U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                                   FORM 10-QSB

[X]  QUARTERLY  REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES  EXCHANGE ACT
     OF 1934

                  For the quarterly period ended June 30, 2006
                ------------------------------------------------


[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

     For the transition period from __________________ to _____________________

                         Commission file number 1-14244
           -----------------------------------------------------------

                         GLAS-AIRE INDUSTRIES GROUP LTD.
          --------------------------- --------------------------------
      (Exact name of small business registrant as specified in its charter)

                      NEVADA                                 84-1214736
--------------------------------------------   ---------------------------------
         (State or other  jurisdiction of
         incorporation  or  organization)      (IRS Employer Identification No.)

                 145 TYEE DRIVE, #1641, POINT ROBERTS, WA 98281
               --------------------------------------------------
                     (Address of principal executive office)

                                 (360) 447-0210
  ----------------------------------------------------------------------------
                          (Registrant telephone number)

        ----------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)

     Securities registered pursuant to Section 12(B) of the Act:

                                                   Name of Each Exchange On
 Title of Each Class                                 Which Registered
--------------------                               -------------------------
   COMMON STOCK                                             OTC

         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 ___X_____     No ________


Issuer's Common Stock:

     Common Stock, $0.01 par value-Issued 5,881,735 shares, not including 93,718
shares of treasury stock held by the Company as of June 30, 2006.

         Transitional Small Business Disclosure Format

        Yes_______        No___X____


<PAGE>



                         Glas-Aire Industries Group Ltd.

                                      INDEX


<TABLE>
<CAPTION>

PART I.           FINANCIAL INFORMATION                                                                      PAGE

<S>  <C>          <C>                                                                                        <C>
     Item 1.      Financial Statements                                                                        1

                  Consolidated Condensed Balance Sheets
                  June 30, 2006 (Unaudited) and December 31, 2005                                             1

                  Consolidated  Condensed Statements of Operations For the three
                  months ended June 30, 2006 and 2005 and
                  the six months ended June 30, 2006 and 2005 (Unaudited)                                     2

                  Consolidated Condensed Statement of Stockholders' Equity
                  For the six months ended June 30, 2006 (Unaudited)                                          3

                  Consolidated Condensed Statements of Cash Flows
                  For the six months ended June 30, 2006 and 2005 (Unaudited)                                 5

                  Notes to Consolidated Condensed Financial Statements (Unaudited)                            6-9

     Item 2.      Management's Discussion and Analysis of
                  Financial Condition and Results of Operations                                              10-13

     Item 3.      Controls and Procedures                                                                     13

PART II.  OTHER INFORMATION

     Item 1.      Legal Proceedings                                                                           13

     Item 2.      Changes in Securities                                                                       14

     Item 3.      Defaults Upon Senior Securities                                                             14

     Item 4.      Submission of Matters to a Vote of Security Holders                                         14

     Item 5.      Other Information                                                                           14

     Item 6.      Exhibits and Reports on Form 8-K                                                            14

SIGNATURES                                                                                                    15
</TABLE>

<PAGE>

                         Glas-Aire Industries Group Ltd.
                      Consolidated Condensed Balance Sheets

<TABLE>
<CAPTION>

                                                                      June 30,               December 31,
                                                                        2006                     2005
                                                                    (Unaudited)               (Audited)
                                                                  ---------------          ----------------
ASSETS
Current
<S>                                                               <C>                      <C>
     Cash and equivalents                                         $          161           $         1,832
                                                                  ---------------          ----------------
                                                                             161                     1,832

                                                                  $          161           $         1,832
                                                                  ===============          ================


LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Current
     Accrued liabilities                                                  82,033                   382,731
     Income taxes payable                                                 35,500                    35,500
                                                                  ---------------          ----------------
                                                                         117,533                   418,231
                                                                  ---------------          ----------------


Stockholders' equity
     Common stock                                                         58,817                    27,112
     Additional paid-in capital                                        1,834,788                 1,549,313
     Accumulated Deficit                                              (2,663,756)               (2,645,602)
     Accumulated other comprehensive income
     Foreign currency translation adjustment                             652,779                   652,778
                                                                  ---------------          ----------------
                                                                        (117,372)                 (416,399)
                                                                  ---------------          ----------------
                                                                  $          161           $          1832
                                                                  ===============          ================

</TABLE>








                 See accompanying notes to financial statements

                                       1
<PAGE>




                         Glas-Aire Industries Group Ltd.
                 Consolidated Condensed Statements of Operations
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                              Three Months Ended            Six Months Ended
                                                        ----------------------------------------------------------
                                                          June 30,         June 30,       June 30,      June 30,
                                                           2006              2005           2006          2005
                                                        -------------   -------------   ------------  ------------

<S>                                                     <C>             <C>             <C>           <C>
Sales                                                   $          0    $         0     $         0   $         0
Cost of sales                                                      0              0               0             0
                                                        -------------   -------------   ------------  ------------


Gross profit                                                       0              0               0             0
                                                        -------------   -------------   ------------  ------------

 Income  (expense)
     General and administrative                              (21,607)       (49,820)        (61,774)     (124,547)
     Other income                                             50,000              0          50,000             0
     Interest income                                               0              0               1             0
     Interest expense                                         (5,136)             0          (6,381)            0
                                                        -------------   -------------   ------------  ------------
                                                              23,257        (49,820)        (18,154)     (124,547)

Gain (loss) from continuing operation before
      Income taxes                                            23,257        (49,820)       ( 18,154)     (124,547)
Income taxes - current (recovery)                                  0              0               0             0
                                                        -------------   -------------   ------------  ------------

Net income (loss) for the period                        $     23,257    $   (49,820)    $   (18,154)  $  (124,547)
                                                        =============   =============   ============  ============
Earnings (loss) per share basic and diluted from
     Continuing operations                              $      0.005    $    (0.018)    $    (0.005)  $    (0.046)
                                                        =============   =============   ============  ============

Weighted average common shares outstanding
(Basic - after deducting 93,718 shares of
treasury stock  held by the Company)                       5,080,394      2,711,213       3,876,050     2,711,213
                                                        =============   =============   ============  ============
</TABLE>












           See accompanying notes to consolidated financial statements

                                       2
<PAGE>



            Consolidated Condensed Statement of Stockholders' Equity
                         Six Months Ended June 30, 2006
                                   (Unaudited)

<TABLE>
<CAPTION>
--------------------- -------------- ------------ --------------- ---------------- -------------- ----------------- ----------------
<S>                   <C>            <C>          <C>             <C>              <C>            <C>               <C>

                         Common        Stock      Additional       Deferred        Accumulated     Accumulated        Stockholders'
                         Stock         Amount     Paid-in          Compensation    Deficit         Other              Equity
                                                  Capital          expense                         Comprehensive
                                                                                                   Income
--------------------- -------------- ------------ --------------- ---------------- --------------- ----------------- ---------------
     Balance -
        December 31,      2,711,213      $27,112      $1,549,313                0     $(2,645,602)         $652,778       $(416,399)
     2005
--------------------- -------------- ------------ --------------- ---------------- --------------- ----------------- ---------------
     Net loss                     -            -               -                -         (18,154)                -         (18,154)
--------------------- -------------- ------------ --------------- ---------------- --------------- ----------------- ---------------
     Shares Issued        3,170,522       31,705         285,475                -               -                 -         299,026
--------------------- -------------- ------------ --------------- ---------------- --------------- ----------------- ---------------
     Deferred                     -            -               -                -               -                 -               -
     compensation
--------------------- -------------- ------------ --------------- ---------------- --------------- ----------------- ---------------
     Foreign currency                -         -               -                -               -                 1               -
      translation
     adjustment
--------------------- -------------- ------------ --------------- ---------------- --------------- ----------------- ---------------
     Balance -
        June 30, 2006     5,881,735      $58,817      $1,834,788                -     $(2,663,756)         $652,779       $(117,372)
--------------------- -------------- ------------ --------------- ---------------- --------------- ----------------- ---------------
</TABLE>

























                 See accompanying notes to financial statements

                                       3
<PAGE>


                         Glas-Aire Industries Group Ltd.
             Comprehensive income (loss) consists of the following:

<TABLE>
<CAPTION>
                                                              Three months ended                        Six months ended
                                                    ---------------------------------------- ---------------------------------------
                                                          June 30,            June 30,           June 30,            June 30,
                                                            2006                2005               2006                2005
                                                    --------------------- ------------------ ----------------- ---------------------

<S>                                                            <C>              <C>               <C>                  <C>
    Net income (loss)                                          $23,257          $(49,820)         $(18,154)            $(124,547)
    Foreign currency translation  adjustment                         1                 0                 1                     0
                                                    --------------------- ------------------ ----------------- ---------------------
    Comprehensive income (loss)                                $23,258          $(49,820)         $(18,153)            $(124,547)
                                                    ===================== ================== ================= =====================
</TABLE>

































                 See accompanying notes to financial statements

                                       4
<PAGE>



                         Glas-Aire Industries Group Ltd
                 Consolidated Condensed Statements of Cash Flows
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                      Six Months Ended
                                                                      --------------------------------------------------
                                                                          June 30,                          June 30,
                                                                            2006                              2005
                                                                      ------------------                ----------------
Increase (decrease) in cash
Cash flows from:
Operating activities
<S>                                                                    <C>                              <C>
 Net loss for the period from continuing operations                    $       (18,154)                 $      (124,547

(Increase) decrease in assets

Increase (decrease) in liabilities
     Accrued liabilities                                                      (300,698)                         122,319
                                                                      ------------------                ----------------
     Net cash used in operating activities
         from continuing operations                                           (318,852)                          (2,228)
Cash flows from discontinued operations                                              -                                0
                                                                      ------------------                ----------------
     Net cash used in operating activities                                    (318,852)                          (2,228)
                                                                      ------------------                ----------------

Investing activities

Financing activities
     Issuance of shares                                                        317,180                                0
                                                                      ------------------                ----------------
     Net cash (used in) provided by financing activities                       317,180                                0
                                                                      ------------------                ----------------

Foreign currency translation adjustment
      effect on cash and equivalents balances                                        1                                0
                                                                      ------------------                ----------------
Increase in cash and equivalents during the period                              (1,671)                          (2,228)
Cash and equivalents, beginning of period                                        1,832                           34,550
                                                                      ------------------                ----------------
Cash and equivalents, end of period                                   $            161                  $        32,322
                                                                      ==================                ================

</TABLE>

<TABLE>
<CAPTION>
                                                                                      SIX MONTHS ENDED
                                                                      --------------------------------------------------
                                                                          June 30,                          June 30,
                                                                            2006                              2005
                                                                      ------------------                ----------------
Supplemental disclosure of cash flow relating to:

<S>                                                                   <C>                               <C>
     Interest paid                                                    $          6,381                  $             0
     Income taxes paid                                                $              0                  $             0

Non - cash investing activities

     Common Stock issued in                                           $        317,180                  $             0
     exchange for compensation
     Stock warrant compensation                                       $              0                  $             0

</TABLE>

                 See accompanying notes to financial statements

                                       5
<PAGE>



                         Glas-Aire Industries Group Ltd.
              Notes to Consolidated Condensed Financial Statements
                                  June 30, 2006
                                   (Unaudited)


1.    NATURE OF BUSINESS AND BASIS OF PRESENTATION

         Glas-Aire  Industries Group Ltd., a Nevada  corporation (the "Company")
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 interim  financial  statements  included  herein,  are presented in
accordance  with United States  generally  accepted  accounting  principles  and
stated in United States Dollars, and have been prepared by the Company,  without
audit, pursuant to the rules and regulations of the United States Securities and
Exchange Commission.

         Certain  information  and  footnote  disclosures  normally  included in
financial  statements  prepared in accordance with generally accepted accounting
principles   have  been  condensed  or  omitted   pursuant  to  such  rules  and
regulations,  although the Company believes that the disclosures are adequate to
make the information presented not misleading.

         These  financial  statements  reflect all  adjustments,  consisting  of
normal recurring  adjustments,  which in the opinion of management are necessary
for fair presentation of the information contained therein. It is suggested that
these  interim  financial  statements  be read in  conjunction  with the audited
financial  statements  of the Company for the years ended  December 31, 2005 and
2004 included in the Company's  10-KSB Annual  Report.  The Company  follows the
same accounting policies in the preparation of interim reports.

         Results of  operations  for the  interim  periods  are not  necessarily
indicative of annual results.

         These interim  financial  statements  include the amounts of its wholly
owned subsidiary Glas-Aire Industries Ltd., to March 23, 2004. On March 24, 2004
the  Canadian  Operation  filed  Bankruptcy  with the  Supreme  Court of British
Columbia. On July 31,2004 Glas-Aire  Industries,  Inc.`s warehouse operation was
closed.  Glas-Aire Industries Group Ltd. and all inter-company  transactions and
accounts have been eliminated from the statements.

BANKRUPTCY

         On March 24,  2004,  the Supreme  Court of British  Columbia  (Case No.
L040758)  appointed KPMG Inc. as receiver over all the right, title and interest
of Glas-Aire Industries Ltd, the wholly owned subsidiary of Glas-Aire Industries
Group  Ltd  (the  "Corporation"),   property,  assets,  and  undertakings.   The
Corporation was in default of certain financial ratios in its banking facilities
agreement with HSBC as was indebted to HSBC Bank for approximately  $2.7 million
(Canadian).  The Corporation has entered into  forbearance  agreements with HSBC
while it attempted to restructure its debt;  however the  forbearance  agreement
expired on March 23, 2004 and HSBC

                                       6
<PAGE>

                         Glas-Aire Industries Group Ltd.
              Notes to Consolidated Condensed Financial Statements
                                  June 30, 2006
                                   (Unaudited)


1.    NATURE OF BUSINESS AND BASIS OF PRESENTATION (CONTINUED)

called the loans into default.  HSBC has security on the  Corporation's  assets,
however  the  assets  are  expected  to  yield   significantly   less  than  the
Corporation's  debt  and  is  expected  that  no  recovery  is  likely  for  the
Corporation's unsecured creditors.

          Craig  Grossman,   President  and  chief  Executive   Officer  of  the
Corporation  resigned as the sole officer and  director of Glas-Aire  Industries
Ltd Effective March 22, 2004.


2.  COMMON STOCK

         (a)      Authorized

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

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


         (b)      Issued and outstanding

                  2,711,213 Common shares

         On April 24, 2006 the company issued  2,440,000  shares of common stock
to management in lieu of the payment of their services.

         On April 24, 2006 the company  issued 236,772 shares of common stock in
connection  with  the  payment  of  legal  fees  is  connection  with  the  Bank
Settlement.

         On April 24, 2006 the company  issued  400,00 shares of common stock to
settle the incurred legal fees.

         On April 24, 2006 The company  issued  93,750 shares of common stock to
consideration For legal and other services rendered for the Company

         As of June 30,  2006,  the Company  had 110,000  options and 0 warrants
outstanding as well as 93,718 shares of treasury stock. The options and warrants
were  excluded  from  the   calculation  of  earning  per  share  due  to  their
antidilutive effect.


                                       7
<PAGE>

                         Glas-Aire Industries Group Ltd.
              Notes to Consolidated Condensed Financial Statements
                                  June 30, 2006
                                   (Unaudited)


3.  STOCK BASED COMPENSATION

        Stock options granted to  non-employees  are accounted for in accordance
with the fair value method  prescribed  in SFAS No. 123 using the  Black-Scholes
option-pricing  model.  There were no stock  options  granted  to  non-employees
during the period covered by these financial statements.

        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.  Stock  options  granted in tranches
(graded  vesting)  are  amortized  over the  respective  vesting  period of each
tranche.

        The Company does not plan to adopt the fair value  method of  accounting
for  stock-based  compensation  to employees.  Consequently,  related  pro-forma
information  as  required  under  SFAS  No.  123 has  been  disclosed  below  in
accordance with SFAS No. 148. To provide the required pro-forma information, the
Company estimates the fair value of each warrant and option granted at the grant
date using the Black-Scholes option-pricing model.


4.   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.

         At June 30, 2006 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, June 30, 2006 is as follows:


                                       8
<PAGE>

                         Glas-Aire Industries Group Ltd.
              Notes to Consolidated Condensed Financial Statements
                                  June 30, 2006
                                   (Unaudited)


4.   STOCK OPTIONS (CONTINUED)

                                                            Number of  Exercise
                                                             Options    Price
                                                          ----------------------
Granted - November 4, 2001; Expiring - November 3, 2006       60,000   $  1.00
Granted - April 1, 2003;  Expiring - March 31, 2008           50,000   $  0.75
                                                          ----------------------
                                                             110,000

         All 110,000 options are vested as of June 30, 2006.

         SFAS No. 123  requires  the  Company to provide  pro-forma  information
regarding net loss as if the  compensation  costs for the Company's stock option
grants  had been  determined  in  accordance  with the fair value  based  method
prescribed in SFAS No. 123. To provide the required pro-forma  information,  the
Company  estimates  the fair value of each stock option  granted to directors at
the grant date using the Black-Scholes  option-pricing  model. The fair value of
stock options granted on December 4, 2001 to directors was $0.53 per option. The
fair value of stock options  granted on April 1, 2003 to the directors was $0.07
per option.  The options were excluded from the calculation of earning per share
due to their antidilutive effect.


5.   GOING CONCERN

         The accompanying  financial statements have been prepared assuming that
the Company will continue as a going concern.  The Company  generated net losses
of $2,663,756 during the period from September 29, 1992 (inception) through June
30, 2006.  Also, on March 24, 2004 the Canadian  Operation filed Bankruptcy with
the Supreme Court of British  Columbia.  On July 31, 2004 Glas-Aire  Industries,
Inc.'s warehouse operation was closed.  These conditions raise substantial doubt
about the  Company's  ability to  continue  as a going  concern.  The  Company's
continuation  as a going  concern  is  dependent  on its  ability  to  meet  its
obligations, to obtain additional financing as may be required and ultimately to
attain  profitability.  The financial  statements do not include any adjustments
that might result from the outcome of this uncertainty.

         Management  plans to raise  additional  funds  through  debt or  equity
offerings.  Management  has yet to decide what type of offering the Company will
use or how much  capital the Company will rise.  There is no guarantee  that the
Company will be able to raise any capital through any type of offerings.

                                       9
<PAGE>


ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OPERATIONS

CHANGES IN RESULTS OF  OPERATIONS:  THREE MONTHS ENDED JUNE 30, 2006 COMPARED TO
THREE MONTHS ENDED JUNE 30, 2005

         General and  administrative  expenses  decreased by 56.63% from $49,820
for the three months ended June 30, 2005,  to $21,607 for the three months ended
June 30, 2006.  This decrease was  primarily  due to amounts,  (i) a decrease of
$48,800 in management  fees for two officers due to contract has been  cancelled
effective April 1, 2006 (ii) an increase of $27,193 in legal fee related to loan
guarantee from Glas-Aire Industries Group Ltd with HSBC and other services.

         Other  Income  increased by $50,000 for the three months ended June 30,
2006 was the result of a reversal of $50,000  accrued audit and accounting  fees
made in 2003 for the anticipated settlement of outstanding amounts.

         Interest expense increase was related to loan guarantee settlement with
HSBC.

SIX MONTHS ENDED JUNE 30, 2006 VS SIX MONTHS ENDED JUNE 30, 2005

         General and  administrative  expenses  decreased by 50.4% from $124,547
for the six months ended June 30, 2005, to $61,774 for the six months ended June
30,  2006.  This  decrease  was  primarily  due to (i) an increase in legal fees
related to loan  guarantee from  Glas-Aire  Industries  Group Ltd with HSBC, and
other  services,  (ii) a decrease in Management fees of $48,800 for two officers
due to cancellation of contracts effective April 1, 2006.

         Other  Income  increased  by $50,000 for the six months  ended June 30,
2006 was the result of a reversal of $50,000  accrued audit and accounting  fees
made in 2003 for the anticipated settlement of outstanding amounts.

         Interest expense increase was related to loan guarantee settlement with
HSBC.

CRITICAL 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.

                                       10
<PAGE>

FINANCIAL INSTRUMENTS

         The  Company's  financial  assets and  liabilities  consist of cash and
equivalents,  accrued  liabilities.  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,  approximate their carrying values due to the short-term
nature of these instruments.

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

         We  recognize  revenue on the sale of products at the time the products
are shipped to customers.

WARRANTY ACCRUAL

         The  Company  records  a  liability  for  estimated  costs  that may be
incurred  under its  warranties at the time that product  revenue is recognized.
The  Company  periodically  assesses  the  adequacy  of  its  recorded  warranty
liability and adjusts the amounts as necessary.

VALUATION OF LONG LIVED ASSETS

         The Company  evaluated  the future  recoverability  of its fixed assets
when events or changes in business  circumstances indicate that the carry amount
of the assets may not be fully recoverable.

FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS

         The Company conducts  business in both Canada and the United States and
uses the U.S. dollar as tits reporting  currency.  The function  currency of the
Canadian  subsidiary is the Canadian  dollar.  The  financial  statements of the
Canadian   subsidiary  have  been  translated  under  SFAS  No.  52.  Asset  and
liabilities are translated at the rate of exchange at the balance sheet date and
revenues and expenses are  translated  at the average  exchange  rate during the
year. The resulting  exchange gains and losses are shown as a separate component
of stockholders' equity.

                                       11
<PAGE>

         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
and 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.

NEW ACCOUNTING PRONOUNCEMENTS

         In April  2002,  the FASB  issued  SFAS No.  145,  "Rescission  of FASB
Statements No. 4, 44 and 64, Amendment of FASB No. 13 and Technical  Corrections
("SFAS No. 145"). Among other things,  SFAS No. 145 requires any gain or loss on
early extinguishments of debt to be included in income from continuing operation
instead of being  classified as an  extraordinary  item. SFAS No. 145 will be in
effect for fiscal  years  beginning  after May 15,  2002.  The  Company  did not
extinguish any debt during the year. Accordingly,  adoption of the new standards
did not have any effect on the Company's financial statements.

         Statement of Financial  Accounting  Standards No. 146,  "Accounting for
Costs  Associated  with Exit or Disposal  Activities"  provides  guidance on the
recognition  and  measurement of liabilities  for costs  associated with exit or
disposal  activities.  The provisions of this Statement are effective to exit or
disposal activities that are initiated after December 31, 2002

         In November 2002, the FASB issued FASB  interpretation  {"FIN") No. 45,
"Guarantor's  Accounting and Disclosure  Requirements for Guarantees,  Including
Indirect  Guarantees of Indebtedness of Others",  which addresses the accounting
for and  disclosure  of  guarantees.  FIN 45 requires a guarantor to recognize a
liability for the fair value of a guarantee at inception. The recognition of the
liability is required  even if it is not probable that payments will be required
under the  guarantee.  The  disclosure  requirement is effective for interim and
annual  financial   statement  ending  after  December  15,  2002.  The  initial
recognition and measurement  provisions are effective for all guarantees  within
the scope of FIN 45 issued or modified after December 31, 2002.

         FIN 46,  "Consolidation of Variable Interest  Entities",  clarifies the
application  of Accounting  Research  Bulletin No. 51,  "Consolidated  Financial
Statements",  to certain  entities  in which  equity  investors  do not have the
characteristics  of a controlling  financial  interest or do not have sufficient
equity at risk for the  entity to  finance  its  activities  without  additional
subordinated  financial  support  from  other  parties.  FIN  46  is  applicable
immediately for variable  interest  entities created after January 31, 2003. For
variable  interest entities created prior to January 31, 2003, the provisions of
FIN 46 are applicable no later than July 1, 2003.

         On May 15, 2003,  the Financial  Accounting  Standards  Board  ("FASB")
issued Statement of Financial  Accounting Standard ("SFAS") No. 150, "Accounting
for Certain Financial  Instruments with  Characteristics of both Liabilities and
Equity".  SFAS No. 150 changes the accounting for certain financial  instruments
that,  under  previous  guidance,  could be classified as equity or  "mezzanine"
equity,  by now requiring those  instruments to be classified as liabilities (or
assets in some  circumstances)  in the  balance  sheet.  Further,  SFAS No.  150
requires  disclosure  regarding the terms of those  instruments  and  settlement
alternatives.  SFAS No. 150 affects an entity's  classification of the following

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<PAGE>

freestanding  instruments:  a)  Mandatory  redeemable  instruments  b) Financial
instruments  to  repurchase  an entity's  own equity  instruments  c)  Financial
instruments embodying obligations that the issuer must or could choose to settle
by issuing a variable  number of its shares or other  equity  instruments  based
solely on (i) a fixed monetary amount known at inception or (ii) something other
than  changes  in its own equity  instruments  d) SFAS No. 150 does not apply to
features  embedded in a financial  instrument  that is not a  derivative  in its
entirety.  The guidance in SFAS No. 150 is generally effective for all financial
instruments  entered  into or  modified  after May 31,  2003,  and is  otherwise
effective at the beginning of the first interim period  beginning after June 15,
2003.

         The  implementation of this new standard did not have a material effect
on our consolidated financial statements

ITEM 3. CONTROLS AND PROCEDURES

         The Company's management, with the participation of the Company's Chief
Executive  Officer and Chief Financial  Officer,  evaluated the effectiveness of
the Company's  disclosure controls and procedures (as defined in Rules 13a-15(e)
and  15d-15(e)  under the  Securities  Exchange  Act of 1934,  as  amended  (the
"Exchange Act")) as of March 31, 2005.  Based on this evaluation,  the Company's
Chief Executive  Officer and Chief Financial Officer concluded that, as of March
31, 2005, the Company's  disclosure controls and procedures were (1) designed to
ensure that material  information  relating to the Company, is made known to the
Company's Chief Executive  Officer and Chief Financial  Officer by others within
the  Company,  particularly  during the  period in which  this  report was being
prepared and (2)  effective,  in that they  provide  reasonable  assurance  that
information required to be disclosed by the Company in the reports that it files
or  submits  under the  Exchange  Act is  recorded,  processed,  summarized  and
reported within the time periods specified in the SEC's rules and forms.



PART II.   OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

         We are involved in certain legal  proceedings,  claims and  litigation,
including those described below.  Further,  we may become involved in other such
proceedings in the future.  The results of legal proceedings cannot be predicted
with certainty. Except as otherwise indicated below, management does not believe
that we have potential  liability  related to any current legal  proceedings and
claims  that would have  material  adverse  effect on our  financial  condition,
liquidity or results of operations.

         DRAGON CAPITAL

         On August 8, 2003,  Dragon Capital,  LLC ("Dragon")  filed suit against
the Company in Denver District Court (Case No. 03CV6198). Dragon alleges that we
have  refused to pay a success fee in the amount of $59,000 in  connection  with
the  Company's  merger with Wonder Tool,  Inc. The  Claimant  alleges  breach of
contract  claim,  promissory  estoppel  and  unjust  enrichment  against  us. On
September 25, 2003, we filed our answer to the  Complaint.  Management  believes
this claim is entirely  without merit and intends to vigorously  defend  against
this claim.

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ITEMS 2, 3 AND 4 ARE NOT APPLICABLE.

ITEM 5. OTHER INFORMATION

         None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

         a)       Exhibits:

                  31.1 Section 302 Certification

                  32.1 Section 906 Certification

         b)       Reports Filed on Form 8-K.

         A report for Entry into a Definitive Agreement was filed on Form 8-K on
May 18, 2006 to disclose the Letter of Intent for reverse  merger with a private
company.

         Glas-Aire Industries Group, Ltd.  ("Glas-Aire") recently entered into a
Letter of Intent with Pacific Environmental Sampling, Inc., a private California
corporation  ("ESP"),  pursuant to which Glas-Aire has agreed to acquire 100% of
ESP's  outstanding  capital  stock.  The  Letter  of Intent  is  subject  to the
execution  of a  definitive  stock  purchase  agreement.  ESP is  engaged in the
business of conducting indoor air quality  inspection tests and moisture surveys
to detect  mold and other  toxins in homes and  commercial  establishments,  and
preparing  certified  reports.  ESP also sells  franchises to other assessors to
conduct the same  business.  Glas-Aire  will acquire ESP's stock in exchange for
ESP's purchase of 14,625,000 shares of Glas-Aire's  common stock,  approximately
90.1%  of  Glas-Aire's  outstanding  stock  at the  closing,  as well  as  ESP's
assumption  of certain  liabilities  of Glas-Aire,  and certain other  covenants
between the parties.

         A Report  on 8K filed on  August  22,  2006  disclosed  the  change  in
Registrant's Certifying Accountant:

         (a)  Dismissal of Previous Independent Accountants.

              Effective  April  14,  2006,   Glas-Aire   Industries   Group  Ltd
              ("Company")  dismissed Dale Matheson Carr-Hilton LaBonte Chartered
              Accounts as its independent public accountants. The Company's sole
              director   approved   this   decision  to  dismiss  Dale  Matheson
              Carr-Hilton La Bonte.

         (b)  Engagement of New Independent Accountants.

              On August 8, 2006 the Company engaged Chang G. Park, CPA Chartered
              Accounts as its new independent accountants.



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                                   SIGNATURES

         Pursuant to the  requirements  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.

Date: August 18, 2006

                                GLAS-AIRE INDUSTRIES GROUP LTD.

                                /s/Craig Grossman
                                --------------------------------------------
                                Craig Grossman
                                President, Chief Executive Officer and Secretary

                                /s/Linda Kwan
                                --------------------------------------
                                Linda Kwan
                                Chief Financial Officer

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


By:  \s\ Craig Grossman                                Dated: August 18, 2006
    ---------------------------------------------------
      Craig Grossman, Chairman of the Board,
      Chief Executive Officer, President,
      and Secretary (Principal Executive Officer)

By:  \s\ Linda Kwan                                    Dated: August 18, 2006
    ---------------------------------------------------
      Linda Kwan, Chief Financial Officer
      (Principal Financial/Accounting Officer)


















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