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 September 30, 2004
                ------------------------------------------------


[ ]  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 2,711,213 shares, not including 93,718
shares of treasury stock held by the Company as of September 30, 2004.

         Transitional Small Business Disclosure Format

        Yes_______        No___X____


<PAGE>


                         Glas-Aire Industries Group Ltd.

                                      INDEX

<TABLE>
<CAPTION>
<S>                                                                                                          <C>
PART I.  FINANCIAL INFORMATION                                                                               PAGE

         Item 1.  Financial Statements                                                                         1

         Consolidated Condensed Balance Sheets
         September 30, 2004 and December 31, 2003 (Unaudited)                                                  1

         Consolidated  Condensed  Statements of Operations  For the three months
         ended September 30, 2004 and 2003 and
         the nine months ended September 30, 2004 and 2003 (Unaudited)                                         2

         Consolidated Condensed Statement of Stockholders' Equity
         For the nine months ended September 30, 2004 (Unaudited)                                              3

         Consolidated  Condensed  Statements of Comprehensive  (Loss) Income For
         the three months ended September 30, 2004 and 2003
         and the nine months ended September 30, 2004 and 2003 (unaudited)                                     4

         Consolidated Condensed Statements of Cash Flows
         For the nine months ended September 30, 2004 and 2003 (Unaudited)                                     5

         Notes to Consolidated Condensed Financial Statements (Unaudited)                                      7-14

         Forward Looking Statements                                                                           15

         Item 2.  Management's Discussion and Analysis of
                  Financial Condition and Results of Operations                                               15-20

         Item 3.  Controls and Procedures                                                                     20

PART II.  OTHER INFORMATION                                                                                   19

         Item 1.  Legal Proceedings                                                                           21

         Item 2.  Changes in Securities                                                                       21

         Item 3.  Defaults Upon Senior Securities                                                             21

         Item 4.  Submission of Matters to a Vote of Security Holders                                         21

         Item 5.  Other Information                                                                           21

         Item 6.  Exhibits and Reports on Form 8-K                                                            22

SIGNATURES                                                                                                    23
</TABLE>

<PAGE>


                         Glas Aire Industries Group Ltd.
                      Consolidated Condensed Balance Sheets

<TABLE>
<CAPTION>
                                                                    September 30,            December 31,
                                                                         2004                    2003
                                                                    (Unaudited)               (Unaudited)
                                                                    ----------------     ------------------
Assets
Current
<S>                                                                 <C>                  <C>
     Cash                                                           $     80,852         $               0
     Accounts receivable, net of allowance
        for doubtful accounts of $0 (2003-$4,215)                         48,986                 1,087,660
     Note receivable                                                           0                         0
     Inventories                                                               0                 1,264,126
     Income taxes refundable                                                   0                    68,543
     Prepaid expenses                                                          0                    60,617
     Deferred income taxes                                               196,011                   196,011
                                                                    ----------------     ------------------
                                                                         325,849                 2,676,957

Property, plant and equipment, net                                             0                 2,258,437
Net assets held for sale                                                       0                         0
                                                                    ----------------     ------------------
                                                                    $    325,849         $       4,935,394
                                                                    ================     ==================

Liabilities and Stockholders' Equity
Liabilities
Current
     Bank indebtedness                                              $          0         $       1,645,421
     Accounts payable                                                        616                 2,330,440
     Accrued liabilities                                                 104,723                   831,202
     Income taxes payable                                                 35,500                         0
     Current portion - long-term debt                                          0                   317,958
     Current portion - capital lease                                           0                    35,081
                                                                    ----------------     ------------------
                                                                         140,939                 5,160,102
Obligation under capital lease                                                 0                    19,711
Deferred income taxes                                                    158,151                   234,783
Net liabilities held for sale                                                  0                         0
                                                                    ----------------     ------------------
                                                                         298,990                 5,414,596
                                                                    ----------------     ------------------
Stockholders' equity
     Common stock                                                         27,112                    27,112
     Additional paid-in capital                                        1,549,313                 1,549,313
     Deferred compensation                                                     0                         0
     Accumulated Deficit                                              (2,201,887)               (2,482,138)
     Accumulated other comprehensive income
       Foreign currency translation adjustment                           652,321                   426,511
                                                                    ----------------     ------------------
                                                                          26,859                  (479,202)
                                                                    ----------------     ------------------
                                                                    $    325,849         $       4,935,394
                                                                    ================     ==================
</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                   Nine Months Ended
                                                       ---------------------------------------  ---------------------------------
                                                       September 30,           September 30,     September 30,      September 30,
                                                            2004                    2003             2004                2003
                                                        ------------            -------------   ----------------   --------------
<S>                                                     <C>                     <C>             <C>                <C>
Sales                                                   $      483              $2,234,453      $   1,637,754      $  8,845,158
Cost of sales                                               18,736               1,658,187          1,469,250         6,699,498
                                                        ------------            -------------   ----------------   --------------
Gross profit                                               (18,253)                576,266            168,504         2,145,660
                                                        ------------            -------------   ----------------   --------------
Expenses
     Depreciation                                               0                   77,707             97,641           218,401
     Research and development                                                      110,932             71,857           433,657
     Selling and distribution                                                      180,519             61,474           818,531
     General and administrative                            86,498                  258,085            307,705           790,558
     Loss on write-down of note receivable                      0                   75,000                  0            75,000
     Foreign exchange (gain) loss                               0                  (43,654)           (18,371)          444,109
     Interest income                                            0                   (4,725)              (712)           (4,807)
     Interest expense                                           0                   49,671             31,451           111,772
                                                        ------------            -------------   ----------------   --------------
                                                           86,498                  703,535            551,045         2,887,221

Loss from continuing operations before
     Income taxes                                        (104,751)                (127,269)          (382,541)         (741,561)
     Income taxes - recovery                                    0                   (5,771)                 0           (96,388)
                                                        ------------            -------------   ----------------   --------------

Loss from continuing operations                          (104,751)                (121,498)          (382,541)         (645,173)
Gain on disposition of operations                            (739)                                    662,792
Gain on disposition of discontinued operations                  -                        -                              520,859
                                                        ------------            -------------   ----------------   --------------
Net loss for the period                                 $(105,490)             $  (121,498)     $     280,251      $   (124,314)
                                                        ============           ==============   ================   ==============

Earnings (loss) per share basic and diluted from
     Continuing operations                              $   (0.04)             $     (0.05)     $        0.10      $      (0.25)
     Discontinued operations                                    -                                                          0.20
                                                        ------------            -------------   ----------------   --------------
                                                        $   (0.04)             $     (0.05)     $        0.10      $      (0.05)
                                                        ============           ==============   ================   ==============

Weighted average common shares outstanding
(Basic and diluted - after deducting 93,718
shares of treasury stock  held by the Company)          2,711,213                2,664,918          2,711,213         2,580,930
                                                        ============           ==============   ================   ==============
</TABLE>



           See accompanying notes to consolidated financial statements
                                       2

<PAGE>

                         Glas Aire Industries Group Ltd.
            Consolidated Condensed Statement of Stockholders' Equity
                      Nine Months Ended September 30, 2004
                                   (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, 2003       2,711,213     $27,112    $1,549,313                -       $ (2,482,138)         $426,511     $(479,202)
--------------------- -------------- ------------ --------------- ---------------- --------------- ----------------- ---------------
 Net loss                         -           -             -                -            280,251                 -       280,251
--------------------- -------------- ------------ --------------- ---------------- --------------- ----------------- ---------------
 Deferred compensation            -           -             -
--------------------- -------------- ------------ --------------- ---------------- --------------- ----------------- ---------------
 Shares issued                                                                                  -                 -
--------------------- -------------- ------------ --------------- ---------------- --------------- ----------------- ---------------
 Foreign currency                 -           -             -                -                  -           225,810       225,810
 translation
 adjustment
--------------------- -------------- ------------ --------------- ---------------- --------------- ----------------- ---------------
 Balance -
  September  30, 2004     2,711,213     $27,112    $1,549,313               $-       $ (2,201,887)         $652,321     $  26,859
--------------------- -------------- ------------ --------------- ---------------- --------------- ----------------- ---------------
</TABLE>











          See accompanying notes to consolidated financial statements

                                       3
<PAGE>


                         Glas Aire Industries Group Ltd.
        Consolidated Condensed Statements of Comprehensive (Loss) Income
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                 Three months ended                       Nine months ended
                                                      ----------------------------------------- ------------------------------------
                                                             September 30,       September 30,     September 30,      September 30,
                                                                  2004                2003              2004               2003
                                                      --------------------- ------------------- ----------------- -----------------
<S>                                                       <C>                   <C>               <C>               <C>
Net loss                                                  $      (105,490)      $    (121,498)    $     280,251     $     (124,314)
Foreign currency translation adjustment                              (222)             (1,725)          225,810            272,489
                                                      --------------------- ------------------- ----------------- ------------------
Comprehensive income (loss)                               $      (105,712)      $    (123,223)    $     506,061     $      148,175
                                                      ===================== =================== ================= ==================
</TABLE>








                 See accompanying notes to financial statements
                                       4

<PAGE>


                         Glas Aire Industries Group Ltd
                 Consolidated Condensed Statements of Cash Flows
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                         Nine Months Ended
                                                                          September 30,                     September 30,
                                                                               2004                             2003
                                                                         ---------------                    --------------
Cash flows from:
Operating activities
<S>                                                                        <C>                              <C>
     Net loss for the period from continuing operations                    $   280,251                      $  (645,173)
     Depreciation                                                               97,641                          218,401
     Deferred income taxes                                                     (76,632)
     Deferred stock warrant compensation amortized                                   0                           25,977
     Unrealized foreign exchange loss                                                0                          168,616
     Stock issued for directors' services                                            0                           30,000
     Loss on write-down of note receivable                                           0                           75,000
(Increase) decrease in assets
     Accounts receivable                                                     1,038,674                        (127,735)
     Inventories                                                             1,264,126                         (81,455)
     Income taxes recoverable                                                   68,543
     Prepaid expenses                                                           60,617                          27,476
Increase (decrease) in liabilities
     Accounts payable                                                       (2,329,824)                        237,785
     Accrued liabilities                                                      (726,479)                       (169,150)
     Income taxes payable                                                       35,500                          75,875
                                                                         ---------------                    --------------
        Net cash used in operating activities                                 (287,583)                       (164,383)
         From continuing operations
Cash flows from discontinued operations                                              -                               0
                                                                         ---------------                    --------------
 Net cash used in operating activities                                        (287,583)                       (164,383)
                                                                         ---------------                    --------------
Financing activities
     Proceeds on issuance of shares                                                  0                           1,700
     Increase in long-term debt                                                      0                               0
     Repayment of capital lease obligation                                     (54,792)                        (33,608)
     Repayment of long-term debt                                              (317,958)                       (486,778)
     Increase in bank indebtedness                                          (1,645,421)                        259,147
                                                                         ---------------                    --------------
          Net cash (used in) provided by financing activities               (2,018,171)                       (259,539)
                                                                         ---------------                    --------------
Investing activities
     Cash proceeds on disposal of Orbital Polishing Division                         0                         631,162
     Disposal of fixed assets                                                2,160,796
     Purchase of equipment                                                           0                        (234,574)
                                                                         ---------------                    --------------
     Net cash provided by (used in) investing activities                     2,160,796                         396,588
                                                                         ---------------                    --------------
Foreign currency translation adjustment
      effect on cash balances                                                  225,810                          46,079
                                                                         ---------------                    --------------
Increase (decrease) in cash                                                     80,852                          18,745
Cash, beginning of period                                                            0                               0
                                                                         ---------------                    --------------
Cash, end of period                                                       $     80,852                       $  18,745
                                                                         ===============                    ==============
</TABLE>

                 See accompanying notes to financial statements

                                       5
<PAGE>


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

<TABLE>
<CAPTION>
                                                                               Nine months ended
                                                           ---------------------------------------------------------------
                                                                  September  30,               September 30,
                                                                       2004                        2003
                                                           ---------------------------------------------------------------
Supplemental disclosure of cash flow relating to:

<S>                                                                   <C>                       <C>
     Interest paid                                                    $   31,451                $    111,772

     Income taxes paid                                                $        0                $          0


Non - cash investing and financing activities

     Note receivable on sale of Orbital Polishing                     $        0                $    200,000

     Common Stock issued for directors' services                               0                $     30,000


Stock warrant compensation,                                           $        0                $          0

</TABLE>


















                 See accompanying notes to financial statements

                                       6
<PAGE>
                         Glas Aire Industries Group Ltd.
              Notes to Consolidated Condensed Financial Statements
                               September 30, 2004
                                   (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.  These interim financial
statements in conjunction with the unaudited financial statements of the Company
for the years ended December 31, 2003 and audited 2002 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.

The  interim  financial  statements  include  the  amounts  of its  wholly-owned
subsidiary Glas-Aire Industries Ltd. Effective June 30, 2003, the Company merged
Wonder Tool,  Inc.,  Glas-Aire  Industries,  Inc.,  consisting of all the United
States subsidiaries into Glas-Aire  Industries Group, Ltd. Also,  effective June
30, 2003,  the Company wound up Glas-Aire  Industries  Ltd. and 326362 B.C. Ltd.
into Multicorp  Holdings Inc. Multicorp Holdings Inc. was then renamed Glas-Aire
Industries Ltd.

These  interim  financial  statements  include the  amounts of its wholly  owned
subsidiary  GlasAire  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.

                                       7

<PAGE>
                         Glas Aire Industries Group Ltd.
              Notes to Consolidated Condensed Financial Statements
                               September 30, 2004
                                   (Unaudited)


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

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  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. INVENTORIES BY COMPONENT ARE AS FOLLOWS:

                                             September 30,        December 31,
                                                 2004                 2003
                                           ------------------- -----------------

              Raw materials                          $0               $  926,797
              Work-in-progress                        0                  329,134
              Finished goods                          0                  227,499
                                           ------------------- -----------------
                                                     $0               $1,483,430
                                           =================== =================


3.  BANK INDEBTEDNESS AND LONG TERM DEBT

The Company's banking facilities  agreement contains covenants that, among other
things,   require  the  maintenance  of  certain   financial  ratios  (including
compliance with certain working capital and debt-to-equity  ratios), and failure
to maintain these financial ratios could lead to the revocation of these banking
facilities.  On December 16, 2003 HSBC (the lender) called the loan into default
as the  Company  was  deemed to be in  violation  of  certain  of the  covenants
contained in the facilities  agreement.  On January 5, 2004 the Company  entered
into a forbearance agreement with HSBC to attempt to restructure its debt within
the next 3 months.  However the forbearance agreement expired on March 23, 2004.
On March 24, 2004 the Supreme Court of British Columbia (Case No. L040758)

                                       8
<PAGE>

                         Glas Aire Industries Group Ltd.
              Notes to Consolidated Condensed Financial Statements
                               September 30, 2004
                                   (Unaudited)

3.  BANK INDEBTEDNESS AND LONG TERM DEBT (CONTINUED)

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 undertaking. 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).


4. WARRANTY ACCRUAL

      Changes in the  Company's  warranty  liability  during the periods were as
follows:

                                                    Nine months ended
                                            ------------------------------------
                                              September 30,       September 30,
                                                 2004                2003
                                           ------------------ ------------------

Balance, beginning of period                     $229,940            $113,284
Warranty expense                                   34,664             453,715
Settlements made                                 (264,604)           (455,141)
                                           ------------------ ------------------

Balance, end of period                                 $0            $111,858
                                           ================== ==================

5.  COMMON STOCK

On April 12, 2003 and August 12,  2003,  the  company  issued  85,000  shares of
common stock  respectively  from the  exercise of warrants,  at a price of $0.01
each.

On April 1, 2003 the Company granted 50,000 common stock options at the exercise
price of $0.75 to the directors in accordance  with the director's  compensation
program  approved by the  stockholders.  The options vested on April 1, 2003 and
are exercisable to March 31, 2008.

On July 18, 2003,  the Company  issued  40,542 shares of common stock (valued at
$30,000 based upon the trading price of the common stock around the dates of the
respective  agreement)  to the directors as part of their  compensation  for the
fiscal year ended December 31, 2002.

As of  September  30,  2004 the  Company  had  230,000  options  and 0  warrants
outstanding and 93,718 shares of treasury  stock.  The options and warrants were
excluded from the  calculation  of earnings per share due to their  antidilutive
effect.

                                       9
<PAGE>

                         Glas Aire Industries Group Ltd.
              Notes to Consolidated Condensed Financial Statements
                               September 30, 2004
                                   (Unaudited)

6.  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 require 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.

The pro-forma  results set out below are based on the following  assumptions for
the warrants: No dividends,  risk-free interest rate of 3.47%, volatility factor
of the  expected  market  price  of the  Company's  common  stock of 137% and an
estimated  weighted average expected life of the warrants of 24 months. The fair
value of warrants  granted on April 12, 2002 to the  Company's  Chief  Executive
Officer and President was $0.33 per warrant.

The pro-forma  results set out below are based on the following  assumptions for
the options: No dividends,  risk-free interest rate of 1.65%,  volatility factor
of the  expected  market  price  of the  Company's  common  stock of 137% and an
estimated  weighted average expected life of the options of 24 months.  The fair
value of stock  options  granted on April 1, 2003 to the directors was $0.07 per
option.

<TABLE>
<CAPTION>
                                                                            Three months ended       Nine months ended
                                                                         ------------------------ -------------------------
                                                                              September 30,            September 30,
                                                                                  2004                      2004
                                                                        ------------------------ -------------------------

<S>                                                                                 <C>                       <C>
    Net income (loss), as reported                                                  $(105,490)                $ 280,251
    Add:  stock-based  compensation  expense  included in reported  net
    income                                                                                  0                         0
    Deduct:  total stock-based  compensation  expense  determined under
    fair-value based method                                                                 0                         0
                                                                         ------------------------ -------------------------
    Net loss, pro-forma                                                             $(105,490)                $ 280,251
                                                                         ======================== =========================

    Income (loss)  per share
           - basic and diluted - as reported                                        $   (0.04)                $    0.10
           - basic and diluted - pro-forma                                          $   (0.04)                $    0.10

</TABLE>

                                       10
<PAGE>

                         Glas Aire Industries Group Ltd.
              Notes to Consolidated Condensed Financial Statements
                               September 30, 2004
                                   (Unaudited)

7.   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 September  30, 2004 and  December 31, 2003 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 September 30,
2004 is as follows:

7.   STOCK OPTIONS (CONTINUED)
                                                            Number of  Exercise
                                                             Options    Price
                                                            --------------------

Granted - November 4, 1999; Expiring - November 3, 2004       60,000   $    4.50
Granted - November 4, 2000; Expiring - November 3, 2005       60,000   $    2.75
Granted - November 4, 2001; Expiring - November 3, 2006       60,000   $    1.00
Granted - April 1, 2003: Expiring - March 31, 2008            50,000   $    0.75
                                                            --------------------
                                                             230,000

All 230,00 options are vested as of September 30, 2004.  The options  granted on
December 4, 2001 vested in May 2002.

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

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 pro-forma  results are set out in the
Summary of  Significant  Accounting  Policies,  base on the  following  weighted
average assumptions: no dividends,  risk-free interest rate of 3.03%, volatility
of the trading price of the Company's common stock of

                                       11
<PAGE>

                         Glas Aire Industries Group Ltd.
              Notes to Consolidated Condensed Financial Statements
                               September 30, 2004
                                   (Unaudited)

100% and a  weighted  average  expected  life of the stock  options  granted  to
directors of 24 months.  The fair value of stock options  granted on December 4,
2001 to directors was $0.53 per option.

8. SEGMENTED INFORMATION

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

<TABLE>
<CAPTION>
                                                        Three months ended                      Nine months ended
                                              --------------------------------------- --------------------------------------
                                                   September 30,       September 30,       September 30,  September 30,
                                                      2004                2003                2004               2003
                                              ------------------- ------------------- ------------------- ------------------
<S>                                                         <C>           <C>                 <C>                <C>
        United States                                       $483          $2,002,264          $1,577,917         $8,041,688
        Canada                                                 0             223,000              57,413            775,720
        Japan and other                                        0               9,189               2,424             27,750
                                              ------------------- ------------------- ------------------- ------------------
                                                            $483          $2,234,453          $1,637,754         $8,845,158
                                              =================== =================== =================== ==================
</TABLE>

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

<TABLE>
<CAPTION>
                                                        Three months ended                      Nine months ended
                                              --------------------------------------- --------------------------------------
                                                   September 30,       September 30,       September 30,  September 30,
                                                      2004                2003                2004               2003
                                              ------------------- ------------------- ------------------- ------------------
<S>                                                           <C>          <C>                  <C>              <C>
        Nissan North America, Inc.                            $0           $ 442,655            $449,744         $2,309,390
        Honda Access America, Inc.                             0             591,093             504,449          2,393,821
        General Motors                                         0             662,164                              2,265,130
        Toyota USA                                             0             225,874             217,336            667,671
                                              ------------------- ------------------- ------------------- ------------------
                                                              $0          $1,921,786          $1,171,529         $7,636,012
                                              =================== =================== =================== ==================
</TABLE>

         (d) Sales  figures are  comprised  of sales in the  following  products
lines:

<TABLE>
<CAPTION>
                                                        Three months ended                      Nine months ended
                                              --------------------------------------- --------------------------------------
                                                   September 30,       September 30,       September 30,  September 30,
                                                       2004                2003                2004               2003
                                              ------------------- ------------------- ------------------- ------------------

<S>                                                         <C>           <C>                 <C>                <C>
        Sunroof                                             $483          $1,155,629          $1,086,523         $5,212,840
        Hood protectors                                        0             941,999             401,494          2,790,325
        Rear air deflectors                                    0              96,183              93,754            632,152
        Door visors                                            0              40,642              55,983            209,841
                                              ------------------- ------------------- ------------------- ------------------
                                                            $483          $2,234,453          $1,637,754         $8,845,158
                                              =================== =================== =================== ==================
</TABLE>

                                       12
<PAGE>

                         Glas Aire Industries Group Ltd.
              Notes to Consolidated Condensed Financial Statements
                               September 30, 2004
                                   (Unaudited)

9. COMMITMENTS

The  Canadian  operation  filed  Bankruptcy  on March 24,  2004.  There  were no
commitments for operating lease.

The Company is committed to minimum  lease  payments  totaling  $176,636 for the
next two year with a five year renewal option,  under an operating lease for its
former premises. As the Company is no longer using these premises, the remaining
future  commitment  was fully  expensed in 2002 in the amount of $253,696  which
includes an estimate of common area  expenses and  property tax of $77,060.  The
Company's  monthly  lease  payment  including  its share of common area costs is
approximately  $12,000 per month until expiry in September  2004.  On October 6,
2003 the Landlord  agreed to accept the surrender of the Lease together with the
sum of  $125,000  in five  installments  as  settlement  for the  release of the
Company's obligation under the term of the Lease agreement.

The Company entered into an operating  lease agreement for its current  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 fee.
The Company is committed to the minimum annual lease payments plus proportionate
common area costs in respect of its new premises

The  Company  entered  into an  employment  agreement  with its Chief  Executive
Officer and President  effective  January 1, 2002 and to terminate  December 31,
2005 unless terminated earlier by the Company or the Chief Executive Officer and
President.  The employment agreement is automatically renewable for three years.
The  employment  agreement  provides an annual salary of $213,000 plus an annual
bonus of 10% of the  increase  in net  shareholders'  equity  from the  previous
fiscal year excluding any increase  resulting  from the issue of shares.  If the
Chief Executive  Office and President is terminated for other than just cause or
is  disabled  and unable to perform  has  duties,  he is entitled to a severance
payment up to 18 months of his compensation.

On September 3, 2003 ALC Holdings,  LLC acquired 53.8% of the outstanding shares
of Glas-Aire  Industries  Group Ltd's common stock. Mr.  Grossman's  employments
agreements  with the company and his  outstanding  85,000  shares  warrant  were
cancelled. Mr. Grossman is one of the owners of ALC Holdings, LLC.

10.   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
$2,201,887  during  the period  from  September  29,  1992  (inception)  through
September  30,  2004.  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

                                       13
<PAGE>

                         Glas Aire Industries Group Ltd.
              Notes to Consolidated Condensed Financial Statements
                               September 30, 2004
                                   (Unaudited)

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.

11. SUBSEQUENT EVENT

The Company's  directors had held the meeting on April 24, 2006 and approved the
following issuance of shares.

The Company decided to issue 1,220,000  shares of the Company's  common stock to
Craig Grossman and 1,220,000  shares of the Company's common stock to Linda Kwan
in lieu of the payment of their services.  The Company has accrued  compensation
to Craig Grossman and Linda Kwan in the amount of approximately $122,000 each.

The Company  decided to issue  44,800  shares of the  Company's  common stock to
Craig Grossman and 191,972 shares of the Company's common stock to Linda Kwan in
connection  with the  payment  of their  personal  funds  paid for legal fees is
connection with the Bank Settlement.

The Company decided to issue  Schlueter & Associates,  P.C. (S&A) or its assigns
400,000  shares of the Company's  common stock to settle the incurred legal fees
to S&A.

The  Company  decided to issue Mark J.  Richardson,  Esq.  93,750  shares of the
Company's  common stock to consideration  for legal and other services  rendered
for the Company.


                                       14

<PAGE>


FORWARD-LOOKING STATEMENTS

         This Form 10-QSB contains certain forward-looking statements within the
meaning of Section 27A of the  Securities  Act of 1933, as amended,  and Section
21E of the Securities Exchange Act of 1934, as amended,  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 our
products  and  future  economic  performance.   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 we will continue in business as a "going concern," that we will continue to
develop, market and ship products on a timely basis, that competitive conditions
within the  automotive  industry will not change  materially or adversely,  that
demand  for our  products  will  remain  strong,  that we will  retain  existing
customers  and key  management  personnel,  that our forecasts  will  accurately
anticipate  market  demand,  that our bank will  continue to provide our various
credit  facilities and loans,  and that there will be no material adverse change
in our  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  our  control.
Although we believe 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,  our  business and  operations  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.

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

CHANGES IN RESULTS OF OPERATIONS: THREE MONTHS ENDED SEPTEMBER 30, 2004 COMPARED
TO THREE MONTHS ENDED SEPTEMBER 30, 2003

         The Company's  sales  decreased by 99.98% from $2,234,453 for the three
months ended September 30, 2003 to $483 for the three months ended September 30,
2004. The decrease was mainly the result of the Canadian  operation's filing for
bankruptcy on March 24, 2004 and ceasing its operation after that date.

         Gross profit  margins,  expressed as a percentage  of sales,  decreased
from 25.79% for the three months ended September 30, 2003, to (3779.09%) for the
three months ended September 30, 2004. This net decrease was due to the Canadian
operation's  filing for  bankruptcy  on March 24, 2004 and ceasing its operation
after that date.

         Depreciation  expense  decreased 100% from $77,707 for the three months
ended  September 30, 2003, to $0 for the three months ended  September 30, 2004.
The primary reason for this decrease was due to the Canadian  operation's filing
for bankruptcy on March 24, 2004 and ceasing its operation after that date.

                                       15
<PAGE>

         Expenses for research and  development  decreased by 100% from $110,932
for the three months ended  September  30, 2003 to $0 for the three months ended
September 30, 2004. This decrease was due to the Canadian operation's filing for
bankruptcy on March 24, 2004 and ceasing its operation after that date.

         Selling and distribution  expenses decreased by 100%, from $180,519 for
the three months  ended  September  30,  2003,  to $0 for the three months ended
September 30, 2004. This decrease was due to the Canadian operation's filing for
bankruptcy on March 24, 2004 and ceasing its operation after that date.

         General and  administrative  expenses decreased by 66.48% from $258,085
for the three months ended  September  30, 2003, to $86,498 for the three months
ended  September  30, 2004.  This decrease was primarily due to (i) the Canadian
operation's  filing for  bankruptcy  on March 24, 2004 and ceasing its operation
after that date (ii) a decrease in legal, consulting and accounting fees related
to the quarterly reports.

         The note receivable from the sale of the Orbital  Polishing  Operations
was written down by $75,000 in September 30, 2003.

         Foreign exchange gain for the three months ended September 30, 2003 was
$43,654  compared to $0 for the three months  ended  September  30,  2004.  This
decrease was result of the Canadian  operation's  filing for bankruptcy on March
24, 2004 and ceasing its operation after that date.

         Interest  expense  decreased  by 100% from $49,671 for the three months
ended  September 30, 2003, to $0 for the three months ended  September 30, 2004.
This was the result of the Canadian  operation's  filing for bankruptcy on March
24, 2004 and ceasing its operation after that date.

         There was a recovery  of income  taxes of $5,771  for the three  months
ended September 30, 2003 compared to $0 for the three months ended September 30,
2004. This was the result of the Canadian  operation's  filing for bankruptcy on
March 24, 2004 and ceasing its operation after that date.

         As a result  of these  factors,  our loss  from  continuing  operations
decreased by 13.18% from a loss of $121,498 for the three months ended September
30, 2003 as compared to a loss of $105,490 for the three months ended  September
30, 2003.

NINE MONTHS ENDED SEPTEMBER 30, 2004 VS NINE MONTHS ENDED SEPTEMBER 30, 2003

         The Company's  sales  decreased by 81.48% from  $8,845,158 for the nine
months  ended  September  30,  2003 to  $1,637,754  for the  nine  months  ended
September  30,  2004.  This  increase  was  primarily  due to (i)  the  Canadian
operation's  filing for  bankruptcy  on March 24, 2004 and ceasing its operation
after  that date (ii) a volume  decrease  in  Sunroof  wind  deflector  sales to
existing customers in the first quarter.

         The gross profit margins expressed as a percentage of sales,  decreased
from 24.26% for the nine months  period ended  September 30, 2003, to 10.29% for
the nine months period ended September 30, 2004. This net decrease was primarily
due to (i) the Canadian  operation's filing for bankruptcy on March 24, 2004 and
ceasing its  operation  after that date (ii) an  increase  in material  cost and
delivery charges for the replacement of products and (iii) an increase in direct
labor and overhead costs during the first quarter.

                                       16
<PAGE>

         Depreciation  expense  decreased  by 55.29% from  $218,401 for the nine
months  ended  September  30,  2003,  to $97,641 for the nine month period ended
September  30, 2004.  The primary  reasons for this decrease were due to (i) the
Canadian  operation's  filing for  bankruptcy  on March 24, 2004 and ceasing its
operation  after that date (ii) an increase in the  placement  of new  equipment
into service during the first quarter.

         Expenses for R&D  decreased by 83.43% from $433,657 for the nine months
ended  September  30, 2003 to $71,857 for the nine months  ended  September  30,
2004. This decrease was result of the Canadian operation's filing for bankruptcy
on March 24, 2004 and ceasing its operation after that date

         Selling and distribution  expenses  decreased by 92.49%,  from $818,531
for the nine months ended  September  30,  2003,  to $61,474 for the nine months
ended  September  30, 2004.  This increase was primarily due to (i) the Canadian
operation's  filing for  bankruptcy  on March 24, 2004 and ceasing its operation
after that date (ii) a  decrease  in  commission  expenses  associated  with the
decrease in sales,  (iii) a decrease in warranty expenses and (iv) a decrease in
consulting fees related to the Company's marketing efforts in Japan.

         General and  administrative  expenses decreased by 61.08% from $790,558
for the nine months ended  September  30, 2003,  to $307,705 for the nine months
ended  September  30, 2004.  This decrease was primarily due to (i) the Canadian
operation's  filing for  bankruptcy  on March 24, 2004 and ceasing its operation
after  that date (ii) a decrease  in legal and  accounting  fees  related to the
preparation  of  quarterly  and  annual  reports,  (iii) an  increase  in legal,
consulting,  and accounting  services related to the forbearance  agreement with
HSBC to attempt to  restructure  its debt.  However  the  forbearance  agreement
expired on March 23, 2004.

         The note receivable from the sale of the Orbital  Polishing  Operations
was written down by $75,000 in September 30, 2003.

         Foreign  exchange loss was $444,109 for the nine months ended September
30,  2003  compared  to a foreign  exchange  gain of $86,920 for the nine months
ended  September 30, 2004. This Foreign  exchange's  variation was primarily the
result from US dollar  denominated  accounts  receivable and amounts due between
our company and our  subsidiary.  The effect of this  variation  in the exchange
rate between the US dollar and the Canadian dollar (our functional currency) was
based on the respective transaction dates and the period end dates reflecting in
a  foreign  exchange  gain or loss,  and the  Canadian  operation's  filing  for
bankruptcy  on March 24,  2004 and ceasing  its  operation  after that date also
contributed to this variation.

         Interest expense  decreased by 71.86% from $111,772 for the nine months
ended  September  30, 2003,  to $31,451 for the nine months ended  September 30,
2004. This was the result of the Canadian  operation's  filing for bankruptcy on
March 24, 2004 and ceasing its operation after that date.

         Recovery  of  income  taxes  was  $96,388  for the  nine  months  ended
September 30, 2003 compared to $0 for the nine months ended  September 30, 2004.
This was the result of the Canadian  operation's  filing for bankruptcy on March
24, 2004 and ceasing its operation after that date.

         As a result of these factors net loss from  continuing  operations  for
the nine months  ended  September  30, 2003 was  $645,173  compared to a loss of
$382,541 for the nine months ended September 30, 2004. This decrease in loss was

                                       17
<PAGE>

primarily due to (i) the Canadian operation's filing for bankruptcy on March 24,
2004 and  ceasing  its  operation  after that date (ii) a decrease  in  warranty
claims, and (iii) a decrease loss on foreign currency exchange.

         Gain on disposition of operations of $662,792 for the nine months ended
September 30, 2004. The Canadian  operation's filing for bankruptcy on March 24,
2004  resulted  in the  elimination  of all  assets  and  liabilities,  and bank
indebtedness, capital lease obligation and long-term debt.

         Gain on disposition of discontinued  operations  decrease  $520,859 for
the nine months  ended  September  30,  2004.  No  disposition  of  discontinued
operations occurred in 2004.

LIQUIDITY AND CAPITAL RESOURCES

         Cash used in operating  activities  for the period ended  September 30,
2004 was $287,583 compared to cash used in operating  activities of $164,383 for
the period ended  September 30, 2003.  The use of cash for the nine months ended
can  be  primarily  attributed  to  (i)  the  Canadian  operation's  filing  for
bankruptcy  and ceasing its operation on March 24, 2004,  (ii) an inflow of cash
of  $662,792  due to the  disposal  of assets and  liabilities  of the  Canadian
operation, (iii) fund loss of $382,541 from continuing operations.

         Cash used in financing  activities  for the period ended  September 30,
2004 was  $2,108,171  compared  to cash  provided  by  financing  activities  of
$259,539  for the  period  ended  September  30,  2003.  Cash used in  financing
activities  for the nine months  ended can be  primarily  attributed  to (i) the
Canadian  operation's  filing for  bankruptcy and ceasing its operation on March
24, 2004 (ii) the payment of long-term debt, and (iii) the write off of all bank
indebtedness, capital lease obligation and long-term debt.

         Cash  provided by  investing  activities  included  (i) the purchase of
fixed assets for the period ended September 30, 2003 of $234,574 compared to the
$0 purchase  of  equipment  in the period  ended  September  30,  2004,  (ii) an
increase  of  $2,160,796  in  disposal  of  fixed  assets  due to  the  Canadian
operation's  filing for  bankruptcy  and ceasing its operation on March 24, 2004
(iii) a decrease of $631,162 due to sales of the assets and  liabilities  of the
Orbital Polishing Operations which did not recur in 2004.

          During 2002,  we were in violation of certain  covenants  contained in
the banking facilities agreement.  Pursuant to GAAP, as a result of the covenant
breach  invoking  the bank's  right to call the  long-term  debt on demand,  the
long-term  debt has been  reclassified  as a  current  liability.  However,  the
Company  remains in close contact with its lenders and has never been in default
or breach of any payment and/or payment  schedule set forth in its original loan
agreements.

         The independent  auditors'  report  accompanying  our December 31, 2002
consolidated  financial  statements contain an explanatory  paragraph expressing
substantial  doubt about the Company's  ability to continue as a going  concern.
The  consolidated  financial  statements  have been prepared  "assuming that the
Company will continue as a going concern," which  contemplates  that the Company
will  realize its assets and  satisfy its  liabilities  and  commitments  in the
ordinary course of business.

                                       18
<PAGE>

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.

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.

REVENUE RECOGNITION

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

ALLOWANCE FOR DOUBTFUL ACCOUNTS

         The  Company  records  an  allowance  for  doubtful  accounts  based on
specifically  identifiable  amounts  that we  believe to be  uncollectible.  The
criteria for the  provision  allowance  include  historical  experience  and the
Company's  assessment of the general financial  conditions  affecting its client
base. If the Company's actual collections  experience changes,  revisions to the
allowance may be required.

RESEARCH AND DEVELOPMENT

         Research and development costs are expensed as incurred.

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  evaluates  the future  recoverability  of its fixed assets
when  events or changes in business  circumstances  indicate  that the  carrying
amount of the assets may not be fully recoverable.

                                       19
<PAGE>

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 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.

         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.

RECENT ACCOUNTING PRONOUNCEMENTS

         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
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 June 30, 2004.  Based on this  evaluation,  the Company's
Chief Executive  Officer and Chief Financial  Officer concluded that, as of June
30, 2004, 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.

                                       20
<PAGE>

                           PART II. OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

         We are involved in certain legal proceedings, claims and litigation. As
of the  date of the  filing  of this  Quarterly  Report,  there  has been no new
litigation  or new  developments  in any pending  litigation  that have not been
previously reported.

         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.

         CELCO PLASTICS, LTD. LITIGATION

         On July 31, 2002, we filed suit against Celco  Plastics Ltd.  ("Celco")
in the Supreme Court of British Columbia  (Action No.  SO24264).  We allege that
Celco,  our supplier of  extrusions in the form of gaskets,  supplied  defective
gaskets to us  commencing  in 2000.  We are alleging  breach of contract and the
negligent  manufacture of gaskets against Celco. We are seeking general damages,
special damages, interests and costs. Celco has commenced a counterclaim against
us for payment of  outstanding  invoices in the amount of CDN $32,521.24 as well
as general  damages,  special  damages,  interests  and costs.  We are currently
proceeding against Celco in this Litigation.

         UNIVERSAL DYNAMICS LIMITED LITIGATION

         On February 14, 2003,  Universal Dynamics Limited  ("Universal")  filed
suit against us in the Supreme Court of British  Columbia  (Action No. S024878).
The  statement  of  claim  alleges  that we have  refused  or  neglected  to pay
outstanding   invoices  to  Universal  for  services  provided  in  the  design,
preparation of drawings and  consulting  work with regard to our new facility in
Richmond,  B.C.  Universal is seeking damages in the amount of approximately CDN
$90,000, plus interest and costs. We have responded to Universal's complaint and
have filed a  counterclaim  alleging  damages  against  Universal as a result of
their failure to complete the services for which they were contracted.  Further,
we intend to vigorously defend against Universal's claim against.

ITEMS 2, 3 AND 4 ARE NOT APPLICABLE.

ITEM 5.    OTHER INFORMATION.

         On September 11, 2003, we issued a press  release  announcing  that ALC
Holdings,  LLC ("ALC") purchased a majority of the outstanding  shares of common
stock of Glas-Aire  Industries Group, Ltd. from several  shareholders.  ALC is a
newly formed company which is controlled by several  managers,  including  Craig
Grossman,  our Chief  Executive  Officer and President.  In connection  with the
acquisition  of the  Glas-Aire  shares,  five  directors of  Glas-Aire  resigned
effective September 3, 2003.

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<PAGE>

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 on 8-K was filed on March 29, 2004 to  disclose  the March 24,
         2004 appointment of KPMG by the Supreme Court of British Columbia (Case
         No.  L040758) 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 and was indebted
         to HSBC Bank for approximately $2.7 million (Canadian).

         A  Report  on 8K  filed  on June  17,  2004  disclosed  the  change  in
         Registrant's Certifying Accountant:

                  (a) Dismissal of Previous Independent Accountants.

                  Effective  June  17,  2004,  Glas-Aire  Industries  Group  Ltd
                  ("Company")   dismissed  BDO  Dunwoody  LLP  ("BDO"),  as  its
                  independent  public  accountants.  The Company's sole Director
                  approved this decision to dismiss BDO.

                  (b) Engagement of New Independent Accountants.

                  On June 17, 2004 the Company engaged Dale Matheson Carr-Hilton
                  LaBonte Chartered Accounts as its new independent accountants.


















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<PAGE>


                                   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 14, 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 14, 2006
    -----------------------

      Craig Grossman, Chairman of the Board,
      Chief Executive Officer, President,
      and Secretary (Principal Executive Officer)



By:  \s\ Linda Kwan                                   Dated: August 14, 2006
    ---------------------------------------------------
      Linda Kwan, Chief Financial Officer
      (Principal Financial/Accounting Officer)























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