the hedged asset or
                                       liability that are attributable to the
                                       hedged risk or (ii) the earnings effect
                                       of the hedged forecasted transaction. For
                                       a derivative not designated as a hedging
                                       instrument, the gain or loss is
                                       recognized in income in the period of
                                       change. Historically, the Company has not
                                       entered into derivative contracts either
                                       to hedge existing risks or for
                                       speculative purposes. Accordingly,
                                       adoption of the new standards on January
                                       1, 2001 did not have any effect on the
                                       Company's financial statements.

                                       In June 2001, SFAS No. 141 "Business
                                       Combinations" was issued. SFAS No. 141
                                       requires that all business combinations
                                       be accounted for using the purchase
                                       method and that one of two specified
                                       criteria be met in identifying intangible
                                       assets apart from goodwill. Additional
                                       disclosures are required in respect to
                                       the primary reasons for the business
                                       combination and the allocation of the
                                       purchase price paid to the assets
                                       acquired and liabilities assumed by major
                                       balance sheet caption. SFAS No. 141
                                       applies to all business combinations
                                       initiated after June 30, 2001. The
                                       Company applied the provisions of SFAS
                                       No. 141 for the reverse acquisition that
                                       took place on December 21, 2001 (Note 1).

                                       In June 2001, SFAS No. 142 "Goodwill and
                                       Other Intangible Assets" was issued.
                                       Under the provisions of SFAS No. 142
                                       goodwill and other intangible assets with
                                       an indefinite life are no longer
                                       amortized but will be tested at least
                                       annually for impairment. The statement
                                       provides a two step process for
                                       estimating fair value of the reporting
                                       units and measuring the amount of
                                       impairment, if any, of goodwill and other
                                       intangible assets. SFAS No. 142 is
                                       effective for fiscal years beginning
                                       after December 15, 2001.

                                       The Company does not expect SFAS No. 142
                                       to have a material impact on its
                                       financial statements because it does not
                                       have any recorded goodwill or other
                                       intangible assets.

                                                                            F-44
<PAGE>

================================================================================

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DECEMBER 31, 2001
--------------------------------------------------------------------------------

NEW ACCOUNTING
    PRONOUNCEMENTS (CONTINUED)         In August 2001, SFAS No. 144 "Accounting
                                       for the Impairment or Disposal of Long-
                                       Lived Assets" was issued. This statement
                                       establishes a single model based upon
                                       SFAS No. 121 for accounting for the
                                       impairment or disposal of long-lived
                                       assets. It supersedes FASB Statement No.
                                       121 and the reporting provisions of APB
                                       Opinion No. 30 for the disposal of a
                                       segment of a business and also amends
                                       certain provisions of Accounting Research
                                       Bulletin No. 51. SFAS No. 144 is
                                       effective for financial statements issued
                                       for fiscal years beginning after December
                                       15, 2001. Management believes that the
                                       adoption of SFAS No. 144 will have no
                                       material effect on the Company's
                                       financial statements.

                                                                            F-45
<PAGE>

================================================================================

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

--------------------------------------------------------------------------------
1.    REVERSE ACQUISITION

      Effective December 21, 2001, the Company closed a Merger Purchase
      Agreement to acquire all of the issued and outstanding shares of Wonder
      Tool Inc. ("WTI"), in exchange for 1,250,000 shares of the Company's
      common stock. WTI (and historically through its predecessor, Orbital
      Polishing Operations ("Orbital")) manufactures and distributes a twin-head
      orbital polisher known as the Wonder Tool for the automotive and aircraft
      industry. The Company acquired WTI to exploit the market synergies between
      the polisher and its own products. Immediately following the acquisition,
      the former stockholders of WTI controlled the Company. The transaction was
      accounted for using accounting principles applicable to reverse
      acquisitions. Following reverse acquisition accounting, financial
      statements subsequent to the closing date are presented as a continuation
      of WTI. The value assigned to the common stock of the Company on
      acquisition, based on the fair market value of the Company's outstanding
      common stock on the date the terms were agreed to, was $1,190,082. Net
      assets of the Company at the acquisition date excluding deferred taxes of
      $359,792 were $1,917,625. The difference in value of $727,543 is negative
      goodwill, and has been assigned to a reduction in the book value of fixed
      assets.


           Current assets                                       $  3,771,276
           Fixed assets                                            1,935,419
                                                                ------------
           Total assets                                            5,706,695
           Liabilities assumed                                    (3,789,070)
                                                                ------------
           Net assets acquired                                     1,917,625

           Excess of net assets acquired over
           consideration paid                                       (727,543)
                                                                ------------
           Consideration paid                                   $  1,190,082
                                                                ============


           Fair value of fixed assets                           $  1,935,419

           Less: "Negative goodwill", net of
                 addition to net assets              727,543
                                                     (82,937)        644,606
                                                    --------    ------------
           Net value assigned to fixed assets                      1,290,813
                                                                ============

                                                                            F-46
<PAGE>

================================================================================

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

1.    REVERSE ACQUISITION (continued)

      Unaudited pro forma information assuming the transaction had been
      completed on January 1, 2000 is as follows:

<TABLE>
<CAPTION>
                                                                               Period from
                                                                           January 1, 2001         Year ended
                                                                            to December 20        December 31
                                                                                      2001               2000
                                                                          -----------------------------------
      <S>                                                                 <C>                   <C>
      Sales                                                               $     12,558,076      $  12,867,009

      Net (loss) income for the period                                    $     (3,355,605)     $     997,031

      (Loss) earnings per share                                           $          (0.98)     $        0.28

      (a) Includes a loss on write-off of equity investment of $4,233,835
</TABLE>

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

2.    INVENTORIES
                                                  DECEMBER 31        December 20
                                                         2001               2001
                                             -----------------------------------
      Raw materials and supplies             $        936,195      $     201,064
      Work-in-process                                 121,487                  -
      Finished goods                                  151,376             22,840
                                             -----------------------------------
                                             $      1,209,058      $     223,904
                                             ===================================

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

3.    FIXED ASSETS

<TABLE>
<CAPTION>
                                                       DECEMBER 31, 2001                   December 20, 2001
                                       ---------------------------------------------------------------------

                                                             ACCUMULATED                         Accumulated
                                                   COST     DEPRECIATION              Cost      Depreciation
                                       ---------------------------------------------------------------------
      <S>                              <C>               <C>              <C>               <C>
      Office equipment                 $        192,362  $           579  $              -  $              -
      Manufacturing equipment                   131,978              397            53,091            53,091
      Computer equipment                         76,830              347                 -                 -
      Dies and molds                            515,045            1,552            39,790            39,790
      Automotive                                 16,270            1,967                 -                 -
      Leasehold improvements                    150,308              548                 -                 -
      Equipment under capital
         lease                                  208,020              363                 -                 -
                                       ---------------------------------------------------------------------

      Total                            $      1,290,813  $         5,753  $         92,881  $         92,881
                                       =====================================================================

      Net book value                                     $     1,285,060                    $              -
                                                         ===============                    ================
</TABLE>

                                                                            F-47
<PAGE>

================================================================================

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

4.    BANK INDEBTEDNESS

                                                  DECEMBER 31       December 20
                                                         2001              2001
                                                  -----------------------------

      Revolving bank loan                         $   169,463       $         -
      Cheques issued in excess of deposit             239,853                 -
                                                  -----------------------------

                                                  $   409,316       $         -
                                                  =============================

      The revolving bank loan is a Cdn. $2,000,000 overdraft facility, which is
      due on demand and bears interest at Canadian bank prime rate (4.0% -
      December 31, 2001; 4.0% - December 20, 2001) plus 1/2%. This line of
      credit is renewable annually in April of each year. At December 31, 2001,
      the Company had undrawn credit capacity under this facility of Cdn.
      $1,348,047 (U.S. $846,345).

      The following have been provided as collateral for the overdraft facility
      and long-term debt:

      (a)  general assignment of accounts receivable and inventories;

      (b)  a Cdn. $2,000,000 demand debenture granting a first fixed charge on
           certain equipment and a floating charge over all other assets of the
           Company;

      (c)  an unlimited guarantee by the Company and its subsidiaries, Glas-Aire
           Industries Ltd. and Multicorp Holdings Inc.

                                                                            F-48
<PAGE>

================================================================================

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

5.    LONG-TERM DEBT

                                                      DECEMBER 31  December 20
                                                             2001         2001
                                                      ------------------------
      HSBC loan payable - interest at prime plus
      1%, due September 28, 2005, monthly
      principal payments of $18,314 plus interest     $   824,021  $         -

      HSBC loan payable - interest at prime plus
      0.5%, due November 14, 2006, monthly
      principal payments of $3,061 plus interest          180,609            -
                                                      ------------------------
                                                        1,004,630            -

      Less current portion                                256,499            -
                                                      ------------------------

                                                      $   748,131  $         -
                                                      ========================

      The Company has a Cdn. $1,000,000 equipment purchase facility and a Cdn.
      $1,400,000 acquisition facility. These facilities bear interest at
      Canadian bank prime rate plus 1/2% to 1%. At December 31, 2001, the
      Company had undrawn credit capacity under these facilities of Cdn.
      $712,328 (U.S. $447,221) for equipment purchases and Cdn. $87,510 (U.S.
      $54,941) for acquisitions.

      The collateral provided for the HSBC loans payable is described in Note 4.

      Principal payments required on long-term debt over the remaining terms of
      the debt are as follows:

                      YEAR                             AMOUNT

                      2002                     $      256,499
                      2003                            256,499
                      2004                            256,499
                      2005                            201,462
                      2006                             33,671
                                               --------------

                                               $    1,004,630
                                               ==============

                                                                            F-49
<PAGE>

================================================================================

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

6.    OBLIGATIONS UNDER CAPITAL LEASE

      The minimum annual lease payments required under capital leases of
      manufacturing equipment expiring in December 2004 together with the
      balance of the obligation are as follows:

                                   YEAR                         AMOUNT

                                   2002                     $   34,515
                                   2003                         34,329
                                   2004                         34,234
                                                            ----------

      Total minimum lease payments                             103,078
      Less amounts representing interest at 8.6%
         per annum                                              13,192
                                                            ----------

      Present value of minimum lease payments                   89,886
      Less current portion                                      26,775
                                                            ----------

                                                            $   63,111
                                                            ==========

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

7.    COMMON STOCK

      Authorized

         30,000,000  Common shares with a par value of $0.01 each

         1,000,000  Preferred stock with a par value of $0.01 each

         Share of common stock held in treasury at December 31, 2001
         totaled 1,375,677 with a nil value

                                                                            F-50
<PAGE>

================================================================================


                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

8.    STOCK OPTIONS

      INCENTIVE AND NON-QUALIFIED PLANS
      During the year ended January 31, 1997, Glas-Aire's Board of Directors
      approved an Incentive Stock Option Plan and a Non-Qualified Stock Option
      Plan. Each plan provides for granting options to purchase not more than
      160,000 shares of the Company's common stock. The Incentive Stock Option
      Plan is to be available to management and employees of the Company. The
      Non-Qualified Stock Option Plan is to be available to certain key
      employees, independent contractors, technical advisors and directors of
      the Company. Vesting for both plans will be determined at the date of
      grant. Upon granting, the options will have a five year life.

      At December 31, 2001 no options had been granted under either plan.

      DIRECTOR COMPENSATION
      In previous periods the Company had granted options to directors in
      accordance with the director's compensation program approved by the
      stockholders. A summary of the status of the Company's stock options
      outstanding as of December 31, 2001 is as follows:


<TABLE>
<CAPTION>


                                                                Number of         Exercise
                                                                 Options             Price
                                                               -----------------------------
      <S>                                                      <C>        <C>
      Granted - November 4, 1999                                  60,000  $           4.50
      Granted - December 4, 2000                                  60,000  $           2.75
      Granted - December 4, 2001                                  60,000  $           1.00
                                                               -----------------------------
                                                                 180,000
                                                               =========
</TABLE>


      All options have vested except for 60,000 which vest on June 4, 2002.

      Under the accounting provisions of SFAS No. 123, pro forma information
      regarding Net Loss and loss per share is required as if the Company had
      accounted for the stock options under the fair value method. Under SFAS
      No. 123, the Company's Net Loss and loss per share would have increased to
      the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                                               PERIOD FROM
                                                                          DECEMBER 21 2001
                                                                            TO DECEMBER 31
                                                                                      2001
                                                                               AS REPORTED        PRO FORMA
                                                                          ----------------------------------
      <S>                                                                 <C>                <C>
      Net loss for the period                                             $        (48,010)  $      (71,173)

      Loss per share - basic and diluted                                  $          (0.01)  $        (0.02)
</TABLE>

      No options were granted in WTI (or its predecessor, Orbital) prior to
December 21, 2001.

                                                                            F-51
<PAGE>

================================================================================

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

9.    INCOME TAXES

      A reconciliation of expected income taxes using the federal U.S. statutory
      tax rate to the tax expense recorded in these finanacial statements is as
      follows:

<TABLE>
<CAPTION>
                                                            PERIOD FROM        Period from
                                                      DECEMBER 21, 2001    January 1, 2001        Year ended
                                                         TO DECEMBER 31     to December 20       December 31
                                                                   2001               2001              2000
                                                         ---------------------------------------------------
      <S>                                             <C>                  <C>                   <C>
      Federal tax at the U.S. federal statutory rate     $      (25,651)   $             -       $         -
      Canadian income taxes at a higher rate                     (3,809)                 -                 -
                                                         ---------------------------------------------------
                                                         $      (29,460)   $             -       $         -
                                                         ===================================================
</TABLE>

      The components of deferred taxes are as follows:

<TABLE>
<CAPTION>
                                                             DECEMBER 31                         December 20
                                                                    2001                                2001
                                         -------------------------------------------------------------------
                                                               TEMPORARY                           Temporary
                                             DIFFERENCE       TAX EFFECT        Difference        Tax Effect
      <S>                                <C>               <C>                <C>               <C>
      Deferred tax assets
         Accrued liabilities             $      148,982    $      50,654      $          -      $          -
         Stock compensation                     189,528           64,440                 -                 -
         Capital loss carry forward           3,327,340        1,131,296                 -                 -
                                         -------------------------------------------------------------------
                                              3,665,850        1,246,390                 -                 -
         Valuation allowance                 (3,327,340)      (1,131,296)                -                 -
                                         -------------------------------------------------------------------
                                                338,510          115,094                 -                 -
                                         -------------------------------------------------------------------
      Deferred tax liability
         Fixed assets                           582,490          198,031                 -                 -
                                         -------------------------------------------------------------------
      Net deferred tax liability         $      243,980    $      82,937      $          -      $          -
                                         ===================================================================
</TABLE>

      The Company evaluates its valuation allowance requirements based on
      projected future operations. When circumstances change and this causes a
      change in management's judgement about the recoverability of future tax
      assets, the impact of the change in the valuation allowance is reflected
      in current income.

                                                                            F-52
<PAGE>

================================================================================

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

10.   COMMITMENTS

      The Company is committed to minimum lease payments of $110,155 for each of
      the next three years with a five year renewal option, under an operating
      lease for its current premises. Rent expense was $4,821 for the period
      from December 21, 2001 to December 31, 2001 and $Nil for the period from
      January 1, 2001 to December 20, 2001 and for the year ended December 31,
      2000. The Company is in the process of subletting its current premises in
      order to occupy its new premises.

      The Company has entered into an operating lease agreement for new premises
      commencing May 1, 2002 for a term of seven years with a five year renewal
      option. The landlord has provided the first three months of the lease rent
      free. The company is committed to the following minimum lease payments
      plus proportionate common area costs:

                                   YEAR                               AMOUNT

                                   2002                         $     73,774
                                   2003                              177,057
                                   2004                              182,678
                                   2005                              185,488
                                   2006                              185,488
                             Thereafter                              449,668
                                                                ------------

                                                                $  1,254,153
                                                                ============


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

11.   SEGMENTED INFORMATION

      The Company has determined that it operates in two business segments, the
      automotive accessories segment and the orbital polishing segment.
      Information pertaining to the business segments are as follows:


<TABLE>
<CAPTION>
                                                            PERIOD FROM        Period from
                                                      DECEMBER 21, 2001    January 1, 2001        Year ended
                                                         TO DECEMBER 31     to December 20       December 31
                                                                   2001               2001              2000
                                                         ---------------------------------------------------
           <S>                                        <C>                  <C>                 <C>
           Automotive accessories

               Assets                                    $     4,713,745    $             -    $          -
               Sales                                     $        53,774    $             -    $          -

           Orbital polishing

               Assets                                    $       223,904    $      864,722     $          -
               Sales                                     $             -    $      822,386     $    947,234
               Sales to customers that accounted
               for more than 10% of sales                $             -    $      148,029     $    227,336
</TABLE>


                                                                            F-53
<PAGE>

================================================================================

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

12.   CONTINGENCIES

      Following his termination for cause from his position as President of the
      Company on September 12, 2001, the Company's former president filed a Writ
      of Summons on September 13, 2001 in the Supreme Court of British Columbia.
      The former president asserted among other things that the repurchase of
      the Company's shares involved a breach of agreements with HSBC Bank of
      Canada, securities and corporate laws. The former president has not filed
      a Statement of Claim. The Company intends to vigorously contest the writ
      and believes that it is without merit. In the opinion of management, the
      outcome of this case is not determinable. Should any loss result from the
      resolution of this writ, such loss will be charged to operations in the
      year of resolution.

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

13.   PROFIT SHARING PROGRAM

      In 1994, Glas-Aire adopted a profit sharing program which provides that
      10% of the Company's income before income taxes and provision for profit
      sharing may be distributed to officers and employees of the Company.

                                                                            F-54