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, 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 June 30, 2004.

         Transitional Small Business Disclosure Format

        Yes_______        No___X____


<PAGE>


                         Glas-Aire Industries Group Ltd.

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                            PAGE
<S>               <C>                                                                                         <C>
PART I.           FINANCIAL INFORMATION                                                                        1

     Item 1.      Financial Statements                                                                         1

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

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

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

                  Consolidated Condensed Statements of Cash Flows
                  For the six months ended June 30, 2004 and 2003 (Unaudited)                                4-5

                  Notes to Consolidated Condensed Financial Statements (Unaudited)                           6-13

                  Forward Looking Statements                                                                  14

     Item 2.      Management's Discussion and Analysis of
                  Financial Condition and Results of Operations                                             14-19

     Item 3.      Controls and Procedures                                                                     19

PART II.  OTHER INFORMATION                                                                                   19

     Item 1.      Legal Proceedings                                                                           20

     Item 2.      Changes in Securities                                                                       20

     Item 3.      Defaults Upon Senior Securities                                                             20

     Item 4.      Submission of Matters to a Vote of Security Holders                                         20

     Item 5.      Other Information                                                                           21

     Item 6.      Exhibits and Reports on Form 8-K                                                            21

SIGNATURES                                                                                                    22
</TABLE>

<PAGE>


                         Glas Aire Industries Group Ltd.
                      Consolidated Condensed Balance Sheets

<TABLE>
<CAPTION>
                                                                       June 30,               December 31,
                                                                         2004                     2003
                                                                     (Unaudited)               (Unaudited)
                                                                    -----------------     -----------------
Assets
Current
<S>                                                                 <C>                   <C>
     Cash and equivalents                                           $     58,434          $              0
     Accounts receivable, net of allowance
            for doubtful accounts of $0 (2003, $4,215)                   164,194                 1,087,660
     Inventories                                                          16,405                 1,264,126
     Income taxes refundable                                                   0                    68,543
     Prepaid expenses                                                          0                    60,617
     Deferred income taxes                                               196,011                   196,011
                                                                    -----------------     -----------------
                                                                         435,044                 2,676,957
Fixed assets, net                                                          5,790                 2,258,437
                                                                    -----------------     -----------------
                                                                    $    440,834          $      4,935,394
                                                                    =================     =================
Liabilities and Stockholders' Equity
Liabilities
Current
     Bank indebtedness                                              $          0          $      1,645,421
     Accounts payable                                                          0                 2,330,440
     Accrued liabilities                                                 150,114                   831,202
     Current portion - long-term debt                                          0                   317,958
     Current portion - capital lease                                           0                    35,081
                                                                    -----------------     -----------------
                                                                         150,114                 5,160,102
Obligation under capital lease                                                 0                    19,711
Deferred income taxes                                                    158,151                   234,783
Net liabilities held for sale                                                  0                         0
                                                                    -----------------     -----------------
                                                                         308,265                 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                                              (2,096,399)               (2,482,138)
     Accumulated other comprehensive income
       Foreign currency translation adjustment                           652,543                   426,511
                                                                    -----------------     -----------------
                                                                         132,569                  (479,202)
                                                                    -----------------     -----------------
                                                                    $    440,834          $      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           Six Months Ended
                                                         --------------------------------------------------------

                                                          June 30,      June 30,      June 30,         June 30,
                                                            2004           2003         2004            2003
                                                         -----------   -----------   -----------      ------------
<S>                                                      <C>           <C>            <C>              <C>
Sales                                                    $  30,416     $3,139,646     $1,637,270       $6,610,705
Cost of sales                                               37,496      2,432,421      1,450,515        5,041,311
                                                         -----------   -----------   -----------      ------------
Gross profit                                                (7,080)       707,225        186,755        1,569,394
                                                         -----------   -----------   -----------      ------------
Expenses
     Depreciation                                                0         74,890         97,641          140,694
     Research and development                                3,399        168,269         71,857          322,725
     Selling and distribution                                 (971)       359,388         61,474          638,012
     General and administrative                             73,811        281,823        221,204          532,473
     Provision for profit sharing                                               0
     Foreign exchange loss                                       0        320,728        (18,371)         487,763
     Interest income                                          (658)           (42)          (712)             (82)
     Interest expense                                          366         32,873         31,451           62,101
                                                         -----------   -----------   -----------      ------------
                                                            75,947      1,237,929        464,544        2,183,686
                                                         -----------   -----------   -----------      ------------
Loss from continuing operation before
      Income taxes                                         (83,027)      (530,704)      (277,789)        (614,292)
Income taxes - current (recovery)                                0        (56,627)             0          (90,617)
                                                         -----------   -----------   -----------      ------------
Loss from continuing operations                            (83,027)      (474,077)      (277,789)        (523,675)
Gain on disposition of operations                                0                       663,531
Gain on disposition of discontinued operations                                                            520,859
                                                         -----------   -----------   -----------      ------------
Net loss for the period                                  $ (83,027)    $ (474,077)   $   385,742      $    (2,816)
                                                         ===========   ===========   ===========      ============
Earnings (loss) per share basic and diluted from
     Continuing operations                               $  (0.031)    $   (0.183)   $     0.142      $    (0.202)
     Discontinued operations                                     -              -                           0.201
                                                         -----------   -----------   -----------      ------------
                                                         $  (0.031)    $   (0.183)   $     0.142      $    (0.001)
                                                         ===========   ===========   ===========      ============
Weighted average common shares outstanding
(Basic - after deducting 93,718shares of
treasury stock  held by the Company)                     2,711,213      2,585,671      2,711,213        2,585,671
                                                         ===========   ===========   ===========      ============
</TABLE>


           See accompanying notes to consolidated financial statements
                                       2

<PAGE>


            Consolidated Condensed Statement of Stockholders' Equity
                         Six Months Ended June 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,        2,711,213      $27,112    $1,549,313                0      $(2,482,138)       $426,511         (479,202)
     2003
--------------------- -------------- ------------ --------------- ---------------- --------------- ----------------- ---------------
     Net loss                     -            -             -                -          385,739               -          385,739
  ------------------- -------------- ------------ --------------- ---------------- --------------- ----------------- ---------------
     Shares Issued                -            -             -                -                -               -                -
--------------------- -------------- ------------ --------------- ---------------- --------------- ----------------- ---------------
     Deferred                     -            -             -                -                -               -                -
     compensation
--------------------- -------------- ------------ --------------- ---------------- --------------- ----------------- ---------------
     Foreign currency             -            -             -                -                -         226,032          226,032
      translation
     adjustment
--------------------- -------------- ------------ --------------- ---------------- --------------- ----------------- ---------------
     Balance -
        June 30, 2004     2,711,213      $27,112    $1,549,313                -      $(2,096,399)       $652,543         $132,569
--------------------- -------------- ------------ --------------- ---------------- --------------- ----------------- ---------------
</TABLE>



Comprehensive income (loss) consists of the following:

<TABLE>
<CAPTION>

                                                               Three months ended                        Six months ended
                                                    ---------------------------------------- ---------------------------------------
                                                           June 30,           June 30,          June 30,              June 30,
                                                             2004               2003              2004                  2003
                                                    --------------------- ------------------ ----------------- ---------------------

<S>                                                 <C>                   <C>                <C>               <C>
   Net loss                                         $           (83,027)  $       (474,077)  $        385,742  $            (2,816)
   Foreign currency translation adjustment                          (56)           215,170            226,032              274,214

                                                    --------------------- ------------------ ----------------- ---------------------
   Comprehensive income (loss)                      $           (83,083)  $       (258,907)  $        611,774  $           271,398
                                                    ===================== ================== ================= =====================

</TABLE>












                 See accompanying notes to financial statements

                                       3
<PAGE>


                         Glas Aire Industries Group Ltd
                 Consolidated Condensed Statements of Cash Flows
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                      Six Months Ended
                                                                        --------------------------------------------------
                                                                            June 30,                         June 30,
                                                                              2004                             2003
                                                                        ----------------                ------------------
Increase (decrease) in cash
Cash flows from:
Operating activities
<S>                                                                      <C>                             <C>
     Net loss for the period from continuing operations                  $     385,740                   $      (523,675)
     Depreciation                                                               97,641                           140,694
     Deferred income taxes                                                     (76,632)
     Deferred compensation expense                                                   0                            21,676
     Stock issued for services                                                       0                                 0
(Increase) decrease in assets
     Accounts receivable                                                       923,466                          (133,871)
     Inventories                                                             1,247,721                          (129,785)
     Income taxes recoverable                                                   68,543                           (90,617)
     Prepaid expense                                                            60,617                            34,806
Increase (decrease) in liabilities
     Accounts payable                                                       (2,330,440)                          746,478
     Accrued liabilities                                                      (716,589)                         (109,166)
     Income taxes payable                                                       35,500                                 0
                                                                        ----------------                ------------------
     Net cash used in operating activities
         from continuing operations                                           (304,433)                          (43,460)
Cash flows from discontinued operations                                              -                                 0
                                                                        ----------------                ------------------
Net cash used in operating activities                                         (304,433)                          (43,460)
                                                                        ----------------                ------------------
Financing activities
     Issuance of shares                                                              0                               850
     Increase in long term debt                                                      0                                 0
     Repayment of capital lease obligation                                     (54,792)                          (26,185)
     Repayment of long-term debt                                              (317,958)                         (405,934)
     (Decrease) increase in bank indebtedness                               (1,645,421)                          (83,266)
                                                                         ----------------                ------------------
          Net cash (used in) provided by financing activities               (2,018,171)                         (514,535)
                                                                        ----------------                ------------------
 Investing activities
Cash proceeds on disposal of Orbital Polishing Division                              0                           631,162
     Disposal of fixed assets                                                2,155,006
     Purchase of fixed assets                                                        0                          (209,718)
                                                                        ----------------                ------------------
     Net cash provided by (used in) investing activities                     2,155,006                           421,444
                                                                        ----------------                ------------------

Foreign currency translation adjustment
      effect on cash and equivalents balances                                  226,032                           202,993
                                                                        ----------------                ------------------
Increase in cash and equivalents during the period                              58,434                            66,442
Cash and equivalents, beginning of period                                            0                                 0
                                                                        ----------------                ------------------
Cash and equivalents, end of period                                       $     58,434                   $        66,442
                                                                        ================                ==================
</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,
                                                                          2004                       2003
                                                                  -----------------             ---------------

Supplemental disclosure of cash flow relating to:

<S>                                                               <C>                           <C>
     Interest paid                                                $       31,451                $     62,101

     Income taxes paid                                            $            0                $          0


Non - cash investing activities

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

     Common Stock issued in                                       $            0                $          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, 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.

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  called the loans  into  default.  HSBC has
security on the Corporation's

                                       6
<PAGE>

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


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

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:

                                                 June 30,          June 30,
                                                    2004              2003
                                              ---------------- -----------------
Raw materials                                  $        0      $  1,022,030
Work-in-progress                                        0           229,545
Finished goods                                     16,405           287,319
                                              ---------------- -----------------
                                               $   16,405      $  1,538,894
                                              ================ =================


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)
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).


                                       7
<PAGE>

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

4.  WARRANTY ACCRUAL

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

                                                     Six months ended
                                            ------------------------------------
                                                June 30,           June 30,
                                                  2004               2003
                                            ----------------- ------------------
Balance, beginning of period                 $    229,940      $     113,284
Warranty expense                                   34,664            360,619
Settlements made                                 (264,604)          (367,616)
                                            ----------------- ------------------
Balance, end of period                       $          0      $     106,287
                                            ================== =================


5.  COMMON STOCK

     (a)  Authorized as of March 31, 2004

          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 as of June 30, 2004

          2,711,213 Common shares

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  issued 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 June 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 earning per share due to their antidilutive effect.

                                       8
<PAGE>

                         Glas Aire Industries Group Ltd.
              Notes to Consolidated Condensed Financial Statements
                                  June 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 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.

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         Six months ended
                                                                      ------------------------ -------------------------
                                                                              June 30,                  June 30,
                                                                                2004                      2004
                                                                      ------------------------ -------------------------

<S>                                                                                <C>                         <C>
    Net income (loss) , as reported                                                $ (83,027)                  $385,742
    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                                                            $ (83,027)                  $385,742
                                                                      ======================== =========================

    Earnings (loss) per share
           - basic - as reported                                                   $  (0.031)                  $  0.142
           - basic - pro-forma                                                     $  (0.031)                  $  0.142
</TABLE>


                                        9
<PAGE>

                         Glas Aire Industries Group Ltd.
              Notes to Consolidated Condensed Financial Statements
                                  June 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 June 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 June 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 June 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

                                       10
<PAGE>

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

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 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                      Six months ended
                                            -------------------------------------- -------------------------------------
                                                  June 30,           June 30,            June 30,          June 30,
                                                    2004               2003                2004              2003
                                            ------------------- ------------------ ------------------- -----------------

<S>                                           <C>                 <C>                <C>                 <C>
        United States                         $         30,416    $     2,787,101    $      1,577,433    $    6,039,424
        Canada                                               0            347,778              57,413           552,720
        Japan and other                                      0              4,767               2,424            18,561
                                            ------------------- ------------------ ------------------- -----------------
                                              $         30,416    $     3,139,646    $      1,637,270    $    6,610,705
                                            =================== ================== =================== =================
</TABLE>

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

<TABLE>
<CAPTION>
                                                      Three months ended                      Six months ended
                                             -------------------------------------- -------------------------------------
                                                  June 30,           June 30,            June 30,          June 30,
                                                    2004               2003                2004              2003
                                             ------------------- ------------------ ------------------- -----------------

<S>                                            <C>                 <C>                <C>                 <C>
        Nissan North America, Inc              $              0    $       835,662    $        449,744    $    1,866,735
        Honda Access America, Inc.                            0            759,839             504,449         1,802,702
        Toyota Inc. USA                                       0                                217,336
        General Motors                                        0            927,843                             1,602,992
                                             ------------------- ------------------ ------------------- -----------------
                                               $              0    $     2,523,344    $      1,171,529    $    5,272,429
                                             =================== ================== =================== =================
</TABLE>





                                       11
<PAGE>



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

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

<TABLE>
<CAPTION>
                                                     Three months ended                      Six months ended
                                            -------------------------------------- -------------------------------------
                                                  June 30,           June 30,          June 30,            June 30,
                                                    2004               2003              2004                2003
                                            ------------------- ------------------ ----------------- -------------------
<S>                                            <C>                <C>                <C>               <C>
        Sunroof                                $        30,416    $     1,867,287    $  1,086,039      $      4,057,211
        Hood protectors                                      0            921,310         401,494             1,848,326
        Rear air deflectors                                  0            257,479          93,754               535,969
        Door visors                                          0             93,570          55,983               169,199
                                            ------------------- ------------------ ----------------- -------------------
                                               $        30,416    $     3,139,646    $  1,637,270      $      6,610,705
                                            =================== ================== ================= ===================
</TABLE>

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.

                                       12
<PAGE>

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


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
$2,096,399 during the period from September 29, 1992 (inception) through June30,
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  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.

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.

                                       13
<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 JUNE 30, 2004 COMPARED TO
THREE MONTHS ENDED JUNE 30, 2003

         The Company's  sales  decreased by 99.03% from $3,139,646 for the three
months  ended June 30, 2003 to $30,416 for the three months ended June 30, 2004.
This  decrease  was the main  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 22.53% for the three months ended June 30, 2003,  to (23.28%) for the three
months  ended  June  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 $74,890 for the three months
ended June 30, 2003,  to $0 for the three  months ended June 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.

                                       14
<PAGE>

         Expenses for research and development decreased by 97.98% from $168,269
for the three  months  ended June 30, 2003 to $3,399 for the three  months ended
June 30, 2004. This decrease resulted primarily 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 100.27%,  from $359,388
for the three months  ended June 30, 2003,  to ($971) for the three months ended
June 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 73.81% from $281,823
for the three months ended June 30, 2003,  to $73,811 for the three months ended
June 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 reports,

         Foreign  exchange  loss  decreased by 100% from  $320,728 for the three
months  ended June 30, 2003  compared to a foreign  exchange  loss of $0 for the
three  months  ended  June  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.

         Interest expense  decreased by 98.89% from $32,873 for the three months
ended June 30, 2003, to $366 for the three months ended June 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 $56,627 for the three  months  ended June
30, 2003  compared to income taxes expense of $0 for the three months ended June
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.

         Our loss from continuing  operations decreased by 82.49% from a loss of
$474,077  for the three  months  ended June 30,  2003 as  compared  to a loss of
$83,027 for the three months ended June 30, 2004.  This decrease in the loss was
primarily  due to the Canadian  operation's  filing for  bankruptcy on March 24,
2004 and ceasing its operation after that date.

SIX MONTHS ENDED JUNE 30, 2004 VS SIX MONTHS ENDED JUNE 30, 2003

         The Company's  sales  decreased by 75.23% from  $6,610,705  for the six
months ended June 30, 2003 to $1,637,270 for the six months ended June 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)
volume decreases in Sunroof wind deflectors' sales to existing  customers during
the first quarter.

         The gross profit margins expressed as a percentage of sales,  decreased
from 23.74% for the six month period ended June 30, 2003,  to 11.41% for the six
months  period ended June 30, 2004,  This net decrease was  primarily due to (i)
the Canadian operation's filing for bankruptcy on March 24, 2004 and ceasing its

                                       15
<PAGE>

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.

         Depreciation  expense  decreased  by 30.60% from  $140,694  for the six
months ended June 30,  2003,  to $97,641 for the six month period ended June 30,
2004.  The  primary  reason  for  this  decrease  was  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 research and development decreased by 77.73% from $322,725
for the six months  ended June 30, 2003 to $71,857 for the six months ended June
30, 2004. This decrease was a direct 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 90.36%,  from $638,012
for the six months ended June 30, 2003, to $61,474 for the six months ended June
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 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 58.46% from $532,473
for the six months  ended June 30,  2003,  to $221,204  for the six months ended
June 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 fees,  accounting  fees related to the preparation
of quarterly and annual reports, (iii) an increase in legal,  accounting service
related to the  forbearance  agreement with HSBC to attempt to  restructure  its
debt. However the forbearance agreement expired on March 23, 2004

         Foreign  exchange  loss was  $487,763 for the six months ended June 30,
2003  compared to a foreign  exchange  gain of $18,371 for the six months  ended
June 30,  2004.  This was the  result of the  decreased  strength  of the United
States dollar against the Canadian dollar and the Canadian  subsidiaries  having
U.S. dollar accounts receivable, which resulted in exchange losses in 2003

         Interest  expense  decreased  by 49.36% from $62,101 for the six months
ended June 30, 2003, to $31,451 for the six months ended June 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 $90,617 for the six months ended June 30,
2003  compared  to $0 for the six months  ended  June 30,  2004.  This  recovery
represents the result of the estimated income taxes recoverable for the Canadian
subsidiaries operating losses for 2003.

         As a result of these factors net loss for the six months ended June 30,
2004 was  $277,789  compared to a loss of $614,292 for the six months ended June
30,  2003.  This  decrease  in  loss  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 warranty claims, and (iii) a decrease loss on
foreign currency exchange.

                                       16
<PAGE>

         Gain on  disposition  of  operations of was $663,531 for the six months
ended June 30, 2004. The Canadian  operation's filing for bankruptcy and ceasing
its  operation 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  decreased $520,859 for
the six months ended June 30, 2004. No  disposition of  discontinued  operations
occurred in 2004.

Liquidity and Capital Resources

         Cash used in  operating  activities  for the period ended June 30, 2004
was $304,433  compared to cash used in operating  activities  of $43,460 for the
period  ended June 30,  2003.  The use of cash for the six  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 $663,531 due
to the disposal of assets and liabilities of the Canadian operation (iii) a fund
loss of $277,789 from continuing operations.

         Cash used in  financing  activities  for the period ended June 30, 2004
was $2,018,171 compared to cash provided by financing activities of $514,535 for
the period ended June 30, 2003.  Cash used in financing  activities  for the six
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  (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 June 30, 2003 of $209,718  compared to the $0
purchase of fixed assets in the period ended June 30, 2004,  (ii) an increase of
$2,155,006  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 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

         The independent  auditor's  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.

                                       17
<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 allowance  provision  includes  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  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.

                                       18
<PAGE>

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.

         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  is not  expected  to have a
material effect on the Company's 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, 2004.  Based on this evaluation,  the Company's
Chief Executive  Officer and Chief Financial Officer concluded that, as of March
31, 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

                                       19
<PAGE>

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.

         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.

                                       20
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ITEM 5.    OTHER INFORMATION

         Effective June 30, 2003, the Company merged Wonder Tool, Inc, Glas-Aire
Industries,  Inc.,  consisting  of all of the United  States  subsidiaries  into
Glas-Aire Industries Group, Ltd. Also effective June 30, 2003, the Company wound
up Multicorp Holdings Inc. and 326362 B.C. Ltd. into Glas-Aire Industries Ltd.

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  accounts.  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.


                                       21
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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 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)