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

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

                  For the fiscal year ended: December 31, 2002

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

                        Commission file number: 001-14244

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

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

                   7791 Alderbridge Way, Richmond B.C. V6X 2A4
                   -------------------------------------------
                (Mailing address of principal executive offices)

Issuer's telephone number:       (604) 207-0221
                                 --------------

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

    Title of each class                Name of each exchange on which registered
Common Stock, $0.01 par value              NASDAQ Electronic Bulletin Board
-----------------------------              --------------------------------

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

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

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

State issuer's revenues for its most recent fiscal year: $11,820,642

As of December 31, 2002, the aggregate market value for the 1,195,115 shares of
the common stock, $0.01 par value per share, held by non-affiliates was
approximately $179,267.

The number of shares of common stock of the registrant outstanding as of
December 31, 2002 were 2,500,671, not including 93,718 shares of treasury stock
held by the Company.

Transitional Small Business Disclosure Format:   Yes  /_/       No /X/

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                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----
PART I
     Item 1.  Description of Business .....................................    1
     Item 2.  Description of Property .....................................   20
     Item 3.  Legal Proceedings ...........................................   20
     Item 4.  Submission of Matters to a Vote of Security Holders .........   22

PART II
     Item 5.  Market for Common Equity and Related Stockholder Matters ....   22
     Item 6.  Management's Discussion and Analysis or Plan of Operation ...   24
     Item 7.  Financial Statements ........................................   34
     Item 8.  Changes in and Disagreements With Accountants on
                Accounting and Financial Disclosure .......................   35

PART III
     Item 9.  Directors, Executive Officers, Promoters and Control Persons;
                Compliance with Section 16(A) of the Exchange Act .........   35
     Item 10. Executive Compensation ......................................   38
     Item 11. Security Ownership of Certain Beneficial Owners
                and Management ............................................   42
     Item 12. Certain Relationships and Related Transactions ..............   43

PART IV
     Item 13. Exhibits and Reports on Form 8-K ............................   44
     Item 14. Controls and Procedures .....................................   44

SIGNATURES ................................................................   45





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                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

BUSINESS

     Except for historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. Such forward-looking statements include, but are not limited to,
statements regarding future events and the Company's plans and expectations. The
Company's actual results could differ materially from those discussed herein.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed below under "Factors That May Affect Future
Results," as well as those discussed elsewhere in this Form 10-KSB.

     We have based the Specialty Equipment Market Association ("SEMA") data and
other statistical information in this Annual Report, on information supplied by
SEMA and various public announcements and filings made by other industry
associations. We have also relied on other sources that we believe are reliable.
While we believe that the information is accurate, we have not independently
verified any of this information or such announcements and filings, and it is
possible they may not be accurate in all material respects. In addition, the
Company's business is subject to continual changes, and because of these
changes, our estimates of our expected industry position may become inaccurate
at any time.

     As used in this Annual Report, the terms "our," "us" and "we" refer to
Glas-Aire Industries Group Ltd.

OVERVIEW

     Glas-Aire Industries Group Ltd. ("Glas-Aire" or the "Company") was
incorporated on September 29, 1992, pursuant to the laws of the State of Nevada.
Glas-Aire designs, develops, manufactures and markets sunroof wind deflectors,
hood protectors, rear air deflectors and door visors for cars, light trucks and
vans. The Company uses plastics (as the major raw material) and thermoforming
technology to produce these products. We supply our products principally to
automotive original equipment manufacturers ("OEMs"). The OEMs we supply
include: Honda, Nissan, General Motors, Hyundai Motor America, Inc. and other
North American/Japanese automotive manufacturers.

     Our principal executive offices are located at 7791 Alderbridge Way,
Richmond B.C., Canada V6X 2A4, and our telephone number is (604) 207-0221.

     In December 2001, Glas-Aire acquired Wonder Tool, Inc. ("Wonder Tool"), a
wholly-owned subsidiary of Cyclo Manufacturing Company ("Cyclo"). The Wonder
Tool acquisition was accounted for as a reverse acquisition because the
shareholders of Wonder Tool became controlling shareholders of the Company.
Cyclo received 1,250,000 shares of Glas-Aire's common stock (which constituted
approximately 50.7% of the Company's total outstanding voting stock) in exchange

<PAGE>

for 1,000 shares of Wonder Tool's common stock. As a consequence of the
acquisition, Wonder Tool became a wholly-owned subsidiary of the Company.
Immediately following the consummation of the acquisition, Cyclo transferred the
Glas-Aire shares it received in the acquisition to Robert C. Johnson and Raymond
J. Gherardini. Under these circumstances, United States Generally Accepted
Accounting Principles ("GAAP") requires that Wonder Tool be identified as the
accounting acquirer.

     On January 9, 2003, we completed the sale of substantially all of the
assets and certain of the liabilities of Wonder Tool, pursuant to an Asset
Purchase Agreement (the "WTI Asset Sale"). The transaction was effective as of
January 1, 2003, although the Asset Purchase Agreement was executed and the
closing occurred on January 9, 2003.

     The Company sold the assets associated with the Wonder Tool pneumatic
polishers, electric polishers, double drum pole polishers, cleaning and
polishing compounds, polishing bonnets, associated accessories, airline toilet
deodorants, and wet/dry vacuum cleaning machines, including the intellectual
property associated with these assets. The consideration for the WTI Asset Sale
was $720,140 in cash, a $200,000 promissory note and up to $200,000 that may be
earned pursuant to an earn out provision in the Asset Purchase Agreement.

     The Company's Consolidated Financial Statements included in this Annual
Report on Form 10-KSB reflect the financial position, results of operations and
cash flows of the Wonder Tool business as "discontinued operations." In
accordance with Statement of Financial Accounting Standards ("SFAS") No. 144
("SFAS No. 144"), "Accounting for the Impairment or Disposal of Long-lived
Assets," the Company's Consolidated Financial Statements have been restated to
reflect the financial position, results of operations and cash flows of the
Wonder Tool business as "discontinued operations."

BUSINESS SEGMENTS

     Prior to the WTI Asset Sale, Glas-Aire operated two business segments -
Automotive Accessories and Orbital Polishing. The operations of each of these
segments were conducted in separate subsidiary companies.

AUTOMOTIVE ACCESSORIES

     Principal Products.

     We design, manufacture and market sunroof wind deflectors, hood protectors,
rear air deflectors and door visors for cars, light trucks and vans. Management
believes that we provide superior product quality to customers who are leaders
within the OEM industry.

     Business Strategy.

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

     Increasing Production Capacity/Efficiency. We have enhanced our production
capacity by the use of additional capital equipment and leasing larger premises
for operations. We are moving forward with our plan to incorporate the Cell

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method of manufacturing which is utilized by many large Japanese and American
manufacturers. This concept involves conduct of the entire manufacturing process
in units or cells on a flow basis in order to avoid delays related to staging.
This concept provides for the layout of operating in a tight sequence to permit
single piece flow and flexible deployment of human effort. A product proceeds
from design to launch, order to delivery, and into the hands of customers with
reduction of scrap, reduction of labor costs with little or no backflows or
stoppages.

     Increasing Sales to Automobile Manufacturers. Virtually all of our sales
are to automobile manufacturers. Management believes that increased sales to
automobile manufacturers can be accomplished through sales of existing and new
products to current as well as potential new clients in North America, Japan,
South America and Europe.

     Continue Research and Development Activities. Management believes that a
key to our future success is the continual development of new products and
complimentary processes to meet the demands and needs of our clients. We
continue to conduct research and development ("R&D") activities to enhance our
existing products, design new products and develop associated manufacturing
processes. Often, our clients participate in the development of the product as
well as the process in which it is developed.

     Investment in or Acquisition of Complimentary Businesses, Technologies or
Product Lines. We continue to evaluate opportunities for growth or expansion of
our business through investment in or acquisition of complimentary businesses,
current or emerging technologies or product lines. Management believes that
opportunities to expand will be available to us and intends to investigate
opportunities that are consistent with our goals and expertise.

     Infrastructure Strengthening. We are actively pursuing the strengthening of
our infrastructure by evaluating integrated, computerized information technology
systems to facilitate effective control functions that we believe are important
to efficiently operate and manage our operations. Management believes that solid
internal controls combined with an integrated information technology system will
ensure a strong infrastructure to run our organization and operations.

INDUSTRY OVERVIEW

     Our products are used in a diverse and growing market comprised of all
automotive after market accessories, dealer installed accessories, car care
products and other products purchased by consumers for the purpose of improving
their vehicles' appearance and/or performance. SEMA is the automotive industry
association involved in this particular market segment. The latest published
data that the Company has from SEMA is presented below. Manufacturer's sales of
specialty automotive products increased from $2.35 billion in 1985 to $8.6
billion in 2000. During this period, retail sales increased from $4.35 billion
to $24.86 billion. Our products compete in the accessory/appearance segment of
this market, estimated to be approximately $4.83 billion at the manufacturers'
level in 2000. SEMA estimates that accessories/appearance products represent
55.6% of the total specialty equipment market. According to SEMA data,
accessories/appearance is the only segment of products that has shown increased
market share over the years increasing from 51.1% in 1996 to 55.6% in 2000.

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

                                 Industry Segment Market Share Trend*
                          -------------------------------------------------
     Segment              2000     1999     1998     1997     1996     1990
     -------              ----     ----     ----     ----     ----     ----
Accessories and           55.6%    54.3%    53.2%    52.4%    51.1%    42.5%
Appearance

Racing and Performance    20.0%    21.2%    22.2%    22.9%    24.1%    30.6%

Wheels, Tires and         24.4%    24.5%    24.6%    24.7%    24.4%    26.9%
Suspension

* Source SEMA 2001 Market Study

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

     We operate in the OEM portion of the SEMA market segment, providing
products to the automotive manufacturers who distribute these products to
consumers through their dealer networks. Management believes that the parts
accessory business has become an increasingly important profit center for the
automotive manufacturers at their dealer level and will continue to become
important based upon current economic conditions and consumer spending trends.
With a strong interest in providing additional profit opportunities for their
vast dealer networks, the manufacturers are increasing their own involvement in
developing new and enhanced accessory products. These products are often
included in "special trim packages" and offered during the sale of the vehicle,
taking advantage of a natural sales channel (i.e., dealers) as well as vehicle
financing which covers the accessory products with only a negligible increase in
monthly payments. Management's studies indicate that the vast number of
strategically located dealers (e.g., GM has approximately 9,500 dealers in North
America), their background in parts/accessories, installation expertise and
ability to offer almost instant financing will increase their market share at
the expense of aftermarket channels.

     Products.

     The table set forth below shows our sales on a percentage basis by type of
product sold during each of the periods indicated.

                                                  Year Ended
            Product Line                         December 31,
            ------------                   ------------------------
                                           2002                2001
                                           ----                ----
       Sunroof Wind Deflectors              56%                 54%
       Hood Protectors                      33%                 33%
       Rear Air Deflectors                  10%                 13%
       Door Visors                          1%                  N/A

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<PAGE>

     Sunroof Wind Deflectors. Sunroof wind deflectors reduce the noise and ear
discomfort resulting from air turbulence created by open sunroofs. We
manufacture sunroof wind deflectors for passenger cars, sport utility vehicles
and mini-vans equipped with electric sliding sunroofs. We market our sunroof
wind deflectors in the United States, Canada, Japan and the United Kingdom.

     Hood Protectors. Hood protectors are designed both to enhance the
appearance of a vehicle and to protect the windshield and hood from insects,
stones and other road debris. We manufacture hood protectors for crossover
vehicles (vehicles designed to blend the ride and handling of cars with the
people and cargo carrying capacity of sport utility vehicles), sport utility
vehicles, light duty pickup trucks and mini-vans. We market our hood protectors
in the United States, Canada and Japan.

     Rear Air Deflectors. Rear air deflectors are mounted on the roof of a sport
utility vehicle or mini-van over the rear hatchback door. This product is
designed to reduce dust and grime buildup on the rear window and improve
visibility. We manufacture rear air deflectors for sport utility vehicles and
mini-vans. We market our rear air deflectors in the United States and Canada.

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

     New Products. With every new model of automobile brought to market by our
customers, we must design, develop and deploy our products to meet the design
specifications of the new models. Thus, we are continually engineering and
developing new molds and products to meet these specifications for these new
products.

     In order to build on our basic product groups (i.e., sunroof wind
deflectors, hood protectors, rear air deflectors and door visors), we continue
to development new products in order to address our clients' and prospective
clients' demands. We intend to continue producing our products on a
cost-effective basis with unique designs, superior finishes, alternate
attachment mechanisms and dimensional accuracy. This strategy is expected to
increase our competitiveness and help expand our target markets.

     Obsolescence/Design Changes. Due to automobile design changes by automobile
manufacturers, our automotive products will become obsolete and/or require
modification. Continued utilization of our products by the OEMs is substantially
dependent upon our ability to quickly and reliably adjust the design of our
products to conform to design changes by the automobile manufacturers. We intend
to continue improving our lead times by using more efficient design software and
innovative prototype tools fabricated in house, and changes in the design
process in keeping with the Cell manufacturing method. This process will further
reduce lead times by facilitating remote fittings of prototypes anywhere in the
world.

                                       5
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     Marketing and Sales.

     Sales are made directly by the Company. We promote the Company and our
products primarily through personal contact, brochures, attendance at trade
shows, press releases, etc. We provide access to information on our filings with
the United States Securities and Exchange Commission and our products on our
website www.glasaire.com.

     During the year ended December 31, 2002, approximately 100% of our sales
were to OEMs. The Company's clients/joint product development partners include
DaimlerChrysler Corporation, General Motors Corporation, Gulf States Toyota,
Inc., Honda Access America, Inc., Hyundai Motor America, KIA Motors America,
Inc., Mazda North America Corporations, Nissan Canada, Inc., Nissan North
America, Inc., Saturn Corp., Southeast Toyota Distributors, LLC, Subaru of
America, Inc., Toyota Canada, Inc. and others. We manufacture products according
to specifications either developed jointly with, or provided by our clients, who
in turn market the products, on a retail basis, under their own brand names
through their dealership and distribution networks. Management believes that we
offer our customers high quality product design and development capabilities.

     We received a number of awards from our customers and various business
associations during the last ten years. The latest award was the "Valued Partner
2002" award from KIA Motors America, Inc.

     We sell our automotive accessories products in the United States, Canada
and Japan. Net sales based upon total revenue to customers by geographic area
consisted of the following for each of the two years ended December 31.

                                           December 31,
                                            (in 000's)
                            -----------------------------------------
                                  2002                     2001
                            ----------------        -----------------
      United States         $10,637      90%        $10,283       87%
      Canada                   $993     8.4%         $1,106       10%
      Japan                    $144       1%           $286        2%
      Other                     $47     0.6%           $115        1%

     We have contracts with two sales representative companies in the United
States who have established relationships with large automobile manufacturers in
North America as well as Japan. As our sales increase, we may hire additional
personnel or may contract with other sales representatives.

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

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

     o    We will continue increasing our presence (attendance or participation)
          in major trade shows in North America, Europe and Japan associated
          with our products.

     o    We will continue to evaluate opportunities for growth or expansion of
          our business through investment in current or emerging technologies or
          product lines. We believe that opportunities to expand will be
          available to us and intend to investigate opportunities that are
          consistent with our goals and our expertise.

     Distribution.

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

     In the United States and Canada, we ship our products to customer's parts
distribution centers and vehicle processing centers. For the Japanese market,
the OEMs generally have one centralized distribution center. With General
Motors, we drop ship the ordered parts on behalf of our client, directly to the
General Motors' network of 9,500 dealers.

     We have Electronic Data Interchange ("EDI") capability which facilitates
receipt of orders from customers and transmission of invoices to customers
electronically after shipment of parts.

     Major Customers.

     We sell principally to automobile manufacturers in the United States,
Canada and Japan. For the year ended December 31, 2002, sales based upon our
revenue in the United States, accounted for 90% of the Company's revenues
(including sales to United States subsidiaries of foreign automobile
manufacturers), sales in Canada accounted for 8.4% of these revenues, and sales
in other countries accounted for 1.6%.

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

     As reflected below, we have four major customers who, together, accounted
for 82% or more of the Automotive Accessories Division's sales during the last
fiscal year:

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<PAGE>

                                              Year ended          Year ended
   Customer                Products        December 31, 2002   December 31, 2001
   --------                --------        -----------------   -----------------
General Motors   Hood protectors and rear         28%                 23%
(USA & CDN)      air deflectors

Honda Access     Sunroof wind deflectors          27%                 21%
America, Inc.    and rear air deflectors

Nissan North     Sunroof wind deflectors,         17%                 25%
America, Inc.    hood protectors and rear
                 air deflectors

Hyundai Motor    Sunroof wind deflectors          10%                 N/A
America, Inc.

     We manufacture accessories for the majority of our customers on a purchase
order/invoice basis. For General Motors Corporation in the United States, we
have a virtual just-in-time drop shipment program utilizing our operating and
warehousing facilities in Bellingham, Washington.

     Competition.

     We have several competitors who have substantially greater technical,
financial and marketing resources. For the sunroof wind deflector market, the
primary competitor has been Plastic Form, a subsidiary under the umbrella of
Masco Tech. In the hood protector and rear air deflector market, our major
competitor is Autotron, a subsidiary of LUND International Holdings ("Lund").
EGR, an Australian based company and Auto Ventshade, an additional subsidiary of
Lund, produce hood protectors and door visors in competition with us.

     We believe that the principal competitive factors we face in the automobile
accessories industry, in order of importance, are quality, customer service and
price. Management believes that we can effectively compete with our competitors
because of the high quality of our products and our commitment to customer
service and product innovation.

     Manufacturing.

     In June 2002 we moved our operations to a larger facility in Richmond,
B.C., Canada. Prior to this move, we conducted operations at the Vancouver,
B.C., Canada facility. See "Item 2. - Description of Property."

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

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     Raw Materials and Suppliers. Acrylic is the single most expensive raw
material used in manufacturing our products. We currently purchase our acrylic
from Acrylco Manufacturing Ltd. (a Canadian distributor for Mitsubishi Canada
Limited), Aristech Acrylics LLC in Florence, Kentucky and Laird Plastics (a
Canadian distributor for Atofina Chemicals, Inc. in Pennsylvania). We do not
have a long-term contract with any of these suppliers. If these suppliers should
become unavailable in the future, it is expected that other suppliers would be
readily available.

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

     The price of acrylic is connected to the price of petroleum and other
chemicals used in its construction. We are susceptible to the fluctuating price
of acrylic and a significant increase in the price of petroleum and acrylic
could have a material affect on of the price of acrylic.

     Quality Assurance. We are ISO9001/QS9000 registered and these international
quality standards control virtually all of our business practices as well as our
operations.

     Our mission includes providing our clients with quality products on time
and cost effectively based on innovative engineering solutions and manufacturing
processes. The fitness-for-use of products/services is the vital principle that
guides all of our activities. Further, the application of this principle is
demanded from all suppliers. One of our primary objectives is to support the
need of our employees as well as suppliers to foster this principle.

     We warrant our products to coincide with the automobile warranty provided
by the automobile manufacturer to the consumer, or in the case of replacement
parts and accessories, for the balance of the life of the new vehicle warranty
or a minimum of 36 months or 36,000 miles after the date of installation on the
vehicle, whichever is greater. We are obligated to reimburse our OEM customers
for all legitimate quality related warranty claims paid by them.

     With the exception of the fiscal years ending December 31, 2001 and 2002,
our level of defective products has represented approximately 1% of annual net
sales. During the last fiscal year it was approximately 2.37%. In 2001, it was
4.2% and the cause was the result of defective gaskets used on some sunroof wind
deflectors. The increase in the fiscal year ended 2002 was deemed to be
primarily the result of a chemical reaction between a specific type of acrylic
and the gasket used on some sunroof wind deflectors. A significant amount of
research has since been completed on the different types of gasket materials to
determine compatibility and the problem has been eliminated. In response to such
defects, we employed two outside consultants to evaluate our processes,
procedures and supplies used in the manufacture of our products. Additionally,
we employed a new quality control manager to manage the quality control process
and we continuously test the processes, procedures and supplies used in the
manufacture of our products to detect and correct any problems that may lead to
defective products in the future. However, there can be no assurance that we
will not incur increased defective products and increased warranty claims. See
"Factors that May Affect Our Future Results - Increase in Warranty Claims."

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<PAGE>

     During the fiscal year ended December 31, 2002, we expensed $273,389
related to warranty claims as compared to $490,959 during the fiscal year ended
December 31, 2001.

     Research and Development.

     We believe that our product development capabilities are important to the
future success of our business. We have 14 permanent employees engaged in R&D at
our Richmond facility. They conduct activities associated with development of
new products, improvements to existing products and the development of new
manufacturing processes. Management believes that spending on research and
development activities will continue to support increased business. We expensed
$481,195 on research and development activities during the year ended December
31, 2001, and $740,105 during the year ended December 31, 2002.

     Product Design.

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

     When the design of a vehicle model changes configuration, we must retool
our products to insure proper fit to the new vehicle. Although frequent model or
configuration changes would increase our costs, tooling costs are frequently
passed on to the customer, often over a two-year period. Successful deployment
of the new production process now under development is expected to result in
improved quality, and less scrap/rework.

     Seasonality.

     Our products are not subject to significant seasonal variation. Our backlog
as of any given date is not a meaningful measure of our future business because
our customers generally require rapid shipment of orders.

     Patents, Trademarks, Licenses, Franchises, Concessions or Royalty
Agreements.

     Currently, we do not hold patents on any of our automotive accessory
products, nor do we have any licenses, trademarks, franchises, concessions or
royalty agreements. During the period ended December 2000, we filed patent
applications for a proprietary molding process known as Match Compression
Molding ("MCM.") In March 2003, our patent counsel was informed that these
applications would be denied by the United States Patent and Trademark Office
because of conflicts with other patent and trademarks. We also filed a trademark
application for MCM in Canada, which has been approved for publication in the
Trademark Journal and will be allowed for registration in due course in the
absence of any third party opposition.

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<PAGE>

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

     There can be no assurance that third parties will not assert infringement
or other claims against us with respect to any existing or future products, or
that licenses would be available if any of our technology or products were
successfully challenged by a third party, or if it became desirable to use any
third party technology to enhance our products. Litigation to protect our
proprietary information or to determine the validity of any third party claims
could result in significant expense to us and divert the efforts of our
technical and management personnel, whether or not such litigation is determined
in our favor.

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

     Government/Environment Regulation.

     We are subject to federal, provincial and local regulations concerning
consumer products and occupational safety and health. We believe that our
operations currently comply in all material respects with these laws and
regulations. In general, we have not experienced any difficulty complying with
such regulations and compliance has not had a material affect on our business.

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

                                       11
<PAGE>

ORBITAL POLISHING

     Pursuant to the decision to sell the Wonder Tool assets in 2002, in January
2003, the Company sold the Wonder Tool assets. For this reason, Wonder Tool has
been reflected as discontinued operations in our consolidated financial
statements.

     Principal Products.

     During 2002, Wonder Tool, the Orbital Polishing segment manufactured and
distributed a twin-head aircraft and automobile orbital polisher as well as
polishing and detailing compounds, pads and additional supplies.

     Orbital Polishers. The aircraft and automobile polishers were manufactured
by Cyclo under the name "Wonder Tool" since 1953. Management believed that prior
to the WTI Asset Sale, Wonder Tool was one of the leading manufacturers of
orbital polishers sold into the aircraft maintenance and automobile detailing
markets. The polisher features dual orbital action heads, a lightweight balanced
design and 4" heads to manage large areas and hard to reach contours with equal
efficiency. The polisher is versatile, allowing the quick change of bonnets,
discs, pads, and brushes to perform a variety of finishing jobs. Wonder Tool
produced a variety of polishers including electric and pneumatic versions.

     Polishing Supplies. Wonder Tool also manufactured polishing and detailing
compounds, pads and additional supplies for use with its orbital polisher. The
supplies included bonnets, Velcro disks, pads, brushes, and a complete line of
deoxidizing and polishing compounds.

     Industry Overview.

     The random orbit polisher dates back to the mid 1950's when Cyclo
Manufacturing Company invented and developed the dual head orbital polisher. The
original patents for single, dual and the triple head orbital polishers came
from Cyclo. The orbital polisher plays a key role in the aircraft and automotive
polishing and detailing industry by offering an alternative to polishing by
hand. For over 45 years major airlines and the military have utilized the
aircraft polisher in the appearance and maintenance of aircraft, missiles and
ground support equipment. The polishers are a reliable tool for car dealerships,
service stations, car washes and detail shops.

     Marketing and Sales.

     Wonder Tool sales were made directly by the Company. A limited amount of
resources was spent in this effort.

     Distribution.

     We directly fulfilled all orders placed for orbital polishers and related
suppliers to the auto detail industry via distributors and mail order
catalogues. Shipments were made on either a prepayment basis or on a purchase
order with terms for larger, more established customers.

                                       12
<PAGE>

     Major Customers.

     We had no contracts with any of its major customers for orbital polishers
or products. We used multiple distributors of our orbital polisher products and
a total of over 3,000 customers worldwide.

     Competition.

     We faced several competitors in the orbital polishing industry. Prior to
the WTI Asset Sale, management believed that the primary competitors to be Gem
Industries, Inc. and Waxcoa/Chamberlain, who both market only a single head
orbital polisher.

     Manufacturing.

     Wonder Tool orbital polishing products were manufactured in Denver,
Colorado.

     The orbital polisher manufacturing process consisted of machining,
polishing, installation, finishing, assembling and testing of the orbital
polisher. Prior to the WTI Asset Sale, we also manufactured in house the
majority of the chemical product line as well as its bonnets and other orbital
polisher accessories.

     Raw Materials and Suppliers. We purchased components including unfinished
aluminum castings, gears, bearings, electrical cords and motors used in the
manufacturing process of the orbital polisher and foam disks, wool pile and raw
rubber used in the manufacturing of bonnets. We did not have any contracts with
any of our suppliers.

     Quality Control. The orbital polisher was manufactured for over 45 years
and we internally set its own specifications and high quality standards. Prior
to the WTI Asset Sale, we performed a testing procedure to conduct individual
inspections of each polisher to ensure proper functioning and compliance with
its specifications. We did not experienced any significant problems with the
orbital polishing products.

     Product Design.

     Tests were performed to determine if improvements could be made to either
the orbital polisher or in the manufacturing and assembly process for the
orbital polisher. Further, tests were performed on alternative components such
as motors, bearings and pads in an attempt to improve upon the performance of
the orbital polisher and related accessories. Adhesives were continuously tested
to ensure orbital pads remain intact throughout their use with the orbital
polisher.

     Seasonality.

     The orbital polishing products were not subject to significant seasonal
variation.

                                       13
<PAGE>

     Patents, Trademarks, Licenses, Franchises, Concessions or Royalty
Agreements.

     In connection with the WTI Asset Sale, we sold our rights in one patent and
three trademarks, including the Double Drum Polisher, Free-Flight, Soil-Zorb and
Solv-it.

EMPLOYEES

     As of March 20, 2003, the Company employed 173 production workers, 14
research and development personnel, 12 clerical/administrative staff and three
management staff members.

     On September 11, 2002, the Canadian Auto Workers Labor Union was certified
by a vote that was monitored by the BC Labor Relations Board. We are now in the
process of negotiating the first contract. We believe there is an adequate
supply of suitable labor, as well as professionals, available.

FACTORS THAT MAY AFFECT OUR FUTURE RESULTS

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

     Important Factors Related to Forward-Looking Statements and Associated
Risks. This Report contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, 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.

                                       14
<PAGE>

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

     Dependence Upon Major Customers. Our Automotive Accessories division has
four customers, which together, accounted for approximately 82% of our sales
during the year ended December 31, 2002. See "Item 1. Description of Business -
Major Customers." There can be no assurance that these customers will continue
to purchase our products at these levels in the future. The loss of any one of
these major customers, or a significant reduction in their purchases, would have
a material adverse effect upon the Company.

     Dependence Upon Industries. Our current products consist exclusively of
automobile accessories, specifically sunroof wind deflectors, hood protectors,
rear air deflectors and door visors. Accordingly, the market for our products is
tied to the success of the automobile industry, and our success is dependent
upon this industry. Demand in the automotive industry is significantly dependent
on the United States and global economies and our business and profitability are
exposed to current and future uncertainties including a continuation of the
current downturn in the economy.

     Our operations are dependent upon automotive production and consumer
demand. The automotive market is highly cyclical and is dependent on consumer
spending and is particularly sensitive to changes in interest rates, the level
of consumer debt, and consumer confidence. The military conflict with Iraq and
other recent political and economic developments have adversely affected
consumer confidence throughout the United States and much of the world. Any
sustained weakness in demand or continued downtown in the economy would have a
material adverse effect upon our sales, profitability and cash flow.

     Dependence Upon Automobile Manufacturers in Japan and Related Risks. A
significant percentage of our sales are to Japanese automobile manufacturers in
the United States or Canadian subsidiaries of Japanese automobile manufacturers.
The passage of protectionist legislation, including increased import tariffs, or
public sentiment against imports could result in a decrease in sales of Japanese
automobiles which would have a direct negative impact on our sales. In addition,
the economic problems experienced in Japan could have a material and adverse
effect upon Japanese customers, which could have a material and adverse effect
on us. Further, the devaluation of the Japanese yen could result in Japanese
automobile manufacturers looking to Japanese suppliers of automobile accessories
that also could have a material adverse effect upon sales.

                                       15
<PAGE>

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

     Currency Fluctuation. Our sales are principally transacted in United States
dollars, whereas our labor, overhead and most component costs are paid in
Canadian dollars. Recent fluctuations in the value of the United States dollar
versus other currencies (primarily the Canadian dollar), and fluctuations in the
relative values of those currencies, have had a negative impact upon our
financial performance. During 2002, we did not engage in hedging activities with
respect to currency fluctuations. However, management intends to take corrective
action in an effort to attempt to minimize any negative impact foreign currency
fluctuations may have upon us. However, if we are unsuccessful in hedging
against currency fluctuations, it may have a material adverse effect on us.

     Dependence on Component and Raw Materials Suppliers. We purchase raw
materials, primarily acrylic from various suppliers. Although we have long term
relationships with our key suppliers we do not have long term supply agreements.
We do not anticipate significant delays or disruption in the manufacture and
delivery of our raw materials or components, but there can be no assurance that
delays or disruptions will not occur. The loss or breakdown of our relationships
with our suppliers could subject us to delays in the delivery of our product to
customers and even the loss of customers. In addition, increased prices for raw
materials or component parts could have a material adverse effect on
profitability.

     Raw Materials Price Increase. We purchase acrylic for use in our products.
The price of acrylic is connected to the price of petroleum and other chemicals
used in its construction. Recently because of geo-political conditions, the
price of petroleum has increased. We are susceptible to the fluctuating price of
acrylic and a significant increase in the price of petroleum could significantly
affect the price of acrylic. Any increase in the price of acrylic could have a
material adverse effect upon us.

     Manufacturing Risks. Our business is subject to many of the risks inherent
in manufacturing, including risks associated with production equipment failure,
fluctuating costs of raw materials and component parts, shortages of raw
materials, changes in governmental regulations, labor shortages, work stoppages
and other labor difficulties. Any significant interruption of manufacturing
activities could have a material adverse effect on us.

                                       16
<PAGE>

     Increase in Warranty Claims. With the exception of the fiscal years ending
December 31, 2001 and 2002, our level of defective products has represented
approximately 1% of annual net sales. During the last fiscal year it was
approximately 2.37%. In 2001 it was 4.2% and the cause was the result of
defective gaskets used on some sunroof wind deflectors. The increase in fiscal
2001 was deemed to be primarily the result of a chemical reaction between a
specific type of acrylic and the gasket used on some sunroof wind deflectors.
There is no assurance that future warranty claims will be consistent with past
history, and in the event we experience a significant increase in warranty
claims, there is no assurance that our reserves are sufficient. This could have
a material adverse effect on our business, financial condition and results of
operations.

     Dependence on a Limited Number of Products. We manufacture and sell sunroof
wind deflectors, hood protectors, rear air deflectors and door visors for cars,
light trucks and mini-vans. Our sales of each of these products are dependent on
the popularity of the type of vehicle or the vehicle accessory to which the
product relates. For example, a decline in popularity of sunroofs would result
in decreased sales of sunroof wind deflectors, while a decline in popularity of
light trucks (which includes sport utility vehicles as well as pickup trucks)
and mini-vans would result in decreased sales of hood protectors and rear air
deflectors. Although not anticipated in the foreseeable future, such events
could have a material adverse effect on our business.

     Automotive OEMs Have Historically Had Significant Leverage Over Their
Outside Suppliers. The automotive industry is fragmented and serves a limited
number of OEM's. As a result, OEMs have historically had and continue to have a
significant amount of leverage over their outside suppliers. Our arrangements
with our customers required us to supply our products at predetermined prices
that may decline over time. The costs we incur to fulfill orders may vary from
our initial estimates due to a number of factors, including changes in the costs
of labor, components or raw materials. If we are unable to pass along these
increased costs, our margins and profitability will be adversely affected.

     In April 2000 and April 2002, a major customer of the Company demanded
price reductions on existing products from all its suppliers (worldwide) in
three stages. These reductions became effective in April 2000 and the third
stage started in April 2002. This customer has since required that its suppliers
integrate this cost reduction program into all quotes for new products that are
to be introduced over the next few years. In turn, we have been assured future
business. Management has agreed to the reductions and is planning to compensate
for them via value engineering activities expected from the development of the
newly developed processes and the less expensive materials these processes will
allow.

     However, since the Company has had limited commercial experience with these
processes, at this time no assurance can be given that the price reductions can
be counter balanced with the use of these new processes plus the less expensive
materials. Further, there can be no assurance that the future business will
actually result in firm orders from, or sales, to this customer. Our failure to
realize sales from new and existing programs would have a material adverse
effect on our net sales, income and cash flow.

     We Have Indebtedness. At December 31, 2002, our total indebtedness
consisted of $1,975,964 under our banking facilities and $2,659,223 of other
trade payables and accrued liabilities. Additionally, our 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. During the year ended

                                       17
<PAGE>

December 31, 2002, we were in violation of certain covenants contained in the
facilities agreement. A breach in the facilities agreement may allow the bank to
revoke the credit facilities. 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. Management believes
that our banking facilities will not be revoked; however if the facilities are
revoked, management believes that we will be able to enter into alternative
financing arrangements. We could be materially and adversely affected if our
banking facilities are revoked and alternative financing arrangements are not
obtained. See "Item 6 - Capital Resources and Liquidity."

     Our indebtedness may:

     o    make us more vulnerable to unfavorable economic conditions;

     o    make it more difficult to obtain additional financing in the future
          for working capital, capital expenditures or other general corporate
          purposes;

     o    require us to dedicate or reserve a large portion of our cash flow
          from operations to make payments on our indebtedness, which would
          prevent us from using it for other purposes, such as capital
          expenditures for new product launches and other items which may be
          required in order for us to bid on or accept new business;

     o    make us more susceptible to fluctuations in market interest rates that
          affect the cost of our borrowings; and

     o    make it more difficult for us to pursue strategic acquisitions,
          alliances and partnerships.

     We Have Liquidity Problems Which May Require Further Financing. There can
be no assurance that, if required, any additional bank financing will be
available upon terms and conditions acceptable to us, if at all. Although we
believe that we have funds sufficient to meet our immediate needs, we may
require further funds to finance the development of any business opportunity
that we acquire. There can be no assurance that such funds will be available or
available on terms satisfactory to us. Our inability to obtain additional
financing in a sufficient amount when needed and upon terms and conditions
acceptable to us could have a material adverse effect upon us.

     Going Concern. 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. However, we have a significant working capital
deficit and are in violation of certain loan covenants with our primary lender.
Although we believe that we have reversed our operating losses and are currently
operating at a profitable level, there can be no assurance that we will be able
to generate sufficient positive cash flow from operations to address all of our
cash flow needs. If our current lenders were to "call" our loans and we were not
able to find alternative sources of cash, our shareholders would be materially
and adversely affected.

                                       18
<PAGE>

OUR BUSINESS MAY BE SIGNIFICANTLY ADVERSELY AFFECTED BY WORK STOPPAGES AND OTHER
LABOR MATTERS

     Our Employees. As of March 31, 2003, approximately 84.65% of our employees
were unionized. We are currently negotiating our first agreement. If we are
unsuccessful in negotiating with our union, we may encounter a strike as early
as May 13, 2003, or binding contractual limitations, either of which could:

     o    have an adverse effect on our ability to produce our products in
          accordance with customer contracts;

     o    interfere with the launch of new product programs;

     o    cause us to lose business to competitors; or

     o    limit our flexibility in dealing with our workforce and promptly
          adjusting to changing economic conditions.

     Our inability to manufacture or deliver products as a result of strikes or
binding contractual limitations could have a material adverse effect on our net
sales, net income and cash flow.

     OEMs and Suppliers. Many OEMs and their suppliers have unionized work
forces. Work stoppages or slow-downs experienced by OEMs or these suppliers
could result in slow downs or closures of assembly plants where our products are
included in assembled vehicles. For example, over the past four years, there
have been labor strikes against General Motors that have resulted in work
stoppages. Material work stoppages by one or more of our customers or these
other suppliers could have a material adverse effect on our business.
Furthermore, organizations responsible for shipping our customers' products may
be impacted by occasional strikes staged by the unions representing
transportation employees. Any interruption in the delivery of our customers' or
their other suppliers' products would reduce demand for our products and could
have a material adverse effect on our sales, profitability and cash flow.

     We Are Controlled by Our Management, Whose Interest May Differ From Those
of The Other Shareholders. At the present time, Mr. Robert C. Johnson, the
chairman of the board of directors, and Mr. Raymond Gherardini, a member of the
board of directors, each are record owners of 625,000 shares of our common
stock, collectively representing approximately 50% of the issued and outstanding
shares of common stock. Due to their stock ownership, Mr. Robert C. Johnson and
Mr. Raymond Gherardini are in a position to elect the board of directors and,
therefore, to control our business and affairs including certain significant
corporate actions such as acquisitions, the sale or purchase of assets and the
issuance and sale of our securities. Mr. Robert C. Johnson and Mr. Raymond
Gherardini are able to prevent or cause a change in control. We also may be
prevented from entering into transactions that could be beneficial to us without
Mr. Robert C. Johnson's and Mr. Raymond Gherardini's consents. The interest of
our largest shareholders may differ from the interests of other shareholders.

                                       19
<PAGE>

ITEM 2. DESCRIPTION OF PROPERTY

     Richmond, British Columbia.

     We lease 52,080 square feet of office and warehouse space located at 7791
Alderbridge Way, Richmond, B.C., Canada. The lease term is for seven years, and
is renewable for a five year term. The total rent per month of CDN $22,785
(i.e., US $14,754) during the first two years of the lease term. The total rent
per month during the third, fourth and fifth year is CDN $23,870 (US $15,500)
and the remaining two years rent is CDN $24,955 (US $16,205) per month.

     Vancouver, British Columbia.

     We are also responsible for the lease of our prior facility located at 3137
Grandview Highway, Vancouver, B.C., Canada V5M 2E9. This facility, leased from
Rockmore Investments Ltd., consists of 27,777 square feet of factory, warehouse
and office space. The lease term is five years and is due to expire in September
2004. The current total rent is CDN $13,270 (i.e., US $8,294 based upon current
exchange rates) per month. The lease is a triple net lease, and the Company is
responsible for its share of common area expenses and maintenance. We continue
to attempt to sublease this space.

     Bellingham, Washington.

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

     Denver, Colorado.

     During 2002, we leased 3,400 square feet of warehouse space in Denver,
Colorado at a rental rate of US $5,000 per month. This facility was used for the
Wonder Tool operations prior to the WTI Asset Sale.

ITEM 3. LEGAL PROCEEDINGS

     Alex Ding Litigation.

     Following his termination for cause from his position as president of the
Company on September 12, 2001, Alex Ding, a former director of the Company and
the Company's former president filed a Writ of Summons on September 13, 2001, in
the Supreme Court of British Columbia (Action No. S015104). Mr. Ding's claims
were made against the Company, Multicorp Holdings Inc., Glas-Aire Industries
Ltd., William R. Ponsoldt, Craig Grossman, Todd Garrett, Mark Baldinger, Regency
Affiliates, Inc. and Speed.com, Inc. (collectively the "Defendants"). Mr. Ding

                                       20
<PAGE>

asserted among other things that the redemption transaction involved a breach of
agreements with HSBC Bank Canada ("Bank"), securities laws, corporate laws, and
fiduciary duties owed by the Defendants to the Company's shareholders. Mr. Ding
asserted that the court should enjoin various actions relating to the redemption
and grant other relief. Mr. Ding has not served all of the Defendants
personally, and has not filed a Statement of Claim. The Company discussed the
redemption with its Canadian counsel prior to effecting the redemption, and
determined that proceeding with the redemption would not be in violation of a
court order or otherwise prohibited. Further, the Bank reviewed the proposed
redemption transaction with both outside counsel and an outside accounting firm.
After completion of these reviews, the Bank loaned the Company the funds
necessary to effect the redemption. On January 14, 2003, Mr. Ding filed a notice
of discontinuance against the Company, Multicorp Holdings Inc., Glas-Aire
Industries Ltd., William R. Ponsoldt, Craig Grossman, Todd Garrett, Mark
Baldinger, Regency Affiliates, Inc. and Speed.com, Inc.

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

     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.

                                       21
<PAGE>

     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 not yet filed a response to Universal's claims,
however, we assert that Universal failed to perform pursuant to our agreement
and we were forced to employ an additional consulting company to complete the
tasks. We intend to vigorously defend against this claim.

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

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

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Market Information.

     The Company's Common Stock is currently traded on the over-the-counter
market on the NASDAQ Electronic Bulletin Board under the symbol GLARE.OB.

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

     Our common stock was also listed on the Pacific Stock Exchange under the
Symbol GLA until it was delisted on November 22, 2002. The Company's common
stock was delisted from the Pacific Stock Exchange for failure to meet the
minimum share bid price.

     The table set forth below presents the range, on a quarterly basis, of high
and low bid prices per share of common stock, as reported by NASDAQ. The
quotations reflect interdealer prices without retail mark-up, mark-down or
commission and may not represent actual transactions.

                                       22
<PAGE>

     Year Ended December 31, 2002                          High          Low
     ----------------------------                          ----          ---

     January 1, 2002 through March 31, 2002                $1.70         $0.75
     April 1, 2002 through June 30, 2002                   $1.00         $0.30
     July 1, 2002 through September 30, 2002               $0.60         $0.25
     October 1, 2002 through December 31, 2002             $0.30         $0.10

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

     January 1, 2001 through March 31, 2001                $2.563        $1.375
     April 1, 2001 through June 30, 2001                   $3.10         $1.01
     July 1, 2001 through September 30, 2001               $1.97         $1.10
     October 1, 2001 through December 31, 2001             $1.35         $.77

     The closing price of the common stock on March 20, 2003 was $0.18 per
share. As of March 20, 2003, the Company had approximately 33 shareholders of
record and estimates that its common stock was beneficially owned by more than
500 shareholders based upon ownership in "street name."

     Securities Authorized for Issuance Under Compensation Plans.

     The table set forth below presents the securities authorized for issuance
with respect to compensation plans under which equity securities are authorized
for issuance:
<TABLE>
<CAPTION>

                                    Equity Compensation Plan Information
------------------------------------------------------------------------------------------------------------
                                                                              Number of securities remaining
                              Number of securities to    Weighted-average     available for future issuance
        Plan Category         be issued upon exercise   exercise price of    under equity compensation plans
                              of outstanding options,  outstanding options,  (excluding securities reflected
                                warrants and rights    warrants and rights          in the 1st column)
---------------------------- ------------------------ ---------------------- -------------------------------
<S>                                  <C>                     <C>                          <C>
Equity Compensation Plans            180,000                 $ 2.75                         N/A
approved by security holders
---------------------------- ------------------------ ---------------------- -------------------------------
Equity compensation plans            255,000 (1)             $ 0.01                       320,000 (2)
not approved by security
holders
---------------------------- ------------------------ ---------------------- -------------------------------
                Total                265,000                 $ 2.76                       320,000
---------------------------- ------------------------ ---------------------- -------------------------------
</TABLE>

(1)  Includes 85,000 shares vested on April 12, 2002 pursuant to Mr. Grossman's
     employment agreement not issued pursuant to any equity compensation plan.
     Mr. Grossman has an addition 85,000 warrants which vest on April 12, 2003
     and 85,000 warrants which vest on April 12, 2004.

(2)  Includes 160,000 options that may be issued pursuant to the Incentive
     Compensation Plan and 160,000 options that may be issued pursuant to the
     Non-Qualified Option Plan.

     Sales of Unregistered Securities.

     On December 21, 2001, we consummated a reverse merger transaction whereby
we acquired 100% of the issued and outstanding stock of Wonder Tool for
1,250,000 shares of our common stock. Prior to the merger, Wonder Tool's common

                                       23
<PAGE>

stock was held by Cyclo, a private company owned by two shareholders each of
whom management believes is an "accredited investor." Cyclo then distributed the
Glas-Aire shares to its shareholders. As a result of this transaction, the
owners of Cyclo acquired 50.7% of the Company's outstanding voting stock. The
acquisition was a privately negotiated transaction, and management believes that
this transaction was exempt from the registration provisions of the Securities
Act of 1933, as amended (the "1933 Act") pursuant to Section 4(2) of the 1933
Act.

     Dividends.

     No dividends were declared or paid during the fiscal year ended December
31, 2002 and 2001. Although the board of directors may elect to declare stock
dividends in the future, there are no present plans, arrangements,
understandings or commitments to do so.

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

     Proceeds of Offering.

     The Company received net proceeds from a registered public offering
amounting to approximately $2,773,000 in May 1996. The registration statement
for that offering was declared effective on May 1, 1996, and the SEC File No.
was 33-99258-LA. During 2002, we used the remaining $450,000 from this offering
on moving expenses to our new facility in Richmond, B.C. Canada.

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

     Selected Financial Data.

     The selected financial information set forth below is derived from the
audited 2002 consolidated financial statements of Glas-Aire. On December 21,
2001, we completed a share exchange agreement with the stockholders of Wonder
Tool which resulted in the former stockholders of Wonder Tool controlling our
company. Accordingly, the transaction was accounted for in our consolidated
financial statements as a reverse acquisition whereby Wonder Tool is the
acquiring and continuing entity.

     Accordingly, comparative 2001 information in this annual report and the
accompanying consolidated financial statements reflects:

     o    the consolidated results of operations and cash flows of Wonder Tool
          and Glas-Aire for the period from December 21, 2001 (the date of
          acquisition and incorporation of Wonder Tool) to December 31, 2001;

                                       24
<PAGE>

     o    the results of discontinued operations and cash flows of Wonder Tool's
          predecessor (the Orbital Polishing Division of Cyclo Manufacturing)
          for the period from January 1, 2001 to December 20, 2001; and

     o    the results of operations and cash flows for Glas-Aire for period from
          January 1, 2001 to the date of the reverse acquisition (December 20,
          2001) because Glas-Aire is considered the predecessor business.

     Our consolidated financial statements are prepared in accordance with
United States generally accepted accounting principles and are stated in United
States dollars. The selected consolidated financial data is qualified in its
entirety by reference to, and should be read in conjunction with, the
Consolidated Financial Statements, related Notes and the information set forth
below under this Item 6.

     In January 2003, the Company sold the Wonder Tool assets, therefore, the
assets, liabilities, results of operations and cash flows for Wonder Tool have
been classified as Discontinued Operations in the consolidated financial
statements (See Note 16).

     The independent auditors' reports appearing elsewhere in this document
contain explanatory paragraphs that state that the Company's losses and negative
cash flows from operations raise substantial doubt about our ability to continue
as a going concern. The consolidated financial statements and the selected
financial data do not include any adjustments that might result from the outcome
of that uncertainty.

     Overview.

     The Company's losses for the preceding year were substantial, and
management believes that it is important to note that certain of the expenses
incurred were one time expenses that impacted the Company's financial
performance during the 2002 fiscal year. The Company experienced several
one-time charges associated with a relocation of its manufacturing plant and
costs associated with warranty claims for defective products introduced in 2001.

     The Company retrofitted and moved into a new manufacturing facility in
Richmond, B.C. Canada. In the course of this move, the Company spent
approximately $82,885 on moving expenses and equipment and truck rental.
Further, the Company wrote off leasehold improvements on the Vancouver property
in the amount of $114,105. Additionally, pursuant to GAAP, the Company has
accrued for its rental obligations for the Vancouver facility in the amount of
$253,696.

     During the year ended December 31, 2002, the Company experienced increased
warranty claims related to defective products introduced to market in 2001. In
connection with these claims, the Company hired consultants and performed
laboratory tests to identify and resolve the problems associated with the
defective products. The Company recognized expenses for the consultants and
laboratory tests in the amount of $99,794.

                                       25
<PAGE>

     Management's Plan Going Forward.

     Management believes the Company can return to profitability in 2003 and
will generate cash flow therefrom to meet cash requirements over the next twelve
months. While the Company believes its plan to be achievable, there can be no
assurance that it will generate sufficient cash flow from operations to address
all cash flow needs. Additionally, the Company's primary lender has indicated
that, although the loans remain on a demand basis, the loans may be repaid in
accordance with the terms and conditions outlined in the banking agreement. This
includes amortized payments on the non-revolving facilities. Thus, the Company
will continue making period payments on the term debt. Management believes that
the Company will be able to maintain these credit facilities on a going forward
basis; however, there can be no assurance that this will occur. In addition,
management is pursuing alternative financing arrangements. There can be no
assurance that the Company will be able to secure alternative financing if
needed or obtain alternative financing on terms satisfactory to the Company.

     Management has implemented a plan to increase sales and improve
efficiencies while reducing labor costs. Management has added additional
personnel to strengthen its manufacturing, engineering, quality control and
research and development departments in an effort to improve efficiencies and
increase the Company's profit margins. Management is optimistic that these steps
will contribute to the Company's return to profitability and provide sufficient
cash flow from operations, capital resources and liquidity to continue to
operate into the future and continue as a going concern. However, there can be
no assurance that the sales increase, improvement in efficiencies or reduction
in labor costs will be successful.

     Balance Sheet Data.

                                                    Period From
                                       -------------------------------------
                                       December 31, 2002   December 31, 2001
                                       -----------------   -----------------

     Working Capital (deficiency)         $(1,647,951)        $   868,330
     Total Current Assets                 $ 3,024,068         $ 3,543,779
     Total Current Liabilities            $ 4,672,019         $ 2,675,449
     Total Assets                         $ 5,129,447         $ 5,052,743
     Total Long Term Debt                 $      --           $   748,131
     Capital Lease Obligations            $    51,050         $    63,111
     Deferred Income Taxes                $   170,975         $   198,031
     Stockholders' Equity                 $   222,151         $ 1,368,021


                                       26
<PAGE>
<TABLE>
<CAPTION>

     Income Statement Data.

                                                        Period from
                                ------------------------------------------------------------
                                 Year Ended    December 21 to   January 1 to    January 1 to
                                December 31,    December 31,    December 20,    December 20,
                                    2002           2001(a)         2001(b)         2001(c)
                                ------------    ------------    ------------    ------------
<S>                             <C>                   <C>         <C>             <C>
Sales                           $ 11,820,642          53,774            --        11,735,690
Cost of Sales                      9,712,823          46,440            --         8,565,896
Gross Profit                       2,107,819           7,334            --         3,169,794
Research and Development             740,105          12,694            --           468,501
Selling and Distrib                  999,070             594            --         1,113,534
General and Admin                  1,788,305          70,070            --         1,003,740
(Loss) Income from Operations     (1,419,661)        (76,024)           --           584,019
Loss from Continuing
Operations                        (1,366,459)        (48,010)           --        (3,516,066)
Income from discontinued
operations                            84,684            --           178,662            --
Net (loss) Income from the
period                            (1,281,775)        (48,010)        178,662      (3,516,066)
(loss) earnings per share
- basic and diluted -
Continuing operations                  (0.55)          (0.02)           --             (1.64)

Discontinued Operations                 0.03            --              0.14            --
                                ------------    ------------    ------------    ------------
Net (loss) income per share            (0.52)          (0.02)           0.14           (1.64)

Weighted average number of
shares outstanding                 2,483,322       2,464,349       1,250,000       2,150,024
</TABLE>

(a)  Represents the results of operations of Wonder Tool and Glas-Aire
     Industries Group Ltd. for the period December 21, 2001 (date of
     acquisition) to December 31, 2001 (Note 1).
(b)  Represents the results of operations of Wonder Tool, which includes its
     predecessor Orbital Polishing Operations. (Note 1).
(c)  Represents the results of operations of Glas-Aire Industries Group Ltd.,
     the predecessor company.

     Results of Operations.

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



                                       27
<PAGE>

                                                   Period From
                                   -------------------------------------------
                                   Year Ended December     Year Ended December
                                        31, 2002               31, 2001(a)
                                   -------------------     -------------------
Net Sales                                  100%                    100%
Cost of Sales                             82.2%                   73.0%
Gross Profit                              17.8%                   27.0%
Research and Development                   6.3%                    4.1%
Selling and distribution                   8.5%                    9.5%
General and Administrative                15.1%                    9.1%
Income (loss) from operations           (12.0%)                    4.3%

(a)  Represents the combined results of operations of Wonder Tool and Glas-Aire
     Industries Group Ltd. for the period January 1, 2001 to December 31, 2001.

     Year Ended December 31, 2002 Compared to Year Ended December 31, 2001.

     As a result of the sale of Wonder Tool net assets in January 2003, we now
operate in one industry segment: the automotive accessories business. Results of
operations of the orbital polishing business are segregated in our financial
statements as discontinued operations. For the purposes of meaningful
discussion, 2002 results of operations are compared to 2001, the 2001 amounts
combine the results for 11.5 month period ended December 20, 2001 with the 10
day period from the date of reverse acquisition of Wonder Tool (December 21,
2001) to December 31, 2001. Such amounts corresponding to our consolidated
financial statement presentation are properly segregated in the Selected
Financial Data table.

     Sales. Sales increased by 0.58% from $11,789,464 for the year ended
December 31, 2001 to $11,820,642 for the year ended December 31, 2002. The sales
increase was primarily due to an increase in volume of products sold as a result
of (i) a general increase in automotive sales, (ii) the addition of new
customers, (iii) sales of new parts, and (iv) additional orders received from
existing customers and offset in part from a 5.5% price reduction requested by
our largest customer effective April 2002. Revenues from our four major
automotive accessories customers accounted for approximately 82% of our sales
during the year ended December 31, 2002.

     Gross Profit. Gross profit margins decreased from $3,177,128 or 27% when
expressed as a percentage of sales for the year ended December 31, 2001 to
$2,107,819 or 17.8% for the year ended December 31, 2002. This net decrease of
$1,069,309 or 10.44% was due primarily to (i) an increase in direct labor and
overhead costs for replacement of products in our automotive accessories segment
due to quality control problems associated with the process of manufacturing
acrylic deflectors, and (ii) an increase in material and labor cost for
replacement of products without charge.

                                       28
<PAGE>

     Research and Development. Expenses for R&D increased by 53.81% from
$481,195 for the year ended December 31, 2001 to $740,105 for the year ended
December 31, 2002. The increase can be attributed to an increase in testing of
materials used and product design modifications, an increase in number of
engineering personnel, and an increase of ordinary research and development
activities.

     Selling and Distribution. Selling and distribution expenses decreased by
10.32% from $1,114,128 for the year ended December 31, 2001 to $999,070 for the
period ended December 31, 2002. This decrease of $115,058 was primarily due to
(i) a decrease of $217,570 or 19.53% in warranty claims expenses, (ii) an
increase of $96,275 or 8.64% due to payroll accrual for a former officer of the
Company, (iii) an increase of $37,580 or 3.37% in travel and promotion expenses,
and (iv) a decrease of $31,342 or 2.81% in costs related to the elimination of a
sales representative in Japan.

     General and Administrative. General and administration expenses increased
by 66.5% from $1,073,810 for the year ended December 31, 2001 to $1,788,305 for
the year ended December 31, 2002. This was a result of (i) a decrease of
$117,209 or 10.50% due to a loss from operation with no bonuses being paid, (ii)
an increase of $253,696 or 23.6% in rent and common areas costs due to the
obligation for rent of the Vancouver facility until September 2004, (iii) an
increase of $114,105 or 10.6% due to write-off of lease-hold improvements to the
Vancouver facility, (iv) an increase of $241,419 or 22.5% related to the
employment of two new managers, (v) an increase of $60,723 or 5.65% related to
compensation expense for warrants granted to our Chief Executive Officer and
President, (vi) an increase of $46,804 or 4.35% related to the preparation of
quarterly and annual reports, and consulting fees related to public relations,
(vii) a decrease of $100,000 or 9.3% in administration staffing costs, (viii) an
increase of $37,652 or 3.5% due to the addition of an in-house computer employee
to eliminate the use of outside computer consultants, (ix) an increase of
$13,795 or 1.3% related to bonuses to employees, (x) an increase of $36,224 or
3.4% in directors insurance, (xi) an increase of $39,454 or 3.6% in accounting
fees resulting from an audit imposed by the bank to review the Company's
financial position, (xii) an increase of $34,551 or 3.2% due to loss on foreign
exchange, and (xiii) an increase of $15,262 or 1.4% in other miscellaneous
administrative costs.

     Interest Expense. Interest expense increased by 83.8% from $57,546 for the
year ended December 31, 2001 to $105,760 for the year ended December 31, 2002.
This is the result of increased borrowing to fund (i) the moving expenses to the
Richmond facility and the purchase of new equipment, and (ii) the redemption of
our common stock from Regency Affiliates, Inc. in October 2001.

     Income from Operations. Our income from operations decreased by 288% from
$507,995 for the year ended December 31, 2001 to a loss of $1,419,661 for the
year ended December 31, 2002. This decrease in income was primarily due to (i)
$95,850 or a 5.5% price reduction as requested by our largest customer effective
April 2002, (ii) $253,696 related to the rent of the Vancouver facility, (iii)
$168,462 related to the moving expenses, (iv) $114,105 due to write-off of
lease-holder improvements to the Vancouver Facility, (v) increased R&D costs of
$258,910, (vi) $143,295 provision for contract cost for an ex-officer of the
Company, (vii) $558,715 increase in labor costs (viii) $285,577 of
administration costs, and (ix) $48,214 increase of interest expenses.

                                       29
<PAGE>

     Interest Income. Interest income decreased by 84.6% from $48,316 for the
year ended December 31, 2001 to $7,018 for the year ended December 31, 2002 due
to the maturity of all term deposits to fund the moving expenses and new
equipment cost.

     Income/Loss from Equity Investment. Income accrued from the equity
investment decreased by 100% from $211,420 for the year ended December 31, 2001
to $0 for the year ended December 31, 2002. Equity income accrued as a result of
our investment in Regency Affiliates, Inc. We wrote off our equity investment in
Regency Affiliates, Inc. in connection with the redemption of its common stock
on October 1, 2001. As a result we will not realize income or loss in the future
from that investment.

     Income Taxes. In 2002, the expected tax recovery based on enacted tax rates
is $516,258. The reduction in the recovery to $151,944 from continuing
operations in the financial statements is due to Federal Subpart F Income Tax
and under accruals.

     In 2001, the expected tax recovery based on enacted tax rates is
$1,171,701. The reduction in the recovery to $69,886 was due to the increase in
the valuation allowance related to capital losses available.

     Discontinued Operation. The results of Wonder Tool have been classified as
a discontinued operation in accordance with accounting principles generally
accepted in the United States. Income from operations of Wonder Tool decreased
from $178,662 for the year ended December 31, 2001 to $84,684 for the year ended
December 31, 2002, which was primarily attributable to a general downturn in the
economy affecting the air travel and cargo industry.

     Capital Resources and Liquidity.

     Cash used in operating activities during 2002 was ($236,570), compared to
$1,054,359 provided by operations during 2001, or a decrease of $1,290,928. This
increase in the use of cash can be primarily attributed to fund losses of
$1,366,459 from continuing operations. The source of funding was from
collections of accounts receivable of $312,676 and an increase in accounts
payable of $789,190. Our current cash requirements to sustain our operations for
the next twelve months through December 2003 are estimated to be $13,200,000. We
expect that these requirements will be provided by operations.

     Our investing activities included the purchase of fixed assets for the year
ended December 31, 2002 of $810,021 compared to purchase of fixed assets in the
prior year of $271,401, or an increase of $538,620, due to the addition of new
equipment. Our bank debt increased by $811,346 and was used in part, to fund the
reduced cash from operations, acquire fixed assets and pay down long term debt.

                                       30
<PAGE>

     As of December 31, 2002, we had a $1,273,723 (Cdn $2,000,000) line of
credit for working capital, secured by accounts receivable, inventories, certain
equipment and other assets of the Company and an unlimited guarantee by the
Company and its subsidiary, Glas-Aire Industries Ltd. As of December 31, 2002,
the Company had overdrawn the line of credit by $109,778.

     On December 31, 2002, there was a working capital deficiency of
($1,647,951) as compared to working capital of $868,330 on December 31, 2001.
This decline was primarily due to (i) the reclassification of long-term debt as
a current liability, (ii) an increase in inventory due to a high volume of
orders, (iii) an increase in renovation and improvement cost relating to the
Richmond facilities, and (iv) an increase in equipment cost. We expect that
working capital requirements and capital additions will continue to be funded
through a combination of our existing funds, internally generated funds and
existing bank facilities and capital leases. Our working capital requirements
are expected to increase in line with the growth of our business. During the
current fiscal year, we anticipate making total capital expenditures of
approximately $650,000 as follows: (i) $250,000 for laser equipment for
mechanized material handing, (ii) $200,000 for design/new software systems,
(iii) $150,000 for thermoforming equipment to facilitate the developed Matched
Compression Molding process, and (iv) $50,000 for leasehold improvements to
increase capacity to accommodate new processes in rental building.

     During 2002, we were in violation of certain of 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.

     We are dependent upon these existing banking facilities. Currently, these
banking facilities and our financial position are under review. Our banking
facilities agreement contains covenants that, among other things, requires 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. We
were in violation of certain of the covenants contained in the facilities
agreement at December 31, 2002. However, the lender has not declared an event of
default, and has agreed to forbear from taking any action until April 30, 2003.
Management believes that our banking facilities will not be revoked; however if
the facilities are revoked, management believes that we will be able to enter
into alternative financing arrangements. We could be materially and adversely
affected if our banking facilities are revoked and alternative financing
arrangements are not obtained.

     Our ability to continue as a going concern is dependent upon our ability to
generate profitable operations and, if we are unable to generate profitable
operations, to obtain the necessary financing to meet our obligations and pay
our liabilities arising from normal business operations when they come due. We
will be unable to continue as a going concern if we are unable to earn
sufficient revenues from our operations or to raise additional capital through
debt or equity financings to meet our working capital and subsidiary capital
requirements.

                                       31
<PAGE>

     Impact of Inflation.

     We believe that inflation has not had a material affect on our business.
Although the cost to us of certain raw materials used in the manufacture of our
products, primarily acrylic, has increased over the past few years, we have been
able to increase the prices of our products accordingly.

     Exchange Rates.

     We sell most of our products to international customers. Our principal
markets are the United States and Japan. We sell most of our products in United
States Dollars, but pay for material components and labor principally in
Canadian Dollars. During 2002, we did not engage in hedging activities with
respect to currency fluctuations. However, management intends to take corrective
action in an effort to attempt to minimize any negative impact foreign currency
fluctuations may have upon us.

     Exchange rates between the United States and Canadian Dollar for the year
ended December 31, 2002, and the year ended December 31, 2001, including the
average exchange rate for the year, are as follows:

Fiscal year ended             Exchange Rate              Average for Period
-----------------             -------------              ------------------

December 31, 2002         1.U.S.$: 1.5776 Cdn.$         1 U.S.$: 1.5702 Cdn.$
December 31, 2001         1.U.S.$: 1.5873 Cdn.$         1 U.S.$: 1.5443 Cdn.$

     Recently Issued Accounting Standards.

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

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

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

                                       32
<PAGE>

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

     The implementation of these new standards is not expected to have a
material effect on our financial statements.

     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.

                                       33
<PAGE>

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.

Contractual Obligations.

     The following table sets forth information with respect to our contractual
obligations and commercial commitments as of December 31, 2002.

                             Contractual Obligations

                                            Payments due by Period
                              --------------------------------------------------
                                                                      More than
                                 Total    1 to 3 years  4 to 5 years   5 years
                                 -----    ------------  ------------   -------
Richmond Lease Payments (1)   $1,155,426   $  533,697    $  368,636   $  253,093
Vancouver Lease Payments(2)   $  253,696   $  253,696          --           --
Craig Grossman Employment     $  426,000   $  426,000          --           --
Contract (3)
Principal Payments on Debt
to HSBC (4)                   $  755,327   $  755,327                       --
Capital Lease Manufacturing   $   99,454   $   99,454          --           --
Equip. (5)

(1)  We have a seven year lease agreement that began on October 1, 2002 for our
     facility located at 7791 Alderbridge Way, Richmond, B.C. Canada. See "Item
     2--Description of Property."
(2)  The lease for the Vancouver facility located at 3137 Grandview Highway,
     Vancouver, B.C. Canada expires in September 2004. See "Item 2--Description
     of Property."
(3)  Mr. Grossman's base salary calculated as of December 31, 2002. Mr.
     Grossman's Employment Agreement terminates on December 31, 2004. See "Item
     10 - Executive Compensation."
(4)  For further explanation, see Note 6 to the Financial Statements.
(5)  For further explanation, see Note 7 to the Financial Statements.

ITEM 7. FINANCIAL STATEMENTS

     Included beginning at page F-1.



                                       34
<PAGE>

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

     Not Applicable.

                                    PART III

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

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

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

     Robert C. Johnson            58         Chairman of the Board

     Raymond Gherardini           57         Director

     Craig Grossman               40         President, Chief Executive Officer
                                             and Director

     Robert D. Johnson            56         Director

     Harry B. Mosgrove            58         Director

     Linda Kwan                   58         Chief Financial Officer

     Doug Preston                 53         General Manager

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

     Raymond Gherardini has served as a director of the Company since December
21, 2001. Mr. Gherardini is currently Vice President for Sales/Marketing at
Cyclo Manufacturing Co. Mr. Gherardini attended Colorado State University in
Fort Collins, Colorado and majored in Business Administration. He is also
Chairman of the Board of Shanghai-Cyclo, Cyclo's Chinese joint venture. Mr.

                                       35
<PAGE>

Gherardini has 34 years experience in the automotive industry. Mr. Gherardini
has developed sales and marketing programs aimed at the automotive chain stores,
automotive warehouse distributors, mass merchant chain accounts and automotive
dealer networks. Mr. Gherardini has handled the diverse classes of automotive
trades, either on a direct basis or through factory representatives. Immediately
prior to acquiring Cyclo, Mr. Gherardini was Vice President of Sales and
Marketing for Turbo Tek Enterprises, Inc., a California marketing firm with 1989
sales of $30 million. Mr. Gherardini was founder of Turbo Tek in 1984 and was
responsible for its successful sales and marketing programs in the United States
and overseas. Mr. Gherardini was a member of APAA for many years and is
currently a member of SEMA through his company.

     Craig Grossman has served as a director of the Company since May 21, 1999.
From September 12, 2001 until December 4, 2001, Mr. Grossman served as the
acting President of the Company. On December 4, 2001, the board of directors
appointed Mr. Grossman the Chief Executive Officer and President of the Company.
From 1999 to the present Mr. Grossman has been the President of Allied
Conservancy Group, Inc., a private hedge fund. Since 1999, Mr. Grossman has
served as the managing partner of Tallman Gulch Development Group, LLC, an
investment group funding a 500-acre residential land development in Douglas
County, Colorado. From 1993 to 2001, he served as the Vice President of
Saddleback Mountain Development, an investment group funding an 1800-acre
residential development in Evergreen, Colorado. From 1998 to 1999, Mr. Grossman
served as the Chief Executive Officer of On-line Mortgage Service, a licensed
retail mortgage broker doing business in 11 states. From 1994 to 1995, Mr.
Grossman also served as the President and a Director of Regency Affiliates, Inc.

     Robert D. Johnson has served as a director of the Company since June 5,
2002. Mr. Johnson currently oversees his personal investments. From 1986 to
March 2001, Mr. Johnson was Chief Executive Officer and owner of Bannon Energy
Incorporated, an independent oil and gas company located in Houston, Texas. In
1996, Bannon sold substantially all of its oil and gas assets. During the past
five years, Bannon has focused on venture capital investments in start-up
companies and trading of common stocks and options of publicly traded companies.
Bannon owned a majority of the membership interest in Newton Healthcare
Networks, LLC when it was acquired by Rockport Healthcare Group, Inc. Bannon
owned a majority interest in InfraResources, LLC, a provider of information
technology personnel on a contract basis, which was sold to ClearWorks.net, Inc.
in April 1998. Mr. Johnson has a Bachelors degree in Engineering and 30 years of
experience in the oil and gas industry in various management positions with
major and independent oil and gas companies.

     Harry B. Mosgrove has served as a director of the Company since June 5,
2002. Mr. Mosgrove currently oversees his personal investments after culminating
in 2000, a 19 year career with Copper Mountain, Inc. a fully integrated Ski and
Golf Resort located in Summit County, Colorado. Mr. Mosgrove's last level of
responsibility for Copper Mountain was as its President and Chief Executive
Officer (13 years). He was responsible for all aspects of the resort including
its real estate development. He successfully negotiated a merge of Copper
Mountain, Inc. with Intrawest, a NYSE and Toronto listed company in 1997 at a
value in excess of $100 million. Mr. Mosgrove's career prior to Copper Mountain,
Inc. included 18 years in real estate and property management with Aristek
Corporation, Tellus Realty Services of Colorado, Fulscher Company and Van
Schaack & Co. where he started in 1963. Mr. Mosgrove was an Honors Graduate of
Regis College in Denver, Colorado where he received a degree in accounting and
finance.

                                       36
<PAGE>

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

     Doug Preston has been the General Manager of the Company since July 15,
2002. Prior to joining the Company, Mr. Preston was employed as the Plant
Manager of Madill Equipment Canada, a major international manufacturer of forest
industry machines. While at Madill, Mr. Preston was responsible for engineering,
purchasing and manufacturing activities. From 1973 to 1996, Mr. Preston was
employed by Freightliner of Canada (a wholly owned subsidiary of
DaimlerChrysler), an international leader in the manufacture of heavy duty
trucks. Mr. Preston holds a Business Management Certificate from the University
of British Columbia and a Diploma in English Bible from Western Pentecostal
Bible College.

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

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

     Compliance With Section 16(A) of The Exchange Act.

     We believe with respect to each person that served during fiscal 2002 as an
officer or member of the board of directors of the Company that there were no
transactions that occurred during our most recent fiscal year end which required
the filing of a Form 5.

     During 2002, Mr. Grossman filed an untimely Form 4 reporting one
transaction. On June 17, 2002, Mr. Grossman filed an amended Form 4 disclosing
the acquisition on April 12, 2002, of 255,000 warrants pursuant to his
Employment Agreement.

                                       37
<PAGE>

     Board Committees.

     The board of directors maintains a Compensation Committee and an Audit
Committee. The members of the Compensation Committee are Messrs. Robert C.
Johnson and Raymond Gherardini. The members of the Audit Committee are Messrs.
Robert D. Johnson and Harry B. Mosgrove, both of whom are independent members of
the board of directors. The Compensation Committee did not have any formal
meetings during the last fiscal year. The Audit Committee met via telephone
conference four times during the last fiscal year.

ITEM 10. EXECTIVE COMPENSATION

     The following table summarizes all compensation paid to the Chief Executive
Officer, for services rendered during the last three fiscal years. No additional
executive officers' compensation exceeded $100,000 during the year ended
December 31, 2002.

                                 Annual Compensation
                   Fiscal Year                            Other      Securities
                      ended        Annual                 Annual     Underlying
                   December 31,    Salary     Bonus    Compensation   Warrants
                   ------------    ------     -----    ------------   --------
Craig Grossman,       2002        $213,000     --       $10,000(1)    255,000
President and CEO                                        11,400(2)
                      2001            --    100,000(3)  $ 6,000(4)     10,000(6)
                      2000(5)         --       --       $11,000(4)     10,000(6)

(1)  Represents $5,000 paid to Mr. Grossman for services as a director in 2002
     and 1,996 shares of common stock having a value of $5,000 based upon the
     trading value as fees were paid in connection with services as a director
     of the Company in 2000.
(2)  Represents vehicle allowance provided pursuant to Mr. Grossman's Employment
     Agreement. (3) Mr. Grossman was paid this bonus for management services he
     provided to the Company for the year ended December 31, 2001.
(4)  Represents fees paid in connection with services as a director of the
     Company.
(5)  The Company changed its fiscal year end from January 31 to December 31
     effective December 31, 2000, so that the information presented is actually
     for the 11 months ended December 31, 2000.
(6)  Represents 10,000 options granted to Mr. Grossman for services as a
     director of the Company.

     Option Grants in the Last Fiscal Year.

     The following table sets forth information concerning options granted
during fiscal year 2002 to the Named Executive Officers.

                                       % of Total Options
                 Number of Securities      Granted to
                  Underlying Options      Employees in     Exercise   Expiration
     Name              Granted             Fiscal Year       Price       Date
     ----              -------             -----------       -----       ----

Craig Grossman         255,000                100%            (1)         (1)

(1)  Pursuant to Mr. Grossman's Employment Agreement 85,000 warrants vested on
     April 12, 2002, 85,000 warrants vested on April 12, 2003 and 85,000
     warrants vest on April 12, 2004. All the warrants expire 10 years from the
     date of grant and are exercisable at $0.01. The trading price on the date
     of grant was $0.35.

                                       38
<PAGE>

     Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option

     During the fiscal year ended December 31, 2002, there were no options
exercised by any of our officers, directors or employees. Further, on December
31, 2002, the exercise prices of all existing options were in excess of the
market value of those options. The following table sets forth information
concerning the number of shares that may be acquired on the exercise of options
and exercisable and unexercisable stock options at the end of fiscal year 2002
for the Named Executive Officers and members of the board of directors.

                                        Number of Securities Underlying
NAME                                    Unexercised Options at Year End
----                                    -------------------------------
                                        Exercisable       Unexercisable
                                        -----------       -------------
Craig Grossman                          115,000 (1)          170,000

(1)  Includes 30,000 options granted to Mr. Grossman for his services as a
     member of the board of directors during 1999, 2000 and 2001.

     Employment Agreements.

     We have entered into two Employment Agreements with Mr. Craig Grossman, our
Chief Executive Officer and a member of the board of directors. One employment
agreement is between Mr. Grossman and the Company and the other agreement is
between Mr. Grossman and the Company's Canadian operating subsidiary Glas-Aire
Industries Ltd. The principal terms of the employment agreements are summarized
below. The employment agreements are to be retroactively effective as of January
1, 2002, and terminate on December 31, 2004, unless earlier terminated by the
Company or Mr. Grossman. The Employment Agreements are automatically renewable
for three year terms.

     The Employment Agreements provide for aggregate annual salary of $213,000,
a car allowance of $11,400 per year, medical insurance in both the United States
and Canada for Mr. Grossman and his family, and an annual bonus. The annual
bonus shall be equal to 10% of the increase in net shareholder's equity over the
net shareholder's equity for the previous fiscal year with any incremental
increase in shareholder's equity resulting from the issuance of any shares of
preferred or common stock for cash or other property excluded in calculating the
annual bonus. If a change of control occurs as defined in the agreement, Mr.
Grossman may at his option elect to treat the change of control as termination
for other than cause and be paid a severance payment equal to 18 months of his
compensation. If Mr. Grossman is terminated for cause, Mr. Grossman is to be
paid all salary and vacation days accrued, but is entitled to no severance
compensation. Copies of Mr. Grossman's Employment Agreements were filed in our
10-KSB for the year ended December 31, 2001.

     In addition, Mr. Grossman was granted warrants to acquire 255,000 shares of
the Company's common stock at an exercise price of $0.01 per share, which expire
on April 12, 2012, and contain customary anti-dilution provisions. The warrants
were granted on April 12, 2002, and vest as follows: 85,000 shares of the
Company's common stock vested immediately upon signing of the agreement, with
warrants to acquire an additional 85,000 shares vesting on the first anniversary
of the date of the agreement provided that Mr. Grossman is employed by the
Company, and warrants to acquire an additional 85,000 shares vesting on the
second anniversary of the date of the agreement provided that Mr. Grossman is
employed by the Company.

                                       39
<PAGE>

     Directors Fees.

     We paid $2,500 in cash to six former directors and $2,500 in cash to the
current directors during the fiscal year ended December 31, 2002.

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

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

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

     o    An annual award of an option to purchase 10,000 shares of Glas-Aire's
          common stock, at fair market value on date of grant. Options granted
          under this provision expire five years from the date of grant, are
          exercisable in cash and contain anti-dilution provisions.

     Profit Sharing Program. We adopted a profit sharing program that provides
that an amount equal to 10% of the Company's income before income taxes (subject
to some adjustments) may be distributed to officers and employees of the
Company. There were no distributions pursuant to the plan for the year ended
December 31, 2002.

     Executive Incentive Compensation Plan. On August 1, 2000, the Compensation
Committee of the Board of Directors approved and established an Executive
Incentive Compensation Plan (the "Executive Compensation Plan"). The purpose of
the Executive Compensation Plan is to help us employ and retain key executive
officers. The Executive Compensation Plan has three components -- base salary,
cash incentive, and an incentive stock option award. The cash incentive portion
is based upon achieving annual earnings goals ("Incentive Goal") based upon
earnings before income taxes including only the earnings derived from the
Company and its consolidated subsidiaries. If 100% of the Incentive Goal is
achieved then the eligible executives each will receive a cash bonus equal to
38.5% of their base salary. If 125% of the Incentive Goal is achieved then each
will receive a cash bonus equal to 57.75% of their base salary, and if 150% of
the Incentive Goal is achieved then each will receive a cash bonus equal to 77%
of their base salary. Under no circumstances will actual bonuses for any fiscal
year exceed 25% of the Company's Net Income (after taxes) or Earnings Applicable
to Common Stock (as appropriate). The Incentive Stock Option Award portion of
the Executive Compensation Plan provides for the award of incentive options to
the eligible executive officers based upon the Company achieving 100% of the

                                       40
<PAGE>

Incentive Goal. If the Incentive Goal is achieved, then the Compensation
Committee shall cause to be set aside options equal to 5% of our outstanding
shares for awards to employees, with 70% of those options being available to the
eligible executive officers, 10% of the entire option pool is available for
issuance to the Chairman of the Board of Directors, provided that the Chairman
is not compensated by a salary. Any options granted will vest as follows:
one-third (1/3) on the date of grant, one-third (1/3) on the first anniversary
of the date of grant, and one-third (1/3) on the second anniversary of the date
of grant.

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

     The board of directors adopted a Non-Qualified Stock Option Plan (the
"Non-Qualified Plan") which provides for the grant of options to purchase an
aggregate of not more than 160,000 shares of our common stock. The purpose of
the Non-Qualified Plan is to provide certain key employees, independent
contractors, technical advisors and directors with options in order to provide
additional rewards and incentives for contributing to the success of the
Company. These options are not incentive stock options within the meaning of
Section 422 of the Code.

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

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

                                       41
<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth as of March 20, 2003, the beneficial
ownership of the Company's common stock by each person known to the Company to
own beneficially more than 5% of the Company's common stock and by the officers
and directors of the Company, individually and as a group. Unless otherwise
stated below, each such person has sole voting and investment power with respect
to all such shares of common stock.

     Name and Address of                                    Amount and Nature of
      Beneficial Owner            Beneficial Ownership        Percent of Class
-----------------------------     --------------------        ----------------
Raymond Gherardini                      625,000                    24.52%
2452 South Chase Lane
Lakewood, Colorado 80227

Robert C. Johnson                       625,000                    24.52%
7085 West Belmont Dr.
Littleton, Colorado 80123

Craig Grossman                          203,485(1)(2)               7.40%
7791 Alderbridge Way
Richmond, B.C.
Canada V6X 2A4

Robert D. Johnson                        30,000                      1.2%
13606 Bermuda Dunes Ct.
Houston, Texas 77069

Harry Mosgrove                            5,300                     0.21%
8065 Iris Street
Arvada, Colorado 80005

Linda Kwan                               16,033                     0.63%
7791 Alderbridge Way
Richmond, B.C.
Canada V6X 2A4

Doug Preston                                  0                        0%
7791 Alderbridge Way
Richmond, B.C.
Canada V6X 2A4

Directors and executive officers
as a group (7 persons)                1,504,818                    54.75%

------------------------------
(1)  Includes options to purchase 10,000 shares granted to directors on November
     4, 1999, 10,000 shares granted to directors on December 4, 2000 and 10,000
     shares granted to directors on December 4, 2001.
(2)  Includes 85,000 shares vested on April 12, 2002 pursuant to Mr. Grossman's
     employment agreement and an additional 85,000 shares that shall become
     exercisable on April 12, 2003.

                                       42
<PAGE>

     Changes in Control.

     None.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Wonder Tool, Inc. Manufacturing Facility Rent.

     During the year ended December 31, 2002, we leased the Wonder Tool
manufacturing facility in Denver, Colorado from companies controlled by Robert
C. Johnson, the Company's Chairman of the board of directors and Raymond
Gherardini, a member of the board of directors. Aggregate rental payments under
this lease for 2002 totaled approximately $56,833.

     Electric Motors for Wonder Tool, Inc.

     During the year ended December 31, 2002, Wonder Tool purchased electric
motors from two entities in which Robert C. Johnson, the Company's Chairman of
the board of directors and Raymond Gherardini, a member of the board of
directors, are the principal shareholders and members of these entities. During
the year ended December 31, 2002, Wonder Tool paid these entities $15,520 in
connection with the purchase of the motors. This amount represents the costs
paid by these entities for the motors and neither of these entities made a
profit on this transaction.

     Indemnification Agreement Glas-Aire and Asian-American.

     In connection with the WTI Asset Sale, Asian-American entered into a motor
supply purchase agreement with the purchaser of the Wonder Tool assets. Pursuant
to the motor supply purchase agreement, Asian-American will supply a maximum of
12,500 electric motors to the purchaser at a guaranteed price of $7.00 per motor
through January 1, 2005. Glas-Aire has agreed to indemnify, defend and hold
harmless Asian-American, and its respective managers, members, employees,
consultants, agents, attorneys, successors, and assigns against any losses,
costs, damages, liabilities, expenses, and claims or suits raising out of the
motor supply purchase agreement. Robert C. Johnson, the Company's Chairman of
the board of directors and Raymond Gherardini, a member of the board of
directors are the managing members of Asian-American.


                                       43
<PAGE>

                                     PART IV

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

     Documents filed as part of this Form 10-KSB:

     (a)  List of Exhibits.

          (i)  Financial Statements: The financial statements listed by the
               Registrant on the accompanying Financial Statements (see pages
               F-1 through F-23) are filed as part of this Annual Report on Form
               10-KSB.

     (b)  Other Exhibits.

          (i)  Sarbanes Oxley 906 Certification.
          (ii) Craig Grossman Sarbanes Oxley 302 Certification.
          (iii) Linda Kwan Sarbanes Oxley 302 Certification.

     (c)  Report on Form 8-K:

          (i)  None.

ITEM 14. CONTROLS AND PROCEDURES

     Our Chief Executive Officer and Chief Financial Officer have evaluated the
effectiveness of the Company's disclosure controls and procedures (as defined in
Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934, as amended, as
of a date within 90 days prior to the filing date of this Annual Report (the
"Evaluation Date"). Based on this evaluation, such officers have concluded that,
as of the Evaluation Date, our disclosure controls and procedures are effective
in timely alerting them to material information required to be included in the
Company's periodic SEC filings. Since the Evaluation Date, there have not been
any significant changes in the internal controls of the Company, or in other
factors that could significantly affect these controls subsequent to the
Evaluation Date.


                                       44
<PAGE>


SIGNATURES

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

                                        GLAS-AIRE INDUSTRIES GROUP LTD.


Date: April 29, 2003                    By: /s/ Craig Grossman
                                        ----------------------------------------
                                        Craig Grossman, Chief Executive Officer,
                                        President and Director


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

Date: April 29, 2003                    /s/ Robert C. Johnson
                                        ----------------------------------------
                                        Robert C. Johnson, Chairman of the Board


Date: April 29, 2003                    /s/ Raymond Gherardini
                                        ----------------------------------------
                                        Raymond Gherardini, Director


Date: April 29, 2003                    /s/ Robert C. Johnson
                                        ----------------------------------------
                                        Robert C. Johnson, Director


Date: April 29, 2003                    /s/ Robert D. Johnson
                                        ----------------------------------------
                                        Robert D. Johnson, Director


Date: April 29, 2003                    /s/ Harry B. Mosgrove
                                        ----------------------------------------
                                        Harry B. Mosgrove, Director


Date: April 29, 2003                    /s/ Linda Kwan
                                        ----------------------------------------
                                        Linda Kwan, Chief Financial Officer




                                       45
<PAGE>




                                                 Glas-Aire Industries Group Ltd.
                                               Consolidated Financial Statements
                                           For the year ended December 31, 2002,
                         the period from December 21, 2001 to December 31, 2001,
                        and the period from January 1, 2001 to December 20, 2001
                                                        (Stated in U.S. Dollars)



                                                                        Contents
--------------------------------------------------------------------------------

Independent Auditors' Report                                                 F-2

Independent Auditors' Report - Predecessor Auditor                           F-3

Consolidated Financial Statements

  Balance Sheets                                                             F-4

  Statements of Operations                                                   F-5

  Statements of Stockholders' Equity                                         F-6

  Statements of Comprehensive (Loss) Income                                  F-7

  Statements of Cash Flows                                                   F-8

  Summary of Significant Accounting Policies                                F-10

  Notes to Financial Statements                                             F-18




                                       F-1
<PAGE>

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

                                                    Independent Auditors' Report

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



To the Directors and Stockholders of
Glas-Aire Industries Group Ltd.

We have audited the accompanying consolidated balance sheets of Glas-Aire
Industries Group Ltd. ("Successor Company") as at December 31, 2002 and December
31, 2001 and the related consolidated statements of operations, stockholders'
equity, comprehensive loss and cash flows for the year ended December 31, 2002
and the period from December 21, 2001 to December 31, 2001 and the consolidated
statements of operations, comprehensive loss and cash flows of Glas-Aire
Industries Group Ltd. ("Predecessor Company"), as discussed in Note 1 to the
financial statements for the period from January 1, 2001 to December 20, 2001.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

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

In our opinion, the Successor Company consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
Glas-Aire Industries Group Ltd. as at December 31, 2002 and December 31, 2001
and the results of its operations and its cash flows for the year ended December
31, 2002 and the period from December 21, 2001 to December 31, 2001 in
conformity with United States generally accepted accounting principles. Further,
in our opinion, the Predecessor Company consolidated financial statements
referred to above present fairly, in all material respects, the results of
operations and cash flows of the Predecessor Company for the period from January
1, 2001 to December 20, 2001 in conformity with United States generally accepted
accounting principles.

As discussed in Note 1 to the financial statements, the Successor Company
purchased assets and assumed liabilities of the Predecessor Company on December
21, 2001, in a business combination accounted for as a reverse acquisition. As a
result, the financial statements of the Successor Company are presented on a new
basis of accounting from the financial statements of the Predecessor Company
and, therefore, are not comparable.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 17 to the
consolidated financial statements, the Company incurred a loss from continuing
operations during the year ended December 31, 2002 of $1,366,459, is in
violation of certain debt covenants and has a working capital deficiency of
$1,647,951 at December 31, 2002. These conditions raise substantial doubt about
the Company's ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 17. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.


Chartered Accountants
Langley, Canada
March 10, 2003

                                       F-2
<PAGE>

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

                                                    Independent Auditors' Report

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



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

We have audited the statements of operations, cash flows and comprehensive
income of Orbital Polisher Operation (A division of Cyclo Manufacturing Company,
an S corporation) for the period from January 1, 2001 to December 20, 2001.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of Orbital
Polisher Operation (A division of Cyclo Manufacturing Company, an S Corporation)
for the period from January 1, 2001 to December 20, 2001 in conformity with
accounting principles generally accepted in the United States of America.


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

                                       F-3
<PAGE>
<TABLE>
<CAPTION>

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

                                                           Glas-Aire Industries Group Ltd.
                                                               Consolidated Balance Sheets
                                                                  (Stated in U.S. Dollars)

December 31                                                        2002            2001
------------------------------------------------------------------------------------------
<S>                                                             <C>            <C>
Assets
Current
  Cash and equivalents                                          $      --      $   465,193
  Accounts receivable, net of allowance for doubtful accounts
    of $21,748 (2001 - $21,588) (Note 5)                          1,509,423      1,836,077
  Inventories (Notes 2 and 5)                                     1,203,022        985,154
  Prepaid expenses                                                   83,735        142,261
  Income taxes refundable                                            31,877           --
  Deferred income taxes (Note 10)                                   196,011        115,094
                                                                -----------    -----------
                                                                  3,024,068      3,543,779

Fixed assets, net (Note 3)                                        1,781,824      1,285,060
Net assets held for sale (Note 16)                                  323,555        223,904
                                                                -----------    -----------
                                                                $ 5,129,447    $ 5,052,743
                                                                ===========    ===========
Liabilities and Stockholders' Equity
Liabilities
Current
  Bank indebtedness (Note 5)                                    $ 1,220,637    $   409,316
  Accounts payable                                                1,546,431        776,584
  Accrued liabilities                                             1,112,792      1,205,859
  Income taxes payable                                                 --              416
  Current portion of long-term debt (Note 6)                        755,327        256,499
  Current portion of obligations under capital lease (Note 7)        36,832         26,775
                                                                -----------    -----------
                                                                  4,672,019      2,675,449

Long-term debt (Note 6)                                                --          748,131
Obligations under capital lease (Note 7)                             51,050         63,111
Deferred income taxes (Note 10)                                     170,975        198,031
Net liabilities held for sale (Note 16)                              13,252           --
                                                                -----------    -----------
                                                                  4,907,296      3,684,722
                                                                -----------    -----------
Contingencies (Note 14)

Stockholders' equity
  Common stock (Note 8)                                              25,007         24,643
  Additional paid-in capital                                      1,519,719      1,389,343
  Accumulated deficit                                            (1,329,785)       (48,010)
  Deferred compensation (Note 8)                                    (25,977)          --
  Accumulated other comprehensive income
    - foreign currency translation adjustment                        33,187          2,045
                                                                -----------    -----------
                                                                    222,151      1,368,021
                                                                -----------    -----------
                                                                $ 5,129,447    $ 5,052,743
                                                                ===========    ===========

                                            F-4
<PAGE>

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

                                                                                      Glas-Aire Industries Group Ltd.
                                                                                Consolidated Statements of Operations
                                                                                             (Stated in U.S. Dollars)

                                                                  Period from         Period from         Period from
                                               Year ended      December 21 to        January 1 to        January 1 to
                                              December 31         December 31         December 20         December 20
                                                     2002            2001 (a)             2001(b)            2001 (c)
---------------------------------------------------------------------------------------------------------------------

Sales (Note 12)                              $ 11,820,642        $     53,774        $       --          $ 11,735,690
Cost of goods sold                              9,712,823              46,440                --             8,565,896
                                             ------------        ------------        ------------        ------------

Gross profit                                    2,107,819               7,334                --             3,169,794
                                             ------------        ------------        ------------        ------------
Expenses
  Research and development                        740,105              12,694                --               468,501
  Selling and distribution                        999,070                 594                --             1,113,534
  General and administrative                    1,788,305              70,070                --             1,003,740
                                             ------------        ------------        ------------        ------------

                                                3,527,480              83,358                --             2,585,775
                                             ------------        ------------        ------------        ------------

(Loss) income from operations                  (1,419,661)            (76,024)               --               584,019
                                             ------------        ------------        ------------        ------------

Other income (expense)
  Interest income                                   7,018               2,722                --                45,594
  Interest expense                               (105,760)             (4,168)               --               (53,378)
                                             ------------        ------------        ------------        ------------

                                                  (98,742)             (1,446)               --                (7,784)
                                             ------------        ------------        ------------        ------------

                                               (1,518,403)            (77,470)               --               576,235

Income from equity investment (Note 4)               --                  --                  --               211,420
Loss on sale of equity investment (Note 4)           --                  --                  --            (4,233,835)
                                             ------------        ------------        ------------        ------------

Loss before income taxes                       (1,518,403)            (77,470)               --            (3,446,180)
                                             ------------        ------------        ------------        ------------
Income taxes (recovery) (Note 10)
  Current                                         (39,521)            (29,460)               --               353,772
  Deferred                                       (112,423)               --                  --              (283,886)
                                             ------------        ------------        ------------        ------------
                                                 (151,944)            (29,460)               --                69,886
Loss from continuing operations                (1,366,459)            (48,010)               --            (3,516,066)

Income from discontinued operations
  net of income taxes of $43,626 (Note 16)         84,684                --               178,662                --
                                             ------------        ------------        ------------        ------------

Net (loss) income for the period             $ (1,281,775)       $    (48,010)       $    178,662        $ (3,516,066)
                                             ============        ============        ============        ============

(Loss) earnings per share - basic
  and diluted from:
  Continuing operations                      $      (0.55)       $      (0.02)       $       --          $      (1.64)
  Discontinued operations                            0.03                --                  0.14                --
                                             ------------        ------------        ------------        ------------

                                             $      (0.52)       $      (0.02)       $       0.14        $      (1.64)
                                             ============        ============        ============        ============

Weighted average shares outstanding             2,483,322           2,464,349           1,250,000           2,150,024
                                             ============        ============        ============        ============

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


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

                                                        F-5
<PAGE>

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

                                                                                                    Glas-Aire Industries Group Ltd.
                                                                                                                (Successor Company)
                                                                                    Consolidated Statements of Stockholders' Equity
                                                                                                          (Stated in U. S. Dollars)

                                                                                                          Accumulated
                                      Common Stock,            Additional      Deferred                         Other         Total
                              net of treasury stock (Note 8)      Paid-in  Compensation    Accumulated  Comprehensive  Stockholders'
                                       Stock        Amount        Capital       Expense        Deficit         Income     Equity (a)
-----------------------------------------------------------------------------------------------------------------------------------

Inception of Wonder Tool Inc.
  at December 21, 2001                 1,000   $   223,904    $      --     $      --      $      --      $      --     $   223,904
Recapitalization of Wonder
  Tool Inc.                        1,249,000      (211,404)       211,404          --             --             --            --
Adjustment for reverse
  acquisition of Glas-aire
  Industries Group Ltd.            1,214,349        12,143      1,177,939          --             --             --       1,190,082
Net loss                                --            --             --            --          (48,010)          --         (48,010)
Foreign currency translation
  adjustment                            --            --             --            --             --            2,045         2,045
                                 -----------   -----------    -----------   -----------    -----------    -----------   -----------

Balance, December 31, 2001         2,464,349        24,643      1,389,343          --          (48,010)         2,045     1,368,021
Net loss                                --            --             --            --       (1,281,775)          --      (1,281,775)
Stock issued (Note 8(b))              36,322           364         43,676          --             --             --          44,040
Stock warrants issued (Note
  8(c))                                 --            --           86,700       (25,977)          --             --          60,723
Foreign currency translation
  adjustment                            --            --             --            --             --           31,142        31,142
                                 -----------   -----------    -----------   -----------    -----------    -----------   -----------

Balance, December 31, 2002         2,500,671   $    25,007    $ 1,519,719   $   (25,977)   $(1,329,785)   $    33,187   $   222,151
                                 ===========   ===========    ===========   ===========    ===========    ===========   ===========

(a)  The Divisional Equity of the Wonder Tool, Inc. predecessor, Orbital Polishing Operations (Note 1) for the period from January
     1, to December 20, 2001 increased by the amount of net income recorded and there were no distributions of Divisional Equity.


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

                                                              F-6
<PAGE>

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

                                                                   Glas-Aire Industries Group Ltd.
                                            Consolidated Statements of Comprehensive (Loss) Income
                                                                          (Stated in U.S. Dollars)

                                                          Period from    Period from   Period from
                                           Year ended  December 21 to   January 1 to  January 1 to
                                          December 31     December 31    December 20   December 20
                                                 2002        2001 (a)       2001 (b)      2001 (c)
--------------------------------------------------------------------------------------------------

Net (loss) income                         $(1,281,775)    $   (48,010)   $   178,662   $(3,516,066)
Foreign currency translation adjustment        31,142           2,045           --        (167,556)
                                          -----------     -----------    -----------   -----------

Comprehensive (loss) income               $(1,250,633)    $   (45,965)   $   178,662   $(3,683,622)
                                          ===========     ===========    ===========   ===========

(a)  Represents the comprehensive loss of Wonder Tool Inc. and Glas-Aire Industries Group Ltd., the
     successor company, for the period December 21, 2001 (date of acquisition) to December 31, 2001
     (Note 1).
(b)  Represents the comprehensive income of the Wonder Tool Inc. predecessor, Orbital Polishing
     Operations (Note 1).
(c)  Represents the comprehensive loss of Glas-Aire Industries Group Ltd., the predecessor company.






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

                                             F-7

<PAGE>

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

                                                                                     Glas-Aire Industries Group Ltd.
                                                                               Consolidated Statements of Cash Flows
                                                                                            (Stated in U.S. Dollars)

                                                                   Period from        Period from        Period from
                                                 Year ended     December 21 to       January 1 to       January 1 to
                                                December 31        December 31        December 20        December 20
                                                       2002           2001 (a)           2001 (b)           2001 (c)
--------------------------------------------------------------------------------------------------------------------

Cash flows from:
Operating activities
  Loss from continuing operations               $(1,366,459)       $   (48,010)       $      --          $(3,516,066)
  Adjustments to reconcile net (loss)
    income to net cash provided by
    (used in) operating activities
      Depreciation                                  242,838              6,014               --              264,408
      Deferred income taxes                        (112,423)              --                 --             (283,886)
  Loss (gain) on disposal of fixed assets           114,105               --                 --               (1,186)
  Loss on sale of equity investment                    --                 --                 --            4,233,835
  Stock compensation expense                        104,763               --                 --                 --
  Income from equity investment                        --                 --                 --             (211,420)
  (Increase) decrease in assets
      Accounts receivable, net                      312,676            247,726               --             (363,733)
      Inventories                                  (210,308)              --                 --               84,046
      Prepaid expenses                               59,028              6,723               --             (108,272)
  Increase (decrease) in liabilities
      Accounts payable                              789,190           (211,738)              --              139,101
      Accrued liabilities                           (93,067)            79,726               --              697,901
      Income taxes payable, net                     (76,913)           (29,460)              --               68,650
                                                -----------        -----------        -----------        -----------
  Net cash provided by (used in)
    operating activities from continuing
    operations                                     (236,570)            50,981               --            1,003,378
                                                -----------        -----------        -----------        -----------
  Cash flows from discontinued operations            41,911               --              259,515               --
                                                -----------        -----------        -----------        -----------
  Net cash provided by (used in)
    operating activities                           (194,659)            50,981            259,515          1,003,378
                                                -----------        -----------        -----------        -----------
Financing activities
  Advance to head office                               --                 --             (259,515)              --
  Redemption of shares                                 --                 --                 --           (2,502,661)
  Proceeds from long-term debt                         --                 --                 --            1,096,033
  Repayment of long-term debt                      (260,190)           (18,889)              --              (40,937)
  Increase (decrease) in bank indebtedness          811,346           (131,447)              --              553,628
  Repayment of obligation under capital
    lease                                           (30,038)              --                 --              (39,595)
                                                -----------        -----------        -----------        -----------
  Net cash provided by (used in) financing
    activities                                      521,118           (150,336)          (259,515)          (933,532)
                                                -----------        -----------        -----------        -----------

Investing activities
  Cash acquired on reverse acquisition                 --              561,801               --                 --
  Proceeds from disposal of fixed assets               --                 --                 --               12,498
  Purchase of fixed assets                         (810,021)              --                 --             (271,401)
                                                -----------        -----------        -----------        -----------
  Net cash provided by (used in) investing
    activities                                     (810,021)           561,801               --             (258,903)
                                                -----------        -----------        -----------        -----------
Foreign currency translation adjustment
  effect on cash balances                            18,369              2,747               --              (54,885)
                                                -----------        -----------        -----------        -----------
(Decrease) increase in cash and equivalents        (465,193)           465,193               --             (243,942)
Cash and equivalents, beginning of period           465,193               --                 --              805,743
                                                -----------        -----------        -----------        -----------
Cash and equivalents, end of period             $      --          $   465,193        $      --          $   561,801
                                                ===========        ===========        ===========        ===========

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


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

                                                     F-8
<PAGE>

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

                                                                 Glas-Aire Industries Group Ltd.
                                               Consolidated Statements of Cash Flows (continued)
                                                                        (Stated in U.S. Dollars)

                                                        Period from   Period from    Period from
                                        Year ended   December 21 to  January 1 to   January 1 to
                                       December 31      December 31   December 20    December 20
                                              2002         2001 (a)      2001 (b)       2001 (c)
------------------------------------------------------------------------------------------------

Supplemental information:

  Interest received                     $    7,018       $    2,722      $   --       $   48,843

  Interest paid                         $  105,870       $    4,168      $   --       $   57,297

  Income taxes paid                     $   35,566       $     --        $   --       $  312,394

Non-cash investing and financing activities:

  Net assets of Glas-Aire
    Industries Group Ltd. acquired
    on reverse acquisition (Note 1)     $     --         $1,190,082      $   --       $     --

  Common stock issued in exchange
    for compensation (Note 8)           $  104,763       $     --        $   --       $     --

  Purchase of fixed assets under
    capital lease                       $   27,028       $     --        $   --       $     --
                                        ==========       ==========      ========     ==========

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


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

                                            F-9
</TABLE>
<PAGE>


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

                                                 Glas-Aire Industries Group Ltd.
                                      Summary of Significant Accounting Policies
December 31, 2002
--------------------------------------------------------------------------------

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

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

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

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

                                      F-10

<PAGE>
================================================================================

                                                 Glas-Aire Industries Group Ltd.
                                      Summary of Significant Accounting Policies
December 31, 2002
--------------------------------------------------------------------------------

Basis of Presentation (continued)  The financial statements of Glas-Aire
                                   Industries Group Ltd. (the Predecessor
                                   business) have been presented for the period
                                   from January 1, 2001 to December 20, 2001
                                   (the acquisition date). As a result of the
                                   Company's decision to sell its Orbital
                                   Polishing Operations, associated assets,
                                   liabilities and results of operations and
                                   cash flows have been segregated in these
                                   financial statements as discontinued
                                   operations. The sale concluded in January
                                   2003 (Note 16).

Allowance for Doubtful Accounts    The Company records an allowance for doubtful
                                   accounts based on specifically identified
                                   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 customer base. If
                                   the Company's actual collections experience
                                   changes, revisions to the allowance may be
                                   required.

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

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

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

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

                                      F-11
<PAGE>
================================================================================

                                                 Glas-Aire Industries Group Ltd.
                                      Summary of Significant Accounting Policies
December 31, 2002
--------------------------------------------------------------------------------

Per Share Information              The Company has adopted Financial Accounting
                                   Standards Board ("FASB") Statement of
                                   Financial Accounting Standards ("SFAS") No.
                                   128, Earnings Per Share ("EPS") which
                                   requires dual presentation of basic EPS and
                                   diluted EPS on the face of all income
                                   statements. Basic EPS is computed as net
                                   income divided by the weighted average number
                                   of shares of common stock outstanding during
                                   the period. Diluted EPS reflects the
                                   potential dilution that could occur if
                                   securities or other contracts were exercised.
                                   In a loss year, dilutive common equivalent
                                   shares are excluded from the loss per share
                                   calculation as the effect would be
                                   anti-dilutive. Basic and diluted loss per
                                   share are the same for the periods presented.
                                   For the year ended December 31, 2002, stock
                                   options and warrants to purchase 435,000
                                   (2001 - 180,000) shares of the Company's
                                   common stock were not included in the
                                   calculation of loss per share because their
                                   effect was anti-dilutive. Treasury stock
                                   (Note 8) is not included in the number of
                                   shares outstanding for earnings per share
                                   purposes.

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

Research and Development           Research and development costs are expensed
                                   as incurred.

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

Stock Based Compensation           he 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.

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

                                      F-12
<PAGE>

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

                                                 Glas-Aire Industries Group Ltd.
                                      Summary of Significant Accounting Policies
December 31, 2002
--------------------------------------------------------------------------------

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

                                   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.
<TABLE>
<CAPTION>
                                                                             Period from       Period from           Period from
                                                            Year ended    December 21 to      January 1 to          January 1 to
                                                           December 31       December 31       December 20           December 20
                                                             2002               2001 (a)          2001 (b)              2001 (c)
                                                         -----------------------------------------------------------------------
<S>                                                      <C>                  <C>                <C>                <C>
Net income (loss), as reported                           $ (1,281,775)        $ (48,010)         $ 178,662          $ (3,516,066)
Add: stock- based compensation expense included
    in reported net loss                                       60,723                --                 --                    --

Deduct: total stock-based compensation expense
    determined under fair-value based method                  (96,782)           (2,462)                --               (88,925)
                                                         -----------------------------------------------------------------------

Net income (loss), pro-forma                             $ (1,317,834)        $ (50,472)         $ 178,662          $ (3,604,991)
                                                         =======================================================================
Earnings (loss) per share
    - basic and diluted - as reported                    $      (0.52)        $ (0.02)           $    0.14          $      (1.64)
    - basic and diluted - pro- forma                     $      (0.53)        $ (0.02)           $    0.14          $      (1.67)
</TABLE>

(a)  Represents the results of operations of Wonder Tool Inc. and Glas-Aire
     Industries Group Ltd., the successor company, for the period December 21,
     2001 (date of acquisition) to December 31, 2001 (Note 1).

(b)  Represents the results of operations of the Wonder Tool Inc. predecessor,
     Orbital Polishing Operations (Note 1).

(c)  Represents the results of operations of Glas-Aire Industries Group Ltd.,
     the predecessor company.

Comprehensive Income               The Company has adopted SFAS No. 130,
                                   "Reporting Comprehensive Income", which
                                   establishes standards for reporting and
                                   display of comprehensive income, its
                                   components and accumulated balances.
                                   Comprehensive income is comprised of net
                                   income (loss) and all changes to
                                   stockholders' equity except those resulting
                                   from investments by owners and distributions
                                   to owners.

                                      F-13
<PAGE>

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

                                                 Glas-Aire Industries Group Ltd.
                                      Summary of Significant Accounting Policies
December 31, 2002
--------------------------------------------------------------------------------

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

                                   Transactions conducted in foreign currencies
                                   are translated as follows:

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

Accounting Estimates               The preparation of financial statements in
                                   conformity with generally accepted accounting
                                   principles requires management to make
                                   estimates and assumptions that affect the
                                   reported amounts of assets and liabilities
                                   and disclosure of contingent assets and
                                   liabilities at the date of the financial
                                   statements and the reported amounts of
                                   revenues and expenses during the reporting
                                   period. Actual results could differ from
                                   those estimates.

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

                                      F-14
<PAGE>

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

                                                 Glas-Aire Industries Group Ltd.
                                      Summary of Significant Accounting Policies
December 31, 2002
--------------------------------------------------------------------------------

Concentration of                   As a Canadian manufacturer, the Company has a
  Exchange Risk                    significant volume of expense transactions
                                   denominated in Canadian currency.

Concentration of Credit Risk       As a manufacturer of automotive accessories,
                                   the Company grants credit to customers
                                   exclusively within the automotive
                                   manufacturing industry.

Revenue Recognition                The Company recognizes revenue on the sale of
                                   products at the time the products are shipped
                                   to its customers. As required by Emerging
                                   Issues Task Force Release 00-10, revenue
                                   earned in respect of shipping is included in
                                   revenue while related costs of shipping are
                                   included in cost of goods sold.

Warranty Accrual                   The Company offers warranties of various
                                   lengths to its customers depending on the
                                   specific product and terms of the customer
                                   purchase agreement. The Company's typical
                                   warranties require it to repair or replace
                                   defective products during the warranty period
                                   at no cost to the customer. At the time that
                                   revenue is recognized, the Company records a
                                   liability for estimated costs that may be
                                   incurred under its warranties. The costs are
                                   estimated based on historical experience and
                                   expectation of future conditions. The Company
                                   periodically assesses the adequacy of its
                                   recorded warranty liability and adjusts the
                                   amounts as necessary. While the Company
                                   believes that its estimated liability for
                                   product warranties is adequate and that the
                                   judgment applied is appropriate, the
                                   estimated liability for product warranties
                                   could differ materially from future actual
                                   warranty costs.

                                   Changes in the Company's warranty liability
                                   during the years were as follows:
<TABLE>
<CAPTION>
                                                                          2002           2001
                                                                     ------------------------
<S>                                                                  <C>            <C>
                                   Balance, beginning of period      $ 387,776      $ 116,160
                                   Warranty expense                    273,389        490,959
                                   Settlements made                   (547,881)      (219,343)
                                                                     ------------------------
                                   Balance, end of period            $ 113,284      $ 387,776
                                                                     ========================
</TABLE>

                                   There were no changes to the warranty accrual
                                   during the period from December 21, 2001 to
                                   December 31, 2001.

                                      F-15
<PAGE>

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

                                                 Glas-Aire Industries Group Ltd.
                                      Summary of Significant Accounting Policies
December 31, 2002
--------------------------------------------------------------------------------

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. An
                                   impairment loss would be recognized when the
                                   net book value of such assets exceeds the
                                   estimated undiscounted future cash flows
                                   attributable to such assets. Impairment, if
                                   any, is assessed using discounted cash flows.
                                   Long-lived assets to be disposed of by sale
                                   are measured at the lower of carrying amount
                                   or fair value less cost of sale. No
                                   impairment was required to be recognized
                                   during the periods presented in these
                                   consolidated financial statements.

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

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

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

                                      F-16
<PAGE>

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

                                                 Glas-Aire Industries Group Ltd.
                                      Summary of Significant Accounting Policies
December 31, 2002
--------------------------------------------------------------------------------

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

                                   The implementation of these new standards is
                                   not expected to have a material effect on the
                                   Company's financial statements.

Reclassifications                  Certain 2001 comparative amounts have been
                                   reclassified to conform with the 2002
                                   consolidated financial statements.

                                      F-17
<PAGE>

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

                                                 Glas-Aire Industries Group Ltd.
                                      Notes to Consolidated Financial Statements
                                                        (Stated in U.S. Dollars)
December 31, 2002
--------------------------------------------------------------------------------

1. Reverse Acquisition


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

   In January, 2003, the Company sold the assets and liabilities of its Orbital
   Polishing Division (Note 16).


   Current assets                                               $ 3,771,276
   Fixed assets                                                   1,935,419
                                                                -----------

   Total assets                                                   5,706,695
   Liabilities assumed                                           (3,789,070)
                                                                -----------

   Net assets acquired                                            1,917,625
   Excess of net assets acquired
     over consideration paid                                       (727,543)
                                                                -----------

   Consideration paid                                           $ 1,190,082
                                                                ===========


   Fair value of fixed assets                                   $ 1,935,419

   Less: "Negative goodwill", net of                 727,543
      deferred tax liability                         (82,937)       644,606
                                                 -----------    -----------

   Net value assigned to fixed assets                           $ 1,290,813
                                                                ===========


                                      F-18
<PAGE>

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

                                                 Glas-Aire Industries Group Ltd.
                                      Notes to Consolidated Financial Statements
                                                        (Stated in U.S. Dollars)
December 31, 2002
--------------------------------------------------------------------------------

1. Reverse Acquisition (continued)

   Unaudited pro-forma information assuming the reverse acquisition had been
   completed on January 1, 2001 is as follows:
                                                         Period from
                                                        January 1 to
                                                         December 20
                                                                2001
                                                        ------------

              Sales                                     $ 12,558,076
              Loss from continuing operations and
               net loss for the period (a)              $ (3,355,605)
              Loss per share                            $      (0.98)

   (a) Includes a loss on sale of equity investment of $4,233,835
--------------------------------------------------------------------------------

2. Inventories
                                                         2002               2001
                                                   -----------------------------

   Raw materials and supplies                      $  910,509         $  735,132
   Work-in-process                                    144,446            121,487
   Finished goods                                     148,067            128,535
                                                   -----------------------------
                                                   $1,203,022         $  985,154
                                                   =============================

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

3. Fixed Assets

                                                                  2002                                    2001
                                        ----------------------------------------------------------------------
                                                           Accumulated                             Accumulated
                                              Cost        Depreciation                Cost        Depreciation
                                        ----------------------------------------------------------------------
<S>                                     <C>                 <C>                 <C>                 <C>
   Office equipment                     $  253,208          $   22,800          $  192,362          $      579
   Manufacturing equipment                 316,441              22,778             131,978                 397
   Computer equipment                       91,296              12,905              76,830                 347
   Dies and molds                          638,923              59,095             515,045               1,552
   Automotive                               16,439               6,283              16,270               1,967
   Leasehold improvements
     (Note 11)                             412,318              38,025             150,308                 548
   Equipment under capital lease           237,697              22,612             208,020                 363
                                        ----------------------------------------------------------------------
   Total                                $1,966,322          $  184,498          $1,290,813          $    5,753
                                        ======================================================================
   Net book value                                           $1,781,824                              $1,285,060
                                                            ==========                              ==========

</TABLE>
                                      F-19
<PAGE>

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

                                                 Glas-Aire Industries Group Ltd.
                                      Notes to Consolidated Financial Statements
                                                        (Stated in U.S. Dollars)
December 31, 2002
--------------------------------------------------------------------------------

4. Investment in Former Parent Company

   On October 1, 2001, the Predecessor Company disposed of its investment in
   Regency Affiliates, Inc. ("Regency", its former parent company) as part of
   the consideration to reacquire shares of the Company's common stock owned by
   Regency. The carrying value of the investment prior to the transaction was
   $4,233,835. Included in the carrying value of the investment is equity income
   of $211,420 recognized in 2001 prior to the disposal. Upon return of the
   shares of Regency, the carrying value was written off.
--------------------------------------------------------------------------------

5. Bank Indebtedness

                                                        2002               2001
                                                 ------------------------------
   Revolving bank loan                           $ 1,398,247          $ 169,463
   (Cash) cheques issued in excess of deposits      (177,610)           239,853
                                                 ------------------------------
                                                 $ 1,220,637          $ 409,316
                                                 ==============================

   The revolving bank loan is a Cdn. $2,000,000 overdraft facility, which is due
   on demand and bears interest at Canadian bank prime rate (4.5% - December 31,
   2002; 4.0% - December 31, 2001) plus 1%. This line of credit is renewable
   annually in April of each year. At December 31, 2002, the Company had
   overdrawn under this facility by Cdn. $173,187 (U.S. $109,778).

   The following have been provided as collateral for the overdraft facility and
   long-term debt (Note 6):


     (a)  general assignment of accounts receivable and inventories; and

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

                                      F-20
<PAGE>

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

                                                 Glas-Aire Industries Group Ltd.
                                      Notes to Consolidated Financial Statements
                                                        (Stated in U.S. Dollars)
December 31, 2002
--------------------------------------------------------------------------------

6. Long-term Debt

                                                            2002           2001
                                                       ------------------------
   HSBC loan payable - interest at prime
   plus 1%, due September 28, 2005, monthly
   principal payments of $18,314 plus interest         $ 610,068      $ 824,021


   HSBC loan payable - interest at prime
   plus 0.5%, due November 14, 2006, monthly
   principal payments of $3,061 plus interest            145,259        180,609
                                                       ------------------------

                                                         755,327      1,004,630
   Less current portion                                  755,327        256,499
                                                       ------------------------
                                                       $    --        $ 748,131
                                                       ========================

   The Company has a Cdn. $1,000,000 equipment purchase facility and a Cdn.
   $1,400,000 acquisition facility. These facilities bear interest at Canadian
   bank prime rate plus 1/2% to 1%. At December 31, 2002, the Company had
   undrawn credit capacity under these facilities of Cdn. $770,837 (U.S.
   $488,610) for equipment purchases and Cdn. $437,550 (U.S. $277,350) for
   acquisitions.

   The collateral provided for the HSBC loans payable is described in Note 5.

   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. During 2002 the Company breached financial
   covenants contained in its credit agreements and such breaches continue to
   exist at December 31, 2002. As a result, the long-term portion of the debt
   has been reclassified to current liabilities in the Company's 2002
   consolidated balance sheet. HSBC continues to monitor the loan balances.
   While now due on demand, HSBC has permitted the Company to continue paying
   the loans in accordance with the terms and conditions in the banking
   agreement.

   Principal payments required on long-term debt over the remaining terms of the
   debt assuming the credit agreements are not evoked or the loans are otherwise
   called are as follows:

                         Year                     Amount

                         2003                   $ 256,500
                         2004                     256,500
                         2005                     207,264
                         2006                      35,063
                                                ---------
                                                $ 755,327
                                                =========

                                      F-21
<PAGE>

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

                                                 Glas-Aire Industries Group Ltd.
                                      Notes to Consolidated Financial Statements
                                                        (Stated in U.S. Dollars)
December 31, 2002
--------------------------------------------------------------------------------

7. Obligations under Capital Lease

   The minimum annual lease payments required under capital leases of
   manufacturing equipment expiring in December 2004 and November 2005 together
   with the balance of the obligation are as follows:

                         Year                    Amount

                         2003                   $  45,069
                         2004                      45,069
                         2005                       9,316
                                                ---------

   Total minimum lease payments                    99,454
   Less amounts representing interest at 8.6%
     and 9.5% per annum                            11,572
                                                ---------

   Present value of minimum lease payments         87,882
   Less current portion                            36,832
                                                ---------

                                                $  51,050
                                                =========
--------------------------------------------------------------------------------

8. Common Stock

   (a) Authorized

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

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

   Shares of common stock held in treasury at December 31, 2002 totalled 93,718
   (2001 -1,375,677) with a Nil value. During the year ended December 31, 2002,
   1,281,959 common shares previously held in treasury were cancelled.

   Issued and outstanding                                     2002         2001
                                                          ---------------------

         2,500,671 (2001 - 2,464,349) Common shares       $ 25,007     $ 24,643
                                                          =====================

                                      F-22
<PAGE>

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

                                                 Glas-Aire Industries Group Ltd.
                                      Notes to Consolidated Financial Statements
                                                        (Stated in U.S. Dollars)
December 31, 2002
--------------------------------------------------------------------------------

8. Common Stock (continued)


     (b)  During the year ended December 31, 2002, the Company issued 36,322
          fully vested, non-forfeitable shares of common stock (valued at
          $44,040 based upon the trading price of the common stock around the
          dates of the respective agreements) to certain employees and directors
          as part of their compensation.


     (c)  During the year ended December 31, 2002 the Company granted to its
          Chief Executive Officer and President warrants to acquire 255,000
          shares of the Company's common stock at an exercise price of $0.01 per
          share, which expire on April 12, 2012. The closing price of the
          Company's common stock on that date was $0.35 per share. The warrants
          vest as follows:

                                                         Number of     Exercise
                                                          Warrants        Price
                                                          ---------------------

   Granted - April 12, 2002; Vesting - April 12, 2002       85,000       $ 0.01
   Granted - April 12, 2002; Vesting - April 12, 2003       85,000       $ 0.01
   Granted - April 12, 2002; Vesting - April 12, 2004       85,000       $ 0.01
                                                           --------------------
                                                           255,000
                                                           =======

   The Company recorded the deferred compensation of $86,700 above based upon
   the difference between the exercise price and market price of the underlying
   common stock on the date the warrants were granted. The deferred compensation
   is being amortized over the vesting period of the warrants with compensation
   expense of $60,723 recognized during the year ended December 31, 2002.

   SFAS No. 123 requires the Company to provide pro-forma information regarding
   net loss as if the compensation costs for the Company's warrants 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 warrant granted 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, based on the following
   assumptions: 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.

                                      F-23
<PAGE>

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

                                                 Glas-Aire Industries Group Ltd.
                                      Notes to Consolidated Financial Statements
                                                        (Stated in U.S. Dollars)
December 31, 2002
--------------------------------------------------------------------------------

9. 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 December 31, 2002 and 2001 no options had been granted under either plan.

   Director Compensation

   In previous periods the Company had granted options to directors in
   accordance with the director's compensation program approved by the
   stockholders. A summary of the status of the Company's stock options
   outstanding as of December 31, 2002 is as follows:

                                                           Number of    Exercise
                                                             Options       Price
                                                            --------------------

   Granted - November 4, 1999; Expiring - November 3, 2004    60,000      $ 4.50
   Granted - December 4, 2000; Expiring - December 3, 2005    60,000      $ 2.75
   Granted - December 4, 2001; Expiring - December 3, 2006    60,000      $ 1.00
                                                             -------------------
                                                             180,000
                                                             =======

   All 180,000 options are vested as of December 31, 2002 (2001 - 120,000). 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, based
   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.

                                      F-24
<PAGE>

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

                                                 Glas-Aire Industries Group Ltd.
                                      Notes to Consolidated Financial Statements
                                                        (Stated in U.S. Dollars)
December 31, 2002
--------------------------------------------------------------------------------

10. Income Taxes

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

                                                                    Period from       Period from       Period from
                                                Year ended       December 21 to      January 1 to      January 1 to
                                               December 31          December 31       December 20       December 20
                                                      2002             2001 (a)           2001 (b)         2001 (c)
                                               --------------------------------------------------------------------
<S>                                           <C>                  <C>                <C>                <C>
   Expense (recovery) at the U.S.
    federal statutory rate on
    continuing operations                      $  (516,258)        $   (25,651)        $    --          $(1,171,701)
   Expense at the U.S. federal lower
    rate                                            13,750                --                --               13,750
   Federal alternative minimum tax                  35,500                --                --                 --
   Federal Subpart F income tax net of
    foreign tax credit                             209,222                --                --                 --
   Effect of income/loss subject to
   Canadian taxes                                  (34,096)             (3,809)             --               58,944
   Reduction in Canadian income
    tax rate                                        11,905                --                --                 --
   Permanent differences for
    non-deductible expenses                         23,876                --                --               69,334
   Under accruals                                  104,157                --                --              (31,737)
   Increase in valuation allowance                    --                  --                --            1,131,296
                                               --------------------------------------------------------------------
   Tax expense from continuing
    operations                                    (151,944)            (29,460)             --               69,886
   Losses utilized to offset taxes
    otherwise payable on income
    from discontinued operations                    43,626                --                --                 --
                                               --------------------------------------------------------------------
                                               $  (108,318)        $   (29,460)        $    --          $    69,886
                                               ====================================================================
</TABLE>

     (a)  Represents the results of operations of Wonder Tool Inc. and Glas-Aire
          Industries Group Ltd., the successor company, for the period December
          21, 2001 (date of acquisition) to December 31, 2001 (Note 1).

     (b)  Represents the results of operations of the Wonder Tool Inc.
          predecessor, Orbital Polishing Operations (Note 1).

     (c)  Represents the results of operations of Glas-Aire Industries Group
          Ltd., the predecessor company.

                                      F-25
<PAGE>

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

                                                 Glas-Aire Industries Group Ltd.
                                      Notes to Consolidated Financial Statements
                                                        (Stated in U.S. Dollars)
December 31, 2002
--------------------------------------------------------------------------------

10. Income Taxes (continued)

   The components of deferred taxes are as follows:

                                                     2002                  2001
                                               --------------------------------

                                                Temporary             Temporary
                                               Tax Effect            Tax Effect
                                               --------------------------------
   Deferred tax assets
     Accrued liabilities                       $  196,011           $    50,654
     Stock compensation                             --                   64,440
     Capital loss carry forward                 1,131,296             1,131,296
                                               --------------------------------
                                                1,327,307             1,246,390
     Valuation allowance                       (1,131,296)           (1,131,296)
                                               --------------------------------
                                                  196,011               115,094
   Deferred tax liability
     Fixed assets                                 170,975               198,031
                                               --------------------------------
   Net deferred tax asset (liability)          $   25,036           $   (82,937)
                                               ================================

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

                                      F-26
<PAGE>

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

                                                 Glas-Aire Industries Group Ltd.
                                      Notes to Consolidated Financial Statements
                                                        (Stated in U.S. Dollars)
December 31, 2002
--------------------------------------------------------------------------------

11. Commitments

     (a)  The Company is committed to minimum lease payments totalling $176,636
          for the next two years 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 taxes 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.
          Additionally the leasehold improvements pertaining to the former
          premises were written off in the amount of $114,105 in 2002. The
          Company is attempting to sublet its former premises.

          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 free. The Company is committed to the following
          minimum annual lease payments plus proportionate common area costs in
          respect of its new premises:

                         Year                        Amount
                         2003                   $   173,314
                         2004                       178,816
                         2005                       181,567
                         2006                       181,567
                         2007                       187,069
                   Thereafter                       253,093
                                                -----------
                                                $ 1,155,426
                                                ===========

          Rent expense (including free rent and escalating payments) has been
          recognized on a straight line basis over the term of the lease,
          excluding the future rent payments related to the former premises
          accrued above, was $336,384 for the year ended December 31, 2002,
          $4,821 for the period from December 21, 2001 to December 31, 2001, and
          $177,284 for the Predecessor Company's period from January 1, 2001 to
          December 20, 2001.

     (b)  During the year ended December 31, 2002, 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
          Officer and President is terminated for other than just cause or is
          disabled and unable to perform his duties, he is entitled to a
          severance payment up to 18 months of his compensation.

                                      F-27
<PAGE>
================================================================================

                                                 Glas-Aire Industries Group Ltd.
                                      Notes to Consolidated Financial Statements
                                                        (Stated in U.S. Dollars)
December 31, 2002
--------------------------------------------------------------------------------

12. Segmented Information

     (a)  As a result of the disposition of the Orbital Polishing Division in
          January 2003 being classified as discontinued in these financial
          statements (Note 16) the Company has determined that it operates in
          one continuing business segment: the automotive accessories segment.

     (b)  Sales figures include sales to customers who are located in the
          following countries:
<TABLE>
<CAPTION>

                                                         Period from              Period from              Period from
                                      Year ended      December 21 to             January 1 to             January 1 to
                                     December 31         December 31              December 20              December 20
                                            2002             2001 (a)                 2001 (b)                 2001 (c)
                                    ----------------------------------------------------------------------------------
<S>                                 <C>                     <C>                 <C>                       <C>
          United States             $ 10,636,621            $ 53,774            $       --                $ 10,229,225
          Canada                         992,916                --                      --                   1,105,817
          Japan and other                191,105                --                      --                     400,648
                                    ----------------------------------------------------------------------------------
                                    $ 11,820,642            $ 53,774            $       --                $ 11,735,690
                                    ==================================================================================

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

                                                         Period from              Period from              Period from
                                      Year ended      December 21 to             January 1 to             January 1 to
                                     December 31         December 31              December 20              December 20
                                            2002             2001 (a)                 2001 (b)                 2001 (c)
                                    ----------------------------------------------------------------------------------

          Nissan North America, Inc  $ 1,996,584            $   --              $       --                $ 2,924,542
          Honda Access America, Inc    3,215,321                --                      --                  2,431,012
          General Motors               3,317,162              53,774                    --                  2,647,160
          Hyundai Motor America, Inc.  1,157,978                --                      --                    914,015
                                     --------------------------------------------------------------------------------
                                     $ 9,687,045            $ 53,774            $       --                $ 8,916,729
                                     ================================================================================

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

                                                         Period from              Period from              Period from
                                      Year ended      December 21 to             January 1 to             January 1 to
                                     December 31         December 31              December 20              December 20
                                            2002             2001 (a)                 2001 (b)                 2001 (c)
                                    ----------------------------------------------------------------------------------

          Sunroof wind deflectors    $ 6,541,164            $    --             $       --                $ 6,410,384
          Hood protectors              3,953,232              53,774                    --                  3,894,119
          Rear air deflectors          1,166,701                 --                     --                  1,431,187
          Door visors                    159,545                 --                     --                      --
                                     --------------------------------------------------------------------------------
                                     $11,820,642            $ 53,774            $       --                $11,735,690
                                     ================================================================================

     (a)  Represents the results of operations of Wonder Tool Inc. and Glas-Aire
          Industries Group Ltd., the successor company, for the period December
          21, 2001 (date of acquisition) to December 31, 2001 (Note 1).

     (b)  Represents the results of operations of the Wonder Tool Inc.
          predecessor, Orbital Polishing Operations (Note 1).

     (c)  Represents the results of operations of Glas-Aire Industries Group
          Ltd., the predecessor company.

                                      F-28
<PAGE>

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

                                                 Glas-Aire Industries Group Ltd.
                                      Notes to Consolidated Financial Statements
                                                        (Stated in U.S. Dollars)
December 31, 2002
--------------------------------------------------------------------------------
12. Segmented Information (continued)

   As at December 31, 2002 and 2001, all of the company's fixed assets are
   located in Canada except for the leasehold improvements, office and computer
   equipment located in the United States of approximately $6,254 net of
   depreciation (2001 - $6,950). 13. Related Party Transactions The Company had
   the following transactions with related parties that were not disclosed
   elsewhere in these financial statements:

                                                                Period from        Period from     Period from
                                             Year ended      December 21 to       January 1 to    January 1 to
                                            December 31         December 31        December 20     December 20
                                                   2002             2001 (a)           2001 (b)        2001 (c)
                                              ----------------------------------------------------------------
   Fees paid to directors/shareholders
    for ongoing consulting services            $ 87,000        $      --         $      --         $ 57,500
   Rent paid to a company controlled
    by certain directors                       $ 56,833        $      --         $      --         $   --
   Material purchases from a company
    controlled by certain directors            $ 15,520        $      --         $      --         $   --
</TABLE>

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


     (a)  Represents the results of operations of Wonder Tool Inc. and Glas-Aire
          Industries Group Ltd., the successor company, for the period December
          21, 2001 (date of acquisition) to December 31, 2001 (Note 1).


     (b)  Represents the results of operations of the Wonder Tool Inc.
          predecessor, Orbital Polishing Operations (Note 1).

     (c)  Represents the results of operations of Glas-Aire Industries Group
          Ltd., the predecessor company.

                                      F-29
<PAGE>

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

                                                 Glas-Aire Industries Group Ltd.
                                      Notes to Consolidated Financial Statements
                                                        (Stated in U.S. Dollars)

December 31, 2002
--------------------------------------------------------------------------------

14.  Contingencies

     Following his termination for cause from his position as President of the
     Company on September 12, 2001, the Company's former president filed a Writ
     of Summons, on September 13, 2001, in the Supreme Court of British
     Columbia. The former president asserted among other things that the
     repurchase of the Company's shares involved a breach of agreements with
     HSBC Bank of Canada, securities and corporate laws. The former president
     has not filed a Statement of Claim. On January 14, 2003, the former
     president filed a notice of discontinuance against the Company and other
     parties. The Company is vigorously contesting the writ. In the opinion of
     management, the exposure to loss is not determinable. The impact of the
     resolution of this matter will be reflected in operations in the year of
     resolution.

     On July 31, 2002, the Company filed suit against a supplier in the Supreme
     Court of British Columbia alleging that the supplier supplied defective
     gaskets to the Company, commencing in 2000. The Company is alleging breach
     of contract and the negligent manufacture of gaskets against the supplier.
     The Company is seeking general damages, special damages, interests and
     costs. The supplier has commenced a counterclaim against the Company for
     payment of outstanding invoices totalling $20,615.

     On February 14, 2003, another supplier filed suit against the Company for
     payment of outstanding invoices totalling $56,805. The Company has withheld
     payment due to the supplier's breach of contract and non-performance. The
     outstanding accounts have been accrued in the financial statements. The
     Company intends to defend this action and pursue a counterclaim for breach
     of contract in an amount that exceeds the amount claimed by the supplier.

                                      F-30
<PAGE>

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

                                                 Glas-Aire Industries Group Ltd.
                                      Notes to Consolidated Financial Statements
                                                        (Stated in U.S. Dollars)

December 31, 2002
--------------------------------------------------------------------------------

15.  Profit Sharing Program

     In 1994, Glas-Aire Industries Group Ltd. adopted a profit sharing program
     which provides that 10% of the Company's income before income taxes and
     provision for profit sharing may be distributed to officers and employees
     of the Company. No amounts were accrued in the periods presented in these
     financial statements except for $117,208 during the Predecessor Company's
     period from January 1, 2001 to December 20, 2001.

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

16. Discontinued Operations

     In January, 2003, the Company sold the assets and liabilities of its
     Orbital Polishing Division for $920,140, comprised of cash of $720,140 and
     a promissory note receivable of $200,000. The sale resulted in a gain of
     $559,837 which was recognized in 2003. The promissory note bears interest
     at the rate of 7% per annum. The principal together with interest shall be
     repaid in twenty quarterly instalments of $13,859 commencing March 31,
     2005. During the first four years after the purchase transaction, the
     purchaser shall pay to the Company 15% of the gross revenue in excess of
     the amounts below from the products included in the Orbital Polishing
     Division (the "Earn Out Payments"). Included in this gross revenue
     calculation is all revenue derived from current products or variations to
     current products included in the Orbital Polishing Division. Any revenue
     derived from new products developed by the purchaser shall be exempt from
     this gross revenue calculation. Payments shall be limited to $50,000 for
     each year. The purchaser shall be responsible for the Earn Out Payments
     only to the extent that gross revenues exceed the following amounts:

                         Year           Gross Revenue
                         ----           -------------
                         2003            $ 1,000,000
                         2004              1,100,000
                         2005              1,200,000
                         2006              1,300,000

     The Company follows SFAS No.144 "Accounting for the Impairment or Disposal
     of Long-lived Assets" in accounting for this transaction. Consequently, the
     Orbital Polishing Division is reported as discontinued for all periods
     presented. Financial information of the Orbital Polishing Division is as
     follows:

                                        Period from   Period from   Period from
                         Year ended  December 21 to  January 1 to  January 1 to
                        December 31     December 31   December 20   December 20
                               2002        2001 (a)      2001 (b)      2001 (c)
                        -------------------------------------------------------
     Revenues              $773,369       $   --        $822,386      $   --
     Pre-tax income        $128,310       $   --        $178,662      $   --


                                      F-31
<PAGE>

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

                                                 Glas-Aire Industries Group Ltd.
                                      Notes to Consolidated Financial Statements
                                                        (Stated in U.S. Dollars)

December 31, 2002.
--------------------------------------------------------------------------------

16.  Discontinued Operations (continued)

                                                           2002        2001
                                                       --------    --------
     Accounts receivable                               $ 61,970    $   --
     Inventory                                         $261,585    $223,904
     Accounts payable and accrued liabilities          $ 13,252    $   --

     During the year ended December 31, 2002, the Company entered into a motor
     contract supply agreement with Asian-American Trading and Investment, LLC.
     ("Asian-American"). The Company's Chairman of the Board of Directors and
     another member of the board of directors are the managing members of
     Asian-American.

     In connection with the Orbital Polishing Division asset sale,
     Asian-American entered into a motor supply purchase agreement with the
     purchaser. Pursuant to the motor supply purchase agreement, Asian-American
     will supply a maximum of 12,500 electric motors to the purchaser at a
     guaranteed price of $7.00 per motor through January 1, 2005. The Company
     has agreed to indemnify, defend and hold harmless Asian-American, and its
     respective managers, members, employees, consultants, agents, attorneys,
     successors, and assigns against any losses, costs, damages, liabilities,
     expenses, and claims or suits raising out of the motor supply purchase
     agreement.



                                      F-32
<PAGE>

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

                                                 Glas-Aire Industries Group Ltd.
                                      Notes to Consolidated Financial Statements
                                                        (Stated in U.S. Dollars)

December 31, 2002.
--------------------------------------------------------------------------------

17.  Going Concern

     These financial statements have been prepared on a going concern basis,
     which contemplates the realization of assets and satisfaction of
     liabilities and commitments in the normal course of business. The Company
     has incurred a loss from continuing operations during the year ended
     December 31, 2002 of $1,366,459, is in violation of certain debt covenants
     (Note 6), has a working capital deficiency of $1,647,951 at December 31,
     2002 and has drawn the maximum amount under its line of credit. Continued
     operations are dependent upon the continued support of lenders and a return
     to profitability.

     Management believes the Company can return to profitability in 2003 and
     will generate cash flow therefrom to meet cash requirements over the next
     twelve months. While the Company believes its plans to be achievable, there
     can be no assurance that it will generate sufficient cash flow from
     operations to address all cash flow needs. Additionally, the Company's
     primary lender has indicated that, although the loans remain on a demand
     basis, the loans may be repaid in accordance with the terms and conditions
     outlined in the banking agreement. This includes amortized payments on the
     non-revolving facilities. Thus, the Company will continue making periodic
     payments on the term debt. Management believes that the Company will be
     able to maintain these credit facilities on a going forward basis; however,
     there can be no assurance that this will occur. In addition, management is
     pursuing alternative financing arrangements. There can be no assurance that
     the Company will be able to secure alternative financing if needed or
     obtain alternative financing on terms satisfactory to the Company.
     Management has implemented a plan to increase sales and improve
     efficiencies while reducing labour costs. Management has added additional
     personnel to strengthen its manufacturing, engineering, quality control and
     research and development departments in an effort to improve efficiencies
     and increase the Company's profit margins. Management is optimistic that
     these steps will contribute to the Company's return to profitability and
     provide sufficient cash flow from operations, capital resources and
     liquidity to continue to operate into the future and continue as a going
     concern. However, there can be no assurance that the sales increase,
     improvement in efficiencies or reduction in labour costs will be
     successful. Finally, in January 2003, the Company sold its Orbital
     Polishing division net assets, resulting in proceeds which included
     $720,140 of cash (Note 16).

     These conditions raise substantial doubt about the Company's ability to
     continue as a going concern. These financial statements do not include any
     adjustments relating to the recoverability and classification of recorded
     asset amounts or amounts and classification of liabilities that might be
     necessary if the Company is unable to continue as a going concern.


                                      F-33