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, 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 September 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

                               SEPTEMBER 30, 1999

                                   (UNAUDITED)

                                TABLE OF CONTENTS

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

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

Interim Consolidated Statement of Income for the nine months
       ended September 30, 1999                                                                              6

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

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

Notes to Interim Consolidated Financial Statements                                                      10 - 25
</TABLE>

<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
INTERIM CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>

                                                                                      1999                1998
                                                                                        $                   $

                                                        ASSETS

       CURRENT ASSETS
<S>                                                                              <C>                 <C>
           Cash                                                                  3,033,098           3,417,414
           Accounts receivable (note 3)                                          5,719,159           3,696,050
           Inventory (note 4)                                                    6,635,084           7,229,444
           Prepaid expenses and sundry assets                                      665,189             288,764
           Income taxes recoverable                                                 27,503              38,738
                                                                                ----------          ----------

                                                                                16,080,033          14,670,410
                                                                                ----------          ----------

       LOANS RECEIVABLE FROM AFFILIATED COMPANIES

           (note 5)                                                                  2,624               1,933

       DEFERRED PRODUCT COSTS (note 6)                                             872,011             851,202

       DEFERRED POLICY COSTS (note 7)                                              280,564             268,506

       MORTGAGES RECEIVABLE (note 8)                                               336,295             321,841

       PROPERTY, PLANT AND EQUIPMENT (note 9)                                    2,734,224           2,160,433
                                                                                ----------          ----------


                                                                                20,305,751          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 SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>

                                                                                      1999                1998
                                                                                        $                   $

                                                      LIABILITIES

       CURRENT LIABILITIES

<S>                                <C>                                           <C>                 <C>
           Bank indebtedness (note 10)                                           4,408,456           3,327,022
           Accounts payable and accrued expenses
                (note 11)                                                        4,886,848           4,581,034
           Income taxes payable                                                          -                   -
           Current portion of long-term debt (note 12)                                   -              77,076
                                                                                ----------          ----------

                                                                                 9,295,304           7,985,132

       LONG-TERM DEBT (note 12)                                                    993,662             950,956

       ADVANCES FROM RELATED PARTIES (note 13)                                   1,109,149           1,174,987

       DEFERRED INCOME TAXES                                                       163,827             156,786
                                                                                ----------          ----------

                                                                                11,561,942          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                                          (24,677)           (388,341)

       RETAINED EARNINGS                                                         3,612,289           3,238,608
                                                                                ----------          ----------

                                                                                 8,743,809           8,006,464
                                                                                ----------          ----------

                                                                                20,305,751          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 SEPTEMBER 30,
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>

                                                                              Three-months        Three-months
                                                                             September 30,       September 30,

                                                                                      1999                1998

                                                                                        $                   $

<S>                                                                              <C>                 <C>
       SALES                                                                     4,784,911           4,877,612

       COST OF SALES                                                             2,863,081           3,027,929
                                                                                ----------          ----------

       GROSS PROFIT                                                              1,921,830           1,849,683
                                                                                ----------          ----------

       OPERATING EXPENSES

           General and administrative                                              557,931             631,846
           Selling                                                                 589,497             559,040
           Design studio                                                           198,958              71,096
           Book development costs                                                   12,371              84,729
           Amortization                                                            185,649             149,861
                                                                                ----------          ----------

       TOTAL OPERATING EXPENSES                                                  1,544,406           1,496,572
                                                                                ----------          ----------

       OPERATING INCOME                                                            377,424             353,111
           Interest expense                                                         56,835            (22,442)
                                                                                ----------          ----------

       INCOME BEFORE INCOME TAXES                                                  320,589             375,553

           Income taxes (note 15)                                                   91,749             145,590
                                                                                ----------          ----------
       NET INCOME                                                                  228,840             229,963
                                                                                ==========          ==========

       Net Income Per Share (note 14)                                                 0.08                0.11
                                                                                ==========          ==========

       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 NINE MONTHS ENDED SEPTEMBER 30,
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>

                                                                               nine-months         nine-months
                                                                             September 30,       September 30,

                                                                                      1999                1998

                                                                                        $                   $

<S>                                                                             <C>                 <C>
       SALES                                                                    14,302,928          15,629,077

       COST OF SALES                                                             8,836,320           9,330,554
                                                                                ----------          ----------

       GROSS PROFIT                                                              5,466,608           6,298,523
                                                                                ----------          ----------

       OPERATING EXPENSES

           General and administrative                                            1,737,437           1,728,767
           Selling                                                               1,818,841           1,602,015
           Design studio                                                           570,692             435,291
           Book development costs                                                  104,820             165,991
           Amortization                                                            554,783             458,423
                                                                                ----------          ----------

       TOTAL OPERATING EXPENSES                                                  4,786,573           4,390,487
                                                                                ----------          ----------

       OPERATING INCOME                                                            680,035           1,908,036
           Interest expense                                                        147,124             198,111
                                                                                ----------          ----------

       INCOME BEFORE INCOME TAXES                                                  532,911           1,709,925

           Income taxes (note 15)                                                  159,230             683,129
                                                                                ----------          ----------

       NET INCOME                                                                  373,681           1,026,796
                                                                                ==========          ==========

       Net Income Per Share (note 14)                                                 0.14                0.48
                                                                                ==========          ==========

       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>

                                                                               Nine-months         Nine-months
                                                                              September 30       September 30,
                                                                                      1999                1998
                                                                                        $                   $

       Cash flows from operating activities:

<S>                                                                                <C>               <C>
           Net income                                                              373,681           1,026,796
                                                                                ----------          ----------

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

           Amortization                                                            554,783             458,423
           (Increase) decrease in deferred product costs                            17,229             498,365
           (Increase) in accounts receivable                                   (1,836,967)            (364,073)
           (Increase) decrease in inventory                                        909,056             349,617
           (Increase) in prepaid expenses and sundry assets                      (359,513)            (447,266)
           Increase (decrease) in accounts payable and accrued expenses             98,997          (2,047,902)
           Increase (decrease) in income taxes payable/recoverable                  12,833             519,990
           Increase in deferred income taxes                                             -             (12,532)
                                                                                ----------          ----------

                Total adjustments                                                (603,582)          (1,045,378)
                                                                                ----------          ----------

           Net cash provided by (used in) operating activities                    (229,901)            (18,582)
                                                                                ----------          ----------

       Cash flows from investing activities:

           Increase in deferred policy costs                                             1             130,583
           Purchases of property, plant and equipment                           (1,026,377)           (699,903)
           Increase in mortgages receivable                                              -              80,401
                                                                                ----------          ----------

           Net cash used in investing activities                               (1,026,376)           (488,919)
                                                                                ==========          ==========

</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>

                                                                               Nine-months         Nine-months
                                                                             September 30,       September 30,

                                                                                      1999                1998

                                                                                        $                   $

       Cash flows from financing activities:

<S>                                                                             <C>                  <C>
            Issuance of Common Stock                                                      -          4,846,342
            Proceeds from bank indebtedness                                         921,904           (811,348)
            (Repayment of) proceeds from loans with affiliated companies               (597)            34,949
            (Repayment of)Proceeds from long-term debt                              (79,664)          (247,443)
            Repayment of stockholders' loans                                       (117,319)           416,911
            Proceeds from loans with directors                                            -          (717,744)
                                                                                ----------          ----------

            Net cash provided by financing activities                               724,324          3,521,667
                                                                                ----------          ----------

       Effect of foreign currency exchange rate changes                             147,637           (186,057)
                                                                                ----------          ----------

       Net (decrease) increase in cash and cash equivalents                        (384,316)         2,828,109

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

       End of nine month period ended September 30                                3,033,098          3,270,764
                                                                                ==========          ==========

       Income taxes paid                                                            318,210             75,672
                                                                                ==========          ==========

       Interest paid                                                                255,375            198,111
                                                                                ==========          ==========

</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)      (134,270)

       Issuance of common stock                        1,265,000       5,156,195

       Net income for the nine-month
          period to September 30, 1998                                        -      1,026,796              -


       Balance as of September 30, 1998                2,765,000       5,156,197      2,962,861      (361,260)

       Balance as of December 31,

          1998                                         2,765,000       5,156,197      3,238,608      (388,341)

       Foreign currency translation                           -              -               -        363,664

       Net income for the nine-month
          period to September 30, 1999                        -              -          373,681             -


       Balance as of September 30,
         1999                                          2,765,000       5,156,197      3,612,289       (24,677)



</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.  which  was  incorporated  on May 14,  1997 is
               principally engaged in the designing, manufacturing 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 companies'  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 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
               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 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  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 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.


<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.

2.       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 to JUNE 30                                                  144,841              796,833

           OTHER COMPREHENSIVE INCOME (LOSS)
                FOREIGN CURRENCY TRANSLATION                                      386,597               15,943
                                                                                  -------               ------

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

           NET INCOME 3rd Qtr                                                     228,840              229,963

                FOREIGN CURRENCY TRANSLATION                                     (22,933)            (150,213)
                                                                                 --------            ---------

           COMPREHENSIVE INCOME as at SEPTEMBER 30                                737,345              892,526

</TABLE>
<TABLE>
<CAPTION>


       3.  ACCOUNTS RECEIVABLE                                               September 30         December 31,
                                                                                 1999                1998
                                                                                   $                   $

<S>                                                                                 <C>              <C>
           Accounts receivable                                                      5,545,425        3,842,820
           Less:  Allowance for doubtful accounts                                     173,734          146,770
                                                                                 --------            ---------

           Accounts receivable, net                                                 5,719,159        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                                                              September 30,  December 31,
                                                                                         1999           1998
                                                                                           $                $
           Inventory comprised the following:

<S>                                                                                   <C>             <C>
                Raw materials                                                         148,663         185,956
                Finished goods                                                      6,486,421       7,043,488
                                                                                     --------       ---------

                                                                                    6,635,084       7,229,444
                                                                                     --------       ---------
</TABLE>
5.       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
           October1, 2000.

6.       DEFERRED PRODUCT COSTS
<TABLE>
<CAPTION>

                                                                                  September 30,      December31,
                                                                                         1999            1998

                                                                                           $               $

<S>                                                                                 <C>                  <C>
           Book development costs                                                   1,617,197            1,285,831
           Deferred software costs                                                     65,404               58,338
                                                                                     --------            ---------

           Cost                                                                     1,682,601            1,344,169
                                                                                     --------            ---------

           Less:  Accumulated amortization

                  Book development costs                                              771,862              467,454
                  Deferred software costs                                              38,728               25,513
                                                                                     --------            ---------

                                                                                      810,590              492,967
                                                                                     --------            ---------
           Net Deferred Product Costs                                                 872,011              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 October1, 2000.
<TABLE>
<CAPTION>

                                                                                 September 30,   December 31,
                                                                                         1999            1998

                                                                                           $               $

<S>        <C>                                                                        <C>             <C>
           1216748 Ontario Inc.                                                       176,347         168,768
           1217576 Ontario Inc.                                                       159,948         153,073
                                                                                      --------       ---------

                                                                                      336,295         321,841
                                                                                      ========       =========
</TABLE>

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

9.       PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>

                                                                                       September 30,  December 31,
                                                                                          1999            1998
                                                                                           $               $
<S>                                                                                    <C>             <C>
           Leasehold improvements                                                      34,723          29,230
           Automobile                                                                  19,552          18,711
           Equipment and furniture                                                    296,600         283,502
           Furniture and fixtures                                                     251,319         240,517
           Computer and equipment                                                     493,645         348,874
           Cylinders and related design costs                                       4,817,627       3,716,883
                                                                                     --------       ---------

           Cost                                                                     5,913,466       4,637,717
                                                                                     --------       ---------

           Less:  Accumulated amortization

                  Leasehold improvements                                               15,540          12,671
                  Automobile                                                           17,882          16,380
                  Equipment and furniture                                             227,867         203,399
                  Furniture and fixtures                                              194,208         185,861
                  Computer and equipment                                              301,243         245,381
                  Cylinders and related design costs                                2,422,502       1,813,592
                                                                                     --------       ---------

                                                                                    3,179,242       2,477,284
                                                                                     --------       ---------
           Net Assets                                                               2,734,224       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  companies  have  available  credit  facilities  up to a
               maximum of $6,924,000 ($10,160,000 Canadian), which bear interest
               at rates  varying  between  the bank's  prime rate plus 0.25% and
               prime  plus  1.25%.   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  $1,703,000  from the
               company,  guarantees  from  affiliated  companies up to $579,000,
               assignment of life  insurance of $1,000,000  (Cdn) on each of the
               lives of two key officers and assignment of fire insurance.

11.      ACCOUNTS PAYABLE AND ACCRUED EXPENSES
<TABLE>
<CAPTION>

                                                                                  September 30,      December 31,
                                                                                         1999             1998
                                                                                           $                $
           Accounts payable and accrued expenses is comprised of the following:

<S>                                                                                 <C>              <C>
                Trade payables                                                      4,672,049        4,230,024
                Accrued expenses                                                      214,799          351,010
                                                                                      --------       ---------

                                                                                    4,886,848        4,581,034
                                                                                      ========       =========
</TABLE>

12.      LONG-TERM DEBT
<TABLE>
<CAPTION>

                                                                                    September 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
               <S>                                                                   <C>             <C>
                    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                                                         993,662         950,956
                                                                                      --------       ---------

                                                                                      993,662       1,028,032
                                                                                      --------       ---------
                Less:  Current portion                                                      -        (77,076)
                                                                                      --------       ---------

                Long-term portion                                                     993,662         950,956
                                                                                      ========       =========
</TABLE>
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
               October1, 2000.

14. COMMON STOCK

a)       Authorised

                    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>

     b) 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

c)       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.

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


<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 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.

           d)  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  holder's
               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  options  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 by 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
               authorisation  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
               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.

                    On August 19, 1999, the Board of Directors  granted  336,500
               stock  options at the most recent  closing price of the Company's
               shares as traded on NASDAQ, specifically, U.S. $1.00 per share on
               August  18,   1999.   Officers,   Directors   and  five   percent
               shareholders  were granted 276,500 options.  The remaining 60,000
               options were granted to key employees.


<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
NOTES TO INTERIM CONSOLIDATED STATEMENTS
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)

e)       Stock Option Plan (cont'd)

                    The Officers,  Directors and five percent  shareholders that
               were granted options and the respective amounts are listed below.
<TABLE>
<CAPTION>

                      <S>                     <C>                                     <C>
                      Alan Fine               Chairman and Chief Executive Officer    125,750
                      Sidney Ackerman         Director and President                  125,750
                      Norman Maxwell          Director and Chief Financial Officer     25,000
</TABLE>

f)       Purchase Warrants

                    During  1998,  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.


<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
NOTES TO INTERIM CONSOLIDATED STATEMENTS
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)

       15. INCOME TAXES
<TABLE>
<CAPTION>

                                                                                       1999               1998
                                                                                         $                  $

            <S>                                                                     <C>             <C>
            a)  Current                                                                   -                  -
                Deferred                                                            163,827            156,786
                                                                                    --------         ---------
                                                                                    163,827            156,786
                                                                                    --------         ---------
</TABLE>

           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:

2001           $ 130,000
2002             294,000
2004              22,000
2005             103,000

               $ 549,000

                    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  $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.                                                   2,624            1,933
           Mortgage receivable - 1216748 Ontario Inc.                                 176,347          168,768
           Mortgage receivable - 1217576 Ontario Inc.                                 159,947          153,073
           Rent paid - 966578 Ontario Inc.                                             12,267            4,236
           Rent paid - 1216748 Ontario Inc.                                             2,044               -

</TABLE>

<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)

17.      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.

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 SEPTEMBER 30, 1999                                    THREE MONTHS    NINE MONTHS
                ----------------------------------------------------------------------------------------------

<S>                                                                               <C>            <C>
                United States of America                                          $   3,174,392  $   8,119,555
                Canada                                                                1,416,899      5,520,921
                Other                                                                   193,620        662,452
                                                                                      ---------      ---------

                                                                                  $   4,784,911  $  14,302,928
                                                                                      =========      =========

                PERIOD ENDED SEPTEMBER 30, 1998

                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
                                                                                      =========      =========
</TABLE>

                    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.
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>

       18. SEGMENTED INFORMATION   (cont'd)

           PERIOD ENDED SEPTEMBER 30, 1999                                       THREE MONTHS      NINE MONTHS
           ---------------------------------------------------------------------------------------------------

<S>                                                                               <C>            <C>
                United States of America                                          $     136,816  $     212,133
                Canada                                                                   81,959        144,241
                Other                                                                    10,065         17,307
                                                                                     ---------      ---------

                                                                                  $     228,840  $     373,681
                                                                                      =========      =========

           PERIOD ENDED SEPTEMBER 30, 1998

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

                                                                                  $     229,963  $   1,026,796
                                                                                      =========      =========
</TABLE>


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

                PERIOD ENDED SEPTEMBER 30, 1999

<S>                                                                                              <C>
                United States of America                                                         $   4,183,087
                Canada                                                                              14,773,627
                Other                                                                                1,349,037
                                                                                                     ---------

                                                                                                 $  20,305,751
                                                                                                    ==========
                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                                                                 2,901,146      4,943,227
                                                                                      ---------      ---------

                % of total sales                                                            20%            32%
                                                                                      ---------      ---------

                Amounts included in accounts receivable                           $     801,699  $   1,128,943
                                                                                      ---------      ---------
</TABLE>
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)

<TABLE>
<CAPTION>
           d) Purchases from major suppliers are as follows:

                                                                                           1999           1998

<S>                                                                               <C>            <C>
                Purchases                                                         $   3,925,156  $   4,804,394
                                                                                      ---------      ---------
                % of total purchases                                                        48%            47%
                                                                                      ---------      ---------

                AMOUNTS INCLUDED IN ACCOUNTS PAYABLE                              $   2,115,282  $   2,347,141
                                                                                      ---------      ---------
</TABLE>
       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:
<TABLE>
<CAPTION>

<S>                                                                                           <C>
               Within one year                                                                $        300,003
               Over one year but not exceeding two years                                               300,003
               Over two years but not exceeding three years                                            300,003
               Over three years but not exceeding four years                                           300,003
               Over four years but not exceeding five years                                            300,003
               Thereafter                                                                               25,000


                                                                                               $     1,525,015
</TABLE>
ROSEDALE DECORATIVE PRODUCTS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)

       21. 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
               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
               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.


<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)

       21. FOREIGN EXCHANGE CONTRACTS

                    As at  September  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
               $10,085,000  (in varying  amounts  from October 1999 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 as of September
               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>

             SEPTEMBER 30, 1999                                                 SEPTEMBER 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              -            -           -            $5,965,000        -          ($524,243)
           1999      $  7,985,000         -        ($345,853)      10,050,000        -           (639,876)
           2000      $  2,100,000                   $ 31,545        2,100,000        -            (66,624)
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

                     MANAGEMENTS DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATION

THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1998.

     Revenues for the three months ended September 30, 1999 were  $4,784,911,  a
2% decrease over prior year revenues of  $4,877,612.  The  substantial  increase
(93%) in sales to the Canadian  market was mostly  offset by the 20% decrease in
sales to the United States market.

     Gross  profit for the three months  ended  September  30, 1999 was 40.2% of
sales, an increase as compared to the same period one-year ago, which was 37.9%.
This  increase in gross profit margin can be attributed to a change in sales mix
due to an increase in sales to the Canadian market and the weakening of Sales to
the Export Market.

     Selling  expenses  increased by 5.4% to $589,497 for the three month period
ended  September  30, 1999 as compared  to $559,040  for the three month  period
ended September 30, 1998.  Travel expense  increased as our sales force attended
different customer shows to generate additional business,  which should increase
sales for the  remainder  of the year.  Also,  Bin  Expenses  have  increased as
compared to last year as we are aggressively  pursuing new business from dealers
who stock wallpaper.

     General and administrative  expenses for the Company decreased by 11.7%, to
$557,931 for the three months period ended  September 30, 1999 from $631,846 for
the three months ended September 30, 1998.  This savings is mostly  attributable
to the extraordinary expenses incurred by the Company during this period in 1998
due to its public offering.

    Book  development  cost for the three-month  period ended September 30, 1999
was $12,371  compared to $84,729  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 were $198,958 for the three months
ended  September  30, 1999 versus  $71,096 for the same period last year.  As we
intend  to  increase  the  number of lines to be  launched,  design  costs  will
increase for a short period before stabilizing.

     Operating income for the three months ended September 30, 1999 was $377,424
compared to $ 353,111 for the three months  ended  September  30,  1998.  Income
increased  with better  margins  being  recorded,  which was offset by increased
expenses.


<PAGE>
     Interest  expense for the Company for the three months ended  September 30,
1999 was  $56,835  compared  to income of  $22,442  for the three  months  ended
September 30, 1998. This change in interest is attributable to higher borrowings
to accommodate the extra lines being launched.

     The Company  showed a Net Profit for the three months ended  September  30,
1999 of $228,840 as compared to $229,963 for the same period ended September 30,
1998.

     Earnings  per share for the three  months  ended  September  30,  1999 were
$0.08,  which  is the  same as last  year,  using  the  total  shares  presently
outstanding of 2,765,000.

NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1998.

     Revenues for the nine months ended September 30, 1999 were $14,302,928,  an
8.5% decrease over prior year revenues of $15,629,077.  This decrease was due to
the general  weakening in the market,  especially in the U.S. and  overseas,  as
observed by the continued  restructuring  of many companies within the wallpaper
industry. We have also experienced a dramatic decrease in Royalties on the sales
of our product in other parts of the world.

     Gross  profit for the nine  months  ended  September  30, 1999 was 38.2% of
sales, a decrease as compared to the same period  one-year ago, which was 40.3%.
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.
Fifty  percent  (50%) of the Company's  sales are made in U.S.  dollars.  As the
majority of our purchases are made in Canadian  dollars,  a stronger U.S. dollar
will help our gross margin,  whereas a strong U.S.  dollar has a negative impact
on the  conversion of the  financial  statements.  We are also  beginning to use
other manufacturing  facilities in Canada, which would also reduce our costs and
have a positive impact on our margins.

     Selling  expenses for the company  increased by 13.5% to $1,818,841 for the
nine month period ended  September  30, 1999 as compared to  $1,602,015  for the
nine month period ended  September 30, 1998.  This increase is  attributable  to
additional expenses incurred for public relations, which did not occur until the
second  half of  1998.  Travel  expense  has  increased  with the  objective  of
increasing  fabric  sales  in the  last  half of  1999.  Bins  Expense  has also
increased  over last year as we  continue to  increase  our market  share in the
Canadian market.

     General and  administrative  expenses for the Company increased by 0.5%, to
$1,737,437 for the nine months period ended  September 30, 1999 from  $1,728,767
for the nine months ended  September  30, 1998.  The Company is taking action to
control  expenses  wherever  possible and will continue to look for ways of cost
cutting.

     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 of these  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 collection,  there is not always a matching of revenues and expenses
e.g.  costs for a January  launch would be recorded in the following  year.  The
Company  ensures  that  there are firm  orders in place  from  customers  before

<PAGE>
significant  expenditures  are incurred to produce the sample books.  Therefore,
there is little speculative risk in their production.  Book development cost for
the nine-month period ended September 30, 1999 was $104,820 compared to $165,991
for the same period last year.  This decrease  relates to a conscious  effort in
reducing  the cost of  sample  books.  However,  the  market  for  books is very
competitive,  and as  these  sample  books  are our  silent  salesperson,  it is
imperative that we keep our books in the marketplace and on top of the counters.

     Design studio  expenses for the Company  increased by 31.1% to $570,692 for
the nine months  ended  September  30, 1999 versus  $435,291 for the same period
last year.  Additional  expenses  were required as the intention is to launch an
additional four collections in 1999 to trigger additional sales.

     Operating  income for the nine months ended September 30, 1999 decreased to
$680,035 from  $1,908,036 for the nine months ended  September 30, 1998. This is
the cumulative  effect of reduced sales and margins,  plus  additional  expenses
incurred after the public offering.

Interest  expense for the Company for the nine months ended  September  30, 1999
decreased to $147,124  from  $198,111 for the nine months  ended  September  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 nine  months  ended  September  30,  1999  decreased  to
$373,681 as compared to $1,026,796 for the same period ended September 30, 1998.
The  decrease  is due to the lower  sales  and  margins  in 1999 and the  higher
operating expenses.

     Earnings per share for the nine months ended  September  30, 1999 was $0.14
compared to $0.37 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  $384,316  for the nine
months ended  September 30, 1999. The principal  sources of cash were Net Income
of  $373,681,  a decrease  in  Inventory  of  $909,056  and an  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  nine  months  ending
September 30, 1999 were $1,026,377.  This reflected planned capital addition for
cylinders,  designs and engravings for new collections. The company received net
proceeds from it's initial public offering effective June 18, 1998 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.


<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.


<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

         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, 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.

                                               ROSEDALE DECORATIVE PRODUCTS LTD.

DATE:    NOVEMBER  11, 1999                   BY:    /S/ALAN FINE
                                                 -------------------------------
                                                        Alan Fine

DATE:    NOVEMBER 11, 1999                    BY:    /S/NORMAN G. MAXWELL
                                                 -------------------------------
                                                        Norman G. Maxwell