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:  January 31, 1999

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

     For the transition period from  _______________ to  ________________

                         Commission file number 1-14244

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

            Nevada                                        84-1072256
            ------                                        ----------
(State or Other Jurisdiction of
 Incorporation or Organization)             (I.R.S. Employer Identification No.)

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

Registrant's telephone number, including area code   (604) 435-8801

Securities registered pursuant to Section 12(b) of the Act:
      Title of each class         Name of each exchange on which registered

 Common Stock, $0.01 par value              Pacific Stock Exchange

Securities registered pursuant to Section 12(g) of the 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 Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the issuer 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 issuer'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-K. Yes ____ No X

The issuer's revenue for its most recent fiscal year was: $6,639,219

<PAGE>



The aggregate  market value of the issuer's  voting stock held as of February 1,
1999, by nonaffiliates of the issuer was $1,384,658.

As of  January  31,  1999,  issuer had  1,593,469  shares of its $0.01 par value
common stock outstanding.

Transitional Small Business Disclosure Format.   Yes X   No ____



TABLE OF CONTENTS

PART I                                                                     

      Item 1.  Business                                                    
      Item 2.  Properties                                                  
      Item 3.  Legal Proceedings                                           
      Item 4.  Submission of Matters to a Vote of Security Holders         


PART II

      Item 5.  Market for Registrant's Common Equity
               and Related Stockholder Matters                             
      Item 6.  Selected Financial Data                                     
      Item 7.  Management's Discussion and Analysis of Financial
               Condition and Results of Operations                         
      Item 8.  Financial Statements and Supplementary Data --Independent
               Auditor's Report                                            
      Item 9.  Changes in and Disagreements With Accountants on
               Accounting and Financial Disclosure                         


PART III

      Item 10. Directors and Executive Officers of the Registrant          
      Item 11. Executive Compensation                                      
      Item 12. Security Ownership of Certain Beneficial Owners and Management 
      Item 13. Certain Relationships and Related Transactions                 


PART IV

      Item 14. Exhibits, Financial Statement Schedules, and Reports on 
               Form 8-K                                                       

SIGNATURES                                                                    


<PAGE>


PART I

Item 1 - 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.

General

     The  Company  designs,  develops,   manufactures  and  sells  sunroof  wind
deflectors,  hood protectors and rear air deflectors for cars,  light trucks and
vans. It uses plastics and thermoforming technology to produce these products.

     During the fiscal year ended  January 31,  1999,  approximately  98% of the
Company's sales were to automobile  manufacturers.  The Company's  clients/joint
product  development  partners include  DaimlerChrysler  Corp, GM. Service Parts
Operation,  GM. of Canada Ltd., Honda Access America,  Inc., Honda Access Corp.,
Mazda North America Operations,  Nissan Canada Inc., Nissan North America, Inc.,
Subaru of America, Inc., Toyota Canada Inc., and Toyota Tsusho America, Inc. The
Company  manufactures  products  according to  specifications  either  developed
jointly with or provided by its clients,  who in turn market the products,  on a
retail  basis,  under  their  own  brand  names  through  their  dealership  and
distribution networks. Management believes that the Company offers its customers
high quality product design and development capabilities.

     In 1989, the Company  received the "British  Columbia  Export Award" and in
1992 and 1993, it was one of six companies out of  approximately  500 to receive
the  "Nissan  Superior  Performance  Award"  granted  to  outstanding  parts and
accessories  suppliers.  In 1995, the Company was awarded the "Nissan First Team
Supplier  Award" for 1994 in  recognition  of its  performance  as a supplier to
Nissan. In 1997, the Company received the Business  Management  Excellence award
in export  category  from the ETHNO  Business  Council  of British  Columbia  in
conjunction with the Business Development Bank of Canada.

     The Company sells its products in the United States, Canada, Japan, and the
United  Kingdom.  Net export sales to customers by geographic  area consisted of
the following for each of the three years ended January 31, 1997, 1998 and 1999.

                                             Year ended January 31
                                   1997              1998             1999
                                      thousands of United States dollars

United States               $3,121      72%     $4,915    77%    $5,481      82%
Canada                         620      14%        789    12%       874      13%
Japan                          491      12%        586     9%       242       4%
Other                           84       2%        120     2%        42       1%



<PAGE>


Industry Overview

     Glas-Aire's  products  are  used  in the  diverse  and  growing  automotive
components market, comprised of all after-market  accessories,  dealer-installed
accessories, car care products and other products purchased by consumers for the
purpose  of  improving  their  vehicles  (versus  those  purchased  for  routine
maintenance). The Specialty Equipment Market Association ("SEMA") estimates this
category at the  manufacturers'  level,  has grown from $2.35 billion in 1985 to
over $6.85 billion in 1997. During this period,  the retail sales increased from
$4.35  billion  to  $19.33  billion.  The  Company's  products  compete  in  the
accessory/appearance segment of this market, estimated to be approximately $3.59
billion at the  manufacturers'  level.  These products are generally  defined as
those  that  change  the  look of the  vehicle,  add  creature  comforts  or add
aerodynamic styling that are not in the original vehicle design.

     According to SEMA, during 1990-1997, the  accessory/appearance  segment has
grown by 94.1%,  mostly due to the rise in light truck and sport utility vehicle
purchases.  Of all vehicles sold in the US in 1996,  43.5% were light trucks and
sport utility  vehicles.  In 1997,  this grew to almost 50%. SEMA estimates that
approximately  30% of all specialty  accessory  products are sold into the light
truck market,  either directly through the manufacturers or through  dealerships
and  after-market  distribution  channels.  Automotive  Market Research  Council
(AMRC) forecasts over 11% increase in light truck sales during the next 5 years.

     Glas-Aire  participates  in the OEM  segment  of the  appearance  accessory
market,  providing product to the automotive manufacturers which then distribute
the product to consumers  through  their dealer  networks.  The parts  accessory
business has become an  increasingly  important  profit  center for the dealers.
With a strong interest in providing  additional  profit  opportunities for their
dealer  networks,  the  manufacturers  are increasing  their own  involvement in
developing new and enhanced  accessory products (often included in "special trim
packages").

     While the Company has maintained its primary focus on the core OEM business
(genuine wind deflectors installed at the dealership level), management believes
the quality  Glas-Aire  product  lines  would have  excellent  potential  in the
largely untapped  after-market  channels as well. These channels  constitute the
majority of consumer  purchases  in the light truck  accessory  market and would
represent   significant   incremental  growth  potential  for  the  Company.  As
previously  mentioned,  the Company  perceives the  after-market  as a potential
target,  in  partnership  with a suitable  industry  participant.  As well,  the
Company  intends to use its  existing  relationship  with a Japanese  automobile
manufacturer  which is based on  direct-to-factory  sales to expand this mode of
operation in Japan and elsewhere.

Business Strategy

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

     Increasing production  capacity/efficiency.  The Company will add 3,000 ft2
to the Vancouver facility by constructing a mezzanine. The Company will move the
offices that are currently located on the main floor to the mezzanine,  allowing
expansion of operations into the vacated office space. The  additional 3,000 ft2
factory work space created by the  construction of the mezzanine will permit the
Company to redesign the flow of work within the factory for more  efficient  and
cost-effective   "finishing  operations,"  and  will  create  needed  space  for
additional equipment that will increase the Company's manufacturing capabilities
and capacity. The construction is scheduled to be completed by June 30, 1999.

     The Company  constantly  evaluates its production  process for improvement.
Recently,  the Company began  evaluating  several  changes in its  manufacturing
processes  that could lead to increases in efficiency  and cost savings in labor
and materials, if successfully implemented.  Although there can be no assurance,
management  is  optimistic  that the Company will be able to obtain the Canadian
Government's funding for further analysis and  development of this new process.


<PAGE>


     Management plans to streamline  machining operations by diverting some work
from the existing three 5-axis CNC trimmers to a new 3-axis CNC trimmer that the
Company plans to acquire. This action is consistent with the Company's objective
of increasing production capacity and efficiency.

     The capacity of the molding  operation  will be increased with the addition
of a third  thermoforming  machine.  This addition  will also  minimize  molding
down-time due to machine breakdowns.

     Increasing  sales to  automobile  manufacturers.  Approximately  98% of the
Company's  sales are to  automobile  manufacturers.  Management  of the  Company
believes that increased  sales to automobile  manufacturers  can be accomplished
through  sales of  existing  and new  products to  existing  customers  in North
America.   Marketing  efforts  in  North  America  are  supported  by  two  well
established and respected automobile  manufacturers' firms that have represented
the Company for a number of years.

     The Company has been  working  with a  manufacturers'  representative  firm
based in Japan to improve  distribution,  to strengthen its client interface and
intensify new business  development  efforts in Japan. In addition,  the Company
has  established  a  distribution  office in Tokyo with one  full-time  Japanese
employee with  automobile  industry  experience to enhance the Company's  direct
marketing efforts in Japan.

     Frequently, an increase in sales is accomplished through the development of
new clients as well as introduction  of new products.  During the last year, the
Company  succeeded in  introducing  2 part  numbers  into a Japanese  automobile
manufacturer  as production  parts rather than  accessories.  Historically,  the
Company's  products  have  been  sold  principally  as  accessories  and  not as
production parts that are installed during the manufacturing process. Management
is optimistic that it will be able to expand sales of its products as production
parts  rather than  accessories  with  existing  clients as well as new clients.
Management  intends to direct its  efforts  toward  further  penetration  of the
Japanese  automotive market, and is hopeful that the success the Company has had
with exiting clients will assist in this effort.

     The "After-Market" as a New distribution channel. Traditionally, almost all
of the Company's products are channeled to parts  distribution  centers of major
car  manufacturers  who, in turn,  private  labeled  the parts via their  dealer
networks as accessories/options for automobile buyers.  Management believes that
sales of the  Company's  products in the  "after-market"  through auto parts and
supply houses, mail order supply houses, or possibly through electronic commerce
on the  internet  offers  the  Company  significant  potential.  Management  has
evaluated a number of different opportunities and has concluded that a strategic
partnership   with  a  partner  that  is  already   actively   involved  in  the
"after-market"  sales of  automotive  products and  accessories  may provide the
optimum  solution  for the  Company's  expansion  into this  market.  Management
intends to further  evaluate this  opportunity and to attempt to find a suitable
strategic  partner.  Investors are cautioned that there can be no assurance that
the Company will be successful in finding a suitable  strategic  partner or that
even  if  such a  partner  is  found  that  an  acceptable  arrangement  will be
negotiated,  or even if  negotiated  that such a  relationship  will result in a
significant increase in the Company's sales or net income.

     Development of New Products.  Management  believes that  development of new
products  to meet the  demands  and  needs of its  customers  in the  automotive
industry is a key factor in the Company's  future success.  The Company conducts
active research and development  activities to enhance its existing products and
to develop new  products.  One such new product  that  management  believes  has
significant  potential is "door  visors." In 1996, the Company worked on a "door
visor project" for Isuzu Car Life Company Limited of Japan ("ICL"). This project
was  successfully  brought to prototype  stage but  canceled  before it could be
carried  into  production  due  to  manufacturing  delays  attributable  to  the
Company's  subcontractor  for injection molded products,  and difficulties  with
procurement of raw material acceptable to ICL. However,  formal negotiations are
now in progress  with  several auto  manufacturers  for the  production  of door
visors. Although there can be no assurance,  management is optimistic that these
negotiation  will result in sales of door visors and the  introduction  of a new
product to the Company's product line.


<PAGE>


Products

     The Company manufactures sunroof wind deflectors,  hood protectors and rear
air deflectors for cars, light trucks and vans. The Company's major raw material
is continuous cast acrylic.

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

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

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

     The following  table sets forth the  percentage of net sales of each of the
Company's product lines for the years ended January 31, 1997, 1998 and 1999.

      Product Line               1995       1996       1997       1998      1999
      ------------               ----       ----       ----       ----      ----
 Sunroof Wind Deflectors          60%        66%        54%        52%       41%
     Hood Protectors              24%        21%        31%        22%       37%
   Rear Air Deflectors            16%        13%        15%        26%       22%
  

     New Products.  In order to build on its basic product groups (i.e.  sunroof
wind deflectors, hood protectors and rear air deflectors),  the Company plans to
upgrade the offerings in all three categories to address its clients'/prospects'
new, more stringent  requirements  in terms of surface  finish,  complex shapes,
alternate  attachment  mechanisms  and  dimensional  accuracy.  This strategy is
expected to increase the  Company's  competitiveness  and help expand its target
markets.

     Management's  recent  marketing  efforts  in  Japan  have  resulted  in the
identification  of  significant   opportunities  in  the  door  visor  category.
Management  estimates  the  potential  market  in Japan to be in  excess of $100
million dollars per year at the factory level. Door visors allow for open window
air circulation by keeping out rain and other elements,  an important factor for
the  significant  number of  Japanese  consumers  who smoke  while  they  drive.
Recently, the Company has had formal inquiries from some of its Japanese clients
regarding the design and supply of door visors. Management does not believe that
injection  molded door visors  with  quality  acceptable  to the  Japanese  auto
manufacturers  are  being  manufactured  in  North  America  due to the  lack of
technology related to molding of such large parts with exacting requirements.

     The Company  intends to develop 2 types of door visor  products  (injection
molded  and  vacuumformed).  Management  believes  that  the U.S.  represents  a
significant potential market for vacuumformed door visors. Although there can be
no assurance,  management is optimistic  that the company will be able to obtain
Canadian  government funding for its marketing  activities of door visors in the
United States.


<PAGE>


     Product  Obsolescence/Design  Changes.  Due to automobile design changes by
automobile  manufacturers,  the Company's  products will become  obsolete and/or
require  modification.  Continued  utilization of the Company's  products by the
original equipment  manufacturers  ("OEMs") is substantially  dependent upon the
Company's  ability to quickly and reliably  adjust the design of its products to
conform to design  changes by the  automobile  manufacturers.  The Company  will
attempt to counteract  this with improved lead times,  as a result of using more
efficient design software and milling its own prototype tools for thermoforming.
Design changes and product  obsolescence could have a material adverse effect on
the Company's profitability.

Major Customers

     The Company sells  principally  to automobile  manufacturers  in the United
States,  Canada, Japan and the United Kingdom. For the fiscal 1999, sales in the
US  accounted  for  82%  of  the  Company's  revenues  (including  sales  to  US
subsidiaries of foreign automobile manufacturers), Canada 13% and others 5%.

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

     As reflected  below, the Company has four major customers who accounted for
10% or more of the Company's sales:

                                                       Percent of Company Sales
                                                           (FYE January 31)
     Customer                Products                   1997     1998     1999
     --------                --------                   ----     ----     ----

Nissan                Sunroof wind deflectors,           31%      34%      32%
North America, Inc.   hood protectors and rear air
                      deflectors

Honda Access          Sunroof wind deflectors            25%      21%      25%
America, Inc.        

General Motors        Hood protectors and rear           19%      14%      21%
(USA & CDN)           air deflectors

Subaru of             Sunroof wind deflectors            11%      9%       10%
America, Inc.


     The Company believes that it has a stable  relationship with its customers,
as  evidenced by the fact that its four  largest  customers  have dealt with the
Company for more than four years.  If, however,  the Company were to lose Nissan
Motor North America,  Inc.,  General Motors (USA & CDN),  Honda Access  America,
Inc. or Subaru of  America,  Inc. or if these  customers  were to  significantly
reduce their purchases from the Company,  the Company's  revenues,  earnings and
financial position would be materially adversely affected.


<PAGE>


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

Manufacturing

     The Company currently  manufactures and assembles its products at its plant
in Vancouver,  B.C., Canada. The Company's present line of products are produced
primarily from acrylic,  using thermoforming.  Thermoforming  involves heating a
sheet of acrylic to soften it and then  molding the  softened  acrylic  into the
desired  shape.  The  Company  is able to meet the  stringent  Japanese  surface
requirements by using an enhanced thermoforming process it has developed,  using
milled aluminum tools, in a clean-air facility.

     The Company's  traditional  manufacturing  operation consists of four major
functions:  (i) cutting;  (ii) molding;  (iii)  machining;  and (iv)  finishing.
Cutting entails cutting the acrylic, which is purchased,  in large sheets, to an
appropriate size for the product being manufactured.  Molding is one of the most
critical  operations  demanding  accurate  control of many parameters - tooling,
timing,  heating  and  cooling.  The  Company  currently  utilizes a  slide-tray
thermoformer,  plus a  three-station  rotary  thermoformer  which performs three
functions  simultaneously  loading/unloading,  heating  and  forming.  The three
stations  rotate so that after the machine  operator loads the acrylic it passes
automatically  through the heating  station  followed by the forming station and
finally to the unloading station without further human  intervention.  Next, the
molded pieces of acrylic are machined to form the blades of the wind  deflector.
This function is performed  primarily  with  computer  numeric  control  ("CNC")
routers.  Finishing  consists  of (i) flame  polishing  whereby the edges of the
blades are polished by use of a flame;  (ii) stamping  identifying  marks on the
product; (iii) application of gasket/extrusion; (iv) labeling; (v) cleaning; and
(vi) boxing.

     The Company  constantly  evaluates its production  process for improvement.
Recently,  the Company began  evaluating  several  changes in its  manufacturing
processes  that could lead to increases in efficiency  and cost savings in labor
and materials, if successfully implemented.  Although there can be no assurance,
management  is  optimistic  that the Company will be able to obtain the Canadian
Government's funding for further analysis and development of this new process.

     Raw  Materials  and  Suppliers.  Acrylic is the single most  expensive  raw
material used in manufacturing  the Company's  products.  The Company  currently
purchases its acrylic from Acrylco  Manufacturing  Ltd. (a Canadian  distributor
for Mitsubishi Canada Limited) and Aristech Acrylics LLC. in Florence, Kentucky.
The Company does not have a long-term  contract with either of these  suppliers.
If the Company were to lose either of these suppliers of acrylic,  management is
confident  that an  alternate  supplier  could be found,  although the number of
acrylic  suppliers is limited.  The absence of an alternate  supplier of acrylic
would have a serious adverse effect on the Company.  Previously, the Company has
reported that it intended to investigate manufacturing acrylic for the Company's
own  use,  and  to  purchase  acrylic  manufacturing   equipment  if  management
determined that it was in the best interests of the Company to do so. Management
believes that this strategy cannot be economically implemented,  and has decided
not to pursue manufacturing its own acrylic at this time.

     The  principal  components  purchased by the Company are  extrusions  (long
plastic strips used in mounting the protectors to vehicles), gaskets for sealing
deflectors  on to  vehicles'  roofs,  and  corrugated  boxes.  Supplies of these
components are readily available from various suppliers.


<PAGE>



     Quality Assurance. Management maintains strict quality assurance procedures
for every  product  manufactured  by the Company  throughout  the  manufacturing
process.  The Company's  acrylic suppliers provide a certificate with each batch
of acrylic showing that it has been sampled for heat and other tests relative to
its  production.   Other  incoming  components  are  manufactured  according  to
specifications  provided by the Company and are  checked  upon  receipt  against
these specifications by the Company's incoming inspection personnel.  During the
production  stage,  the  Company's  quality  assurance  personnel  monitor  each
operation  in the  manufacturing  process.  All work in process is also  checked
during the fabrication and assembly processes using operator statistical process
control procedures.

     The Company's  culture  emphasizes  that quality is the  responsibility  of
every  employee;  thus,  every line  worker is also  encouraged  to be a quality
assurance  inspector.  After packing and before shipment,  the quality assurance
personnel   randomly   check   goods   according   to  product   specifications.
Historically,   the  Company's  level  of  defective   products  has  been  low,
representing approximately 1% of annual net sales.

     Generally,   the  Company  warrants  its  products  to  coincide  with  the
automobile warranty provided by the automobile manufacturer to the consumer, and
is obligated to reimburse the automobile manufacturer for all legitimate quality
related  warranty  claims paid by it. To date, the Company's  warranty  expenses
have been insignificant.

     Management  of the  Company is in the  process of  registering  for QS-9000
quality   standard   certification.    These   standards   were   developed   by
Chrysler/Ford/General Motors Supplier Quality Requirements Task Force. Recently,
the North  American  automobile  manufacturers  shifted their  supplier  quality
requirements to QS-9000. Towards 1997, the Company was informed about this shift
by General  Motors  (Canada and the US) and responded by changing its focus from
ISO 9000 to QS-9000.  Since then, the Company prepared and published its QS-9000
Quality Policy Manual and submitted it to General  Motors  (Canada) as the first
step towards  certification.  While substantial effort is required to formulate,
publish and  implement  all of the  practices  mandated  by QS-9000,  management
intends  to  continue   pursuing  the  various  steps   necessary  to  attaining
certification.  It must be noted that substantial  effort/expense is required to
implement  all of the  practices  mandated by QS-9000.  Although  management  is
optimistic that the Company will receive certification,  investors are cautioned
that  there can be no  assurance  that the  Company  will,  in fact,  be granted
QS-9000 certification or that, once granted, it will retain such certification.

Marketing and Distribution

     Marketing.  The Company markets itself primarily  through personal contact,
the distribution of written and computerized  information  about the Company and
its products,  incentive programs and attendance at trade shows. These functions
are primarily performed by management of the Company;  however,  the Company has
contracts with three sales representatives - two in the United States and one in
Japan - who have established  relationships with large automobile manufacturers.
The sales representatives  handle the day-to-day customer contacts. In addition,
the Company has  established a  distribution  office in Tokyo with one full-time
Japanese employee with automobile  industry  experience to enhance the Company's
direct marketing efforts in Japan. As the Company's sales increase,  the Company
may  hire   additional   personnel  or  may  contract  with   additional   sales
representatives if additional marketing personnel are needed.

     Glas-Aire has recently been selected by General Motors for inclusion in its
accessory   promotional  program.  As  a  result,  the  Company's  products  are
prominently  displayed in marketing  brochures provided to GM's network of 7,000
dealers.

     Management  believes  that the Company  should  attempt to  strengthen  its
customer  base by  increasing  both the  number of  customers  and the number of
products sold to each customer,  by expanding into additional geographic markets
and through establishing new channels of distribution.  (See "Business--Business
Strategy.")  In  that  regard,  management  intends  to  utilize  the  following
promotional strategies:


<PAGE>


     - The Company's  existing corporate  brochure will be  reviewed/updated  to
include new products and processes, when necessary.

     - A corporate  and product  profile is available on digital  medium  (i.e.,
computer disks). This will enable the Company to present itself and its products
more  effectively  using both digitized  information  available on disks, and on
digital networks for rapid information transfer over telephone lines anywhere on
the globe, as well as demonstrating the Company's innovative spirit.  Management
provides  access to information  on the Company,  including its filings with the
United States Securities and Exchange  Commission,  its press releases,  and its
products  through  the  INTERNET.  The  Company's  web page may be  accessed  at
www.glasaire.com.

     - Representatives of the Company will continue  traveling to Japan,  China,
Europe etc. to present the Company and its  products to  potential  customers as
well as new distributors or other potential  strategic partners for entering the
non-dealership after-market segment.

     - The Company will continue  increasing  its  participation  in major trade
shows associated with its products.

     Distribution.  The majority of the Company's products are supplied to parts
distribution  centers of major car manufacturers  which, in turn,  private label
the parts via their dealer networks as accessories/options for automobile buyers

     The Company  generally  sells and ships its products  "F.O.B.  factory" and
most of its  customers  are  responsible  for  the  transportation  of  finished
products  from the  Company's  factory  or  warehouse  facility  to their  final
destination and bear the risk of loss during transportation.

     With respect to most customers  located in North  America,  the Company has
Electronic Data  Interchange  ("EDI")  capability which  facilitates  receipt of
orders from customers and transmission of invoices to customers  electronically.
After receipt of purchase orders from customers,  wherever located,  the Company
generally  bulk-ships  the ordered parts to the  customers'  parts  distribution
centers within a mutually acceptable lead time, usually 30 days.

     For most of the cars sold in North America, Glas-Aire ships its products to
customers' parts distribution  centers and vehicle processing centers throughout
the U.S.  and Canada.  For the  Japanese  market,  the OEMs  generally  have one
centralized  distribution center. With General Motors,  Glas-Aire drop ships the
ordered parts directly to its network of 7,000 dealers.

     Last year, the Company completed a feasibility study regarding distribution
into the after-market . Management believes that sales of the Company's products
in the  "after-market"  through auto parts and supply houses,  mail order supply
houses,  or  possibly  through  electronic   commerce  on  the  internet  offers
significant   potential.   Management   has  evaluated  a  number  of  different
opportunities and has concluded that a strategic partnership with a partner that
is already actively involved in the "after-market"  sales of automotive products
and  accessories  may provide the optimum  solution for the Company's  expansion
into this market. Management intends to further evaluate this opportunity and to
attempt to find a suitable strategic partner. Investors are cautioned that there
can be no assurance  that the Company will be  successful  in finding a suitable
strategic  partner or that even if such a partner  is found  that an  acceptable
arrangement  will be negotiated,  or even if negotiated that such a relationship
will result in a significant increase in the Company's sales or net income.


<PAGE>


Research and Development and Product Design

     Management believes that its product development capabilities are important
to the future success of the Company's business.  The Company has four permanent
employees  engaged in research and  development  at its Vancouver  facility.  In
addition,  the Company  contracts  out the  Company's  research and  development
function to a research and  development  company  which  employs four  permanent
research  and  development  professionals  who work on the  Company's  projects.
During the fiscal years ended January 31, 1997, 1998 and 1999, the Company spent
approximately $395,099,  $393,182 and $415,751,  respectively,  towards research
and  development.  The increase in research and  development  costs from 1997 to
1999 resulted from increased research and development activities associated with
development of new products and  improvements to existing  products.  Management
expects  that this trend of  increased  spending  on  research  and  development
activities will continue.

     During the last fiscal year, the Company purchased the Pro/E CAD/CAM system
and related hardware,  which was a significant upgrade to the Company's computer
aided design capabilities. Management believes that this upgrade will facilitate
the electronic  transfer of technical data and drawings  between the Company and
engineering departments of the Company's OEM customers.  Utilization of Pro/E is
expected to increase the  efficiency of the Company's  research and  development
function and simplify the engineering  process.  As the Company's  customers are
principally  automobile  manufacturers,  the major responsibility of the product
design  personnel is to produce designs to the satisfaction of and in accordance
with  the   specifications   developed   with  or  provided  by  the  automobile
manufacturers.  The Company's  cycle time for product  development is relatively
short, ranging from three to six months.

     When the design of a vehicle model changes configuration,  the Company must
retool its  products to insure  proper fit of its  products.  Although  frequent
model or configuration changes would increase the Company's costs, tooling costs
generally are not  substantial  and frequently may be passed on to the customer,
often over a two year period.  However,  investors are cautioned  that continued
utilization of the Company's products by the OEMs as well as the after-market is
substantially  dependent  upon the  Company's  ability to quickly  and  reliably
adjust  the  design of its  products  to  conform  with  design  changes  by the
automobile  manufacturers and that design changes and product obsolescence could
have a material adverse effect on the Company's profitability.

Competition

     The  Company  has  several  competitors  which have  substantially  greater
technical,  financial and marketing resources than the Company.  For the sunroof
wind  deflector  market,  the  primary  competitor  has  been  Plastic  Form,  a
subsidiary  under the umbrella of MascoTech.  In the hood protector and rear air
deflector  market,  its major  competitor  is  Autotron,  a  subsidiary  of LUND
International  Holdings  ("Lund").  Autoventshade,  also a  subsidiary  of Lund,
produces hood protectors and door visors.

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

<PAGE>


Seasonality

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

Employees

     As of January 31,  1999,  the Company  employed 86  production  workers,  8
research  and  development  personnel,  2  clerical/administrative  staff  and 3
management  staff  members.  In  addition,  the  Company  has a contract  with a
research and  development  company with 4 engineers  and  technologists  for the
Company's projects.

     The Company attempts to maintain amiable and  communicative  relations with
its employees.  The Company is not a party to any labor  contracts or collective
bargaining agreements.  The Company has experienced no labor stoppages in recent
years  and   management   believes  that   relations   with  its  employees  are
satisfactory. The Company believes there is an adequate supply of suitable labor
available.

Factors That May Affect Future Results

     Major Customers. The Company has four customers which, together,  accounted
for 86% of its sales during the fiscal year ended January 31, 1999. There can be
no  assurance  that these  customers  will  continue to purchase  the  Company's
products  at these  levels  in the  future.  The loss of any one of these  major
customers, or a significant reduction in their purchases from the Company, would
have a material adverse effect upon the Company and its operations.

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

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

     Dependence Upon Key Personnel. The Company's future performance will depend
to a  significant  extent upon the efforts and  abilities of certain  members of
senior  management as well as upon the  Company's  ability to attract and retain
qualified engineering, technical, design, marketing and production personnel. In
particular,  the Company is  dependent  upon the  experience  and  abilities  of
William R. Ponsoldt;  the Company's Chief Executive  Officer and the Chairman of
its Board of Directors,  Alex Ding, the President of the Company,  and Omer Esen
the General Manager of the Company. Accordingly, the loss of the services of Mr.
William R.  Ponsoldt,  Mr. Ding,  Mr. Esen or other key  personnel  could have a
material adverse effect on the Company and its future operations. If Mr. William
R. Ponsoldt,  Mr. Ding, or Mr. Esen were to be unavailable for any reason, there
can be no assurance that the Company would be able to employ a qualified  person
or persons on terms suitable to the Company.


<PAGE>


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

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

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

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

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



<PAGE>



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

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

Item 2 - Properties
-------------------

     The Company  leases  21,777  square feet of factory,  warehouse  and office
space located at 3137 Grandview  Highway,  Vancouver,  B.C., Canada V5M 2E9 from
Rockmore  Investments Ltd. The lease term is 5 years, due to expire in 2003 with
an option for a further  5-year  term at that time.  The  current  total rent is
CDN$9,779  (i.e., US $6,520 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.  The Company is adding approximately 3,000
ft2 to the Vancouver facility by constructing a mezzanine. Costs of construction
are being borne by the landlord.  Upon completion of the mezzanine,  the Company
will pay an additional CDN $3,000 (i.e.,  US $2,000 based upon current  exchange
rates) per month for the term of the lease.

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

     These  facilities are adequate for the Company's  present level of business
and  anticipated  growth  over the  next  two  years;  however,  if  sales  grow
significantly  greater than is anticipated  then management will have to acquire
additional manufacturing space either by leasing additional space in the current
facilities or by moving to a larger facility.


<PAGE>


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

     The Company does not hold any patents on any of its  products,  nor does it
have any licenses, trademarks, franchises, concessions or royalty agreements.

Government/Environmental Regulation

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

Item 3 - Legal Proceedings
--------------------------

     The Company is not aware of any material  pending  litigation  to which the
Company is or may be a party,  nor is it aware of any  pending  or  contemplated
proceedings  against it by  governmental  authorities.  The Company  knows of no
legal  proceedings  pending or threatened,  or judgments  entered  against,  any
director or officer of the Company,  or legal  proceeding to which any director,
officer  or  security  holder of the  Company  is a party  adverse  to, or has a
material interest adverse to, the Company.


Item 4 - Submission of Matters To a Vote of Security Holders
------------------------------------------------------------

     No  matters  were  submitted  by the  Company  to a vote  of the  Company's
shareholders through the substitution of proxies or otherwise, during the fourth
quarter of the fiscal year covered by this report.


                                     PART II

Item 5 - Market For Registrant's Common Equity and Related Stockholder Matters
------------------------------------------------------------------------------

The  Company's  Common  Stock is  traded in the  over-the-counter  market on the
NASDAQ  Small Cap  Market  under the  symbol  "GLAR"  and on the  Pacific  Stock
Exchange under the Symbol GLA.

     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 the  National
Quotation Bureau, Inc.

         Quarter Ended                                 High Bid        Low Bid
         -------------                                 --------        -------
         Fiscal 1999
         May 1 thru July 31, 1998                       $3.00           $1.75
         August 1 thru October 31, 1998                 $2.00           $1.25
         November 1 thru January 31, 1999               $2.25           $1.094



<PAGE>



     The closing bid price of the Common Stock as of April 23,  1999,  was $2.75
per share. As of January 31, 1999, the Company had approximately 30 shareholders
of record and  estimates  that its  Common  Stock was  beneficially  owned by in
excess of 500 shareholders based upon ownership in "street name."

     Holders  of common  stock  are  entitled  to  receive  dividends  as may be
declared by the Board of Directors out of funds legally available therefore.  In
April of 1999,  the Board of Directors  declared a $0.25 per share cash dividend
payable to shareholders  of record on April 23, 1999.  Subsequent to the date of
declaration  of the cash  dividend  and  before the  record  date,  the Board of
Directors rescinded the cash dividend subject to receiving  shareholder approval
of the rescission at the next annual meeting of the  shareholders.  The Board of
Directors  has advised  that they do not  anticipate  declaring  and paying cash
dividends in the foreseeable future.

Item 6 - Selected Financial Data
--------------------------------

     The  selected  financial  information  set forth below is derived  from the
audited consolidated  financial statements of the Company, which are prepared in
accordance with generally accepted accounting principles in the United States of
America  and  stated  in  United  States  dollars.  The  consolidated  financial
statements  at January 31, 1998 and 1999 and for the fiscal years ended  January
31,  1997,  1998  and  1999  have  been  audited  by  BDO  Dunwoody,   Chartered
Accountants,  and appear elsewhere herein. The selected  consolidated  financial
data is  qualified  in its  entirety  by  reference  to,  and  should be read in
conjunction  with,  the  Consolidated  Financial  Statements,  related Notes and
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations."

                                              As of January 31,
                                           ----------------------
Balance Sheet Data                          1998             1999
------------------                          ----             ----
                                   (In thousands of United States dollars,
                                             except share data)

Working capital                           $ 3,086          $ 3,401

Total assets                                5,047            5,885
Long-term debt                                --              --
Obligation under capital lease                                  68
Deferred income taxes                         281              359
Shareholders' equity                        4,213            4,581

                                                 Year ended January 31,
                                      -----------------------------------------
Income Statement Data                     1997           1998           1999
---------------------                     ----           ----           ----

Sales                                 $     4,316    $     6,410    $     6,639
Cost of sales                               3,028          4,506          4,497
                                      -----------    -----------    -----------
Gross profit                                1,288          1,904          2,142
                                      -----------    -----------    -----------
Research and development                      395            393            416

Selling and distribution                      282            386            403
General and administrative                    414            528            513
Provision for profit sharing                   23             68             89
Interest                                      (61)           (74)           (79)
                                      -----------    -----------    -----------
Total expenses                              1,053          1,301          1,342
                                      -----------    -----------    -----------
Income before income taxes                    235            603            800
Income taxes                                  126            257            299
                                      -----------    -----------    -----------

Net income                            $       110    $       346    $       501
                                      ===========    ===========    ===========
Earnings per share basic & diluted    $      0.08    $      0.23    $      0.34
                                      ===========    ===========    ===========
Weighted average number of
  shares outstanding                    1,426,038      1,519,405      1,470,129


<PAGE>


Item 7 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
--------------------------------------------------------------------------------

Overview

     The Company  derives its revenues from the sale of  automotive  accessories
manufactured by it. The Company's sales increased from $4,316,372 for the fiscal
year ended January 31, 1997, to $6,409,954 for the fiscal year ended January 31,
1998,  and to $6,639,219 for the fiscal year ended January 31, 1999. The Company
had net income of $109,800  in net income for the fiscal year ended  January 31,
1997,  and an  increase  to  $346,328  in net income  for the fiscal  year ended
January  31,  1998 and an increase to $500,768 in net income for the fiscal year
ended January 31, 1999.  Gross profit margins  decreased to 29.8% for the fiscal
year ended January 31, 1997,  and to 29.7% for the fiscal year ended January 31,
1998,  and an increase to 32.26% for the fiscal year ended  January 31, 1999 due
to the  addition  of new  customers  plus volume  increase in sales  orders from
existing customer.  However, management believes that it will be able to further
increase  gross  profit  and net  income in future  periods  by  increasing  the
Company's  production capacity and production  efficiency.  Increased revenue in
future  periods will depend on the Company's  ability to strengthen its customer
base through the development of new products, increasing the number of customers
and expanding into  additional  geographic  markets and  distribution  channels,
while  maintaining  or  increasing  sales of its  existing  products  to current
customers.  Management  intends to increase  production  capacity and production
efficiency through the purchase of additional equipment and machinery.  Further,
management  also  intends  to focus  its  efforts  upon  improving  the sales to
overhead ratio and increase the Company's  gross margin by  reorganization,  the
use of more effective tools and better  utilization of resources.  Investors are
cautioned  that there can be no assurance that gross profit and net income will,
in fact, increase in future periods. See "Business--Business Strategy."

Results of Operations

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

                                                     Year ended January 31,
                                               -------------------------------
                                                1997         1998         1999
                                                ----         ----         ----
Net sales                                      100.0%       100.0%       100.0%
Cost of sales                                   70.2         70.3         67.7
                                               -----        -----        -----
Gross profit                                    29.8         29.7         32.3
                                               -----        -----        -----
Research and development                         9.2          6.1          6.3
Selling and distribution                         6.5          6.0          6.1
General and administrative                       9.6          8.2          7.7
Provision for profit sharing                     0.5          1.1          1.3
Interest                                        (1.4)        (1.1)        (1.2)
                                               -----        -----        -----
Income before income taxes                       5.4          9.4         12.1
Income taxes                                     2.9          4.0          4.5
                                               -----        -----        -----
Net income                                       2.5          5.4          7.6
                                               =====        =====        =====

<PAGE>


Year Ended January 31, 1999 Compared to Year Ended January 31, 1998

     Sales.  The Company's sales increased by 3.58% from $6,409,954 for the year
ended January 31, 1998, to $6,639,219 for the year ended January 31, 1999.  This
increase resulted primarily (1) from the addition of new customers, (2) sales of
new parts, and (3) additional orders from existing customers.  Revenues from the
Company's four major customers  accounted for approximately 88% of the Company's
sales during the year ended January 31, 1999.

     Gross  Profit.  Gross profit  margins,  expressed as a percentage of sales,
increased  slightly from 29.7% for the year ended January 31, 1998 to 32.26% for
the year ended January 31, 1999. This net increase of 2.56% was due primarily to
(i) an increase in the value of Canadian  dollar which  diminished  the exchange
rate benefit  reflected in the gross profit  margin of the Company for the prior
fiscal  year,  (ii) decline in material  cost due to the usage of raw  materials
remaining from the previous year,  (iii) an increase in depreciation  due to the
placement  of new  equipment  service,  and (iv) an increase in direct labor and
overhead cost.

     Research and Development.  Expenses for research and development  increased
by 5.74% from  $393,182 for the year ended January 31, 1998, to $415,751 for the
year ended January 31, 1999. This increase was primarily due to (i) an increased
in the number of engineering  personnel conducting in-house activities,  (ii) an
increase in usage of outside  contractors to accommodate an increase in research
and development activities, (iii) an increase in travel expenses to customers to
provide extra services related to new design.

     Selling and Distribution.  Selling and distribution  expenses  increased by
4.48%,  from  $386,098 for the year ended  January 31, 1998, to $403,382 for the
year ended January 31, 1999. This increase was primarily due to (i) the increase
of $12,274  after-market  research,  (ii) the increase of $10,317 warranty claim
due to major design change requested by the Company's  largest  customer,  (iii)
the increase of $11,303 commission  expenses from volume increase in sales, (iv)
a decrease of $16,610 in travel & promotion  expenses  related to the  Company's
marketing efforts deferred to February & March 1999.

     General and administrative.  General and administrative  expenses decreased
by 2.69% from  $527,552 for the year ended January 31, 1998, to $513,384 for the
year  ended  January  31,  1999,  as a result of (i) an  increase  of $12,830 in
consulting fees and travel expenses related to the Company's evaluation, (ii) an
increase of $8,000 in director's fees, (iii) a decrease of $5,916 in consulting,
legal fees relating to the preparation of annual reports to investors. Excluding
these  expenses the general and  administrative  expenses were actually lower by
$29,082 from the same period in 1998, a result of (i) an increase of $13,832 due
to  additional  maintenance  support fees paid to the EDI program as required by
our major  customers.  (ii) a  decrease  in the number of  persons  employed  in
administration  of  $22,285,  (iii) a  decrease  in  consulting  fees of $11,980
relating to the QS9000 (Quality  Control  Certification)  (iv) a gain on foreign
exchange  of 4,380 (v) an  increase  in cash  discount,  and a decrease in other
administration cost of $4,269.

     Provision for Profit  Sharing.  Provision for profit  sharing  increased by
30.64% from  $68,504 for the year ended  January 31, 1998 and to $89,496 for the
year  ended  January  31,  1999.  This  increase  was a  result  of  the  higher
profitability of the Company.

     Interest.  Interest income (net of interest expense) increased from $74,256
for the year ended  January 31, 1998,  to $79,903 for the year ended January 31,
1999,  primarily as a result of interest  earned on cash deposits  obtained from
the public offering.

     Income  before Income Taxes.  Before  income  taxes,  the Company's  income
increased from $602,985 for the year ended January 31, 1998, to $799,829 for the
year ended January 31, 1999.


<PAGE>


     Income  Taxes.  The Company  provided  for income taxes of $299,061 for the
year ended January 31, 1999. The Company's effective tax rate in 1999 was 37.4%

     Net Income.  Net income  increased from $346,328 for the year ended January
31, 1998, to $500,768 for the year ended January 1999.

Year Ended January 31, 1998 Compared to Year Ended January 31, 1997

     Sales.  The Company's sales increased by 48.5% from $4,316,372 for the year
ended January 31, 1997, to $6,409,954 for the year ended January 31, 1998.  This
increase resulted primarily (1) from the addition of new customers, (2) sales of
new parts, and (3) additional orders from existing customers.  Revenues from the
Company's three major customers accounted for approximately 64% of the Company's
sales during the year ended January 31, 1998.

     Gross  Profit.  Gross profit  margins,  expressed as a percentage of sales,
decreased  slightly  from 29.8% for the year ended January 31, 1997 to 29.7% for
the year ended January 31, 1998. This net decrease of 0.14% was due primarily to
(1) an increase in the value of Canadian  dollar which  diminished  the exchange
rate benefit  reflected in the gross profit  margin of the Company for the prior
fiscal year, (2) an increase in depreciation  due to the placement new equipment
service, and (3) an increase in direct labor and overhead cost.

     Research and Development.  Expenses for research and development  decreased
slightly by 0.48% from $395,099 for the year ended January 31, 1997, to $393,182
for the year  ended  January  31,  1998.  This  decrease  was  primarily  due to
increased   utilization  of  the  Company's   Engineering   department  for  R&D
activities.

     Selling and Distribution.  Selling and distribution  expenses  increased by
37%, from $281,669 for the year ended January 31, 1997, to $386,098 for the year
ended  January 31, 1998.  This increase was primarily due to (1) the increase of
$19,548 travel & promotion expenses relating to the Company's marketing efforts,
(2) the  increase  of  $72,670  commission  expenses  from the  addition  of new
customers and volume increase in sales order from existing customers, and (3) an
increase of 1996 warranty claims of $12,202.

     General and administrative.  General and administrative  expenses increased
by 27.4% from  $414,174 for the year ended January 31, 1997, to $527,552 for the
year ended January 31, 1998, as a result of (1) increased administration cost of
$12,435  relating to the  preparation of annual  reports to all  investors,  (2)
additional  consulting fees of $15,019  relating to the QS9000 (Quality  Control
Certification)  process  and  Project  Teamwork  Assessment,  (3) an increase of
$22,800 in consulting, legal, and annual fees relating to the Company becoming a
fully  reporting  public  company,  (4) a loss of  $18,415  on the sale of fixed
assets,  (5) a loss on foreign  exchange  of $34,875,  and (6)  increase in cash
discount, bad debt and other administration cost of $9,834.

     Provision for Profit  Sharing.  Provision for profit  sharing  increased by
191.5% from  $23,498 for the year ended  January 31, 1997 and to $68,504 for the
year  ended  January  31,  1998.  This  increase  was a  result  of  the  higher
profitability of the Company.

     Interest.  Interest income (net of interest expense) increased from $61,354
for the year ended  January 31, 1997,  to $74,256 for the year ended January 31,
1998,  primarily as a result of interest  earned on cash deposits  obtained from
the public offering.


<PAGE>


     Income  before Income Taxes.  Before  income  taxes,  the Company's  income
increased from $235,318 for the year ended January 31, 1997, to $602,985 for the
year ended January 31, 1998.

     Income  Taxes.  The Company  provided  for income taxes of $256,657 for the
year ended January 31, 1998. The Company's effective tax rate in 1998 was 42.5%.

     Net Income.  Net income  increased from $109,800 for the year ended January
31, 1997, to $346,328 for the year ended January 1998.


Liquidity and Capital Resources

     The Company has  traditionally  relied on  internally  generated  funds and
short-term  bank  borrowings to finance its operations  and expansion,  although
capital  expenditures  have been partly  financed by long-term debt. In May 1996
the  Company  received  net  proceeds  from  a  public  offering   amounting  to
$2,773,000.

     The  Company  has in  place  a  demand  revolving  credit  facility  in the
principal amount of CDN$1,000,000  with a financial  institution.  As of January
31, 1999, the Company had not utilized any of its credit  facility.  Interest on
this indebtedness  equals the Canadian prime rate plus 1/2%. The credit facility
is 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.  The  credit  facility  was  renewed in
December  1998 for a one-year  period.  During the fiscal year ended January 31,
1999, the Company paid a total of $103 in interest. There was no amount of total
short-term borrowings outstanding in both years at January 31, 1999, and January
31, 1998.

     Working  capital was  $3,400,499  at January 31,  1999.  For the year ended
January 31, 1999, net cash generated  from  operations was $1,367,586  including
net income of  $500,768,  depreciation  of  $186,664,  deferred  income taxes of
$77,177 and a net change in  non-cash  working  capital of $606,969  occurred as
follows:  (i)  accounts  receivable  decreased  by  $247,162  primarily  due  to
increased collection efforts, (ii) inventories decreased by $99,092 as result of
the usage of raw  materials  remaining  from the previous  year,  (iii)  prepaid
expenses  increased  by $14,365 and  accounts  payable  and accrued  liabilities
increased  by $272,832 as a result of the deferral of payment  until  February &
March 1999.

     Net cash provided by financing  activities amounted to $27,788 for the year
ended January 31, 1999,  primarily  due to increase in obligation  under capital
lease of $156,108, the repayment of capital lease of $38,331, issuance of shares
of $13,421 and the repurchase of shares for $103,410.

     Net cash used in  investing  activities  amounted to $888,219  for the year
ended January 31, 1999, was primarily due to (I) the issuance of note receivable
of  $506,806  (ii) the  purchase  of fixed  assets.  Net cash used in  investing
activities  amounted to $365,033 and  $573,861  for the years ended  January 31,
1998 and 1997, respectively.  Capital expenditures during the year ended January
31, 1999 totaled  $398,234  and were  financed  primarily by the funds  received
during fiscal 1997 from the public  offering.  Capital  expenditures  during the
years  ended   January  31,  1998  and  1997  totaled   $442,921  and  $586,305,
respectively.

     The Company expects that working capital requirements and capital additions
will  continue to be funded  through a  combination  of the  Company's  existing
funds,  internally  generated  funds,  and existing bank  facilities and capital
leases.  The Company's working capital  requirements are expected to increase in
line  with the  growth of the  Company's  business,  and it  either  has or will
generate  sufficient working capital to meet the Company's  requirements  during
this fiscal year. During the current fiscal year, the Company anticipates making
total capital  expenditures of approximately  $650,000 as follows:  (1) $100,000
for the purchase of a CNC Machine, (2) $350,000 for a MAAC Machine and upgrading
the  Company's  other MAAC  machines  for natural gas  heating,  (3) $70,000 for
software and related hardware, (4) $95,000 for leasehold  improvements,  and (5)
$35,000 for the QS9000 (Quality Control Certification) process.


<PAGE>


Impact of Inflation

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

Exchange Rates

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

     Exchange rates between the United States and Canadian dollar for the fiscal
years ended January 31, 1999, 1998 and 1997, including the average exchange rate
for the period, are as follows:

     Fiscal year ended                                  Average Exchange Rate
        January 31,              Exchange Rate              for Period
        -----------              -------------              ----------

           1999              1.U.S.$:1.5110 Cdn.$       1 U.S.$:1.4861 Cdn.$
           1998              1.U.S.$:1.4556 Cdn.$       1 U.S.$:1.4267 Cdn.$
           1997              1.U.S.$:1.3470 Cdn.$       1 U.S.$:1.3625 Cdn.$

Year 2000 Compliance

     The Year 2000 ("Y2K")  computer  problem refers to the potential for system
and processing failures of date-related data as a result of  computer-controlled
systems using two digits  rather than four to define the  applicable  year.  For
example,  computer  programs that have  time-sensitive  software may recognize a
date  represented as "00" as the year 1900 rather than the year 2000. This could
result in a system failure or miscalculations causing disruptions of operations,
including  among other things,  a temporary  inability to process  transactions,
send invoices, or engage in similar normal business activities.

     The Company has developed certain proprietary  software products for use in
its business. The Company has retained a consultant who has revised the software
to be Y2K compliant and who has conducted  preliminary tests of the software for
Y2K compliance.  Preliminary  tests indicate that the software is Y2K compliant.
However,  the  Company  intends  to  conduct  more  rigorous  tests  in order to
establish Y2K compliance. Management believes that any necessary changes will be
completed by October 31, 1999.

     The Company  also may be affected  by Y2K issues  related to  non-compliant
internal systems developed by the Company or by third-party vendors. The Company
has reviewed its internal  systems,  including its accounting  system,  and have
found them to be Y2K  compliant.  The Company is not currently  aware of any Y2K
problem  relating to any of its internal,  material systems and does not believe
that it has any material  systems that contain  embedded  chips that are not Y2K
compliant.

     The Company's internal  operations and business are also dependent upon the
computer-controlled  systems of third parties such as  suppliers,  customers and
service  providers.  Management  believes that absent a systemic failure outside
the control of the Company,  such as a prolonged loss of electrical or telephone
service,  Y2K problems at such third parties will not have a material  impact on
the Company.  The Company has no contingency plan for systemic  failures such as
loss of electrical or telephone services.  The Company's contingency plan in the
event of a non-systemic  failure is to establish  relationships with alternative
suppliers  or vendors to replace  failed  suppliers  or vendors.  Other than the
previously  described testing,  and remedying problems  identified by testing or
from external  sources,  the Company has no other contingency plans or intention
to create other contingency plans.


<PAGE>


     Failures of the Company's  internal  systems could  temporarily  prevent it
from  processing  orders,  issuing  invoices,  and  could  require  it to devote
significant   resources  to  correcting  such  problems.   But  to  management's
knowledge, the internal accounting systems have been attested by the supplier as
Y2K compliant. Due to the general uncertainty inherent in the year 2000 computer
problem,   resulting  from  the  uncertainty  of  the  year  2000  readiness  of
third-party  suppliers  and vendors,  the Company is unable to determine at this
time whether the consequences of Y2K failures will have a material impact on its
business, results of operations, and financial condition.


Item 8 - Financial Statements and Supplementary Data
----------------------------------------------------

     Included at pages F-1.

Item 9 - Changes  in and  Disagreements  with  Accountants  on  Accounting  and;
Financial Disclosure
--------------------------------------------------------------------------------

     The Company has not had any  reported  or  material  disagreement  with its
accountants  on any matter of  accounting  principles,  practices  or  financial
statement disclosure.


                                    PART III

Item 10 - Directors and Executive Officers of the Registrant
------------------------------------------------------------

     The  directors,  executive  officers,  and  one of  the  key  employees  of
Glas-Aire Industries Group Ltd. at January 31, 1999 were as follows:

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

Edward Ting                 51          Chief Executive Officer and Chairman
                                        of the Board of Directors

Alex Yie Wie Ding           39          President, Chief Operating Officer
                                        and Treasurer and Director

Omer Esen                   56          General Manager, Chief Financial Officer

Linda Kwan                  53          Financial Controller

Chris G. Mendrop            47          Director

Clement Cheung              44          Director



<PAGE>



     Edward Ting. Mr. Ting served as Chief Executive Officer and Chairman of the
Board of  Directors  of the Company from  inception  until April 16, 1999.  From
September  1992 to  February  1995,  Mr. Ting also  served as  President  of the
Company.  Since  March  1988,  Mr.  Ting  also has  served as  President,  Chief
Executive  Officer and a director of Electrocon  International  Inc., a publicly
traded,  Hong Kong-based  holding company that conducts  operations  through its
subsidiaries  in  two  separate   business   segments  -  the   distribution  of
semi-conductor  products  (primarily  computer chips) to small and  medium-sized
manufacturers  located in Hong Kong and the People's  Republic of China, and the
distribution of golf carts, irrigation products and systems, fertilizer and turf
equipment to golf clubs in Hong Kong, Macao and the People's  Republic of China.
As President and Chief Executive Officer of Electrocon,  Mr. Ting is responsible
for the overall management, strategy and direction of that company.

     Alex Yie Wie  Ding,  age 39,  has  served  as the  general  manager,  chief
operating  officer and a director  of the  Company  since 1991 and has served as
president  of the Company  since  February  1995.  Mr.  Ding's  responsibilities
include   managing  and  advising   senior  staff,   as  well  as   manufacturer
representative   agencies,  on  a  variety  of  important  issues.  He  is  also
responsible  for new  business  development,  analysis and  evaluation  of major
projects and maintaining  high level contact with key customers.  From September
1998 to June 1991,  Mr.  Ding was General  Manager of Hing Wor Inc.,  a clothing
manufacturer  based in  Montreal.  Mr.  Ding  serves on the board of the  Better
Business  Bureau  of the  Lower  Mainland  of  British  Columbia  also he is the
President  of Sunbrite  Business  Association.  Mr. Ding has a bachelors  degree
(1984) in civil engineering and a post-graduate diploma in management (MBA Level
1, 1986), both from McGill University.

     Omer Esen,  age 56,  has served as Vice  President  of  operations  for the
Company since February 1995, assumed the additional  position of Chief Financial
Officer in November of 1996,  and in 1997 was appointed as the General  Manager.
In that position, Mr. Esen plans, organizes, directs and controls all operations
including    production,    research   and   development,    customer   service,
purchasing/inventory  control,  quality  assurance  and  management  information
systems.  From 1992 until 1995,  Mr.  Esen was  employed  as Vice  President  of
operation  for West Bay  Sonship  Yachts  ltd.  (Vancouver),  one of the world's
leading  manufacturers of 58 - 100 foot yachts,  where he managed  manufacturing
operations  as well as developed  and installed  various  computerized  business
control  systems.  During Esen's  tenure,  the  company's  revenues grew from $2
million to $15 million. From 1988 until 1992, Mr. Esen was director o operations
for DBA Communication Systems Inc. in Vancouver, a design and manufacturing firm
for small business  telecommunications  equipment and systems.  Mr. Esen holds a
bachelors  degree in  electrical  engineering  from  Faraday  House  Engineering
College in London,  England  and a diploma in business  administration  from the
University of British Columbia.

     Linda Kwan, age 53, served as the Company's  accounting  manager from March
1995 until November 1996, at which time she was appointed as the controller. Ms.
Kwan is a member of the Certified Management Accountants of Canada. From 1992 to
1995, Ms. 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  Group,  Ms. Kwan held a number of positions,
eventually  rising to the position of Corporate  Controller with  responsibility
for all of the firm's  accounting  functions.  Ms. Kwan graduated from Hong Kong
Technical College with a degree in commercial business and accounting.

     Chris G. Mendrop.  Mr. Mendrop has been a director of the Company since its
inception. He has been Chief Executive Officer of Corporate Development Capital,
Inc., an investment  advisory and financial  consulting  firm located in Denver,
Colorado,  since July 1992.  From December 1990 until its sale in December 1992,
Mr.  Mendrop was a principal  of Asset  Income  Securities,  Inc., a NASD member
broker-dealer  which provided financial  consulting and placement agent services
to alternate credit companies seeking asset securitization to access the capital
markets. From May 1990 to July 1992, he served as Corporate Secretary to Western
Acceptance  Corporation,  in which  position he guided that company in financial
policy  and  assisted  in  capital  raising,  in the  development  of the  first
insurance premium  securitized  financing in the country and other  asset-backed
financing.  Mr.  Mendrop  holds a Bachelor of Science  degree in Economics  from
Colorado  State  University and a Masters of Business  Administration  degree in
Finance from the University of Colorado.


<PAGE>


     Clement Cheung served as a director of the Company from March 1998 to April
16, 1999. Mr. Cheung is an officer and director of Electron International, Inc.,
a publicly  traded,  Hong Kong-based  holding  company that conducts  operations
through its subsidiaries in two separate business segments - the distribution of
semi-conductor  products  (primarily  computer chips) to small and  medium-sized
manufacturers  located in Hong Kong and the People's  Republic of China, and the
distribution of golf carts, irrigation products and systems, fertilizer and turf
equipment to golf clubs in Hong Kong, Macao and the People's  Republic of China.
Mr. Cheung joined EPL in 1990 as an accounting and administrative manager. Prior
to joining EPL, Mr. Cheung was the controller for Econ Electronics Limited.

     On April 16, 1999,  Edward Ting and Clement Cheung  resigned from the Board
of Directors of the Company in connection  with Mr. Ting's sale of the Company's
stock held by Mr. Ting and his wife to Speed.com Inc., a wholly-owned subsidiary
of Regency Affiliates, Inc. ("Regency").  Mr. William Ponsoldt, the Chairman and
Chief  Executive  Officer of Regency,  was elected to the Board of  Directors to
fill the vacancy created by Mr. Ting's resignation. Mr. Cheung also resigned and
Marc Baldinger was elected to the Board of Directors to fill the vacancy created
by Mr.  Cheung's  resignation.  Information  concerning  Mr.  Ponsoldt  and  Mr.
Baldinger is set forth below:

     William R. Ponsoldt (age 57). Mr.  Ponsoldt has served as a director of the
Company since April 16, 1999. Mr.  Ponsoldt is the Chairman of the Board,  Chief
Executive Officer and President of Regency  Affiliates,  Inc.  ("Regency").  Mr.
Ponsoldt  has been a  director  of Regency  since  June  1996,  and has been the
Chairman of the Board since  August  1996,  and  President  and Chief  Executive
Officer since June 1997.  During the past five years, Mr. Ponsoldt has served as
the portfolio manager for several hedge funds.

     Marc  Baldinger  (age 43).  Mr.  Baldinger  has served as a director of the
Company  since April 16, 1999.  Mr.  Baldinger is a Senior  Officer in Financial
Services  for  Riverside  National  Bank  ("Riverside")  located  in Palm  City,
Florida,  and is responsible for portfolio  management,  asset  allocation,  and
investment  selection for Riverside's Trust Department.  He has been employed by
Riverside since November 1996. From January 1994 to November 1996 Mr.  Baldinger
was employed as a Certified  Financial  Planner for American  Express  Financial
Advisors,  Inc. and Linsco Private Ledger.  Mr. Baldinger has a broad background
in financial  management and planning.  Prior to entering the financial planning
business,  Mr. Baldinger was the President of Supreme Petroleum  Company,  which
was a petroleum trading company.

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

     Pursuant  to the  Underwriting  Agreement  between  the  Company and Global
Financial Group, Inc. ("Global"),  Global may, in its discretion,  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 not yet designated such
person.

<PAGE>



Item 11 - Executive Compensation
--------------------------------

     The following table summarizes all compensation paid to the Chief Executive
Officer and the  President of the Company for  services  rendered to the Company
during the last three fiscal years.

<TABLE>
<CAPTION>

                                                                 Annual Compensation
       Name                                                      -------------------
       and                             Fiscal year                                     Other
     principal                             ended                                       annual
     position                           January 31,      Salary          Bonus      compensation
     --------                           -----------      ------          -----      ------------
<S>                                         <C>         <C>           <C>           <C>         
Edward Ting                                 1999        $      0      $  13,528     $  48,000(1)
  Chief Executive Officer,                  1998        $      0      $   5,140     $  48,000(1)
  Chairman of the Board,                    1997        $      0      $   6,801     $  48,000(1)

Alex Y.W. Ding                              1999        $ 57,575      $  13,528             0
  President, Chief Operating Officer        1998        $ 51,097      $   5,140             0
                                            1997        $ 49,357      $   6,801             0
Chris G. Mendrop
   Director                                 1999        $             $       0     $  12,000(2)
                                            1998        $      0      $       0     $  12,000(2)
                                            1997        $      0      $       0     $  12,000(2)

(1)  Represents  consulting  fees paid by the  Company to Mr.  Ting.  during the
     fiscal years ended January 31, 1999..  Mr. Ting was paid a bonus of $13,528
     during the fiscal year ended January 31, 1999, $5,140 and $6,801 1998, 1997
     pursuant to the Company's profit sharing program described below.

(2)  Represents  consulting  fees paid by the  Company to Mr.  Chris G.  Mendrop
     during the fiscal year ended January 31, 1999.


</TABLE>

     Employment  Agreements.  Effective August 1, 1998, the Company entered into
amended and restated  employment  agreements  with Edward Ting,  Alex Ding, Omer
Esen and  Linda  Kwan.  The  agreements  are for two  year  terms.  Under  those
employment  agreements,  Messrs.  Ting,  Ding, Esen and Ms. Kwan are entitled to
base  annual   compensation   of  $48,000(US),   $72,000(US),   $48,000(US)  and
$37,800(US),  respectively. Messrs. Ding, Esen and Ms. Kwan are paid in Canadian
dollars  and the US dollar  figures  in the  preceding  sentence  are based upon
conversion  at the average  exchange  rate during the year.  In addition to base
compensation  and the minimum  bonuses as provided  in the  agreements,  Messrs.
Ting,  Ding,  Esen and Ms. Kwan will be entitled  to  participate  in the profit
sharing program described below.

     Directors.   The  Company  paid  $2,000  to  each  director  (employee  and
non-employee)  during the fiscal year ended January 31, 1999 as compensation for
serving as directors.

     Profit Sharing  Program.  Rather than paying its executives  high salaries,
management  believes it desirable to provide incentives through a profit sharing
program.  Accordingly,  in 1994, the Company  adopted a profit  sharing  program
which provides that an amount equal to 10% of the Company's income before income
taxes and  provision  for profit  sharing may be  distributed  to  officers  and
employees  of the  Company.  The  first  distributions  pursuant  to  the  plan,
aggregating  approximately  $83,000,  were made in April 1995,  based on the net
income of the Company for the fiscal year ended  January 31, 1995.  The Board of
Directors of the Company has adopted an amendment to the profit sharing  program
under which the maximum amount that can be distributed  under the program in any
one fiscal year is  $100,000.  Distributions  under the plan for the fiscal year
ended January 31, 1999, aggregated approximately $89,496

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


<PAGE>


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

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

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

Compliance with Section 16(a) of the Exchange Act

     The Company has received representations from each other person that served
during  fiscal 1996 as an officer or director  of the  Company  confirming  that
there were no transactions that occurred during the Company's most recent fiscal
year end which required the filing of a Form 5.

<PAGE>



Item 12. - Security Ownership of Certain Beneficial Owners and Management
-------------------------------------------------------------------------

     The  following  table sets forth as of January  31,  1999,  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(1)
    ----------------                --------------------    -------------------

Alex Ding
3137 Grandview Highway
Vancouver, B.C.,
Canada V5M 2E9                           71,747(2)(5)               4.5%

Edward Ting
21045 Comer Drive
Saratoga, California 95070              513,915(3)                 32.25%

Viola Ting
21045 Comer Drive
Saratoga, California 95070              513,915(4)                 32.25%

Chris G. Mendrop                            Nil                     0.0%
1860 Blake Street
Denver, Colorado  80202

Omer Esen
3137 Grandview Highway
Vancouver, B.C.
Canada V5M 2E9                            1,860                     0.0%(6)

Directors and executive officers
as a group (6 persons)                  588,877(2)(3)              36.95%
                                      
------------------------------

(1)  Excludes (i) 68,000  shares of Common Stock  issuable  upon exercise of the
     Representative's  Warrants  issued in conjunction  with the public offering
     completed in May 1996; and (ii) 320,000 shares of Common Stock reserved for
     issuance under the Company's Stock Option Plans.

(2)  Includes 70,777 shares sold by the numbered company controlled by Alex Ding
     in September 1998 to his mother, Mr. Sik Chun Fei.

(3)  Includes  138,729  shares owned of record by Viola Ting, the wife of Edward
     Ting.

(4)  Includes  375,186  shares  owned of record by Edward  Ting,  the husband of
     Viola Ting.

(5)  In  September  1998,  Alex  Ding sold his  share to Ms.  Sik Chun Fei,  his
     mother,  at fair market value.  Mr. Ding may be deemed to be the beneficial
     owner, although not the record owner of those shares.

(6)  Represents less than 1%

<PAGE>



Change in Control

     On April 16, 1999,  Edward Ting,  the Chairman of the Board of Directors of
Glas-Aire Industries Group Ltd.  ("Glas-Aire"),  and Viola Ting, Mr. Ting's wife
and a Director of  Glas-Aire,  sold an aggregate of 513,915  shares of the $0.01
par value common stock of Glas-Aire to Speed.com, Inc. ("Speed.com"), a Delaware
corporation, in a private transaction. Speed.com is a wholly-owned subsidiary of
Regency Affiliates, Inc. ("Regency"), also a Delaware corporation.

     The  purchase  price  for  the  shares  was  One  Million,   Eight  Hundred
Sixty-Three Thousand Dollars ($1,863,000).  $1,213,000 of the purchase price for
the shares was paid in cash and the balance of $650,000  was paid in the form of
a promissory  note due January 1, 2000 which bears interest at the rate of 7.5%.
The indebtedness evidenced by the promissory note is secured by a first priority
security interest in 200,000 of the shares purchased by Speed.com.  In addition,
payment of the  indebtedness  evidenced by the promissory  note is guaranteed by
Mr.  William R.  Ponsoldt,  President and a Director of Speed.com and President,
Chief Executive Officer, and Chairman of the Board of Directors of Regency.

     The cash in the amount of $1,213,000 was borrowed from National Trust
Company,   an  affiliate  of  Statesman  Group,  Inc.  which  is  a  controlling
shareholder of Regency. The loan is unsecured and is due on demand.

     Subsequent  to  the  transfer  of  the  513,915  shares,   Speed.com  owns,
beneficially and of record,  approximately  32.25% of the issued and outstanding
shares  of  Glas-Aire,  including  3,000  shares  previously  purchased  on  the
open-market.

     Pursuant to the Contract for the Purchase and Sale of  Securities,  Messrs.
Edward Ting and  Clement  Cheung  resigned as  directors  of  Glas-Aire  and, by
consent  minutes dated April 16, 1999,  Messrs.  William R. Ponsoldt and Marc H.
Baldinger  were  elected to fill the  vacancies  created by their  resignations.
Neither Mr. Ting nor Mr. Cheung  resigned as a result of any  disagreement  with
Glas-Aire.  In  addition,  it is  anticipated  that  Speed.com  will name  three
additional  directors to  Glas-Aire's  Board of Directors and that the Directors
will elect the three persons named by Speed.com to the Board  effective ten days
after the  mailing  of a notice  pursuant  to  Section  14(f) of the  Securities
Exchange  Act  of  1934  and  Rule  14f-1  thereunder,  to all  shareholders  of
Glas-Aire.

     Management of Glas-Aire does not know of any  arrangements,  other than the
above-described  pledge  of  200,000  shares,  the  operation  of which may at a
subsequent date result in a change in control of the company.

Item 13 - Certain Relationships and Related Transactions
--------------------------------------------------------

Certain Transactions

     In May 1991, a company  owned by Alex Yie Wie Ding  acquired  48.97% of the
outstanding  shares of  Multicorp  from an  unaffiliated  party and  incurred an
installment purchase obligation in the amount of CDN$375,000 with respect to the
purchase.  Multicorp has made advances to Mr. Ding's company which correspond to
the company's payment  obligations under the installment  purchase.  In December
1992,  prior to the exchange of the  Company's  stock with the  stockholders  of
Multicorp under which the Company acquired 100% of the outstanding capital stock
of  Multicorp,  Multicorp  declared a dividend on the shares owned by Mr. Ding's
company  in the  amount of  CDN$375,000.  Mr.  Ding's  company  then  repaid the
advances  previously  paid to it in the amount of CDN$75,000  and made a loan to
the Company in the amount of CDN$300,000.  The repayment schedule under the loan
corresponds to the repayment schedule under the installment  purchase obligation
incurred  by Mr.  Ding's  company to the former  stockholder  of  Multicorp.  In
essence,   the  Company  has  assumed  the  payment  obligation  to  the  former
stockholder  of Multicorp.  The loan from Mr. Ding's  company was repaid in full
(including $26,745 of principal) during the year ended January 31, 1997.


<PAGE>


     In May 1994, the Company made a loan in the principal amount of $300,000 to
a company  controlled by Edward Ting, the Chairman of the Board of Directors and
Chief Executive Officer of the Company.  The loan was not evidenced by a written
agreement or promissory note, but bore interest at the rate of 9% per annum. The
loan was paid in full prior to January 31, 1995. In November  1994, the Board of
Directors  adopted a policy  resolution  prohibiting the Company from making any
loan or advance of money or property  to a director of the Company and  limiting
the Company's  ability to make such loans or advances to officers of the Company
or its  subsidiaries  unless a majority  of  independent  disinterested  outside
directors  determine  that such loan or advance  may  reasonably  be expected to
benefit the Company.  Further, all future loans and advances, if approved,  will
be made on terms that are no less  favorable  to the Company than those that are
generally available from unaffiliated third parties. In March of 1998, the Board
of Directors  rescinded  these  resolutions in connection with their approval of
the  transaction  described below in which the Company granted a bank a security
interest  in a $500,000  deposit as  collateral  for the  issuance  of a standby
letter of credit (the "LC") to one of the suppliers to a wholly-owned subsidiary
of Electrocon  International Inc. ("EII").  Mr. Edward Ting, the Chairman of the
Board, and Mr. Clement Cheung, a member of the Board of Directors, were officers
and directors of EII.

     In November 1993, Mr. Alex Ding, the President of the Company,  made a loan
to the Company in the principal amount of CDN$80,000. The loan was not evidenced
by a written  agreement or promissory note, but bore interest at the rate of 10%
per annum. The loan was paid in full prior to January 31, 1995.

     In late 1994, a company  controlled by a former officer of the Company made
a loan to the Company in the principal amount of $100,000.  The loan, which bore
interest  at the rate of 10% per annum,  was repaid in full prior to January 31,
1996.

     Effective February 1, 1996, the Company entered into a Consulting Agreement
with  Corporate  Development  Capital,  Inc.  ("CDC"),  a corporation  owned and
controlled by Chris G. Mendrop, a director of the Company, pursuant to which CDC
has agreed to assist the Company in the  development  of a  long-term  strategic
plan,  including  but not  limited  to the areas of  management,  marketing  and
finance,  and to  perform  such other  management  consulting  services  for the
Company as shall be requested from time to time by the President of the Company.
As compensation  for these  services,  CDC was paid $16,000 on or by the date of
closing  of the  public  offering  and  $4,000  per  month  for  the  12  months
thereafter.  In addition,  Mr. Mendrop was issued 12,800 shares of the Company's
Common Stock  pursuant to the Consulting  Agreement.  All amounts due under this
agreement have been paid.

     On March 31,  1998,  the  Company  granted a bank a security  interest in a
$500,000  deposit as collateral  for the issuance of a standby  letter of credit
(the "LC") to one of the  suppliers to a  wholly-owned  subsidiary of Electrocon
International Inc. ("EII").  Mr. Edward Ting, the Chairman of the Board, and Mr.
Clement Cheung,  a member of the Board of Directors,  are officers and directors
of EII. As  consideration  for the Company  agreeing to provide the security for
the LC, EII agreed as follows:  (i) to issue the  Company a warrant  exercisable
for a period of five (5) years from March 25, 1998, to purchase  250,000  shares
of common stock of EII at an exercise  price of $1.00 per share during the first
year,  $1.10 per share during the second year,  $1.20 per share during the third
year,  $1.50 per share  during  the fourth  year and $1.75 per share  during the
fifth year; (ii) to pay the Company a fee in the amount of 1% of the collateral,
or  $5,000,  payable to the  Corporation  in advance  for the  six-month  period
beginning on the date the LC is issued by the Bank, and an additional fee of 1%,
also payable in advance,  for the  six-month  period  immediately  following the
initial six-month period, if the Company's  collateral  continues to be utilized
for the LC, with the  understanding  that the collateral shall be made available
by the Company to collateralize  the LC for a period not to exceed one year; and
(iii) the pledge to the Company by Edward Ting of all shares of common  stock of
the Company currently held by him, his wife, or under his control. Subsequently,
the Board of Directors  approved a loan in the  principal  amount of $500,000 to
EII secured by 100% of Edward Ting's stock in the Company. EII used the proceeds
of the loan to among  other  things  cause  the bank to  release  the  Company's
$500,000 security deposit that was being used as collateral for the LC. On April
16, 1999, the loan (including principal and interest) was paid in full by Edward
Ting and the Company assigned the promissory note from EII to Mr. Ting.


<PAGE>


                                     PART IV

Item 14 - Exhibits, Financial Statement Schedules, and Reports on Form 8-K
--------------------------------------------------------------------------

     (a) Documents filed as part of this Form 10-K:

     1. Financial Statements

The financial statements listed by the Registrant on the accompanying  Financial
Statements (see pages F-1 through F-16) are filed as part of this Annual Report.

     2. Exhibit 10.1 Master Equipment Lease and attachments thereto.
        Exhibit 10.2 Credit Facility with HSBC.

     (b) Reports on Form 8-K: The Company has not filed a report on Form 8-K.



<PAGE>



                         Glas-Aire Industries Group Ltd.
                        Consolidated Financial Statements
                       For the year ended January 31, 1999




                                    Contents



Auditors' Report                                                      F-2

Consolidated Financial Statements

    Balance Sheets                                                    F-3

    Statements of Income                                              F-4

    Statements of Shareholders' Equity
      and Comprehensive Income                                        F-5

    Statements of Cash Flows                                          F-6

    Summary of Significant Accounting Policies                        F-8

    Notes to Consolidated Financial Statements                        F-12


<PAGE>

                                Auditors' Report





To the Shareholders of
Glas-Aire Industries Group Ltd.

We have audited the  consolidated  balance sheets of Glas-Aire  Industries Group
Ltd.  and  subsidiaries  as at  January  31,  1999  and  1998  and  the  related
consolidated  statements  of  income,  shareholders'  equity  and  comprehensive
income,  and cash  flows for each of the years in the three  year  period  ended
January 31, 1999.  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 generally accepted auditing standards
in the United States.  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 consolidated  financial  statements described above present
fairly, in all material respects,  the financial position of the Company and its
subsidiaries as at January 31, 1999 and 1998 and the results of their operations
and  their  cash  flows for each of the years in the  three  year  period  ended
January 31, 1999, in conformity with generally accepted accounting principles in
the United States.





Chartered Accountants

Langley, British Columbia 
March 18, 1999, except for note 1,
as to which the date is April 19, 1999

                                       F-2

<PAGE>
<TABLE>
<CAPTION>



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

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

January 31                                                 1999           1998
----------------------------------------------------------------------------------

Assets

Current
<S>                                                     <C>            <C>        
    Cash and equivalents                                $ 2,110,535    $ 1,645,953
    Accounts receivable, net of allowance
       for doubtful accounts                                953,289      1,200,451
    Note receivable from related party (Note 1)             506,806           --
    Inventories (Note 2)                                    673,688        772,780
    Prepaid expenses                                         33,460         19,095
                                                        -----------    -----------

                                                          4,277,778      3,638,279
Fixed assets, net (Note 3)                                1,607,557      1,408,816
                                                        -----------    -----------

                                                        $ 5,885,335    $ 5,047,095
                                                        


Liabilities and Shareholders' Equity

Current
    Accounts payable and accrued liabilities            $   733,512    $   460,680
    Income taxes payable                                     94,712         92,464
    Current portion of obligation under capital lease        49,055           --
                                                        -----------    -----------

                                                            877,279        553,144

Obligation under capital lease (Note 4)                      68,722           --
Deferred income taxes (Note 6)                              358,504        281,327

                                                          1,304,505        834,471
                                                        -----------    -----------

Shareholders' equity
    Common stock (Note 5(a))                                 15,935         15,875
    Additional paid-in capital                            3,475,695      3,462,334
    Retained earnings                                     1,546,730      1,045,962
    Accumulated other comprehensive income                 (117,957)       (75,384)
    Treasury stock (Note 5(b))                             (339,573)      (236,163)
                                                        -----------    -----------

                                                          4,580,830      4,212,624
                                                        -----------    -----------

                                                        $ 5,885,335    $ 5,047,095


On behalf of the Board:

----------------------------
Director

---------------------------- 
Director

The  accompanying  summary of significant  accounting  policies and notes are an
integral part of these financial statements.
                                                          
                                              
                                       F-3
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


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

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

                                                   Years ended January 31,
                                         -----------------------------------------
                                             1999           1998            1997
                                             ----           ----            ----

<S>                                      <C>            <C>            <C>        
Sales (Note 8)                           $ 6,639,219    $ 6,409,954    $ 4,316,372
Cost of sales                              4,497,280      4,505,889      3,027,968
                                         -----------    -----------    -----------

Gross profit                               2,141,939      1,904,065      1,288,404
                                         -----------    -----------    -----------

Expenses
    Research and development                 415,751        393,182        395,099
    Selling and distribution                 403,381        386,098        281,669
    General and administrative               513,385        527,552        414,174
    Provision for profit sharing              89,496         68,504         23,498
    Interest income                          (79,903)       (74,256)       (61,354)
                                         -----------    -----------    -----------

                                           1,342,110      1,301,080      1,053,086
                                         -----------    -----------    -----------

Income before income taxes                   799,829        602,985        235,318

Income taxes (Note 6)                        299,061        256,657        125,518
                                         -----------    -----------    -----------

Net income for the year                  $   500,768    $   346,328    $   109,800


Earnings per share - basic and diluted   $      0.34    $      0.23    $      0.08


Weighted average number of
    shares outstanding                     1,470,129      1,519,405      1,426,038



The  accompanying  summary of significant  accounting  policies and notes are an
integral part of these financial statements.
                                                 
                                       F-4
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


Glas-Aire Industries Group Ltd.
Consolidated Statements of Shareholders' Equity and Comprehensive Income
Years ended January 31, 1999, 1998 and 1997
(Stated in U.S. Dollars)

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

                                                                                                         Accumulated
                                                              Additional                                    Other          Total
                                     Common Stock              Paid-in        Retained      Treasury    Comprehensive  Shareholders'
                                  Shares        Amount         Capital        Earnings        Stock         Income         Equity
                                  ------        ------         -------        --------        -----         ------         ------
<S>                                <C>        <C>            <C>            <C>           <C>            <C>            <C>        
Balance -
  January 31, 1996                 923,813    $     9,238    $   911,148    $   589,834   $   (17,010)   $   (29,052)   $ 1,464,158
Net income                                                                      109,800                                     109,800
Shares issued                      692,800          6,928      2,645,771                                                  2,652,699
Shares repurchased                                                                           (147,476)                     (147,476)
Shares retired                      (4,192)           (42)       (16,968)                      17,010                          --
Foreign currency
  translation adjustment                                                                                      13,203         13,203
-----------------------------------------------------------------------------------------------------------------------------------

Balance -
  January 31, 1997               1,612,421         16,124      3,539,951        699,634      (147,476)       (15,849)     4,092,384
Net income                                                                      346,328                                     346,328
Shares repurchased (Note 5(b))                                                               (166,553)                     (166,553)
Shares retired (Note 5(b))         (24,917)          (249)       (77,617)                      77,866                          --
Foreign currency
  translation adjustment                                                                                     (59,535)       (59,535)
-----------------------------------------------------------------------------------------------------------------------------------

Balance -
  January 31, 1998               1,587,504    $    15,875    $ 3,462,334    $ 1,045,962   $  (236,163)   $   (75,384)   $ 4,212,624
Net income                                                                      500,768                                     500,768
Shares issued (Note 5(c))            5,965             60         13,361                                                     13,421
Shares repurchased (Note 5(b))                                                               (103,410)                     (103,410)
Foreign currency
  translation adjustment                                                                                     (42,573)       (42,573)
-----------------------------------------------------------------------------------------------------------------------------------

Balance -
  January 31, 1999               1,593,469    $    15,935    $ 3,475,695    $ 1,546,730   $  (339,573)   $  (117,957)   $ 4,580,830
===================================================================================================================================


Comprehensive income and its components consist of the following:

                                                1999         1998         1997
                                             -----------------------------------

Net income                                   $ 500,768    $ 346,328    $ 109,800
Foreign currency translation adjustment        (42,573)     (59,535)      13,203
                                             -----------------------------------

Comprehensive income                         $ 458,195    $ 286,793    $ 123,003
                                             ===================================


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

                                       F-5
</TABLE>

<PAGE>
<TABLE>
<CAPTION>



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

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


                                                            Years ended January 31,
                                                       1999           1998          1997
                                                       ----           ----          ----
Increase (decrease) in cash
<S>                                                <C>            <C>            <C>        
Cash flows from:
Operating activities
    Net income for the year                        $   500,768    $   346,328    $   109,800
    Depreciation                                       186,664        159,310        110,480
    Deferred income taxes                               77,177         93,829         56,927
    Loss (gain) on sale of fixed assets                 (3,992)        17,438          1,017
    Net change in non-cash working capital             606,969        610,337     (1,162,587)
                                                   -----------    -----------    -----------
    Net cash (used in) provided by
       operating activities                          1,367,586      1,227,242       (884,363)
                                                   -----------    -----------    -----------

Financing activities
    Increase in obligation under
       capital lease                                   156,108           --             --
    Repayment of obligation
       under capital lease                             (38,331)          --          (97,246)
    Repayment of long-term debt                           --             --          (27,304)
    Issuance of shares                                  13,421           --        2,652,699
    Repurchase of shares                              (103,410)      (166,553)      (147,476)
    Decrease in bank indebtedness                         --         (110,100)      (145,827)
                                                   -----------    -----------    -----------
    Net cash provided by (used in)
       financing activities                             27,788       (276,653)     2,234,846

Investing activities
    Issuance of note receivable                       (506,806)          --             --
    Proceeds from sale of fixed assets                  16,821         77,888         12,444
    Purchase of fixed assets                          (398,234)      (442,921)      (586,305)
                                                   -----------    -----------    -----------

    Net cash used in investing activities             (888,219)      (365,033)      (573,861)
                                                   -----------    -----------    -----------

Foreign currency translation adjustment                (42,573)       (59,535)        13,203
                                                   -----------    -----------    -----------

Increase in cash and equivalents during the year       464,582        526,021        789,825

Cash and equivalents, beginning of year              1,645,953      1,119,932        330,107
                                                   -----------    -----------    -----------

Cash and equivalents, end of year                  $ 2,110,535    $ 1,645,953    $ 1,119,932



The  accompanying  summary of significant  accounting  policies and notes are an
integral part of these financial statements.
                                                          
                                            
                                       F-6
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


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

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


                                                                 Years ended January 31,
                                                          1999            1998            1997
                                                          ----            ----            ----
Changes in non-cash working capital

<S>                                                  <C>            <C>             <C>             
    Term deposit                                     $        -     $  1,000,000    $    (1,000,000)
    Accounts receivable, net                              247,162       (462,864)           (64,916)
    Inventories                                            99,092       (144,357)            61,435
    Prepaid expenses                                      (14,365)       139,414             15,357
    Accounts payable and accrued liabilities              272,832            942            (51,268)
    Income taxes payable                                    2,248         77,202           (123,195)
                                                     ------------   ------------    --------------- 

                                                     $    606,969   $    610,337    $    (1,162,587)
                                                     ============   ============    =============== 
                                                      

Supplemental disclosure of cash flow
    relating to:
       Interest income                               $     54,956   $     75,264    $        74,591
       Income taxes                                       206,701         69,453            194,936



The  accompanying  summary of significant  accounting  policies and notes are an
integral part of these financial statements.
                                                    
                                                     
                                       F-7
</TABLE>

<PAGE>


Glas-Aire Industries Group Ltd.
Summary of Significant Accounting Policies
(Stated in U.S. Dollars)

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


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 are located in Vancouver, Canada.

Basis of Consolidation  
----------------------  

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

These  financial  statements  have been prepared in accordance  with  accounting
principles generally accepted in the United States.

Comparative Figures
-------------------

Certain  comparative  figures  from the prior  year have  been  reclassified  to
conform with the current year's presentation.

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-progress and finished goods as net realizable value.

Fixed Assets
------------

Fixed assets are recorded at cost less accumulated depreciation. Depreciation is
calculated using the declining-balance method, except for leasehold improvements
where the straight-line method is used, at the following annual rates:

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


                                       F-8
<PAGE>


Glas-Aire Industries Group Ltd.
Summary of Significant Accounting Policies
(Stated in U.S. Dollars)

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


Per Share Information  
---------------------  

The Company has adopted  Financial  Accounting  Standards  Board ("FASB") issued
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  potential dilution that could occur if securities
or other  contracts,  which,  for the Company,  consists of warrants to purchase
68,000 shares of the Company's common stock, are exercised.  These warrants were
anti-dilutive  in 1999, 1998 and 1997 and as such,  dilutive EPS amounts are the
same as basic EPS for all periods presented.  Treasury stock held by the Company
is not included in the number of shares outstanding.

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 asset and  liability  method of accounting  for income  taxes.  The
asset and liability  method  requires the recognition of deferred tax assets and
liabilities for the future tax consequences of temporary differences between the
financial statement basis and the tax basis of assets and liabilities.


                                       F-9
<PAGE>

Glas-Aire Industries Group Ltd.
Summary of Significant Accounting Policies
(Stated in U.S. Dollars)

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


Foreign Currency Translation
----------------------------

The  functional  currency of the companies'  operations is the Canadian  dollar.
These  financial  statements  have been  translated  into United States currency
using SFAS No. 52. Under this method assets and  liabilities  are  translated at
the rate of exchange at the balance  sheet date and  revenues  and  expenses are
translated at the rate of exchange in effect when those items are  recognized in
the financial  statements.  The resulting exchange gains and losses are deferred
and are shown as a separate component of shareholders' equity.

All figures are reported in U.S.  dollars.  Exchange  rates between the U.S. and
Canadian  dollar for each of the applicable  years  reported in these  financial
statements,  with bracketed figures reflecting the average exchange rate for the
year, are:


January 31, 1999      - 1 U.S. $:1.5110 Cdn. $  (1.4861 Cdn. $)
January 31, 1998      - 1 U.S. $:1.4556 Cdn. $  (1.4267 Cdn. $)
January 31, 1997      - 1 U.S. $:1.3470 Cdn. $  (1.3625 Cdn. $)



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  instruments  consist of cash and equivalents,  accounts
receivable,  note  receivable,  accounts  payable and  obligation  under capital
lease.  Unless otherwise  noted, it is management's  opinion that the company is
not exposed to significant interest, currency or credit risks arising from these
financial instruments. The fair value of these financial instruments approximate
their carrying values, unless otherwise stated.

                                      F-10
<PAGE>

Glas-Aire Industries Group Ltd.
Summary of Significant Accounting Policies
(Stated in U.S. Dollars)

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


New Accounting Standards
------------------------

SFAS No. 130, "Reporting  Comprehensive Income", issued by the FASB is effective
for financial  statements  with fiscal years  beginning after December 15, 1997.
SFAS No. 130 establishes standards for reporting and displaying of comprehensive
income and its components in a full set of general purpose financial statements.
Adoption  of SFAS No.  130 did not have an  impact  on the  Company's  financial
position  or results  of  operations.  The other  disclosures  required  by this
statement are presented.

SFAS  No.  131,  "Disclosures  about  Segments  of  an  Enterprise  and  Related
Information",  issued by the FASB is effective  for  financial  statements  with
fiscal years  beginning  after  December 15,  1997.  SFAS No. 131 requires  that
public companies report certain information about operating segments,  products,
services,  and  geographical  areas  in  which  they  operate  and  their  major
customers.  The  Company  operates  in only  one  business  segment.  The  other
disclosures required by this statement are presented.

SFAS No. 133, "Accounting for Derivative  Instruments and Hedging Activities" is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999.
SFAS No. 133 requires companies to recognize all derivative  contracts as either
assets or liabilities in the balance sheet and to measure them at fair value. If
certain  conditions  are met, a derivative may be  specifically  designated as a
hedge, the objective of which is to match the timing of gain or loss recognition
on the hedging  derivative  with the  recognition of (i) the changes in the fair
value of the hedged asset or liability that are  attributable to the hedged risk
or  (ii)  the  earnings  effect  of the  hedged  forecasted  transaction.  For a
derivative  not  designated  as a  hedging  instrument,  the  gain  or  loss  is
recognized in income in the period of change. Historically,  the Company has not
entered  into  derivative  contracts  either  to  hedge  existing  risks  or for
speculative purposes.  Accordingly,  the Company does not expect adoption of the
new standard to have any affect on its financial statements.

                                      F-11
<PAGE>

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

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


1. Note Receivable
                                                   January 31,       January 31,
                                                      1999              1998
                                                      ----              ----

     Promissory note, due on demand, interest
          at 10.0%,  matures  March 25, 1999.
          Secured   by  first   priority   in
          513,915  common shares of Glas-Aire
          Industries  Group Ltd.,  owned by a
          director (Note 9)                         $506,806          $   --
                                                    ========          ========  

      The  promissory  note  was  repaid  on
          April 19, 1999.

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

2. Inventories
                                                   January 31,       January 31,
                                                      1999              1998
                                                      ----              ----

Raw materials                                       $410,051          $568,444
Work-in-progress                                      88,956            65,166
Finished goods                                       153,811           120,217
Supplies                                              20,870            18,953
                                                    --------          --------

                                                    $673,688          $772,780
                                                    ========          ========


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

3. Fixed Assets
                                  January 31, 1999          January 31, 1998
                              --------------------------------------------------
                                          Accumulated               Accumulated
                                  Cost    Depreciation     Cost     Depreciation
                                  ----    ------------     ----     ------------

Office equipment              $  111,646   $   48,471   $  110,475   $   43,200
Manufacturing
   equipment                   1,126,788      464,823    1,134,426      414,376
Computer equipment               164,805       85,027      111,874       67,073
Dies and molds                   777,576      234,959      635,756      182,278
Automotive                        18,035          902       27,720       10,256
Leasehold improvements           147,171       43,481      133,828       28,080
Equipment under
   capital lease                 151,853       12,654         --           --
                              ----------   ----------   ----------   ----------




                              $2,497,874   $  890,317   $2,154,079   $  745,263
                              ==========   ==========   ==========   ==========


Net book value                             $1,607,557                $1,408,816
                                           ==========                ==========




                                      F-12

<PAGE>

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

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

4. Obligation under Capital Lease

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

         1999                                       $   57,459
         2000                                           57,459
         2001                                            9,577
                                                         -----

         Total minimum lease payments                  124,495

         Option to purchase                              3,902
                                                         -----

                                                       128,397
         Less amounts representing interest
           at 6.5% per annum                            10,620
                                                        ------

                                                       117,777

         Less current portion                           49,055
                                                        ------

                                                    $   68,722
                                                    ==========
                                               
--------------------------------------------------------------------------------

5. Share Capital

     (a)  Authorized

          3,000,000  Common stock with a par value
                     of $0.01 each
          1,000,000  Preferred stock with a par value
                     of $0.01 each

                                                        January 31,  January 31,
                                                           1999         1998
                                                           ----         ----
           Issued

                1,593,469 Common stock
                     (1998 - 1,587,504)                  $  15,935    $  15,875
                                                         =========    =========
                                                                  

          In  connection  with a public  offering in 1996,  the  Company  issued
          warrants to the underwriters to purchase shares as follows:

                    Shares                Price            Expiry Date
                    ------                -----            -----------

                    68,000             $     6.00           April 2001



                                      F-13

<PAGE>

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

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

5. Share Capital (continued)

     (b)  During the year ended January 31, 1999, the Company repurchased 55,472
          common  stock,  at share  prices  between  $1.50 and $1.97 per  share,
          amounting to $103,410.  In fiscal 1998, the Company repurchased 78,317
          common  stock at share  prices  between  $1.56  and  $3.12  per  share
          amounting to  $166,553.  These  shares are  accounted  for as treasury
          stock until  reissued or retired.  The purchase of the shares  reduced
          shareholders' equity. In fiscal 1998 the Company retired 24,917 common
          stock amounting to $77,866.

     (c)  On May 29, 1998,  the Company  issued  shares to certain  employees as
          part of their  compensation.  The total  number of common stock issued
          was 5,965.  At May 29, 1998, the common stock was trading at $2.25 per
          share.

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

6. Income Taxes

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

                                   January 31,      January 31,      January 31,
                                      1999             1998             1997
                                      ----             ----             ----

Current                             $210,103         $146,655         $ 71,741
Deferred                              88,958          110,002           53,777
                                    --------         --------         --------

                                    $299,061         $256,657         $125,518
                                    ========         ========         ========



     The effective income tax rate on earnings consists of the following:

                                           January 31,  January 31,  January 31,
                                              1999        1998          1997
                                               %           %             %
                                             ------      ------        ------

General combined federal and
  provincial rate                             45.6       45.3          45.3
Manufacturing reduction                       (7.0)      (7.0)         (7.0)
Under (over) accrual of prior year taxes      (1.2)       4.2          14.7
                                              ----       ----          ----

Effective rate                                37.4       42.5          53.0
                                              ====       ====          ====


                                      F-14
<PAGE>

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

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


6. Income Taxes (continued)

     The components of deferred taxes are as follows:

                                  January 31,               January 31,
                                     1999                      1998
                           ------------------------    ------------------------
                                         Temporary                   Temporary
                           Difference    Tax Effect    Difference    Tax Effect

Deferred tax
  liabilities
Depreciation                $943,643      $358,504      $734,615      $281,327
                            ========      ========      ========      ========


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

7. Rent

     The Company  operates in its  facilities  on a month to month  basis.  Rent
     expense was $106,312, $117,072 and $121,252 for the years ended January 31,
     1999, 1998 and 1997 respectively.

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

8. Sales Information

     (a)  Sales figures include sales to the following countries:


                               January 31,  January 31,  January 31,
                                  1999         1998         1997
                               -------------------------------------

            United States      $5,481,000   $4,915,000   $3,121,000
            Japan                 242,000      586,000      491,000
            Canada and other      916,000      908,000      704,000

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

                                  January 31,  January 31,  January 31,
                                     1999         1998          1997
                                     ----         ----          ----

               Customer 1         $2,094,000   $2,128,000   $1,341,000
               Customer 2          1,404,000    1,334,000      828,000
               Customer 3          1,637,000      912,000      839,000
               Customer 4               --           --        491,000

                                      F-15
<PAGE>

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

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

9. Related Party Transactions

     The Company had the following transactions with related parties:

                                          January 31,  January 31,  January 31,
                                             1999        1998         1997
                                             ----        ----         ----

      Fees paid to
         directors/shareholders for
         ongoing consulting services       $ 68,000    $ 60,000      $ 60,000
      Promissory note receivable
         from a company controlled
         by a director (Note 1)             500,000        --            --
      Interest earned on promissory note
         (Note 1)                             6,806        --            --


                                      F-16



<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, 1999                          By: /s/ Alex Yie Wie Ding
--------------------                             ----------------------
                                                 Alex Yie Wie Ding, President


     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, 1999                         /s/ William R. Ponsoldt
--------------------                         -----------------------
                                             William R. Ponsoldt, 
                                             Chief Executive Officer and
                                             Chairman of the Board


Date: April 29, 1999                         /s/ Alex Yie Wie Ding
--------------------                         ---------------------
                                             Alex Yie Wie Ding, President, Chief
                                             Operating Officer, Treasurer 
                                             and Director


Date: April 29, 1999                         /s/ Omer Esen
--------------------                         -------------
                                             Omer Esen, General Manager and
                                             Chief Financial Officer


Date: April 29, 1999                         /s/ Chris G. Mendrop
--------------------                         --------------------
                                             Chris G. Mendrop, Director



Date: April 29, 1999                         /s/ Marc Baldinger
--------------------                         ------------------
                                             Marc Baldinger, Director