<PAGE>

                                  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 September 30, 1998

[ ]  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)

       ONTARIO, CANADA                                          5110
(State or other jurisdiction of                     (Primary Standard Industrial
 incorporation or organization)                      Classification Code Number)

                               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 November 4, 1998, 2,765,000 shares of Common Stock, par value
$.01 per share, of Rosedale Decorative Products Ltd. were issued and
outstanding.

<PAGE>

                        ROSEDALE DECORATIVE PRODUCTS LTD.

                      INTERIM COMBINED FINANCIAL STATEMENTS

                               SEPTEMBER 30, 1998

                                  (UNAUDITED)

                               TABLE OF CONTENTS


Interim  Balance Sheet as of September 30, 1998 and December 31, 1997      4 - 5

Interim Statement of Income for the three months ended September 30, 1998      6

Interim Statement of Income for the nine months ended September 30, 1998       7

Interim Statement of Cash Flows for the period ended September 30, 1998    8 - 9

Interim Statement of Stockholders' Equity for the period ended
       September 30, 1998                                                     10

Notes to Interim Financial Statements                                     11- 26










                                       2
<PAGE>

                                     PART I
                             FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                       ROSEDALE DECORATIVE PRODUCTS LTD.

                     INTERIM COMBINED FINANCIAL STATEMENTS

                               SEPTEMBER 30, 1998

                                  (UNAUDITED)











                                       3
<PAGE>

ROSEDALE DECORATIVE PRODUCTS LTD.
INTERIM COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)

<TABLE>
<CAPTION>
                                                                        1998                1997

                                                                          $                   $
<S>                                                               <C>                 <C>
ASSETS
       CURRENT ASSETS
           Cash                                                    3,270,764             442,655
           Accounts receivable (note 2)                            5,047,985           4,683,912
           Inventory (note 3)                                      6,844,215           7,193,831
           Prepaid expenses and sundry assets                        627,362             180,096
                                                                ------------        ------------

                                                                  15,790,326          12,500,494

       LOANS RECEIVABLE FROM AFFILIATED COMPANIES
           (note 4)                                                    1,935              36,884

       DEFERRED PRODUCT COSTS (note 5)                               142,663             641,028

       DEFERRED POLICY COSTS (note 6)                                 52,290             182,873

       MORTGAGES RECEIVABLE (note 7)                                 322,283             402,684

       PROPERTY, PLANT AND EQUIPMENT (note 8)                      2,172,349           1,930,869
                                                                ------------        ------------


                                                                  18,481,846          15,694,832
                                                                ============        ============
</TABLE>






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

                                       4
<PAGE>

ROSEDALE DECORATIVE PRODUCTS LTD.
INTERIM COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)

<TABLE>
<CAPTION>
                                                                  1998                1997

                                                                    $                   $
<S>                                                       <C>                 <C>
LIABILITIES
       CURRENT LIABILITIES

           Bank indebtedness (note 9)                        3,159,595           3,970,943
           Accounts payable and accrued expenses
                (note 10)                                    4,693,529           6,741,431
           Income taxes payable                                692,528             172,538
           Current portion of long-term debt (note 11)          77,187              82,616
                                                          ------------        ------------

                                                             8,622,839          10,967,528

       LONG-TERM DEBT (note 11)                                754,967             996,981

       LOANS PAYABLE TO STOCKHOLDERS                           655,856             238,945

       ADVANCES FROM DIRECTORS (note 13)                       822,048           1,539,791

       DEFERRED INCOME TAXES                                   178,030             190,564
                                                          ------------        ------------

                                                            11,033,740          13,933,809
                                                          ------------        ------------

STOCKHOLDERS' EQUITY

       CAPITAL STOCK (note 14)                               4,846,505                 163

       CUMULATIVE TRANSLATION ADJUSTMENT                     (361,260)           (175,205)

       RETAINED EARNINGS                                     2,962,861           1,936,065
                                                          ------------        ------------

                                                             7,448,106           1,761,023
                                                          ------------        ------------

                                                            18,481,846          15,694,832
                                                          ============        ============
</TABLE>



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

                                       5
<PAGE>

ROSEDALE DECORATIVE PRODUCTS LTD.
COMBINED STATEMENT OF INCOME
FOR THE THREE-MONTHS ENDED SEPTEMBER 30,
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)

<TABLE>
<CAPTION>
                                                                              Three-months        Three-months
                                                                             September 30,       September 30,
                                                                                      1998                1997

                                                                                        $                   $
<S>                                                                           <C>                 <C>
       SALES                                                                     4,877,612           5,292,734

       COST OF SALES                                                             3,027,929           3,415,066
                                                                              ------------        ------------

       GROSS PROFIT                                                              1,849,683           1,877,668
                                                                              ------------        ------------

       OPERATING EXPENSES

           General and administrative                                              631,846             771,080
           Selling                                                                 559,040             625,952
           Design studio                                                            71,096             231,754
           Book development costs                                                   84,729              46,658
           Amortization                                                            149,861             143,265
                                                                              ------------        ------------

       TOTAL OPERATING EXPENSES                                                  1,496,572           1,818,709
                                                                              ------------        ------------

       OPERATING INCOME                                                            353,111              58,959

           Interest expense                                                       (22,442)              55,014
                                                                              ------------        ------------

       INCOME BEFORE INCOME TAXES                                                  375,553               3,945

           Income taxes (note 15)                                                  145,590               1,611
                                                                              ------------        ------------

        INCOME BEFORE CUMULATIVE EFFECT OF                                         229,963               2,334
           A CHANGE IN ACCOUNTING PRINCIPLE

           Cumulative effect of change in accounting principle (1c)                      -                   -

       NET INCOME                                                                  229,963               2,334
                                                                              ============        ============

       Pro Forma Earnings Per Share (note 14)                                         0.08                0.00
                                                                              ============        ============

       Fully Diluted Earnings per Share                                               0.06                0.00
                                                                              ============        ============
</TABLE>

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

                                       6
<PAGE>

ROSEDALE DECORATIVE PRODUCTS LTD.
COMBINED STATEMENT OF INCOME
FOR THE NINE-MONTHS ENDED SEPTEMBER 30,
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)

<TABLE>
<CAPTION>
                                                                               Nine-months         Nine-months
                                                                             September 30,       September 30,
                                                                                      1998                1997

                                                                                        $                   $
<S>                                                                           <C>                 <C>
       SALES                                                                    15,629,077          16,251,371

       COST OF SALES                                                             9,330,554          10,374,682
                                                                              ------------        ------------

       GROSS PROFIT                                                              6,298,523           5,782,689
                                                                              ------------        ------------

       OPERATING EXPENSES

           General and administrative                                            1,728,767           1,781,740
           Selling                                                               1,602,015           1,755,077
           Design studio                                                           435,291             628,876
           Book development costs                                                  165,991             142,065
           Amortization                                                            458,423             429,611
                                                                              ------------        ------------

       TOTAL OPERATING EXPENSES                                                  4,390,487           4,737,369
                                                                              ------------        ------------

       OPERATING INCOME                                                          1,908,036           1,139,320

           Interest expense                                                        198,111             159,722
                                                                              ------------        ------------

       INCOME BEFORE INCOME TAXES                                                1,709,925             979,598

           Income taxes (note 15)                                                  683,129             303,675
                                                                              ------------        ------------

           INCOME BEFORE CUMULATIVE EFFECT OF

          A CHANGE IN ACCOUNTING PRINCIPLE                                       1,026,796             675,923
          Cumulative effect of change in accounting principle (note 1(c))                -             174,202
                                                                              ------------        ------------

       NET INCOME                                                                1,026,796             850,125
                                                                              ============        ============

       Pro Forma Earnings Per Share (note 14)                                         0.37                0.31
                                                                              ============        ============

       Fully Diluted Earnings per Share                                               0.26                0.21
                                                                              ============        ============
</TABLE>

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

                                       7
<PAGE>

ROSEDALE DECORATIVE PRODUCTS LTD.
INTERIM COMBINED STATEMENTS OF CASH FLOWS
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)

<TABLE>
<CAPTION>
                                                                               Nine-months         Nine-months
                                                                              September 30       September 30,
                                                                                      1998                1997

                                                                                        $                   $
<S>                                                                           <C>                 <C>
       Cash flows from operating activities:

           Net income                                                            1,026,796             850,125
                                                                              ------------        ------------

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

           Amortization                                                            458,423             549,611
           (Increase) decrease in deferred product costs                           498,365            (310,059)
           (Increase) decrease in accounts receivable                             (364,073)         (1,647,732)
           (Increase) decrease in inventory                                        349,617          (1,165,691)
           (Increase) decrease in prepaid expenses and sundry assets              (447,266)             43,013
           Increase (decrease) in accounts payable and accrued expenses         (2,047,902)          1,043,722
           Increase (decrease) in income taxes payable                             519,990             111,855
           Increase (decrease) in deferred income taxes                            (12,532)                  -
                                                                              ------------        ------------

                Total adjustments                                               (1,045,378)         (1,375,281)
                                                                              ------------        ------------

           Net cash provided by (used in) operating activities                     (18,582)           (525,056)
                                                                              ------------        ------------

       Cash flows from investing activities:

           (Increase) decrease in deferred policy costs                            130,583             125,826
           Purchases of property, plant and equipment                             (699,903)           (553,240)
           (Increase) decrease in mortgages receivable                              80,401            (385,746)
                                                                              ------------        ------------

           Net cash used in investing activities                                  (488,919)           (813,160)
                                                                              ============        ============
</TABLE>



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

                                       8
<PAGE>

ROSEDALE DECORATIVE PRODUCTS LTD.
INTERIM COMBINED STATEMENTS OF CASH FLOWS
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)

<TABLE>
<CAPTION>
                                                                               Nine-months         Nine-months
                                                                             September 30,       September 30,
                                                                                      1998                1997

                                                                                        $                   $
<S>                                                                           <C>                 <C>
       Cash flows from financing activities:

            Proceeds from share capital                                          4,846,342                   0
            Proceeds from (repayment of) bank indebtedness                        (811,348)            428,299
            (Repayment of) proceeds from loans with affiliated companies            34,949              61,049
            Proceeds from (repayment of) long-term debt                           (247,443)            (97,415)
            Proceeds from (repayment of) stockholders' loans                       416,911             (25,427)
            Proceeds from (repayment of) loans with directors                     (717,744)            134,085
                                                                              ------------        ------------

            Net cash provided by financing activities                             3,521,667            500,591
                                                                              ------------        ------------

       Effect of foreign currency exchange rate changes                           (186,057)             23,366
                                                                              ------------        ------------

       Net (decrease) increase in cash and cash equivalents                      2,828,109            (814,259)

       Cash and cash equivalents, January 1                                        442,655           1,079,823
                                                                              ------------        ------------

       End of nine month period ended September 30                               3,270,764             265,564
                                                                              ============        ============

       Income taxes paid                                                            75,672             187,432
                                                                              ============        ============

       Interest paid                                                               198,111             159,722
                                                                              ============        ============
</TABLE>



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

                                       9
<PAGE>

ROSEDALE DECORATIVE PRODUCTS LTD.
INTERIM COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)

<TABLE>
<CAPTION>
                                                  Common
                                   Class A          Stock                                    Cumulative
                                 Number of      Number of                       Retained    Translation
                                    Shares         Shares          Amount       Earnings    Adjustments
                                 ---------      ---------       ---------     ----------    -----------
                                                                     $             $              $
<S>                               <C>          <C>             <C>            <C>           <C>
Balance as of December 31, 1996         20            220             163      1,136,237      (106,297)

Foreign currency translation             -              -               -              -       (11,487)

Net income for the nine-month
   period to September 30, 1997          -              -               -        850,125             -
                                  --------     ----------      ----------     ----------    ----------

Balance as of September 30, 1997        20            220             163      1,986,362      (117,784)

Balance as of December 31, 1997         20            220             163      1,936,065      (175,203)

Capital stock redeemed                 (20)          (220)

Capital stock issued                     0      2,765,000       4,846,342

Foreign currency translation             -              -               -              -      (186,057)

Net income for the three-month
   period to September 30, 1998          -              -               -      1,026,796             -
                                  --------     ----------      ----------     ----------    ----------
Balance as of September 30,
  1998                                   0      2,765,000       4,846,505      2,962,861      (361,260)
                                  ========     ==========      ==========     ==========    ==========
</TABLE>



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

                                      10
<PAGE>

ROSEDALE DECORATIVE PRODUCTS LTD.
NOTES TO INTERIM COMBINED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    a)   Basis of Presentation

         These financial statements combine the accounts of the following
         companies as at the respective interim fiscal periods:

           Ontario Paint & Wallpaper Limited         September 30, 1998 and 1997
           Rosedale Wallcoverings and Fabrics Inc.   September 30, 1998 and 1997
           Rosedale Decorative Products Ltd.         September 30, 1998 and 1997

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

    b)   Principal Activities

         The companies, Ontario Paint and Wallpaper Limited and Rosedale 
         Wallcoverings and Fabrics Inc. were incorporated in Canada on 
         December 3, 1971 and April 7, 1981 respectively.  Rosedale 
         Decorative Products Ltd. Was incorporated in May 1997.  The 
         companies are principally engaged in the designing, manufacturing 
         and marketing of wallpapers and decorative fabrics in Canada, U.S. 
         and Europe.

    c)   Deferred Product costs

         Expenditures relating to the design and distribution of wallpaper 
         and fabric sample books consisting of 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 companies' accounts receivable and 
         payable approximates fair value because of the short maturity of 
         these instruments.

                                      11
<PAGE>

ROSEDALE DECORATIVE PRODUCTS LTD.
NOTES TO INTERIM COMBINED 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 companies' 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 companies' 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
         under-noted rates and methods:

         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

         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 companies account 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 recognised for all
         significant temporary differences between the tax and financial
         statement bases of assets and liabilities.

                                     12
<PAGE>

ROSEDALE DECORATIVE PRODUCTS LTD.
NOTES TO INTERIM COMBINED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)

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

    j)   Foreign Currency Translation

         The companies maintain their 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 recognised upon the passage of title to the
         customers.

    l)   Net Income per Weighted Average Common Stock

         Net income per common stock is computed by dividing net income
         for the year by the weighted average number of common stock
         outstanding as presented on a pro-forma basis as explained in
         note 14 (d).

    m)   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.

    n)   Accounting Changes

On January 1, 1997, the companies 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 companies' result of operations.

                                      13
<PAGE>

ROSEDALE DECORATIVE PRODUCTS LTD.
NOTES TO INTERIM COMBINED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)

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

    n)   Accounting Changes   (cont'd)

         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 recognise
         compensation expense for stock-based compensation to employees
         based on the new fair value accounting rules. Companies that
         choose not to adopt the new rules will continue to apply the
         existing accounting rules contained in Accounting Principles
         Board Opinion No. 25, Accounting for Stock Issued to Employees.
         However, SFAS No. 123 requires companies that choose not to
         adopt the new fair value accounting rules to disclose pro forma
         net income and earnings per share under the new method. SFAS No.
         123 is effective for financial statements for fiscal years
         beginning after December 15, 1995. The companies have adopted
         the disclosure provisions of SFAS No. 123.

2.  ACCOUNTS RECEIVABLE

                                                  1998             1997

                                                    $                $

    Accounts receivable                      5,145,905        5,655,789
    Less:  Allowance for doubtful accounts      97,920          128,545
                                            ----------       ----------

    Accounts receivable, net                 5,047,985        5,527,244
                                            ==========       ==========

3.  INVENTORY

                                                  1998             1997

                                                    $                $
    Inventory comprised the following:

         Raw materials                         142,948           31,000
         Finished goods                      6,701,267        7,361,079
                                            ----------       ----------

                                             6,844,215        7,392,079
                                            ==========       ==========

                                      14
<PAGE>

ROSEDALE DECORATIVE PRODUCTS LTD.
NOTES TO INTERIM COMBINED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)

4.  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
    October 1, 1999.

5.  DEFERRED PRODUCT COSTS

                                                  1998            1997

                                                    $               $

    Book development costs                     844,737         848,996
    Deferred software costs                     58,338          62,915
                                            ----------      ----------

    Cost                                       903,075         911,911
                                            ----------      ----------

    Less:  Accumulated amortization

           Book development costs              734,899         208,299
           Deferred software costs              25,513          12,584
                                            ----------      ----------

                                               760,412         270,883
                                            ----------      ----------

    Net Deferred Product Costs                 142,663         641,028
                                            ==========      ==========

6.  DEFERRED POLICY COSTS

    Deferred policy costs represents the prepaid portion of premiums on
    the life insurance policies referred to in note 20.

                                      15
<PAGE>

ROSEDALE DECORATIVE PRODUCTS LTD.
NOTES TO INTERIM COMBINED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)

7.  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 October 1, 1999.

                                                          1998            1997

                                                            $               $

    1216748 Ontario Inc.                               168,999         198,714
    1217576 Ontario Inc.                               153,284         185,717
                                                    ----------      ----------

                                                       322,283         384,461
                                                    ==========      ==========

    The fair value of the mortgages receivable is estimated to be $360,000.

8.  PROPERTY, PLANT AND EQUIPMENT

                                                          1998            1997

                                                            $               $

    Leasehold improvements                              29,271          32,451
    Automobile                                          18,738          20,774
    Equipment and furniture                            283,890         264,469
    Furniture and fixtures                             239,037         300,632
    Computer and equipment                             337,791         339,830
    Cylinders and related design costs               3,516,697       2,772,742
                                                    ----------      ----------

    Cost                                             4,425,424       3,730,898
                                                    ----------      ----------

    Less:  Accumulated amortization

           Leasehold improvements                       11,965          10,020
           Automobile                                   16,165          16,695
           Equipment and furniture                     199,468         186,593
           Furniture and fixtures                      172,423         196,044
           Computer and equipment                      228,544         226,030
           Cylinders and related design costs        1,624,500       1,659,841
                                                    ----------      ----------

                                                     2,253,075       2,295,223
                                                    ----------      ----------

    Net Assets                                       2,172,349       1,435,675
                                                    ==========      ==========

                                      16
<PAGE>

ROSEDALE DECORATIVE PRODUCTS LTD.
NOTES TO INTERIM COMBINED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)

9.  BANK INDEBTEDNESS

    The companies have available credit facilities up to a maximum of
    $6,635,000 ($10,160,000 Canadian), which bear interest at rates
    varying between the bank's prime rate and prime plus .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
    $1,633,000 from the companies, guarantees from affiliated companies
    up to $555,000, assignment of life insurance of $1,307,000 on the
    lives of two key officers and assignment of fire insurance.

10. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

                                                          1998            1997

                                                            $               $
    Accounts payable and accrued expenses is 
    comprised of the following:

         Trade payables                              4,371,552       6,430,613
         Accrued expenses                              321,977          38,846
                                                    ----------      ----------

                                                     4,693,529       6,469,459
                                                    ==========      ==========

11. LONG-TERM DEBT

                                                          1998            1997

                                                            $               $
    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 $100,000                     96,479         192,534
                                                    ----------      ----------


                                      17
<PAGE>

ROSEDALE DECORATIVE PRODUCTS LTD.
NOTES TO INTERIM COMBINED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)

11. LONG-TERM DEBT   (cont'd)

                                                          1998            1997

                                                            $               $

         Balance forward                                96,479         192,534

    b)   Insurance Loan

         Amount in excess of cash surrender values
          of life insurance policies (note 20) 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                             735,675         693,650
                                                    ----------      ----------

                                                       832,154         886,184

                Less:  Current portion                 (77,187)       (192,534)
                                                    ----------      ----------

                Long-term portion                      754,967         693,650
                                                    ==========      ==========


12. LOANS PAYABLE TO STOCKHOLDERS

   Stockholder's advances are secured by general security agreements,
   bears interest at prime plus 1.5%, have no specific repayment terms,
   and the stockholders are not expected to demand repayment prior to
   October 1, 1999.

13. ADVANCES FROM DIRECTORS

    Advances from directors are secured by general security agreements,
    bears interest at prime plus 1.5%, have no specific repayment terms,
    and the directors are not expected to demand repayment prior to
    October 1, 1999.

                                      18
<PAGE>

ROSEDALE DECORATIVE PRODUCTS LTD.
NOTES TO INTERIM COMBINED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)

14. CAPITAL STOCK

    a)   Ontario Paint & Wallpaper Limited

         Authorized

            500,020   Class A Preference shares, 8% non-cumulative, 
                      non-voting, redeemable at $12,500 per share
             25,000   Class B Preference shares, 8% non-cumulative, 
                      non-voting, redeemable at paid up amount
            249,980   Common shares

         Issued

                                                         1998             1997

                                                           $                $

                   20   Class A Preference shares           0                1
                   20   Common shares                       0                2
                                                    ---------        ---------

                                                            0                3
                                                    =========        =========

    b)   Rosedale Wallcoverings and Fabrics Inc.

         Authorized

              3,600   Preference shares, 9% non-cumulative, non-voting, 
                      redeemable at the amount paid up plus a premium of 10%
              4,000   Common shares

         Issued

                                                         1998             1997

                                                           $                $

                   200  Common shares                       0              160
                                                    =========        =========


                                      19
<PAGE>

ROSEDALE DECORATIVE PRODUCTS LTD.
NOTES TO INTERIM COMBINED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)

14. CAPITAL STOCK   (cont'd)

    c)   Rosedale Decorative Products Ltd.

         Authorized

           Unlimited number of common shares

         Issued

                                                         1998             1997

                                                           $                $

                       2,765,000 Common Shares      4,846,505                0
                                                    =========        =========

    d)   Issued - Combined

                                                         1998             1997

                                                           $                $

                   20   Class A Preference shares           0                1
                  220   Common Shares                       0              162
            2,765,000   Common Shares               4,846,505                0
                                                    ---------        ---------

                                                    4,846,505              163
                                                    =========        =========

    d)  Weighted Average Number of Common Shares

        On May 14, 1997, a newly incorporated holding company, Rosedale
        Decorative Products Ltd. (the "Registrant"), was formed by the
        shareholders of the companies for the purpose of consolidating
        and reorganizing their 100% ownership interests in anticipation
        of an initial public offering. This reorganization was carried
        out using the pooling of interests method.

        For the purpose of determining earnings per share, the weighted 
        average number of common shares has been presented on a pro-forma 
        basis.

        This re-organization resulted in the transfer of all the
        outstanding common shares of the parent companies of Ontario and
        Rosedale held by the Fine and Ackerman families to the
        Registrant in exchange for 1,500,000 common shares of the
        Registrant.

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

        The Company issued 165,000 common shares to the public on July 20, 1998.


                                      20
<PAGE>

Accordingly, the earnings per share data are presented herein on a pro-forma
basis assuming that the weighted average number of shares issued is 2,765,000.
Fully diluted earnings per share include 1,265,000 warrants increasing the
average number of shares to 4,030,000.



























                                      21
<PAGE>

ROSEDALE DECORATIVE PRODUCTS LTD.
NOTES TO INTERIM COMBINED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)

15.    INCOME TAXES

                                                         1998             1997

                                                           $                $

       a)  Current                                    692,528          187,432
           Deferred                                   178,030                -

                                                   ----------       ----------
                                                      870,558          187,432
                                                   ==========       ==========



       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 $770,000 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:

            2001                                                    $  432,000
            2002                                                       312,000
            2004                                                        26,000
                                                                    ----------
                                                                    $  770,000
                                                                    ==========

            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 $690,000 [see note 18
            (b)]. Should the assessments be upheld, the benefits of these
            losses may not be realized.

                                      22
<PAGE>

ROSEDALE DECORATIVE PRODUCTS LTD.
NOTES TO INTERIM COMBINED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)

16. RELATED PARTY TRANSACTIONS

    Amounts due from or paid to companies which are related through
    common ownership.

                                                         1998             1997

                                                           $                $

    Loan - 966578 Ontario Inc.                                 0          7,216
    Loan - 976168 Ontario Inc.                             1,935         33,748
    Mortgage receivable - 1216748 Ontario Inc.           168,999        198,744
    Mortgage receivable - 1217576 Ontario Inc.           153,284        185,177
    Rent paid - 966578 Ontario Inc.                       12,211          4,993


17. 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:

        PERIOD ENDED SEPTEMBER 30, 1998         THREE MONTHS       NINE MONTHS
        -----------------------------------------------------------------------


        United States of America                $  3,974,672      $   9,389,876
        Canada                                       735,703          5,253,973
        Other                                        167,237            985,228
                                                ------------      -------------

                                                $  4,877,612      $  15,629,077
                                                ============      =============

        PERIOD ENDED SEPTEMBER 30, 1997

        United States of America                $  2,176,878      $   7,575,868
        Canada                                     2,570,314          7,163,159
        Other                                        545,542          1,512,344
                                                ------------      -------------

                                                $  5,292,734      $  16,251,371
                                                ============      =============



                                      23
<PAGE>

ROSEDALE DECORATIVE PRODUCTS LTD.
NOTES TO INTERIM COMBINED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)

17. SEGMENTED INFORMATION   (cont'd)

    a)   The companies' 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 SEPTEMBER 30, 1998         THREE MONTHS       NINE MONTHS
        -----------------------------------------------------------------------

                United States of America        $    215,290      $     616,894
                Canada                                10,504            345,174
                Other                                  4,169             64,728
                                                ------------      -------------

                                                $    229,963      $   1,026,796
                                                ============      =============

                PERIOD ENDED SEPTEMBER 30, 1997

                United States of America        $        959      $     396,158
                Canada                                 1,134            374,905
                Other                                    241             79,062
                                                ------------      -------------

                                                $      2,334      $     850,125
                                                ============      =============

    b)   The breakdown of identifiable assets by geographic area is as follows:

         PERIOD ENDED SEPTEMBER 30, 1998

         United States of America                                 $   3,697,125
         Canada                                                      13,288,104
         Other                                                        1,496,617
                                                                  -------------

                                                                  $  18,481,846
                                                                  =============
         PERIOD ENDED SEPTEMBER 30, 1997

         United States of America                                 $   1,149,550
         Canada                                                      13,133,391
         Other                                                        1,411,891
                                                                  -------------

                                                                  $  15,694,832
                                                                  =============

                                      24
<PAGE>

ROSEDALE DECORATIVE PRODUCTS LTD.
NOTES TO INTERIM COMBINED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)

17. SEGMENTED INFORMATION   (cont'd)

    c)   Sales to major customers are as follows:

                                                            1998           1997

         Sales                                      $  4,943,227   $  2,267,780
                                                    ------------   ------------

         % of total sales                                    32%            14%
                                                    ------------   ------------

         Amounts included in accounts receivable    $  1,128,943   $    333,100
                                                    ------------   ------------

    d)   Purchases from major suppliers are as follows:

                                                            1998           1997

         Purchases                                  $  4,804,394   $  4,596,216
                                                    ------------   ------------

         % of total purchases                                47%            37%
                                                    ------------   ------------

         Amounts included in accounts payable       $  2,347,141   $  3,168,656
                                                    ------------   ------------

18. CONTINGENCIES

    a)   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 $690,000. 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.

                                      25
<PAGE>

ROSEDALE DECORATIVE PRODUCTS LTD.
NOTES TO INTERIM COMBINED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)

19. COMMITMENTS

    Minimum payments under operating leases for premises amount to
    approximately $321,000 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                                            $   321,018
       Over one year but not exceeding two years                      321,018
       Over two years but not exceeding three years                   321,018
       Over three years but not exceeding four years                  321,018
       Over four years but not exceeding five years                   321,018
       Thereafter                                                     347,770
                                                                  -----------

                                                                  $ 1,952,860
                                                                  ===========

20. LIFE INSURANCE POLICIES

    The companies are the beneficiaries of life insurance policies with
    The Prudential of America Life Insurance Company (Canada) ("PruCan")
    taken out on the lives of two of the officers and one shareholder for
    a total insured value of $22 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.

                                      26
<PAGE>

ROSEDALE DECORATIVE PRODUCTS LTD.
NOTES TO INTERIM COMBINED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)

20. LIFE INSURANCE POLICIES   (cont'd)

    The amounts offset were as follows:

    Cash surrender value of life insurance policies          $   1,979,519
    Advances                                                 $  (1,979,519)

    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 companies are 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.

21. FOREIGN EXCHANGE CONTRACTS

    As at September 30, 1998, 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 cash 
    requirements arise as the contracts are exercised to the value of 
    $18,115,000 (in varying amounts from October 1998 through June 2000). The 
    following table presents the aggregate notional principal amounts, 
    carrying values and fair values of the Company's foreign exchange 
    contracts outstanding at September 30, 1998. 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>
                 September 30, 1998                             September 30, 1997
              -------------------------                      ------------------------
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          $ 5,965,000          -         ($524,243)          -               -             -
1999          $10,050,000          -         ($639,876)          -               -             -
2000          $ 2,100,000          -          ($66,624)          -               -             -

</TABLE>


                                      27
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
         RESULTS OF OPERATIONS

RESULTS OF OPERATION

     NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1997.

     Revenues for the nine months ended September 30, 1998 were $15,629,077, a
3.8% reduction over prior year revenues of $16,251,371 for the same nine month
period. This decrease was due to the weakening of the Canadian dollar versus the
U.S. dollar, reduced sales to the eastern bloc and a reduction in wallpaper
collections launched this year. Using a consistent exchange rate, revenues would
have remained materially unchanged.

     Gross profit for the Company for the nine months ended September 30, 1998
was 40.3% of sales, an increase as compared to the same period one-year ago,
which was 35.6%. This increase in gross profit margin can be attributed to a
change in sales mix due to a decrease in sales to the export market and the
strengthening of the U.S. dollar, of which 60% of our sales arise. As the
majority the Company's of purchases are made in Canadian dollars, a stronger
U.S. dollar will improve gross margin, whereas a strong U.S. dollar has a
negative impact on the conversion of the Canadian sales for the financial
statements.

     Selling expenses for the Company decreased by 8.7% to $1,602,015 for the
nine-month period ended September 30, 1998 as compared to $1,755,077 for the
nine-month period ended September 30, 1997. This decrease is attributable to
savings on commissions to sales reductions.

     General and administrative expenses for the Company decreased by 3.0%, 
to $1,728,767 for the nine-month period ended September 30, 1998 from 
$1,781,740 for the nine-months ended September 30, 1997 due to expense 
controls.

     Rosedale develops wallpaper and fabric sample books, which are created for
each collection and sold through distributors. The majority of expenditures for
the creation of sample books are incurred in the quarter before the introduction
of a collection. Some expenditures are incurred as early as nine to eight months
in advance. Revenues generated from the sales of sample books are netted from
the costs incurred in the same period and the net amount is shown on the income
statement. Because expenditures are made in the quarter before the launch of a
wallpaper collection, there is not always a matching of revenues and expenses,
for instance, costs for a January launch would be recorded in the previous year.
The Company ensures that there are orders in place from customers before
significant expenditures are incurred to produce the sample books and therefore,
there is little speculative risk in their production. Book development cost for
the nine-month period ended September 30, 1998 was $165,991 compared to $142,065
for the same period last year.

     Design studio expenses for the Company decreased to $435,291 for the
nine-months ended September 30, 1998 versus $628,876 for the same period last
year. This reduction is attributable to lower staff requirements as a result of
the implementation of computer-aided design ("CAD") design computer systems for
the studio and the reduction of design purchases for the year.


                                      28
<PAGE>

     Operating income for the nine-months ended September 30, 1998 increased
67.5% to $1,908,036 from $1,139,320 for the nine-months ended September 30,
1997. This relates to the increase in gross margins and a conscious effort to
control expenses.

    Interest expense for the Company for the nine-months ended September 30, 
1998 increased 24.8% to $198,111 from $159,722 for the nine-months ended 
September 30, 1997. This increase in interest expense is attributable to 
higher borrowing costs.

     Net income for the nine-months ended September 30, 1998 increased 20.78%
over the same period ended September 30, 1997. The improvement is attributable
to an improved mix of sales, better gross margins and a tighter control of
costs.

     Earnings per share for the nine months ended September 30, 1998 were $0.37
compared to $0.31 for the same period last year. Earnings per share were
calculated for both periods based on 2,765,000 shares of common stock issued as
of September 30, 1998.

     Fully diluted earnings per share were $0.26 for the nine months ended
September 30, 1998 compared to $0.21 for the comparative period last year. Fully
diluted earnings per share were calculated based on a total of 4,030,000 common
shares which includes 1,265,000 warrants.

THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1997.

     Revenues for the three months ended September 30, 1998 were $4,877,612, a
7.86% reduction as compared to the same period last year. Export sales weakened
in the quarter to create part of the shortfall and the missed launch of a new
wallpaper collection also contributed to the decline. However, using consistent
exchange rates, the sales for the quarter would be even.

     Gross Profit for the three months ended September 30, 1998 was $1,849,683,
1.5% decrease over the comparative period last year. This relates to the
strengthening of the U.S. dollar which accounted for 60% of the Company's sales.
Gross Profit increased as the majority of our product costs are in Canadian
dollars. As a percentage of sales, the gross profit was 37.9% for the third
quarter of 1998 as compared to 35.5% for the third quarter of 1997.

     Selling expenses for the three months ended September 30, 1998 decreased 
by 10.7% to $559,040 as compared to the same period last year with 
Commissions accounting for the majority of the decrease.

     General and administrative expenses decreased by 18.06% for the 
three-month period ended September 30, 1998, with a reduction in professional 
fees and computer consulting leading the way.

     Book development costs increased by $41,071 to $84,729 for the three-month
period ended September 30, 1998.

     Design studio expenses for the third quarter decreased due to a
re-allocation design expenses incurred in 1998, as well as continued savings due
to the CAD system.

                                      29
<PAGE>

     Net Income for the three months ended September 30, 1998 increased 
substantially over the same period last year.  This can be attributed to 
better gross margins and tighter cost controls on expenses.

      Earnings per share for the three months ended September 30, 1998 were 
$0.08 compared to $0.00 for the previous year. A total of 2,765,000 common 
shares were used to make these calculations. Diluted Earnings per share for 
the third quarter of 1998 was $0.06 with the third quarter 1997 being $0.00.

LIQUIDITY AND CAPITAL RESOURCES

     The Company had a positive net change in cash of $2,828,109 for the nine
months ended September 30, 1998. The principal sources of cash were Net Income
of $1,026,796 and proceeds from share capital of $4,846,342. These items were
off set by cash used to reduce Accounts Payable and Bank Debt. This is a
substantial improvement over the same period in 1997 where $814,259 was used to
fund a sizeable increase in Accounts Receivable and Inventories. Cash flows used
in investing activities for the nine months ending September 30, 1998 were
$488,919. This reflected planned capital addition for cylinders, designs and
engravings for new collections. 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 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.

OTHER INFORMATION

     The Company completed an initial public offering of its common stock and
common stock purchase warrants pursuant to a registration statement declared
effective by the commission on June 18, 1998.

The following are the Company's expenses incurred in connection with the
issuance and distribution of the common stock and warrants in the offering from
the effective date of the registration statement to September 30, 1998.

          Underwriters Discounts and Commissions         $  648,312
          Expenses paid to or for the Underwriter           211,222
          Other expenses (estimate)                         589,738
                                                         ----------
          Total expenses                                 $1,449,272

None of the foregoing expenses were paid, directly or indirectly, to any
director or officer of the Company or their associates, to any person who owns
10 percent or more of common stock or warrants of the Company, or to any
affiliate of the Company.

     The net offering proceeds of the public offering, including the proceeds of
the over-allotment option, to the Company after deducting for the expenses are
$4,846,342. The Company has used $1,567,398 for working capital.


                                      30
<PAGE>

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.

                                   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

         None

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 nine month
       period ended September 30, 1998.


                                      31
<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.

                                        ROSEDALE DECORATIVE PRODUCTS LTD.


Date: November 4, 1998                  By: /s/ Alan Fine
                                           ------------------------------
                                                Alan Fine


Date: November 4, 1998                  By: /s/ Norman G. Maxwell
                                           ------------------------------
                                                Norman G. Maxwell








                                      32