UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                  FORM 10-KSB/A

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


                   For the fiscal year ended December 31, 2003

                        Commission File Number 001-14898

                        ROSEDALE DECORATIVE PRODUCTS LTD
                     _______________________________________

             (Exact name of registrant as specified in its charter)

    Ontario, Canada                                        N/A
(State or other jurisdiction of                       (I.R.S. Employer
 incorporation or organization)                        Identification No.)

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

                                 (905) 669-8909
              (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(g) of the Act:

                           Common Stock, no par value
                    Redeemable Common Stock Purchase Warrants
                                (Title of Class)

Indicate by check mark whether the registrant (1) has 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  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes [X ] No [ ]

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-B is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [ ]

                                        1
<PAGE>
The Company's revenues for the year ended December 31, 2003, were $12,263,554.

As of July 12,  2004,  the  aggregate  market  value of the voting stock held by
non-affiliates  of the  registrant  (based on The NASDAQ  Stock Market last sale
price of $0.12 on June 23, 2004) was $330,626.

As of July 12, 2004,  there were  2,755,214  shares of the  registrant's  common
stock outstanding.


Documents Incorporated By Reference:

      Reference is made in Part III of this Report to the Registrant's Form SB-2
Registration   statement,  as  filed  on  January  22,  1998,  which  is  hereby
incorporated by reference.

      Reference is made in Part III of this Report to Amendment  Number 1 to the
Registrant's Form SB-2 Registration Statement, as filed on April 23, 1998, which
is hereby incorporated by reference.

      Reference is made in Part III of this Report to Amendment  Number 2 to the
Registrant's Form SB-2 Registration  Statement,  as filed on May 28, 1998, which
is hereby incorporated by reference.

      Reference is made in Part III of this Report to Amendment  Number 3 to the
Registrant's Form SB-2 Registration  Statement, as filed on June 11, 1998, which
is hereby incorporated by reference.

                                       2

<PAGE>
PART I.

Item 1.  HISTORY OF THE COMPANY

      Rosedale Decorative Products, Ltd. (the "Company") commenced operations as
a single  retail  store,  Ontario  Paint &  Wallpaper  Limited,  in 1913 and has
operated as a family owned business since its inception. In its early years, the
Company  focused on the sale of paint to homeowners and major  contractors.  The
retail store is still in  operation  in its  original  location and has become a
well-known  landmark.  In the early 1970's,  Ontario  Paint & Wallpaper  Limited
("Ontario")  diversified  into  wallpaper  distribution.  In 1981, the Company's
subsidiary  Rosedale  Wallcoverings  and Fabrics,  Inc.  ("Rosedale")  commenced
operations   under  the  name  Desart   Wallcoverings   Inc.  In  1988,   Desart
Wallcoverings  Inc. changed its name to Rosedale  Wallcoverings Inc. and in 1995
its name was changed to Rosedale  Wallcoverings  & Fabrics Inc.  Over the years,
the  Company  has  become one of the  largest  independent  wholesale  wallpaper
distributors in Canada. In the early 1990's,  the Company continued to diversify
by designing  wallcovering  collections for  distribution in Canada,  the United
States, Europe, South America and Asia.

      On May 14, 1998,  the Company was formed by the  shareholders  of Rosedale
and  Ontario  for  the  purpose  of  consolidating   the  business  of  the  two
subsidiaries.

      In July 2002, the Company filed a Proxy-Statement  with the Securities and
Exchange  Commission  (SEC) for the  approval by  shareholders  of the sale of a
wholly owned subsidiary,  Rosedale  Wallcoverings & Fabrics Inc. ("Rosedale") to
the  Chairman  of the Board and Chief  Executive  Officer,  Alan Fine.  The sale
received  Shareholder  approval on March 14, 2003 and the transaction  closed on
March 24, 2003.

                                       3
<PAGE>
General

      The Company designs, markets and distributes residential wallcoverings and
ceiling  panels.  The Company also operates one retail paint and wallpaper store
located in downtown  Toronto,  Canada,  which has been in  continuous  operation
since 1913.  The Company's  products  include  wallpaper  and wallpaper  borders
(which are collectively referred to as wallcoverings), ceiling panels and paint.

      The  Company  designs  and  distributes  its  owned  branded  wallcovering
collections,  as well as distributing  other  manufacturers'  wallcoverings on a
wholesale basis.  Wallcoverings  sold under Company brand names are manufactured
for the Company on an outsource basis by third party manufacturers

      Sales of Company's name brand wallcoverings  account for approximately 48%
of the Company's  total  revenues and wholesale  distribution  of  wallcoverings
under  non-company  brand names accounts for  approximately 26% of the Company's
total  revenues.  The  Company's  retail  paint and  wallpaper  store  generates
approximately 26% of the Company's annual revenues.

      In  2003,  the  Company   distributed   approximately   15  Company  brand
wallcovering  collections to approximately 10,000 to 20,000 retail wallpaper and
paint stores worldwide.  In addition,  in 2003, the Company's Ontario subsidiary
distributed  approximately  64  non-Company  brand  wallcovering  collections to
approximately 1,500-2,000 home decorating stores in Canada.

      The Company  believes  that its product mix of  wallcoverings  and paints,
along  with its  wooden  window  blinds  and  ceiling  tile  offerings  presents
significant cross marketing opportunities.


                                       4
<PAGE>
Company Brands

      The Company designs and distributes approximately three different lines of
wallcoverings sold under the Company's own brand names each year. A selection of
wallcovering are sold under each of the Company's brand names. Each wallcovering
collection sold by the Company  consists of a variety of coordinated  wallpapers
and borders.  Collections  take  approximately  twelve months to develop and are
generally  available  in the  marketplace  for a minimum  of three  years  after
launch.  These products are distributed to approximately 10,000 to 20,000 retail
stores and interior designers worldwide.

      Wallcovering collections are developed by the Company's design staff using
a variety of color schemes to create thematically consistent  collections.  Each
collection  is tailored to fit the  particular  target market for the brand name
for which the collection is being  created.  The Company's  management,  design,
marketing and sales staff approves  collections for production  based upon their
assessment  of the  commercial  potential  of those  collections  in each of the
Company's target markets.

      The  Company's  Ontario  subsidiary  maintains a design  studio in London,
England.

      Company  brand  name   Wallcoverings   include;   Concord,   Bridle  Path,
Sweetwater,   Caledon,  Glenayr  and  Ridley  Nash.  The  Company's  brand  name
wallcoverings are targeted for middle and upper-middle income consumers, as well
as the  high-end  interior  designer  market where the  Company's  wallcoverings
compete based upon quality and design. The Company does not design  wallcovering
collections for the lower end of the market where competition is based primarily
upon price.


      The  Concord,  Glenayr  and Ridley Nash  brands  were  established  by the
Company's  Ontario  subsidiary to provide the subsidiary with its own brand name
of wallpaper  products for  introduction  into the United States  market.  These
brands are created in London, England by the Company's design staff. The Company
designs and  distributes one  wallcovering  collection per year under each brand
name.  These lines of  wallcoverings  are  targeted  for middle to upper  income
consumers.

                                       5
<PAGE>

      The Company's  various  brands enable the Company to take advantage of the
changing nature of the North American wholesale distribution business, including
the growth of large  national  distributors  and a trend  towards  consolidation
among smaller regional distributors. Our broad product mix also covers all major
price categories with the market except the low margin,  mass merchant  business
segment.




Third Party Manufacturing

      Wallcovering  manufacturers  in the United Kingdom and Canada  manufacture
company brand wallcoverings for the Company. In the United Kingdom,  collections
are manufactured by CWV Group and Zen Wallcoverings Ltd. ("Zen"),  and in Canada
by Norwall Group Inc.  Although the Company does have  contracts  with the third
party manufacturers it uses, there are numerous other  manufacturers  available,
including others,  which presently do work for the Company. The Company believes
that it could  replace the  services of the  contracted  manufacturer  without a
material  impact on the Company's  business or operations.  The Company does not
believe that such contract is material to an investor.

                                       6
<PAGE>
      The Company  generally  enters into  contracts with its  manufacturers  to
produce designs to the Company's  specifications  on a "make and ship" basis, so
that  the  manufacturers  hold  no  inventory  of the  Company's  products.  The
Company's products are manufactured on a pattern by pattern basis. The terms and
conditions  of  production  are outlined by the Company in written  instructions
provided to the manufacturers for each new design that the Company produces. The
Company  maintains  the  exclusive  copyrights  to each of its  designs  and the
manufacturers do not have rights to sell the Company's  designs unless permitted
by the Company.


Wholesale Distribution of Wallcoverings Manufactured by Third Parties

      The Company is a  wholesale  distributor  of  wallcoverings  designed  and
produced  by  manufacturers  located in the United  Kingdom,  United  States and
Canada.  The Company markets  wallcovering  collections  produced by third party
manufactures under each manufacturer's brand names. The Company has distribution
agreements  with  Walquest and Olney  located in the U.S. and with Norwall Group
Inc. ("Norwall"),  located in Canada. The Company's distribution agreements with
Walquest,  Olney and Norwall  provide the Company  with the  exclusive  Canadian
distribution  rights for each  manufacturers'  wallcovering  lines.  The Company
believes that its position as one of the few remaining distributors not owned by
a  manufacturing  facility makes it an attractive  distributor to  manufacturers
that do not want to distribute their products through competing manufacturers.


New Products

      The Company has expanded the products offered by its Ontario subsidiary to
include  a line of  retro  art  decorative  ceiling  tiles  for  commercial  and
residential  customers.  The  decorative  ceiling tiles are designed to fit into
standard  suspension  ceiling  frameworks  and are  embossed  with  designs that
emulate  ceilings  found in many turn of the century  buildings.  This  provides
commercial and  residential  customers  with the ability to add Victorian  style
ceilings to their decor. The Company believes that its decorative  ceiling tiles
will be attractive to commercial users, such as restaurants  looking to recreate
the look of the late  1800's.  The  decorative  ceiling  tiles were  launched in
Canada in the fourth quarter of 2000 and will be introduced into the U.S. market
in early 2005. The Ontario subsidiary has also obtained distribution rights to a
new line of wooden  window  treatments,  which they began to distribute in early
2002.  They have also started  distributing a new product called  Wallpapers for
Windows,  which has received world-wide interest.  The Company has also obtained
exclusive  distribution  rights for a plastic  product called  Mirroflex.  It is
anticipated that the Company will do very well with additional products.


Retail Operation

      The Company's  retail  operation,  Ontario Paint & Wallpaper,  has been in
continuous  operation since 1913 and the store has become a well-known  landmark
in metropolitan  Toronto.  The retail store sells Benjamin Moore and Para paints
and related sundry products,  including  wallcoverings to customers ranging from
individual homeowners to large industrial accounts. The store offers a full line
of wallcoverings,  including all brands distributed by the Company. The majority
of Ontario Paint &  Wallpaper's  paint sales are made to local movie studios for
set designs and to commercial  customers  for  apartment  and office  buildings.
Sales to  commercial  customers  have been growing  steadily over the past three
years.  The retail store is the largest  single source  distributor  of Benjamin
Moore Paints in Canada.

                                        7
<PAGE>
      The  retail  store  offers  special   services  to  attract  and  maintain
commercial customers. The store maintains detailed records of paint purchases by
commercial customers. Commercial customers that have purchased paint in the past
can order  additional paint simply by telephoning the store and indicating which
area of their  building  requires  paint.  The store manager then  retrieves the
stored information about the building,  selects the correct paint colors for the
commercial customer,  and delivers the paint to the customer.  In addition,  the
Company has a portable paint scanner, which provides retail store employees with
the ability to visit a building and scan the building's paints and return to the
store where the scanned  information is transferred to a paint mixer, which then
mixes matching paint colors.

      In the fourth quarter of 2000,  decorative  hardware and gift  accessories
were added to the product lines  carried by the retail  store.  These lines grew
steadily  during 2003 and  management  believes that further growth in 2004 will
occur.


Marketing and Distribution (Company Brands)

      The Company  distributes its brand name wallcoverings in the United States
and  Canada  through  national  distributors.  The  Company  appoints  a  single
distributor to a particular geographical area, so that distributors' territories
generally do not overlap.  The Company  does not  maintain  formal  distribution
agreements  with its  distributors,  which is customary in the  industry.  It is
common   practice  in  the  industry  that  neither  the   distributor  nor  the
manufacturer is obligated to maintain a relationship  other than on a collection
by collection basis. It is the Company's policy that each of its distributors is
obligated to purchase every  collection the Company markets or forfeit its right
to be a Company distributor.

      The Company markets and promotes its products through the distribution and
sale of sample books. The Company prepares a sample book for each of its Company
brand  collections of  wallcoverings  designs.  The majority of the sample books
prepared by the Company  contain  partial  sheets of wallpaper  and  coordinated
borders.  In addition,  sample books contain  photographs of model room settings
demonstrating how the Company's Wallcoverings and borders look in simulated home
environments.

      The  number  of  sample  books  that the  Company  prepares  for any given
collection is determined based upon orders from the Company's distributors.  The
distributors  inform  the  Company  how many books  they will  require  for each
collection  and the Company  produces  the sample  books.  The Company  does not
produce sample books unless a distributor  has requested  them. The sample books
are sold to distributors and the  distributors,  in turn, place the sample books
with retail and interior  design  customers  who  ultimately  sell the Company's
products to  consumers.  In addition to purchasing  the Company's  sample books,
each distributor is also required to purchase inventory for each pattern in each
collection.  It takes  between  10 to 12 months  from the time that the  Company
approves  design for a  collection  to the shipping of the sample books for that
collection.

                                       8
<PAGE>
Canadian Distribution

      The Company sells approximately 50% of its wallcoverings in Canada.  These
sales are made through national chains such as Color Your World and the majority
of the independent paint and wallpaper stores across Canada.


United States Distribution

      Approximately  46% of the  Company's  wallcovering  sales  are made in the
United States.  The Company  distributes its  wallcoverings in the United States
through  sales to  national  distributors.  National  distributors  include  The
Blonder Company, Patton Wallcoverings and Olney Wallcoverings.



Wallcovering Market

      Over two billion rolls of wallcoverings  were sold worldwide in 1994, with
over 161 million rolls sold in Canada and the United States and over 500 million
rolls of residential  wallcoverings sold in Europe during the same period. Sales
of  wallcoverings  tend to  have a  direct  relationship  to the  level  of home
renovations  and the economy in general,  but have a lesser  relationship to new
housing  starts.  The market has been declining over the past few months with it
becoming  more  important  to increase  market share by staying in tune with the
needs of the consumer.


                                       9
<PAGE>
      The Company competes primarily within the residential wallcovering segment
of the home  decorative  industry,  which is a sector of the  building  supplies
industry that caters to the  do-it-yourself  market.  Currently the wallcovering
segment is controlled by a few large  companies with many small and medium sized
companies being forced to consolidate to survive.

      Industry  trends  suggest a market shift toward  distributors  with higher
distribution  volumes.  The  Company  believes  that  it  has  developed  strong
relationships with independent regional distributors.  The Company also believes
it is well positioned to take advantage of growth in mass merchandising  through
relationships with its national distributors and large retail chains.

Patents and Trademarks

      The  Company  trademarks  the names of each of its  collections  and brand
names.  In  addition,  the  Company  copyrights  designs  created  for its brand
Wallcoverings.


Government Regulation

      The Company is subject to various Canadian  regulations relating to health
and safety standards  applicable warehouse  operations.  The Company must comply
with Canadian  federal  regulations  administered by the Workman's  Compensation
Board, relating to worker safety issues in its warehouse facility.  Although the
cost of compliance  with such  regulations is not material,  changes to existing
regulations  may have a material  adverse  effect on the Company's  business and
result of operations.  The Company is also subject to U.S.  Federal  Regulations
relating to imports of goods and the North American Free Trade  Agreement on its
products that it exports to the United  States.  Although the cost of compliance
with such regulations is not material,  changes to existing regulations may have
a material adverse effect on the Company's business and result of operations.


Employees

      As of December 31, 2003, the Company  employed 41(37 on a full time basis)
persons,  which  includes 2 senior  executives,  23 sales staff persons (19 full
time, 4 part time),  4 design  studio,  5 support  staff persons and 7 warehouse
workers.   The  Company  has  no  unionized  employees  and  believes  that  its
relationship with its employees is satisfactory.


                                       10

<PAGE>
Item 2.  PROPERTIES AND FACILITIES

      The Company leases facilities in Concord,  Ontario of approximately 78,000
square feet.  The lease was amended  July 13,  1995,  and expires on October 31,
2004,  with an annual  base  rent of Cdn.  $260,027.  The  building  houses  the
Company's executive offices, warehouse and showroom and the executive offices of
Rosedale Decorative Products.

      The  Company  also leases  space for its retail  paint  store,  located in
downtown  Toronto,  from three  companies  owned by Sid Ackerman,  the Company's
President. These leases calls for rental payments in the amount of Cdn. $36,000,
$36,000 and $42,000 per annum,  plus  property  taxes,  payable in equal monthly
installments of Cdn. $3,000,$3,000 and $3,500 respectively. The leases are for a
five-year term.

Item 3.  LEGAL PROCEEDINGS

              None.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

              None.




                                       11
<PAGE>

                                    PART II.


Item 5.  MARKET  FOR THE  REGISTRANT'S  COMMON  EQUITY AND  RELATED  STOCKHOLDER
MATTERS

      The  transfer  agent of our common stock is  Continental  Stock & Transfer
Company, New York, New York.

      The Company has not paid dividends to date.

                                       12
<PAGE>
Item 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OR PLAN OF OPERATIONS

General

      The  statements  contained  in this  report  that are not  historical  are
forward looking  statements  within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange  Act,  including  statements  regarding  the
Company's expectations,  intentions, beliefs or strategies regarding the future.
All forward-  looking  statements  include the  Company's  statements  regarding
liquidity,  anticipated  cash needs and  availability  and  anticipated  expense
levels.  All  forward-looking  statements  included  in this report are based on
information available to the Company on the date hereof, and the Company assumes
no obligation to update any such forward-looking  statement.  It is important to
note that the Company's  actual  results could differ  materially  from those in
such forward-looking statements.


      The  wallcoverings,  decorative  fabrics and paint  markets are highly
      competitive  and consist of foreign  and  domestic  manufacturers  and
      distributors  most of who are larger and have greater  resources  than
      the  Company.   The  Company's   future  success  as  a  designer  and
      distributor of high quality wallcoverings and designer fabrics will be
      influenced by several factors  including the ability of the Company to
      efficiently meet the quality and design requirements of its customers,
      management's  ability to  evaluate  the  public's  quality  and design
      requirements and to achieve market acceptance of its wallcoverings and
      designer fabrics collections.  The major factor affecting the industry
      is consumer  confidence  in the economy.  Consumers are leery to spend
      under present conditions and those who are spending are more cognizant
      of color,  design and quality of the product  they intend to purchase.
      The Company must continue to  concentrate  its efforts to evaluate and
      meet the requirements of its customers.  Further factors impacting the
      Company's   operations  are  increases  in  expenses  associated  with
      continued  sales growth,  the ability of the Company to control costs,
      to develop products with  satisfactory  profit margins and the ability
      to develop  and  manage  the  introduction  of new  product  lines and
      competition.


Management's Plans for 2004

      The Company will continue to take appropriate steps to continue to improve
performance in 2004. The economy has continued to be slow,  both in the U.S. and
Canada.  We continue to source products for  distribution,  which complement our
existing offering.  Selling prices on collections launched in 2004 will continue
to be  increased  to show a  positive  impact on  margins.  It is  difficult  to
quantify  what  impact  increasing  the  selling  prices on the new  collections
launched  in 2004 will have on total sales as the  collections  launched in 2003
and prior are still  generating  sales  without any price  increase.  The retail
prices for the 2003  collections  were  increased  approximately  5%, which will
relate to a smaller percentage  increase on over-all sales. The export market is
on the rebound,  with new customers in England,  France, Italy,  Australia,  New
Zealand and Mexico,  plus the  resurgence  in the eastern  block,  which  should
continue for us in 2004.  New  overseas  customers  have been  obtained in 2003,
which we would  anticipate  increasing  sales by  approximately  5%.  The retail
operation is anticipated to have small growth again in 2004.

      Expenses have been  dramatically cut by  approximately  $1.3 million on an
annualized  basis to offset the significant drop in sales recorded over the last
few months.  The full impact of these  savings will not be realized  until 2005,
with 2004  showing an  approximate  savings of  $750,000.  Management  has taken
sizable remuneration reductions which is included in these cost saving measures.
New  facilities  are being  sourced  which could save the Company  approximately
$150,000. It is management's intention to continue to rationalize the efficiency
of the Company's operations and attain increased profitability in 2004 and 2005.



                                       13
<PAGE>
Results of Operations

      Fiscal year ended  December 31, 2003  compared to the fiscal year December
31, 2002

      Revenues for the fiscal year ended December 31, 2003 were  $12,263,554,  a
42.1% decrease over prior year revenues of $21,193,725. This decrease was mainly
due to the sale of the operating  subsidiary,  Rosedale  Wallcoverings & Fabrics
Inc.  Also,  there has been an industry  wide drop in home  renovation  sales in
North  America,  which has continued  into the first part of 2004.  Retail sales
continue to grow at a slower pace than previously experienced.

      Gross  Profit for the Company for the fiscal year ended  December 31, 2003
was 34.4% of sales,  a decrease as compared  to the same  period  one-year  ago,
which was 40.1%.  This  decrease in gross profit margin can be attributed to the
selling  of the  operating  subsidiary,  which  impacted  the  sales mix for the
Company.  Slow and obsolete inventory continued to be cleared from the inventory
having a negative  impact on the gross margin.  Also  affecting  margins was the
drop in the U.S. dollar against the Canadian dollar.

      Selling expenses for the Company  decreased by 32.7% to $2,071,651 for the
fiscal year ended  December  31, 2003 as compared to  $3,079,880  for the fiscal
year ended December 31, 2002.  Again,  the largest  savings is attributed to the
sale of the division. Cut backs in warehouse staff and advertising and promotion
were initiated  when the market began to soften.  Further cut backs on warehouse
and sales  staffhave  occurred in 2004 to ensure that the Company can maintain a
cash positive statement.

      General and administrative expenses for the Company decreased by 20.5%, to
$2,048,207 for the fiscal year ended  December 31, 2003 from  $2,576,277 for the
fiscal year ended December 31, 2002.  This decrease is  attributable to the sale
of the  operating  subsidiary,  offset some what by an increase in the provision
for doubtful  accounts in 2003 relating to one customer  (Images  Wallcoverings)
who has not been able to maintain  the payment  schedule  anticipated.  The full
provision for this customer was set up for 2003. Our bad debt expense experience
has been  relatively  consistent  over the past four years with the exception of
the  write-off  of IHDG  (filed  Chapter  11) in 2000 and the  current  default.
Management  initiated  major  salary  reductions  in 2003 for the two  remaining
officers and directors.  Further  reductions on salaries have been instituted in
2004.

      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.  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 preceding  year. The Company
ensures that there are firm orders in place from  customers  before  significant
expenditures  are  incurred to produce  the sample  books.  Therefore,  there is
little  speculative risk in their  production.  Book development and subsidy for
the fiscal year ended December 31, 2003 of $214,133 compared to $191,046 for the
same  period  last  year.  Book  subsidies  are now  expensed  in the  financial
statements  rather than being  amortized over the life of the  collection.  This
method  provides a more  conservative  approach to accounting for such costs. As
the market has become much more  competitive,  customers are less willing to pay
higher prices for these collections,  therefore it is necessary to subsidize the
books to ensure  we get  coverage  in our  territories  as books are our  silent
salesman.

      Design  studio  expenses  for the  Company  decreased  by 20.3% to for the
fiscal year ended December 31, 2003, to $614,179  versus $770,657 for the fiscal
year ended  December 31, 2002.  This  decrease is a direct result of the sale of
Rosedale  Wallcoverings.  Design  costs  now  being  expensed  in the  financial
statements  rather than  accounted  for as prepaids  and matched to the year the
collections are launched.  This method provides a more conservative  approach to
accounting for such costs.

                                       14
<PAGE>
      The  operating  loss for the  fiscal  year  ended  December  31,  2003 was
$1,500,006  compared to  operating  income of $311,181 for the fiscal year ended
December 31, 2002.  The two main areas  creating this loss were the  significant
drop in sales and the drop in gross margins. We anticipate are margins to regain
some of their previous strength but not to the 40% mark as the US dollar is much
weaker than in previous years.


      The  Company was forced by the  National  Bank to cancel  certain  foreign
exchange contracts in October 2001, which resulted in a cancellation  expense of
$214,668.  During 2000, the Company had foreign exchange  contracts to sell U.S.
dollars based on projected U.S. sales. The Company  defaulted on these contracts
primarily  due to the  Chapter  11 filing of a major  customer  in the U.S.  The
National Bank, at their discretion,  permitted the Company to roll forward these
contracts  through 2000 and the first nine months of 2001. In October 2001,  the
National Bank changed their policy on rolling forward these contracts forcing us
to settle the roll forward  contracts,  which  resulted in an immediate  expense
consisting of the difference  between the contract value and the market value of
the U.S. dollar to the Canadian dollar, thus a cancellation expense of $214,668.
This had a major impact on our profitability for 2001, is a one time expense and
will not re-occur.

      Interest  expense  and bank  charges  for the  Company for the fiscal year
ended  December 31, 2003  decreased  2.6% to $234,538 from $240,773 for the year
ended December 31, 2002.  This decrease in interest  expense is  attributable to
decreased interest income and lower interest rates during the year.

      The exchange gain on foreign exchange contracts of $206,712 relates to the
FASB requirement that the ineffective  portion of gain or losses attributable to
cash flow  hedges be  reported  in  earnings.  As the U.S.  dollar has  weakened
dramatically  in 2003,  the  contracts we engaged to protect our margins on U.S.
sales had a positive impact on net income.

A loss on the sale of Rosedale  Wallcoverings was recorded in 2003 in the amount
of  $1,323,715.   The  shareholders   approved  the  sale  of  the  wholly-owned
subsidiary,  Rosedale Wallcoverings & Fabrics Inc. to our former Chairman of the
Board and Chief Executive  Officer,  Alan Fine. The terms of the transaction are
as follows:

      The total purchase price to be paid was $1,224,000 (Cdn.) ($768,458 U.S.).
Such  amount  was  paid  by the  assumption  of  our  obligation  for  severance
obligations to Mr. Fine in the amount of $1,100,250 Cdn ($690,765  U.S.),  and a
cash payment of $123,750 Cdn ($77,693 U.S.).  Upon closing of the sale, Mr. Fine
resigned  as an  officer  and  member  of the  Board of  Directors  of  Rosedale
Decorative Products Ltd. The pre-existing  inter-company term loan due and owing
by Rosedale  Wallcoverings  and Fabrics to Rosedale  Decorative  Products in the
principal  amount of  approximately  $696,000 Cdn ($437,000  U.S.) was repaid by
Rosedale  Wallcoverings & Fabrics Inc. by delivery of a lump-sum  payment on the
closing date in full settlement  thereof in the amount of $400,000 Cdn ($251,130
U.S.), being the present value of the term loan accelerated to the closing date.
The pre-existing  loan due and owing by Rosedale  Wallcovering & Fabrics Inc. to
Sidney Ackerman in the face amount of approximately $486,000 Cdn ($305,000 U.S.)
was repaid in full by Rosedale Wallcoverings & Fabrics Inc. on the closing date.
The  pre-existing  loan due and owing by our  wholly-owned  subsidiary,  Ontario
Paint &  Wallpaper  Limited  to Mr.  Fine in the face  amount  of  approximately
$250,000 Cdn ($157,000 U.S.) was repaid by Ontario Paint & Wallpaper  Limited in
full on the closing date. In connection  with the sale, Mr.  Ackerman has agreed
to purchase  375,000  shares of our common stock from Mr.  Fine.  As a result of
such purchase,  Mr. Ackerman will then be the beneficial owner of 923,781 shares
of  common  stock  representing  33.5%  of the  total  shares  outstanding.  The
background  of the  proposed  transaction  is  rooted  in  disagreements  in the
direction of our  businesses,  growth and  development  as between Alan Fine and
Sidney Ackerman.

                                       15
<PAGE>
As  Rosedale  Decorative  Products  Ltd.  was  essentially  created as a holding
company for its two independently operating subsidiaries, Rosedale Wallcoverings
&  Fabrics  Inc.  and  Ontario  Paint &  Wallpaper  Limited,  with  both  having
responsibilities to the Board of Directors, it was determined that it was in the
best  interest of  Rosedale  Decorative  Products  to divest  itself of Rosedale
Wallcoverings  & Fabrics,  which would  reduce the debt and also  eliminate  the
contingent  tax liability of  approximately  $830,000.  The sale of the Rosedale
Wallcoverings & Fabrics Inc. to Mr. Fine will  significantly  reduce the product
lines and lines of business which we conduct.  This decrease in  diversification
of our business  could serve to magnify any downturns in the remaining  business
lines.  In  particular:  Our ability to adjust to changes in consumer  demand or
economic  shifts  could  be  materially   impacted.   Although  we  received  an
independent  evaluation of the value of Rosedale  Wallcoverings  & Fabrics Inc.,
there can be no assurance that the value may not be higher to other  purchasers.
We did not seek bids from any purchaser other than Mr. Fine.


      The net loss for the fiscal year ended  December 31, 2003 was  $2,994,178,
as compared to a net profit of $164,358  for the fiscal year ended  December 31,
2002.

      The loss per share for the fiscal year ended  December  31, 2003 was $1.09
compared to a earnings per share of $0.06 for the fiscal year ended December 31,
2002.  Earnings per share were calculated for both periods based on the weighted
average  number of shares issued in each year.  The weighted  average  number of
shares for 2003 was 2,755,331 and 2,755,514 for 2002.


Liquidity and Capital Resources

      The Company had a net change in cash of $126,098 for the fiscal year ended
December 31, 2003. This was  attributable  to paying down of bank debt,  capital
additions and the sale of the subsidiary.

      Cash flows  generated from investing  activities for the fiscal year ended
December 31, 2003 were $1,323,763.  This reflected the proceeds from the sale of
Rosedale Wallcoverings,  the proceeds from the sale of equipment,  offset by the
capital addition for cylinders, designs and engravings for new collections.

      The Company has reviewed their  position on all guarantees  that they have
issued  and have  determined  that they have no  exposure  on the  contingencies
referred to in the financial  statements.  The Company has also done an in depth
study to review the useful life of our assets and have  determined that there is
no impairment.

      The Company's main currency is Canadian  dollars even though we have sales
made in U.S.  dollars.  As  purchases  are  normally  made in Canadian  dollars,
profitabilty  can be affected by the fluctuation in the rate of exchange between
the  currencies.  The  stronger the U.S.  dollar,  the better the margin on U.S.
sales will be. This is why the Company will sell  forward on the U.S.  dollar to
protect their margin.


Item 7.  FINANCIAL STATEMENTS

     The Financial  Statements are included with this report  commencing on page
F-1.


Item 8. CHANGES IN ACCOUNTANTS AND DISAGREEMENTS  WITH ACCOUNTANTS ON ACCOUNTING
        AND FINANCIAL DISCLOSURE


                                       16
<PAGE>
         None.

Item 8A - CONTROLS AND PROCEDURES

     Evaluation  of  disclosure  controls  and  procedures.  An  evaluation  was
performed under the supervision  and with the  participation  of our management,
including the chief executive  officer and the chief financial  officer,  of the
effectiveness of the design and operation of our disclosure procedures. Based on
management's evaluation as of as of the end of the period covered by this Annual
Report,  our  principal  executive  officer  and chief  financial  officer  have
concluded  that our  disclosure  controls  and  procedures  (as defined in Rules
13a-14(c) and 15d-14(c)  under the  Securities  Exchange Act of 1934, as amended
(the "Exchange Act")) were sufficiently effective to ensure that the information
required to be  disclosed  by us in the reports  that we file under the Exchange
Act is gathered,  analyzed and disclosed with adequate timeliness,  accuracy and
completeness.

     Changes in internal controls. There have been no significant changes in our
internal  controls or in other  factors  that could  significantly  affect these
controls  subsequent to the date of the evaluation  referred to above,  nor were
there any  significant  deficiencies  or  material  weaknesses  in our  internal
controls. Accordingly, no corrective actions were required or undertaken.

                                       17

<PAGE>


                                   PART III.


Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(A) OF THE EXCHANGE ACT

Directors and Executive Officers

     The following table sets forth certain information concerning the Directors
and Executive Officers of the Company:

 Name                        Age      Position
 -----------------------  ----------- -----------------------------------------
 Sidney Ackerman              58      President and Director

 Norman G. Maxwell            56      Chief Financial Officer and Director

 Ken Page                     41      Director

 Janet Hendry                 65      Director


     Set  forth  below  is a  biographical  description  of  each  director  and
executive officer of the Company based on information
supplied by each of them.


     Sidney  Ackerman  has  served as the  President  of the  Company  since its
inception in May 1998. In 1971, Mr. Ackerman was responsible for the development
of Ontario Wallcoverings, which became the wallpaper distribution arm of Ontario
Paint & Wallpaper  Ltd. In June 1978,  Mr.  Ackerman  was elected  Director  and
Treasurer of Ontario Paint & Wallpaper Ltd. Since 1994, Mr.  Ackerman has served
as the President of Ontario Paint & Wallpaper Ltd.

     Norman G. Maxwell has been Chief Financial  Officer and Operations  Manager
of the Company  since its  inception in May 1998 and has served as a director of
the Company since May 1998. Prior thereto, since 1992, Mr. Maxwell has served as
the Vice  President  of Finance with  Ontario.  From 1989 to 1992,  Mr.  Maxwell
served as the Controller of Ontario.  Mr.  Maxwell has been in the  wallcovering
industry for over 20 years and has been a Certified Management  Accountant since
1977.

     Ken Page has been a Director of the Company since June 2000. Since 1992 Mr.
Page has been a  partner  of the law firm of Page  Arnold in  Toronto,  Ontario,
Canada. Mr. Page graduated from the University of Western Ontario with an LLB in
1986 and was admitted to the bar in Ontario 1988.

     Janet  Hendry has been a Director  of the Company  since  March  2003.  Ms.
Hendry has been employed as a legal secretary for a lawyer involved in corporate
and  securities  law for over 30  years.  She is  currently  the  Administrative
Assistant  to a private  company  engaged  in  mortgage  financing.  She is also
Corporate  Secretary of Sterling  Centrecorp  Inc., a public  company listed for
trading on the Toronto Stock  Exchange,  involved in real estate  investment and
management services.

                                       18

<PAGE>
Committees of the Board of Directors

The Board of Directors has a Compensation Committee and an Audit Committee.

     The Compensation  Committee  presently  consists of, Ken Page, Janet Hendry
and Sid Ackerman.  Mr. Page and Ms. Hendry are independent directors who are not
salaried officers of the Company.  The purpose of the Compensation  Committee is
to review the Company's  compensation of its executives,  to make determinations
relative  thereto and to submit  recommendations  to the Board of Directors with
respect  thereto.  The  Compensation  Committee also selects the persons to whom
options to purchase  shares of the  Company's  Common Stock under the 1998 Stock
Option  Plan will be  granted  and to make  various  other  determinations  with
respect to such Plan.

     The Audit Committee  consists of Ken Page, Janet Hendry and Norman Maxwell.
The purpose of the Audit  Committee  is to provide  general  oversight of audit,
legal compliance and potential conflict of interest matters.


Compensation of Directors

     The Company did not pay  compensation  to any  director  for acting in such
capacity.

     The Company  intends to file with the  Securities  and Exchange  Commission
within  120  days of the end of the  fiscal  year  covered  by  this  report  an
information statement (the "Information Statement"),  pursuant to Regulation 14C
pertaining to the Annual Meeting of Stockholders held in March 2003. Information
regarding  directors and executive officers of the Company will appear under the
caption "Election of Directors" in the Information Statement and is incorporated
herein by reference.

Section 16(a) Beneficial Ownership Reporting Compliance

     Based  solely  upon a review of Forms 3, 4 and 5, and  amendments  thereto,
furnished to the Company  during  fiscal year 2003,  the Company is not aware of
any  director,  officer  or  beneficial  owner of more than ten  percent  of the
Company's Common Stock that, during fiscal year 2003, failed to file on a timely
basis reports required by Section 16(a) of the Securities Exchange Act of 1934.


Item 10. EXECUTIVE COMPENSATION

     The following table sets forth certain information  regarding  compensation
paid by the Company  during each of the last three fiscal years to the Company's


                                       19

<PAGE>
Chief  Executive  Officer and to each of the  Company's  executive  officers who
earned in excess of $100,000.

<TABLE>
<CAPTION>
                                                      Summary Compensation Table


                                                                                  Long-Term Compensation
                                                                                  ----------------------
                                                                               Awards                  Payouts
                                                                               ------                  -------
                                                                                        Securities             All
                                                                            Restricted  Underlying             Other
                                                       Other                Stock        Options/    LTIP      Compen-sation
                                                    Compen-sation           Award(s)       SARs      Payouts       ($)
Name              Position   Year (1)     Salary                   Bonus       ($)       (#)(1)(2)     ($)
<S>                <C>          <C>        <C>           <C>        <C>        <C>          <C>        <C>       <C>
Alan Fine(1)      Chief        2003       -----           ----      ----      ----         ----       ----      ----
                  Executive    2002      $195,822                   ----      ----         ----       ----      ----
                  Officer      2001      $198,528         ----                ----         ----       ----      ----
                                                        $2,317

Sidney            President    2003     $ 197,466       $5,427      ----      ----         ----       ----      ----
Ackerman(1)                    2002     $ 195,822       $4,784      ----      ----         ----       ----      ----
                               2000      $198,528       $4,896      ----      ----         ----       ----      ----
----------------- ---------- ---------- ----------- ------------ ---------- ----------- ------------ --------- ----------
</TABLE>
(1)  Reflects total  compensation  received from both the Company's  Ontario and
     Rosedale subsidiaries.  As the Company is located in Canada, the executives
     have been paid salaries of $307,500 Canadian dollar in 2003, ($205,000 U.S.
     based on an effective exchange rate of $1.50).


                       STOCK OPTIONS GRANTS AND EXERCISES

     Stock options granted to the named executive  officers in 1999 were reduced
in 2000 to 25,000 each from 125,750 each.

     No stock  options were granted  during the fiscal year ending  December 31,
2001 and 2002.  In 2003 all stock  options  that were issued to  employees  were
cancelled.

     The  following  table shows the value at December  31, 2003 of  unexercised
options held by the named executive officers:
<TABLE>
<CAPTION>
                            Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-end Option Values
                            ---------------------------------------------------------------------------------
                                                                       Number of securities         Value of unexercised
                                                                      underlying unexercised       in-the-money options at
                                                                        options at fiscal            fiscal year-end ($)
                                                                           year-end (#)

           Name               Shares acquired on   Value Realized
                                 exercise (#)            ($)        Exercisable/unexercisable     Exercisable/unexercisable


<S>                                   <C>                 <C>                   <C>                         <C>
Sidney Ackerman, President            0                   0                     0                           $0/0
---------------------------- --------------------- ---------------- --------------------------- ------------------------------
</TABLE>


                                       20
<PAGE>

Employment Agreements

     On the  effective  date of the  Company's  Registration  Statement,  Sidney
Ackerman  entered into five year employment  agreement with the Company.  Sidney
Ackerman  is  retained  as  President  of the  Company  at an  annual  salary of
$205,000.  The  compensation  committee  presented to the board an annual salary
increase to $205,000 for both executive officers retroactive to January 1, 2002.
The board unanimously  approved the increase.  On January 1, 2003 the employment
contract for Sidney Ackerman was renewed for a period of one year under the same
terms.  On January 13, 2004,  the  employment  contract for Sidney  Ackerman was
renewed for a period of three years under the same terms.

     The employment  agreement with Sidney Ackerman  provide that upon his death
that three years full salary will be paid to the employee's estate in a lump sum
payment.  The agreement also provides for  reimbursement of reasonable  business
expenses.

     Sidney  Ackerman is entitled to bonuses of up to $10,000 per annum based on
achieving  sales,  profitability  and management  goals as  predetermined by the
Board of Directors or compensation  committee and other  subjective  criteria as
determined by the Board of Directors or Compensation Committee.

     Sidney  Ackerman shall receive  $20,000 per year  additional  compensation,
including  car  allowance,   insurance  and  retirement   savings  with  matched
contributions by the Company and such other perquisites.

     Upon the  resignation,  or exercise of retirement  option upon reaching the
age of 60, the Company shall pay the employee a lump sum  resignation  allowance
equal to three years salary plus equivalent in benefits. Based upon any wrongful
termination, the Company shall pay the employee a lump sum resignation allowance
of 5 years salary and equivalent in benefits.

     In the event that there is a change in control of the  Company,  through an
acquisition  where  any  person  acquires  more  than 50% of the  shares  of the
Company,  an  amalgamation,  consolidation  or merger with  another  corporation
resulting  in at least 50% of the  voting  shares of the  surviving  corporation
being  controlled  by a new acquirer or the sale directly or otherwise of all of
the assets of the Company to a third party in a non-distress situation, then the
Company shall pay to Sidney  Ackerman a lump sum payment equal to the sum of one
and one-half times their  respective  annual salaries paid or payable in respect
of the most recently completed fiscal year.


Stock Option Plan

     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 administered by the Compensation Committee or the board of
directors,  who  determine,  among other  things,  those  individuals  who shall
receive  options,  the time period  during which the options may be partially or
fully exercised, the number of shares of Common Stock issuable upon the exercise
of the options and the option exercise price.


                                       21

<PAGE>


     The 1998 Plan is for a period  for 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  will  be  exercisable  only  by  the
participant during his or her lifetime.

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

     Options granted under the 1998 Plan, at the discretion 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  participant's  personal
recourse note, or with an assignment to the Company of sufficient  proceeds from
the sale of the Common  Stock  acquired  upon  exercise of the  Options  with an
authorization  to the broker or selling agent to pay that amount to the Company,
or any combination of the above.

     The exercise  price of an option may not be less than the fair market value
per share of Common  Stock on the date that the  option is  granted  in order to
receive certain tax benefits under the Income Tax Act of Canada (the "ITA"). The
exercise  price of all future  options  will be at least 85% of the fair  market
value of the Common Stock on the date of grant of the options.  A benefit  equal
to the  amount  by which  the fair  market  value of the  shares at the time the
employee  acquires  them  exceeds the total of the amount paid for the shares or
the  amount  paid for the  right to  acquire  the  shares  shall be deemed to be
received  by the  employee  in the year the  shares  are  acquired  pursuant  to
paragraph  7(1) of the ITA.  Where the exercise  price of the option is equal to
the fair market value of the shares at the time the option is granted, paragraph
110(1)(d) of the ITA allows a deduction  from income equal to one quarter of the
benefit as calculated  above.  If the exercise  price of the option is less than
the fair market value at the time it is granted,  no deduction  under  paragraph
110(1)(d) is permitted. Options granted to any non-employees,  whether directors
or consultants or otherwise  will confer a tax benefit in  contemplation  of the
person becoming a shareholder pursuant to subsection 15(1) of the ITA.

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

     Any  unexercised  options that expire or that  terminate upon an employee's
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 shareholders of the Company.




EQUITY COMPENSATION PLAN INFORMATION

The  following  table sets forth  information  about the shares of the Company's
common  Stock  that may be  issued  upon the  exercise  of  options  granted  to
employees under the 1998 Stock Option Plan,  which were approved by the Board of
Directors,  as well as shares  that may be issued  upon the  exercise of options
under the 2002 Stock Option Plan,  that were issued to  consultants,  which were
not approved by the Board of Directors.

                                       22
<PAGE>

<TABLE>
<CAPTION>
                                                                                                   (c)
                                                                                           Number of securities
                                             (a)                       (b)               remaining available for
                                    Number of securities         Weighted-average         future issuance under
                                      to be issued upon         exercise price of       equity compensation plans
                                         exercise of               outstanding             excluding securities
                                    outstanding options,        options, warrants        reflected in column (a)
       Plan Category                 warrants and rights            and rights                     (1)
-----------------------------      ------------------------    ---------------------    ---------------------------
<S>                                        <C>                          <C>                           <C>
Equity compensation plans
approved by security holders                         -                        -                              -

Equity compensation plans
not approved by security
holders (1)
                                   ------------------------    ---------------------    ---------------------------
</TABLE>
Total

     (1)  The Company  established a nonqualified  stock option plan pursuant to
          which options to acquire a maximum of 750,000  shares of the Company's
          common  stock  were  reserved  for grant.  As of  December  31,  2003,
          included  above  are [ ] shares  issuable  upon  exercise  of  options
          granted to employees and directors.


     Information regarding executive  compensation will appear under the caption
"Executive Compensation" in the Information Statement and is incorporated herein
by reference.

                                       23
<PAGE>
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Principal Stockholders

     The following table sets forth certain  information,  as of the date hereof
by the Company with respect to the  beneficial  ownership of the Common Stock by
each beneficial owner of more than 5% of the outstanding shares thereof, by each
director,  each  nominee to become a director  and each  executive  named in the
Summary Compensation Table and by all executive officers, directors and nominees
to become directors of the Company as a group.
<TABLE>
<CAPTION>
-------------------------------------------------------------- ------------------- --------------------------
                                                                Shares of Common
                                                               Stock Beneficially   Approximate Percentage
                                                                     Owned              of Common Stock
Name                                                                                      Outstanding
-------------------------------------------------------------- ------------------- --------------------------
<S>            <C>                                               <C>                        <C>
Sidney Ackerman(2)                                               891,726                    32.4%
Rosalyn Fine                                                     375,000                    13.6%
Janis Ackerman                                                    77,758                     2.8%
Robert Ackerman                                                   77,758                     2.8%
Lauren Ackerman                                                   77,758                     2.8%
All Executive Officers and Directors
as a Group (one person)                                          891,726                    32.4%
_____________________
</TABLE>
     (1)  Unless  otherwise  indicated,  the address is c/o Rosedale  Decorative
          Products Ltd., 731 Millway Avenue, Concord, Ontario, Canada L4K 3S8.

     (2)  Does not  include  233,274  shares of Common  Stock  held by the Janis
          Ackerman, Robert Ackerman and Lauren Ackerman. Includes 228,574 shares
          of Common  Stock  owned by  1369597  Ontario  Inc.,  which is owned by
          Sidney Ackerman, Janis Ackerman, Robert Ackerman and Lauren Ackerman.


     The  securities   "beneficially  owned"  by  a  person  are  determined  in
accordance with the definition of "beneficial  ownership" set forth in the rules
and  regulations   promulgated  under  the  Securities  Exchange  Act  of  1934.
Beneficially  owned  securities may include  securities  owned by and for, among
others, the spouse and/or minor children of an individual and any other relative
who has the same home as such individual. Beneficially owned securities may also
include  other  securities  as to which the  individual  has or shares voting or
investment  power or which such  person has the right to acquire  within 60 days
pursuant to the  conversion  of  convertible  equity,  exercise  of options,  or
otherwise.  Beneficial  ownership  may  be  disclaimed  as  to  certain  of  the
securities.

     The  foregoing  table  is based  upon  2,755,214  shares  of  common  stock
outstanding as of December 31, 2003, assuming no other changes in the beneficial
ownership of the securities, except the tax-free reorganization of share capital
held by the  principal  stockholders.  The total  number of shares  beneficially
owned by the principal stockholders, 1,500,000 shares, did not change.


Item 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


     Sidney  Ackerman,  President  of the  Company,  owns all of the  issued and
outstanding  capital  stock of 966578  Ontario  Inc.,  1216748  Ontario Inc. and
976168 Ontario Inc. Sid Ackerman owns all of the issued and outstanding  capital
stock of 1369597  Ontario  Inc. The Company  leases space for its retail  store,
located in downtown Toronto,  from 966578 Ontario Inc., 1216748 Ontario Inc. and
1369597  Ontario  Inc.  The  leases  call for rental  payments  in the amount of
$25,686  per annum,  plus  general  property  taxes,  payable  in equal  monthly
installments  of $2,141 for the property  leased from  1216748  Ontario Inc. The
lease for 966578 Ontario Inc. calls for rental payments in the amount of $25,686
per annum plus general property taxes,  payable in equal monthly installments of
$2,171.  The lease for 1369597  Ontario  Inc.  calls for rental  payments in the
amount of  $29,968  per annum  plus  general  property  taxes,  payable in equal
monthly installments of $2,497. The leases are for a five-year term.

     The Company has second  collateral  mortgages  from two related  companies,
1216748 Ontario Inc. and 1217576 Ontario Inc., both of which are owned by Sidney
Ackerman, President. The principal amount of the loans from 1216748 Ontario Inc.
and 1217576 Ontario Inc. are $199,593 and $181,032,  respectively. The mortgages
are  secured by land and  buildings  and bear  interest  at 9% per annum and are
payable on demand.

     The Company has available credit  facilities up to a maximum of $3,857,000,
which bear  interest at rates  varying  between the bank's prime rate plus 0.25%
and prime plus 0.75%. The credit  facilities are 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 $964,000 from the Company
and its  subsidiaries,  guarantees  from  affiliated  companies  up to $656,000,

                                       24
<PAGE>
assignment  of life  insurance of  $1,157,000  on the lives of a key officer and
assignment of fire insurance.

     Information  regarding  Certain  Transaction  will appear under the caption
"Certain Transaction" in the Information Statement and is incorporated herein by
reference.

Item 13.   EXHIBITS AND REPORTS ON FORM 8-K

         (a) Exhibits

     3.1  Articles of Incorporation of the Registrant(1)

     3.2  By-laws of Registrant(1)

     4.1  Form of Underwriters' Warrant(3)

     4.2  Form of Warrant Agreement(1)

     4.3  Specimen Common Stock Certificate(3)

     4.4  Specimen Redeemable Common Stock Purchase Warrant Certificate(4)

     10.2 1998 Stock Option Plan(3)

     10.4 Form of Employment Agreement with Sidney Ackerman(3)

     10.5 Form of Employment Agreement with Alan Fine(3) 14Code of Ethics

     21   List of Subsidiaries of Registrant(1)

     31.1 Certification of Principal  Executive  Officer pursuant to Rule 13a-14
          and Rule 15d-14(a),  promulgated under the Securities and Exchange Act
          of 1934, as amended

     31.2 Certification of Principal  Financial  Officer pursuant to Rule 13a-14
          and Rule 15d 14(a),  promulgated under the Securities and Exchange Act
          of 1934, as amended

     32.1 Certification  pursuant to 18 U.S.C. Section 1350, as adopted pursuant
          to Section  906 of the  Sarbanes-Oxley  Act of 2002  (Chief  Executive
          Officer)

     32.2 Certification  pursuant to 18 U.S.C. Section 1350, as adopted pursuant
          to Section  906 of the  Sarbanes-Oxley  Act of 2002  (Chief  Financial
          Officer)

     (1)  Incorporated by reference from registrant's  Registration Statement on
          Form SB-2, filed on January 22, 1998.

     (2)  Incorporated by reference from registrant's  Registration Statement on
          Form SB-2, Amendment No. 1, filed on April 23, 1998.

     (3)  Incorporated by reference from registrant's  Registration Statement on
          Form SB-2, Amendment No. 2, filed on May 28, 1998.

     (4)  Incorporated by reference from registrant's  Registration Statement on
          Form SB-2, Amendment No. 3, filed on June 11, 1998.

  (b) Reports on Form 8-K.

     (1)  Changes in Registrant's certifying Accountant April 15, 2004

Item 14. PRINCIPAL ACCOUNTNAT FEEES AND SERVICES

Audit Fees. The aggregate fees billed by our auditors, for professional services
rendered  for the audit of our annual  financial  statements  for the year ended
December  31,  2003 and 2002,  and for the reviews of the  financial  statements
included in our  Quarterly  Reports on Form 10-QSB  during that fiscal year were
$52,856, and $78,515, respectively.

Audit Related  Fees. We incurred no fees to auditors for audit related  services
during the fiscal year ended December 31, 2003 and 2002.

Tax Fees. We incurred no fees to auditors for tax compliance, tax advice and tax
compliance services during the fiscal year ended December 31, 2003 and 2002.

All Other Fees. The aggregate  fees billed by auditors for services  rendered to
the Company, other than the services covered in "Audit Fees" for the fiscal year
ended  December 31, 2003 and 2002 were $14,010 and $0,  respectively  which fees
primarily related to the Company's tax returns.

The Audit Committee has considered  whether the provision of non-audit  services
is compatible with maintaining the principal accountant's independence.

                                       25
<PAGE>
                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.

                                       ROSEDALE  DECORATIVE PRODUCTS LTD.


                                       By/s/ SIDNEY ACKERMAN
                                         -------------------
                                       President and Director

                               Date: August 30, 2004

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

<TABLE>
<CAPTION>


Name                          Position                                          Date

<S>                               <C>                                           <C>
/s/ SIDNEY ACKERMAN           President Director                          August 30, 2004
-------------------
    Sidney Ackerman

/s/ NORMAN G. MAXWELL         Director, Chief Financial Officer,          August 30, 2004
---------------------
    Norman G. Maxwell         Principal Accounting Officer

/s/ KEN PAGE                  Director                                    August 30, 2004
------------
Ken Page

/s/ JANET HENDRY              Director                                    August 30, 2004
-----------------
    JANET HENDRY
</TABLE>

                                     26
<PAGE>
                      ROSEDALE DECORATIVE PRODUCTS LIMITED
                        CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002
                                  TOGETHER WITH
                         REPORT OF INDEPENDENT AUDITORS
                        (Amounts expressed in US dollars)






                             CONTENTS

Independent Auditors' Report                                             1

Consolidated Balance Sheets                                              2

Consolidated Statements of Operations                                    3

Consolidated Statements of Changes in Stockholders' Equity               4

Consolidated Statements of Cash Flows                                    5

Notes to Consolidated Financial Statements                         6  - 20


<PAGE>

                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders of Rosedale Decorative Products
Limited

     We have audited the  accompanying  consolidated  balance sheets of Rosedale
Decorative Products Limited (incorporated in Canada) as at December 31, 2003 and
2002  and  the  related  consolidated  statements  of  operations,   changes  in
stockholders'  equity and cash flows for the years then ended.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audit.

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

     In our opinion,  the consolidated  financial  statements  referred to above
present fairly,  in all material  respects,  the financial  position of Rosedale
Decorative Products Limited, as at December 31, 2003 and 2002 and the results of
its  operations,  changes in  stockholders'  equity and cash flows for the years
then ended in accordance with accounting  principles  generally  accepted in the
United States of America.

     Since the  accompanying  consolidated  financial  statements  have not been
prepared and audited in accordance with generally accepted accounting principles
and  standards in Canada,  they may not satisfy the  reporting  requirements  of
Canadian statutes and regulations.

     The comparative financial statements for December 31, 2002 were audited and
reported on by another  firm of  Chartered  Accountants  to which they  attached
their unqualified auditor's report, dated April 2, 2003.




Toronto, Canada                      CHARTERED ACCOUNTANTS
May 14, 2004

                                       F-2

<PAGE>

ROSEDALE DECORATIVE PRODUCTS LIMITED
Consolidated Balance Sheets
December 31, 2003 and 2002
(Amounts expressed in US dollars)


<TABLE>
<CAPTION>
                                                                                             2003              2002
                                                    ASSETS
Current
<S>                                                                                        <C>               <C>
   Cash                                                                               $ 1,312,534       $ 1,186,436
   Accounts receivable (note 4)                                                         1,399,731         3,973,605
   Inventories (note 5)                                                                 3,565,498         5,886,464
   Prepaid and sundry assets                                                              240,150           332,031
   Mortgages receivable (note 6)                                                          380,625                 -
                                                                                  ----------------------------------

                                                                                        6,898,538        11,378,536
Advances to Related Party (note 7)                                                         21,154            41,975
Mortgages Receivable (note 6)                                                            -                  312,805
Equipment (note 8)                                                                      2,390,858         4,279,689
                                                                                  ----------------------------------

                                                                                      $ 9,310,550      $ 16,013,005
                                                                                  ----------------------------------

                                                        LIABILITIES
Current
   Bank indebtedness (note 9)                                                         $ 3,676,960       $ 4,710,636
   Accounts payable and accrued charges                                                 2,302,407         4,578,251
   Income taxes payable                                                                  -                    4,145
   Advances from directors                                                               -                  919,427
                                                                                  ----------------------------------

                                                                                        5,979,367        10,212,459
Deferred Income Taxes (note 10)                                                           187,373           410,624
                                                                                  ----------------------------------

                                                                                        6,166,740        10,623,083
                                                                                  ----------------------------------

                                                         STOCKHOLDERS' EQUITY
Capital Stock (note 11)                                                                 5,029,282         5,029,355
Additional Paid-In Capital                                                                142,314           142,314
Accumulated Other Comprehensive Loss                                                      288,142          (459,997)
(Deficit) Retained Earnings                                                            (2,315,928)          678,250
                                                                                  ----------------------------------

                                                                                        3,143,810         5,389,922
                                                                                  ----------------------------------

                                                                                      $ 9,310,550      $ 16,013,005
                                                                                  ----------------------------------
</TABLE>

APPROVED ON BEHALF OF THE BOARD


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



                                       F-3

<PAGE>

ROSEDALE DECORATIVE PRODUCTS LIMITED
Consolidated Balance Sheets
December 31, 2003 and 2002
(Amounts expressed in US dollars)
<TABLE>
<CAPTION>


                                                                          2003             2002


<S>                                                                      <C>              <C>
    Sales                                                           $ 12,263,554     $ 21,186,170
    Cost of Sales                                                      8,050,123       12,014,307
                                                                    --------------------------------

     Gross Profit                                                      4,213,431        9,171,863
                                                                    --------------------------------

     Expenses
         General and administrative                                    2,262,340        2,767,738
         Selling and delivery                                          2,071,651        3,079,873
         Design studio                                                   614,179          770,655
         Financial                                                       234,538          230,667
         Exchange (gain) loss                                            (88,359)         681,967
         Exchange (gain) loss on foreign exchange contracts             (206,712)           7,520
         Amortization                                                    825,800        1,322,262
                                                                    --------------------------------
                                                                       5,713,437        8,860,682
                                                                    --------------------------------

    (Loss) Earnings Before the Undernoted                             (1,500,006)         311,181
     Loss on sale of subsidiary (Loss) Earnings                        1,323,715                -
                                                                    --------------------------------

    Before Income Taxes                                               (2,823,721)         311,181
                                                                    --------------------------------

        Current income taxes                                                (879)          19,459
        Future income taxes                                              171,336          127,364
                                                                    --------------------------------
                                                                         170,457          146,823
                                                                    --------------------------------

    Net (Loss) Earnings                                             $ (2,994,178)     $   164,358
                                                                    --------------------------------



     (Loss) earnings per weighted average number of
      shares outstanding - basic and diluted                       $       (1.09)    $       0.06
                                                                   ---------------------------------

 Weighted average number of shares
     outstanding - basic and diluted                                   2,755,331        2,755,514
                                                                   ---------------------------------
</TABLE>


                                       F-4
<PAGE>

ROSEDALE DECORATIVE PRODUCTS LIMITED
Consolidated Statements of Operations
Years Ended December 31, 2003 and 2002
(Amounts expressed in US dollars)
<TABLE>
<CAPTION>



                                                                 Paid in    Accumulated
                                                               Capital in      Other        Retained           Total
                                 Number of    Capital           excess of   Comprehensive   Earnings       Stockholders'
                                  Shares       Stock            Par Value       Loss        (Deficit)          Equity
                               -----------------------------------------------------------------------------------------
<S>               <C> <C>        <C>          <C>               <C>           <C>             <C>           <C>
Balance, December 31, 2001       2,755,514    $ 5,029,355       $ 142,314     $ (509,109)     $ 513,892     $ 5,176,452

Foreign exchange on
  translation                            -              -               -         49,112              -          49,112

Net income                               -              -               -              -        164,358         164,358
                              ------------------------------------------------------------------------------------------


Balance, December 31, 2002       2,755,514    $ 5,029,355       $ 142,314     $ (459,997)     $ 678,250     $ 5,389,922
                              ------------------------------------------------------------------------------------------






Balance, December 31, 2002       2,755,514    $ 5,029,355       $ 142,314     $ (459,997)     $ 678,250     $ 5,389,922

Repurchase of treasury
 stock                                (300)           (73)              -              -              -             (73)

Foreign exchange on
  translation                            -              -               -          748,1                        748,139

Net income                               -              -               -              -     (2,994,178)     (2,994,178)
                              ------------------------------------------------------------------------------------------


Balance, December 31, 2003       2,755,214    $ 5,029,282       $ 142,314      $ 288,142    $(2,315,928)    $ 3,143,810
                              ------------------------------------------------------------------------------------------

</TABLE>


                                       F-5
<PAGE>

ROSEDALE DECORATIVE PRODUCTS LIMITED
Consolidated Statements of Cash Flows
Years Ended December 31, 2003 and 2002
(Amounts expressed in US dollars)

<TABLE>
<CAPTION>


                                                                                          2003              2002
<S>                                                                                        <C>                <C>
Cash Flows from Operating Activities
   Net (loss) earnings                                                              $ (2,994,178)  $        164,358
                                                                                  ----------------------------------
   Adjustments to reconcile net income to net cash provided by
       operating activities:
     Amortization of equipment                                                           825,800          1,322,265
     Loss on sale of subsidiary                                                        1,323,715                  -
     Net assets of subsidiary                                                         (1,652,274)                 -
     Exchange (gain) loss on foreign exchange contracts                                 (206,712)             7,520
     Accounts receivable                                                               2,573,871           (125,935)
     Inventory                                                                         2,320,963           (216,755)
     Prepaid expenses and sundry assets                                                   91,881             40,427
     Accounts payable and accrued charges                                             (2,069,124)           302,188
     Income taxes recoverable                                                             (4,145)            49,170
     Future income taxes                                                                (223,250)           127,364
                                                                                  ----------------------------------
                                                                                       2,980,725          1,506,244
                                                                                  ----------------------------------
                                                                                         (13,453)         1,670,602
                                                                                  ----------------------------------

Cash Flows from Investing Activities
   Acquisition of equipment                                                           (1,457,413)        (1,893,433)
   Proceeds on disposal of equipment                                                   2,520,444                  -
   Mortgages receivable                                                                  (67,822)                 -
   Proceeds from sale of subsidiary                                                      328,554                  -
                                                                                  ----------------------------------

                                                                                       1,323,763         (1,893,433)
                                                                                  ----------------------------------

Cash Flows from Financing Activities
   Repayment of bank indebtedness                                                     (1,033,676)          (224,332)
   Repayment of advances from directors                                                 (919,423)          (243,358)
   Proceeds from (repayment of) advances from related party                                20,821           (42,170)
   Purchase of treasury stock                                                                (73)                 -
   Foreign currency exchange rate changes                                                748,139             21,674
                                                                                  ----------------------------------

                                                                                      (1,184,212)          (488,186)
                                                                                   ----------------------------------

Net Increase (Decrease) in Cash                                                          126,098           (711,017)
Cash - beginning of year                                                               1,186,436          1,897,453
                                                                                  ----------------------------------

Cash - end of year                                                                   $ 1,312,534       $  1,186,436
                                                                                  ----------------------------------


Interest and Income Taxes Paid
During the year, the company had cash flows arising
   from interest and income taxes paid as follows:

   Interest paid
                                                                                      $  201,616      $    230,608
   Income taxes paid                                                                  $        -      $     32,170
</TABLE>

                                     F-6
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LIMITED
Notes to Consolidated Financial Statements December 31,
2003 and 2002
(Amounts expressed in US dollars)


1. Sale of a Wholly-Owned Subsidiary

In July 2002,  the  Company  filed a Proxy  Statement  with the  Securities  and
Exchange  Commission ("SEC") for approval by the stockholders of the sale of one
of  its  wholly-owned  subsidiaries,   Rosedale  Wallcoverings  &  Fabrics  Inc.
("Rosedale"), to the Chairman of the Board and Chief Executive Officer, Mr. Alan
Fine.  Stockholder  approval of the sale of Rosedale  was  received on March 14,
2003. A resolution by the Board of Directors  authorized  the transfer of all of
the issued and outstanding shares in the capital of Rosedale to Mr. Alan Fine on
March 24, 2003.

The terms,  conditions  and impact to the Company  resulting  from the  proposed
transaction is fully set out in the proforma  financial  statements  included in
the aforementioned Proxy Statement.

The pro-forma impact of the sale on the 2003 and 2002 financial statements is as
follows:
<TABLE>
<CAPTION>

                                                                              Audited Adjustments         Pro-forma
                                                                ----------------------------------------------------
       <S>                                                              <C>             <C>                  <C>
      2003
      Current assets                                                 $ 6,898,538  $                     $ 6,898,538
                                                                                               -
      Total assets                                                     9,310,550               -          9,310,550
      Sales                                                           12,263,554      (1,838,656)        10,424,898
      Gross profit                                                     4,213,431        (650,239)         3,563,192
      Net earnings (loss)                                            (2,994,178)         (39,679)        (3,033,857)
      Net earnings (loss) per share                                       (1.09)           (0.01)             (1.10)

      2002

      Current assets                                                $ 11,378,536    $ (4,696,760)       $ 6,681,776
      Total assets                                                    16,013,005      (6,967,544)         9,045,461
      Sales                                                           21,186,170      (9,887,432)        11,298,738
      Gross profit                                                     9,171,863      (3,831,030)         5,340,833
      Net earnings (loss)                                                164,358        (168,447)            (4,089)
      Net earnings (loss) per share                                         0.06           (0.06)                 -

</TABLE>

                                      F-7
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LIMITED
Notes to Consolidated Financial Statements December 31,
2003 and 2002
(Amounts expressed in US dollars)



2. Summary of Significant Accounting Policies


The accounting  policies of the Company are in accordance  with United States of
America generally accepted accounting  principles and their basis of application
is consistent with that of the previous year.  Outlined below are those policies
considered particularly significant:

   a) Basis of Presentation

          The consolidated financial statements include the accounts of Rosedale
          Decorative   Products  Ltd.  ("the  Company")  and  its  wholly  owned
          subsidiary, Ontario Paint and Wallpaper Limited ("Ontario").

     All material inter-company accounts and transactions have been eliminated.

   b) Principal Activities



     The  Company,  which  was  incorporated  in  Canada  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  subsidiary,  Ontario.  Ontario  was  incorporated  in  Canada on
     December 31, 1971.


   c) 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.



   d) Other Financial Instruments



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

   e) 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.

   f) Inventory

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


                                      F-8
<PAGE>


ROSEDALE DECORATIVE PRODUCTS LIMITED
Notes to Consolidated Financial Statements December 31,
2003 and 2002
(Amounts expressed in US dollars)





2. Summary of Significant Accounting Policies (cont'd)

   g) Equipment and Amortization


     Equipment is stated at cost less  accumulated  amortization.  Amortization,
     based on the estimated useful lives of the assets, is provided as follows:


             Furniture and equipment        20%    declining balance declining
             Computer equipment             30%    balance declining balance
             Automobile                     30%    straight-line over 10 years
             Leasehold improvements
             Cylinders and designs


   h) Income Taxes

     The Company accounts for income taxes pursuant to SFAS No. 109, "Accounting
     for Income  Taxes".  Deferred tax assets and  liabilities  are recorded for
     differences between the financial statement and tax basis of the assets and
     liabilities that will result in taxable or deductible amounts in the future
     based on enacted tax laws and rates  applicable to the periods in which the
     differences are expected to affect taxable income. Valuation allowances are
     established  when  necessary  to reduce  deferred  tax assets to the amount
     expected to be  realized.  Income tax expense is recorded for the amount of
     income tax payable or refundable  for the period  increased or decreased by
     the change in deferred tax assets and liabilities during the period.

   i)   Foreign Currency Translation

     The company is a foreign private issuer and maintains its books and records
     in Canadian dollars (the functional currency). The financial statements are
     converted  to US dollars as the company has elected to report in US dollars
     consistent with  Regulation S-X, Rule 3-20. The translation  method used is
     the current rate method  which is the method  mandated by SFAS No. 52 where
     the functional  currency is the foreign currency.  Under the current method
     all  assets  and   liabilities   are   translated   at  the  current  rate,
     stockholders'  equity  accounts  are  translated  at  historical  rates and
     revenues and expenses are translated at average rates for the year.

     Due to the fact that items in the financial statements are being translated
     at different rates according to their nature,  a translation  adjustment is
     created. This translation adjustment has been included in accumulated other
     comprehensive  income.  Foreign currency  transaction  gains and losses are
     recognized in operations.


                                       F-9
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LIMITED
Notes to Consolidated Financial Statements December 31,
2003 and 2002
(Amounts expressed in US dollars)





2. Summary of Significant Accounting Policies (cont'd)

   j) Earnings or Loss Per Share

     The Company accounts for earnings per share pursuant to SFAS No. 128, which
     requires  disclosure on the  financial  statements of "basic" and "diluted"
     earnings  (loss) per share.  Basic earnings (loss) per share is computed by
     dividing net income (loss) by the weighted  average number of common shares
     outstanding for the year.  Diluted earnings (loss) per share is computed by
     dividing net income (loss) by the weighted  average number of common shares
     outstanding  plus common stock  equivalents (if dilutive)  related to stock
     options and warrants for each year. The stock options  discussed in Note 11
     could  potentially  dilute  earnings  per share in the  future but were not
     included in diluted  loss per share since they would be  anti-dilutive  for
     the periods presented.



   k) Revenue Recognition

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


   l) Use of Estimates


     The  preparation  of financial  statements  in conformity  with  accounting
     principles  generally accepted in the United States requires  management to
     make estimates and assumptions  that affect the reported  amounts of assets
     and liabilities and the disclosure of contingent  assets and liabilities at
     the date of the financial  statements and the reported  amounts of revenues
     and expenses during the reporting period.  Actual results could differ from
     those  estimates.  These  estimates  are  reviewed  periodically,  and,  as
     adjustments  become necessary,  they are reported in earnings in the period
     in which they become known.


   m) Asset Impairments


     The  Company  evaluates  the  propriety  of  the  carrying  amounts  of its
     long-lived   assets  at  least   annually,   or  when  current  events  and
     circumstances  indicate a potential  impairment.  The Company believes that
     there are no significant impairments of the carrying amounts of such assets
     and no reduction in their estimated useful lives is warranted.


   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  stock-based  compensation  expenses  to
     employees  based on the new fair value  accounting  rules.  Companies  that
     choose  not to adopt  the new rules  will  continue  to apply the  existing
     accounting rules in Accounting  Principles Board Option No. 25,  Accounting
     for stock issued to  employees.  However,  SFAS No. 123 requires  companies
     that  choose not to adopt the new fair value  accounting  rules to disclose
     pro forma net income  and  earnings  per share  under the new  method.  The
     company has adopted the disclosure provisions of SFAS No. 123.

                                       F-10
<PAGE>


ROSEDALE DECORATIVE PRODUCTS LIMITED
 Notes to Consolidated Financial Statements December 31,
 2003 and 2002
(Amounts expressed in US dollars)





2. Summary of Significant Accounting Policies (cont'd)

   Derivative Instruments and Hedging Activities

     The Company uses derivative financial instruments to reduce the exposure to
     adverse  fluctuations  in foreign  exchange  rates.  When entered into, the
     Company  formally  designates  and documents the financial  instrument as a
     hedge of a specific  underlying  exposure,  as well as the risk  management
     objectives and  strategies  for  undertaking  the hedge  transactions.  The
     Company  formally  assesses,  both at the inception and at least  quarterly
     thereafter,  whether  the  financial  instruments  that are used in hedging
     transactions  are effective at offsetting  changes in either the fair value
     or cash  flows of the  related  underlying  exposure.  Because  of the high
     degree of effectiveness  between the hedging  instrument and the underlying
     exposure  being  hedged,  fluctuations  in  the  value  of  the  derivative
     instruments  are  generally  offset by changes  in the fair  values or cash
     flows of the underlying  exposures being hedged. Any ineffective portion of
     a financial  instrument's change in fair value is immediately recognized in
     earnings.   All   of  the   Companies   derivatives   are   straightforward
     over-the-counter  instruments  with liquid  markets.  The Company  does not
     enter into derivative financial instruments for trading purposes.

     On January 1, 2001,  the Company  adopted  SFAS No. 133, as amended by SFAS
     No. 137 and SFAS No. 138. SFAS No. 133 was further amended by SFAS No. 149.
     SFAS No. 149, which did not have a material  impact effect on our financial
     statements,  became  effective  beginning  July 1, 2003.  These  statements
     require the  Company to  recognize  all  derivative  instruments  as either
     assets or liabilities  in our balance sheets at fair value.  The accounting
     for changes in the fair value of a derivative instrument depends on whether
     it has been designated and qualifies as part of a hedging relationship and,
     further,  on the type of  hedging  relationship.  At the  inception  of the
     hedging relationship,  the Company must designate the derivative instrument
     as a fair value hedge,  a cash flow hedge or a hedge of a net investment in
     a foreign  operation.  This  designation  is based upon the exposure  being
     hedged.


3.  Comprehensive  (Loss) Income

    The components of  comprehensive  income are as follows:


                                                    2003             2002
      Net (loss) earnings                   $ (2,994,178)       $ 164,358
      Foreign currency translation               748,139           49,112
                                        ----------------------------------

      Comprehensive (loss) income           $ (2,246,039)      $  213,470
                                        ----------------------------------

                                      F-11
<PAGE>

ROSEDALE DECORATIVE PRODUCTS LIMITED
Notes to Consolidated Financial Statements December 31,
 2003 and 2002
(Amounts expressed in US dollars)





4. Accounts Receivable

     The activity for the allowance for doubtful  accounts is as follows for the
     years ended December 31, 2003 and 2002:

<TABLE>
<CAPTION>

                                                                 2003              2002



        <S>                                                   <C>                  <C>
      Beginning balance                               $       342,970      $    370,387
      Provision                                               166,756             4,670
      Write-offs, net of recoveries                           (33,988)          (32,087)
                                                      ----------------------------------

      Ending balance                                  $       475,738      $    342,970
                                                      ----------------------------------
</TABLE>



     The  Company  carries  accounts  receivable  at the  amounts it deems to be
     collectible.  Accordingly,  the Company  provides  allowances  for accounts
     receivable  it  deems  to  be  uncollectible  based  on  management's  best
     estimates.  Recoveries are recognized in the period they are received.  The
     ultimate  amount of accounts  receivable  that become  uncollectible  could
     differ from those estimated.


5. Inventories


                                            2003              2002
      Finished goods                 $ 3,565,498       $ 5,175,408
      Raw materials                       -                711,056
                                 ----------------------------------

                                     $ 3,565,498       $ 5,886,464
                                 ----------------------------------



6. Mortgages Receivable

     The mortgages  receivable are due from two companies owned by a shareholder
     of the parent  company.  The mortgages  bear interest at 9%, are secured by
     second  collateral  mortgages over real property and are payable on demand.
     The terms of the mortgages  changed  during the year.  The  repayments  are
     expected to be fully received by October 31, 2004.  Approximately  $116,000
     was received in April 2004.



7. Advances to Related Party


The  advances  to a company  owned by a  shareholder  of the parent  company are
non-interest bearing and are expected to be repaid during 2004.


                                      F-12
<PAGE>


 ROSEDALE DECORATIVE PRODUCTS LIMITED
 Notes to Consolidated Financial Statements
 December 31, 2003 and 2002
 (Amounts expressed in US dollars)



8. Equipment

<TABLE>
<CAPTION>
                                                                           2003                             2002
                                              Accumulated                                            Accumulated
                                              Cost Amortization                             Cost    Amortization
                                              ----------------------------------------------------------------------

<S>                                                  <C>               <C>               <C>              <C>
      Furniture and fixtures                  $       425,684   $       334,686   $      587,704   $        474,984
      Computer equipment                              444,900           351,440          720,890            513,730
      Automobile                                       49,876            39,116           40,989             28,357
      Leasehold improvements                          575,473           118,069          316,684             96,005
      Cylinders and designs                         3,633,929         1,895,693        7,251,966          3,525,468
                                              ----------------------------------------------------------------------

                                                  $ 5,129,862       $ 2,739,004      $ 8,918,233        $ 4,638,544
                                              ----------------------------------------------------------------------


      Net carrying amount                                           $ 2,390,858                         $ 4,279,689
                                                                -------------------                -----------------
</TABLE>



9. Bank Indebtedness


     The  Company  has  available  an  operating  line of credit to a maximum of
     $3,857,000  ($5,000,000  Canadian) of which  $3,538,000 (2002 - $4,711,000)
     was  utilized at year end. The  operating  line bears  interest  based on a
     "funded  debt to EBITA  ratio" and the  interest  rate  ranges  between the
     National  Bank of Canada's  prime plus 0.25% to its prime plus  0.75%.  The
     debt is  secured  by a  general  assignment  of book  debts,  a  pledge  of
     inventories under section 427 of the Bank Act, a general security agreement
     providing  a first  floating  charge  over all  assets  of the  Company,  a
     guarantee  and  postponement  of  claim  of up  to a  maximum  of  $964,000
     ($1,250,000 Canadian) from the parent company supported by an assignment of
     a $154,000  ($200,000  Canadian)  cash  deposit,  guarantees  from  related
     companies of up to a maximum of $656,000 ($850,000  Canadian)  supported by
     first  collateral  mortgage  of  up to  $656,000  ($850,000  Canadian),  an
     assignment  of life  insurance of $1,157,000  ($1,500,000  Canadian) on the
     life  of a key  director,  postponement  of  claim  from  director  and  an
     assignment of fire insurance.

     The  provisions  under  the  banking   agreement  require  the  Company  to
     periodically  meet  certain  restrictive  financial  covenants  and  margin
     requirements.  As at December 31, 2003,  the Company was not in  compliance
     with the current ratio,  capital  expenditure and margin  requirement.  The
     Company's banker has acknowledged the breaches that exist and the Company's
     banker have, subsequent to year end, renewed the banking facilities.


                                       F-13
<PAGE>



ROSEDALE DECORATIVE PRODUCTS LIMITED
Notes to Consolidated Financial Statements December 31,
2003 and 2002
(Amounts expressed in US dollars)


<TABLE>
<CAPTION>




10. Income Taxes

     Deferred  income tax assets and  liabilities  are  recognized  on temporary
     differences between the financial and tax bases of the equipment in note 8.

      The provision for income taxes has been computed as follows:
                                                                                           2003              2002


<S>                                                                                         <C>               <C>
      Expected income tax recovery at the statutory rate
        of 33.12% (2002 - 36.60%)                                                     $ (583,946)        $  66,859

      Tax effect of expenses that are not deductible for
        income tax purposes (net of other amounts
        deductible for tax purposes)                                                       8,169            19,893

      Tax effect of differences in the timing of
        deductibility of items for income tax purposes:

        Differences between amortization and capital
            cost allowance                                                               (32,342)         (239,713)

        Previously recognized non-capital tax losses                                     145,558                 -

        Rate change                                                                      (26,098)                -

        Loss on disposal of subsidiary                                                    40,815                 -
                                                                                  ----------------------------------
                                                                                        (447,844)         (152,961)
      Utilization of non-capital tax losses to offset
        current taxable income                                                                 -           104,494

      Non-capital tax losses available to offset future
        taxable income, as described below                                               618,301           195,290
                                                                                  ----------------------------------

      Provision for income taxes                                                  $      170,457      $    146,823
                                                                                  ----------------------------------
</TABLE>


                                       F-14
<PAGE>



ROSEDALE DECORATIVE PRODUCTS LIMITED
Notes to Consolidated Financial Statements December 31,
2003 and 2002
(Amounts expressed in US dollars)



10. Income Taxes (cont'd)
<TABLE>
<CAPTION>


      The components of deferred income taxes are as follows:
                                                                                             2003              2002
<S>                                                                                          <C>               <C>
      Deferred income tax liabilities:
        Equipment                                                                $       502,817  $        855,730
      Deferred income tax assets:
        Non-capital tax loss carry-forward                                                     -          (129,944)
        Unused financing fee deductions                                                 (315,444)         (315,162)
                                                                                  -----------------------------------

      Deferred income taxes                                                      $       187,373  $        410,624
                                                                                  -----------------------------------
</TABLE>

     Due to the losses  incurred in the current  year,  the  deferred  tax asset
     resulting from the non-capital tax losses  available for  carryforward,  as
     recognized in the prior year, do not meet the criteria that the realization
     of such  assets is 'more  likely  than  not'.  This  previously  recognized
     deferred tax asset has been written off in the current year. The unused tax
     losses available for carryforward expire as follows:

           2009                                      $       667,214
           2010                                              303,102
           2011                                            1,648,704
           2012                                              552,583
           2013                                            2,115,187
                                                     ----------------

                                                     $     5,286,790
                                                     ----------------


11. Capital Stock

     Authorized

     An unlimited amount of common and preference  shares

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

<TABLE>
<CAPTION>


                                                                                             2003            2002
       Issued
<S>                                                                                         <C>             <C>
            2,786,714 common shares                                                   $ 5,061,956       $ 5,061,956
            31,500 treasury shares (2002 - 31,200)                                        (32,674)          (32,601)
                          expired warrants (2002 - 1,265,000 warrants)                    142,314           142,314
                                                                                   ---------------------------------

                                                                                      $ 5,171,596       $ 5,171,669
                                                                                   ---------------------------------
</TABLE>


                                       F-15
<PAGE>


ROSEDALE DECORATIVE PRODUCTS LIMITED
 Notes to Consolidated Financial Statements December 31,
 2003 and 2002
(Amounts expressed in US dollars)





11. Capital Stock (cont'd)

      The following transactions occurred during the year:

     a)   On May 8, 2000,  the  Company  announced  that it was  implementing  a
          repurchase  program  for up to 200,000 of its  common  shares.  During
          2000, the Company re-purchased 22,400 of its common shares.

     b)   During 2001, the Company  repurchased  8,800 of its common shares.

     c)   During 2003, the Company repurchased 300 of its common shares.

     d)   During 2003,  the 1,265,000  warrants  expired.  Employee Stock Option
          Plan.

     The company has  adopted a Stock  Option Plan (the 1998 Plan),  pursuant to
     which 750,000 of common shares 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 shares
     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  shares  acquired upon exercise of the
     Options with an  authorization  to the broker or selling  agent to pay that
     amount to the company, or any combination of the above.

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

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


                                       F-16
<PAGE>

ROSEDALE DECORATIVE PRODUCTS LIMITED
 Notes to Consolidated Financial Statements December 31,
 2003 and 2002
(Amounts expressed in US dollars)


11. Capital Stock (cont'd)


     The 1998  Plan may be  terminated  or  amended  at any time by the board of
     directors,  except that the number of shares of common shares  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.
<TABLE>
<CAPTION>

                                                                                        Shares
                                                                       Shares           Subject
                                                                      Available        for grant          Option
                                                                      Options           Prices              to
                                                                     -----------       ---------          -------

<S>                                                                    <C>                <C>                  <C>
     Outstanding at December 31, 2001 615,000 135,000 $ 1.00
     Granted                                                               -                 -                 -

     Exercised                                                             -                 -                 -

     Expired                                                               -                 -                 -

     Cancelled                                                             -                 -                 -
                                                                      --------------------------------------------


     Outstanding at December 31, 2002
     Granted                                                         615,000           135,000              1.00

     Exercised                                                             -                 -                 -

     Expired                                                               -                 -                 -

     Cancelled                                                       135,000          (135,000)                -


     Outstanding at December 31, 2003                                750,000                 -            $ 1.00
</TABLE>


 During the fiscal year, no options were granted or exercised.

     The remaining  life of the stock option plan as of December 31, 2003 is 4.7
     years.

 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, 2000, 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


                                       F-17
<PAGE>

     Warrants, provided that the closing bid price of the common stock if traded
     on the Nasdaq Small Cap 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.

                                      F-18
<PAGE>



ROSEDALE DECORATIVE PRODUCTS LIMITED
Notes to Consolidated Financial Statements December 31,
2003 and 2002
(Amounts expressed in US dollars)



11. Capital Stock (cont'd)



     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.


      These warrants expired in 2003.


12. Related Party Transactions

The following table summarizes the Company's related party  transactions for the
year:

<TABLE>
<CAPTION>

                                                                                             2003             2002
<S>                                                                                           <C>             <C>
     Revenue
        Mortgage interest received from a company owned by a
           shareholder of the parent company                                             $ 31,680       $   28,275

     Expenses
        Rent paid to a company owned by a shareholder of the
           parent company                                                                  87,406           49,658

        Purchases from a company owned by a shareholder of
           the parent company                                                                   -          157,886

</TABLE>


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

Included in accounts  payable is $nil (2002 - $20,008) from a company owned by a
shareholder of the parent company.


                                       F-19
<PAGE>


ROSEDALE DECORATIVE PRODUCTS LIMITED
 Notes to Consolidated Financial Statements December 31,
 2003 and 2002
(Amounts expressed in US dollars)



13. Segmented Information

The company has adopted SFAS No. 131 - "Disclosures About Segments of Enterprise
and Related  Information".  Ontario is engaged  primarily in the  marketing  and
distribution, while Rosedale was engaged primarily in the design, manufacturing,
marketing,  and distribution of wallpaper and designer  fabrics.  These products
are regarded as one segment by the company. As the company's  reportable segment
has been  organized  around its  principal  products,  disclosure  of revenue by
product is not required.  The breakdown of relevant financial  information is as
follows:
<TABLE>
<CAPTION>


                                                 Domestic           Canada             Other             Total
                                         ----------------------------------------------------------------------
<S>                                      <C>                   <C>               <C>               <C>
2003
Assets                                   $        409,793      $ 8,031,639       $   869,118       $ 9,310,550
Sales, net                                      5,587,463        6,157,479           518,612        12,263,554
Net loss                                       (1,364,193)      (1,503,364)         (126,621)       (2,994,178)
2002
Assets                                        $ 3,364,335      $ 8,760,130       $ 3,888,540      $ 16,013,005
Sales, net                                     13,202,250        6,579,261         1,404,659        21,186,170
Net earnings                                      102,384           51,081            10,893           164,358

Transactions with major customers and suppliers are as follows:

                                                                                        2003              2002
Sales                                                                            $ 4,241,870       $ 5,558,582
% of total sales                                                                         35%               26%
Included in accounts receivable                                                  $   325,756       $ 1,242,685
Purchases                                                                        $ 3,860,120       $ 7,894,193
% of total purchases                                                                     63%               62%
Included in accounts payable                                                     $ 1,076,392       $ 2,664,783
</TABLE>



14. Economic Dependence


The Company is  economically  dependant on Norwall Group Inc., its main supplier
and manufacturer of wallpaper.  Approximately  32% (2002 - 35%) of the Company's
purchases are made from this supplier.

                                      F-20
<PAGE>


ROSEDALE DECORATIVE PRODUCTS LIMITED
 Notes to Consolidated Financial Statements December 31,
 2003 and 2002
(Amounts expressed in US dollars)


15. Commitments


The Company has issued guarantees secured by general security agreements for the
loan made by the  Laurentian  Bank of Canada to 1369597  Ontario Inc. As at year
end, the  indebtedness of these companies  amounted to  approximately  $766,000.
These loans were made to purchase life insurance,  a portion of which represents
the key man life insurance  policies for which the company is  beneficiary.  The
Company has a standby letter of credit in favour of the  Laurentian  Bank in the
amount of $197,000.



16. Lease Commitments


The Company is committed  to lease  obligations  for  premises.  Future  minimum
annual  payments  (exclusive of taxes,  insurance and  maintenance  costs) under
these leases are as follows:


       2004                                      $       268,829
       2005                                               87,929
       2006                                               87,929
       2007                                               87,929
                                                 ----------------
                                                 $       532,616
                                                 ----------------

The lease on the  warehouse  expires  October  31,  2004.  The Company is in the
process of renegotiating the lease.

The Company is committed to lease  obligations  for  equipment.  Future  minimum
annual payments under these leases are as follows:


                2004 $ 5,220 2005 5,220 2006                2,610
                                                  ----------------
                                                   $       13,050

The Company is committed  to lease  obligations  for  vehicles.  Future  minimum
annual payments under these leases are as follows:

          2004          $ 23,439
          2005          $  6,613
          2006          $  6,613
          2007          $  6,613
          2008          $  6,613

                        $ 49,891

                                       F-21
<PAGE>

ROSEDALE DECORATIVE PRODUCTS LIMITED
Notes to Consolidated Financial Statements December 31,
2003 and 2002
(Amounts expressed in US dollars)




17. Financial Instruments


Foreign Exchange Contracts


As at December 31, 2003, 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  hedging
activities  is to  protect  it 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. For the year
ended December 31, 2003, the Company has identified  that these contracts act as
hedges against the anticipated  transactions  to which they relate.  The related
realized and unrealized gains or losses,  if any, are reported in the statements
of cash flows and operations.

Credit Risk Management

The Company is exposed to credit risk on accounts receivable from its customers.
In order to reduce its credit  risk,  the Company has  adopted  credit  policies
which  includes the analysis of the financial  position of its customers and the
regular review of their credit terms.  Approximately  29% of the Company's sales
were made to two  customers.  The  Company  continues  to  actively  expand  its
customer base and markets.

18. Comparative Information

Certain  figures for the year ended December 31, 2002 have been  reclassified to
conform with the current year's financial statement presentation.



                                      F-22