UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

(Mark One)
[x]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934
       For the quarterly period ended June 30, 1999

[ ]  TRANSITION REPORT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
      For the Transition Period from _______________ TO _______________.

                                    333-44747
                            (Commission File Numbers)

                        ROSEDALE DECORATIVE PRODUCTS LTD.
             (Exact name of registrant as specified in its charter)

<TABLE>
<CAPTION>
<S>                                                                             <C>
                  Ontario, Canada                                               5110
         (State or other jurisdiction of                                        (Primary Standard Industrial
         incorporation or organization)                                         Classification Code Number)
</TABLE>



                               731 Millway Avenue
                                Concord, Ontario
                                 Canada L4K 3S8
                    (Address of principal executive offices)

                                 (619) 794-2602
              (Registrants' telephone number, including area code)

                                 Not Applicable

     (Former name,  former address and former fiscal year, if changed since last
report)

     Indicate by check mark whether the  Registrants  (1) have filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrants  were required to file such  reports),  and (2) have been subject to
such filing requirements for the past 90 days. YES [ X ] NO[ ]

     As of June 30, 1999,  2,765,000  shares of Common  Stock,  no par value per
share, of Rosedale Decorative Products Ltd. were issued and outstanding.




<PAGE>
                                     PART I
                              FINANCIAL INFORMATION

Item 1.  Financial Statements

                        ROSEDALE DECORATIVE PRODUCTS LTD.

                    INTERIM CONSOLIDATED FINANCIAL STATEMENTS

                                  JUNE 30, 1999

                                   (Unaudited)


                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
<S>                                                                                                                    <C>
       Interim Consolidated Balance Sheet as of June 30, 1999 and December 31, 1998                                    3 - 4

       Interim Consolidated Statement of Income for the three months ended June 30,1999                                5

       Interim Consolidated Statement of Income for the six months ended June 30, 1999                                 6

       Interim Consolidated Statement of Cash Flows for the period ended June 30, 1999                                 7 - 8

       Interim Consolidated Statement of Stockholders' Equity for the period ended
              June 30, 1999                                                                                            9

       Notes to Interim Consolidated Financial Statements                                                              10 - 25

</TABLE>






<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Interim Consolidated Balance Sheet
As of June 30, 1999 and December 31, 1998
(Amounts expressed in US dollars)
(Unaudited)

<TABLE>
<CAPTION>
                                         Six Months Ended   Year Ended
                                           June 30, 1999  December 31, 1998

                                                  $            $

                                                      ASSETS
       CURRENT ASSETS

<S>                                           <C>          <C>
    Cash .................................    3,004,591    3,417,414
    Accounts receivable (note 3) .........    4,666,930    3,696,050
    Inventory (note 4) ...................    6,880,146    7,229,444
    Prepaid expenses and sundry assets ...      488,494      288,764
    Income taxes recoverable .............       38,524       38,738
                                             ----------   ----------

                                             15,078,685   14,670,410


LOANS RECEIVABLE FROM AFFILIATED COMPANIES
    (note 5) .............................        2.487        1,933

DEFERRED PRODUCT COSTS (note 6) ..........      684,847      851,202

DEFERRED POLICY COSTS (note 7) ...........      281,408      268,506

MORTGAGES RECEIVABLE (note 8) ............      337,306      321,841

PROPERTY, PLANT AND EQUIPMENT (note 9) ...    2.673,930    2,160,433
                                             ----------   ----------
                                             19,058,663   18,274,325
                                             ==========   ==========

</TABLE>






   The accompanying notes are an integral part of these financial statements.





<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Interim Consolidated Balance Sheet
As of June 30, 1999 and December 31, 1998
(Amounts expressed in US dollars)
(Unaudited)
<TABLE>
<CAPTION>

                                                            Six Months Ended     Year Ended
                                                              June 30, 1999    December 31, 1998

                                                                    $             $

                                                    LIABILITIES
       CURRENT LIABILITIES

<S>                         <C>                                  <C>            <C>
    Bank indebtedness (note 10) ............................     3,615,893      3,327,022
    Accounts payable and accrued expenses
         (note 11) .........................................     4,571,808      4,581,034
    Income taxes payable ...................................          --             --
    Current portion of long-term debt (note 12) ............          --           77,076
                                                                 ---------      ---------
                                                                 8,187,701      7,985,132

LONG-TERM DEBT (note 12) ...................................       996,651        950,956

ADVANCES FROM RELATED PARTIES (note 13) ....................     1,172,089      1,174,987

DEFERRED INCOME TAXES ......................................       164,320        156,786
                                                                ----------     ----------
                                                                10,520,761     10,267,861
                                                                ----------     ----------

                                        STOCKHOLDERS' EQUITY

CAPITAL STOCK (note 14) ....................................     5,013,883      5,013,883

ADDITIONAL PAID-IN CAPITAL (note 14) .......................       142,314        142,314

CUMULATIVE TRANSLATION ADJUSTMENT ..........................        (1,744)      (388,341)

RETAINED EARNINGS ..........................................     3,383,449      3,238,608
                                                                ----------      ---------
                                                                 8,537,902      8,006,464
                                                                ----------      ---------
                                                                19,058,663     18,274,325
                                                                ==========     ==========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Interim  Consolidated  Statement of Income
For the three  months ended June 30,
(Amounts expressed in US dollars) (Unaudited)
<TABLE>
<CAPTION>

                                           Three-months Three-months
                                             June 30,     June 30,
                                               1999         1998
                                                $             $

<S>                                         <C>           <C>
SALES ..................................    4,470,560     4,244,876

COST OF SALES ..........................    3,048,796     2,224,517
                                            ---------     ---------
GROSS PROFIT ...........................    1,421,764     2,020,359
                                            ---------     ---------
OPERATING EXPENSES

    General and administrative .........      582,918       526,546
    Selling ............................      667,828       532,732
    Design studio ......................      178,985       190,335
    Book development costs .............      (30,803)       30,370
    Amortization .......................      181,592       150,770
                                            ---------     ---------

TOTAL OPERATING EXPENSES ...............    1,580,520     1,430,753
                                            ---------     ---------

OPERATING INCOME .......................     (158,756)      589,606

    Interest expense ...................       62,702       137,384
                                            ---------     ---------

INCOME BEFORE INCOME TAXES .............     (221,458)      452,223

    Income taxes (note 15) .............      (40,530)      184,539
                                            ----------     ---------

NET INCOME .............................     (180,927)      267,683
                                            ==========    ==========

Net Income Per Share (note 14) .........        (0.07)         0.12
                                            ==========    ==========

Weighted average number of common shares
    Outstanding (note 14) ..............    2,765,000     2,160,753
                                            ==========    ==========

</TABLE>


   The accompanying notes are an integral part of these financial statements.

<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Interim Consolidated Statement of Income
For the six months ended June 30,
(Amounts expressed in US dollars)
(Unaudited)
<TABLE>
<CAPTION>

                                            Six-months   Six-months
                                             June 30,     June 30,
                                               1999        1998

                                                 $          $

<S>                                         <C>         <C>
SALES ..................................    9,518,017   10,751,465

COST OF SALES ..........................    5,973,239    6,302,625
                                            ---------   ----------

GROSS PROFIT ...........................    3,544,778    4,448,840
                                            ---------   ----------

OPERATING EXPENSES

    General and administrative .........    1,179,506    1,096,921
    Selling ............................    1,229,344    1,042,976
    Design studio ......................      371,734      364,195
    Book development costs .............       92,449       81,262
    Amortization .......................      369,134      308,562
                                            ---------   ----------

TOTAL OPERATING EXPENSES ...............    3,242,167    2,893,915
                                            ---------   ----------

OPERATING INCOME .......................      302,611    1,554,925

    Interest expense ...................       90,289      220,553
                                            ---------   ----------

INCOME BEFORE INCOME TAXES .............      212,322    1,334,373

    Income taxes (note 15) .............       67,481      537,539
                                            ---------   ----------

NET INCOME .............................      144,841      796,833
                                            =========   ==========

Net Income Per Share (note 14) .........         0.05         0.37
                                            =========   ==========

Weighted average number of common shares
    Outstanding (note 14) ..............    2,765,000    2,160,753
                                            =========   ==========

</TABLE>
   The accompanying notes are an integral part of these financial statements.
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Interim Consolidated Statements of Cash Flows
(Amounts expressed in US dollars)
(Unaudited)
<TABLE>
<CAPTION>

                                                                             Six-months     Six-months
                                                                               June 30,      June 30,
                                                                                1999          1998
                                                                                  $             $

       Cash flows from operating activities:

<S>                                                                            <C>           <C>
    Net income ..........................................................      144,841       796,833
                                                                              ---------     ---------

    Adjustments to reconcile net income to net cash provided by operating
         activities:

    Amortization ........................................................      369,134       308,562
    (Increase) decrease in deferred product costs .......................      204,614       441,106
    (Increase) in accounts receivable ...................................     (783,160)     (542,672)
    (Increase) decrease in inventory ....................................      687,801       314,537
    (Increase) in prepaid expenses and sundry assets ....................     (183,483)     (132,655)
    Increase (decrease) in accounts payable and accrued expenses ........     (226,428)     (228,891)
    Increase (decrease) in income taxes payable/recoverable .............        2,049       456,872
    Increase in deferred income taxes ...................................         --          (4,843)
                                                                              ---------    ---------

         Total adjustments ..............................................       70,527       612,016
                                                                              ---------    ---------

    Net cash provided by (used in) operating activities .................      215,368     1,408,849
                                                                              ---------    ---------

Cash flows from investing activities:

    Increase in deferred policy costs ...................................            1         4,647
    Purchases of property, plant and equipment ..........................     (773,593)     (546,296)
    Increase in mortgages receivable ....................................         --          66,481
                                                                              ---------    ---------

    Net cash used in investing activities ...............................     (773,592)     (475,168)
                                                                              =========    =========

</TABLE>


   The accompanying notes are an integral part of these financial statements.

<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Interim Consolidated Statements of Cash Flows
(Amounts expressed in US dollars)
(Unaudited)
<TABLE>
<CAPTION>

                                                                     Six-months    Six-months
                                                                      June 30,      June 30,
                                                                        1999          1998
                                                                         $              $

Cash flows from financing activities:

<S>                                                                    <C>         <C>
     Issuance of Common Stock ...................................         --       4,306,615
     Proceeds from bank indebtedness ............................      127,356      (582,605)
     (Repayment of) proceeds from loans with affiliated companies         (455)       34,865
     Proceeds from long-term debt ...............................      (79,752)      (67,693)
     Repayment of stockholders' loans ...........................      (58,602)      455,370
     Proceeds from loans with directors .........................         --        (681,008)
                                                                     ----------    ----------

     Net cash provided by financing activities ..................      (11,453)    3,465,544
                                                                     ----------    ----------

Effect of foreign currency exchange rate changes ................      156,854       (35,844)
                                                                     ----------    ----------

Net (decrease) increase in cash and cash equivalents ............     (412,823)    4,363,381

Cash and cash equivalents, January 1 ............................    3,417,414       442,655
                                                                     ----------    ----------

End of six month period ended June 30 ...........................    3,004,591     4,806,036
                                                                     ==========    ==========

Income taxes paid ...............................................      146,000        38,428
                                                                     ==========    ==========

Interest paid ...................................................      160,875       163,311
                                                                     ==========    ==========


</TABLE>


   The accompanying notes are an integral part of these financial statements.

<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Interim Consolidated Statements of Stockholders' Equity
(Amounts expressed in US dollars)
(Unaudited)
<TABLE>
<CAPTION>

                                                          Common
                                                           Stock                                    Cumulative
                                                       Number of                       Retained    Translation
                                                          Shares          Amount       Earnings    Adjustments
                                                                              $              $              $

<S>                    <C> <C>                         <C>                  <C>        <C>           <C>
Balance as of December 31, 1997                        1,500,000            2          2,188,055     (226,990)

Foreign currency translation (adj)                            --           --           (251,990)      15,943

Issuance of common stock ......                        1,100,000    4,306,776

Net income for the six-month
   period to June 30, 1998 ....                               --                         796,833         --
                                                       ---------    -----------        ----------    ---------

Balance as of June 30, 1998 ...                        2,600,000    4,306,778          2,732,898     (211,047)

Balance as of December 31, 1998                        2,765,000    5,156,197          3,238,608     (388,341)

Foreign currency translation ..                              --           --           --             386,597

Net income for the six-month
   period to June 30, 1999 ....                              --           --             144,841         --
                                                       ---------    -----------        ----------    ---------

Balance as of June 30, 1999                            2,765,000    5,156,197          3,383,449      (1,744)
                                                       =========    ===========        ==========    =========
</TABLE>











   The accompanying notes are an integral part of these financial statements.

<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Interim Consolidated Financial Statements
(Amounts expressed in US dollars)
(Unaudited)


       1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

           a)   Basis of Presentation

                         These  consolidated  financial  statements  include the
                    accounts  of  Rosedale   Decorative   Products   Ltd.   (the
                    "Company") and its wholly owned subsidiaries, 521305 Ontario
                    Inc.  ("521305") and 1010037 Ontario Inc.  ("1010037"),  the
                    parent companies of the operating subsidiaries Ontario Paint
                    and Wallpaper Limited ("Ontario") and Rosedale Wallcoverings
                    and Fabrics Inc. ("Rosedale").

                         On June 15, 1998,  the Company  acquired all the issued
                    and  outstanding  common  shares of 521305 and 1010037  from
                    their  shareholders in exchange for 1,500,000  shares of the
                    Company.  Since these companies were under common control by
                    a related group,  this  transaction  has been recorded using
                    the   pooling  of  interest   method   whereby  the  assets,
                    liabilities and operations have been  consolidated as if the
                    Company  had  owned  the  wholly-owned   subsidiaries  since
                    incorporation.  The Company was incorporated on May 14, 1997
                    by its shareholders  for the purpose of consolidating  their
                    100%  ownership  interests  in  anticipation  of an  initial
                    public offering.

                         All material  inter-company  accounts and  transactions
                    have been eliminated. (see note 14)

           b)   Principal Activities

                         The  Company  is  principally  engaged  in the  design,
                    manufacture  and  marketing  of  wallpapers  and  decorative
                    fabrics in Canada,  U.S.  and Europe  through its  operating
                    subsidiaries   Ontario  Paint  and  Wallpaper   Limited  and
                    Rosedale  Wallcoverings and Fabrics Inc. These  subsidiaries
                    were  incorporated  in Canada on December 31, 1971 and April
                    7, 1981, respectively.

           c)   Deferred Product costs

                         Expenditures relating to the design and distribution of
                    wallpaper   and  fabric  sample   books,   consisting   book
                    development  and design costs relating to  collections  that
                    have not been  launched,  are deferred and amortized  over a
                    three-year  period on a straight-line  basis.  Proceeds from
                    the  sale of  sample  books  are  offset  against  the  book
                    development costs when received.


           d)   Cash and Cash Equivalents (Bank Indebtedness)

                         Cash and cash equivalents (bank indebtedness)  includes
                    cash on hand,  amounts due from and to banks,  and any other
                    highly liquid investments purchased with a maturity of three
                    months or less. The carrying amounts approximate fair values
                    because of the short maturity of those instruments.

           e)   Other Current Financial Instruments

                         The   carrying   amount  of  the   Company's   accounts
                    receivable  and payable  approximates  fair value because of
                    the short maturity of these instruments.








<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Interim Consolidated Financial Statements
(Amounts expressed in US dollars)
(Unaudited)




       1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   (cont'd)

           f)   Long-term Financial Instruments

                         The  fair  value  of  each of the  Company's  long-term
                    financial assets and debt instruments is based on the amount
                    of  future  cash  flows   associated  with  each  instrument
                    discounted  using an estimate of what the Company's  current
                    borrowing   rate  for  similar   instruments  of  comparable
                    maturity would be.

           g)   Inventory

                         Inventory  is  valued  at the  lower  of cost  and fair
                    market value. Cost is determined on the first-in,  first-out
                    basis.

           h)   Property, Plant and equipment

                         Property,  plant and equipment are recorded at cost and
                    are amortized on the basis of their  estimated  useful lives
                    at the undernoted rates and methods:
<TABLE>
<CAPTION>

<S>                                                           <C>                           <C>
                Leasehold improvements                        10%                           Straight-line
                Cylinders and related design costs            5 years                       Straight-line
                Equipment furniture and fixtures              20%                           Declining balance
                Computer equipment                            30% and 20%                   Declining balance
                Automobile                                    30%                           Declining balance
</TABLE>

                         Amortization  for  assets  acquired  during the year is
                    recorded  at  one-half  of  the   indicated   rates,   which
                    approximate when they were put into use.

           i)   Income taxes

                         The   Company   accounts   for  income  tax  under  the
                    provisions  of Statement of Financial  Accounting  Standards
                    No. 109, which  requires  recognition of deferred tax assets
                    and liabilities for the expected future tax  consequences of
                    events that have been included in the  financial  statements
                    or tax returns. Deferred income taxes are provided using the
                    liability  method.  Under  the  liability  method,  deferred
                    income taxes are  recognized for all  significant  temporary
                    differences between the tax and financial statement bases of
                    assets and liabilities.

<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Interim Consolidated Financial Statements
(Amounts expressed in US dollars)
(Unaudited)



       1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   (cont'd)

           j)   Foreign Currency Translation

                         The Company maintains its books and records in Canadian
                    dollars.  Foreign currency transactions are translated using
                    the temporal method.  Under this method,  all monetary items
                    are  translated  into Canadian funds at the rate of exchange
                    prevailing  at balance  sheet date.  Non-monetary  items are
                    translated  at  historical  rates.  Income and  expenses are
                    translated at the rate in effect on the  transaction  dates.
                    Transaction   gains  and   losses   are   included   in  the
                    determination of earnings for the year.

                         The  translation  of  the  financial   statements  from
                    Canadian  dollars  ("CDN $") into United  States  dollars is
                    performed for the  convenience of the reader.  Balance sheet
                    accounts are  translated  using  closing  exchange  rates in
                    effect at the  balance  sheet date and  income  and  expense
                    accounts  are  translated  using an  average  exchange  rate
                    prevailing  during each reporting  period. No representation
                    is made that the Canadian dollar amounts could have been, or
                    could be,  converted  into United Sates dollars at the rates
                    on the  respective  dates and or at any other certain rates.
                    Adjustments  resulting from the  translation are included in
                    the  cumulative  translation  adjustments  in  stockholders'
                    equity.

           k)   Sales

                         Sales represent the invoiced value of goods supplied to
                    customers.  Sales are recognized  upon delivery of goods and
                    passage of title to customers.

           l)   Use of Estimates

                         The  preparation  of  financial   statements   requires
                    management  to make  estimates and  assumptions  that affect
                    certain  reported  amounts  of assets  and  liabilities  and
                    disclosures 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.

           m)   Long-Lived Assets

                         On January 1, 1996, the Company  adopted the provisions
                    of SFAS No. 121, Accounting for the Impairment of Long-Lived
                    Assets and for Long-Lived Assets to be Disposed of. SFAS No.
                    121 requires that  long-lived  assets to be held and used by
                    an entity be  reviewed  for  impairment  whenever  events or
                    changes in  circumstances  indicate that the carrying amount
                    of an  asset  may  not  be  recoverable.  SFAS  No.  121  is
                    effective   for  financial   statements   for  fiscal  years
                    beginning after December 15, 1995.  Adoption of SFAS No. 121
                    did not have a material  impact on the  Company's  result of
                    operations.




<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Interim Consolidated Financial Statements
(Amounts expressed in US dollars)
(Unaudited)


       1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   (cont'd)

           n)   Stock Based Compensation

                         In  December  1995,   SFAS  No.  123,   Accounting  for
                    Stock-Based Compensation,  was issued. It introduced the use
                    of a fair  value-based  method of accounting for stock-based
                    compensation. It encourages, but does not require, companies
                    to   recognize    compensation   expense   for   stock-based
                    compensation  to  employees  based  on the  new  fair  value
                    accounting  rules.  The Company chose to continue to account
                    for  stock-based  compensation  using  the  intrinsic  value
                    method prescribed in Accounting Principles Board Opinion No.
                    25. " Accounting for Stock Issued to Employees", and related
                    interpretations.  Accordingly,  compensation  cost for stock
                    options is  measured  as the  excess,  if any, of the quoted
                    market price of the Company's stock at the measurement  date
                    over the amount an employee must pay to acquire the stock.

       COMPREHENSIVE INCOME

                         The  Company  has  adopted   Statement   of   Financial
                    Accounting Standard No. 130 "Reporting Comprehensive Income"
                    as of  December 1, 1998 which  requires  new  standards  for
                    reporting  and  display  of  comprehensive  income  and  its
                    components in the financial statements. However, it does not
                    affect  net  income  or  total  stockholders'   equity.  The
                    components of comprehensive income are as follows:
<TABLE>
<CAPTION>

                                                                                     1999                  1998

                                                                                            $                          $

<S>                   <C>                                                         <C>                  <C>
           NET INCOME 1ST Qtr                                                     325,768              529,150

           OTHER COMPREHENSIVE INCOME (LOSS)

                Foreign currency translation                                      130,635             (22,522)
                                                                                  -------             --------

           COMPREHENSIVE INCOME as at MARCH 31                                    456,403              506,628

           NET INCOME (Loss) 2nd Qtr                                            (180,927)              267,683

                Foreign currency translation                                      255,962               38,465
                                                                                  -------               ------

           COMPREHENSIVE INCOME as at JUNE 30                                     531,438              812,776
                                                                                  =======             ========


       3.  ACCOUNTS RECEIVABLE                                                    June 30         December 31,
                                                                                     1999              1998

                                                                                           $                $

           Accounts receivable                                                      4,847,853        3,842,820
           Less:  Allowance for doubtful accounts                                     180,923          146,770
                                                                                    ---------        ---------

           Accounts receivable, net                                                 4,666,930        3,696,050
                                                                                    =========        =========

</TABLE>



<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Interim Consolidated Financial Statements
(Amounts expressed in US dollars)
(Unaudited)
<TABLE>
<CAPTION>



       4.  INVENTORY                                                                June 30,      December 31,
                                                                                      1999            1998

                                                                                       $               $
           Inventory comprised the following:

<S>                                                                                 <C>             <C>
                Raw materials                                                         210,023         185,956
                Finished goods                                                      6,670,123       7,043,488
                                                                                    ---------       ---------

                                                                                    6,880,146       7,229,444
                                                                                    ---------       ---------
</TABLE>

       LOANS RECEIVABLE FROM AFFILIATED COMPANIES

           The loans  receivable  from  affiliated  companies  which are related
through  common  ownership  bear  interest at prime plus 1.5%,  have no specific
repayment terms, and are not expected to be repaid prior to July 1, 2000.

<TABLE>
<CAPTION>

       DEFERRED PRODUCT COSTS
                                                                                 June 30,        December 31
                                                                                     1999            1998
                                                                                           $               $

<S>                                                                                 <C>             <C>
           Book development costs                                                   1,352,489       1,285,831
           Deferred software costs                                                     65,601          58,338
                                                                                    ---------       ---------

           Cost                                                                     1,418,090       1,344,169
                                                                                    ---------       ---------

           Less:                                            Accumulated amortization

                  Book development costs                                              698,921         467,454
                  Deferred software costs                                              34,322          25,513
                                                                                    ---------       ---------
                                                                                      733,243         492,967
                                                                                    ---------       ---------

           Net Deferred Product Costs                                                 684,847         851,202
                                                                                    =========       =========

</TABLE>

       7.  DEFERRED POLICY COSTS

                         Deferred policy costs represents the prepaid portion of
                    premiums on the life insurance  policies referred to in note
                    21.



<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Interim Consolidated Financial Statements
(Amounts expressed in US dollars)
(Unaudited)

       8.  MORTGAGES RECEIVABLE

                         Second mortgages from companies  related through common
                    ownership,  secured by land and buildings,  bear interest at
                    9% and are payable on demand.  No  repayments  are  expected
                    prior to April 1, 2000.
<TABLE>
<CAPTION>

                                                                                     June 30,      December 31,
                                                                                       1999            1998
                                                                                        $               $

<S>        <C>                                                                        <C>             <C>
           1216748 Ontario Inc.                                                       176,877         168,768
           1217576 Ontario Inc.                                                       160,429         153,073
                                                                                    ---------       ---------

                                                                                      337,306         321,841
                                                                                    =========       =========
</TABLE>


                         The fair value of the mortgages receivable is estimated
                    to be $350,000.


       PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
                                                                                      June 30,       December 31,
                                                                                       1999            1998
                                                                                           $               $

<S>                                                                                    <C>             <C>
           Leasehold improvements                                                      30,635          29,230
           Automobile                                                                  19,611          18,711
           Equipment and furniture                                                    297,492         283,502
           Furniture and fixtures                                                     252,075         240,517
           Computer and equipment                                                     489,681         348,874
           Cylinders and related design costs                                       4,584,587       3,716,883
                                                                                    ---------       ---------

           Cost                                                                     5,674,081       4,637,717
                                                                                    ---------       ---------

           Less:                                            Accumulated amortization

                  Leasehold improvements                                               14,817          12,671
                  Automobile                                                           17,679          16,380
                  Equipment and furniture                                             223,426         203,399
                  Furniture and fixtures                                              194,792         185,861
                  Computer and equipment                                              295,997         245,381
                  Cylinders and related design costs                                2,253,440       1,813,592
                                                                                    ---------       ---------

                                                                                    3,000,151       2,477,284
                                                                                    ---------       ---------

           Net Assets                                                               2,673,930       2,160,433
                                                                                    =========       =========


</TABLE>
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Interim Consolidated Financial Statements
(Amounts expressed in US dollars)
(Unaudited)

       10.   BANK INDEBTEDNESS

                         The Company has  available  credit  facilities  up to a
                    maximum of  $6,735,000  ($10,160,000  Canadian),  which bear
                    interest at rates varying  between the bank's prime rate and
                    prime plus  0.25%.  The  indebtedness  is secured by general
                    assignments of book debts, pledge of inventory under Section
                    427 of the Bank Act of Canada,  general security  agreements
                    providing   a  first   floating   charge  over  all  assets,
                    guarantees  and  postponement  of  claims  to a  maximum  of
                    $1,657,000  from the  Company,  guarantees  from  affiliated
                    companies up to $563,000,  assignment  of life  insurance of
                    $1,000,000  (Cdn) on each of the  lives of two key  officers
                    and assignment of fire insurance.


       ACCOUNTS PAYABLE AND ACCRUED EXPENSES
<TABLE>
<CAPTION>
                                                                                    June 30,      December 31,
                                                                                     1999             1998
                                                                                       $                $
           Accounts payable and accrued expenses is comprised of the following:

<S>                                                                                 <C>              <C>
                Trade payables                                                      4,265,984        4,230,024
                Accrued expenses                                                      305,824          351,010
                                                                                    ---------       ----------

                                                                                    4,571,808        4,581,034
                                                                                    =========       ==========


       LONG-TERM DEBT
                                                                                    June 30,    December 31,
                                                                                      1999             1998
                                                                                        $                $
           a)   Settlement Payable

                Settlement of a claim initiated by a third party payable $7,242
                    monthly.  The fair value of the settlement payable is
                    estimated to be $138,000                                          -                 77,076
                                                                                    ---------       ----------

           b)   Insurance Loan

                Amount in excess  of cash  surrender  values  of life  insurance
                    policies (note 21) which is payable on demand but is
                     expected  to become due for  payment in the year 2004.  The
                    loan  bears  interest  at prime  plus 1.5% and is secured by
                    letters of guarantee  from a major  Canadian  Chartered Bank
                    and a second collateral mortgage on the assets of the
                    companies                                                         996,651          950,956
                                                                                    ---------       ----------

                                                                                      996,651        1,028,032

                Less:  Current portion                                                      -          (77,076)
                                                                                    ---------       -----------

                Long-term portion                                                     996,651          950,956
                                                                                    =========       ===========

</TABLE>



<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Interim Consolidated Financial Statements
(Amounts expressed in US dollars)
(Unaudited)





       13.      DUE TO STOCKHOLDERS AND DIRECTORS

                         Stockholders'  and  directors  advances  are secured by
                    general security agreements,  bears interest at the National
                    Bank of Canada  prime  lending  rate plus 1.5%,  are without
                    specific  terms of  repayment,  and are not  expected  to be
                    repaid prior to July 1, 2000.




       COMMON STOCK

           Authorized

                         An unlimited number of common and preference shares

                         The preference shares are issuable upon approval by the
                    directors   with  the   appropriate   designation,   rights,
                    privileges  and  conditions  attaching to each share of such
                    series.

                Issued
<TABLE>
<CAPTION>
                                                                                     1999               1998

                                                                                        $                          $

<S>             <C>                                                             <C>                  <C>
                2,765,000 Common shares                                         5,013,883            5,013,883
                1,265,000 Warrants                                                142,314              142,314
                                                                                  -------              -------

                                                                                5,156,197            5,156,197
                                                                                ---------            ---------
</TABLE>

           During 1998, the company issued 1,265,000 common shares and 1,265,000
warrants as follows:
<TABLE>
<CAPTION>

<S>                                                                                            <C>
                Proceeds received from the issuance                                            $     6,158,857
                Issuance costs (net of income taxes)                                                (1,002,662)
                                                                                                   ------------

                Net proceeds                                                                   $     5,156,195
                                                                                                     ---------
</TABLE>

                         Net proceeds include the deferred income tax recoveries



           Weighted Average Number of Common Shares

                         On June 15, 1998, the  shareholders  transferred  their
                    100% ownership  interests in 521305 Ontario Inc. and 1010037
                    Ontario  Inc. in  exchange  for the  issuance  of  1,500,000
                    common shares of the Company.


<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Interim Consolidated Financial Statements
(Amounts expressed in US dollars)
(Unaudited)




       14.      COMMON STOCK   (cont'd)

           c)   Weighted Average Number of Common Shares

                         On June 18, 1998, the Company issued  1,100,000  common
                    shares to the public.

                         On July 29, 1998,  the Company  issued  165,000  common
                    shares to the public.

                         The  weighted  average  number of  shares  for 1998 was
                    based on the  number  of days the  shares  were  outstanding
                    during the year under the assumption that the share transfer
                    referred to above occurred at the beginning of the year.

                         The  weighted  average  number of  shares  for 1999 was
                    based on the shares  outstanding as of January 1, 1999 as no
                    further shares have been issued.

c)         The Company has adopted a Stock Option Plan (the 1998 Plan), pursuant
to which 750,000 shares of Common Stock are reserved for issuance.

                         The 1998 Plan is for a period of ten years. Options may
                    be  granted  to  officers,   directors,   consultants,   key
                    employees,  advisors and similar  parties who provide  their
                    skills and expertise to the Company.  Options  granted under
                    the 1998 Plan may be  exercisable  for up to ten years,  may
                    require  vesting,  and shall be at an exercise  price all as
                    determined  by the board.  Options will be  non-transferable
                    except to an option  holders  personal  holding  company  or
                    registered  retirement savings plan and are exercisable only
                    by the participant during his or her lifetime.

                         If a participant ceases affiliation with the Company by
                    reason of death,  permanent  disability  or retirement at or
                    after  age 70,  the  option  remains  exercisable  for three
                    months  from such  occurrence  but not beyond  the  option's
                    expiration  date.  Other  termination  gives the participant
                    three months to exercise,  except for  termination for cause
                    which results in immediate termination of the option.

                         Options  granted  under the 1998 Plan, as the directors
                    of the compensation committee or the board, may be exercised
                    either with cash, common stock having a fair market equal to
                    the cash exercise price, the participants  personal recourse
                    note,  or with an  assignment  to the Company of  sufficient
                    proceeds  from the sale of the common  stock  acquired  upon
                    exercise of the options with an  authorization to the broker
                    or selling  agent to pay that amount to the Company,  or any
                    combination of the above.

                         Options  under the 1998 Plan must be issued  within ten
                    years from the effective date of the 1998 Plan.

                         Any  unexercised  options that expire or that terminate
                    upon an  employees  ceasing to be  employed  by the  Company
                    become available again for issuance under the 1998 Plan.

                         The 1998 Plan may be  terminated or amended at any time
                    by the board of directors,  except that the number of shares
                    of common stock  reserved for issuance  upon the exercise of
                    options  granted  under the 1998  Plan may not be  increased
                    without the consent of the  stockholders of the Company.  No
                    options were granted during this period.

<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Interim Consolidated Statements
(Amounts expressed in US dollars)
(Unaudited)


           Purchase Warrants

                         During   1998,    common   stock   purchase    warrants
                    ("Warrants")  were issued  pursuant  to a Warrant  Agreement
                    between  the  company  and J.P.  Turner  and  Company.  Each
                    Warrant  entitles its holders to  purchase,  during the four
                    year period commencing on June 18, 1999, one share of common
                    stock at an  exercise  price of $6.00 per share,  subject to
                    adjustment in accordance  with the  anti-dilution  and other
                    provision referred to below.

                         The Warrants may be redeemed by the Company at any time
                    commencing  one year from June 18, 1998 (or earlier with the
                    consent   of  the   representative)   and   prior  to  their
                    expiration,  at a redemption price of $0.10 per Warrant,  on
                    not less than 30 days' prior  written  notice to the holders
                    of such Warrants, provided that the closing bid price of the
                    common stock if traded on the Nasdaq SmallCap Market, or the
                    last sale price of the common stock, if listed on the Nasdaq
                    National Market or on a national exchange,  is at least 150%
                    ($9.00 per share,  subject to  adjustment)  of the  exercise
                    price  of  the  Warrants  for a  period  of  10  consecutive
                    business  days ending on the third day prior to the date the
                    notice of  redemption  is given.  Holders of Warrants  shall
                    have  exercise  rights  until the close of the  business day
                    preceding the date fixed for redemption.

                         The  exercise  price and the number of shares of common
                    stock  purchasable  upon the  exercise of the  Warrants  are
                    subject to adjustment upon the occurrence of certain events,
                    including  stock  dividends,  stock splits,  combinations or
                    classification  of the common  stock.  The  Warrants  do not
                    confer  upon  holders  any  voting  or any  other  rights of
                    shareholders of the Company.

                         No Warrant  will be  exercisable  unless at the time of
                    exercise the Company has filed with the Commission a current
                    prospectus  covering the  issuance of common stock  issuable
                    upon the  exercise of the Warrant and the issuance of shares
                    has been  registered  or qualified or is deemed to be exempt
                    from registration or qualification under the securities laws
                    of the state of residence of the holder of the Warrant.  The
                    Company has undertaken to use its best efforts to maintain a
                    current  prospectus  relating  to the  issuance of shares of
                    common  stock upon the  exercise of the  Warrants  until the
                    expiration  of the  Warrants,  subject  to the  terms of the
                    Warrant  Agreement.  While it is the Company's  intention to
                    maintain a current prospectus, there is no assurance that it
                    will be able to do so.

<TABLE>
<CAPTION>
       15.      INCOME TAXES
                                                                                       1999               1998

                                                                                         $                  $
<S>                                                                                 <C>                <C>
            a)  Current                                                                   -                  -
                Deferred                                                            164,320            156,786
                                                                                    -------            -------

                                                                                    164,320            156,786
                                                                                    =======            =======
</TABLE>
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Interim Consolidated Statements
(Amounts expressed in US dollars)
(Unaudited)


       15.      INCOME TAXES   (cont'd)

     b) Deferred income taxes represented the tax charges derived from temporary
differences  between  amortization of property,  plant and equipment and amounts
deducted from taxable income.

     c)  Rosedale  has  operating  losses  of  approximately  $534,000  which is
expected to he used to reduce future taxable  income.  The potential tax benefit
relating to the losses have been  recognized  in the accounts to the extent that
they reduce  deferred  taxes.  The  deductibility  of these  losses if available
expires as follows:
<TABLE>
<CAPTION>

<S>             <C>                                                                              <C>
                2001                                                                             $     127,000
                2002                                                                                   286,000
                2004                                                                                    21,000
                2005                                                                                   100,000
                                                                                                       -------

                                                                                                 $     534,000
                                                                                                       =======
</TABLE>
                         Rosedale has been  reassessed by Revenue Canada and the
                    Province of Ontario for fiscal year ended  December 31, 1993
                    and  December  31,  1994  in  the  amount  of  approximately
                    $717,000 (see note 19).  Should the  assessments  be upheld,
                    the benefits of these losses may not be realized.

16.    RELATED PARTY TRANSACTIONS

                         Amounts due from or paid to companies which are related
                    through common ownership.
<TABLE>
<CAPTION>
                                                                                      1999                1998
                                                                                        $                   $
<S>               <C>                                                                   <C>              <C>
           Loan - 976168 Ontario Inc.                                                   2,487            1,933
           Mortgage receivable - 1216748 Ontario Inc.                                 176,877          168,768
           Mortgage receivable - 1217576 Ontario Inc.                                 160,429          153,073
           Rent paid - 966578 Ontario Inc.                                              8,098            4,236

</TABLE>
UNCERTAINTY DUE TO THE YEAR 2000 ISSUE

                         The year 2000 issue arises  because  many  computerized
                    systems use two digits  rather than four to identify a year.
                    Date-sensitive  systems may  recognize the year 2000 as 1900
                    or some other date,  resulting  in errors  when  information
                    using year 2000 dates is  processed.  In  addition,  similar
                    problems may arise in some systems  which use certain  dates
                    in 1999  to  represent  something  other  than a  date.  The
                    effects of the year 2000 issue may be experienced before, on
                    or after January 1, 2000, and, if not addressed,  the impact
                    on operations  and financial  reporting may range from minor
                    errors to significant  systems  failure which could affect a
                    company's ability to conduct normal business operations.  It
                    is not  possible to be certain  that all aspects of the year
                    2000 issue affecting the Company, including those related to
                    the efforts of customers, suppliers, or other third parties,
                    will be fully resolved.

<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Interim Consolidated Financial Statements
(Amounts expressed in US dollars)
(Unaudited)

       18.      SEGMENTED INFORMATION

                         Rosedale   is   engaged   primarily   in  the   design,
                    manufacturing,  marketing,  and  distribution and Ontario is
                    engaged  primarily  in the  marketing  and  distribution  of
                    wallpaper and designer fabrics.

           a) The breakdown of sales by geographic area is as follows:
<TABLE>
<CAPTION>

                Period ended June 30, 1999                                        three months   six months

<S>                                                                               <C>            <C>
                United States of America                                          $   2,159,301  $   4,945,163
                Canada                                                                2,014,579      4,104,022
                Other                                                                   296,680        468,832
                                                                                    -----------    -----------

                                                                                  $   4,470,560  $   9,518,017
                                                                                    ===========    ===========

                Period ended June 30, 1998

                United States of America                                          $   2,023,082  $   5,415,204
                Canada                                                                2,142,566      4,518,270
                Other                                                                    79,228        817,991
                                                                                    -----------    -----------

                                                                                  $   4,244,876  $  10,751,465
                                                                                    ===========    ===========
</TABLE>
                         The Company's accounting records do not readily provide
                    information on net income by geographic area.  Management is
                    of the  opinion  that the  proportion  of net  income  based
                    principally on sales,  presented below, would fairly present
                    the results of operations by geographic area.

Period ended June 30, 1999   three months  six months

United States of America .   $(104,485)   $  75,317
Canada ...................     (72,573)      62,282
Other ....................      (3,869)       7,242
                              ---------     -------
                             $(180,927)   $ 144,841
                              =========     =======

Period ended June 30, 1998

United States of America .   $ 125,739    $ 401,604
Canada ...................     141,465      334,670
Other ....................         479       60,559
                              ---------     -------
                             $ 267,683    $ 796,833
                              =========     =======





<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Interim Consolidated Financial Statements
(Amounts expressed in US dollars)
(Unaudited)




       18.      SEGMENTED INFORMATION   (cont'd)


           b) The  breakdown of  identifiable  assets by  geographic  area is as
follows:
<TABLE>
<CAPTION>

                Period ended June 30, 1999

<S>                                                                                              <C>
                United States of America                                                         $   2,519,251
                Canada                                                                              15,161,202
                Other                                                                                1,378,210
                                                                                                    ----------

                                                                                                 $  19,058,663
                                                                                                    ==========

                Year ended December 1998

                United States of America                                                         $   1,744,862
                Canada                                                                              15,430,713
                Other                                                                                1,098,750
                                                                                                    ----------

                                                                                                 $  18,274,325
                                                                                                    ==========

</TABLE>

c) Sales to major customers are as follows:
<TABLE>
<CAPTION>
                                                                                           1999           1998

<S>                                                                                   <C>            <C>
                Sales                                                                 2,042,113      2,517,971
                                                                                      ---------      ---------

                % of total sales                                                             21%           23%
                                                                                      ---------      ---------

                Amounts included in accounts receivable                              $  477,005     $1,194,710
                                                                                      ---------      ---------

           d) Purchases from major suppliers are as follows:

                                                                                           1999           1998

                Purchases                                                         $   2,316,787  $   2,940,735
                                                                                      ---------      ---------

                % of total purchases                                                        41%             33%
                                                                                      ---------      ---------

                Amounts included in accounts payable                               $  1,341,753  $   2,419,155
                                                                                      ---------      ---------
</TABLE>
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Interim Consolidated Financial Statements
(Amounts expressed in US dollars)
(Unaudited)

       19.      CONTINGENCIES


                         Rosedale has been re-assessed by Revenue Canada and the
                    Province of Ontario for fiscal years ended December 31, 1993
                    and December 31, 1994 for additional  taxes  estimated to be
                    $717,000.  The Company has objected to these  re-assessments
                    and has no obligation to pay the portion relating to Revenue
                    Canada in the amount of $450,000 until the  objections  have
                    been  processed.  No provision has been made in the accounts
                    for the additional taxes.

                         The Company has retained a firm of tax  specialists  to
                    represent  them in presenting  their case to Revenue  Canada
                    and currently the Notices of Objections are being considered
                    by the Chief of Appeals.

                         Since the Company  considers the  re-assessments  to be
                    incorrect,  no  liability  has been set up in the  accounts.
                    Should  all or part of the  re-assessments  be  upheld,  the
                    additional  income  taxes would be taken into account in the
                    year of occurrence.



       20.      COMMITMENTS

                         Minimum  payments under  operating  leases for premises
                    amount to  approximately  $300,000  per annum,  exclusive of
                    insurance and other occupancy charges.  The leases expire on
                    October 31, 2004. The future minimum lease payments over the
                    next four years are as follows:

           Payable during the following periods:

Within one year .............................   $300,905
Over one year but not exceeding two years ...    300,905
Over two years but not exceeding three years     300,905
Over three years but not exceeding four years    300,905
Over four years but not exceeding five years     300,905
Thereafter ..................................    100,302
                                               ---------

                                         $     1,604,827
                                               =========

<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Interim Consolidated Financial Statements
(Amounts expressed in US dollars)
(Unaudited)


       21.      LIFE INSURANCE POLICIES

                         The  Company  is  the  beneficiary  of  life  insurance
                    policies  with The  Prudential  of  America  Life  Insurance
                    Company (Canada) ("PruCan") taken out on the lives of two of
                    the officers for a total insured  value of $6.6 million.  In
                    consideration for this benefit, the companies agreed to fund
                    the  premiums  payable  on the  policies.  Funding  is being
                    provided  by  advances  from the  Laurentian  Bank of Canada
                    ("Laurentian").

                         The Laurentian has a legal right of set-off of the cash
                    surrender values of the life insurance  policies against the
                    debt owing to it by the companies.  Accordingly  the related
                    assets and  liabilities  have been  offset in the  financial
                    statements.


           The amounts offset were as follows:
<TABLE>
<CAPTION>

<S>                                                                                            <C>
           Cash surrender value of life insurance policies                                     $    1,817,683
           Advances                                                                            $   (1,817,683)
</TABLE>

                         The amount in excess of the cash surrender value of the
                    life  insurance  policies is included in long-term debt (see
                    note 11).

                         The advances from  Laurentian are payable on demand but
                    are expected to become due for payment in the year 2004. The
                    Company is liable for the interest on the advances. Security
                    is  provided  by first  charges on the  insurance  policies,
                    letters of credit from a major  Canadian  chartered bank and
                    general  security  agreements  creating a second charge over
                    all corporate assets.

<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Interim Consolidated Financial Statements
(Amounts expressed in US dollars)
(Unaudited)


       21.      FOREIGN EXCHANGE CONTRACTS

                         As at  June  30,  1999,  the  Company  had  outstanding
                    foreign  exchange  contracts  to sell  U.S.  dollars  to the
                    National  Bank of Canada to hedge  against  fluctuations  in
                    foreign  currency.  The  purpose  of the  Company's  foreign
                    exchange  hedging  activities is to protect the Company from
                    the risk that the eventual dollar net cash inflows resulting
                    from the sale and purchase of products in foreign currencies
                    will not be adversely affected by changes in exchange rates.
                    It is  the  Company's  policy  to use  derivative  financial
                    instruments  to reduce foreign  risks.  Fluctuations  in the
                    value  of  these   hedging   instruments   are   offset   by
                    fluctuations in the value of the underlying  exposures being
                    hedged.  As the contracts are settled,  the related gains or
                    losses,  if  any,  will be  reported  in the  statements  of
                    financial position and income.  There is a potential risk of
                    non-performance   by  the  National  Bank  of  Canada,   the
                    financial  institution  that  the  Company  has the  Foreign
                    Forward Exchange Contracts with. However, given the National
                    Bank's  prominence  and  financial  condition,  the  Company
                    believes that this risk is insignificant. The Company had no
                    contracts  outstanding with maturities  beyond one year. The
                    cash  requirements  arise as the  contracts are exercised to
                    the value of $14,020,000 (in varying amounts from April 1999
                    through  June  2000).   The  following  table  presents  the
                    aggregate national  principal  amounts,  carrying values and
                    fair  values of the  Company's  foreign  exchange  contracts
                    outstanding  as of June 30, 1999.  Deferred gains and losses
                    on forward  exchange  contracts  are  recognized in earnings
                    when  the  future  purchases  and  sales  being  hedged  are
                    recognized.  The  Company  does not hold or issue  financial
                    instruments for trading purposes.  The estimated fair values
                    of the  derivatives  used to hedge the Company's  risks will
                    fluctuate over time.
<TABLE>
<CAPTION>

                                   June 30, 1999                                                     June 30, 1998
                      -----------------------------------------------------------                -------------------------
           Forward                        Notional                                Forward         Notional
           Exchange                      Principal       Carrying      Fair       Exchange        Principal          Carrying
           Contracts                       Amounts          Value     Values      Contracts       Amounts             Values
           ------------------------- -------------  -------------  --------------  ------------- -------------     --------------

           <S>                       <C>               <C>            <C>           <C>             <C>            <C>
           1998                                -               -          -         $8,235,000       -            ($413,439)
           1999                      $  9,240,000              -      ($218,610)     9,750,000       -             (196,710)
           2000                      $  2,100,000              -      $  27,878


</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations

Results of Operation

     Three  months  ended June 30, 1999  compared to three months ended June 30,
1998.

     Revenues for the three months ended June 30, 1999 were  $4,470,560,  a 5.3%
increase over prior year's revenues of $4,244,876.  This increase was due to the
strengthening of the Canadian dollar versus the U.S. dollar, a dramatic increase
in export  sales and a  conscious  effort  to clear  collections  that are to be
discontinued in the near future.

     Gross  profit for the Company for the three  months ended June 30, 1999 was
31.8% of sales,  an decrease as compared to the same period  one-year ago, which
was 47.8%. This decrease in gross profit margin can be attributed to a change in
sales mix due to an increase in sales to the export  market and the weakening of
the U.S.  dollar,  of which over 50% of our sales arise.  The Company's  margins
were also impacted by the clearance of product during the quarter.

     Selling  expenses  for the Company  increased  by 25.4% to $667,828 for the
three month  period  ended June 30,  1999 as compared to $532,732  for the three
month period ended June 30, 1998.  This increase is  attributable  to additional
expenses incurred for public relations which did not occur until the second half
of 1998.  Also,  promotion  expense  increased due to two very successful  trade
shows held in Toronto and Quebec City. Travel expense increased  dramatically as
the  Company's  fabric sales force  attended  different  trade shows to generate
additional business, which should increase sales for the remainder of the year.

     General and administrative  expenses for the Company increased by 10.7%, to
$582,918 for the three month  period  ended June 30, 1999 from  $526,546 for the
three  months  ended June 30,  1998.  Approximately  $60,000  was  expended  for
consulting,  legal and registration  expenses relating to the new public entity.
The Company did not incur such expenses in the previous year.

     Book  development  costs for the three  month  period  ended June 30,  1999
generated a profit of $30,803,  compared  to an  expenditure  of $30,370 for the
same period last year. This decrease relates to a conscious effort to reduce the
cost of sample book production.

     Design  studio  expenses for the Company  decreased by 6.0% to $178,985 for
the three months ended June 30, 1999,  versus  $190,335 for the same period last
year. Most of these savings relate to reduction in travel costs as we have moved
a good portion of our production to Canada from the United Kingdom.

     Operating  income for the three months ended June 30, 1999 showed a loss of
$158,756  compared to a profit of $ 589,606 for the three  months ended June 30,
1998.  Income was reduced by lower  margins,  and increased  expenses from going
public in 1998.

     Interest  expense for the Company for the three  months ended June 30, 1999
decreased  to $62,702  from  $137,384  for the three months ended June 30, 1998.
This decrease in interest  expense is  attributable  to lower interest rates and
short term  investment  interest on the funds raised from the  Company's  public
offering.

     The Company  showed a net loss for the three  months ended June 30, 1999 of
$180,927 as compared  to net income of $267,683  for the same period  ended June
30, 1998.

     Earnings  per share for the three  months  ended June 30, 1999 were ($0.07)
compared to $0.10 for the same period last year using the total shares presently
outstanding of 2,765,000.


<PAGE>
Six months ended June 30, 1999 compared to six months ended June 30, 1998.

     Revenues  for the six months ended June 30, 1999 were  $9,518,017,  a 11.5%
decrease over prior year's revenues of $10,751,465. This decrease was due to the
general  weakening in the market as observed by the continued  restructuring  of
many companies within the wallpaper industry. The Company experienced a dramatic
drop in royalties  on the sales of its product in other parts of the world.  The
Company also launched one less new collection in the first six months of 1999 as
compared to 1998.

     Gross  profit for the  Company  for the six months  ended June 30, 1999 was
37.2% of sales,  a decrease as compared to the same period  one-year ago,  which
was 41.4%. This decrease in gross profit margin can be attributed to a change in
sales mix due to an increase in  clearance  sales and the  weakening of the U.S.
dollar,  of which over 50% of the Company's  sales arise. As the majority of the
Company's  purchases are made in Canadian  dollars,  a stronger U.S. dollar will
help its gross margin, whereas a strong U.S. dollar has a negative impact on the
conversion of the financial statements.  The Company is also beginning to source
other manufacturing  facilities in Canada, which would also reduce its costs and
have a positive impact on its margins.

     Selling  expenses for the Company  increased by 17.9% to $1,229,344 for the
six month period ended June 30, 1999 as compared to $1,042,976 for the six month
period ended June 30, 1998. This increase is attributable to additional expenses
incurred for public relations which did not occur until the second half of 1998.
Also, promotion expense increased due to two very successful trade shows held in
Toronto and Quebec City and travel  expense has increased  with the objective of
increasing fabric sales in the last half of 1999.

     General and  administrative  expenses for the Company increased by 7.5%, to
$1,179,506 for the six months period ended June 30, 1999 from $1,096,921 for the
six months ended June 30, 1998.  In the first six months of 1999,  approximately
$105,000 was expended for consulting, legal, insurance and registration expenses
which did not occur in the previous year.

     Rosedale  Decorative  Products  Ltd.  develops  wallpaper and fabric sample
books  which  are  created  for each of its  collections  and are  sold  through
distributors.  The majority of  expenditures  relating to the creation of sample
books are  incurred  during the fiscal  quarter that is prior to the date of the
introduction of a collection.  Some expenditures are incurred as early as six to
eight months in advance of the  introduction of a collection.  Because  revenues
generated  from the sale of sample books are  generally  received  during fiscal
quarters  that are  subsequent  to quarters  where the  expenses for such sample
books are recognized, our quarterly financial statements do not always reflect a
matching of revenues and expenses. For example, costs for a January launch would
be recorded in the following year. Before significant  expenditures are incurred
to produce sample books, the Company ensures that there are firm orders for such
books.  Therefore,  there is little speculative risk in the production of sample
books.

     Sample book  development  cost for the six-month period ended June 30, 1999
was $92,449 compared to $81,262 for the same period last year. We have increased
expenditures  on sample book  production  as the market has become  increasingly
competitive  and our customers have become more  demanding,  choosing less books
for their  stores.  As  sample  books  serve as our  silent  salesperson,  it is
imperative  that we design and produce  high  quality  books to keep them in the
marketplace and on top of our customer s sales counters.

     Design  studio  expenses for the Company  increased by 2.1% to $371,734 for
the six months  ended June 30,  1999,  versus  $364,195 for the same period last
year.  Additional expenses were required as the Company's intention is to launch
an additional four collections in 1999 to trigger additional sales.

     Operating  income  for the six  months  ended June 30,  1999  decreased  to
$302,611 from  $1,554,925 for the six months ended June 30, 1998.  This decrease
relates to the decrease in sales and margins,  plus additional expenses incurred
after the Company's public offering.


<PAGE>
     Interest  expense for the  Company  for the six months  ended June 30, 1999
decreased to $90,289 from $220,553 for the six months ended June 30, 1998.  This
decrease in interest  expense is  attributable to lower interest rates and short
term investment interest on the funds raised from the public offering.

     Net income for the six months ended June 30, 1999  decreased to $144,841 as
compared to $796,833 for the same period  ended June 30,  1998.  The decrease is
due to the lower sales and  margins in 1999 and the  slightly  higher  operating
expenses.

     Earnings  per  share  for the six  months  ended  June 30,  1999 was  $0.05
compared to $0.29 for the same period last year using the total shares presently
outstanding of 2,765,000.

Liquidity and Capital Resources

     The  Company  had a  negative  net change in cash of  $412,823  for the six
months ended June 30,  1999.  The  principal  sources of cash were Net Income of
$144,841,  a decrease  in  Inventory  of $687,801  and a small  increase in bank
indebtedness.  These  items  were  off set by cash  used  to  increase  Accounts
Receivable at the end of the period.

     Cash flows used in investing  activities for the six months ending June 30,
1999 were  $773,592.  This  reflected  planned  capital  addition for cylinders,
designs and engravings for new  collections.  In June 1998, the Company received
net proceeds from its initial public  offering in the amount of $5,156,195.  The
Company believes that the proceeds of the offering, coupled with the income from
operations,  will fulfill the company's  working  capital needs for at least the
next twelve to eighteen months. It is the Company's  intention to utilize a good
portion of these funds to develop new product lines of wallpaper and fabric plus
continue the development of floor  coverings and ceiling tiles,  and using funds
for possible acquisitions.

Year 2000

     The  Company's  review of its own  operating  systems does not indicate any
year 2000  problems.  However,  the Company is highly  dependent  on third party
vendors.  Failures and  interruptions,  if any,  resulting from the inability of
certain  computing  systems of third  party  vendors,  including  the  Company's
clearing broker to recognize the year 2000 could have material adverse effect on
the Company's  results of  operations.  There can be no assurance  that the year
2000 issue can be resolved by any of such third  parties  prior to the  upcoming
change  in the  century.  Although  the  Company  may incur  substantial  costs,
particularly  costs resulting from increased  charges by its third party service
providers,  as a result of such third party service  providers  correcting  year
2000 issues, such costs are not sufficiently certain to estimate at this time.

<PAGE>
                                     PART II
                                OTHER INFORMATION


Item 1.  Legal Proceedings

         None.

Item 2.  Changes in Securities and Use of Proceeds

         None.

Item 3.  Defaults Upon Senior Securities

         None.

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

                  The Company's  Annual Meeting of Shareholders was held on June
3,1999 in Toronto,  Ontario. The Company's  shareholders voted on, and approved,
the following three items:

     1. The Company's  shareholders  elected the following five (5) directors to
serve until the 2000 Annual Meeting. The result of the vote was as follows:
<TABLE>
<CAPTION>

MEMBER                                 FOR                             AGAINST                   ABSTENTIONS

<S>                                 <C>                         <C>                              <C>
Alan Fine                           2,602,010                   19,100                           0

Sidney Ackerman                     2,602,010                   19,100                           0

Norman Maxwell                      2,602,010                   19,100                           0

Ken Page                            2,602,010                   19,100                           0

Gregory Sichenzia                   2,587,010                   34,100                           0
</TABLE>

     2. The  Company's  shareholders  approved  the  resolution  of the Board of
Directors to remove certain  restrictions on the issuance of the Company's Class
A Special Shares. The Company's Articles of Incorporation authorize the issuance
of  an  unlimited  number  of  shares  of  Class  A  Special  Shares  with  such
designations, rights and preferences as shall be determined from time to time by
the  Board of  Directors.  Accordingly,  the  Company's  Board of  Directors  is
empowered,  without stockholder  approval,  to issue Special Shares with voting,
liquidation,  conversion or other rights that could adversely  affect the rights
of  the  holders  of  the  Common  Stock.  In  the  Company's  final  prospectus
distributed in connection  with the Company's  initial  public  offering in June
1998, the Company made an undertaking that it would not offer the Special Shares
to certain  officers and directors of the Company except on the same terms as it
is  offered  to  all  other  existing  shareholders  or  new  shareholders.  The
undertaking was necessary solely to qualify the Company's securities for sale in
the  State  of  Oregon.  The  Company  may now rely on an  after-market  trading
exemption for the sale of its securities in that State.  The Board believes that
the  restriction  on the  Special  Shares no longer  serves any  purpose and the
Board, therefore, believes that removal of the restriction on the Special Shares
is in the best interest of the Company. The result of the vote was as follows:

                                    For                    1,594,420
                                    Against                   71,185
                                    Abstentions              955,005


<PAGE>
     3. The shareholders  ratified the appointment of Schwartz Levitsky Feldman,
Chartered Accountants, as the Company's independent certified public accountants
for the 1999 fiscal year. The result of the balloting was as follows:

                                    For              2,615,300
                                    Against              3,810
                                    Abstentions          2,000

Item 5.  Other Information

         None.

Item 6.  Exhibits and Reports on Form 8-K

         (a)  Exhibits

         Exhibit 27:                 Financial Data Schedule

         (b)  Reports on Form 8-K

                  The  Company  did not file any  reports on Form 8-K during the
six month period ended June 30, 1999.






<PAGE>
                                   SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.
<TABLE>
<CAPTION>


                                               ROSEDALE DECORATIVE PRODUCTS LTD.


<S>               <C>                                         <C>
Date:             August 12, 1999                   By:    /s/Alan Fine
                                                              Alan Fine

Date:             August 12, 1999                   By:    /s/Norman G. Maxwell
                                                              Norman G. Maxwell
</TABLE>

<PAGE>