<SUBMISSION>
<ACCESSION-NUMBER>0000899243-02-001358
<TYPE>10KSB
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<PERIOD>20011231
<FILING-DATE>20020503
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<CONFORMED-NAME>GLAS-AIRE INDUSTRIES GROUP LTD
<CIK>0000911441
<ASSIGNED-SIC>3711
<IRS-NUMBER>841214736
<STATE-OF-INCORPORATION>NV
<FISCAL-YEAR-END>1231
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<ACT>34
<FILE-NUMBER>001-14244
<FILM-NUMBER>02633586
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>3137 GRANDVIEW HIGHWAY
<CITY>VANCOUVER BC CANAD
<STATE>A6
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<FILENAME>d10ksb.txt
<DESCRIPTION>FORM 10KSB
<TEXT>
<PAGE>

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

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

     For the fiscal year ended: December 31, 2001

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

                         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                (I.R.S. Employer Identification No.)
of incorporation or organization)

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

Issuer's telephone number       (604) 435-8801

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

     Title of each class               Name of each exchange on which registered
Common Stock, $0.01 par value                    Pacific Stock Exchange
-----------------------------          -----------------------------------------

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

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

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

State issuer's revenues for its most recent fiscal year: $11,735,690

As of March 31, 2002, the aggregate market value for the 1,123,345 shares of the
common stock, $0.01 par value per share, held by non-affiliates was
approximately $1,123,345.

The number of shares of common stock of the registrant outstanding as of March
31, 2002 were 3,887,587, excluding 1,375,677 shares of treasury stock held by
the Company.

Transitional Small Business Disclosure Format. Yes[ ] No [X]
<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                               PAGE
<S>                                                                            <C>
PART I

   Item 1.    Description of Business........................................    1
   Item 2.    Description of Property........................................   19
   Item 3.    Legal Proceedings..............................................   20
   Item 4.    Submission of Matters to a Vote of Security Holders............   21

PART II

   Item 5.    Market for Common Equity and Related Stockholder Matters.......   21
   Item 6.    Management's Discussion and Analysis or Plan of Operation......   23
   Item 7.    Financial Statements...........................................   35
   Item 8.    Changes in and Disagreements With Accountants on
                 Accounting and Financial Disclosure.........................   35

PART III

   Item 9.    Directors, Executive Officers, Promoters and Control
                 Persons; Compliance with Section 16(a) of the Exchange Act..   35
   Item 10.   Executive Compensation.........................................   40
   Item 11.   Security Ownership of Certain Beneficial Owners and
                 Management..................................................   44
   Item 12.   Certain Relationships and Related Transactions.................   45

PART IV

   Item 13.   Exhibits and Reports on Form 8-K...............................   46

SIGNATURES...................................................................   48
</TABLE>
<PAGE>

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

GENERAL

     Glas-Aire Industries Inc. ("Glas-Aire" or the "Company") was incorporated
on September 29, 1992, pursuant to the laws of the State of Nevada. Glas-Aire
designs, develops, manufactures and markets sunroof wind deflectors, hood
protectors, rear air deflectors and door visors for cars, light trucks and vans.
The Company uses plastics (as the major raw material) and thermoforming
technology to produce these products.

     In December 2001, Glas-Aire Industries Ltd. ("Glas-Aire or the "Company")
acquired Wonder Tool, Inc. ("Wonder Tool"), a wholly-owned subsidiary of Cyclo
Manufacturing Company ("Cyclo"). Under current accounting rules, the acquisition
of Wonder Tool must be accounted for as a reverse acquisition. Wonder Tool
manufactures orbital polishers for use on aircraft and automobiles. The Company
acquired all of Wonder Tool's machinery, equipment, inventory and intellectual
property rights including one patent and three trademarks.

     The acquisition of Wonder Tool by the Company was conducted pursuant to a
Merger Purchase Agreement on December 21, 2001. Immediately prior to the merger,
Cyclo transferred certain assets associated with its orbital polishing
operations into Wonder Tool in exchange for 1000 shares of Wonder Tool's common
stock. Cyclo received 1,250,000 shares of Glas-Aire's common stock (which
constituted approximately 50.7% of the Company's total outstanding voting stock)
in exchange for 1,000 shares of Wonder Tool's common stock. As a consequence of
the acquisition, Wonder Tool became a wholly-owned subsidiary of the Company.
The Wonder Tool acquisition has been accounted for as a reverse acquisition,
because the shareholders of Wonder Tool became controlling shareholders of the
Company. Immediately following the consummation of the acquisition, Cyclo
transferred the Glas-Aire shares it received in the acquisition to Robert C.
Johnson ("Johnson") and Raymond J. Gherardini ("Gherardini"). Hence, Johnson and
Gherardini each own 625,000 shares of the Company and together control a
majority of Glas-Aire's voting stock. Under these circumstances, United States
Generally Accepted Accounting Principles ("GAAP") requires that Wonder Tool be
identified as the accounting acquirer. Accordingly, this annual report and the
accompanying financial statements reflect, both prior and subsequent to the
acquisition, the business of the acquired entity, Wonder Tool. The financial
information for Glas-Aire for periods prior to the date of the reverse
acquisition (December 21, 2001) has been included, because Glas-Aire is
considered the predecessor for accounting purposes.

Previous Change of Fiscal Year End

     In August 2000, Glas-Aire changed its fiscal year end from January 31 to
December 31. Unless otherwise indicated, information in this Form 10-KSB which
refers to: (i) the fiscal year or period ended January 31, 2000, is for the
twelve month period then ended, (ii) the fiscal year or period ended December
31, 2000 is for the 11 month transition period then ended, and (iii) the fiscal
year or period ended December 31, 2001, is for the twelve month period then
ended.

                                      -1-
<PAGE>

BUSINESS DIVISIONS

     Glas-Aire operates two business divisions - Automotive Accessories and
Orbital Polishing. The operations of each of these divisions are conducted in
separate subsidiary companies. Management believes that both of these divisions
provide superior product quality to customers who are leaders within their
industries.

     AUTOMOTIVE ACCESSORIES. The Company's Automotive Accessories Division
manufactures and markets sunroof wind deflectors, hood protectors, rear air
deflectors and door visors for cars, light trucks and vans.

     ORBITAL POLISHING. The recently acquired Orbital Polishing Division
manufactures and distributes a twin-head aircraft and automobile orbital
polisher as well as polishing and detailing compounds, pads and additional
supplies.

BUSINESS STRATEGY

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

     INTEGRATION OF ORBITAL POLISHING DIVISION AND IMPLEMENTATIOIN OF MARKETING
STRATEGY TO INCREASE SALES. The Company will integrate the Orbital Polishing
Division into the Company's business operations. Integration will include moving
the orbital polishing operations from Denver, Colorado to the Company's facility
in Vancouver, B.C., and development and execution of a marketing strategy to
increase sales, both domestically and internationally. Management believes that
effective integration of the orbital polishing operations in Canada should
result in reduced costs and improved margins. Further, management is optimistic
that the Company will be able to increase sales of the orbital polishers into
the aircraft and automotive industries.

     INCREASING PRODUCTION CAPACITY/EFFICIENCY. The Company plans to enhance its
production capacity by the use of additional capital equipment in a larger
premises which will double the manufacturing area. To this end, the lease on a
new building has been recently executed and some major capital equipment has
been received. Further, the Company has engaged a experienced firm to help in
the layout and construction management of the new building, and to enhance
production efficiency by combining the "cell manufacturing" concept with the
proprietary thermoforming process (Matched Compression Moulding or MCM)
developed by the Company. The cell method of manufacturing is utilized by many
large Japanese and American manufacturers. This concept involves conduct of the
entire manufacturing process in units or cells on a flow basis in order to avoid
delays related to staging. This concept provides for the layout of machines of
different types performing different operations in a tight sequence to permit
single piece flow and flexible deployment of human effort. A product proceeds
from design to launch, order to delivery, and into the hands of customers with
reduction of scrap, reduction of labor costs or no backflows or stoppages.

                                      -2-
<PAGE>

     INCREASING SALES TO AUTOMOBILE MANUFACTURERS. Virtually all of the
Automotive Accessories Division's sales are to automobile manufacturers.
Management believes that increased sales to automobile manufacturers can be
accomplished through sales of existing and new products to current as well as
potential new clients in North America, Japan, South America and Europe.

     DEVELOPMENT OF NEW PROCESSES. Management believes that a key to the
Company's future success is the development of new products and complimentary
processes to meet the demands and needs of its clients. The Company conducts
active research and development ("R&D") activities to enhance its existing
products, design new ones and develop associated manufacturing processes. Often,
the Company's clients participate in the development of the product as well as
the process in which it is developed.

     INVESTMENT IN OR ACQUISITION OF COMPLEMENTARY BUSINESSES, TECHNOLOGIES OR
PRODUCT LINES. Recently, the Company acquired Wonder Tool Inc. of Denver,
Colorado that manufactures specialized polishers for the aircraft and automotive
industries, to exploit the market synergies between these polishers and its own
products. The Company will continue to evaluate such opportunities for growth or
expansion of its business through investment in or acquisition of complementary
businesses, current or emerging technologies or product lines. Management
believes that opportunities to expand will be available to the Company and
intends to investigate opportunities that are consistent with the Company's
goals and expertise.

     INFRASTRUCTURE STRENGTHENING. Over the last several years, the Company has
been customizing and deploying integrated, computerized business systems to
facilitate effective control functions, and to facilitate running a much larger
organization. This activity will be maintained and enhanced through the use of
appropriate third party consultants. Management believes that solid controls
combined with the Company's basic organizational design and expertise will
ensure an infrastructure suitable to run a much larger business.

INDUSTRY OVERVIEW

     AUTOMOTIVE ACCESSORIES

     Glas-Aire's automotive accessories products are used in a diverse and
growing market, comprised of all automotive aftermarket accessories,
dealer-installed accessories, car care products and other products purchased by
consumers for the purpose of improving their vehicles' appearance and/or
performance. The automotive industry association involved in this particular
market segment is referred to as "SEMA" (Specialty Equipment Market
Association). Manufacturer's sales of specialty automotive products increased
from $2.35 billion in 1985 to $8.6 billion in 2000. During this period, retail
sales increased from $4.35 billion to $24.86 billion. The Company's products
compete in the accessory/appearance segment of this market, estimated to be
approximately $4.83 billion at the manufacturers' level in 2000. SEMA estimates
that accessories/appearance products represent 55.6% of the total specialty
equipment market. According to SEMA data, accessories/appearance is the only
segment of products that have shown increased market share over the years going
form 51.1% in 1996 to 55.6% in 2000. The

                                      -3-
<PAGE>

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

--------------------------------------------------------------------------------
                      Industry Segment Market Share Trend*
--------------------------------------------------------------------------------
Segment                            2000    1999    1998    1997    1996    1990
--------------------------------------------------------------------------------
Accessories and                    55.6%   54.3%   53.2%   52.4%   51.1%   42.5%
Appearance
--------------------------------------------------------------------------------
Racing and                         20.0%   21.2%   22.2%   22.9%   24.1%   30.6%
Performance
--------------------------------------------------------------------------------
Wheels, Tires and                  24.4%   24.5%   24.6%   24.7%   24.4%   26.9%
Suspension
--------------------------------------------------------------------------------
*    Source SEMA 2001 Market Study
--------------------------------------------------------------------------------

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

     Glas-Aire operates in the original equipment manufacturer ("OEM") portion
of the SEMA market segment, providing products to the automotive manufacturers
that then distribute these products to consumers through their dealer networks.
Management believes that the parts accessory business has become an increasingly
important profit center for the automotive manufacturers at their dealer level,
and this trend is accelerating. With a strong interest in providing additional
profit opportunities for their vast dealer networks, the manufacturers are
increasing their own involvement in developing new and enhanced accessory
products. These products are often included in "special trim packages" and
offered during the sale of the vehicle, taking advantage of a natural sales
channel (i.e. dealers) as well as vehicle financing which covers the accessory
products with only a negligible increase in monthly payments. Management's
studies indicate that the vast number of strategically located dealers (e.g. GM
has approximately 8,000 dealers in North America), their background in
parts/accessories, installation expertise and ability to offer almost instant
financing will increase their market share at the expense of aftermarket
channels. Through this the Company has continued to increase its market share.

     ORBITAL POLISHERS

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

                                      -4-
<PAGE>

PRODUCTS

     Our product lines within our two primary operating divisions, Automotive
Accessories and Orbital Polishing, are set forth below.

     AUTOMOTIVE ACCESSORIES

          The table set forth below shows sales of the Company's Automotive
Accessories on a percentage basis by type of product sold during each of the
periods indicated. Door Visors have not been included because the sales volume
has not been significant to date.

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

                                                           Year Ended
     Product Line                                         December 31,
--------------------------------------------------------------------------
                                                     2001   2000*   2000**
--------------------------------------------------------------------------
Sunroof Wind Deflectors                               54%    60%     56%
--------------------------------------------------------------------------
    Hood Protectors                                   33%    31%     32%
--------------------------------------------------------------------------
  Rear Air Deflectors                                 13%     9%     12%
--------------------------------------------------------------------------
*    For the eleven month transition period
**   For the year ended January 31,
--------------------------------------------------------------------------------

          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.

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

          NEW PRODUCTS. In order to build on its basic product groups (i.e.
sunroof wind deflectors, hood protectors, rear air deflectors and doorvisors),
the Company will continue

                                      -5-
<PAGE>

development of new products in order to address its clients' and prospective
clients' demands. The Company intends to continue producing its products on a
cost-effective basis with unique designs, superior finishes, alternate
attachment mechanisms and dimensional accuracy. This strategy is expected to
increase the Company's competitiveness and help expand its target markets. As
new models of automobiles are brought to market the Company must design, develop
and deploy its products to meet the design specifications of the new models.

          OBSOLESCENE/DESIGN CHANGES. Due to automobile design changes by
automobile manufacturers, the Company's automotive 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. The Company will continue improving its lead times by
using more efficient design software and innovative prototype tools fabricated
in-house, and changes in the design process in keeping with the Cell
Manufacturing method. This process will further reduce lead times by
facilitating remote fittings of prototypes anywhere in the world.

     ORBITAL POLISHING.

     ORBITAL POLISHERS. The Company's newly acquired aircraft and automobile
polishers have been manufactured by Cyclo under the name "Wonder Tool" since
1953. Management believes that the Company is one of the leading manufacturers
of orbital polishers sold into the aircraft maintenance and automobile detailing
markets. The polisher features dual orbital action heads, a lightweight balanced
design and 4" heads to manage large areas and hard to reach contours with equal
efficiency. The polisher, is versatile allowing the quick change of bonnets,
discs, pads, and brushes to perform a variety of finishing jobs. The Company
produces a variety of polishers including electric and pneumatic versions.

     POLISHING SUPPLIES. The company also manufactures polishing and detailing
compounds, pads and additional supplies for use with its orbital polisher. The
supplies include bonnets, Velcro disks, pads, brushes, and a complete line of
deoxidizing and polishing compounds.

MARKETING AND SALES

     The Company promotes itself and its products primarily through personal
contact, brochures, attendance at trade shows, press releases, etc. These
functions are primarily performed by management of the Company. Management also
intends to provide access to information on the Company's filings with the
United States Securities and Exchange Commission and its products on its WEB
site.

     AUTOMOTIVE ACCESSORIES

     During the year ended December 31, 2001, approximately 99% of the
Automotive Accessories Division's saleswere to automobile manufacturers. The
Company's clients/joint product development partners include DaimlerChrysler
Corporation, Daewoo Motor America

                                      -6-
<PAGE>

Inc., Daihatsu Motor Co., General Motors Corporation, Gulf States Toyota, Inc.,
Honda Access America, Inc., Hyundai Motor America, KIA Motors America, Inc.,
Mazda North America Corporations, Nissan Canada, Inc., Nissan North America,
Inc., Saturn Corp., Southeast Toyota Distributors, Inc., Subaru of America,
Inc., Toyota Canada Inc., Ltd. and others. 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.

     The Company has received a number of awards from its customers and various
business associations during the last ten years. The latest award was the
"Valued Partner 2001" award from KIA Motors America Inc.

     The Company sells its automotive accessories products in the United States,
Canada and Japan. Net export sales to customers by geographic area consisted of
the following for each of the two years ended December 31, 2000 and 2001.

---------------------------------------------------------------
                                            December 31,
                                            (in 000's)
                                    ---------------------------
                                        2001           2000*
---------------------------------------------------------------
United States                       $10,229   87%  $9,217   84%
---------------------------------------------------------------
Canada                              $ 1,106   10%  $1,364   12%
---------------------------------------------------------------
Japan                               $   286    2%  $  340    3%
---------------------------------------------------------------
Other                               $   115    1%  $    9    1%
---------------------------------------------------------------
* For the eleven month transition period
---------------------------------------------------------------

     ORBITAL POLISHERS

     The Company Orbital Polishing Division's focus is on continued expansion
into the United States and foreign markets. On March 1, 2002, the Company
entered into a Manufacturer's Representative Contract with AG Group Worldwide,
Inc. ("AG Group") of Roseville, Michigan. Through its sales force, AG Group will
market the Company's orbital polishing and detailing products through their
network of contacts in the aircraft industry and automotive detailing industry.
AG Group will act as the worldwide sales representatives for the Orbital
Polishing Division's products. Management is optimistic that AG Group will be
able to assist the Company in developing and sustaining an increased volume of
sales. AG Group will be compensated on a commission basis and must meet yearly
sales goals to maintain the contract. The contract establishes first year
minimum sales of $1,000,000. The Company and AG Group also intend to introduce
the product line to the marine industry. The duration of the contract is one
year, and automatically renews each year with a 10% increase in minimum sales
over the previous year. Should AG Group fail to meet the minimum sales, the
Company has the right to cancel the contract.

                                      -7-
<PAGE>

DISTRIBUTION.

     AUTOMOTIVE ACCESSORIES.

     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. The Company
commonly bulk-ships the ordered parts to the customers' parts distribution
centers within a mutually acceptable lead time, varying from 59 minutes to 30
days.

     In the U.S. and Canada, Glas-Aire ships its products to customer's parts
distribution centers and vehicle processing centers. For the Japanese market,
the OEMs generally have one centralized distribution center. With General
Motors, Glas-Aire drop ships the ordered parts on behalf of its client, directly
to the General Motors network of 8,000 dealers.

     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.

     The Company has contracts with two sales representative companies in the
United States who have established relationships with large automobile
manufacturers in North America as well as Japan. As the Automotive Accessories
Division's sales increase, the Company may hire additional personnel or may
contract with other sales representatives.

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

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

     .    The Company will continue increasing its presence (attendance or
          participation) in major trade shows in North America, Europe and Japan
          associated with its products.

     .    Management will continue to evaluate opportunities for growth or
          expansion of the Company's business through investment in or
          acquisition of complementary businesses, current or emerging
          technologies or product lines. Management believes that opportunities
          to expand will be available to the Company and intends to investigate
          opportunities that are consistent with the Company's goals and its
          expertise. In line with this strategy, the Company recently acquired
          Wonder Tool.

                                      -8-
<PAGE>

     ORBITAL POLISHERS

     The Company sells its orbital polisher directly to the airline industry.
The Company directly fulfills orders placed with the Company and sells to the
auto detail industry via distributors and mail order catalogues. The Company
ships on either a prepayment basis or on a purchase order with terms for larger,
more established customers.

MAJOR CUSTOMERS

     AUTOMOTIVE ACCESSORIES.

     The Company's Automobile Accessories Division sells principally to
automobile manufacturers in the United States, Canada and Japan. For the year
ended December 31, 2001, sales in the US accounted for 87% of the Company's
Automotive Accessories revenues (including sales to US subsidiaries of foreign
automobile manufacturers), sales in Canada accounted for 10% and sales in other
countries accounted for 3%.

     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 three major customers who, together,
accounted for 69% or more of the Automotive Accessories Division's sales during
the last fiscal year:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
                                                          Period Ended
-----------------------------------------------------------------------------------------------
    Customer                 Products                December 31,   December 31,    January 31,
    --------                 --------                   2001           2000*          2000
--------------   ---------------------------------   ------------   ------------   ------------
<S>              <C>                                 <C>            <C>            <C>
Nissan North     Sunroof  wind  deflectors, hood         25%            34%            30%
America, Inc.    protectors and rear air
                 deflectors
--------------   ---------------------------------   ------------   ------------   ------------
Honda Access     Sunroof wind deflectors                 21%            15%            17%
America, Inc.
--------------   ---------------------------------   ------------   ------------   ------------
General Motors   Hood protectors and rear air            23%            29%            29%
(USA & CDN)      deflectors
-----------------------------------------------------------------------------------------------
        *  For the eleven month transition period
-----------------------------------------------------------------------------------------------
</TABLE>

     The Company manufactures accessories for the majority of its customers on a
purchase order/invoice basis. For General Motors Corporation in the U.S., the
Company has a virtual just-in-time drop shipment program utilizing its operating
and 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

                                      -9-
<PAGE>

is obligated to reimburse its OEM customers for all legitimate quality related
warranty claims paid by them.

     ORBITAL POLISHERS.

     The Company sells the majority of its orbital polisher product line
directly to its major customers in the airline, auto detailing and car washing
industry. The Company has no contracts with any of its major customers. The
Company also has multiple distributors of its orbital polisher products and a
total of over 3,000 customers worldwide. Additionally, the Company has entered
into an agreement with AG Group to act as a manufacturer's representative to
market its orbital polishing products.

     The Orbital Polisher Division has one customer who accounted for 18% of
sales during the last fiscal year:

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

                                                           Fiscal Year Ended
---------------------------------------------------------------------------------
                                                       December 31   December 31,
------------------   -------------------------------   -----------   ------------
      Customer                   Products                 2001          2000
      --------                   --------                 ----          ----
------------------   -------------------------------   -----------   ------------
<S>                  <C>                               <C>           <C>
Autosmart            Orbital Polishers and supplies        18%           24%
International
------------------   -------------------------------   -----------   ------------
</TABLE>

COMPETITION.

     AUTOMOTIVE ACCESSORIES.

     The Company has several competitors in the Automotive Accessories Division
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 Masco Tech. In the
hood protector and rear air deflector market, our major competitor is Autotron,
a subsidiary of LUND International Holdings ("Lund"). Autoventshade a subsidiary
of Lund and EGR, produce hood protectors and door visors in competition with the
Company.

     Management believes that the principal competitive factors facing the
Company 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.

     ORBITAL POLISHERS.

     The Company faces several competitors in the orbital polishing industry.
Management believes that its primary competitors are Gem Industries, Inc. and
Waxcoa/Chamberlain, who both market only a single head orbital polisher.
Further, management believes it can compete

                                      -10-
<PAGE>

with these competitors because of Wonder Tools' reputation for producing a high
quality orbital polisher and related orbital polisher supplies.

MANUFACTURING.

     The Company currently manufactures its automotive accessories products at
its plant in Vancouver, B.C., Canada. Orbital polishing products are being
manufactured in Denver, Colorado; however, the Company anticipates moving that
manufacturing operation to Vancouver, B.C., Canada, prior to the end of the
third quarter.

     AUTOMOTIVE ACCESSORIES.

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

          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), Aristech Acrylics LLC in Florence, Kentucky and
Laird Plastics (a Canadian distributor for Atofina Chemicals, Inc. in
Pennsylvania). The Company does not have a long-term contract with any of these
suppliers. If these suppliers should become unavailable in the future, it is
expected that other suppliers would be readily available.

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

          QUALITY ASSURANCE. The Company is ISO9001/QS9000 certified and these
international quality standards control virtually all of the Company's business
practices as well as its operations.

     The Company's mission includes providing its clients with quality products
on time and cost-effectively based on innovative engineering solutions and
manufacturing processes. The

                                      -11-
<PAGE>

fitness-for-use of products/services is the vital principle that guides all
activities of the Company. Further, the application of this principle is
demanded from all suppliers. A primary objective of the Company is to support
the need of its employees as well as suppliers to foster this principle.

     Although the Company's level of defective products has traditionally
represented approximately 1% of annual net sales, during the last fiscal year it
was approximately 4%. The increase was primarily the result of a defective
component sourced from one of the Company's suppliers. The Company is now
negotiating with this supplier and management is optimistic that the Company
will be able to enter into a favorable settlement with the supplier or that the
Company will prevail against this supplier if litigation is necessary. During
the fiscal year ended December 31, 2001, the Company accrued approximately
$390,000 of expense relating to warranty claims, and accrued approximately
$151,000 of expense for warranty claims in the eleven month period ending
December 31, 2000.

     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 the manufacturer.

     ORBITAL POLISHERS.

     The Company currently manufactures its orbital polishing products in
Denver, Colorado. However, the Company intends to move its manufacturing
facility to a new facility in Richmond, British Columbia to effectively
integrate this Division with its Automotive Accessory Division. "Item 2 -
Description of Property."

     The Company's orbital polisher manufacturing process consists of machining,
polishing, installation, finishing, assembling and testing of the orbital
polisher. The Company also manufactures in-house the majority of its chemical
product line as well as its bonnets and other orbital polisher accessories.

          RAW MATERIALS AND SUPPLIERS. The Company purchases components
including unfinished aluminum castings, gears, bearings, electrical cords and
motors used in the manufacturing process of its orbital polisher and foam disks,
wool pile and raw rubber used in the manufacturing of bonnets. The Company does
not have any contracts with any of its suppliers. If these suppliers should
become unavailable in the future, it is expected that other suppliers would be
readily available.

          QUALITY CONTROL. The Company has manufactured the orbital polisher for
over 45 years and has internally set its own specifications and high quality
standards. The Company has a testing procedure in place to conduct individual
inspections of each polisher to ensure proper functioning and compliance with
its specifications. The Company has not experienced any significant problems
with it orbital polishing products.

                                      -12-
<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 16 permanent
employees engaged in R&D at its Vancouver facility. They conduct activities
associated with development of new products, improvements to existing products
and the development of new manufacturing processes. Management expects that
spending on research and development activities will continue to support
increased business. The Company expended $489,000 on research and development
activities during the 11 months ended December 31, 2000, and $469,000 during the
twelve months ended December 31, 2001.

     AUTOMOTIVE ACCESSORIES.

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

     When the design of a vehicle model changes configuration, 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 are passed on to the customer,
often over a two-year period. Successful deployment of the new production
process now under development is expected to result in improved tooling costs.

     ORBITAL POLISHER.

     The Company performs tests to determine if improvements can be made to
either the orbital polisher or in the manufacturing and assembly process for the
orbital polisher. Further, the Company also tests alternative components such as
motors, bearings and pads to improve upon the performance of its orbital
polisher and related accessories. Management continuously tests adhesives to
ensure orbital pads remain intact throughout their use with the orbital
polisher.

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.

                                      -13-
<PAGE>

PATENTS, TRADEMARKS, LICENCESS, FRANCHISES CONCESSIONS OR ROYALTY AGREEMENTS.

     AUTOMOTIVE ACCESSORIES.

     Currently, the Company does not hold any patents on any of its automotive
accessories products, nor does it have any licenses, trademarks, franchises,
concessions or royalty agreements. However, during the period ended December
2000, the Company filed patent applications for a proprietary moulding process
(Matched Compression Moulding known as MCM). The Company also filed a trademark
application for "MCM."

     POLISHING DIVISION.

     In connection with the acquisition of Wonder Tool, the Company acquired one
patent and three trademarks.

     DOUBLE DRUM POLISHER, United States Patent No. 5,040,339. The Double Drum
Polisher contains a pair of counter rotating polishing drums on its head. The
Double Drum Polisher is used for polishing the fuselage and wings of aircraft as
well as large surfaces associated with other types of vehicles including tank
trucks and railcars. This patent was issued on August 20, 1991

     FREE-FLITE, United States Trademark No. 1,604,284. FREE-FLIGHT is the
trademark of a metal cleaner and polisher marketed by the Company, which has
carried a military approval since 1954. This trademark was issued on July 3,
1990.

     SOIL-ZORB, United States Trademark No. 1,456,016. SOIL-ZORB is the
trademark of a cleaning agent with emulsifying properties for use on rugs and
carpeting marketed by the Company. This trademark was issued on September 8,
1987.

     SOLV-IT, United States Trademark No. 1,456,015. SOLV-IT is the trademark of
a dry cleaning solution for upholstery, rugs and carpeting marketed by the
Company. This trademark was issued on September 8, 1987.

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

     There can be no assurance that third parties will not assert infringement
or other claims against the Company with respect to any existing or future
products, or that licenses would be

                                      -14-
<PAGE>

available if any Company technology or products were successfully challenged by
a third party, or if it became desirable to use any third-party technology to
enhance the Company's products. Litigation to protect the Company's proprietary
information or to determine the validity of any third-party claims could result
in significant expense to the Company and divert the efforts of the Company's
technical and management personnel, whether or not such litigation is determined
in favor of the Company.

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

GOVERNMENT/ENVIROMENT REGULATION.

     The Company, like all manufacturers of consumer products, is liable to
federal state and local regulations concerning consumer products and
occupational safety and health. The Company believes that its operations
currently comply in all material respects with these laws and regulations. In
general, the Company has not experienced any difficulty complying with such
regulations and compliance has not had a material effect on the Company's
business.

     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 laws 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.

EMPLOYEES.

     As of March 30, 2002, the Company employed 214 production workers, 16
research and development personnel, 10 clerical/administrative staff and 3
management staff members.

     The Company attempts to maintain amiable and communicative relations with
its employees. None of the employees are represented by a labor union, nor is
the Company a party to any labor contracts or collective bargaining agreements.
The Company has never experienced labor slowdowns or stoppages, and management
believes that relations with its employees are satisfactory. The Company
believes there is an adequate supply of suitable labor, as well as
professionals, available.

                                      -15-
<PAGE>

FACTORS THAT MAY AFFECT OUR FUTURE RESULTS

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

Important Factors related to Forward-Looking Statements and Associated Risks.
This Report contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 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 either the automotive or airline industries 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 operations of the Company are subject to substantial risks that
increase the uncertainty inherent in such forward-looking statements. In light
of the significant uncertainties inherent in the forward-looking information
included herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the objectives or plans
of the Company will be achieved.

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

     DEPENDENCE UPON MAJOR CUSTOMERS. The Company's Automotive Accessory
Division has three customers, which, together, accounted for approximately 69%
of its sales during the year ended December 31, 2001. The Company's Orbital
Polisher Division

                                      -16-
<PAGE>

has one customer who accounted for approximately 18% of its sales during the
year ended December 31, 2001. See "Item 1. Description of Business - Major
Customers." 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 INDUSTRIES.

     AUTOMOTIVE ACCESSORY DIVISION. The Company's Automotive Accessory Division
current products consist exclusively of automobile accessories, specifically
sunroof wind deflectors, hood protectors, rear air deflectors and doorvisors,
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.

     ORBITAL POLISHING DIVISION. The Company's Orbital Polishing Division is
tied to the airline, general aviation and air cargo industries. Since the events
of September 11, 2001, this industry has been extremely volatile. Due to poor
financial situations several carriers have been threatened with bankruptcy. A
significant decline in the travel or cargo industry or airline bankruptcy could
have an effect on the Company and its business. Additionally, the Orbital
Polishing Division is also tied to the automotive industry. Deteriorating
economic conditions could reduce the amount spent on air travel and automotive
detailing. A significant decline in these industries could also have an adverse
effect on the Company and its business.

     DEPENDENCE UPON AUTOMOBILE MANUFACTURERS IN JAPAN AND RELATED RISKS. A
significant percentage of the Company's Automobile Accessories Division sales
have been to Japanese automobile manufacturers in the United States or Canadian
subsidiaries of Japanese automobile manufacturers. The passage of protectionist
legislation, including increased import tariffs, or public sentiment against
imports could result in a decrease in sales of Japanese automobiles which would
have a direct negative impact on the Automotive Accessories Division's sales. In
addition, the economic problems experienced in Japan could have a material and
adverse effect 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 that also could have a serious negative impact on the
Automotive Accessories Division'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 Craig
Grossman (Chief Executive Officer), Omer Esen

                                      -17-
<PAGE>

(Chief Operating Officer) and Linda Kwan (Chief Financial Officer). Accordingly,
the loss of the services of Mr. Grossman, Mr. Esen, Mrs. Kwan or other key
personnel could have a material adverse effect on the Company and its future
operations. If Mr. Grossman, Mr. Esen or Mrs. Kwan 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.

     COMPETITION. The Company's Automotive Accessories Division sales and
profitability should be considered in light of the competitive environments in
which the Company operates. The Company's Automotive Accessories Division
operates in an industry that 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 that 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 automotive division sales are
principally transacted in United States dollars, whereas its labor, overhead and
most component costs are paid in Canadian dollars. The Orbital Polishing
Division's sales and expenses are principally transacted in United States
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 metal components used in the
manufacture of its orbital polishing products from various suppliers. Although
the Company has long term relationships with its key suppliers it does not have
long-term supply agreements. The 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.

     MANUFACURING 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

                                      -18-
<PAGE>

significant interruption of manufacturing activities could have a material
adverse effect on the Company's operations.

     AUTOMOTIVE ACCESSORIES PRODUCT OBSOLENSCENCE 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.

     DEPENDENCE ON A LIMITED NUMBER OF PRODUCTS. The Company's Automotive
Accessories Division manufactures and sells sunroof wind deflectors, hood
protectors, rear air deflectors and doorvisors 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. The Company's Orbital Polishing
Division manufactures polishers and related supplies used in the aircraft and
automotive industry. A decline in the amount of air travel and detailing of
automobiles would result in decreased sales of the orbital polisher and related
supplies. Such events could have an adverse effect on the Company's business.

     MAJOR CHANGES IN BUSINESS STRATEGY OF KEY AUTOMOTIVE ACCESSORIES CLIENT.
During April 2000 and April 2002, a major client of the Company demanded price
reductions on existing products from all its suppliers (worldwide) in three
stages. These reductions became effective in April 2000 and the 3rd stage
started in April 2002. In turn, the Company has been assured future business.
Management agreed to the reductions, planning to compensate for them via value
engineering activities expected from the deployment of the newly developed
processes and the less expensive materials these processes will allow. However,
since the Company has had limited commercial experience with these processes, at
this time no assurance can be given that the price reductions can be
counterbalanced with the use of these new processes plus the less expensive
materials.

ITEM 2. DESCRIPTION OF PROPERTY

Vancouver, British Columbia

     The Company has been leasing 27,777 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 five years and is due to expire
in September 2004. The current total rent is CDN$13,270 (i.e., US $8,294 based
upon current exchange rates) per month. The lease is a triple net lease, and the
Company is responsible for its share of common area expenses and maintenance.
Management is optimistic that the Company will be able to sublease

                                      -19-
<PAGE>

this space for an amount that is at least equal to the required lease payments
after moving to the new facility described below in Richmond. To the extent that
the Company is unable to sublease the property, the Company will be obligated to
continue the rental payments until the end of the lease.

     The property at 3137 Grandview Highway is listed for sublet with a
reputable real estate agent.

Richmond, British Columbia

     On April 5, 2002, the Board of Directors approved a lease of a 52,080
square feet office and warehouse space located at 7791 Alderbridge Way,
Richmond, B.C., Canada. Management has signed a 7 year lease at CDN$22,785 (i.e.
US $14,754) per month during the first two years of the lease period. This
larger building should allow the Company to expand its business and increase
productivity through a more effective factory layout. The move from the existing
premises to the new one is expected to start in April 2002 and completed as soon
as possible. An important objective will be adherence to the shipping schedules.
The total rent per month is CDN$22,785 (i.e., US $14,754) based upon current
exchange rates) per month. The lease term is seven years, and is renewable for a
five year term.

Bellingham, Washington

     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.

ITEM 3. LEGAL PROCEEDINGS

     Following his termination for cause from his position as President of the
Company on September 12, 2001, Alex Ding, a former director of the Company and
the Company's former President filed a Writ of Summons on September 13, 2001, in
the Supreme Court of British Columbia. Mr. Ding's claims were made against the
Company, Multicorp Holdings Inc., Glas-Aire Industries Ltd., William R.
Ponsoldt, Craig Grossman, Todd Garrett, Mark Baldinger, Regency Affiliates, Inc.
and Speed.com, Inc. (collectively the "Defendants"). Mr. Ding asserted among
other things that the redemption transaction involved a breach of agreements
with HSBC Bank Canada ("Bank"), securities laws, corporate laws, and fiduciary
duties owed by the Defendants to the Company's shareholders. Mr. Ding asserted
that the court should enjoin various actions relating to the redemption and
grant other relief. Mr. Ding has not served all of the Defendants personally,
and has not filed a Statement of Claim. The Company discussed the redemption
with its Canadian Counsel prior to effecting the redemption, and determined that
proceeding with the redemption would not be in violation of a court order or
otherwise prohibited. Further, the Bank reviewed the proposed redemption
transaction with both outside counsel and an outside accounting firm. After
completion of these reviews, the Bank loaned the Company the funds necessary to
effect the redemption. The Company intends to vigorously contest Mr. Ding's
claims and believes that they are without merit. No hearing or trial date has
been set. The Company and the individual Defendants believe that they have
substantial defenses

                                      -20-
<PAGE>

to claims alleged. However, there are no assurances that the resolution of this
case will not have a material adverse effect on the company. The Company is
advancing the Defendants' costs of defense. These costs may be material to the
Company.

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

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

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

                                     PART II

ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
-----------------------------------------------------------------

MARKET INFORMATION

     The Company's common stock was 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 until it was delisted from the NASDAQ SmallCap
Market in March 2002. The Company's common stock was delisted from the NASDAQ
SmallCap Market for failure to comply with the requirement to hold an annual
meeting of the Company's shareholders during the fiscal year ended December 31,
2001, and for failure to obtain the approval of the Company's shareholders for
the consummation of the acquisition of Wonder Tool. The

                                      -21-
<PAGE>

Company's Common Stock is currently traded in the over-the-counter market on the
NASDAQ Electronic Bulletin Board.

     The table set forth below presents the range, on a quarterly basis, of high
and low sales prices per share of common stock, as reported by Nasdaq.

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

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

Transition Period Ended December 31, 2000

February 1 through April 30, 2000              $13.655    $3.450
May 1 through July 31, 2000                    $ 5.235    $3.171
August 1 through October 31, 2000              $ 3.415    $1.875
November 1, 2000 through December 31, 2000     $ 3.000    $1.391

     The closing price of the common stock on April 12, 2002, was $.35 per
share. As of March 31, 2002, the Company had approximately 34 shareholders of
record and estimates that its common stock was beneficially owned by more than
500 shareholders based upon ownership in "street name."

RECENT SALES OF UNREGISTERED SECURITIES

     On December 21, 2001, the Company consummated a reverse merger transaction
whereby it acquired 100% of the issued and outstanding stock of Wonder Tool Inc.
("Wonder Tool") for 1,250,000 shares of the Company's common stock. Prior to the
merger, Wonder Tool's common stock was held by Cyclo, a private company owned by
two shareholders each of whom management believes is an "accredited investor."
Cyclo then distributed the Glas-Aire shares to its shareholders. As a result of
this transaction, the owners of Cyclo acquired 50.7% of the Company's
outstanding voting stock. The acquisition was a privately negotiated
transaction, and management believes that this transaction was exempt from the
registration provisions of the Securities Act of 1933, as amended (the "1933
Act") pursuant to Section 4(2) of the 1933 Act.

DIVIDENDS

     On November 11, 1999, the Company announced the payment of four 2.5%
quarterly stock dividends. In addition, on February 9, 2000, the Company
announced that a special stock dividend of 18.5% would be paid to stockholders
of record on March 10, 2000, concurrent with the Company's second 2.5% quarterly
stock dividend. The special stock dividend was declared to assist the Company in
meeting the Nasdaq National Market System listing criteria of 1.1 million
publicly held shares. The two additional 2.5% quarterly stock dividends were
paid in

                                      -22-
<PAGE>

June and September of 2000. No dividends were declared or paid during the fiscal
year ended December 31, 2001. Although the Board of Directors may elect to
declare stock dividends in the future, there are no present plans, arrangements,
understandings or commitments to do so.

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

PROCEEDS OF OFFERING

     The Company received net proceeds from a registered public offering
amounting to approximately $2,773,000 in May 1996. The registration statement
for that offering was declared effective on May 1, 1996, and the SEC File No.
was 33-99258-LA. Approximately $450,000 of the net proceeds of that offering
have not been utilized by the Company.

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

GLAS-AIRE INDUSTRIES GROUP LTD. SELECTED FINANCIAL DATA (SUBSEQUENT TO REVERSE
ACQUSITION OF WONDER TOOL INC.)

     The selected financial information set forth below is derived from the
audited consolidated financial statements of Wonder Tool, because the
acquisition of Wonder Tool must be accounted for as a reverse acquisition with
Wonder Tool as the acquiring entity for accounting purposes. Accordingly, this
annual report and the accompanying financial statements reflect, both prior and
subsequent to the acquisition, the business of the acquired entity, Wonder Tool.
The financial information for Glas-Aire for periods prior the date of the
reverse acquisition (December 21, 2001) has been included, because Glas-Aire is
considered the predecessor for accounting purposes. The Wonder Tool financial
statements are prepared in accordance with generally accepted accounting
principles in the United States of America and stated in United States dollars.
The financial information for the periods ended December 31, 2001 and December
20, 2001, are derived from audited financial statements. The selected
consolidated financial data is qualified in its entirety by reference to, and
should be read in conjunction with, the Consolidated Financial Statements,
related Notes and the information set forth below under this Item 6.

SELECTED FINANCIAL DATA
                                                   December 31,   December 20,
Balance Sheet Data                                     2001         2001/(a)/
                                                   ------------   ------------

Total Current Assets                                $3,652,589      $864,622
Total Assets                                        $4,937,649      $864,722
Total Current Liabilities                           $2,675,449      $ 57,784
Stockholder's Equity                                $1,368,021      $806,938

----------
/(a)/ Represents the financial position of Wonder Tool Inc. at acquisition

                                      -23-
<PAGE>

<TABLE>
<CAPTION>
                                                Period from January 1,    Year Ended
                                                 2001 to December 20,    December 31,
Income Statement Data                                 2001/(a)/           2000/(a)/
                                                ----------------------   ------------
<S>                                             <C>                      <C>
Sales                                                 $  822,386          $  947,234
Cost of sales                                            593,588             587,721
                                                      ----------          ----------
Gross profit                                             228,798             359,513
                                                      ----------          ----------
Selling and distribution                                   8,085              11,198
General and administrative                                42,051              42,682
                                                      ----------          ----------
Income from operations                                   178,662             305,633
Net income (loss) for the period                         178,662             305,633
Pro Forma Income Taxes                                    60,745             103,915
Pro Forma Net Income (loss) for the period               117,917             201,718
(Loss) earnings per share-basic and diluted                 0.09                0.16
Weighted average number of shares outstanding          1,250,000           1,250,000
</TABLE>

----------
/(a)/ Represents the results of operations of Wonder Tool Inc. which includes
its predecessor Orbital Polishing Operations.

Results of Operations

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

                                  Period from January 1,    Year Ended
                                  2001 to December 20,     December 31,
Income Statement Data                   2001/(a)/           2000 /(a)/
                                  ----------------------   ------------
Net sales .....................          100.0%               100.0%
Cost of sales .................           72.2%                62.0%
Gross profit ..................           27.8%                38.0%
Selling and distribution ......            1.0%                 1.2%
General and administrative ....            5.1%                 4.5%
Income from operations ........           21.7%                32.3%

----------
/(a)/ Represents the results of operations of Wonder Tool Inc. which includes
its predecessor Orbital Polishing Operations.

Management's Discussion and Analysis of Financial Condition and Results of
Operations

     This section contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under Item 1 - "Description of Business--Special Risk
Factors." The following discussion and analysis should be read in conjunction
with Item 8 - "Selected Financial Data" and the Consolidated Financial
Statements and notes thereto appearing elsewhere in this Annual Report.

                                      -24-
<PAGE>

Overview

     Wonder Tool derives its revenues from the sale of aircraft and automobile
orbital polishers and related accessories. The Companies sales decreased to
$822,386 for the period ended December 20, 2001, from $947,234 for the year
ended December 31, 2000. Management believes that revenue decreased because of a
deteriorating economy during the year ended December 31, 2001. Additionally, the
event of September 11, 2001, had a significant effect on Wonder Tool's sales to
the airline industry. Wonder Tool is closely linked to the airline industry, See
Item 1 - "Risk Factors." As a result of the economic slow down during 2001 and
the September 11, 2001 tragedy, Wonder Tool's gross profit decreased to $228,798
for the period ended December 20, 2001 from $359,513 for the year ended December
31, 2000, a decline of 36.4%. For the same reasons listed above, Wonder Tool's
net income declined from $305,633 for the period ended December 20, 2000, to
$178,662 for the year ended December 31, 2001. Management is optimistic that it
will be able to increase both gross profit and net income in future periods by
integrating the Orbital Polishing Division into Glas-Aire's manufacturing
operations in Canada so that labor costs may be reduced, and by decreasing both
raw material and component costs. Increased revenue in the future periods is
dependent upon the Company's ability to increase market penetration in both the
domestic and foreign airline markets, and in the automotive detailing industry.
Management believes that its new Manufacturing Representatives agreement with AG
Group will lead to greater sales to foreign airlines. Investors are cautioned
there can be no assurance that sales will be increase or that either gross
profit margins or net income will increase in future periods.

Period from January 1, 2001 to December 20, 2001 Compared to the Year Ended
December 31, 2000

     Sales. Wonder Tool's sales decreased by 13.2% from $947,234 for the year
ended December 31, 2000 to $822,386 for the period ended December 20, 2001.
Wonder Tool's largest customer accounted for approximately 18% of Wonder Tool's
revenues.

     Gross Profit. Gross profit decreased from $359,513 for the year ended
December 31, 2000 to $228,798 for the period ended December 20, 2001. This net
decrease of 36.4% was due primarily to the economic slowdown during the year
ended December 31, 2001 and the events of September 11, 2001.

     Selling and Distribution. Selling and distribution expenses decreased from
$11,198 for the year ended December 31, 2000 to $8,085 for the period ended
December 20, 2001. This net decrease of 27.8% was primarily due to a decrease in
freight out and advertising. Commissions increased from $0 for the year ended on
December 31, 2000 to $1,149 for the period ended on December 20, 2001.

     General and Administrative. General and administration expenses decreased
1.5% from $42,682 for the year ended December 31, 2000 to $42,051 for the period
ended December 20, 2001.

     Net Income. Wonder Tool's net income decreased 41.5% from $305,633 for the
year ended December 31, 2000 to $178,662 for the year ended December 31, 2001.
This decrease in

                                      -25-
<PAGE>

income was primarily due to the economic slowdown during the year ended December
31, 2001 and the events of September 11, 2001.

Capital Resources and Liquidity

     At December 31, 2001, as compared to December 31, 2000, Wonder Tool's
current assets increased 24.8 % from $693,065 to $864,622. Management believes
its current assets plus anticipated cash flow from operations will be adequate
to cover the Division's future financial needs.

GLAS-AIRE INDUSTRIES GROUP LTD. SELECTED FINANCIAL DATA (PRIOR TO REVERSE
ACQUSITION OF WONDER TOOL INC.)

     The selected financial information set forth below is derived from the
audited consolidated financial statements of Glas-Aire Industries Group Ltd.,
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 for the period ended December 20, 2001 and for
the eleven months ended December 31, 2000 have been audited by BDO Dunwoody,
Chartered Accountants. The financial statements and BDO Dunwoody's report
thereon 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 the information
set forth below under this Item 6.

                                                December 20,   December 31,
Balance Sheet Data                                  2001           2000
                                                ------------   ------------
                      (In thousands of United States dollars, except share data)

Working capital                                    $  862         $2,399
Total assets                                        5,757          9,841
Obligation under capital lease and
   long term debt                                     830             93
Deferred income taxes                                 410            644
Shareholders' equity                               $1,558         $7,744

                                      -26-
<PAGE>

<TABLE>
<CAPTION>
Income Statement Data:                                                 Eleven Months
                                                         Period Ended      Ended        Year Ended
(In thousands of United States dollars, except per       December 20,  December 31,     January 31,
 share data)                                                 2001          2000            2000
                                                         -----------   -------------   ------------
<S>                                                      <C>            <C>             <C>
Sales                                                    $   11,736     $  10,930       $    9,726
Cost of sales                                                 8,566         7,913            6,845
                                                         ----------    ----------       ----------
Gross profit                                                  3,170         3,017            2,881
                                                         ----------    ----------       ----------
Research and development                                        469           489              426
Selling and distribution                                      1,114           769              749
General and administrative                                    1,004           923              812
                                                         ----------    ----------       ----------
Income from operations                                          584           836              894
Interest income                                                  46            34               84
Interest expense                                                (53)          (21)             (22)
                                                         ----------    ----------       ----------
Income before income from equity investment and income
   tax expense                                                  577           849              956
Income from equity investment                                   211           392              254
(Loss) on write off of equity investment                     (4,234)
                                                         ----------    ----------       ----------
Income (loss) before income taxes                            (3,446)        1,241            1,209
Income taxes                                                     70           556              397
                                                         ----------    ----------       ----------
Net income (loss) for the period                         $   (3,516)   $      685       $      812
                                                         ==========    ==========       ==========
(Loss) earnings per share/basic and diluted              $    (1.64)   $     0.30       $     0.36
                                                         ==========    ==========       ==========
Weighted average number of
   shares outstanding                                     2,150,024     2,306,905        2,229,522
</TABLE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations

Overview

     Glas-Aire derives its revenues from the sale of manufactured automotive
accessories. Glas-Aires's sales increased from $10,929,775 for the eleven month
period ended December 31, 2000 to $11,735,690 for the period ended December 20,
2001. Glas-Aire had a net loss of $3,516,066 for the period ended December 20,
2001, as compared to the net income of $685,769 for the eleven month period
ended December 31, 2000. As a result of the redemption of the Company's shares
and a decline in the market value of Regency's common stock, Glas-Aire

                                      -27-
<PAGE>

recorded a loss of $4,233,835 on its investment in 4,040,375 shares of Regency
Affiliates Inc.'s common stock. For additional information, please see "Item 11,
Security Ownership of Certain Beneficial Owners and Management--Change of
Control," "Item 12, Certain Relationships and Related Transactions-Regency
Redemption," "Item 12, Certain Relationships and Related Transactions-Wonder
Tool Acquisition," and Footnote 3 to Glas-Aire's Financial Statements. Gross
profit margins decreased from 27.6% for the eleven month period ended December
31, 2000 to 27.0% for the period ended December 20, 2001. This decrease was
primarily due to a 6.5% price reduction effective July 2001, imposed by
Glas-Aire's largest customer and to increases in direct labor and overhead
costs. However, management believes that it will be able to increase gross
profit and net income in future periods by increasing Glas-Aire's production
capacity and production efficiency. Increased revenue in future periods will
depend on Glas-Aire'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 increasing
Glas-Aire's gross margin by focusing upon cost reduction, 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 "Item 1. Description of Business--Business
Strategy."

Results of Operations

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

                                                                   Eleven month
                                                    Period ended   period ended
                                                    December 20,   December 31,
                                                        2001           2000
                                                    ------------   ------------
Net sales ......................................       100.0%         100.0%
Cost of sales ..................................        73.0           72.4
Gross profit ...................................        27.0           27.6
Research and development .......................         4.0            4.5
Selling and distribution .......................         9.5            7.0
General and administrative .....................         8.6            8.4
Income from operations .........................         5.0            7.6
Interest income ................................         0.4            0.3
Interest expense ...............................        (0.5)          (0.2)
                                                       -----          -----
Income before income from equity investment
   and income tax expense ......................         4.9            7.8
Income from equity investment ..................         1.8            3.6
Loss on sale of equity investment ..............       (36.1)           0.0
Income taxes ...................................         0.6            5.1
                                                       -----          -----
Net income (loss) ..............................       (30.0)           6.3
                                                       -----          -----

                                      -28-
<PAGE>

Period ended December 20, 2001 Compared to Eleven-Month Period Ended December
31, 2000

     The following information compares information for the eleven month period
ended December 31, 2000 (i.e., the transition period resulting from a change in
Glas-Aire's fiscal year end) with the financial information for Glas-Aire for
the period ended December 20, 2001, prior to the reverse acquisition of Wonder
Tool.

     Sales. Glas-Aire's sales increased by 7.37% from $10,929,775 for the year
ended December 31, 2000 to $11,735,690 for the period ended December 20, 2001.
This increase resulted primarily from (i) a general increase in automotive
sales, (ii) the addition of new customers, (iii) sales of new parts, and (iv)
additional orders from existing customers. Revenues from Glas-Aire's three major
customers accounted for approximately 69% of Glas-Aire's sales during the period
ended December 20, 2001.

     Gross Profit. Gross profit margins, expressed as a percentage of sales,
decreased slightly from 27.6% for the eleven month period ended December 31,
2000 to 27.0% for the period ended December 20, 2001. This net decrease of 0.6%
was due primarily to, (i) a 6.5% price reduction as requested by Glas-Aire's
largest customer effective July 2001, (ii) an increase in direct labor and
overhead costs of 2.2%, (iii) an increase in consulting fees for the Worker's
Compensation Board safety requirements of 2.36%, (iv) a decrease in material
costs of 3.63%, and (v) a decrease of 0.33% in operating costs and cash
discounts.

     Research and Development. Expenses for research and development decreased
by 4.10% from $488,576 for the year ended December 31, 2000 to $468,501 for the
period ended December 20, 2001. This decrease was primarily due to research and
development for the Matched Compression Molding activities which included (i) a
decrease of $39,453 or 8.07% in labor, consultant, research and development
supplies, (ii) a decrease of $12,235 or 2.5% for patent and trade mark
applications, and (iii) an increase in ordinary research and development
activities attributed from (i) an increase of $37,459 or 7.67% in the number of
engineering personnel conducting in-house activities, (ii) an increase of $8,155
or 1.67% in engineering supplies, (iii) a decrease of $9,698 or 1.98% in the
usage of outside contractors to accommodate a decrease in research and
development activities, and (iv) a decrease of $4,304 or 0.9% in travel expenses
to customers relative to new designs.

     Selling and Distribution. Selling and distribution expenses increased by
44.89%, from $768,557 for the eleven month ended December 31, 2000 to $1,113,534
for the period ended December 20, 2001. This increase was primarily due to (i)
an increase of $24,358 or 3.17% in commission expenses resulting from volume
increase in sales, (ii) an increase in warranty claims of $334,511 or 43.52% due
to a major design change requested by Glas-Aire's largest customer and claims of
defective material (extrusion) from one of our suppliers, (iii) an increase of
$7,911 or 1.03% in travel and promotion expenses, and (iv) an increase of $1,111
or 0.15% resulting from other operating costs, and (v) a decrease of $22,914 or
2.98% in consulting and other operating costs due to cost reduction from the
closing of Glas-Aire's office in Japan.

     General and Administrative. General and administration expenses increased
by 8.78%

                                      -29-
<PAGE>

from $922,750 for the eleven month period ended December 31, 2000 to $1,003,740
for the period ended December 20, 2001. This was a result of (i) a decrease of
$24,007 or 2.60% due to a deferral of bonus to employees, (ii) a decrease of
$90,015 or 9.76% in consulting fee related to public relations, (iii) an
increase of $129,432 or 14.03% in legal, consultant, and accounting fees related
to potential acquisitions, (iv) an increase of $140,292 of 15.20% in travel,
administration cost related to Glas-Aire's reorganization, (v) a gain on foreign
exchange of $65,160 or 7.06%, (vi) a decrease of $14,750 or 1.60% related to the
preparation of annual reports to investors and annual general meetings, and
(vii) an increase of $5,198 or 0.57% in other operating costs.

     Interest Expense. Interest expense increase by 152.38% from $20,968 for the
eleven month ended December 31, 2000 to $53,378, This resulted from increased
borrowing to fund the redemption of Glas-Aire's common stock from Regency
Affiliates, Inc. For additional information concerning the redemption, please
see "Item 12, Certain Relationships and Related Transactions-Regency
Redemption."

     Income from Operations. Glas-Aire's income from operations decreased by
30.14% from $836,521 for the eleven month ended December 31, 2000 to $584,019
for the period ended December 20, 2001. This decrease in income was primarily
due to (i) a 6.5% price reduction as requested by Glas-Aire's largest customer
effective April 2000, (ii) higher warranties claim, (iii) higher administration
costs, and (iv) higher interest expenses.

     Interest Income. Interest income increased by 35.29% from $34,066 for the
eleven month ended December 31, 2000 to $45,594 for the period ended December
20, 2001, as a result of interest earnings on temporary term deposit, and
delayed payments to suppliers.

     Income/Loss from Equity Investment. Income accrued from the equity
investment decreased by 46.12% from $392,356 for the eleven month ended December
31, 2000 to $211,420 for the period ended December 20, 2001. Equity income
accrued as a result of Glas-Aire's investment in Regency Affiliates, Inc.
Glas-Aire wrote off its equity investment in Regency Affiliates, Inc. in
connection with the redemption of its common stock on October 1, 2001. As a
result Glas-Aire will not realize income or loss in the future from that
investment. For further information concerning the redemption please see, "Item
11. Security Ownership of Certain Beneficial Owners and Management--Change of
Control," "Item 12, Certain Relationships and Related Transactions-Regency
Redemption," and Footnote 3 to Glas-Aire's Financial Statements. Further, as a
result of redemption transaction and a decline in the market value of Regency's
common stock, Glas-Aire recorded a loss of $4,233,835 on its investment in
4,040,375 shares of Regency Affiliates Inc. 's common stock. Please see "Item
12, Certain Relationships and Related Transactions-Regency Redemption." The
redemption was consummated on October 1, 2001.

     Income Taxes. Glas-Aire provided for income taxes of $69,886 for the period
ended December 20, 2001, a decrease of 87.41%, as a result of higher expenses
and the loss.

                                      -30-
<PAGE>

Eleven-month period ended December 31, 2000 Compared to Year Ended January 31,
2000

     Sales. The Company's sales increased by 12.38% from $9,725,611 for the year
ended January 31, 2000 to $10,929,775 for the eleven month period ended December
31, 2000. This increase resulted primarily from (i) a general increase in
automotive sales, (ii) the addition of new customers, (iii) sales of new parts,
and (iv) additional orders from existing customers. Revenues from the Company's
three major customers accounted for approximately 79% of the Company's sales
during the eleven month period ended December 31, 2000.

     Gross Profit. Gross profit margins, expressed as a percentage of sales,
decreased slightly from 29.62% for the year ended January 31, 2000 to 27.6% for
the eleven month period ended December 31, 2000. This net decrease of 2.02% was
due primarily to, (i) a 10% price reduction as requested by the Company's
largest customer effective April 2000, (ii) an increase in material costs of
1.25%, (ii) an increase in direct labor and overhead costs of 1.09%, (iii) an
increase in depreciation of 0.09% due to the placement of new equipment in
service, and (iv) a decrease of 0.41% in operating costs and cash discounts.

     Research and Development. Expenses for research and development increased
by 14.69% from $425,990 for the year ended January 31, 2000 to $488,576 for the
eleven month period ended December 31, 2000. This increase was primarily due to
research and development relative to Matched Compression Molding activities
which included (i) an increase of $60,295 or 14.16% in labor cost, (ii) an
increase of $12,235 or 2.87% for patent and trade mark applications, and (iii)
an increase of $18,848 or 4.42% in research and development supplies, as well as
ordinary research and development activities which included (i) an increase of
$24,777 or 5.82% in the number of engineering personnel conducting in-house
activities, (ii) an increase of $4,897 or 1.15% in engineering supplies, (iii) a
decrease of $50,636 or 11.89% in the usage of outside contractors to accommodate
a decrease in research and development activities, and (iv) a decrease of $7,830
or 1.84% in travel expenses to customers relative to new designs.

     Selling and Distribution. Selling and distribution expenses increased by
2.67%, from $748,596 for the year ended January 31, 2000 to $768,557 for the
eleven month period ended December 31, 2000. This increase was primarily due to
(i) an increase of $10,211 or 1.37% in commission expenses resulting from volume
increase in sales, (ii) an increase in warranty claims of $10,638 or 1.42% due
to a major design change requested by the Company's largest customer, (iii) a
decrease of $5,345 or 0.71% in travel and promotion expenses, and (iv) an
increase of $4,458 or 0.59% resulting from a new employment contract and other
operating cost.

     General and Administrative. General and administrative expenses increased
by 15% from $811,608 for the year ended January 31, 2000 to $922,750 for the
eleven month period ended December 31, 2000, as a result of (i) an increase of
$80,501 or 8.7% in consulting fees related to public relations, (ii) an increase
of $43,500 or 4.7% in directors' fees, (iii) an increase of $10,238 or 1.1% in
consulting and travel expenses related to the Company's M & A (Merger &
Acquisition), (iv) an increase of $10,000 or 1.08% in audit fees, (v) a decrease
of $18,830 or 2.04% related to the preparation of annual reports to investors
and annual general meetings, (vi) a decrease of $12,000 or 1.3% due to the
cancellation of management contracts, (vii) a decrease of $7,595 or .80% in
other miscellaneous administration costs, and (viii) an increase in provision

                                      -31-
<PAGE>

for profit sharing of $5,327 or .59%. Provision for Profit Sharing. Provision
for profit sharing increased by 4.99% from $106,684 for the year ended January
31, 2000 to $112,011 for the eleven month period ended December 31, 2000. This
increase was a result of the higher profitability of the Company.

     Interest Expense. Interest expense decreased by 6.66% from $22,463 for the
year ended January 31, 2000 to $20,968 for the eleven month period ended
December 31, 2000, as a result of decreased borrowings.

     Income from Operations. The Company's income from operations decreased 6.4%
from $894,110 for the year ended January 31, 2000 to $836,521 for the eleven
month period ended December 31, 2000. This decrease in income was primarily due
to (i) a 10% price reduction as requested by the Company's largest customer
effective April 2000, (ii) higher research and development costs, (iii) higher
administration costs, and (iv) the eleven month reporting period.

     Interest Income. Interest income decreased by 59.2% from $83,573 for the
year ended January 31, 2000 to $34,066 for the eleven month period ended
December 31, 2000, as a result of the reduction in the Company's liquid assets
earning interest. The Company substantially reduced its liquid assets earning
interest when it invested a significant amount of the Company's liquid assets in
the common stock of Regency Affiliates, Inc.

     Income from Equity Investment. Income accrued from the equity investment
increased by 55% from $253,719 for the year ended January 31, 2000 to $392,356
for the eleven month period ended December 31, 2000. Equity income accrues as a
result of the Company's investment in Regency Affiliates, Inc. See "Item 11.
Security Ownership of Certain Beneficial Owners and Management--Change of
Control" and Footnote 3 to the Company's Financial Statements.

     Income Taxes. The Company provided for income taxes of $556,206 for the
eleven month period ended December 31, 2000. The Company's effective tax rate
for the eleven month period ended December 31, 2000 was 44.8% compared to 32.8%
for the fiscal year ended January 31, 2000.

     Net Income. Net income decreased by 15.6% from $812,332 for the year ended
January 31, 2000 to $685,769 for the eleven month period ended December 31,
2000. This decrease in income resulted primarily from the recording of income
taxes on equity earnings related to the Company's investment in Regency
Affiliates, Inc., its parent company.

Liquidity and Capital Resources

     On December 31, 2000, Glas-Aire's working capital was approximately
$2,399,000 as compared to $862,000 on December 20, 2001. This decline occurred
primarily as the result of the use of available liquid resources to fund the
$2,500,000 cash payment made to Regency in connection with the redemption.
Glas-Aire expects that working capital requirements and capital additions will
continue to be funded through a combination of Glas-Aire's existing funds,
internally generated funds and existing bank facilities and capital leases.
Glas-Aire's working

                                      -32-
<PAGE>

capital requirements are expected to increase in line with the growth of Glas-
Aire's business, and it either has or will generate sufficient working capital
to meet Glas-Aire's requirements during this fiscal year. During the current
fiscal year, Glas-Aire anticipates making total capital expenditures of
approximately $650,000 as follows: (1) $50,000 for mechanized material handing,
(2) $200,000 for thermoforming equipment to facilitate the recently developed
Matched Compression Molding process, (3) $130,000 for design/upgrade software
and related hardware, (4) $250,000 for moving expenses and for leasehold
improvements to enable capacity increases and to accommodate new processes in a
bigger building, and (5) $20,000 for QS9000 audits by QMI (Quality Management
Institute), which will be expensed as incurred.

Impact of Inflation

     Glas-Aire believes that inflation has not had a material effect on its
business. Although the cost to Glas-Aire of certain raw materials used in the
manufacture of its products, primarily acrylic, has increased over the past few
years, Glas-Aire 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 eleven
month period ended December 31, 2000, and the year ended December 31, 2001,
including the average exchange rate for the period, are as follows:

Fiscal period ended        Exchange Rate           for Period
-------------------        -------------           ----------

 December 31, 2001     1.U.S.$: 1.5873 Cdn.$   1 U.S.$: 1.5443Cdn.$
 December 31, 2000     1.U.S.$: 1.4995 Cdn.$   1 U.S.$: 1.4820Cdn.$

Significant Accounting Policies and Estimates

Accounting Estimates

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

                                      -33-
<PAGE>

Revenue Recognition

     The Company recognizes revenue on the sale of products at the time the
products are shipped to its customers.

Research and Development

     Research and development costs are expensed as incurred.

Recently Issued Accounting Standards

     SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" is effective for all fiscal quarters of fiscal years beginning after
June 15, 2000. 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,
adoption of the new standards on January 1, 2001 did not have any effect on its
financial statements.

     In June 2001, SFAS No. 141 "Business Combinations" was issued. SFAS No. 141
requires that all business combinations be accounted for using the purchase
method and that one of two specified criteria be met in identifying intangible
assets apart from goodwill. Additional disclosures are required in respect to
the primary reasons for the business combination and the allocation of the
purchase price paid to the assets acquired and liabilities assumed by major
balance sheet caption. SFAS No. 141 applies to all business combinations
initiated after June 30, 2001. The Company applied the provisions of SFAS No.
141 for the reverse acquisition that took place subsequent to December 20, 2001.

     In June 2001, SFAS No. 142 "Goodwill and Other Intangible Assets" was
issued. Under the provisions of SFAS No. 142 goodwill and other intangible
assets with an indefinite life are no longer amortized but will be tested at
least annually for impairment. The statement provides a two step process for
estimating fair value of the reporting units and measuring the amount of
impairment, if any, of goodwill and other intangible assets. SFAS No. 142 is
effective for fiscal years beginning after December 15, 2001.

     The Company does not expect SFAS No. 142 to have a material impact on its
financial statements because it does not have any recorded goodwill or other
intangible assets.

     In August 2001, SFAS No. 144 "Accounting for the Impairment or Disposal of
Long-Lived Assets" was issued. This statement establishes a single model based
upon SFAS No. 121 for accounting for the impairment or disposal of long lived
assets. It supersedes FASB Statement No. 121 and the reporting provisions of APB
Opinion No. 30 for the disposal of a

                                      -34-
<PAGE>

segment of a business and also amends certain provisions of ARB No. 51. SFAS No.
144 is effective for financial statements issued for fiscal years beginning
after December 15, 2001. Management believes that the adoption of SFAS No. 144
will have no material effect on the Company's financial statements.

Item 7 - Financial Statements
-----------------------------

     Included beginning at page F-1.

Item 8 - Changes in and Disagreements with Accountants on Accounting and
------------------------------------------------------------------------
Financial Disclosure
--------------------

     Not  Applicable.

                                    PART III

Item 9 - Directors, Executive Officers, Promoters and Control Persons;
----------------------------------------------------------------------
Compliance with Section 16(a) of the Exchange Act
-------------------------------------------------

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

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

William R. Ponsoldt    60   Chairman of the Board of Directors

Craig Grossman         39   President, Chief Executive Officer and
                            Director

Robert C. Johnson      57   Director

Raymond Gherardini     56   Director

Omer Esen              59   Chief Operating Officer

Linda Kwan             56   Chief Financial Officer

Marc Baldinger         46   Director

Todd M. Garrett        36   Director

Chris G. Mendrop       49   Director

                                      -35-
<PAGE>

     William R. Ponsoldt. Mr. Ponsoldt has served as the Chairman of the Board
of Directors of the Company since April 16, 1999 and as the Company's Chief
Executive Officer from April 16, 1999 until December 4, 2001. 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.

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

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

     Raymond Gherardini. Mr. Gherardini has served as a director of the Company
since December 21, 2001. Mr. Gherardini is currently Vice President for
Sales/Marketing at Cyclo Manufacturing Co. Mr. Gherardini attended Colorado
State University in Fort Collins, Colorado and majored in Business
Administration. He is also Chairman of the Board of Shanghai-Cyclo, Cyclo's
Chinese joint venture. Mr. Gherardini has thirty-four (34) years experience in
the automotive industry. Mr. Gherardini has developed sales and marketing
programs aimed at the automotive chain stores, automotive warehouse
distributors, mass merchant chain accounts and automotive dealer networks. Mr.
Gherardini has handled the diverse classes of automotive trades either on a
direct basis or through factory representatives. Immediately prior to acquiring
Cyclo, Mr. Gherardini was Vice President of Sales and Marketing for Turbo Tek
Enterprises, Inc., a California marketing firm with 1989 sales of $30MM. Mr.
Gherardini was founder of Turbo Tek in 1984 and was responsible for its
successful sales and marketing programs in the

                                      -36-
<PAGE>

United States and overseas. Mr. Gherardini was a member of APAA for many years
and is currently a member of SEMA through his company.

     Omer Esen. Mr. Esen has served as Vice President of Operations for the
Company from 1995 - 1997, assumed the additional position of Chief Financial
Officer from 1996 - 2001, appointed as the General Manager from 1997 - 2001,
2001 was appointed as the Chief Operating Officer. 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 to 100 foot
yachts, where he managed manufacturing operations as well as developed and
installed various computerized business control systems. During Mr. Esen's
tenure, the Company's revenues grew from $2 million to $15 million. From 1988
until 1992, Mr. Esen was Director of Operations for DBA Communication Systems
Inc. in Vancouver, a design and manufacturing firm for small business
telecommunications equipment and systems. Mr. Esen holds a bachelor's 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. Mrs. Kwan has been appointed as the Chief Financial Officer of
the Company in 2001. In 1996 she has assumed the position of Controller. From
1995 until 1996 she has served as the Accounting Manager. Mrs. Kwan is a member
of the Certified Management Accountants of Canada. From 1992 to 1995, Mrs. Kwan
operated as a private consultant, providing accounting consulting services to
small businesses and individuals. From 1983 to 1992, Ms. Kwan has worked with
York-Hanover Developments, Ltd., a large real estate developer located in
Toronto. While with York Hanover Group, Mrs. Kwan held a number of positions,
eventually rising to the position of Corporate Controller with responsibility
for all of the firm's accounting functions. Ms. Kwan graduated from Hong Kong
Technical College with a degree in commercial business and accounting.

     Marc Baldinger. Mr. Baldinger has served as a director of the Company since
April 16, 1999. Mr. Baldinger is the Chief Financial Officer of Regency
Affiliates, Inc., and until late in 2001, was a Senior Officer in Financial
Services for Riverside National Bank ("Riverside") located in Palm City,
Florida, and was responsible for portfolio management, asset allocation and
investment selection for Riverside's Trust Department. He commenced employment
with Riverside in 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.

     Todd M. Garrett. Mr. Garrett has served as a director of the Company since
May 21, 1999. Since November 2001, Mr. Garrett has been employed as a Vice
President-Financial Advisor at The Seidler Companies Incorporated. From January
2001 to October 2001Mr. Garrett was employed by US Bancorp Piper Jaffray in
Newport Beach, California, as a Vice President, Investments . From 1996 to
January 2001 he worked as an investment advisor in the Private

                                      -37-
<PAGE>

Client Department in the corporate headquarters of Cruttenden Roth, Incorporated
in Newport Beach. Mr. Garrett specializes in formulating investment strategies
through the selection of optimal investment combinations tailored to client
needs and objectives. His managed portfolios comprise both high net worth
individuals and institutional investors. Mr. Garrett has worked in the
investment industry for more than nine years. Furthermore, he has worked for
several investment banks that include Kidder Peabody & Co., Lehman Brothers,
Fidelity Investments and Sutro & Co. Mr. Garrett holds a Bachelor of Arts degree
in Business Economics from San Diego State University with an emphasis in
finance and accounting. Mr. Garrett is currently pursuing the Certified
Financial Planner (CFP) designation.

     Chris G. Mendrop. Mr. Mendrop has been a director of the Company since its
inception. He is currently self-employed as a financial consultant. From their
inceptions in January, March and July 1998, respectively, until March 2001, he
served as the Chief Executive Officer of Blake Street Group LLC, Blake Street
Securities LLC and Blake Street Advisors LLC (collectively the "Blake Street
Group"). From July 1992 until January 1998, Mr. Mendrop was the Chief Executive
Officer of Corporate Development Capital, Inc., an investment advisory and
financial consulting firm located in Denver, Colorado. 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.

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

     At the present time no family relationship exists among any of the named
directors and executive officers. No arrangement or understanding exists between
any of these directors or officers and any other persons pursuant to which any
director or executive officer was elected as a director or executive officer of
the 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 of the
Company.

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

     The Company believes with respect to each person that served during fiscal
2001 as an officer or director of the Company that there were no transactions
that occurred during the Company's most recent fiscal year end which required
the filing of a Form 5.

                                      -38-
<PAGE>

BOARD COMMITTEES

     The Board of Directors maintains a Compensation Committee and an Audit
Committee. The members of the Compensation Committee are Messrs. Grossman and
Mendrop. Mr. Grossman is the Company's Chief Executive Officer and a director
and Mr. Mendrop is a non-management directors. The members of the Audit
Committee are Messrs. Mendrop, Baldinger and Garrett, all of whom are
non-management directors. The Compensation Committee did not have any formal
meetings during the last fiscal year. The Audit Committee met via telephone
conference three (3) times during the last fiscal year.

                                      -39-
<PAGE>

ITEM 10 - EXECTIVE COMPENSATION
-------------------------------

     The following table summarizes all compensation paid to the former Chief
Executive Officer, the new President and Chief Executive Officer, and the former
President and Chief Operating Officer of the Company (together, the "Named
Executive Officers") for services rendered to the Company during the last three
fiscal years. The amount of compensation paid to each of the other executive
officers as total annual salary and bonus does not exceed $100,000.

<TABLE>
<CAPTION>
                                                      Annual Compensation
                                       -----------------------------------------------------
                                       Fiscal year
                                           ended       Annual                      Other
Name and principal position            December 31,    Salary      Bonus        Compensation
---------------------------            ------------   -------   -------------   ------------
<S>                                      <C>          <C>       <C>             <C>
Craig Grossman                           2001                   $100,000/(1)/   $ 6,000/(2)/
 President and Chief Executive           2000/(3)/                              $11,000/(2)/
 Officer                                 1999/(4)/                              $ 2,250/(2)/

William R. Ponsoldt                      2001                                   $ 6,000/(2)/
 Chairman of the Board and               2000/(3)/                              $11,000/(2)/
 former Chief Executive Officer          1999/(4)/                              $ 2,250

Alex Y. W. Ding                          2001         $77,066                   $ 2,500
 Former President , Chief Operating      2000/(3)/    $82,659   $ 22,046/(5)/   $11,000/(2)/
 Officer, Treasurer                      1999/(4)/    $83,170   $ 13,528/(5)/   $ 2,250/(2)/
 and Director
</TABLE>

----------
     /(1)/Mr. Grossman was paid this bonus for management services he provided
          to the Company for the year ended December 31, 2001.

    /(2)/ Represents fees paid in connection with services as a director of the
          Company.

    /(3)/ The Company changed its fiscal year end from January 31 to December 31
          effective December 31, 2000, so that the information presented is
          actually for the 11 months ended December 31, 2000.

    /(4)/ The Company changed its fiscal year end from January 31 to December 31
          effective December 31, 2000, so that the information presented is
          actually for the 12 months ended January 31, 2000.

    /(5)/ Represents bonuses paid pursuant to the Company's profit sharing
          program described below.

                                      -40-
<PAGE>

OPTION GRANTS IN THE LAST FISCAL YEAR

     The following table sets forth information concerning options granted
during fiscal 2001 to the Named Executive Officers.

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
                        Number of          % of Total
                        Securities      Options Granted
                        Underlying      to Employees in   Exercise
Name                  Options Granted     Fiscal Year     Price      Expiration Date
-------------------------------------------------------------------------------------
<S>                       <C>                 <C>            <C>     <C>
William R. Ponsoldt       10,000              50%            $1.00   December 3, 2006
-------------------------------------------------------------------------------------
Craig Grossman            10,000              50%            $1.00   December 3, 2006
-------------------------------------------------------------------------------------
</TABLE>

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

     During the fiscal year ended December 31, 2001, there were no options
exercised by any officers, directors, or employees of the Company. Further, on
December 31, 2001, the exercise prices of all existing options were in excess of
the market value of those options. The following table sets forth information
concerning the number of shares that may be acquired on the exercise of options
and exercisable and unexercisable stock options at the end of fiscal 2001 for
the Named Executive Officers and the directors.

--------------------------------------------------------------------------------
                                                Number of Securities Underlying
                                                Unexercised Options at Year End
--------------------------------------------------------------------------------
NAME                                            Exercisable        Unexercisable
--------------------------------------------------------------------------------
William R. Ponsoldt                               20,000                0
--------------------------------------------------------------------------------
Craig Grossman                                    20,000                0
--------------------------------------------------------------------------------
Marc Baldinger                                    20,000                0
--------------------------------------------------------------------------------
ToddGarrett                                       20,000                0
--------------------------------------------------------------------------------
Chris Mendrop                                     20,000                0
--------------------------------------------------------------------------------

     EMPLOYMENT AGREEMENTS. Effective August 1, 2000, the Company entered into
amended and restated employment agreements with Omer Esen and Linda Kwan. The
agreements are for two-year terms. Under those employment agreements, Messrs.
Esen and Ms. Kwan are each entitled to base annual compensation of $67,480(US).
Messrs. 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. Esen and Ms. Kwan will be entitled to
participate in the profit sharing program described below.

     The Board of Directors has authorized the Company to enter into two
employment agreements with Mr. Craig Grossman, the Company's Chief Executive
Officer and a member of the Board of directors. One employment agreement is
between Mr. Grossman and the Company

                                      -41-
<PAGE>

and the other agreement is between Mr. Grossman and the Company's Canadian
operating subsidiary Glas-Aire Industries Ltd. The principal terms of the
employment agreements are summarized below. The employment agreements are to be
retroactively effective as of January 1, 2002, and terminate on December 31,
2005, unless earlier terminated by the Company or Mr. Grossman. The employment
agreements are automatically renewable for three year terms. The employment
agreements provide for aggregate annual salary of $213,000, a car allowance of
$11,400 per year, medical insurance in both the United States and Canada for Mr.
Grossman and his family, and an annual bonus. The annual bonus shall be equal to
10% of the increase in net shareholder's equity over the net shareholder's
equity for the previous fiscal year with any incremental increase in
shareholder's equity resulting from the issuance of any shares of preferred or
common stock for cash or other property excluded in calculating the annual
bonus. If a change of control occurs as defined in the agreement, Mr. Grossman
may at his option elect to treat the change of control as termination for other
than cause and be paid a severance payment equal to 18 months of his
compensation. In addition, Mr. Grossman was granted warrants to acquire 255,000
shares of the Company's common stock at an exercise price of $0.01 per share,
which expire on April 12, 2012, and contain customary anti-dilution provisions.
The Warrants were granted on April 12, 2002, and vest as follows: 85,000 shares
of the Company's common stock vested immediately upon signing of the agreement,
with warrants to acquire an additional 85,000 shares vesting on the first
anniversary of the date of the agreement provided that Mr. Grossman is employed
by the Company, and warrants to acquire an additional 85,000 shares vesting on
the second anniversary of the date of the agreement provided that Mr. Grossman
is employed by the Company.

     DIRECTORS. The Company paid $6,000 in cash to five directors and $2,500 to
Mr. Alex Ding during the fiscal year ended December 31, 2001, and granted each
of the directors options to acquire 10,000 shares of Glas-Aire's common stock at
an exercise price of $1.00 per share which expire on December 31, 2006. The
company paid $5,000 and issued 1,996 shares of common stock valued at $5,000 to
each of six directors (employee and non-employee) during the fiscal year ended
December 31, 2000 as compensation for serving as directors. The Company did not
hold an annual meeting in 2001, and as a result, the directors were not issued
any shares.

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

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

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

     .    An annual award of an option to purchase 10,000 shares of Glas-Aire's
          common stock, at fair market value on date of grant. Options granted
          under this provision

                                      -42-
<PAGE>

          expire five years from the date of grant, are exercisable in cash and
          contain anti-dilution provisions.

     PROFIT SHARING PROGRAM. The Company has adopted a profit sharing program
that provides that an amount equal to 10% of the Company's income before income
taxes (subject to some adjustments) may be distributed to officers and employees
of the Company. Distributions pursuant to the plan for the year ended December
31, 2001 aggregated approximately $117,209.

     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").

     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

                                      -43-
<PAGE>

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.

ITEM 11. - SECURITY OWNERSH OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-----------------------------------------------------------------------

     The following table sets forth as of March 31, 2002, the beneficial
ownership of the Company's common stock by each person known to the Company to
own beneficially more than 5% of the Company's common stock and by the officers
and directors of the Company, individually and as a group. Unless otherwise
stated below, each such person has sole voting and investment power with respect
to all such shares of common stock.

   Name and Address of              Amount and Nature of
    Beneficial Owner                 Beneficial Ownership      Percent of Class
------------------------------      ---------------------      ----------------
Raymond Gherardini                        625,000                   24.79%
2452 South Chase Lane
Lakewood, Colorado 80227

Robert C. Johnson                         625,000                   24.79%
7085 West Belmont Dr.
Littleton, Colorado 80123

William R. Ponsoldt                        21,489/(3)/               0.84%
729 South Federal Highway #307
Stuart, Florida 34994

Alex Ding                                 124,093/(2)/               4.88%
3137 Grandview Highway
Vancouver, B.C.
Canada V5M 2E9

Chris G. Mendrop                           21,489/(3)/               0.84%
1860 Blake Street #500
Denver, Colorado 80202

Marc Baldinger                             21,489/(3)/               0.84%
850 Lighthouse Drive
Palm City, Florida 34990

                                      -44-
<PAGE>

Todd M. Garrett                            21,489/(3)/               0.84%
201 Marsala Drive
Newport Beach, California 92660

Craig Grossman                             21,489/(3)/               0.84%
3137 Grandview Highway
Vancouver, B.C.
Canada V5M 2E9

Omer Esen                                  10,945                    0.43%
3137 Grandview Highway
Vancouver, B.C.
Canada V5M 2E9

Linda Kwan                                  8,350                    0.33%
3137 Grandview Highway
Vancouver, B.C.
Canada V5M 2E9

Rabideau Family Trust                     145,100                    5.75%
8101 E. Kalil Drive
Scottsdale, AZ 85260

Directors and executive officers
as a group (9 persons)                  1,376,740/(2)//(3)/         52.53%

----------
/(1)/ Excludes 320,000 shares of Common Stock reserved for issuance under the
     Company's Stock Option Plans.
/(2)/ Includes 87,572 shares sold by the numbered company controlled by Alex
     Ding in September 1998 to his mother, Ms. Sik Chun Fei. Mr. Ding may be
     deemed to be the beneficial owner, although not the record owner, of those
     shares.
/(3)/ Includes options to purchase 10,000 shares granted to each of the
     directors on November 4, 1999, and options to purchase10,000 shares granted
     to each of the directors on December 4, 2001.

CHANGE IN CONTROL

     The transactions described below under ITEM 12 - CERTAIN RELATIONSHIIPS AND
RELATED TRANSACTIONS-REGENCY REDEMPTION and ITEM 12 - CERTAIN RELATIONSHIIPS AND
RELATED TRANSACTIONS-WONDER TOOL ACQUISITION each involved a "Change in
Control." For further information please see ITEM 12 - CERTAIN RELATIONSHIIPS
AND RELATED TRANSACTIONS.

                                      -45-
<PAGE>

ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------

     REGENCY REDEMPTION

     On October 1, 2001, the Company completed a transaction for the repurchase
of all of its shares of common stock owned by Regency Affiliates, Inc. and its
wholly-owned subsidiary, Speed.com, Inc. The Company's Chairman of the Board of
Directors, William Ponsoldt, is the Chairman of the Board, Chief Executive
Officer and President of Regency Affiliates, Inc. Prior to the transaction,
Regency owned 1,215,105 shares of Glas-Aire's common stock and Glas-Aire owned
4,040,375 shares of Regency's common stock. Glas-Aire acquired 1,215,105 shares
of its common stock representing approximately 50% of the issued and outstanding
shares of Glas-Aire for $2,500,000 in cash plus 4,040,375 of Regency's common
stock, representing approximately 23% of the issued and outstanding shares of
Regency.

     WONDER TOOL ACQUISITION

     On December 21, 2001, in connection with the Wonder Tool acquisition among
Glas-Aire, Glas-Aire Acquisition Corporation, a Colorado corporation and
wholly-owned subsidiary of the Company, Cyclo and Wonder Tool, Wonder Tool and
Glas-Aire Acquisition Corporation merged. Cyclo received 1,250,000 shares of
Glas-Aire's common stock (which constituted approximately 50.7% of the Company's
total outstanding voting stock) in exchange for 1,000 shares of Wonder Tool's
common stock which it owned. As a consequence of the merger, Wonder Tool became
a wholly-owned subsidiary of the Company. After the closing, Cyclo transferred
the shares to Johnson and Gherardini. Hence, Johnson and Gherardini each own
625,000 shares of the Company and together control a majority of Glas-Aire's
voting stock. Both Johnson and Gherardini have been elected to serve on
Glas-Aire's board of directors.

     OTHER TRANSACTIONS

     On December 4, 2001, the Board of Directors approved a cash bonus of
$100,000 to Mr. Craig Grossman, as compensation for his management services to
the Company during the year ended December 31, 2001.

                                     PART IV

ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K
------------------------------------------

     Documents filed as part of this Form 10-K:

     (a) List of Exhibits.

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

                                      -46-
<PAGE>

          ii.  Other Exhibits

               10.1 Grossman Canadian Employment Contract

               10.2 Grossman American Employment Contract

               10.3 New Lease

     (b)  Reports on Form 8-K: Three Reports on Form 8-K were filed by the
          Company during the forth quarter ended December 31, 2001. The Company
          filed a Report of Form 8-K on October 10, 2001 and Form 8-K/A on
          October 12, 2001 and December 28, 2001 reporting its stock redemption
          with Regency Affiliates, Inc.

                                      -47-
<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 26, 2002             By: /s/ Craig Grossman
                                     -------------------------------------------
                                      Craig Grossman, Chief Executive Officer,
                                      President and Director

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


Date: April 26, 2002
                                  ----------------------------------------------
                                  Willam R. Ponsoldt, Sr. Chairman of the Board


Date: April 26, 2002
                                  ----------------------------------------------
                                  Robert C. Johnson, Director


Date: April 26, 2002
                                  ----------------------------------------------
                                  Raymond Gherardini, Director


Date: April 26, 2002              /s/ Linda Kwan
                                  ----------------------------------------------
                                  Linda Kwan, Chief Financial Officer


Date: April 26, 2002              /s/ Chris G. Mendrop
                                  ----------------------------------------------
                                  Chris G. Mendrop, Director


Date: April 26, 2002              /s/ Marc Baldinger
                                  ----------------------------------------------
                                  Marc Baldinger, Director


Date: April 26, 2002              /s/ Todd M. Garrett
                                  ----------------------------------------------
                                  Todd M. Garrett, Director

                                      -48-
<PAGE>

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)

                                               CONSOLIDATED FINANCIAL STATEMENTS

                        FOR THE PERIOD FROM JANUARY 1, 2001 TO DECEMBER 20, 2001
                      (ACQUISITION DATE, NOTE 13), THE ELEVEN-MONTH PERIOD ENDED
                           DECEMBER 31, 2000 AND THE YEAR ENDED JANUARY 31, 2000
                                                        (STATED IN U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                                        Contents
--------------------------------------------------------------------------------
<S>                                                                     <C>
INDEPENDENT AUDITORS' REPORT                                                F-2

INDEPENDENT AUDITORS REPORT                                                 F-3

CONSOLIDATED FINANCIAL STATEMENTS

    Balance Sheets                                                          F-4

    Statements of Operations                                                F-5

    Statements of Stockholders' Equity and Comprehensive (Loss) Income      F-6

    Statements of Cash Flows                                                F-7

    Summary of Significant Accounting Policies                              F-9

    Notes to Financial Statements                                          F-14
</TABLE>
<PAGE>

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

                                                    INDEPENDENT AUDITORS' REPORT

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


TO THE DIRECTORS AND STOCKHOLDERS OF
GLAS-AIRE INDUSTRIES GROUP LTD.


We have audited the accompanying consolidated balance sheets of Glas-Aire
Industries Group Ltd. (Predecessor Company) as at December 20, 2001 (acquisition
date) and December 31, 2000 and the related consolidated statements of
operations, stockholders' equity and comprehensive (loss) income and cash flows
for the period from January 1, 2001 to December 20, 2001, the eleven-month
period ended December 31, 2000 and the year ended January 31, 2000. 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 did not audit the financial statements of Regency Affiliates,
Inc. as of December 31, 2000 and for the two years then ended, the investment
which was reflected in the accompanying financial statements using the equity
method of accounting. The investment in Regency Affiliates, Inc. represents
approximately 41% of consolidated total assets as of December 31, 2000 and 100%
of the income from equity investment for the eleven-month period ended December
31, 2000 and the year ended January 31, 2000. The financial statements of
Regency Affiliates, Inc. were audited by other auditors whose report had been
furnished to us, and our opinion, insofar as it relates to the amounts included
for Regency Affiliates, Inc., is based solely on the report of the other
auditors.

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

In our opinion, based on our audits and the report of other auditors, these
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Glas-Aire Industries Group Ltd.
(Predecessor Company) as at December 20, 2001 (acquisition date) and December
31, 2000 the results of its operations and its cash flows for the period from
January 1, 2001 to December 20, 2001, the eleven-month period ended December 31,
2000 and the year ended January 31, 2000 in conformity with U.S. generally
accepted accounting principles.



/s/ BDO Dunwoody LLP

Chartered Accountants

Langley, Canada
March 21, 2002

                                                                             F-2
<PAGE>


                                Rosenberg Rich
                                 Baker Berman
                                 ------------
                                   & Company
                                     -------
                         A professional association of
                         CERTIFIED PUBLIC ACCOUNTANTS
         380 Foothill road o P.O. Box 6483 Bridgewater, NJ 08807--0483
                    Phone: 908-231-1000 . FAX: 908-231-6894
                 Website: www.rrbb.com . E-Mail: info@rrbb.com
                          ------------           -------------

                         Independent Auditor's Report



To the Board of Directors and Stockholders
of Regency Affiliates, Inc. and Subsidiaries


We have audited the consolidated balance sheet of Regency Affiliates, Inc. and
Subsidiaries as of December 31, 2000 and the related consolidated statements of
operations, retained earnings, and cash flows for the year then end. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Regency
Affiliates, Inc. and Subsidiaries as of December 31, 2000 and the results of its
consolidated operations and its cash flows for the year ended in conformity with
accounting principles generally accepted in the United States of America.



/s/ Rosenberg, Rich, Baker, Berman & Co. CPA

Bridgewater, New Jersey
March 27, 2001

<PAGE>

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

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                                     CONSOLIDATED BALANCE SHEETS
                                                        (STATED IN U.S. DOLLARS)


<TABLE>
<CAPTION>
                                                                               DECEMBER 20       December 31
                                                                                   2001(A)              2000
------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>              <C>
ASSETS
CURRENT
    Cash and equivalents                                                     $     561,801    $     805,743
    Accounts receivable, net of allowance for doubtful accounts
        of $21,588 (2000 - $22,621) (Note 4)                                     2,075,474        1,754,092
    Inventories (Notes 1 and 4)                                                    985,154        1,130,007
    Prepaid expenses                                                               148,847           44,094
    Income taxes receivable                                                              -           24,556
    Deferred income taxes (Note 9)                                                  50,654                -
                                                                             -------------------------------
                                                                                 3,821,930        3,758,492
FIXED ASSETS, net (Note 2)                                                       1,935,419        2,059,860
INVESTMENT IN PARENT COMPANY (Note 3)                                                    -        4,022,415
                                                                             -------------------------------
                                                                             $   5,757,349    $   9,840,767
============================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
    Bank indebtedness (Note 4)                                               $     536,756    $           -
    Accounts payable                                                               981,368          833,600
    Accrued liabilities                                                          1,128,240          470,065
    Income taxes payable                                                            29,876           13,054
    Current portion of long-term debt (Note 5)                                     256,499                -
    Current portion of obligations under capital lease (Note 6)                     26,775           42,971
                                                                             -------------------------------
                                                                                 2,959,514        1,359,690

LONG-TERM DEBT (Note 5)                                                            766,445                -
OBLIGATIONS UNDER CAPITAL LEASE (Note 6)                                            63,111           93,283
DEFERRED INCOME TAXES (Note 9)                                                     410,446          643,678
                                                                             -------------------------------
                                                                                 4,199,516        2,096,651
                                                                             -------------------------------

CONTINGENCIES (Note 14)

STOCKHOLDERS' EQUITY
    Common stock (Note 7)                                                           25,900           25,940
    Additional paid-in capital                                                   7,763,229        7,782,039
    (Accumulated deficit) retained earnings                                     (3,128,066)         369,150
    Treasury stock                                                              (2,842,234)        (339,573)
    Accumulated other comprehensive loss
        - foreign currency translation adjustment                                 (260,996)         (93,440)
                                                                             -------------------------------
                                                                                 1,557,833        7,744,116
                                                                             -------------------------------
                                                                             $   5,757,349    $   9,840,767
============================================================================================================
</TABLE>

(a) Acquisition date (Note 13)

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


                                                                             F-4
<PAGE>

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

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                           CONSOLIDATED STATEMENTS OF OPERATIONS
                                                        (STATED IN U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                            PERIOD FROM       Eleven-month
                                                        JANUARY 1, 2001       period ended         Year ended
                                                         TO DECEMBER 20        December 31         January 31
                                                                2001(A)               2000               2000
-------------------------------------------------------------------------------------------------------------
<S>                                                     <C>                  <C>                   <C>
SALES (Note 11)                                            $  11,735,690     $  10,929,775      $  9,725,611
COST OF GOODS SOLD                                             8,565,896         7,913,371         6,845,307
                                                           --------------------------------------------------
GROSS PROFIT                                                   3,169,794         3,016,404         2,880,304
                                                           --------------------------------------------------
EXPENSES
    Research and development                                     468,501           488,576           425,990
    Selling and distribution                                   1,113,534           768,557           748,596
    General and administrative                                 1,003,740           922,750           811,608
                                                           --------------------------------------------------
                                                               2,585,775         2,179,883         1,986,194
                                                           --------------------------------------------------
INCOME FROM OPERATIONS                                           584,019           836,521           894,110
                                                           --------------------------------------------------
OTHER INCOME (EXPENSE)
    Interest income                                               45,594            34,066            83,573
    Interest expense                                             (53,378)          (20,968)          (22,463)
                                                           --------------------------------------------------
                                                                  (7,784)           13,098            61,110
                                                           --------------------------------------------------

INCOME BEFORE INCOME (LOSS) FROM EQUITY
    INVESTMENT AND INCOME TAX EXPENSE                            576,235           849,619           955,220
INCOME FROM EQUITY INVESTMENT (Note 3)                           211,420           392,356           253,719
LOSS ON WRITE-OFF OF EQUITY INVESTMENT (Note 3)               (4,233,835)                -                 -
                                                           --------------------------------------------------
(LOSS) INCOME BEFORE INCOME TAXES                             (3,446,180)        1,241,975         1,208,939
INCOME TAXES (Note 9)                                             69,886           556,206           396,607
                                                           --------------------------------------------------
NET (LOSS) INCOME FOR THE PERIOD                           $  (3,516,066)    $     685,769      $    812,332
=============================================================================================================
(LOSS) EARNINGS PER SHARE - BASIC AND DILUTED              $       (1.64)    $        0.30      $       0.36
=============================================================================================================
WEIGHTED AVERAGE SHARES OUTSTANDING                            2,150,024         2,306,905         2,229,522
=============================================================================================================
</TABLE>

(a) Acquisition date (Note 13)

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

                                                                             F-5
<PAGE>

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

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE (LOSS) INCOME
                                                        (STATED IN U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                                             (Accumulated                 Accumulated
                                                                 Additional      Deficit)                       Other          Total
                                                   Common Stock     Paid-in      Retained     Treasury  Comprehensive  Stockholders'
                                               Stock     Amount     Capital      Earnings        Stock  Income (Loss)         Equity
------------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>        <C>       <C>         <C>           <C>          <C>            <C>
Balance, February 1, 1999                   1,593,469  $ 15,935  $3,475,695  $  1,546,730  $  (339,573)  $  (117,957)     4,580,830
Net income                                          -         -           -       812,332            -             -        812,332
Stock issued (Note 7(g))                      403,820     4,038   1,439,574             -            -             -      1,443,612
Stock dividend (Note 7(f))                     49,441       494     271,432      (271,926)           -             -              -
Foreign currency translation adjustment             -         -           -             -            -        94,282         94,282
                                         -------------------------------------------------------------------------------------------
Balance, January 31, 2000                   2,046,730    20,467   5,186,701     2,087,136     (339,573)      (23,675)     6,931,056
Net income                                          -         -           -       685,769            -             -        685,769
Income from equity investment,
    net of income taxes (Note 3)                    -         -           -        32,340            -             -         32,340
Stock issued (Note 7(d))                       31,510       315     164,401             -            -             -        164,716
Stock dividend (Note 7(e))                    515,758     5,158   2,430,937    (2,436,095)           -             -              -
Foreign currency translation adjustment             -         -           -             -            -       (69,765)       (69,765)
                                         -------------------------------------------------------------------------------------------
Balance, December 31, 2000                  2,593,998    25,940   7,782,039       369,150     (339,573)      (93,440)     7,744,116
Net loss                                            -         -           -    (3,516,066)           -             -     (3,516,066)
Share redemption (Note 7(c))                        -         -           -             -   (2,500,000)            -     (2,500,000)
Stock repurchased (Note 7(b))                       -         -           -             -       (2,661)            -         (2,661)
Stock dividend reversal (Note 7(h))            (3,972)      (40)    (18,810)       18,850            -             -              -
Foreign currency translation adjustment             -         -           -             -            -      (167,556)      (167,556)
                                         -------------------------------------------------------------------------------------------
Balance, December 20, 2001
    (Acquisition date, Note 13)             2,590,026  $ 25,900  $7,763,229  $ (3,128,066) $(2,842,234)  $  (260,996)   $ 1,557,833
====================================================================================================================================

<CAPTION>
Comprehensive (loss) income consists of the following:
                                                                                           PERIOD FROM
                                                                                            JANUARY 1,  Eleven-month
                                                                                               2001 to  period ended     Year ended
                                                                                           DECEMBER 20   December 31     January 31
                                                                                                  2001          2000           2000
                                                                                           -----------------------------------------
<S>                                                                                        <C>           <C>            <C>
Net (loss) income                                                                          $(3,516,066)  $   685,769    $   812,332
Foreign currency translation adjustment                                                       (167,556)      (69,765)        94,282
                                                                                           -----------------------------------------
Comprehensive (loss) income                                                                $(3,683,622)  $   616,004    $   906,614
                                                                                           =========================================
</TABLE>

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

                                                                             F-6
<PAGE>

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

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                        (STATED IN U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                            PERIOD FROM    Eleven-month
                                                        JANUARY 1, 2001    period ended      Year ended
                                                         TO DECEMBER 20     December 31      January 31
                                                                2001(A)            2000            2000
-------------------------------------------------------------------------------------------------------
<S>                                                     <C>               <C>              <C>
CASH FLOWS FROM:
OPERATING ACTIVITIES
    Net (loss) income for the period                      $  (3,516,066)  $     685,769    $    812,332
    Adjustments to reconcile net (loss) income
      to cash provided by operating activities
        Depreciation                                            264,408         251,475         237,124
        Deferred income taxes                                  (283,886)        199,328          88,322
        Gain on sale of fixed assets                             (1,186)           (742)              -
        Loss on write-off of equity investment                4,233,835               -               -
        Non-cash compensation expense and
        investment services (Note 7(d))                               -         164,716          84,273
        Income from equity investment (Note 3)                 (211,420)       (392,356)       (253,719)
    (Increase) decrease in assets
        Accounts receivable, net                               (363,733)         44,730        (835,246)
        Inventories                                              84,046        (331,118)       (154,456)
        Prepaid expenses                                       (108,272)        104,507         (64,457)
    Increase (decrease) in liabilities
        Accounts payable                                        139,101           1,299         437,207
        Accrued liabilities                                     697,901          63,779               -
        Income taxes payable, net                                68,650        (123,993)         11,383
                                                          ---------------------------------------------

    Net cash provided by operating activities                 1,003,378         667,394         362,763
                                                          ---------------------------------------------

  FINANCING ACTIVITIES
    Redemption of shares                                     (2,502,661)              -               -
    Proceeds from long-term debt                              1,096,033               -               -
    Repayment of long-term debt                                 (40,937)              -               -
    Increase (decrease) in bank indebtedness                    553,628        (115,357)        115,070
    Repayment of obligations under capital lease                (39,595)        (52,984)        (57,849)
                                                          ---------------------------------------------

    Net cash (used in) provided by financing activities        (933,532)       (168,341)         57,221
                                                          ---------------------------------------------

  INVESTING ACTIVITIES
    Payment of note receivable                                        -               -         506,806
    Investment in Regency Affiliates, Inc.                            -               -      (1,968,000)
    Proceeds from sale of fixed assets                           12,498           9,983               -
    Purchase of fixed assets                                   (271,401)       (343,744)       (439,375)
                                                          ---------------------------------------------

    Net cash used in investing activities                      (258,903)       (333,761)     (1,900,569)
                                                          ---------------------------------------------
FOREIGN CURRENCY TRANSLATION ADJUSTMENT EFFECT
    ON CASH BALANCES                                            (54,885)         (9,567)         20,068
                                                          ---------------------------------------------
(DECREASE) INCREASE IN CASH AND EQUIVALENTS
    DURING THE PERIOD                                          (243,942)        155,725      (1,460,517)

CASH AND EQUIVALENTS, beginning of period                       805,743         650,018       2,110,535
                                                          ---------------------------------------------
CASH AND EQUIVALENTS, end of period                       $     561,801   $     805,743    $    650,018
=======================================================================================================
</TABLE>

(a) Acquisition date (Note 13)

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

                                                                             F-7
<PAGE>

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

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                                                        (STATED IN U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                             PERIOD FROM     Eleven-month
                                                         JANUARY 1, 2001     period ended         Year ended
                                                          TO DECEMBER 20      December 31         January 31
                                                                 2001(A)             2000               2000
------------------------------------------------------------------------------------------------------------

SUPPLEMENTAL INFORMATION:
<S>                                                      <C>                <C>               <C>
    Interest received                                       $     48,843    $      34,754     $      113,020

    Interest paid                                           $     57,297    $      20,079     $       22,458

    Income taxes paid                                       $    312,394    $     478,957     $      291,409

NON-CASH INVESTING AND FINANCING ACTIVITIES

    Increase in obligations under capital lease             $          -    $       5,683     $      129,875

    Common stock issued in exchange for
    common stock in parent (Note 3)                         $          -    $           -     $    1,359,340

    Common stock issued in exchange for
    compensation (Note 7(d)(iii and iv))                    $          -    $      54,007     $       18,413

    Common stock issued in exchange for
    investment services (Note 7(d)(i and ii))               $          -    $     110,709     $       65,860
============================================================================================================
</TABLE>

(a) Acquisition date (Note 13)

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

                                                                             F-8
<PAGE>

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

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DECEMBER 20, 2001
--------------------------------------------------------------------------------

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

BASIS OF PRESENTATION         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
                              have been eliminated.

                              These financial statements have been prepared in
                              accordance with accounting principles generally
                              accepted in the United States. As a result of a
                              purchase transaction that took place on December
                              21, 2001, to which reverse acquisition accounting
                              is applicable, these financial statements present
                              the financial position of the Company as at
                              December 20, 2001 and results of its operations
                              for the period from January 1, 2001 to December
                              20, 2001 (Note 13).

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

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

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

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

                                                                             F-9
<PAGE>

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

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DECEMBER 20, 2001
--------------------------------------------------------------------------------

LONG-TERM INVESTMENT          The Company's investment in its parent company was
                              accounted for using the equity method of
                              accounting. During 2001, the Company disposed of
                              all of its investment in its parent company.

PER SHARE INFORMATION         The Company has adopted Finanical Accounting
                              Standards Board ("FASB") Statement of Financial
                              Accounting Standards ("SFAS") No. 128, Earnings
                              Per Share ("EPS") which requires dual presentation
                              of basic EPS and diluted EPS on the face of all
                              income statements. Basic EPS is computed as net
                              income divided by the weighted average number of
                              shares of common stock outstanding during the
                              period. Diluted EPS reflects the potential
                              dilution that could occur if securities or other
                              contracts were exercised. For the Company, stock
                              options to purchase 180,000 shares (December 31,
                              2000 - 120,000, January 31, 2000 - 60,000) of the
                              Company's common stock were anti-dilutive.
                              Warrants outstanding at December 31, 2000 expired
                              in April 2001. Warrants to purchase 68,000 shares
                              at December 31, 2000 and January 31, 2000 were
                              also anti-dilutive. As such, dilutive EPS amounts
                              are the same as basic EPS for all periods
                              presented. EPS has been restated for stock
                              dividends. Treasury stock held by the Company
                              (Note 7(c)) is not included in the number of
                              shares outstanding, for earnings per share
                              purposes.

STOCK DIVIDENDS               The Company accounts for stock dividends in
                              accordance with Accounting Research Bulletin No.
                              43, which requires a transfer of an amount equal
                              to the fair value of the stock issued from
                              retained earnings to additional paid-in capital as
                              permanent capitalization. Where the fair value of
                              the stock dividend exceeds cumulative retained
                              earnings at measurement date, the balance is
                              accounted for as a distribution at par value of
                              the stock issued.

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

RESEARCH AND DEVELOPMENT      Research and development costs are expensed as
                              incurred.

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

                                                                            F-10
<PAGE>

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

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DECEMBER 20, 2001
--------------------------------------------------------------------------------

STOCK BASED COMPENSATION      The Company applies Accounting Principles Board
                              ("APB") Opinion No. 25, "Accounting for Stock
                              Issued to Employees", and related interpretations
                              in accounting for stock option plans. Under APB
                              Opinion No. 25, compensation cost is recognized
                              for stock options granted at prices below market
                              price of the underlying common stock on date of
                              grant.

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

                              Stock options granted to non-employees are
                              accounted for in accordance with SFAS No. 123.
                              There were no stock options granted to non-
                              employees during the periods covered by these
                              financial statements.

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

                              Transactions conducted in foreign currencies are
                              translated as follows:

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

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

                                                                            F-11
<PAGE>

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

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DECEMBER 20, 2001
--------------------------------------------------------------------------------

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

CONCENTRATION OF
    EXCHANGE RISK             As a Canadian manufacturer, the Company has a
                              significant volume of expense transactions
                              denominated in Canadian currency.

CONCENTRATION OF CREDIT RISK  As a manufacturer of automotive accessories, the
                              Company grants credit to customers exclusively
                              within the automotive manufacturing industry.

REVENUE RECOGNITION           The Company recognizes revenue on the sale of
                              products at the time the products are shipped to
                              its customers.

NEW ACCOUNTING
    PRONOUNCEMENTS            SFAS No. 133, "Accounting for Derivative
                              Instruments and Hedging Activities" is effective
                              for all fiscal quarters of fiscal years beginning
                              after June 15, 2000. 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, adoption of the
                              new standards on January 1, 2001 did not have any
                              effect on the Company's financial statements.

                                                                            F-12
<PAGE>

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

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DECEMBER 20, 2001
--------------------------------------------------------------------------------

NEW ACCOUNTING
    PRONOUNCEMENTS (CONTINUED)     In June 2001, SFAS No. 141 "Business
                                   Combinations" was issued. SFAS No. 141
                                   requires that all business combinations be
                                   accounted for using the purchase method and
                                   that one of two specified criteria be met in
                                   identifying intangible assets apart from
                                   goodwill. Additional disclosures are required
                                   in respect to the primary reasons for the
                                   business combination and the allocation of
                                   the purchase price paid to the assets
                                   acquired and liabilities assumed by major
                                   balance sheet caption. SFAS No. 141 applies
                                   to all business combinations initiated after
                                   June 30, 2001. The Company applied the
                                   provisions of SFAS No. 141 for the reverse
                                   acquisition that took place subsequent to
                                   December 20, 2001 (Note 13).

                                   In June 2001, SFAS No. 142 "Goodwill and
                                   Other Intangible Assets" was issued. Under
                                   the provisions of SFAS No. 142 goodwill and
                                   other intangible assets with an indefinite
                                   life are no longer amortized but will be
                                   tested at least annually for impairment. The
                                   statement provides a two step process for
                                   estimating fair value of the reporting units
                                   and measuring the amount of impairment, if
                                   any, of goodwill and other intangible assets.
                                   SFAS No. 142 is effective for fiscal years
                                   beginning after December 15, 2001.

                                   The Company does not expect SFAS No. 142 to
                                   have a material impact on its financial
                                   statements because it does not have any
                                   recorded goodwill or other intangible assets.

                                   In August 2001, SFAS No. 144 "Accounting for
                                   the Impairment or Disposal of Long-Lived
                                   Assets" was issued. This statement
                                   establishes a single model based upon SFAS
                                   No. 121 for accounting for the impairment or
                                   disposal of long-lived assets. It supersedes
                                   FASB Statement No. 121 and the reporting
                                   provisions of APB Opinion No. 30 for the
                                   disposal of a segment of a business and also
                                   amends certain provisions of Accounting
                                   Research Bulletin No. 51. SFAS No. 144 is
                                   effective for financial statements issued for
                                   fiscal years beginning after December 15,
                                   2001. Management believes that the adoption
                                   of SFAS No. 144 will have no material effect
                                   on the Company's financial statements.

                                                                            F-13
<PAGE>

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

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. Dollars)

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

1.    INVENTORIES

<TABLE>
<CAPTION>
                                                                               DECEMBER 20      December 31
                                                                                      2001             2000
                                                                           --------------------------------
<S>                                                                       <C>                 <C>
      Raw materials and supplies                                          $        735,131    $     775,929
      Work-in-process                                                              121,487          252,761
      Finished goods                                                               128,536          101,317
                                                                          ---------------------------------
                                                                          $        985,154    $   1,130,007
                                                                          =================================
</TABLE>

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

2.    FIXED ASSETS

<TABLE>
<CAPTION>
                                                       DECEMBER 20, 2001                 December 31, 2000
                                       --------------------------------------------------------------------
                                                             ACCUMULATED                        Accumulated
                                                   COST     DEPRECIATION              Cost     Depreciation
                                       --------------------------------------------------------------------
<S>                                    <C>                  <C>              <C>               <C>
      Office equipment                 $        286,354     $     93,992     $     272,506     $     77,647
      Manufacturing equipment                 1,428,323          651,739         1,429,835          618,216
      Computer equipment                        233,749          156,919           230,832          142,767
      Dies and molds                            986,411          471,366           942,786          402,798
      Automotive                                 17,589            1,319            16,251            1,219
      Leasehold improvements                    252,241          101,933           247,438           82,650
      Equipment under capital
         lease                                  275,156           67,136           292,273           46,764
                                       --------------------------------------------------------------------
      Total                            $      3,479,823     $  1,544,404     $   3,431,921     $  1,372,061
                                       ====================================================================
      Net book value                                        $  1,935,419                       $  2,059,860
                                                            ============                        ===========
</TABLE>

                                                                            F-14
<PAGE>

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

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

3.    INVESTMENT IN PARENT COMPANY

      During the year ended January 31, 2000, Regency Affiliates, Inc.
      ("Regency") acquired a 51% controlling interest in the Company. The
      Company disposed of its investment in Regency in 2001.

      On July 31, 1999, the Company exchanged 288,000 of its common stock for
      1,188,000 common stock of Regency. This exchange was valued at $1,045,440
      ($3.63 per share). On August 6, 1999, the Company acquired an additional
      2,852,375 common stock of Regency by exchanging 86,000 shares (valued at
      $313,900 or $3.65 per share) of its common stock and cash of $1,968,000.
      The values were determined based on share exchanges between independent
      parties. Total value of common stock exchanged on the above transactions
      was $1,359,340 (Note 7(h)(i)). As at August 6, 1999, the Company had
      acquired a 26% interest in Regency. At December 31, 2000 the interest in
      Regency was approximately 23.5%.

      The Company accounted for its investment in Regency as an asset using the
      equity method of accounting. The income from the Company's equity share of
      earnings of Regency net of amortization of goodwill of $5,500 (December
      31, 2000 - $10,100, January 31, 2000 - $5,500) for the period ended
      December 20, 2001 was $211,420 (December 31, 2000 -$441,356, January 31,
      2000 - $253,719). As the Company was only reported on an eleven-month
      period at December 31, 2000, its share of earnings was reduced by $49,000
      reflecting the Company's share of one month of earnings. This amount, net
      of deferred taxes of $16,660 has been credited directly to equity.
      Goodwill of $165,635 resulted from the acquisition and was being
      depreciated on a straight-line basis over a period of 15 years.
      Accumulated depreciation at December 31, 2000 was $15,600 (January 31,
      2000 - $5,500).

      The effect of the investment transaction and equity earnings are
      summarized as follows:

<TABLE>
<CAPTION>
                                                                               DECEMBER 20      December 31
                                                                                      2001             2000
                                                                          ---------------------------------
<S>                                                                       <C>                 <C>
      Equity in net assets of Regency Affiliates, Inc.                    $              -    $   3,161,705
      Goodwill                                                                           -          165,635
      Cumulative equity earnings, net of cumulative
         depreciation of goodwill of $15,600                                             -          695,075
                                                                          ---------------------------------
                                                                          $              -    $   4,022,415
                                                                          =================================
</TABLE>

                                                                            F-15
<PAGE>

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

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

3.    INVESTMENT IN PARENT COMPANY (continued)

      On October 1, 2001, the Company disposed of its investment in Regency as
      part of the consideration to reacquire the Company's common stock owned by
      Regency (see Note 7(c)). The carrying value of the investment prior to the
      transaction was $4,233,835. Included in the carrying value of the
      investment is equity income of $211,420 recognized in 2001. Upon return of
      the shares to Regency, the carrying value was written off.

      Summarized financial information of Regency is as follows:

<TABLE>
<CAPTION>
                                                                               DECEMBER 20       December 31
                                                                                      2001              2000
                                                                          ----------------------------------
<S>                                                                       <C>                <C>
      Consolidated Balance Sheet data ('000)

         Assets                                                           $              -   $        37,017
                                                                          ==================================
         Liabilities                                                                     -            20,941

         Stockholders' Equity                                                            -            16,076
                                                                          ----------------------------------
                                                                          $              -   $        37,017
                                                                          ==================================
      Consolidated Statement of Operations data ('000)

         Sales                                                            $              -   $        14,343
                                                                          ==================================
         Loss from operations                                                            -              (814)
                                                                          ==================================
         Net income                                                       $              -   $         2,155
                                                                          ==================================
</TABLE>

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

4.    BANK INDEBTEDNESS

<TABLE>
<CAPTION>
                                                                               DECEMBER 20      December 31
                                                                                      2001             2000
                                                                          ---------------------------------
<S>                                                                       <C>                 <C>
      Revolving bank loan                                                 $        169,462    $           -
      Cheques issued in excess of deposit                                          367,294                -
                                                                          ---------------------------------
                                                                          $        536,756    $           -
                                                                          =================================
</TABLE>

      The revolving bank loan is a Cdn. $2,000,000 overdraft facility, which is
      due on demand and bears interest at Canadian bank prime rate (4.0% -
      December 20, 2001; 6.5% - December 31, 2000) plus 1/2%. This line of
      credit is renewable annually in April of each year. At December 20, 2001,
      the Company had undrawn credit capacity under this facility of Cdn.
      $1,145,061 (U.S. $718,904).

                                                                            F-16
<PAGE>

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

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

4.    BANK INDEBTEDNESS (continued)

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

      (a)  general assignment of accounts receivable and inventories;

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

      (c)  an unlimited guarantee by the Company and its subsidiaries, Glas-Aire
           Industries Ltd. and Multicorp Holdings Inc.


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

5.    LONG-TERM DEBT

<TABLE>
<CAPTION>
                                                                                  DECEMBER 20       December 31
                                                                                         2001              2000
                                                                                  -----------------------------
<S>                                                                               <C>               <C>
      HSBC loan payable - interest at prime plus 1%, due
      September 28, 2005, monthly principal payments
      of $18,314 plus interest                                                    $   842,335       $         -

      HSBC loan payable - interest at prime plus 0.5%, due
      November 14, 2006, monthly principal payments
      of $3,061 plus interest                                                         180,609                 -
                                                                                  -----------------------------
                                                                                    1,022,944                 -

      Less current portion                                                            256,499                 -
                                                                                  -----------------------------
                                                                                  $   766,445       $         -
                                                                                  =============================
</TABLE>

      The Company has a Cdn. $1,000,000 equipment purchase facility and a Cdn.
      $1,400,000 acquisition facility. These facilities bear interest at
      Canadian bank prime rate plus1/2% to 1%. At December 20, 2001, the Company
      had undrawn credit capacity under these facilities of Cdn. $712,328 (U.S.
      $447,221) for equipment purchases and Cdn. $58,340 (U.S. $36,627) for
      acquisitions.

      The collateral provided for the HSBC loans payable is described in Note 4.

                                                                            F-17
<PAGE>

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

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

5.    LONG-TERM DEBT (continued)

      Principal payments required on long-term debt over the remaining terms of
      the debt are as follows:

                                   YEAR                               AMOUNT

                                   2002                     $        256,499
                                   2003                              256,499
                                   2004                              256,499
                                   2005                              219,776
                                   2006                               33,671
                                                            ----------------
                                                            $      1,022,944
                                                            ================

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

6.    OBLIGATIONS UNDER CAPITAL LEASE

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

                                   YEAR                               AMOUNT

                                   2002                          $    34,515
                                   2003                               34,329
                                   2004                               34,234
                                                                 -----------
      Total minimum lease payments                                   103,078
      Less amounts representing interest at 8.6%
         per annum                                                    13,192
                                                                 -----------
      Present value of minimum lease payments                         89,886
      Less current portion                                            26,775
                                                                 -----------
                                                                 $    63,111
                                                                 ===========

                                                                            F-18
<PAGE>

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

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

7.    COMMON STOCK

      (a)  Authorized

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

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

<TABLE>
<CAPTION>
                                                                               DECEMBER 20       December 31
           Issued                                                                     2001             2000
                                                                               -----------------------------
       <S>                                                                     <C>               <C>
                2,590,026  Common stock
       (December 31, 2000 - 2,593,998)                                         $    25,900       $   25,940
                                                                               ============================
</TABLE>


           On March 6, 2000, the Company amended its articles of incorporation
           to reflect an increase in its authorized share capital from 3,000,000
           shares of common stock at $0.01 par value to 30,000,000 shares of
           common stock at $0.01 par value and 1,000,000 shares of preferred
           stock at $0.01 par value.

      (b)  During the period ended December 20, 2001, the Company repurchased
           1,700 shares of common stock at prices between $1.51 and $1.85 per
           share, amounting to $2,661. These shares were acquired at fair market
           value and are accounted for as treasury stock until reissued or
           retired. The purchase of the stock reduced stockholders' equity.

      (c)  On October 1, 2001, the Company repurchased 1,215,105 shares of
           common stock with a fair market value (based on market price) of
           approximately $2,000,000, representing at that time, approximately
           50% of the issued and outstanding stock of the Company for $2,500,000
           cash plus 4,040,375 shares of stock of its parent company, Regency
           Affiliates, Inc. These shares have been ascribed a value of
           $2,500,000 reflecting a 25% premium to reacquire control and are
           accounted for as treasury stock until reissued or retired. The
           purchase of the stock reduced stockholders' equity.

           Shares of common stock held in treasury at December 20, 2001 totaled
           1,375,677 (December 31, 2000 - 158,872).


                                                                            F-19
<PAGE>

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

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

7.    COMMON STOCK (continued)

      (d)  The Company issued 31,510 shares of common stock during the year
           ended December 31, 2000 for services and compensation. The shares
           were valued at fair market value on the date of issuance and were
           charged to expense in the year incurred.


<TABLE>
<CAPTION>
                                                                                Additional
                                                          Common Stock             Paid-in
                                                        Stock     Amount           Capital             Total
                                                        ----------------------------------------------------
            <S>                                         <C>       <C>            <C>              <C>
           (i)   Stock issued to an investor
                 relations company in return
                 for services                            12,300   $   123        $   77,748       $   77,871

           (ii)  Stock issued to an investor
                 relations company in return
                 for services                             2,875        29        $   32,809           32,838

           (iii) Stock issued to certain
                 employees as part of their
                 compensation                             7,839        78        $   23,929           24,007

           (iv)  Stock issued to directors
                 as part of their compensation            8,496        85        $   29,915           30,000

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

                                                         31,510   $   315        $  164,401       $  164,716
                                                        ====================================================
</TABLE>

                                                                            F-20
<PAGE>

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

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)
--------------------------------------------------------------------------------

     7.   COMMON STOCK (continued)

          (e)  Pursuant to a stock dividend announced October 28, 1999 and
               subsequent revision March 6, 2000, the Company issued 515,758
               shares of common stock during the period ended December 31, 2000.
               The Company has accounted for the stock dividends in part by a
               transfer of $2,436,095 from retained earnings to additional paid-
               in capital.

<TABLE>
<CAPTION>
                                      Total                   Common                                                     Additional
                                    Common Stock               Stock                Total Common Stock      Paid-in        Retained
                                    Outstanding    %   Trading Price   Fair Value     Stock    Amount       Capital        Earnings
                                    ------------------------------------------------------------------------------------------------
               <S>                  <C>           <C>  <C>            <C>            <C>       <C>       <C>           <C>
               March 10, 2000       1,899,061     21.0      $ 10.880   $ 4,338,977   398,803   $ 3,988    $ 2,156,438  $ (2,160,426)

               June 12, 2000        2,306,360      2.5         4.438       255,891    57,659       577         93,468       (94,045)

               September 11, 2000   2,371,858      2.5         3.063       181,624    59,296       593        181,031      (181,624)
                                    ------------------------------------------------------------------------------------------------

                                                                                     515,758   $ 5,158    $ 2,430,937  $ (2,436,095)
                                                                                     ===============================================
</TABLE>

                                                                            F-21
<PAGE>

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

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

7.   COMMON STOCK (continued)

     (f)  On October 28, 1999, the Company announced a stock dividend to be
          issued in a series of 2.5% increments. The stock dividend was
          determined on a cumulative basis on the total outstanding common stock
          on the following dates of record: December 10, 1999, March 10, 2000,
          June 12, 2000 and September 11, 2000. On December 10, 1999, 49,441
          shares of common stock were issued representing 2.5% of 1,977,289
          common stock outstanding. On December 10, 1999, the common stock was
          trading at $5.50 for a total fair value of $271,926.

     (g)  The Company issued 403,820 shares of common stock during the year
          ended January 31, 2000. This total consists of the following:

<TABLE>
<CAPTION>
                                                                               Additional
                                                           Common Stock         Paid-in
                                                          Stock    Amount       Capital          Total
                                                      ----------------------------------------------------
          <S>                                         <C>                    <C>              <C>
          (i)      Stock issued in exchange for
                   stock in parent company on the
                   following dates (Note 3):

                      - July 31, 1999                    288,000  $  2,880   $  1,042,560     $  1,045,440
                      - August 6, 1999                    86,000       860        313,040          313,900
                                                      ----------------------------------------------------
                                                         374,000     3,740      1,355,600        1,359,340
          (ii)     Stock issued to certain
                   employees as part of their
                   compensation.                           9,820        98         18,314           18,412

          (iii)    Stock issued to an investor
                   relations company in return for
                   services.                              20,000       200         65,660           65,860
                                                      ----------------------------------------------------
                                                         403,820  $  4,038   $  1,439,574     $  1,443,612
                                                      ====================================================
</TABLE>

     (h)  During the eleven-month period ended December 31, 2000, shares were
          issued in error, pursuant to a stock dividend, on treasury stock
          outstanding. These shares were cancelled in 2001.

     (i)  At December 31, 2000 and January 31 2000, there were warrants
          outstanding to purchase 68,000 shares of the Company. These warrants
          expired in April 2001.

                                                                            F-22
<PAGE>

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

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

8.   STOCK OPTIONS

     INCENTIVE AND NON-QUALIFIED PLANS
     During the year ended January 31, 1997, the Company's Board of Directors
     approved an Incentive Stock Option Plan and a Non-Qualified Stock Option
     Plan. Each plan provides for granting options to purchase not more than
     160,000 shares of the Company's common stock. The Incentive Stock Option
     Plan is to be available to management and employees of the Company. The
     Non-Qualified Stock Option Plan is to be available to certain key
     employees, independent contractors, technical advisors and directors of the
     Company. Vesting for both plans will be determined at the date of grant.
     Upon granting, the options will have a five year life.

     DIRECTOR COMPENSATION
     On November 4, 1999, December 4, 2000, and December 4, 2001 the Company
     issued 60,000 common stock options at the exercise prices of $4.50, $2.75
     and $1 respectively to the directors in accordance with the director's
     compensation program approved by the stockholders. The 1999 options vested
     on May 4, 2000, the 2000 options vested on June 4, 2001 and the 2001 option
     vests on June 4, 2002, are exercisable until November 3, 2004, December 3,
     2005 and December 3, 2006 respectively.

     Under the accounting provisions of SFAS No. 123, pro forma information
     regarding Net Income and Earnings Per Share is required as if the Company
     had accounted for the stock options under the fair value method.

     The fair value of each grant is estimated at the date of grant using a
     Black-Scholes option pricing model.

     On November 4, 1999 the weighted average fair value of options granted was
     $4.04 using the following weighted average assumptions: no dividends, a
     risk-free interest rate of 5.64%, volatility factor of the expected market
     price of the Company's common stock of 216% and a weighted average expected
     life of the options of 36 months. The options vested on May 4, 2000 and
     expire on November 3, 2004.

     On December 4, 2000 the weighted average fair value of options granted was
     estimated to be $1.73 using the following weighted average assumptions: no
     dividends, a risk-free interest rate of 5.61%, volatility factor of the
     expected market price of the Company's common stock of 96% and weighted
     average expected life of the options of 36 months. The options vested on
     June 4, 2001 and expire on December 3, 2005.

     On December 4, 2001 the weighted average fair value of options granted was
     estimated to be $0.53 using the following weighted average assumptions: no
     dividends, a risk-free interest rate of 3.03%, volatility factor of the
     expected market price of the Company's common stock of 100% and weighted
     average expected life of the options of 24 months. The options vest on June
     4, 2002 and expire on December 3, 2006.

                                                                            F-23
<PAGE>

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

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

8.   STOCK OPTIONS (continued)

     Under SFAS No. 123, the Company's Net Income and Earnings Per Share would
     have decreased to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                          PERIOD FROM                   Eleven-month
                                         JANUARY 1 to                   period ended                                     Year ended
                                          DECEMBER 20                    December 31                                     January 31
                                                 2001                           2000                                           2000
                                          AS REPORTED      PRO FORMA     As reported      Pro forma      As reported      Pro forma
                                        -------------------------------------------------------------------------------------------
<S>                                     <C>             <C>            <C>             <C>             <C>             <C>
Net (loss) income for the period        $  (3,516,066)  $ (3,604,991)  $     685,769   $    545,769    $     812,332   $    629,447
(Loss) earnings per share -
  basic and diluted                             (1.64)         (1.67)           0.30           0.24    $        0.36   $       0.28

A summary of the status of the Company's stock options outstanding as of December 20, 2001 is as follows:

<CAPTION>

                                                                                                            Weighted
                                                                           Number of       Exercise          Average
                                                                             Options          Price       Fair Value
                                                                         -------------------------------------------
<S>                                                                      <C>           <C>             <C>
Granted - November 4, 1999                                                    60,000   $       4.50    $        4.04
Granted - December 4, 2000                                                    60,000   $       2.75    $        1.73
Granted - December 4, 2001                                                    60,000   $       1.00    $        0.53
                                                                         -------------------------------------------
                                                                             180,000
                                                                         ===========
</TABLE>

                                      F-24
<PAGE>

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

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

9.   INCOME TAXES

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

<TABLE>
<CAPTION>
                                                      PERIOD FROM    Eleven-month
                                                  JANUARY 1, 2001    period ended    Year ended
                                                   TO DECEMBER 20     December 31    January 31
                                                             2001            2000          2000
                                                  ---------------------------------------------
<S>                                               <C>              <C>             <C>
     Current                                      $       353,772  $      356,878  $    308,285
     Deferred (recovery)                                 (283,886)        199,328        88,322
                                                  ---------------------------------------------
                                                  $        69,886  $      556,206  $    396,607
                                                  =============================================
</TABLE>

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

<TABLE>
<CAPTION>
                                                            PERIOD FROM      Eleven-month
                                                        JANUARY 1, 2001      period ended        Year ended
                                                         TO DECEMBER 20       December 31        January 31
                                                                   2001              2000              2000
                                                        --------------------------------------------------
<S>                                                    <C>                   <C>                <C>
     Federal tax at the U.S. federal statutory rate     $    (1,171,701)      $   422,271       $  411,039
     Federal tax of income taxed at a lower rate                (14,250)           (9,996)          (2,378)
     Canadian income taxes at a higher rate                      58,944            45,246           43,188
     Permanent differences for non-deductible
        expenses                                                 69,334             9,683            2,715
     Over (under) accruals                                       (3,737)           89,002          (57,957)
     Increase in valuation allowance                          1,131,296                 -                -
                                                        --------------------------------------------------
                                                        $        69,886       $   556,206       $  396,607
                                                        ==================================================
</TABLE>

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

                                                                            F-25
<PAGE>

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

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

9.   INCOME TAXES (continued)


     The components of deferred taxes are as follows:

<TABLE>
<CAPTION>
                                                            DECEMBER 20                        December 31
                                                                   2001                               2000
                                      --------------------------------------------------------------------
                                                              TEMPORARY                          Temporary
                                            DIFFERENCE       TAX EFFECT        Difference       Tax Effect
                                      --------------------------------------------------------------------
<S>                                   <C>                 <C>               <C>               <C>
     Deferred tax assets
        Accrued liabilities           $        148,982    $      50,654     $           -     $          -
        Stock compensation                     189,528           64,440           189,528           64,440
        Capital loss carry forward           3,327,340        1,131,296                 -                -
                                      --------------------------------------------------------------------
                                             3,665,850        1,246,390           189,528           64,440
        Valuation allowance                 (3,327,340)      (1,131,296)                -                -
                                      --------------------------------------------------------------------

                                               338,510          115,094           189,528           64,440
                                      --------------------------------------------------------------------
     Deferred tax liabilities
        Fixed Assets                         1,227,096          474,886         1,207,950          466,488
        Investment in Parent
         Company - equity
         earnings                                    -                -           710,675          241,630
                                      --------------------------------------------------------------------

                                      $      1,227,096    $     474,886     $   1,918,625     $    708,118
                                      --------------------------------------------------------------------
     Net deferred tax liability                           $     359,792                       $    643,678
                                                          =============                       ============
</TABLE>

                                                                            F-25
<PAGE>

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

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

10.  COMMITMENTS

     The Company is committed to minimum lease payments of $110,155 for each of
     the next three years with a five year renewal option, under an operating
     lease for its current premises. Rent expense was $177,284 for the period
     from January 1, 2001 to December 20, 2001, $165,393 for the eleven-month
     period ended December 31, 2000 and $113,514 for the year ended January 31,
     2000. The Company is in the process of subletting its current premises in
     order to occupy its new premises.

     The Company has entered into an operating lease agreement for new premises
     commencing May 1, 2002 for a term of seven years with a five year renewal
     option. The landlord has provided the first three months of the lease rent
     free. The company is committed to the following minimum lease payments plus
     proportionate common costs:

                                   YEAR                          AMOUNT

                                   2002                     $     73,774
                                   2003                          177,057
                                   2004                          182,678
                                   2005                          185,488
                                   2006                          185,488
                             Thereafter                          449,668
                                                            ------------
                                                            $  1,254,153
                                                            ============

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

11.  SALES INFORMATION ('000)

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

<TABLE>
<CAPTION>
                                                             PERIOD FROM    Eleven-month
                                                         JANUARY 1, 2001    period ended     Year ended
                                                          TO DECEMBER 20     December 31     January 31
                                                                    2001            2000           2000
                                                         ----------------------------------------------
<S>                                                      <C>                <C>              <C>
           United States                                 $        10,229      $    9,217      $   8,207
           Canada                                                  1,106           1,364          1,231
           Japan and other                                           401             349            287
                                                         ----------------------------------------------
                                                         $        11,736      $   10,930      $   9,725
                                                         ==============================================
</TABLE>

                                                                            F-27
<PAGE>

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

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

11.  SALES INFORMATION ('000) (continued)

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

<TABLE>
<CAPTION>
                                                            PERIOD FROM    Eleven-month
                                                        JANUARY 1, 2001    period ended     Year ended
                                                         TO DECEMBER 20     December 31     January 31
                                                                   2001            2000           2000
                                                        ----------------------------------------------
<S>                                                     <C>                <C>              <C>
          Customer 1                                    $         2,924    $      3,718      $   2,930
          Customer 2                                              2,431           1,607          1,640
          Customer 3                                              2,647           3,215          2,853
          Customer 4                                                  -               -            994
                                                        ----------------------------------------------
                                                        $         8,002    $      8,540      $   8,417
                                                        ==============================================
</TABLE>

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

<TABLE>
<CAPTION>
                                                            PERIOD FROM      Eleven-month
                                                        JANUARY 1, 2001      period ended       Year ended
                                                         TO DECEMBER 20       December 31       January 31
                                                                   2001             2000              2000
                                                        --------------------------------------------------
<S>                                                     <C>                  <C>                <C>
          Sunroof wind deflectors                       $         6,411       $     6,558        $   5,446
          Hood protectors                                         3,894             3,388            3,112
          Rear air deflectors                                     1,431               984            1,167
                                                        --------------------------------------------------
                                                        $        11,736       $    10,930        $   9,725
                                                        ==================================================
</TABLE>

                                                                            F-28
<PAGE>

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

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

12.  RELATED PARTY TRANSACTIONS

     The Company had the following transactions with related parties that were
     not disclosed elsewhere in these financial statements:

<TABLE>
<CAPTION>
                                                            PERIOD FROM      Eleven month
                                                        JANUARY 1, 2001      period ended       Year ended
                                                         TO DECEMBER 20       December 31       January 31
                                                                   2001              2000             2000
                                                        --------------------------------------------------
<S>                                                     <C>                  <C>               <C>
     Fees paid to directors/stockholders for
        ongoing consulting services                     $        57,500      $     52,500       $   15,000
</TABLE>

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

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

13.  ACQUISITION OF WONDER TOOL INC.

     Effective December 21, 2001, the Company closed a Merger Purchase Agreement
     to acquire all of the issued and outstanding shares of Wonder Tool Inc.
     ("WTI"), in exchange for 1,250,000 shares of the Company's common stock.
     WTI manufactures and distributes a twin-head orbital polisher, known as the
     Wonder Tool, for the automotive and aircraft industry. The transaction was
     accounted for using accounting principles applicable to reverse
     acquisitions. Under reverse acquisition accounting, even though the Company
     is the legal acquirer, WTI is considered the acquirer for accounting
     purposes. Following reverse acquisition accounting, financial statements
     subsequent to the closing date are presented as a continuation of WTI.
     These financial statements present the financial position and results of
     operation of the Company to the date of acquisition, as the predecessor
     corporation, as it will continue to be the main operating entity.

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

14.  CONTINGENCIES

     Following his termination for cause from his position as President of the
     Company on September 12, 2001, the Company's former president filed a Writ
     of Summons on September 13, 2001 in the Supreme Court of British Columbia.
     The former president asserted among other things that the repurchase of
     company shares involved a breach of agreements with HSBC Bank of Canada,
     securities and corporate laws. The former president has not filed a
     Statement of Claim. The Company intends to vigorously contest the writ and
     believes that it is without merit. In the opinion of management, the
     outcome of this case is not determinable. Should any loss result from the
     resolution of this writ, such loss will be charged to operations in the
     year of resolution.

                                                                            F-29
<PAGE>

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

                           GLAS-AIRE INDUSTRIES GROUP LTD. (PREDECESSOR COMPANY)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

15.  PROFIT SHARING PROGRAM

     In 1994, the Company adopted a profit sharing program which provides that
     10% of the Company's income before income taxes and provision for profit
     sharing may be distributed to officers and employees of the Company. Profit
     sharing expenses were $117,209 for the period from January 1, 2001 through
     December 20, 2001, $112,011 for the eleven-month period ended December 31,
     2000 and $106,684 for the year ended January 31, 2000.

                                                                            F-30
<PAGE>

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.

                                               CONSOLIDATED FINANCIAL STATEMENTS

                      FOR THE PERIOD FROM DECEMBER 21, 2001 TO DECEMBER 31, 2001
                                                        (STATED IN U.S. DOLLARS)



                                                                        CONTENTS
--------------------------------------------------------------------------------

INDEPENDENT AUDITORS' REPORT                                                F-32

INDEPENDENT AUDITORS' REPORT                                                F-33

INDEPENDENT AUDITORS' REPORT                                                F-34

CONSOLIDATED FINANCIAL STATEMENTS

    Balance Sheets                                                          F-35

    Statements of Operations                                                F-36

    Statements of Stockholders' Equity and Comprehensive Loss               F-37

    Statements of Cash Flows                                                F-38

    Summary of Significant Accounting Policies                              F-40

    Notes to Financial Statements                                           F-46
<PAGE>

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

                                                    INDEPENDENT AUDITORS' REPORT

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


TO THE DIRECTORS AND STOCKHOLDERS OF
GLAS-AIRE INDUSTRIES GROUP LTD.

We have audited the accompanying consolidated balance sheet of Glas-Aire
Industries Group Ltd. as at December 31, 2001 and the related consolidated
statements of operations, stockholders' equity and comprehensive loss and cash
flows for the period from December 21, 2001 to December 31, 2001. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, these consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Glas-Aire
Industries Group Ltd. as at December 31, 2001 and the results of its operations
and its cash flows for the period from December 21, 2001 to December 31, 2001 in
conformity with U.S. generally accepted accounting principles.

/s/ BDO Dunwoody LLP

Chartered Accountants

Langley, Canada
March 21, 2002

                                                                           F-32
<PAGE>


                            Zarlengo Wilkins & Co.
                          A Professional Corporation



                         INDEPENDENT AUDITOR'S REPORT



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

We have audited the accompanying balance sheet of Orbital Polisher Operation (A
division of Cyclo Manufacturing Company, and S corporation) as of December 20,
2001 and the related statements of operations and divisional net assets, and
cash flows for the eleven and half months then ended. 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

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


/s/ Zarlengo Wilkins and Co., P.C.

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

                                                                            F-33

<PAGE>

                            Zarlengo Wilkins & Co.
                          A Professional Corporation



                         INDEPENDENT AUDITOR'S REPORT



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

We have audited the accompanying balance sheet of Orbital Polisher Operation (A
division of Cyclo Manufacturing Company, and S corporation) as of December 31,
2000 and the related statements of operations and divisional net assets, and
cash flows for the year then ended. 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Orbital Polisher Operation (A
division of Cyclo Manufacturing Company, an S Corporation) as of December 31,
2000, and the results of its operations and its cash flows for the year then
ended in conformity with accounting principles generally accepted in the United
States of America.


/s/ Zarlengo Wilkins and Co., P.C.

Zarlengo Wilkins and CO., P.C.
Wheat Ridge, Colorado


February 18, 2002

                                                                            F-34

<PAGE>

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

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                                     CONSOLIDATED BALANCE SHEETS
                                                        (STATED IN U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                                               DECEMBER 31       December 20
                                                                                      2001            2001(a)
------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>               <C>
ASSETS
CURRENT
    Cash and equivalents                                                      $    465,193      $          -
    Accounts receivable, net of allowance for doubtful accounts
        of $21,588 (Note 4)                                                      1,836,077            61,004
    Inventories (Notes 2 and 4)                                                  1,209,058           223,904
    Prepaid expenses                                                               142,261                 -
    Deferred income taxes (Note 9)                                                  50,654                 -
                                                                              ------------------------------
                                                                                 3,703,243           284,908
FIXED ASSETS, net (Note 3)                                                       1,285,060                 -
ADVANCE TO HEAD OFFICE                                                                   -           579,714
GOODWILL                                                                                 -               100
                                                                              ------------------------------
                                                                              $  4,988,303      $    864,722
============================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
    Bank indebtedness (Note 4)                                                $    409,316      $          -
    Accounts payable                                                               776,584            57,784
    Accrued liabilities                                                          1,205,859                 -
    Income taxes payable                                                               416                 -
    Current portion of long-term debt (Note 5)                                     256,499                 -
    Current portion of obligations under capital lease (Note 6)                     26,775                 -
                                                                              ------------------------------
                                                                                 2,675,449            57,784

LONG-TERM DEBT (Note 5)                                                            748,131                 -
OBLIGATIONS UNDER CAPITAL LEASE (Note 6)                                            63,111                 -
DEFERRED INCOME TAXES (Note 9)                                                     133,591                 -
                                                                              ------------------------------
                                                                                 3,620,282            57,784
                                                                              ------------------------------
CONTINGENCIES (Note 12)

STOCKHOLDERS' EQUITY
    Common stock (Note 7)                                                           24,643                 -
    Additional paid-in capital                                                   1,389,343                 -
    Accumulated deficit                                                            (48,010)                -
    Divisional equity                                                                    -           806,938
    Accumulated other comprehensive income
        - foreign currency translation adjustment                                    2,045                 -
                                                                              ------------------------------
                                                                                 1,368,021           806,938
                                                                              ------------------------------
                                                                              $  4,988,303      $    864,722
============================================================================================================
</TABLE>

(a)  Represents the financial position of the Wonder Tool Inc. predecessor
Orbital Polishing Operations at the acquisition date (Note 1).

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

                                                                            F-35
<PAGE>

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

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                           CONSOLIDATED STATEMENTS OF OPERATIONS
                                                        (STATED IN U.S. DOLLARS)


<TABLE>
<CAPTION>
                                                             PERIOD FROM       Period from
                                                       DECEMBER 21, 2001   January 1, 2001        Year ended
                                                          TO DECEMBER 31    to December 20       December 31
                                                                  2001(B)           2001(a)           2000(a)
------------------------------------------------------------------------------------------------------------
<S>                                                    <C>                 <C>                  <C>
SALES (Note 11)                                            $      53,774      $    822,386      $    947,234
COST OF GOODS SOLD                                                46,440           593,588           587,721
                                                           -------------------------------------------------
GROSS PROFIT                                                       7,334           228,798           359,513
                                                           -------------------------------------------------
EXPENSES
    Research and development                                      12,694                 -                 -
    Selling and distribution                                         594             8,085            11,198
    General and administrative                                    70,070            42,051            42,682
                                                           -------------------------------------------------
                                                                  83,358            50,136            53,880
                                                           -------------------------------------------------
(LOSS) INCOME FROM OPERATIONS                                    (76,024)          178,662           305,633
                                                           -------------------------------------------------
OTHER INCOME (EXPENSE)
    Interest income                                                2,722                 -                 -
    Interest expense                                              (4,168)                -                 -
                                                           -------------------------------------------------
                                                                  (1,446)                -                 -
                                                           -------------------------------------------------

(LOSS) INCOME BEFORE INCOME TAXES                                (77,470)          178,662           305,633

INCOME TAX RECOVERY - CURRENT (Note 9)                           (29,460)                -                 -
                                                           -------------------------------------------------
NET (LOSS) INCOME                                                (48,010)          178,662           305,633

PRO FORMA INCOME TAXES (unaudited)                                     -            60,745           103,915
                                                           -------------------------------------------------
PRO FORMA NET (LOSS) INCOME FOR THE PERIOD(c)              $     (48,010)     $    117,917      $    201,718
============================================================================================================
(LOSS) EARNINGS PER SHARE - BASIC AND DILUTED(c)           $       (0.02)     $       0.09      $       0.16
============================================================================================================
WEIGHTED AVERAGE SHARES OUTSTANDING                            2,464,349         1,250,000         1,250,000
============================================================================================================
</TABLE>

(a)  Represents the results of operations of the Wonder Tool Inc. predecessor
     Orbital Polishing Operations (Note 1).
(b)  Represents the results of operations of Wonder Tool Inc. and Glas-Aire
     Industries Group Ltd. for the period December 21, 2001 (date of
     acquisition) to December 31, 2001 (Note 1).
(c)  The net (loss) income and (loss) earnings per share are unaudited for all
     periods except for the period from December 21, 2001 (date of acquisition)
     to December 31, 2001, and are on a pro forma basis.

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

                                                                            F-36
<PAGE>

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

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE LOSS
                                                        (STATED IN U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                                                                       Accumulated
                                                                      Additional                             Other            Total
                                              Common       Stock         Paid-in      Accumulated    Comprehensive    Stockholders'
                                               Stock      Amount         Capital          Deficit           Income        Equity(a)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>            <C>           <C>            <C>             <C>              <C>
Inception of Wonder Tool Inc. at
December 21, 2001                              1,000    $  223,904   $         -     $          -    $           -    $     223,904
Recapitalization of Wonder Tool Inc.       1,249,000      (211,404)      211,404                -                -                -
Adjustment for reverse acquisition
Glas-aire Industries Group Ltd.            1,214,349        12,143     1,177,939                -                -        1,190,082
Net loss                                           -             -                        (48,010)               -          (48,010)
Foreign currency translation adjustment            -             -             -                -            2,045            2,045
                                         ------------------------------------------------------------------------------------------
Balance, December 31, 2001                 2,464,349    $   24,643   $ 1,389,343     $    (48,010)   $       2,045    $   1,368,021
===================================================================================================================================
Comprehensive loss consists of the following:
                                                                                                                               2001
                                                                                                                      -------------
Net loss                                                                                                              $     (48,010)
Foreign currency translation adjustment                                                                                       2,045
                                                                                                                      -------------
Comprehensive loss                                                                                                    $     (45,965)
                                                                                                                      =============
</TABLE>

(a)  The divisional equity for 2000 and 2001 increased by the amount of net
     income recorded and there were no distrubutions of divisional equity.

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

                                                                            F-37
<PAGE>

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

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                        (STATED IN U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                            PERIOD FROM        Period from
                                                      DECEMBER 21, 2001    January 1, 2001        Year ended
                                                         TO DECEMBER 31     to December 20       December 31
                                                                2001(B)            2001(a)           2000(a)
------------------------------------------------------------------------------------------------------------
<S>                                                     <C>                  <C>                <C>
CASH FLOWS FROM:
OPERATING ACTIVITIES
    Net (loss) income for the period                         $   (48,010)    $     178,662     $    305,633
    Adjustment to reconcile net (loss) income
      to net cash provided by operating activities
        Depreciation                                               6,014                 -                -
    Decrease in assets
        Accounts receivable, net                                 247,726            57,497           22,974
        Inventories                                                    -            30,461           26,768
        Prepaid expenses                                           6,723                 -                -
    Increase (decrease) in liabilites
        Accounts payable                                        (211,738)           (7,105)          22,321
        Accrued liabilities                                       79,726                 -                -
        Income taxes payable, net                                (29,460)                -                -
                                                             -----------------------------------------------
    Net cash provided by operating activities                     50,981           259,515          377,696
                                                             -----------------------------------------------

FINANCING ACTIVITIES
    Advance to head office                                             -          (259,515)        (377,696)
    Repayment of long-term debt                                  (18,889)                -                -
    Decrease in bank indebtedness                               (131,447)                -                -
                                                             -----------------------------------------------
    Net cash used in financing activities                       (150,336)         (259,515)        (377,696)
                                                             -----------------------------------------------

INVESTING ACTIVITIES
    Cash acquired on reverse acquisition                         561,801                 -                -
                                                             -----------------------------------------------
FOREIGN CURRENCY TRANSLATION ADJUSTMENT EFFECT ON
    CASH BALANCES                                                  2,747                 -                -
                                                             -----------------------------------------------
INCREASE IN CASH AND EQUIVALENTS DURING THE PERIOD               465,193                 -                -

CASH AND EQUIVALENTS, beginning of period                              -                 -                -
                                                             -----------------------------------------------
CASH AND EQUIVALENTS, end of period                          $   465,193     $           -    $           -
============================================================================================================
</TABLE>

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

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

                                                                            F-38
<PAGE>

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

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                                                        (STATED IN U.S. DOLLARS)


<TABLE>
<CAPTION>
                                                            PERIOD FROM        Period from
                                                      DECEMBER 21, 2001    January 1, 2001        Year ended
                                                         TO DECEMBER 31     to December 20       December 31
                                                                2001(B)            2001(a)           2000(a)
------------------------------------------------------------------------------------------------------------
<S>                                                    <C>                 <C>                  <C>
SUPPLEMENTAL INFORMATION:

    Interest received                                    $        2,722      $           -       $         -

    Interest paid                                        $        4,168      $           -       $         -

NON-CASH INVESTING AND FINANCING ACTIVITY:

    Net assets of Glas-Aire Industries
    Group Ltd. on reverse acquisition (Note 1)           $    1,190,082      $           -       $         -
============================================================================================================
</TABLE>

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

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

                                                                            F-39
<PAGE>

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

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DECEMBER 31, 2001
--------------------------------------------------------------------------------

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

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

                                   The Company acquired 100% of the voting stock
                                   of WTI on December 21, 2001. WTI was
                                   previously owned by Cyclo Manufacturing
                                   Company ("Cyclo"). Just prior to the
                                   acquisition, Cyclo had transferred certain
                                   assets of its Orbital Polishing Operations
                                   division ("Orbital") into WTI and
                                   concurrently sold its shares of WTI to the
                                   Company. The assets transferred included
                                   inventory, fixed assets, patents and
                                   trademarks. The assets were recorded by WTI
                                   on a carry over basis because of common
                                   control. The only asset with any carry over
                                   value was inventory valued at $223,904. The
                                   amounts receivable from head office, trade
                                   accounts receivable and goodwill were not
                                   included as part of this transaction. Upon
                                   consummation of this transaction the former
                                   stockholders of WTI obtained 50.7% voting
                                   rights of the Company. Although the Company
                                   is the legal acquirer, the transaction has
                                   been accounted for as a reverse acquisition
                                   and WTI is considered the acquirer for
                                   accounting purposes. Accordingly, the
                                   financial statements for the Company for the
                                   periods prior to the acquisition are those of
                                   WTI (and its predecessor Orbital). As WTI and
                                   its predecessor Orbital were taxed under the
                                   provisions of Subchapter S of the Internal
                                   Revenue Code, no income taxes were payable.
                                   For purposes of the comparative statement of
                                   operations income taxes have been provided on
                                   a pro forma basis at 34%. All inter-company
                                   transactions and accounts have been
                                   eliminated.

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

                                                                            F-40
<PAGE>

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

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DECEMBER 31, 2001
--------------------------------------------------------------------------------

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

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

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

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

PER SHARE INFORMATION              The Company has adopted Financial Accounting
                                   Standards Board ("FASB") Statement of
                                   Financial Accounting Standards ("SFAS") No.
                                   128, Earnings Per Share ("EPS") which
                                   requires dual presentation of basic EPS and
                                   diluted EPS on the face of all income
                                   statements. Basic EPS is computed as net
                                   income divided by the weighted average number
                                   of shares of common stock outstanding during
                                   the period. Diluted EPS reflects the
                                   potential dilution that could occur if
                                   securities or other contracts were exercised.
                                   For the Company, stock options to purchase
                                   180,000 shares of the Company's common stock
                                   were anti-dilutive during the period ended
                                   December 31, 2001. Treasury stock held by the
                                   Company (Note 7) is not included in the
                                   number of shares outstanding, for earnings
                                   per share purposes.

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

RESEARCH AND DEVELOPMENT           Research and development costs are expensed
                                   as incurred.

                                                                            F-41
<PAGE>

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

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DECEMBER 31, 2001
--------------------------------------------------------------------------------

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

STOCK BASED COMPENSATION               The Company applies Accounting Principles
                                       Board ("APB") Opinion No. 25, "Accounting
                                       for Stock Issued to Employees", and
                                       related interpretations in accounting for
                                       stock option plans. Under APB Opinion No.
                                       25, compensation cost is recognized for
                                       stock options granted at prices below
                                       market price of the underlying common
                                       stock on date of grant.

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

                                       Stock options granted to non-employees
                                       are accounted for in accordance with SFAS
                                       No. 123. There were no stock options
                                       granted to non-employees during the
                                       periods covered by these financial
                                       statements.

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

                                       Transactions conducted in foreign
                                       currencies are translated as follows:

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

                                                                            F-42
<PAGE>

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

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DECEMBER 31, 2001
--------------------------------------------------------------------------------

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

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

CONCENTRATION OF
    EXCHANGE RISK                      As a Canadian manufacturer, the Company
                                       has a significant volume of expense
                                       transactions denominated in Canadian
                                       currency.

CONCENTRATION OF CREDIT RISK           As a manufacturer of automotive
                                       accessories, the Company grants credit to
                                       customers exclusively within the
                                       automotive manufacturing industry.

REVENUE RECOGNITION                    The Company recognizes revenue on the
                                       sale of products at the time the products
                                       are shipped to its customers.

                                                                            F-43
<PAGE>

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

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DECEMBER 31, 2001
--------------------------------------------------------------------------------

NEW ACCOUNTING
    PRONOUNCEMENTS                     SFAS No. 133, "Accounting for Derivative
                                       Instruments and Hedging Activities" is
                                       effective for all fiscal quarters of
                                       fiscal years beginning after June 15,
                                       2000. 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,
                                       adoption of the new standards on January
                                       1, 2001 did not have any effect on the
                                       Company's financial statements.

                                       In June 2001, SFAS No. 141 "Business
                                       Combinations" was issued. SFAS No. 141
                                       requires that all business combinations
                                       be accounted for using the purchase
                                       method and that one of two specified
                                       criteria be met in identifying intangible
                                       assets apart from goodwill. Additional
                                       disclosures are required in respect to
                                       the primary reasons for the business
                                       combination and the allocation of the
                                       purchase price paid to the assets
                                       acquired and liabilities assumed by major
                                       balance sheet caption. SFAS No. 141
                                       applies to all business combinations
                                       initiated after June 30, 2001. The
                                       Company applied the provisions of SFAS
                                       No. 141 for the reverse acquisition that
                                       took place on December 21, 2001 (Note 1).

                                       In June 2001, SFAS No. 142 "Goodwill and
                                       Other Intangible Assets" was issued.
                                       Under the provisions of SFAS No. 142
                                       goodwill and other intangible assets with
                                       an indefinite life are no longer
                                       amortized but will be tested at least
                                       annually for impairment. The statement
                                       provides a two step process for
                                       estimating fair value of the reporting
                                       units and measuring the amount of
                                       impairment, if any, of goodwill and other
                                       intangible assets. SFAS No. 142 is
                                       effective for fiscal years beginning
                                       after December 15, 2001.

                                       The Company does not expect SFAS No. 142
                                       to have a material impact on its
                                       financial statements because it does not
                                       have any recorded goodwill or other
                                       intangible assets.

                                                                            F-44
<PAGE>

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

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DECEMBER 31, 2001
--------------------------------------------------------------------------------

NEW ACCOUNTING
    PRONOUNCEMENTS (CONTINUED)         In August 2001, SFAS No. 144 "Accounting
                                       for the Impairment or Disposal of Long-
                                       Lived Assets" was issued. This statement
                                       establishes a single model based upon
                                       SFAS No. 121 for accounting for the
                                       impairment or disposal of long-lived
                                       assets. It supersedes FASB Statement No.
                                       121 and the reporting provisions of APB
                                       Opinion No. 30 for the disposal of a
                                       segment of a business and also amends
                                       certain provisions of Accounting Research
                                       Bulletin No. 51. SFAS No. 144 is
                                       effective for financial statements issued
                                       for fiscal years beginning after December
                                       15, 2001. Management believes that the
                                       adoption of SFAS No. 144 will have no
                                       material effect on the Company's
                                       financial statements.

                                                                            F-45
<PAGE>

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

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

--------------------------------------------------------------------------------
1.    REVERSE ACQUISITION

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


           Current assets                                       $  3,771,276
           Fixed assets                                            1,935,419
                                                                ------------
           Total assets                                            5,706,695
           Liabilities assumed                                    (3,789,070)
                                                                ------------
           Net assets acquired                                     1,917,625

           Excess of net assets acquired over
           consideration paid                                       (727,543)
                                                                ------------
           Consideration paid                                   $  1,190,082
                                                                ============


           Fair value of fixed assets                           $  1,935,419

           Less: "Negative goodwill", net of
                 addition to net assets              727,543
                                                     (82,937)        644,606
                                                    --------    ------------
           Net value assigned to fixed assets                      1,290,813
                                                                ============

                                                                            F-46
<PAGE>

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

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

1.    REVERSE ACQUISITION (continued)

      Unaudited pro forma information assuming the transaction had been
      completed on January 1, 2000 is as follows:

<TABLE>
<CAPTION>
                                                                               Period from
                                                                           January 1, 2001         Year ended
                                                                            to December 20        December 31
                                                                                      2001               2000
                                                                          -----------------------------------
      <S>                                                                 <C>                   <C>
      Sales                                                               $     12,558,076      $  12,867,009

      Net (loss) income for the period                                    $     (3,355,605)     $     997,031

      (Loss) earnings per share                                           $          (0.98)     $        0.28

      (a) Includes a loss on write-off of equity investment of $4,233,835
</TABLE>

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

2.    INVENTORIES
                                                  DECEMBER 31        December 20
                                                         2001               2001
                                             -----------------------------------
      Raw materials and supplies             $        936,195      $     201,064
      Work-in-process                                 121,487                  -
      Finished goods                                  151,376             22,840
                                             -----------------------------------
                                             $      1,209,058      $     223,904
                                             ===================================

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

3.    FIXED ASSETS

<TABLE>
<CAPTION>
                                                       DECEMBER 31, 2001                   December 20, 2001
                                       ---------------------------------------------------------------------

                                                             ACCUMULATED                         Accumulated
                                                   COST     DEPRECIATION              Cost      Depreciation
                                       ---------------------------------------------------------------------
      <S>                              <C>               <C>              <C>               <C>
      Office equipment                 $        192,362  $           579  $              -  $              -
      Manufacturing equipment                   131,978              397            53,091            53,091
      Computer equipment                         76,830              347                 -                 -
      Dies and molds                            515,045            1,552            39,790            39,790
      Automotive                                 16,270            1,967                 -                 -
      Leasehold improvements                    150,308              548                 -                 -
      Equipment under capital
         lease                                  208,020              363                 -                 -
                                       ---------------------------------------------------------------------

      Total                            $      1,290,813  $         5,753  $         92,881  $         92,881
                                       =====================================================================

      Net book value                                     $     1,285,060                    $              -
                                                         ===============                    ================
</TABLE>

                                                                            F-47
<PAGE>

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

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

4.    BANK INDEBTEDNESS

                                                  DECEMBER 31       December 20
                                                         2001              2001
                                                  -----------------------------

      Revolving bank loan                         $   169,463       $         -
      Cheques issued in excess of deposit             239,853                 -
                                                  -----------------------------

                                                  $   409,316       $         -
                                                  =============================

      The revolving bank loan is a Cdn. $2,000,000 overdraft facility, which is
      due on demand and bears interest at Canadian bank prime rate (4.0% -
      December 31, 2001; 4.0% - December 20, 2001) plus 1/2%. This line of
      credit is renewable annually in April of each year. At December 31, 2001,
      the Company had undrawn credit capacity under this facility of Cdn.
      $1,348,047 (U.S. $846,345).

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

      (a)  general assignment of accounts receivable and inventories;

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

      (c)  an unlimited guarantee by the Company and its subsidiaries, Glas-Aire
           Industries Ltd. and Multicorp Holdings Inc.

                                                                            F-48
<PAGE>

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

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

5.    LONG-TERM DEBT

                                                      DECEMBER 31  December 20
                                                             2001         2001
                                                      ------------------------
      HSBC loan payable - interest at prime plus
      1%, due September 28, 2005, monthly
      principal payments of $18,314 plus interest     $   824,021  $         -

      HSBC loan payable - interest at prime plus
      0.5%, due November 14, 2006, monthly
      principal payments of $3,061 plus interest          180,609            -
                                                      ------------------------
                                                        1,004,630            -

      Less current portion                                256,499            -
                                                      ------------------------

                                                      $   748,131  $         -
                                                      ========================

      The Company has a Cdn. $1,000,000 equipment purchase facility and a Cdn.
      $1,400,000 acquisition facility. These facilities bear interest at
      Canadian bank prime rate plus 1/2% to 1%. At December 31, 2001, the
      Company had undrawn credit capacity under these facilities of Cdn.
      $712,328 (U.S. $447,221) for equipment purchases and Cdn. $87,510 (U.S.
      $54,941) for acquisitions.

      The collateral provided for the HSBC loans payable is described in Note 4.

      Principal payments required on long-term debt over the remaining terms of
      the debt are as follows:

                      YEAR                             AMOUNT

                      2002                     $      256,499
                      2003                            256,499
                      2004                            256,499
                      2005                            201,462
                      2006                             33,671
                                               --------------

                                               $    1,004,630
                                               ==============

                                                                            F-49
<PAGE>

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

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

6.    OBLIGATIONS UNDER CAPITAL LEASE

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

                                   YEAR                         AMOUNT

                                   2002                     $   34,515
                                   2003                         34,329
                                   2004                         34,234
                                                            ----------

      Total minimum lease payments                             103,078
      Less amounts representing interest at 8.6%
         per annum                                              13,192
                                                            ----------

      Present value of minimum lease payments                   89,886
      Less current portion                                      26,775
                                                            ----------

                                                            $   63,111
                                                            ==========

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

7.    COMMON STOCK

      Authorized

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

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

         Share of common stock held in treasury at December 31, 2001
         totaled 1,375,677 with a nil value

                                                                            F-50
<PAGE>

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


                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

8.    STOCK OPTIONS

      INCENTIVE AND NON-QUALIFIED PLANS
      During the year ended January 31, 1997, Glas-Aire's Board of Directors
      approved an Incentive Stock Option Plan and a Non-Qualified Stock Option
      Plan. Each plan provides for granting options to purchase not more than
      160,000 shares of the Company's common stock. The Incentive Stock Option
      Plan is to be available to management and employees of the Company. The
      Non-Qualified Stock Option Plan is to be available to certain key
      employees, independent contractors, technical advisors and directors of
      the Company. Vesting for both plans will be determined at the date of
      grant. Upon granting, the options will have a five year life.

      At December 31, 2001 no options had been granted under either plan.

      DIRECTOR COMPENSATION
      In previous periods the Company had granted options to directors in
      accordance with the director's compensation program approved by the
      stockholders. A summary of the status of the Company's stock options
      outstanding as of December 31, 2001 is as follows:


<TABLE>
<CAPTION>


                                                                Number of         Exercise
                                                                 Options             Price
                                                               -----------------------------
      <S>                                                      <C>        <C>
      Granted - November 4, 1999                                  60,000  $           4.50
      Granted - December 4, 2000                                  60,000  $           2.75
      Granted - December 4, 2001                                  60,000  $           1.00
                                                               -----------------------------
                                                                 180,000
                                                               =========
</TABLE>


      All options have vested except for 60,000 which vest on June 4, 2002.

      Under the accounting provisions of SFAS No. 123, pro forma information
      regarding Net Loss and loss per share is required as if the Company had
      accounted for the stock options under the fair value method. Under SFAS
      No. 123, the Company's Net Loss and loss per share would have increased to
      the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                                               PERIOD FROM
                                                                          DECEMBER 21 2001
                                                                            TO DECEMBER 31
                                                                                      2001
                                                                               AS REPORTED        PRO FORMA
                                                                          ----------------------------------
      <S>                                                                 <C>                <C>
      Net loss for the period                                             $        (48,010)  $      (71,173)

      Loss per share - basic and diluted                                  $          (0.01)  $        (0.02)
</TABLE>

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

                                                                            F-51
<PAGE>

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

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

9.    INCOME TAXES

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

<TABLE>
<CAPTION>
                                                            PERIOD FROM        Period from
                                                      DECEMBER 21, 2001    January 1, 2001        Year ended
                                                         TO DECEMBER 31     to December 20       December 31
                                                                   2001               2001              2000
                                                         ---------------------------------------------------
      <S>                                             <C>                  <C>                   <C>
      Federal tax at the U.S. federal statutory rate     $      (25,651)   $             -       $         -
      Canadian income taxes at a higher rate                     (3,809)                 -                 -
                                                         ---------------------------------------------------
                                                         $      (29,460)   $             -       $         -
                                                         ===================================================
</TABLE>

      The components of deferred taxes are as follows:

<TABLE>
<CAPTION>
                                                             DECEMBER 31                         December 20
                                                                    2001                                2001
                                         -------------------------------------------------------------------
                                                               TEMPORARY                           Temporary
                                             DIFFERENCE       TAX EFFECT        Difference        Tax Effect
      <S>                                <C>               <C>                <C>               <C>
      Deferred tax assets
         Accrued liabilities             $      148,982    $      50,654      $          -      $          -
         Stock compensation                     189,528           64,440                 -                 -
         Capital loss carry forward           3,327,340        1,131,296                 -                 -
                                         -------------------------------------------------------------------
                                              3,665,850        1,246,390                 -                 -
         Valuation allowance                 (3,327,340)      (1,131,296)                -                 -
                                         -------------------------------------------------------------------
                                                338,510          115,094                 -                 -
                                         -------------------------------------------------------------------
      Deferred tax liability
         Fixed assets                           582,490          198,031                 -                 -
                                         -------------------------------------------------------------------
      Net deferred tax liability         $      243,980    $      82,937      $          -      $          -
                                         ===================================================================
</TABLE>

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

                                                                            F-52
<PAGE>

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

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

10.   COMMITMENTS

      The Company is committed to minimum lease payments of $110,155 for each of
      the next three years with a five year renewal option, under an operating
      lease for its current premises. Rent expense was $4,821 for the period
      from December 21, 2001 to December 31, 2001 and $Nil for the period from
      January 1, 2001 to December 20, 2001 and for the year ended December 31,
      2000. The Company is in the process of subletting its current premises in
      order to occupy its new premises.

      The Company has entered into an operating lease agreement for new premises
      commencing May 1, 2002 for a term of seven years with a five year renewal
      option. The landlord has provided the first three months of the lease rent
      free. The company is committed to the following minimum lease payments
      plus proportionate common area costs:

                                   YEAR                               AMOUNT

                                   2002                         $     73,774
                                   2003                              177,057
                                   2004                              182,678
                                   2005                              185,488
                                   2006                              185,488
                             Thereafter                              449,668
                                                                ------------

                                                                $  1,254,153
                                                                ============


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

11.   SEGMENTED INFORMATION

      The Company has determined that it operates in two business segments, the
      automotive accessories segment and the orbital polishing segment.
      Information pertaining to the business segments are as follows:


<TABLE>
<CAPTION>
                                                            PERIOD FROM        Period from
                                                      DECEMBER 21, 2001    January 1, 2001        Year ended
                                                         TO DECEMBER 31     to December 20       December 31
                                                                   2001               2001              2000
                                                         ---------------------------------------------------
           <S>                                        <C>                  <C>                 <C>
           Automotive accessories

               Assets                                    $     4,713,745    $             -    $          -
               Sales                                     $        53,774    $             -    $          -

           Orbital polishing

               Assets                                    $       223,904    $      864,722     $          -
               Sales                                     $             -    $      822,386     $    947,234
               Sales to customers that accounted
               for more than 10% of sales                $             -    $      148,029     $    227,336
</TABLE>


                                                                            F-53
<PAGE>

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

                                                 GLAS-AIRE INDUSTRIES GROUP LTD.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                        (STATED IN U.S. DOLLARS)

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

12.   CONTINGENCIES

      Following his termination for cause from his position as President of the
      Company on September 12, 2001, the Company's former president filed a Writ
      of Summons on September 13, 2001 in the Supreme Court of British Columbia.
      The former president asserted among other things that the repurchase of
      the Company's shares involved a breach of agreements with HSBC Bank of
      Canada, securities and corporate laws. The former president has not filed
      a Statement of Claim. The Company intends to vigorously contest the writ
      and believes that it is without merit. In the opinion of management, the
      outcome of this case is not determinable. Should any loss result from the
      resolution of this writ, such loss will be charged to operations in the
      year of resolution.

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

13.   PROFIT SHARING PROGRAM

      In 1994, Glas-Aire adopted a profit sharing program which provides that
      10% of the Company's income before income taxes and provision for profit
      sharing may be distributed to officers and employees of the Company.

                                                                            F-54

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<FILENAME>dex101.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT
<TEXT>
<PAGE>

                                                                    Exhibit 10.1

                         EXECUTIVE EMPLOYMENT AGREEMENT

     This Executive Employment Agreement (the "Agreement"), effective as of
January 1, 2002 (the "Effective Date"), is the employment agreement by and
between GLAS-AIRE INDUSTRIES LTD., a corporation duly incorporated under the
laws of British Columbia with its registered and records office at 3137
Grandview Highway, Vancouver, British Columbia, Canada, and CRAIG GROSSMAN, an
individual residing at 4817 South Kalispell Street, Aurora, Colorado, United
States of America (the "Executive").

     Whereas, the Company desires to enter into this Executive Employment
Agreement with the Executive in order to employ the Executive and has offered
the Executive incentives for being employed by the Company; and the Company
believes it is necessary, proper, and in the best interests of the Company and
its shareholders to encourage the Executive to be employed by the Company; and

     Whereas, the Company desires to employ the Executive for the period of 24
months from the Effective Date hereof and any renewal periods thereafter; and

     Whereas, both parties desire to embody the terms and conditions of
employment of the Executive into a written agreement.

     Now, Therefore, in consideration of the mutual covenants herein contained,
the parties hereby agree as follows:

     1.   Definitions.

          a. "Board" shall mean the Board of Directors of the Company together
     with an executive committee thereof (if any), as the same shall be
     constituted from time to time.

          b. "Cause" for termination shall mean (i) that the Company acting in
     good faith based upon information then known to the Company has determined
     that Executive has engaged in or committed willful misconduct, gross
     negligence, embezzlement, theft, fraud or other illegal conduct; (ii)
     Executive's refusal or unwillingness to perform his duties; (iii) engaging
     in any conduct that involves a conflict of interest, insubordination,
     failure to follow the written directions of the Board of Directors or any
     committee thereof, or any other material breach of this Agreement; (iv)
     breach of any confidentiality or trade secret agreements between the
     Company and Executive; or (v) conviction of any felony, or any entry of a
     plea of nolo contendere, under the laws of Canada, any province in Canada,
     the United States or any state in the United States. In the case of (ii)
     and (iii), the Board of Directors must provide written notice containing
     the Board's good faith determination that the Executive was guilty of
     conduct set forth above in clause (ii) and (iii) and provide Executive a
     period of thirty (30) days in which to cure or remedy (if possible) the
     offending conduct; and upon cure or remedy, there shall be no cause.

                                      -1-
<PAGE>

          c. "Change of Control" shall mean the occurrence of one or more of the
     following three (3) events:

               i. after the Effective Date of this Agreement, any person or
          persons acting in concert, becomes a beneficial owner (as such term is
          defined in Rule 13d-3 promulgated under the Securities Exchange Act of
          1934) directly or indirectly of securities representing 33% or more of
          the total number of votes which may be cast for the election of
          directors of Glas-Aire Industries Group Ltd., a Nevada corporation
          ("Glas-Aire Group"); provided that the issuance by Glas-Aire Group of
          the Series A Preferred Stock or the shares of common stock to be
          issued upon conversion of the Series A Preferred Stock shall not be
          considered in determining whether a "change of control" has occurred;
          or

               ii. within one (1) year after a merger, consolidation,
          reorganization, liquidation, or sale of assets involving Glas-Aire
          Group or a contested election of a Glas-Aire Group director or any
          combination of the foregoing, the individuals who were directors of
          Glas-Aire Group immediately prior thereto shall cease to constitute a
          majority of the Board of Glas-Aire Group; or

               iii. within one (1) year after a tender offer or exchange offer
          for voting securities of Glas-Aire Group, the individuals who were
          directors of Glas-Aire Group immediately prior thereto shall cease to
          constitute a majority of the Board or Glas-Aire Group.

          d. "Disability" shall mean written documentation by a physician
     mutually agreeable to the Company and the Executive (or in the event of the
     Executive's total physical or mental disability, the Executive's legal
     representative) that the Executive is physically or mentally unable to
     perform his duties under this Agreement and that such disability can
     reasonably be expected to continue for a period of six (6) consecutive
     months or for shorter periods aggregating one hundred eighty (180) days in
     any twelve (12) month period.

          e. "Executive" shall mean Craig Grossman and, if the context requires,
     his heirs, personal representatives, and permitted successors and assigns.

          f. "Person" shall mean any natural person, incorporated entity,
     limited or general partnership, business trust, agency (governmental or
     private), division, political sovereign, or subdivision or instrumentality.

          g. "Reorganization" shall mean any transaction or any series of
     transactions consummated in a twelve (12) month period pursuant to which
     any Person acquires (by merger, acquisition, or otherwise) all or
     substantially all the assets of the Company or the then outstanding equity
     securities of the Company or any of its Subsidiaries and the Company or the
     Subsidiary or Subsidiaries which are involved are not the surviving entity
     or entities, the Company and any Subsidiary being deemed surviving if, and
     only if, the majority

                                      -2-
<PAGE>

     of the Board of Directors of the surviving entity were directors of the
     Company or Subsidiary involved with the transaction prior to the
     reorganization.

          h. "Subsidiary" or "Subsidiaries" shall mean any corporation or entity
     of which the Company shall from time to time own more than 50% of the
     voting stock or ownership interests.

     2.   Employment Period and Duties.

          a. Term. The Company hereby agrees to employ the Executive as
     President and Chief Executive Officer ("CEO") and the Executive hereby
     agrees to serve the Company in such capacity for a period commencing on the
     Effective Date of this Agreement and continuing thereafter for a period of
     twenty-four (24) months unless terminated by either party as provided
     herein.

          b. Services. Executive will perform those duties and have such
     authority and powers as are customarily associated with the offices of
     President and Chief Executive Officer and as set forth in the Company's
     Bylaws and, as may from time to time be assigned by the Board of Directors.

     3. Scope of Duties. The Executive will devote such amount of business time
to the conduct of the business of the Company as may be reasonably required to
effectively discharge Executive's duties under this Agreement, subject to the
supervision and direction of the Company's Board of Directors. Executive further
agrees to serve as Director of the Company, if nominated and elected as such;
provided, however, Executive shall be entitled to vacation periods as provided
in this Agreement and shall be entitled to engage in other business ventures,
and in particular to maintain employment as President and Chief Executive
Officer of Glas-Aire Industries Group Ltd., a Nevada Corporation, but only to
the extent that such other business does not interfere with or adversely affect
the performance of Executive's services under this Agreement.

     4. Location. The Executive shall perform the above services from a location
directed by the Company. If the Executive is required by the Company to relocate
to provide the above services, the Company shall pay for all direct costs and
expenses of relocation.

     5. Compensation. The remuneration of the Executive for his services
hereunder shall be at the rate of CDN $100,000 per year, together with any such
increments thereto as the Board of Directors of the Company may from time to
time determine, payable in bi-monthly installments in arrears.

     6. Reimbursement of Expenses. The Executive shall be reimbursed for all
reasonable, out-of-pocket expenses, including but not limited to travel and
entertainment expenses, incurred by him in connection with his duties hereunder.

     7. Vacation. The Executive shall be entitled to take and be paid for four
(4) paid vacation weeks per calendar year, to be taken at times acceptable to
the Executive. A total of up to four (4) weeks unused vacation may be
accumulated over the term of this Agreement. The Executive

                                      -3-
<PAGE>

shall also be entitled to be paid for all statutory holidays in effect in the
province of British Columbia. The Executive shall be entitled to additional
unpaid vacation to be negotiated with the Board of Directors.

     8.   Termination.

          a. Termination by Company for Other Than Cause. If the Company
     terminates the employment of the Executive without cause and without
     notice, the Executive will be entitled to receive as compensation in lieu
     of notice the remuneration that he would have received during the period
     following the termination for which the Executive is entitled to
     compensation for length of service under the Employment Standards Act.

          b. Termination by the Company for Cause. The Company shall have the
     right to terminate the employment of the Executive for Cause. Upon
     Termination of the Executive for Cause, Executive is to be immediately paid
     all salary and vacation pay accrued to the date of termination, but
     Executive will not be paid any severance compensation.

          d. Termination by Executive Without Cause. Executive may voluntarily
     terminate this Agreement at any time after giving the Company ninety (90)
     days prior written notice. In the event of a voluntary Termination by the
     Executive Without Cause, Company will pay to Employee all salary and
     vacation pay accrued to the date of termination, but Employee will not be
     paid any severance compensation.

          e. Change in Control. If at any time during the term of this Agreement
     there is a Change of Control, this, at Executive's option (to be exercised
     within one (1) year from the date Executive receives notice of the Change
     in Control), shall be considered a termination of Executive's employment by
     the Company for Other than Cause, and the provisions of paragraph (a) shall
     apply.

          f. Termination on Account of Executive's Death. In the event of
     Executive's death during the term of this Agreement, this Agreement shall
     terminate and Executive's designee shall receive all accrued salary and
     vacation pay.

     9. The Executive's Rights under Certain Plans. The Company agrees that
nothing contained herein is intended to or shall be deemed to be granted to the
Executive in lieu of any rights and privileges under any retirement, pension,
profit, insurance, hospitalization, moving expense reimbursement, or other plans
which may now be in effect or which will be adopted during the Employment
Period.

     10. Binding Agreement, Non-assignability. This Agreement and the rights and
obligations of the parties shall bind and inure to the benefit of each of the
parties hereto and shall also bind and inure to the benefit of any successor or
successors of the Company by reorganization, merger, or consolidation and any
assignee of all or substantially all of its business and properties; but except
as to any successor or assignee of the Company, neither this Agreement nor any
rights or benefits hereunder may be assigned by the Executive.

                                      -4-
<PAGE>

     11. Governing Law. This Agreement shall be governed by the laws of the
Province of British Columbia.

     12. Arbitration of Disputes and Judicial Proceedings. Any controversy or
claim arising out of or relating to this Agreement, or breach of this Agreement,
is to be settled by court action in British Columbia, Canada.

     13. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original and all of which shall constitute one
and the same instrument.

     In Witness Whereof, the Company has caused this Agreement to be executed
and its seal to be affixed hereunto by its officer thereunto duly authorized,
and the Executive has signed this Agreement, all as of the day and year written
above.

                                 GLAS-AIRE INDUSTRIES LTD.


April 12, 2002                   By:
                                    --------------------------------------------
                                 William R. Ponsoldt, Sr., Chairman of the Board


April 12, 2002
                                 -----------------------------------------------
                                 Craig Grossman

                                      -5-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>4
<FILENAME>dex102.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT
<TEXT>
<PAGE>

                                                                    Exhibit 10.2

                         EXECUTIVE EMPLOYMENT AGREEMENT

     This Executive Employment Agreement (the "Agreement"), effective as of
January 1, 2002 (the "Effective Date"), is the employment agreement by and
between GLAS-AIRE INDUSTRIES GROUP LTD., a Nevada corporation (the "Company"),
and CRAIG GROSSMAN, an individual residing at 4817 South Kalispell Street,
Aurora, Colorado 80015 (the "Executive").

     Whereas, the Company desires to enter into this Executive Employment
Agreement with the Executive in order to employ the Executive and has offered
the Executive the incentives for being employed by the Company; and the Company
believes it is necessary, proper, and in the best interests of the Company and
its shareholders to encourage the Executive to be employed by the Company; and

     Whereas, the Company desires to employ the Executive for the period of
three (3) years from the Effective Date hereof and any renewal periods
thereafter; and

     Whereas, both parties desire to embody the terms and conditions of
employment of the Executive into a written agreement.

     Now, Therefore, in consideration of the mutual covenants herein contained,
the parties hereby agree as follows:

     1.   Definitions.

          a. "Board" shall mean the Board of Directors of the Company together
     with an executive committee thereof (if any), as the same shall be
     constituted from time to time.

          b. "Cause" for termination shall mean (i) that the Company acting in
     good faith based upon information then known to the Company has determined
     that Executive has engaged in or committed willful misconduct, gross
     negligence, embezzlement, theft, fraud or other illegal conduct; (ii)
     Executive's refusal or unwillingness to perform his duties; (iii) engaging
     in any conduct that involves a conflict of interest, insubordination,
     failure to follow the written directions of the Board of Directors or any
     committee thereof, or any other material breach of this Agreement; (iv)
     breach of the "Restrictive Covenants" set forth in Section 11.b and 11.c of
     this Agreement; or (v) conviction of any felony, or any entry of a plea of
     nolo contendere, under the laws of the United States or any state. In the
     case of (ii) and (iii), the Board of Directors must provide written notice
     containing the Board's good faith determination that the Executive was
     guilty of conduct set forth above in clause (ii) and (iii) and provide
     Executive a period of thirty (30) days in which to cure or remedy (if
     possible) the offending conduct; and upon cure or remedy, there shall be no
     cause.

          c. "Change of Control" shall mean the occurrence of one or more of the
     following three (3) events:

                                      -1-
<PAGE>

               i. after the Effective Date of this Agreement, any person or
          persons acting in concert, becomes a beneficial owner (as such term is
          defined in Rule 13d-3 promulgated under the Securities Exchange Act of
          1934) directly or indirectly of securities representing 33% or more of
          the total number of votes which may be cast for the election of
          directors of the Company or 33% or more of the total number of votes
          which may be cast for the election of directors of any of the
          Company's subsidiaries, including but not limited to Multicorp
          Holdings Inc., Glas-Aire Industries Ltd., or Glas-Aire Industries
          Inc.; provided that the issuance of the Series A Preferred Stock or
          the shares of common stock to be issued upon conversion of the Series
          A Preferred Stock shall not be considered in determining whether a
          "change of control" has occurred; or

               ii. within one (1) year after a merger, consolidation,
          reorganization, liquidation, or sale of assets involving the Company
          or a contested election of a Company director or any combination of
          the foregoing, the individuals who were directors of the Company
          immediately prior thereto shall cease to constitute a majority of the
          Board; or

               iii. within one (1) year after a tender offer or exchange offer
          for voting securities of the Company, the individuals who were
          directors of the Company immediately prior thereto shall cease to
          constitute a majority of the Board.

          d. "Disability" shall mean a written documentation by a physician
     mutually agreeable to the Company and the Executive (or in the event of the
     Executive's total physical or mental disability, the Executive's legal
     representative) that the Executive is physically or mentally unable to
     perform his duties under this Agreement and that such disability can
     reasonably be expected to continue for a period of six (6) consecutive
     months or for shorter periods aggregating one hundred eighty (180) days in
     any twelve- (12) month period.

          e. "Executive" shall mean Craig Grossman and, if the context requires,
     his heirs, personal representatives, and permitted successors and assigns.

          f. "Person" shall mean any natural person, incorporated entity,
     limited or general partnership, business trust, agency (governmental or
     private), division, political sovereign, or subdivision or instrumentality,
     including those groups identified as "persons" in ' 13(d)(3) and 14(d)(2)
     of the Securities Exchange Act of 1934.

          g. "Reorganization" shall mean any transaction or any series of
     transactions consummated in a twelve (12) month period pursuant to which
     any Person acquires (by merger, acquisition, or otherwise) all or
     substantially all the assets of the Company or the then outstanding equity
     securities of the Company or any of its Subsidiaries and the Company or the
     Subsidiary or Subsidiaries which are involved are not the surviving entity
     or entities, the Company and any Subsidiary being deemed surviving if, and
     only if, the majority

                                      -2-
<PAGE>

     of the Board of Directors of the surviving entity were directors of the
     Company or Subsidiary involved with the transaction prior to the
     reorganization.

          h. "Subsidiary" or "Subsidiaries" shall mean any of the following
     corporations, and any other corporations or entities that the Company shall
     from time to time own more than 50% of the voting stock or ownership
     interests: Multicorp Holdings Inc.; Wondertool, Inc.; Glas-Aire Industries
     Group Ltd.; and Glas-Aire Industries Inc.

     2.   Employment Period and Duties.

          a. Term. The Company hereby agrees to employ the Executive as
     President and Chief Executive Officer ("CEO") and the Executive hereby
     agrees to serve the Company in such capacity for a period commencing on the
     Effective Date of this Agreement and continuing thereafter for a period of
     three (3) years unless terminated by either party as provided herein.
     Provided that the Executive is in compliance with all of his obligations
     hereunder, the term of the Executive's employment shall be extended
     automatically for an additional three (3) years at the end of each term or
     extended term of this Agreement on the same terms and conditions as
     contained in this Agreement, unless either the Company or the Executive
     shall, at least 120 days prior to the expiration of the initial term or of
     any renewal term, give written notice of the intention not to renew this
     Agreement. If the Company gives such written notice of non-renewal, the
     provisions of Section 10.a. shall apply; if the Executive gives such
     written notice of non-renewal, the provisions of Section 10.d. shall apply.
     Automatic renewals shall be effective in subsequent years on the same day
     of the same month as the original effective day and month of this
     Agreement.

          b. Services. Executive will perform those duties and have such
     authority and powers as are customarily associated with the offices of
     President and Chief Executive Officer and as set forth in the Company's
     Bylaws and, as may from time to time be assigned by the Board of Directors.

     3. Scope of Duties. The Executive will devote such amount of business time
to the conduct of the business of the Company as may be reasonably required to
effectively discharge Executive's duties under this Agreement, subject to the
supervision and direction of the Company's Board of Directors. Executive further
agrees to serve as Director of the Company, if nominated and elected as such;
provided, however, Executive shall be entitled to vacation periods as provided
in this Agreement and shall be entitled to engage in other business ventures but
only to the extent that such other business does not interfere with or adversely
affect the performance of Executive's services under this Agreement.

     4. Location. The Executive shall perform the above services from a location
directed by the Company. If the Executive is required by the Company to relocate
to provide the above services, the Company shall pay for all direct costs and
expenses of relocation. If the Executive is terminated by the Company other than
for cause, the Company shall pay for the direct costs and expenses of relocation
of the Executive back to the Denver, Colorado, metropolitan area.

                                      -3-
<PAGE>

     5. Provision of Services by Executive to Glas Aire Industries Ltd. During
the period January 1, 2002, to December 31, 2003, the Executive will provide
services to the Company and to Glas Aire Industries Ltd. as directed by the
Company. The Executive will use the office of Glas Aire Industries Ltd. in
Vancouver, British Columbia, Canada, to the extent necessary to provide these
services and to the extent allowed by Canadian law.

     6.   Compensation.

          a. Minimum Salary. The remuneration of the Executive for his services
     hereunder shall be at the base rate of $213,000 (United States dollars) per
     year (the "Minimum Annual Compensation"), together with any such increments
     thereto as the Board of Directors of the Company may from time to time
     determine, payable in bi-monthly installments in arrears, the first of such
     installments to be payable on the earlier of the 15th day of January, 2002.
     To the extent the Executive is paid by Glas Aire Industries, Ltd., a
     Canadian company, for employment services provided by Executive, the salary
     shall be reduced monthly by the amount received.

          b. Automobile Allowance. The Company shall furnish, at the Company's
     expense, the Executive an automobile for the Executive's use during the
     term of this Agreement in the monthly amount of $950 (United States
     dollars).

          c. Bonus. In addition to the foregoing Minimum Annual Compensation and
     other benefits described herein, the Executive shall be paid an annual
     bonus determined as follows: 10% of the increase in net shareholder's
     equity over the net shareholder's equity for the previous fiscal year. It
     is expressly understood and agreed that any incremental increase in
     shareholder's equity resulting from the issuance of any shares of preferred
     or common stock for cash or other property shall be excluded in calculating
     Executive's annual bonus; provided however, that any such shares issues in
     connection with the acquisition of another business or entity shall be
     included in the calculation. The annual calculation shall be made as soon
     as possible after the closing of the Company's fiscal year and preparation
     of fiscal year end audited financial statements. Any such annual bonus
     shall be paid not later than May 31 of each year.

          d. Other Benefits. In addition to the foregoing Minimum Annual
     Compensation and bonus, during the term of his employment under this
     Agreement, the Executive will be eligible to participate in all bonus and
     incentive plans established by the Board, including, without limitation,
     the Company's profit sharing plan, pension or retirement plans, to the
     extent maintained by the Company. In addition, the Executive is to be
     eligible to participate in all employee benefit plans to the extent
     maintained by the Company, including (without limitation) any life, dental,
     disability, health, accident and other insurance programs, paid vacations,
     and similar plans or programs, as set forth herein as to life, dental,
     disability and health insurance, and as to other benefit plans, subject in
     each case to the generally applicable terms and conditions of the plan or
     program in question and to the determinations of any committee
     administering such plan or program (collectively, the foregoing bonus and
     incentive plans and employee benefit plans are referred to herein as the
     "Other Benefits").

                                      -4-
<PAGE>

     On termination of the Executive for any reason, the Executive will retain
     all of Executive's rights to benefits that have vested under such plans,
     but the Executive's rights to participate in those plans will cease on the
     Executive's termination unless the termination is a Termination Other Than
     for Cause, in which case Executive's rights of participation will continue
     for a period of eighteen (18) months following Executive's termination.

          e. Warrants. The Company may elect, at its option, at the end of each
     year to pay up to fifty percent (50%) of the bonus earned by Executive
     through the issuance of warrants to purchase the common stock of the
     Company. The number of warrants to be issued to the Executive under this
     option would be determined by taking the dollar amount of the bonus to be
     paid in warrants and dividing that number by half the average bid price for
     the Company's stock for the calendar year for which such bonus is payable
     (the "Average Bid Price"). The warrants would be exercisable at any time at
     a price of fifty percent (50%) of the Average Bid Price (the "Exercise
     Price") for a period of ten (10) years from the date of issuance. At the
     option of the Executive, payment may be made by the Executive for exercise
     of the warrants to purchase shares of the Company's common stock granted
     hereunder, in whole or in part, in the form of a non-recourse promissory
     note executed by the Executive, secured only by a pledge of the shares
     purchased, which promissory note will accrue interest for any quarter at
     the prime rate in effect on the last day of the quarter at Chase Manhattan
     Bank, with interest and principal payable in a balloon payment five (5)
     years after the date of execution of the note.

          f. Warrant Grant. As a one-time consideration and as additional
     consideration for entering into this Agreement, the Company shall within
     thirty (30) days of the date of execution of this Agreement issue to
     Executive warrants to purchase 255,000 shares of the Company's common
     stock. The warrants shall be issued in three certificates with each
     certificate representing the right to acquire 85,000 shares of the
     Company's Common Stock. Warrants to acquire 85,000 shares of the Company's
     common stock shall vest immediately upon execution of this Agreement, with
     the warrants to acquire an additional 85,000 shares vesting on the first
     anniversary of the date of execution of this Agreement subject to the
     condition that Executive is employed by the Company at that time, and
     warrants to acquire the final 85,000 shares vesting on the second
     anniversary of the date of execution of this Agreement subject to the
     condition that Executive is employed by the Company at that time. This one
     time grant of warrants shall be effective as of the date of execution of
     this Agreement which shall be deemed the date of grant for all purposes and
     not as of the Effective Date. The warrants issued under this paragraph
     shall have an exercise price of $.01 per share, shall be exercisable for a
     period of ten (10) years from the date issued, and shall contain customary
     anti-dilution provisions. It is understood that the Board of Directors may
     from time to time in the future consider the grant of additional options or
     warrants to the Executive as additional compensation and incentive for
     future performance of his duties.

     7. Reimbursement of Expenses. The Executive shall be reimbursed for all
reasonable out-of-pocket expenses, including but not limited to travel and
entertainment expenses, incurred by him in connection with his duties hereunder.

                                      -5-
<PAGE>

     8. Vacation. The Executive shall be entitled to take and be paid for four
(4) paid vacation weeks per calendar year, to be taken at times acceptable to
the Executive and approved by the Company. A total of up to four (4) weeks
unused vacation may be accumulated over the initial term of this Agreement. The
Executive shall also be entitled to be paid for all state, local, and national
holidays customarily recognized in the United States and days given off to
employees in general. The Executive shall be entitled to additional unpaid
vacation to be negotiated with the Board of Directors.

     9. Health, Dental, Life, and Disability Insurance. The Company shall
maintain health and dental insurance for the Executive and his family effective
within the U.S. and Canada. During the effectiveness of this Agreement, the
Company shall also maintain at least $1,500,000 (US) in term life insurance for
the Executive, the first $500,000 of which is payable to the Company and the
remainder of which will be paid to a beneficiary of the Executive's choosing.
Upon termination for any reason, the life insurance policy shall be assigned to
the Executive. The Company shall maintain disability insurance for the Executive
in the amount equal to fifty percent (50%) of his Minimum Annual Compensation or
the maximum amount allowed by law, if less.

     10.  Termination.

          a. Termination by Company for Other Than Cause. The Company shall have
     the right to terminate the Executive at any time after thirteen (13) months
     from the Effective Date after giving Executive ninety (90) days' prior
     written notice thereof; provided, however, the Company shall be required to
     pay all compensation to the Executive due for the next eighteen (18)
     months, in lump sum, regardless of the remaining term of the Agreement. In
     addition, the Company shall continue Executive's Other Benefits for a
     period of eighteen (18) months from the date of termination. None of these
     amounts shall be reduced by reason of other employment. The Company will
     also pay the Executive the Executive's accumulated unused vacation no later
     than thirty (30) days after the date of termination.

          b. Constructive Discharge. If the Company engages in any breach of the
     terms of this Agreement, the Executive, at his option, may terminate his
     employment; such termination shall be considered to be a termination of the
     Executive's employment by the Company for reasons other than "Cause," and
     the Executive shall be entitled to all benefits under subparagraph a.,
     including compensation for eighteen (18) months, lump sum, plus the
     continuation of the Other Benefits for a period of eighteen (18) months
     from the date of termination and payment of the Executive's accumulated
     unused vacation no later than thirty (30) days after the date of
     termination.

          c. Termination by the Company for Cause. The Company shall have the
     right to terminate the employment of the Executive for Cause, after giving
     the Executive the required notice and right to cure. Upon Termination of
     the Executive for Cause, Executive is to be immediately paid all accrued
     salary, Other Benefits, bonuses, incentive compensation to the extent
     earned, vested deferred compensation (other than pension plan or profit
     sharing plan benefits, which will be paid in accordance with the applicable
     plan), including vested or earned warrants, and accrued vacation pay, all
     to the date of termination, but Executive will

                                      -6-
<PAGE>

     not be paid any severance compensation. Benefits which are required by
     applicable law to be continued shall be made and reimbursement of prior
     expenses shall be made. Benefits shall not be reduced on account of other
     employment.

          d. Termination by Executive Without Cause. Executive may voluntarily
     terminate this Agreement at any time after giving the Company ninety (90)
     days' prior written notice. In the event of a voluntary Termination by the
     Executive Without Cause, Company will immediately pay to Employee all
     earned salary, Benefits, earned bonuses, all incentive compensation to the
     extent earned, vested deferred compensation (other than pension plan or
     profit sharing plan benefits, which will be paid in accordance with the
     applicable plan), and accrued vacation pay, all to the date of termination,
     but Employee will not be paid any severance compensation. Benefits which
     are required by applicable law to be continued shall be made and
     reimbursement of prior expenses shall be made. Benefits shall not be
     reduced on account of other employment.

          e. Change in Control. If at any time during the term of this Agreement
     there is a Change of Control, this, at Executive's option (to be exercised
     within one (1) year from the date Executive receives notice of the Change
     in Control), shall be considered a termination of Executive's employment by
     the Company for other than Cause, and the provisions of Paragraph 10.a.
     shall apply.

          f. Termination on Account of Executive's Death. In the event of
     Executive's death during the term of this Agreement, this Agreement shall
     terminate and Executive's designee shall receive all vested amounts, unused
     vacation pay, and $1,000,000 (payable from the term life insurance policy,
     pursuant to Paragraph 9, above).

          g. Termination on Account of Executive's Disability. If Executive
     ceases to perform services for the Company because he is suffering from a
     disability and, therefore, is incapable of performing such services, in
     addition to the disability benefits set forth in Paragraph 9, the Company
     shall continue to pay the Executive for one (1) year an amount equal to the
     Executive's Minimum Annual Compensation as in effect on the date of
     Executive's cessation of services by reason of disability less any (i)
     amounts paid to Executive under the disability policy paid for by the
     Company during that one (1) year; (ii) accrued and unused vacation pay,
     workmen's compensation, social security disability benefits (or any other
     disability benefits paid to Executive as federal, state, or local
     disability benefits); and (iii) any amounts paid to Executive as disability
     payments under any other disability plan or program.

     11.  Restrictive Covenants.

          a. Post-employment Non-competition Covenant. Except with the prior
     written consent of the Board, the Executive shall not engage in activities,
     either on the Executive's own behalf or that of any other business
     organization, which are in direct competition with the Company for a period
     of eighteen (18) months subsequent to Executive's voluntary withdrawal from
     employment with the Company as long as Executive is being paid by the

                                      -7-
<PAGE>

     Company. The Executive and the Company expressly declare that the time
     limitations contained in this paragraph are entirely reasonable at this
     time and are properly and necessarily required for the adequate protection
     of the business and intellectual property of the Company. If the
     territorial or time limitations in this Agreement, or any portions thereof,
     are deemed to be unreasonable by a court of competent jurisdiction, whether
     due to passage of time, change of circumstances, or otherwise, the
     Executive and the Company agree to a reduction of said territorial and/or
     time limitations to such areas and/or period of time as said court shall
     deem reasonable.

          b. Confidential Information. The Executive recognizes and acknowledges
     that the Company's trade secrets and proprietary information and know-how,
     as they may exist from time to time (the "Confidential Information"), are
     valuable, special, and unique assets of the Company's business, access to
     and knowledge of which are essential to the performance of the Executive's
     duties hereunder. The Executive, during or after the term of his employment
     by the Company, will not disclose, in whole or in part, such secrets,
     information, or know-how to any Person for any reason or purpose
     whatsoever. The Executive shall have no obligation hereunder to keep
     confidential any Confidential Information if and to the extent such
     disclosure of any thereof is specifically required by law; provided,
     however, in the event disclosure is required by applicable law, the
     Executive shall provide the Company with prompt notice of such requirement
     prior to making any disclosure so the Company may seek an appropriate
     protective order.

          c. Non-solicitation. Except with the prior written consent of the
     Board, the Executive shall not solicit customers, clients, or employees of
     the Company or any of its affiliates for a period of eighteen (18) months
     from the date of the expiration of this Agreement. Without limiting the
     generality of the foregoing, during this eighteen (18) month period, the
     Executive will not willfully canvas, solicit, or accept any such business
     in competition with the business of the Company from any customers of the
     Company with whom the Executive had contact during, or of which the
     Executive had knowledge solely as a result of his performance of services
     for the Company pursuant to this Agreement. During this eighteen (18) month
     period, the Executive will not directly or indirectly request, induce, or
     advise any customers of the Company with whom the Executive had contact
     during the term of this Agreement to withdraw, curtail, or cancel their
     business with the Company.

          d. Equitable Relief. The Executive acknowledges that his services to
     the Company are of a unique character which give them special value to the
     Company. The Executive further recognizes that violations by the Executive
     of any one or more of the provisions of this Paragraph 11 may give rise to
     losses or damages for which the Company cannot be reasonably or adequately
     compensated in an action at law and that such violations may result in
     irreparable and continuing harm to the Company. The Executive and the
     Company agree that this shall be the sole remedy which the Company may have
     at law and equity and the Company shall be entitled to injunctive relief to
     restrain any violation, actual or threatened, by the Executive of Paragraph
     11 of this Agreement.

                                      -8-
<PAGE>

     12. The Executive's Rights under Certain Plans. The Company agrees that
nothing contained herein is intended to or shall be deemed to be granted to the
Executive in lieu of any rights and privileges under any retirement, pension,
profit, insurance, hospitalization, moving expense reimbursement, or other plans
which may now be in effect or which will be adopted during the Employment
Period.

     13. Binding Agreement, Non-assignability. This Agreement and the rights and
obligations of the parties shall bind and inure to the benefit of each of the
parties hereto and shall also bind and inure to the benefit of any successor or
successors of the Company by reorganization, merger, or consolidation and any
assignee of all or substantially all of its business and properties; but except
as to any successor or assignee of the Company, neither this Agreement nor any
rights or benefits hereunder may be assigned by the Executive.

     14. Governing Law. This Agreement has been executed and delivered in
Colorado, and its validity and interpretation shall be governed by the laws of
the State of Colorado.

     15. Arbitration of Disputes and Judicial Proceedings. Venue for any
controversy or claim arising out of or relating to this Agreement, or breach of
this Agreement, shall be exclusively in Colorado.

     16. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original and all of which shall constitute one
and the same instrument.

     In Witness Whereof, the Company has caused this Agreement to be executed
and its seal to be affixed hereunto by its officer thereunto duly authorized,
and the Executive has signed this Agreement, all as of the day and year written
above.

                                             GLAS-AIRE INDUSTRIES GROUP LTD.,
                                             a Nevada corporation


Dated: April 12, 2002
                                             By:
                                                --------------------------------
                                             William R. Ponsoldt, Sr.,
                                             Chairman of the Board

Dated: April 12, 2002

                                             -----------------------------------
                                             Craig Grossman

                                      -9-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>5
<FILENAME>dex103.txt
<DESCRIPTION>LEASE AGREEMENT
<TEXT>
<PAGE>

                                                                    Exhibit 10.3

                                     LEASE

THIS LEASE is made as of the 1st day of May, 2002.

BETWEEN:

          HALLMARK HOLDINGS LTD., a body corporate, incorporated
          under the laws of the Province of British Columbia, having
          its registered office at 2100 - 1075 West Georgia Street,
          Vancouver, British Columbia, V6E 3G2

          (the "Landlord")

                                                               OF THE FIRST PART

AND:

          GLAS-AIRE INDUSTRIES LTD., a British Columbia company
          having its registered and records office at 3137 Grandview
          Highway, Vancouver, British Columbia, V5M 2E9

          (the "Tenant")

                                                              OF THE SECOND PART

WITNESSES:

A. Demise and Habendum

In consideration of the rents reserved and the covenants herein contained on the
part of the Tenant, the Landlord hereby demises to the Tenant the building
comprising approximately 52,080 square feet of office and warehouse space as
shown outlined in red on the plan attached hereto as Schedule "A" (the
"Building") situated at 7791 Alderbridge Way, in the City of Richmond, in the
Province of British Columbia, and located on those lands being legally described
as:

          Parcel Identifier: 003-645-592
          Lot 76, Section 5
          Block 4 North, Range 6 West and
          Section 32, Block 5 North Range 6 West
          New Westminster District
          Plan 36115

          (The "Lands")
<PAGE>

                                      -2-

B. Term and Early Occupancy

To hold the Building for the term of seven (7) years (the "Term") from and
including the 1st day of May, 2002 (the "Commencement Date"), to and including
the 30th day of April, 2009.

Notwithstanding the foregoing, upon receipt of the security deposit and provided
that the Tenant has executed this Lease, the Tenant shall be permitted to have
access to the Building so that the Tenant may commence the installation of its
leasehold improvements to the Building (the "Early Occupancy Period"). The
Tenant shall be responsible for payment of additional rent, administration and
management fee during the Early Occupancy Period provided that the Tenant shall
not be responsible for payment of minimum rent until the Commencement Date.

C. Rent

The Tenant paying minimum rent therefor during the Term to the Landlord, without
deduction, abatement or set-off whatsoever, in lawful money of Canada payable in
equal monthly instalments on the 1st day of each and every month during the Term
as follows:

<TABLE>
<CAPTION>
         --------------------------------------------------------
                      Per Square
           Year       Foot         Per Month      Per Annum
         --------------------------------------------------------
         <S>          <C>          <C>            <C>
            1         $5.25        $22,785.00     $273,420.00
         --------------------------------------------------------
            2         $5.25        $22,785.00     $273,420.00
         --------------------------------------------------------
            3         $5.50        $23,870.00     $286,440.00
         --------------------------------------------------------
            4         $5.50        $23,870.00     $286,440.00
         --------------------------------------------------------
            5         $5.50        $23,870.00     $286,440.00
         --------------------------------------------------------
            6         $5.75        $24,955.00     $299,460.00
         --------------------------------------------------------
            7         $5.75        $24,955.00     $299,460.00
         --------------------------------------------------------
</TABLE>

AND FURTHER PAYING THEREFOR to the Landlord as additional rent the money and
other charges, costs and expenses herein provided to be paid by the Tenant at
the several times when they become payable. The Landlord may reasonably estimate
such money, charges, costs and expenses from time to time for such period as the
Landlord may reasonably determine and the Tenant shall pay to the Landlord such
amount in monthly instalments in advance during such period on the first day of
each month and the Landlord may from time to time revise such estimate and the
Tenant shall make payments pursuant to such revised estimate upon notice
thereof.

In this Lease the phrase "Year of the Term" means in the case of the first Year
of the Term, that period of time beginning on the Commencement Date and ending
at 11:59 p.m. on that day which is a full 12 consecutive months thereafter, and
each subsequent Year of the Term shall be calculated and determined in the same
manner.  Unless the contrary intention is set forth in this Lease, each year in
this Lease shall be calculated in the manner described in the foregoing
sentence.

It is agreed that at the end of each Year of the Term or any renewal thereof,
the aggregate of such monthly charges paid by the Tenant during the relevant
Year of the Term shall be adjusted appropriately by the Landlord on the basis of
the total amount actually payable by the Tenant for
<PAGE>

                                      -3-

such Year of the Term (or, if applicable, for a portion of the year should the
rent payable during the Term of this Lease commence on any day other than the
first day of the Year of the Term or end on any day other than the last day of a
Year of the Term, in which case Additional Rent for the fractions of any month
at the commencement and at the end of the Term shall also be adjusted pro rata)
                                                                      --- ----
pursuant to this Lease with any resulting excess or deficiency being payable
respectively by the Landlord to the Tenant within one hundred and eighty (180)
days after the end of the Year of the Term then in review, or if applicable, by
the Tenant to the Landlord as Additional Rent promptly upon demand.

Within 120 days of the end of each Year of the Term or any renewal thereof the
Landlord shall, upon written request at the end of any such year, provide to the
Tenant a statement of the actual costs paid or payable by the Tenant as
Additional Rent in respect of that year, in accordance with this Lease. The
statement must show in reasonable detail the information relevant and necessary
to the exact calculation of these amounts and the allocation of the Additional
Rent amounts among the lessees of the Lands. The Tenant shall be entitled to
inspect the Landlord's books, accounts and records solely as they pertain to
such costs, and, at the Tenant's option in the event of a dispute concerning the
accuracy of the amount or allocation of the expenses comprising Additional Rent
paid or payable by the Tenant the Tenant may have an independent audit by an
accredited public accountant made of same. Any such inspection or audit shall be
carried out at reasonable times, by appointment with reasonable notice and with
professional diligence and courtesy extended by, and to, all parties involved.
Any errors revealed by such audit, as evidenced by the auditor's professional
opinion, shall be adjusted immediately save and except as provided for elsewhere
herein, and if the dollar amount of the error results in a reduction of the
amount of Additional Rent paid or payable by the Tenant equal to or greater than
five percent (5%) of the most recent amount of Additional Rent stated by the
Landlord to be paid or payable prior to such audit, then the Landlord shall pay
the cost for the audit to the extent that such cost is reasonable.
Notwithstanding the foregoing, the Landlord may, at its option, retain a
chartered accountant to carry out an audit of the Additional Rent records at its
expense and the professional opinion of such accountant shall be conclusive and
binding on the Tenant and the Landlord; if the Landlord elects to carry out such
audit it shall be completed without any unreasonable delay.

Notwithstanding the foregoing, the Tenant shall not be obliged to pay minimum
rent during the first three (3) months starting on the Commencement Date (the
"Free Rent Months") provided that all other terms and conditions of this lease
including payment of additional rent, administration and management fee shall
apply during the Free Rent Months.

For the purposes of this Agreement, minimum rent and additional rent shall be
collectively referred to herein as "Rent" and the Tenant's Proportionate Share
shall be deemed to be fifty-five (55.00%) percent.

D. Place and Manner of Payment

All payments by the Tenant under this Lease shall be made to the Landlord at the
Landlord's office at 2100- 1075 West Georgia Street, Vancouver, British
Columbia, V6E 3G2 or to such agent of the Landlord or at such other place as the
Landlord shall hereinafter from time to time in writing direct.
<PAGE>

                                      -4-

At the request of the Landlord, the Tenant shall provide the Landlord with post-
dated cheques for the ensuing twelve month period, each cheque to be in the
amount of the monthly instalments of Rent payable hereunder, including the
amount of additional rent estimated as aforesaid, or, in the alternative,
provide the Landlord with a signed pre-authorized withdrawal form directed to
the financial institution at which the Tenant regularly keeps a chequing
account.

E. Use of Premises

The Tenant shall use the Building for the purpose of manufacturing and
distribution of acrylic automotive accessories and other manufacturing as may be
necessary and related general office use, all in accordance with the City of
Richmond zoning regulations and business licence requirements, and shall not use
the Building for any other purpose without the prior written consent of the
Landlord, which consent shall not be unreasonably withheld.

1.   TENANT'S COVENANTS

THE TENANT COVENANTS WITH THE LANDLORD AS FOLLOWS:

     (a)  Payment of Rent

          To pay Rent.

     (b)  Payment of Business Taxes

          (i)  In every year of the Term, to pay when due the business taxes
               levied in respect of the occupancy of the Building by the Tenant
               and in respect of the Tenant's fixtures and improvements, and if
               such business taxes are assessed against the Landlord, to pay the
               said taxes to the Landlord as additional rent within five (5)
               days after it has been demanded in writing provided that the
               Tenant shall have the right to contest by appropriate legal
               proceedings the validity of any business taxes, assessment or
               other charges referred to in this clause; and if the payment of
               any such business taxes, assessment or other charge may be
               legally held in abeyance without subjecting the Landlord or the
               Tenant to any liability for failure to pay it, the Tenant may
               postpone such payment until the final determination, if any, of
               such proceedings, but shall prosecute such proceedings with all
               due diligence;

     (C)  Taxes

          To pay to the Landlord monthly as additional rent:

          (i)  The Tenant's Proportionate Share of all charges, taxes, rates,
               duties and assessments whatsoever, whether municipal,
               parliamentary or otherwise, charged, levied, rated or assessed
               against the Lands, or any part thereof, and any equipment,
               facilities, installations, and improvements now or at any time
               during the Term made in or brought on the Lands or against the
               Landlord on account thereof, and including (but without
               restricting the
<PAGE>

                                      -5-

                 generality of the foregoing) realty taxes and municipal taxes
                 for local improvements for works assessed or charged against
                 the Lands and any similar taxes not now in existence or
                 contemplated but levied at any time during the Term by any
                 competent government or municipal body in addition to, or in
                 lieu of, the taxes, rates, duties and assessments hereinbefore
                 referred to, and all taxes on Rent or other taxes imposed on
                 the Landlord in respect of the Rent payable to the Landlord by
                 the Tenant or in respect of the rental of the Building by the
                 Tenant but excluding taxes on the income or capital of the
                 Landlord, and provided that the Tenant shall have the right to
                 contest by appropriate legal proceedings the validity of any
                 tax, rate (including local improvement rates), assessment or
                 other charges referred to in this clause; and if the payment of
                 any such tax, rate, local improvement rate, assessment or other
                 charge may be legally held in abeyance without subjecting the
                 Landlord or the Tenant to any liability for failure to pay it,
                 the Tenant may postpone such payment until the final
                 determination, if any, of such proceedings, but shall prosecute
                 such proceedings with all due diligence;

          (ii)   If the taxes in respect of the Lands, or any part thereof,
                 shall be increased by reason of any installations in or
                 alterations made to the Building by the Tenant, the amount of
                 such increase to the extent that such amount is not included in
                 the taxes referred to in sub-paragraph (i) of this paragraph
                 (c); and

          (iii)  On the first day of each month during the Term an amount equal
                 to one-twelfth (1/12) of the sum estimated by the Landlord to
                 be payable by the Tenant under paragraph 1(b) and 1(c) for the
                 ensuing Year of the Term. Any amount payable by the Tenant
                 under this sub-paragraph (iv) and unpaid after five (5) days
                 shall be recoverable by the Landlord as if it were Rent in
                 arrears.

     (d)  Services and Utilities

          To pay as they become due all charges for public services and
          utilities, including water, gas, electrical power or energy, steam or
          hot water used upon or in respect of the Building and for fittings,
          machines, apparatus, meters or other things leased in respect thereof,
          and for all work or services performed by any corporation or
          commission in connection with such public services and utilities.

     (e)  Repairs to Building

          To carry out promptly at its own expense all repairs, maintenance and
          painting of the Building including all machinery and equipment
          therein, so as to keep the Building in as good a state of repair and
          condition as it is in when this Lease commences (reasonable wear and
          tear excepted and excepting any items which are the responsibility of
          the Landlord pursuant to this Lease), and to repair and maintain the
          Building or any part thereof, including the Landlord's Work, and
<PAGE>

                                      -6-

          without limiting the generality of the foregoing, to repair and
          maintain the interior of the Building, the roof, water, sewer and gas
          connections, wiring, sprinkler system, pipes and water mains, and all
          other fixtures, machinery, facilities and equipment belonging to or
          connected to the Building, or any part thereof, and used in its
          operation, but excepting any repairs necessary to correct structural
          defects including the roof and roof membrane, foundations, bearing
          structures, structural elements, subfloors, and roof structures and
          supports of the Building, and excepting deficiencies in the Landlord's
          Work provided the Landlord receives notification within three months
          of completion of such work, all of which excepted items shall be the
          responsibility of the Landlord to repair, replace, reconstruct or
          rebuild at no cost to the Tenant unless made necessary by the
          negligence of the Tenant or those for whom the Tenant is responsible
          at law; PROVIDED that notwithstanding any other provision in this
          Lease to the contrary the Tenant shall not be responsible for any roof
          repair expense or expenses which in accordance with accounting
          principles generally accepted in British Columbia are capital in
          nature and are in excess of an aggregate of $5,000 in any Year of the
          Term unless made necessary by the negligence of the Tenant or those
          for whom the Tenant is responsible at law; and further PROVIDED that
          if repairs, replacements, rebuilding or reconstruction should become
          necessary, the Tenant, before commencing or authorizing any work in
          that respect, shall submit the plans and specifications therefor,
          prepared by an architect or engineer approved by the Landlord, to the
          Landlord for its approval to ensure such work is in conformity with
          the design, layout and character of the Building and with the original
          plans and specifications thereof, and comply with all applicable by-
          laws and regulations of all competent authorities, and forthwith after
          such approval has been obtained the Tenant shall proceed at its own
          expense with such work, repairs, replacement, rebuilding or
          reconstruction with all reasonable speed and shall complete it
          strictly in accordance with such approved plans and specifications;
          but if the Tenant defaults under the provisions of this paragraph, the
          Landlord may proceed with such repairs and maintenance and the Tenant
          shall pay all costs and expenses incurred by the Landlord in so doing
          and such costs and expenses shall be recovered from the Tenant as if
          they were Rent in arrears under this Lease.

          On or about the beginning of the Fourth Year of the Term of this
          Lease, if necessary, at the Landlord's sole discretion, the Landlord
          will repaint the Building at the Tenant's expense as provided in this
          paragraph.

     (f)  Delivery up of Possession

          At the expiration or sooner determination of the Term, to surrender
          the Building peaceably to the Landlord in good and substantial repair
          and condition, reasonable wear and tear excepted, together with all
          installations or erections which at any time during the Term shall be
          made therein or thereon (but excluding the Tenant's trade fixtures
          which shall remain the sole property of the Tenant and which shall be
          removed by the Tenant at its sole cost and expense at the expiration
          or sooner determination of the Term pursuant to clause 3(e) below).

                                       6
<PAGE>

                                      -7-

     (g)  Compliance with Insurance Regulations and By-Laws

          At its own cost and expense, to promptly comply with every applicable
          regulation or order of the regulatory body of the Landlord's insurer,
          or any body having similar functions, and of any liability or fire
          insurance company by which the Landlord or the Tenant may be insured,
          and with all the applicable laws, ordinances, and regulations of duly
          constituted public authorities having jurisdiction now or hereafter in
          any manner affecting the Building or the use or occupation thereof,
          whether or not such regulations, orders, laws or ordinances which may
          hereafter be promulgated, issued or enacted involve a change of policy
          or require changes or alterations in or about the Building.

     (h)  Nuisance

          Not to do or omit to do or permit to be done or omitted anything upon
          or in respect of the Building the doing or omission of which shall be
          or result in a nuisance.

     (i)  Assignment and Subletting

          Not to assign or sublet the Building or any part thereof without the
          consent in writing of the Landlord, such consent not to be
          unreasonably withheld or delayed, provided that:

          (i)    no assignment or subletting permitted by the Landlord shall in
                 any manner release the Tenant from any covenant to be observed
                 or performed by it hereunder;

          (ii)   the Tenant and any assignee or subtenant hereunder must, if not
                 a company incorporated under the Company Act of British
                 Columbia (the "Act"), be duly registered as an extra-provincial
                 company under the Act and authorized to carry on business
                 within the Province of British Columbia;

          (iii)  any consideration whatsoever including, without limitation, any
                 Rent or other charges in respect of the Building in excess of
                 that payable hereunder by the Tenant to the Landlord, payable
                 by an assignee or subtenant to the Tenant pursuant to any
                 permitted assignment or sublease shall be assigned by the
                 Tenant to the Landlord at the time such leave is granted;

          (iv)   the Tenant shall pay to the Landlord the Landlord's reasonable
                 legal costs incurred as a result of such assignment or
                 subletting;

          (v)    if the Tenant is a corporation, any change in control (as that
                 word is defined in the Act) of the Tenant will be deemed to be
                 an assignment provided that restrictions on assignment by way
                 of change in control shall

                                       7
<PAGE>

                                      -8-

                 not be applicable to any transfer of shares which are listed on
                 a security exchange (including, without limitation, NASDAQ)
                 regulated by governmental authority;

          (vi)   the consent by the Landlord to an assignment or sublet of the
                 Building will not constitute a waiver of its consent to a
                 subsequent assignment or subletting;

          (vii)  no consent of the Landlord shall be required in the event the
                 Tenant assigns or sublets the whole or any portion of the
                 Building to a corporation controlled by the Tenant or
                 affiliated with the Tenant, or to a corporation which controls
                 the Tenant, upon receipt of written notice from the Tenant to
                 the Landlord advising of same; provided that such approved
                 assignment or subletting shall in no way release the Tenant
                 from its obligations under this Lease or constitute a waiver of
                 the Landlord's consent to any subsequent assignment or
                 subletting.

     (j)  Landlord's Insurance

          To pay the Tenant's Proportionate Share of all premiums with respect
          to insurance to be placed by the Landlord and described as follows:

          (i)    All-risk insurance for the full replacement value of the
                 Building and any improvements and equipment thereon which are
                 the property of the Landlord;

          (ii)   Insurance against loss of rental income and rental value
                 attributable to all perils insured against by the Landlord or
                 commonly insured against by prudent landlords, including all
                 loss of Rent receivable from the Building in accordance with
                 the provisions of this Lease, in such amount or amounts as the
                 Landlord or mortgagees from time to time require;

          (iii)  Insurance protecting the Landlord against claims for personal
                 injury, death, property damage, or third party or public
                 liability claims arising from any accident or occurrence upon
                 the Building or the Lands, from any cause in an amount that the
                 Landlord within its sole discretion shall determine for
                 personal injury, death, property or other claims in respect of
                 any one accident or occurrence;

          (iv)   Plate glass insurance, provided that the Tenant shall also pay
                 to the Landlord the amount of any loss in respect of the plate
                 glass in the Building which is a deductible amount under such
                 plate glass insurance coverage and provided further that the
                 Tenant may elect to waive plate glass insurance in which event
                 the Tenant shall be responsible for and shall pay to the
                 Landlord the amount of any loss in respect of the plate glass
                 in the Building; and

                                       8
<PAGE>

                                      -9-

          (v)    Such other insurance as it is or may become customary for
                 owners of property to carry for loss of or damage to the
                 Building or the Lands or liability arising therefrom,
                 specifically including any insurance required by reason of the
                 introduction by or on behalf of the Tenant or its subtenants of
                 radio-active materials or substances into the Building or onto
                 the Lands.

          The Tenant may inspect the policies of insurance pertaining to the
          insurance placed under this paragraph.

     (k)  Insurance Premium Increase

          To pay the amount of any increase in the cost of insurance for the
          Building or the Lands if such increase is caused by the Tenant's
          operation at the Building and not to do anything that would cause the
          Building or the Lands to become uninsurable.

     (l)  Tenant's Insurance

          To take out and keep in force throughout the Term and during such
          other time as the Tenant occupies the Building or a part thereof, at
          its sole cost and expense:

          (i)    public liability insurance in the amount of FIVE MILLION
                 DOLLARS ($5,000,000.00) or such greater amount as the Landlord
                 may determine from time to time in respect of bodily injury,
                 including death, to one or more persons and property damage;

          (ii)   all risk insurance covering all the contents of the Building
                 including, but not being limited to, merchandise, inventory,
                 stock in trade, furniture, plate glass, fixtures and
                 improvements which the Tenant installs in the Building to the
                 full replacement value thereof;

          (iii)  automobile liability insurance to a limit of liability of not
                 less than FIVE MILLION DOLLARS ($5,000,000.00) in any one
                 accident, covering all licensed motor vehicles owned by the
                 Tenant and used in connection with the business carried on from
                 the Building; and

          (iv)   all other insurance in such amounts and upon such terms as
                 determined by the Landlord, its insurance advisors or its
                 mortgagee.

          The Tenant's insurance policies referred to under this paragraph (1)
          shall name the Landlord and any persons, firms or corporations
          designated by the Landlord as additional named insureds thereunder as
          their interests may appear, shall contain a waiver of all rights of
          subrogation against the Landlord and cross-liability clause protecting
          the Landlord and any other insured designated by it against claims by
          the Tenant as if the Landlord and such other insured designated by the
          Landlord were separately insured, and shall contain a clause that the
          insurer will not cancel, change or refuse to renew the insurance
          without first

                                       9
<PAGE>

                                     -10-

          giving the Landlord and insured party so designated thirty (30) days'
          prior written notice. All policies of insurance will be placed with
          insurers acceptable to the Landlord and in a form satisfactory to the
          Landlord and the Tenant will promptly deliver to the Landlord copies
          or certificates of such policies. If the Tenant fails to take out or
          keep in force any policy of insurance referred to in this paragraph
          (1), the Landlord may do so and pay the premium and in that event the
          Tenant shall pay to the Landlord the amount so paid as additional rent
          which shall be due and payable by the Tenant to the Landlord on
          demand.

     (m)  Indemnity

          To indemnify the Landlord from all liabilities, fines, suits, claims,
          demands and actions of any kind or nature for which the Landlord shall
          or may become liable or suffer by reason of any breach, violation or
          non-performance by the Tenant of any covenant, or proviso hereof, or
          by reason of any injury or death occasioned to or suffered by any
          person or persons or any property through any wilful act, or the
          negligence of the Tenant or any of its agents or employees; such
          indemnification in respect of any such breach, violation or non-
          performance, damage to property, injury or death occurring during the
          Term of this Lease shall survive any termination of this Lease,
          anything in this Lease to the contrary notwithstanding, provided that
          the Tenant's obligations to indemnify the Landlord under this
          paragraph shall exclude anything for which the Landlord is insured or
          that arise by reason of the wrongful or negligent acts or omissions of
          the Landlord or others for whom the Landlord is responsible at law.

     (n)  Not to Commit Waste

          To keep the Building, the Easement Area (as hereinafter defined) and
          the Licence Area (as hereinafter defined) and every part thereof in a
          clean and tidy condition and not to permit waste paper, garbage,
          ashes, waste, hazardous or objectionable material to accumulate
          thereon.

     (o)  Hazardous Substances

          Not to locate, create or store on the Building or the Lands and not to
          permit any of its agents, employees, suppliers, customers, invitees,
          subtenants, licensees or any other person having business with or
          under the control of the Tenant to locate, create or store on the
          Building or the Lands any Hazardous Substance in contravention of
          applicable Environmental Laws. The term "Environmental Laws" means all
          statutes, regulations, orders, bylaws, permits, standards, guidelines,
          policies, and any other laws, including the principles of common law
          and equity now or hereafter in force, applicable to the Building, or
          the Lands, relating in any way to health, occupational health and
          safety, product liability, transportation of dangerous goods, or the
          protection of people, plants, animals, or the environment.

                                       10
<PAGE>

                                      -11-

          The term "Hazardous Substance" means all substances, the storage,
          handling, transport, disposal, or release of which, in concentrations
          above prescribed standards, may necessitate, invite, or permit a
          governmental authority having jurisdiction over the Landlord, the
          Tenant or the Building, to require remedial or investigatory action
          under any Environmental Laws. If the Tenant is in breach of the
          foregoing prohibition regarding the location, creation or storage of
          Hazardous Substances, the Landlord, in addition to all other remedies
          it has under this Lease, may require the Tenant, at the Tenant's cost,
          to cause such Hazardous Substances to be removed and to cause the
          Building or the Lands, as the case may be, to be properly restored and
          repaired all in accordance with any applicable laws, bylaws, rules,
          regulations or orders. Alternatively, at its option, the Landlord may
          cause such Hazardous Substances to be removed and may repair and
          restore the Building or the Lands, as the case may be, and may cause
          its employees or agents to enter the Building for such purpose. Should
          the Landlord undertake such removal, repair or restoration, the Tenant
          shall forthwith pay to the Landlord the total cost of such removal,
          repair or restoration plus a fee equal to 10% of such cost, and the
          total of such fee and cost shall, until paid to the Landlord, bear
          interest at the rate stipulated herein for amounts in arrears and
          shall be recoverable as additional rent reserved hereunder. The Tenant
          hereby indemnifies and holds the Landlord harmless from and against
          all loss, cost, damage and expense (including, without limitation,
          legal fees on a solicitor and own client basis and costs incurred in
          the investigation, defence and settlement of claims) that the Landlord
          may incur as a result of or in connection with or arising from the
          breach of this paragraph by the Tenant or in respect of non-compliance
          by the Tenant with any federal, provincial or municipal laws, bylaws,
          rules, regulations or orders relating to Hazardous Substances. The
          provisions of this paragraph requiring the Tenant to reimburse the
          Landlord's costs, plus pay a fee of 10% of such costs, and requiring
          the Tenant to indemnify the Landlord, shall survive the termination of
          this Lease, anything to the contrary notwithstanding.

     (p)  Evidence of Payment

          To produce to the Landlord upon request satisfactory evidence of the
          due payment by the Tenant of all payments required to be made by the
          Tenant under this Lease.

     (q)  Notice of Damage

          In the event of any substantial damage to the Building or the Lands by
          any cause, to give notice in writing thereof to the Landlord forthwith
          upon becoming aware of it.

     (r)  Landlord's Right to Review

          To permit the Landlord at all reasonable times to enter upon and view
          the state of repair of the Building and to comply with all reasonable
          requirements of the Landlord with regard to the care, maintenance and
          repair thereof, to the extent
<PAGE>

                                      -12-

          that the Tenant is responsible under this Lease for such care,
          maintenance and repair.

     (s)  Building Maintenance

          Subject to the Landlord's obligations pursuant to paragraph 1(e) of
          this Lease, to pay all reasonable expenses incurred by the Landlord to
          repair, maintain and paint the Building including the exterior walls,
          windows and roof and all machinery and equipment therein, so as to
          keep the Building including the Landlord's Work, in as good a state of
          repair and condition as it is in when this Lease commences, and to
          repair and maintain all water, sewer and gas connections, wiring,
          sprinkler system, pipes and water mains and all other fixtures,
          machinery, facilities and equipment belonging to or connected to the
          Building, or any part thereof, and used in its operation.

     (t)  Grounds Maintenance

          To pay the Tenant's Proportionate Share of all expenses incurred by
          the Landlord to maintain the grounds of the Lands and including, but
          without restricting the generality of the foregoing, all reasonable
          expenses incurred by the Landlord for snow removal, landscaping, yard
          maintenance and clean-up, and repairs to concrete walks, stairs,
          asphalt and concrete paved areas, and gravel-surfaced areas.

     (u)  Administration and Management Fees

          To pay an administration and management fee equal to three (3) percent
          of the minimum rent payable by the Tenant to the Landlord, such fee to
          compensate the Landlord for its property management services and
          costs.

     (v)  Showing Building

          To permit the Landlord at any time within 180 days prior to the
          expiration of the Term hereby granted to enter upon the Building at
          all reasonable times for the purpose of offering the same for lease
          and exhibiting the same to prospective tenants and to place and keep
          upon the Building signs advertising the Building for lease.

     (w)  Damage to Premises

          That it will not bring upon the Building or any part thereof any
          machinery, equipment, article or thing that by reason of its weight,
          size or use might damage the floors of the Building and that if any
          damage is caused to the Building by any machinery, equipment, article
          or thing, or by overloading or by any act, neglect or misuse on the
          part of the Tenant or any of its servants, agents or employees or any
          person having business with the Tenant, the Tenant will forthwith
          repair such damage, at its own cost, or pay the cost of repair to the
          Landlord.
<PAGE>

                                      -13-

     (x)  Goods and Services Tax

          Notwithstanding any other provision of this Lease to pay to the
          Landlord an amount equal to any and all goods and services taxes,
          sales taxes, value added taxes, or any other taxes imposed on the
          Landlord with respect to minimum rent or additional rent payable by
          the Tenant to the Landlord under this Lease, or in respect of the
          Building under this Lease, whether characterized as goods and services
          tax, sales tax, value added tax, or otherwise (herein called "Sales
          Taxes"), it being the intention of the parties that the Landlord shall
          be fully reimbursed by the Tenant with respect to any and all Sales
          Taxes at the full tax rate applicable from time to time in respect of
          the minimum rent or additional rent for the Building, without
          reference to any tax credits available to the Landlord. The amount of
          the Sales Taxes so payable by the Tenant shall be calculated by the
          Landlord in accordance with the applicable legislation and shall be
          paid to the Landlord at the same time as the amounts to which such
          Sales Taxes apply are payable to the Landlord under the terms of this
          Lease or upon demand at such other time or times as the Landlord from
          time to time determines. Notwithstanding any other provision of this
          Lease, the amount payable by the Tenant under this paragraph shall be
          deemed not to be minimum rent or additional rent, but the Landlord
          shall have all of the same remedies for and rights of recovery of such
          amount as it has for recovery of minimum rent or additional rent under
          this Lease.

     (y)  Recovery of Rent

          That whenever any amount by the terms of this Lease is payable by the
          Tenant to the Landlord, whether as additional rent or otherwise, such
          amount shall be recoverable by the Landlord in the same manner as if
          such amount were Rent in arrears under this Lease after the Landlord
          has demanded such amount be paid and the Landlord shall be entitled to
          take any action therefor in respect of Rent in arrears under the Lease
          and if the Tenant fails to pay any sum required to be paid by it under
          the provisions of this Lease to any person, firm or corporation other
          than the Landlord, the Landlord shall have the right to pay any such
          sum and to demand reimbursement of such sum from the Tenant and in
          default of reimbursement to recover it as if it were Rent in arrears
          under this Lease and the Landlord shall be entitled to take any action
          therefor which it may be entitled to take with respect to Rent in
          arrears under this Lease.

     (z)  Costs of Enforcement

          To pay and to indemnify the Landlord against all legal costs and
          charges including legal fees on a solicitor and own client basis and
          all bailiffs fees and costs of distress lawfully and reasonably
          incurred in obtaining possession of the Building after default of the
          Tenant or upon expiration or earlier termination of the Term of this
          Lease or in enforcing any covenant or agreement of the Tenant herein
          contained.
<PAGE>

                                      -14-

     (aa) Overdue Payments

          To pay to the Landlord interest at the then current rate of interest
          being charged to the Landlord by the Landlord's bank on all overdue
          payments required to be made by the Tenant under any one or more of
          the provisions of this Lease.

     (bb) Maintenance of Licence Area

          To maintain the Licence Area (hereinafter defined) including without
          restriction the generality of the foregoing snow removal, landscaping
          including planting and replanting of shrubs and plants, yard
          maintenance, the clean up and repair of concrete walk, stairs, asphalt
          and concrete paved areas and gravel surfaced areas; provided that if
          the Tenant is in default under the provisions of this paragraph the
          Landlord may proceed with such repairs, maintenance, painting,
          replacements, rebuilding or reconstruction and the Tenant shall all
          costs and expenses incurred by the Landlord in so doing and such costs
          and expenses shall be recovered by the Landlord as if they were
          minimum rent in arrears under this Lease.

2.  LANDLORD'S COVENANTS

THE LANDLORD COVENANTS WITH THE TENANT AS FOLLOWS:

     (a)  Quiet Enjoyment

          For quiet enjoyment.

     (b)  Tenant's Furniture and Equipment

          To allow the Tenant to install at the Building such furniture and
          equipment as the Tenant may require for the purpose of its business.

     (c)  Signs

          The Tenant may from time to time during the Term erect, paint,
          display, maintain, alter, change or remove signs on the exterior and
          interior of the walls, all such signs to be dignified in appearance,
          approved in writing by the Landlord acting reasonably and without
          delay as to dimensions, type and location, and to comply with the
          requirements of municipal and governmental authorities; and the
          Landlord in approving such sign shall have regard to:

          (i)   the aesthetic appeal of the Building;

          (ii)  the need, as a primary purpose to identify and not to advertise
                the Tenant; and

          (iii) the necessity on a multiple occupancy site for all signs to be
                complementary and not to detract from each other.
<PAGE>

                                      -15-

          The signs shall remain the property of the Tenant and shall be removed
          by it on the termination of the Term hereby granted. Upon removal of
          any such signs the Building shall be restored to its original
          condition at the Tenant's cost, except for reasonable wear and tear.
          The Tenant shall indemnify the Landlord against any loss or damage
          caused to any person or property as a result of the placing, use or
          removal of any sign on the Building.

     (d)  Parking

          The Landlord hereby grants to the Tenant the licence irrevocable
          during the Term or any renewal thereof to the intent that the benefit
          of such licence may be annexed to and run with this Lease or any
          renewal lease, over the licensed area outlined in green on Schedule
          "A" hereto (the "Licence Area") for the purposes only of parking and
          loading.

     (e)  Access Easement

          The Landlord hereby grants to the Tenant an easement over the easement
          area shown outlined in blue on Schedule "A" hereto (the "Easement
          Area") to pass and repass by foot or by vehicle over said easement
          area together with the Tenant or tenants of the other building on the
          Lands.

     (f)  Tenant's Allowance

          The Landlord shall provide to the Tenant, a tenant improvement
          allowance (the "Allowance") in the amount of Sixty-Two Thousand Five
          Hundred Dollars ($62,500.00) inclusive of GST which shall be used by
          the Tenant towards non-structural partitions, location of heavy
          machinery, electrical updates including extra lighting within the
          Building.  The Landlord will reimburse the Tenant for improvement work
          done by the Tenant from the Allowance on or before thirty (30) days
          following submission to the Landlord of receipted invoices for
          completed work by the Tenant.

     (g)  Landlord's Work

          The Landlord shall construct or effect the construction of
          improvements to the Building at its sole cost and expense, as outlined
          in Schedule "B" attached to this Lease (the "Landlord's Work").

          Subject to the provisions of paragraph 3(n), the Landlord covenants
          with the Tenant to repair, rebuild, re-construct or replace as
          necessary and with all reasonable diligence to correct structural
          defects including the roof and roof membrane, foundations, bearing
          structures, subfloors, and roof structures and supports of the
          Building, and deficiencies in the Landlord's Work provided the
          Landlord receives notification within three months of completion of
          such work, at no cost to the Tenant unless made necessary by the
          negligence of the Tenant or those for whom the Tenant is responsible
          at law.
<PAGE>

                                      -16-


3.   PROVISOS

PROVIDED ALWAYS AND IT IS HEREBY AGREED AS FOLLOWS:

     (a)  Acceptance of Building

          Subject to the completion of the Landlord's Work as set forth in
          paragraph 2(g) hereof, the Tenant accepts the Building on an "as is"
          basis.

     (b)  Special Equipment

          The Tenant shall be responsible, at its sole cost and expense, for the
          installation, operation and maintenance of any special equipment
          required by the Tenant's occupancy and business at the Building.

     (c)  Subordination of Lease

          This Lease and everything herein contained shall be deemed to be
          subordinate to any charge or charges from time to time created by the
          Landlord by charge or mortgage on the Building or the Lands and the
          Tenant shall promptly at any time as required by the Landlord execute
          all documents and give such further assurances as may be reasonably
          required to postpone its rights and privileges to the holder of any
          charge or mortgage; provided that such chargeholder or mortgagee shall
          give an assurance to the Tenant in writing acceptable to the Tenant
          acting reasonably and without delay that it shall be permitted to
          continue in quiet possession of the Building in accordance with the
          terms and conditions of this Lease as long as the Tenant is not in
          default hereunder, whether such charge or mortgage is in good standing
          or not.

     (d)  Estoppel Certificate

          At any time or times at reasonable intervals and within ten (10) days
          after a written request by the Landlord, the Tenant will execute,
          acknowledge and deliver to the Landlord or such assignee or mortgagee
          as the Landlord designates, a certificate setting forth the status of
          this Lease, in such form and content required by the Landlord acting
          reasonably.

     (e)  Removal of Trade Fixtures

          Provided the Tenant is not in default hereunder, the Tenant may remove
          its trade fixtures, and shall in such removal do no damage to the
          Building, and shall, at its own cost, make good any damage which it
          may occasion thereto; provided that any erection, addition, structure
          or improvement erected upon the Building (excluding trade fixtures)
          shall become a part thereof, shall not be removed and shall be subject
          to all of the provisions of this Lease but the Tenant at its own
          expense, shall remove all or some of any erection, addition, structure
          or improvement erected upon the Building if, and to the extent,
          requested by the Landlord.
<PAGE>

                                      -17-

     (f)  Alterations and Installations

          The Tenant shall not erect or cause to be erected any addition,
          structure or improvement upon the Building without the prior written
          consent of the Landlord, which consent shall not unreasonably be
          withheld or delayed. As a condition of the Landlord's consent, the
          Tenant shall be required to prepare working drawings of the proposed
          improvement work and present same to the Landlord for its approval.
          All improvement work shall be completed by qualified and licensed
          contractors and sub-contractors approved in writing by the Landlord
          prior to the commencement of alterations. All improvements to the
          Building shall be completed to a good and workmanlike standard in
          keeping with the appearance and character of the Building and shall be
          completed in compliance with all applicable municipal, provincial and
          federal laws, bylaws, regulations and ordinances.

     (g)  Bankruptcy and Insolvency

          If the Term or any of the goods or chattels of the Tenant shall be at
          any time seized or taken in execution or in attachment by any creditor
          of the Tenant, or if a writ of execution shall issue against the goods
          and chattels of the Tenant and remain unsatisfied for ten days, (and
          if the Tenant shall not contest such seizure or execution by
          appropriate legal proceedings), or if the Tenant shall execute any
          bill of sale of any of its goods or chattels, other than a bill of
          sale of goods in the ordinary course of the Tenant's business or if
          the Tenant shall make any assignment for the benefit of creditors or
          shall be adjudged bankrupt or insolvent by any court of competent
          jurisdiction under any legislation then in force or shall take the
          benefit of any statute that may be in force for bankrupt or insolvent
          debtors or shall attempt to abandon the Building, or to sell or
          dispose of its goods and chattels so that there would not remain after
          such sale or disposal a sufficient distress on the Building in the
          opinion of the Landlord for the then accruing Rent, or if a Receiver
          or Receiver-Manager of any of the assets, business or undertaking of
          the Tenant is appointed by Court Order or otherwise, then and in each
          of such cases, the minimum rent and any additional rent for the month
          then current and the next ensuing three months and taxes payable
          hereunder by the Tenant for the then current year, including local
          improvement rates (to be reckoned on the rate for the next preceding
          year in case the rate should not have been fixed for the current year)
          shall, immediately become due and payable, and the Term shall, at the
          option of the Landlord, forthwith be determined and in each of the
          above cases such accelerated minimum rent, additional rent and taxes
          shall be recoverable by the Landlord as if it were Rent in arrears.

     (h)  Right to Re-enter or Relet

          If and whenever the minimum rent or additional rent hereby reserved,
          or any part thereof, shall not be paid on the date appointed for
          payment thereof, whether lawfully demanded or not, or in case the
          Building shall be vacated or remain unoccupied or in case the Term
          shall be taken in execution or attachment for any
<PAGE>

                                      -18-

          cause whatsoever, then and in every such case, it shall be lawful for
          the Landlord at any time thereafter to enter into and upon the
          Building or any part thereof in the name of the whole and the same to
          have again, repossess and enjoy as of its former state, anything in
          this Lease to the contrary notwithstanding or, at the Landlord's
          option, to relet the Building to the Tenant's account and to claim any
          loss between the Rent and other moneys payable by the Tenant to the
          Landlord under this Lease and the Rent and other moneys receivable
          from any party to whom the Building is relet.

     (i)  Landlord's Rights on Seizure of Forfeiture of Term

          If the Term should be seized or forfeited for any of the causes set
          forth in paragraph 3(g) hereof, the Landlord may exercise the rights
          and remedies set out in paragraph 3(h).

     (j)  Notice of Default

          Notwithstanding anything herein contained to the contrary, if the
          Tenant shall fail to comply with any of its covenants hereunder,
          except the covenants to pay Rent, the Landlord may give to the Tenant
          notice in writing stating the default with reasonably sufficient
          particulars and requiring it to be remedied, and if such default is
          not remedied by the Tenant within fifteen (15) days after the receipt
          of such notice, or such longer period as may be reasonably necessary
          (in view of the nature of the default), the Landlord at its option may
          either exercise the rights and remedies set out in paragraph 3(h)
          hereof or take such steps as may be necessary to remedy and correct
          such default and recover the costs and expenses incurred in so doing
          from the Tenant as additional rent.

     (k)  Waiver of Lien

          The Landlord waives any lien rights it may hold to any inventory,
          fixtures, equipment or other personal property owned or leased by the
          Tenant now or hereafter located at the Building in favour of the
          Tenant's lender.  The Landlord shall execute such documents as the
          Tenant may require to evidence such waiver.

     (l)  Holding Over

          If the Tenant should hold over after the original Term or any extended
          term hereof, and the Landlord accepts Rent, such holding over shall be
          deemed to be a tenancy from month to month only and shall have no
          greater effect, any custom, statute, law or ordinance to the contrary
          notwithstanding. Such month to month tenancy shall be governed by the
          terms and conditions hereof notwithstanding any statutory provisions
          or rules of law with respect to month to month leases, and during such
          period of holding over the Tenant shall be required to pay the monthly
          rental previously paid by the Tenant under the terms hereof during the
          month immediately preceding the expiration or termination of this
          Lease or any extension thereof and all other payments for which the
          Tenant is liable hereunder.
<PAGE>

                                      -19-

     (m)    Non-Waiver

            Any condoning, excusing or overlooking by the Landlord of any
            default, breach, or non-performance by the Tenant at any time of any
            covenant, proviso or condition herein contained shall not operate to
            waive the Landlord's rights under this Lease in respect of any later
            default, breach or non-observance so as to defeat in any way the
            rights of the Landlord under this Lease on any such later default,
            breach or non-observance, and all rights and remedies of the
            Landlord shall be deemed to be cumulative, not alternative.

     (n)    Damage to Premises

            Whenever during the Term the Building shall be damaged by fire,
            lightning or tempest, or any of the perils insured against under the
            provisions or clause 1(j) hereof, the following terms shall apply:

            (i)    If the damage is such that the Building is rendered wholly
                   unfit for occupancy or it is impossible or unsafe to use and
                   occupy it and if the damage cannot be repaired with
                   reasonable diligence within 120 days from the time the damage
                   occurs, the Landlord may terminate this Lease by giving to
                   the Tenant notice in writing of such termination, in which
                   event this Lease shall be at an end from the date of such
                   damage and the Rent and all other payments for which the
                   Tenant is liable hereunder shall be apportioned and paid in
                   full to the date of such damage and if the Landlord does not
                   terminate this Lease as aforesaid, then the Landlord shall
                   repair the Building with all reasonable speed and the Rent
                   hereby reserved and all other payments for which the Tenant
                   is liable hereunder shall abate from the date of the
                   occurrence of the damage until the Building shall have been
                   restored to substantially the same condition as prior to the
                   occurrence of such damage.

            (ii)   If the damage be such that the Building is rendered wholly
                   unfit for occupancy, or it is impossible or unsafe to use or
                   occupy it, but if in either event the damage can be repaired
                   with reasonable diligence within 120 days from the happening
                   thereof, then the Rent hereby reserved and all other payments
                   for which the Tenant is liable hereunder shall abate from the
                   date of occurrence of the damage until the Building has been
                   restored to substantially the same condition as prior to the
                   occurrence of such damage, and the Landlord shall repair the
                   damage with all reasonable speed;

            (iii)  If the damage can be made good as aforesaid within 120 days
                   of its occurrence and is such that the Building is capable of
                   being partially used for the purposes for which the Tenant
                   has used them then until such damage has been repaired, the
                   Tenant shall pay that portion of the Rent hereby reserved and
                   all other payments for which the Tenant is liable hereunder
                   as the floor areas of the part of the Building that is fit
                   for the
<PAGE>

                                      -20-

                   Tenant's use and occupancy compares with the floor area of
                   the whole of the Building and the Landlord shall repair the
                   damage with all reasonable speed.

     (o)  Adjustments

          Upon the Tenant's occupancy of the Building and upon the termination
          of this Lease, the Landlord and the Tenant shall prorate, adjust,
          apportion and allow between themselves as of the said dates all items
          which are required to be paid by the Tenant under this Lease and
          including, without restricting the generality of the foregoing, all
          items of taxes, utility charges, repairs and maintenance, insurance
          premiums, common expenses, and all other costs, charges and expenses
          of a similar nature, to the extent that the burden thereof shall be
          borne by the Landlord until the Tenant takes possession of the
          Building and by the Tenant thereafter until it shall deliver up
          possession of the Building in accordance with the provisions hereof
          upon the termination of this Lease or of any holding over hereunder
          and not afterwards.

     (p)  Termination on Expropriation

          If the Building or any part thereof is expropriated the Landlord shall
          be entitled, at its option, to terminate the Lease by giving notice to
          the Tenant, and thereafter Rent and all other payments payable by the
          Tenant hereunder shall be apportioned and paid to the date of
          termination and the Tenant shall surrender and yield up possession of
          the Building to the Landlord and the Landlord shall be solely entitled
          to any award payable on such expropriation free of any apportionment
          in favour of the Tenant.

     (q)  Notices

          All notices, elections, demands and requests which may or are required
          to be given or made hereunder shall be in writing and either delivered
          or mailed, if to the Landlord, to:

               Hallmark Holdings Ltd.
               c/o 2100 - 1075 West Georgia Street
               Vancouver, British Columbia, V6E 3G2

               Attention: George W. Hungerford

               and if to the Tenant, to:

               Glas-Aire Industries Ltd.
               c/o 3137 Grandview Highway
               Vancouver, British Columbia,  V5M 2E9

               Attention: Craig Grossman, President
<PAGE>

                                     -21-

          and shall be deemed to have been received on the date of delivery if
          delivered or, if mailed, during periods of normal postal service,
          within 72 hours of mailing the same by postage prepaid registered mail
          from any post office in the Province of British Columbia. Either party
          may change its address by notice to the other and in such event this
          paragraph shall be deemed to be amended accordingly.

     (r)  Liens

          The Tenant shall not suffer or permit any lien under the Builders Lien
          Act or any like statute to be filed or registered against the Building
          or the Lands, by reason of work, labour, services or materials
          supplied or claimed to have been supplied to the Tenant or anyone
          holding any interest in any part thereof through or under the Tenant.
          If any such lien shall at any time be filed or registered the Tenant
          shall procure registration of its discharge within 20 days after the
          lien has come to the notice or knowledge of the Tenant; provided,
          however, that should the Tenant desire to contest in good faith the
          amount or validity of any lien and it shall have so notified the
          Landlord, and if the Tenant shall have deposited with the Landlord or
          paid into court to the credit of any lien action, the amount of the
          lien claimed plus a reasonable amount for costs, then the Tenant may
          defer payment of such lien claim for a period of time sufficient to
          enable the Tenant to contest the claim with due diligence, provided
          always that neither the Building nor any part thereof, nor the
          Tenant's leasehold interest therein shall thereby become liable to
          forfeiture or sale. The Landlord may, but shall not be obliged to
          discharge any lien filed or registered at any time if in the
          Landlord's judgment the Building or the Lands or any part thereof or
          the Tenant's interest therein becomes liable to any forfeiture or sale
          or is otherwise in jeopardy, and any amount paid by the Landlord in so
          doing, together with all reasonable costs and expenses of the
          Landlord, shall be reimbursed to the Landlord by the Tenant on demand
          and it may be recovered as Rent in arrears. Nothing herein contained
          shall authorize the Tenant, or imply any consent or agreement on the
          part of the Landlord, to subject the Landlord's estate and interest in
          the Building to any lien.

4.   OPTION TO RENEW

          Provided that the Tenant has duly and regularly paid the Rent and has
          duly and regularly performed each and every of the covenants herein to
          be performed by the Tenant, the Tenant shall have the right to extend
          the term of this Lease for one further term of five (5) years (the
          "First Renewal Term") upon giving the Landlord at least six months
          prior to the expiration of the Term written notice of the exercise of
          such right. If this right of renewal is exercised, the Lease shall
          continue for the First Renewal Term on the same terms and conditions
          as this Lease, save and except minimum rent (which is to be negotiated
          for the First Renewal Term), Landlord's Work, the Allowance and this
          right of renewal. The minimum rent payable by the Tenant during the
          First Renewal Term shall be the fair market rental value based on the
          rents then payable for leased premises of the same permitted use,
          similar size, type, location and quality in the same geographical area
          as mutually agreed upon by the Landlord and the Tenant by a
<PAGE>

                                     -22-

          date six months prior to the date upon which the First Renewal Term is
          to commence. If the Landlord and the Tenant are unable to agree on or
          before the aforesaid date upon the fair market rental value of the
          Building, the fair market rental value payable by the Tenant to the
          Landlord shall be determined by arbitration pursuant to the Commercial
          Arbitration Act of British Columbia, as amended from time to time, or
          any successor legislation; provided always that in no event will the
          minimum rent payable during the First Renewal Term be less than that
          payable during the Seventh Year of the Term.

5.   MISCELLANEOUS

     (a)  Net Lease

          It is the intent of this Lease and agreed by the parties hereto that
          except as otherwise set out in this Lease, this is an absolutely net
          lease and that all and every cost, expense, rate, tax or charge in any
          way related to the Building will be borne by the Tenant without any
          variation, setoff or deduction whatsoever.

     (b)  Marginal Notes

          The captions herein have been inserted as a matter of convenience and
          for reference only and in no way define, limit or enlarge the scope or
          meaning of this Lease or any provision hereof.

     (c)  Binding Effect

          This Lease and anything herein contained shall extend to, bind and
          enure to the benefit of the successors and assigns of each of the
          parties hereto subject to the consent of the Landlord being obtained,
          as hereinbefore provided, to any assignment or sublease by the Tenant
          and, where there is more than one Landlord or Tenant or Guarantor (if
          any) or where the Landlord or Tenant or Guarantor (if any) is a male,
          female or a corporation, the provisions herein shall be read with all
          grammatical changes thereby rendered necessary. All covenants herein
          contained shall be deemed joint and several and all rights and powers
          reserved to the Landlord may be exercised by either the Landlord or
          its agents or representatives.

     (d)  Governing Law

          This Lease shall be construed in accordance with the laws of the
          Province of British Columbia.

     (e)  Registration

          The Landlord shall prepare this Lease in 8.5" by 11" format to enable
          the Tenant to register the Lease on title if it so desires and
          provided that the Tenant pays all costs, expenses, fees, and taxes in
          connection with the registration of this Lease in the
<PAGE>

                                     -23-

          appropriate land title office and the costs of any plans required for
          such registration and the Landlord shall execute and deliver this
          Lease in registrable form.

     (f)  Prepaid Rent and Security Deposit

          The Landlord acknowledges receipt of the sum of FIFTY-ONE THOUSAND,
          EIGHTY-ONE DOLLARS AND EIGHTY CENTS ($51,081.80) from the Tenant,
          which sum shall be applied firstly in payment of the fourth month's
          minimum rent, and the remainder held by the Landlord, without
          liability for interest, as security for the faithful performance by
          the Tenant of the terms of this Lease, and if at any time Rent is
          overdue, then the Landlord may apply any portion of the deposit toward
          payment of such Rent and any money not so applied will be applied
          toward payment of minimum rent for the last month of the Term.

     (g)  Assignment by Landlord

          If the Landlord sells an interest in the Building, the Lands or in
          this Lease, to the extent that the purchaser or assignee agrees to be
          responsible for compliance with the covenants and obligations of the
          Landlord hereunder, the Landlord without further agreement will be
          relieved of liability under those covenants and obligations.

     (h)  Time

          Time shall be of the essence hereof.

     (i)  Entire Agreement

          The Tenant acknowledges that there are no covenants, representations,
          warranties, agreements or conditions expressed or implied, collateral
          or otherwise forming part of or in any way affecting or relating to
          this Lease or the Building save as expressly set out in this Lease and
          the Offer to Lease made by the Tenant on the 6th day of February, 2002
          and accepted by the Landlord on the 6th day of February, 2002 (the
          "Offer") and that this Lease and the Offer constitute the entire
          agreement between the Landlord and the Tenant and may not be modified
          except as herein explicitly provided or except by subsequent agreement
          in writing of equal formality hereto executed by the Landlord and the
          Tenant.
<PAGE>

                                     -24-

WITNESS WHEREOF the parties hereto have executed this Lease as of the day and
year first written above.


HALLMARK HOLDINGS LTD.
by its authorized signatory:

Per: __________________________
     George William Hungerford
     Authorized Signatory



GLAS-AIRE INDUSTRIES LTD.
by its authorized signatory:

Per: __________________________
     Authorized Signatory
<PAGE>

                                  SCHEDULE "A"


Attach Plan of Premises
<PAGE>

                                     -26-

                                  SCHEDULE "B"

                                LANDLORD'S WORK

The Landlord shall use its best efforts to complete the following work on or
before the Commencement Date:

1.  Ensure that all lighting, plumbing, air conditioning, heating units, and
loading doors are functional and in good working order.

2.  Provide washrooms as follows:

    (a)   new washrooms in
          warehouse area:            6 cubicles plus 3 sinks for women

                                     3 cubicles plus 3 urinals plus 3 sinks for
                                     men

    (b)   existing washrooms
               in office area:       2 cubicles for women

                                     1 cubicle plus 1 urinal plus 1 private
                                     washroom for men.


3.  Provide primary electrical service to the Building as follows:

Following removal of all conditions of the Offer, the Landlord shall immediately
commence installation of the new electrical service as described in the Offer
which will be contracted on a best efforts basis to complete on or about 16
weeks.   For greater certainty, particulars and specifications of the new
electrical work is attached and will be installed in compliance with the
standards and requirements of the municipal governmental authorities.  Power
interruptions will be anticipated in order to complete installation of the new
electrical work.  Reasonable prior notice of any power interruptions will be
given to the Tenant.

</TEXT>
</DOCUMENT>
</SUBMISSION>
