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

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


                   For the fiscal year ended December 31, 2000

                        Commission File Number 333-44747

                        ROSEDALE DECORATIVE PRODUCTS LTD
                     ---------------------------------------
             (Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>

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

                               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, 2000, were $21,216,386

As of March 23,  2001,  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 $0.9380 on March 23, 2001) was $1,185,927.

As of March 23, 2001,  there were 2,764,314  shares of the  registrant's  common
stock outstanding.
<PAGE>
                        ROSEDALE DECORATIVE PRODUCTS LTD.

                        CONSOLIDATED FINANCIAL STATEMENTS

                  AS OF DECEMBER 31, 2000 AND DECEMBER 31, 1999

                  TOGETHER WITH REPORT OF INDEPENDENT AUDITORS


































<PAGE>
                        ROSEDALE DECORATIVE PRODUCTS LTD.

                        CONSOLIDATED FINANCIAL STATEMENTS

                  AS OF DECEMBER 31, 2000 AND DECEMBER 31, 1999

                  TOGETHER WITH REPORT OF INDEPENDENT AUDITORS


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

<S>                                                                                                          <C>
       Report of Independent Auditors                                                                        1

       Consolidated Balance Sheets as of December 31, 2000 and December 31, 1999                             2 - 3

       Consolidated Statements of Operations for the years ended December 31, 2000,
           December 31, 1999 and December 31, 1998                                                           4

       Consolidated Statements of Cash Flows for the years ended December 31, 2000,
           December 31, 1999 and December 31, 1998                                                           5 - 6

       Consolidated Statements of Changes in Stockholders' Equity for the years
           ended December 31, 2000, December 31, 1999 and December 31, 1998                                  7

       Notes to Consolidated Financial Statements                                                            8 - 25

</TABLE>
<PAGE>
Schwartz Levitsky Feldman llp
CHARTERED ACCOUNTANTS
TORONTO, MONTREAL, OTTAWA



                         REPORT OF INDEPENDENT AUDITORS


To the Board of Directors and Stockholders of
Rosedale Decorative Products Ltd.

     We have audited the  accompanying  consolidated  balance sheets of Rosedale
Decorative  Products Ltd.  (incorporated  in Canada) as of December 31, 2000 and
1999 and the  related  consolidated  statements  of  operations,  cash flows and
changes in  stockholders'  equity for each of the years ended December 31, 2000,
1999 and 1998. These consolidated financial statements are the responsibility of
the management of Rosedale  Decorative  Products Ltd. Our  responsibility  is to
express an  opinion  on these  consolidated  financial  statements  based on our
audits.

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

     In our opinion,  the consolidated  financial  statements  referred to above
present fairly,  in all material  respects,  the financial  position of Rosedale
Decorative Products Ltd. as of December 31, 2000 and 1999 and the results of its
operations  and its cash flows for each of the years ended  December  31,  2000,
1999 and 1998, in conformity with generally  accepted  accounting  principles in
the United States of America.

     Since the  accompanying  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.



Toronto, Ontario
March 9, 2001                                              Chartered Accountants

                    1167 Caledonia Road
                    Toronto, Ontario M6A 2X1
                    Fax:  416 785 5663
                    Tel:  416 785 5353

<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Consolidated Balance Sheets
As of December 31, 2000 and December 31, 1999
(Amounts expressed in US dollars)
<TABLE>
<CAPTION>
                                                           2000          1999
                                                             $             $

                                                           ASSETS
       CURRENT ASSETS

<S>                                                      <C>           <C>
    Cash ...........................................     2,524,394     3,240,720
    Accounts receivable (notes 3 and 10) ...........     3,796,829     3,341,592
    Income taxes recoverable .......................        34,742        95,827
    Inventory (notes 4 and 10) .....................     6,375,981     7,385,373
    Prepaid expenses and sundry assets (note 5) ....     1,271,120       626,074
                                                        ----------    ----------

                                                        14,003,066    14,689,586

LOAN RECEIVABLE FROM AFFILIATED COMPANY (note 6) ...        27,022         2,054

DEFERRED PRODUCT COSTS [note 1(c) and 7] ...........       589,786       861,366

MORTGAGES RECEIVABLE (note 8) ......................       329,096       341,910

PROPERTY, PLANT AND EQUIPMENT (note 9) .............     3,126,084     2,901,705
                                                        ----------    ----------


                                                        18,075,054    18,796,621
                                                        ==========    ==========

</TABLE>



       APPROVED ON BEHALF OF THE BOARD

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

                                                               Director
       --------------------------------------------------------
                                      F-2


<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Consolidated Balance Sheets
As of December 31, 2000 and December 31, 1999
(Amounts expressed in US dollars)
<TABLE>
<CAPTION>
                                                                         2000           1999
                                                                           $             $

                                                         LIABILITIES
       CURRENT LIABILITIES

<S>                         <C>                                       <C>            <C>
    Bank indebtedness (note 10) .................................     4,189,063      4,744,567
    Accounts payable and accrued liabilities (note 11) ..........     4,964,236      5,289,746
                                                                     ----------     ----------

                                                                      9,153,299     10,034,313

LONG TERM DEBT (note 12) ........................................       697,833           --

DUE TO STOCKHOLDERS AND DIRECTORS (note 13) .....................       937,716      1,560,918

DEFERRED INCOME TAXES ...........................................       298,633        219,913
                                                                     ----------     ----------

                                                                     11,087,481     11,815,144
                                                                     ----------     ----------

                                             STOCKHOLDERS' EQUITY

COMMON STOCK (note 14) ..........................................     5,038,083      5,061,956

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


ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) ...................      (195,670)        66,849


RETAINED EARNINGS ...............................................     2,002,846      1,710,358
                                                                     ----------     ----------

                                                                      6,987,573      6,981,477
                                                                     ----------     ----------

                                                                     18,075,054     18,796,621
                                                                     ==========     ==========


</TABLE>
     The accompanying notes are an integral part of these consolidated financial
statements.



                                      F-3
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Consolidated Statements of Operations
For the years ended December 31
(Amounts expressed in US dollars)
<TABLE>
<CAPTION>
                                                                   2000               1999               1998

                                                                     $                  $                  $

<S>                                                          <C>                <C>                <C>
       SALES                                                 21,216,386         16,908,400         18,970,792
       COST OF SALES                                         13,066,808         11,179,513         11,420,943
                                                             ----------         ----------         ----------

       GROSS PROFIT                                           8,149,578          5,728,887          7,549,849
                                                             ----------         ----------         ----------

       OPERATING EXPENSES

           General and administrative                         2,667,969          2,749,065          2,114,943
           Selling                                            3,036,650          2,496,841          2,135,594
           Design studio                                        675,799            791,741            766,235
           Book development costs (recovery)                   (16,558)            (2,593)            279,454
           Amortization                                         955,238            815,374            598,586
                                                             ----------         ----------         ----------

       TOTAL OPERATING EXPENSES                               7,319,098          6,850,428          5,894,812
                                                             ----------         ----------         ----------

       OPERATING INCOME (LOSS)                                  830,480        (1,121,541)          1,655,037

           Interest expense                                     426,070            265,990            292,341
                                                             ----------         ----------         ----------
       INCOME (LOSS) BEFORE INCOME TAXES                        404,410        (1,387,531)          1,362,696

           Income taxes (note 15)                               111,922            140,719            312,143
                                                             ----------         ----------         ----------


       NET INCOME (LOSS)                                        292,488        (1,528,250)          1,050,553
                                                             ==========         ==========         ==========

       Net earnings (loss) per common share, basic and
           diluted                                                 0.11             (0.55)               0.49
                                                             ==========         ==========         ==========

       Weighted average number of common shares
           outstanding                                        2,777,181          2,769,997          2,160,753
                                                             ==========         ==========         ==========

</TABLE>


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


                                       F-4
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Consolidated Statements of Cash Flows
For the years ended December 31
(Amounts expressed in US dollars)
<TABLE>
<CAPTION>

                                                                                 2000        1999           1998
                                                                                  $            $             $
       Cash flows from operating activities:

<S>                                                                            <C>        <C>            <C>
    Net income (loss) ...................................................      292,488    (1,528,250)    1,050,553
                                                                            -----------   -----------   -----------

    Adjustments to reconcile net income to net cash (used in) provided by
      operating activities:

    Amortization of capital assets ......................................      955,238       815,374       598,586
          Amortization of deferred product costs ........................      294,954       483,584       359,789

          (Increase) decrease in accounts receivable ....................     (586,066)      568,201       693,551

                  (Increase) decrease in inventory ......................      739,648       286,443      (570,438)

    Increase in prepaid expenses and sundry assets ......................     (674,947)     (310,170)     (124,276)
    (Increase) decrease in deferred policy costs ........................         --         277,090      (100,759)
    Increase (decrease) in accounts payable and
        Accrued liabilities .............................................     (128,480)      410,952    (1,758,420)
    (Increase) decrease in income taxes recoverable .....................       58,047       (53,110)     (205,553)
    Increase (decrease) in deferred income taxes ........................       87,800        51,824       (21,615)
                                                                            -----------   -----------   -----------

    Total adjustments ...................................................      746,194     2,530,188    (1,129,135)
                                                                            -----------   -----------   -----------

    Net cash provided by (used in) operating
        activities ......................................................    1,038,682     1,001,938       (78,582)
                                                                            -----------   -----------   -----------

Cash flows from investing activities:

    Deferred product costs incurred .....................................     (157,164)     (563,271)     (609,461)
    Purchases of property, plant and equipment ..........................   (1,187,768)   (1,283,204)     (979,003)
    Decrease in mortgages receivable ....................................         --            --          55,421
                                                                            -----------   -----------   -----------

    Net cash used in investing activities ...............................   (1,344,932)   (1,846,475)   (1,533,043)
                                                                            -----------   -----------   -----------

</TABLE>
     The accompanying notes are an integral part of these consolidated financial
statements.


                                       F-5
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Consolidated Statements of Cash Flows
For the years ended December 31
(Amounts expressed in US dollars)
<TABLE>
<CAPTION>
                                                        2000         1999          1998
                                                          $            $            $

       Cash flows from financing activities:

<S>                                                <C>               <C>        <C>
     Issuance of common stock ..................         --          48,073     5,156,195
     Purchase of treasury stock ................      (23,873)         --            --
     Proceeds from (repayment of) bank
         indebtedness ..........................     (381,318)    1,175,468      (388,743)
     Proceeds from loans from stockholders .....      287,574       419,756        33,429
     Loans from affiliated companies ...........      213,958          --            --
     (Repayment of) proceeds from long-term
         debt ..................................      704,552    (1,060,898)       21,426
     Repayment of directors loans ..............   (1,096,955)     (116,038)     (269,222)
                                                   -----------   -----------    ----------

     Net cash provided by (used in)
         financing activities ..................     (296,062)      466,361     4,553,085
                                                   -----------   -----------    ----------

Effect of foreign currency exchange rate changes     (114,014)      201,482        33,299
                                                   -----------   -----------    ----------

Net increase (decrease) in cash and cash
    equivalents ................................     (716,326)     (176,694)    2,974,759

Cash and cash equivalents, beginning of year ...    3,240,720     3,417,414       442,655
                                                   -----------   -----------    ----------

Cash and cash equivalents, end of year .........    2,524,394     3,240,720     3,417,414
                                                   ===========   ===========    ==========

Income taxes paid ..............................       50,062       316,810       238,575
                                                   ===========   ===========    ==========

Interest paid ..................................      468,354       531,980       330,384
                                                   ===========   ===========    ==========

</TABLE>


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

                                       F-6
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Consolidated Statements of Changes in Stockholders' Equity
For the years ended December 31
(Amounts expressed in US dollars)
<TABLE>
<CAPTION>
                                           Common
                                            Stock         Common      Additional                         Other
                                        Number of          Stock         Paid-in       Retained  Comprehensive
                                           Shares         Amount         Capital       Earnings  Income (loss)
                                    -------------  -------------  --------------  -------------  -------------
                                                              $               $              $              $
       Balance as of December 31,
<S>        <C>                          <C>                    <C>                    <C>            <C>
           1997                         1,500,000              2              -       2,188,055      (226,990)

       Issuance of common stock         1,265,000      5,013,881              -              -              -

       Purchase warrants (1,265,000)           -              -          142,314             -              -

       Foreign currency translation            -              -               -              -       (161,351)

          Net income for the year              -              -               -       1,050,553             -
                                       ----------      ---------        --------     -----------     ---------

       Balance as of December 31,
           1998                         2,765,000      5,013,883         142,314      3,238,608      (388,341)

       Issuance of common stock
           [note 14 (b) (iv) (v)]          21,714         48,073              -              -              -

       Foreign currency translation            -              -               -              -         455,190

         Net loss for the year                 -              -               -     (1,528,250)             -
                                       ----------      ---------        --------     -----------     ---------

       Balance as of December 31,
           1999                         2,786,714      5,061,956         142,314      1,710,358         66,849
       Purchase of Treasury Stock
           [note 14(b) (vi)]               (22,400)      (23,873)             -              -              -

       Foreign currency translation            -              -               -              -       (262,519)

         Net income for the year               -              -               -         292,488             -
                                       ----------      ---------        --------     -----------     ---------

       Balance as of December 31
         2000                           2,764,314      5,038,083         142,314      2,002,846      (195,670)
                                       ==========      =========        ========     ===========     =========

</TABLE>
     The accompanying notes are an integral part of these consolidated financial
statements.


                                       F-7
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2000 and December 31, 1999
(Amounts expressed in US dollars)


       1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

           a)   Basis of Presentation

               The  consolidated   financial  statements  include  the  accounts
               of Rosedale  Decorative  Products  Ltd.  ("the  company") and its
               wholly owned  subsidiaries,  Rosedale  Wallcoverings  and Fabrics
               Inc.   ("Rosedale")  and  Ontario  Paint  and  Wallpaper  Limited
               ("Ontario").

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

                On January 1, 2000,  521305 and 1010037  were  amalgamated  with
                Rosedale  and  Ontario,   respectively.   The  amalgamation  was
                accounted for as a pooling of interest.

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

           b)   Principal Activities

                The company, which was incorporated in Canada on May 14, 1998 is
                principally   engaged  in  the  designing,   manufacturing   and
                marketing of wallpapers and decorative fabrics in Canada, United
                States of America and Europe through its operating  subsidiaries
                Ontario and Rosedale.  These  subsidiaries  were incorporated in
                Canada on December 31, 1971 and April 7, 1981 respectively.

           c)   Deferred Product Costs

                (i) Book Development Costs

                  Expenditures  relating  to  the  design  and  distribution  of
                  wallpaper   and  fabric   sample  books   consisting  of  book
                  development and design costs relating to collections that have
                  not been  launched  are  deferred  and  amortized  over  their
                  estimated useful lives. Proceeds from the sale of sample books
                  to distributors are offset against the book development  costs
                  when received.

                  The deferral of a portion of book development and design costs
                  commencing   in  1998   represented  a  change  in  accounting
                  principle from a full write-off to a deferral over a period of
                  up to five years.

                (ii) Book Subsidy

                   Sales of completed  sample  books to retailers  are sold at a
                   discount.  This discount is deferred and amortized over their
                   estimated useful lives.

                                        F-8
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2000 and December 31, 1999
(Amounts expressed in US dollars)


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

           d)   Cash and Cash Equivalents (Bank Indebtedness)

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

           e)   Other Financial Instruments

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

           f)   Long-term Financial Instruments

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

           g)   Inventory

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

           h)   Property, Plant and Equipment

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

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

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

           i)   Income taxes

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


                                       F-9
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2000 and December 31, 1999
(Amounts expressed in US dollars)




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

           j)   Foreign Currency Translation

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

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

           k)   Earnings or Loss Per Share

                The  company  adopted FAS No.128,  "Earnings  per Share"  during
                fiscal  1998,   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.

           l)   Sales

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

           m)   Use of Estimates

                The preparation of financial  statements  requires management to
                make estimates and assumptions  that affect the reported amounts
                of assets and liabilities  and disclosures of contingent  assets
                and liabilities at the date of the financial  statements and the
                reported  amounts of revenues and expenses  during the reporting
                period. Actual results could differ from those estimated.

           n)   Long-Lived Assets

                The company  adopted the  provisions of FAS No. 121,  Accounting
                for the  Impairment  of  Long-Lived  Assets  and for  Long-Lived
                Assets to be Disposed of. FAS No. 121 requires  that  long-lived
                assets  to be  held  and  used  by an  entity  be  reviewed  for
                impairment whenever events or changes in circumstances  indicate
                that the  carrying  amount of an asset  may not be  recoverable.
                Management used its best estimate of the undiscounted cash flows
                to evaluate  the  carrying  amount and have  determined  that no
                impairment has occurred.

                                      F-10

<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2000 and December 31, 1999
(Amounts expressed in US dollars)




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

           o)   Stock Based Compensation

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

           p)   Concentrations of Credit Risks

                The company's  receivable are unsecured and are generally due in
                30 days. Currently, the company's customers are primarily local,
                national and  international  users of wallpapers  and decorative
                fabrics. The company's  receivables do not represent significant
                concentrations  of credit risk as at December 31,  2000,  due to
                the wide variety of customers,  markets and geographic  areas to
                which the company's products are sold.

           q)   Recently Issued Accounting Standards

               In   June   1998,   FAS  No.  133  was  issued  with  respect  to
               Accounting for Derivative Instruments and Hedging activities. The
               requirements  of  FAS  No.  133  was  extended  to  fiscal  years
               beginning  January 1, 2001 by FAS No. 137.  The company is in the
               process  of  evaluating  the  impact of the  application  of this
               standard.

                In December 1999, the Securities and Exchange  Commission issued
                Staff   Accounting   Bulletin  No.  101  ("SAB  101"),   Revenue
                Recognition in Financial  Statements.  SAB 101 provides guidance
                on   applying   accepted   accounting   principles   to  revenue
                recognition issues in financial statements.  The company adopted
                SAB 101 as required by December  31, 2000 and the  adoption  did
                not have a material impact on the company's  financial position,
                results of operations or cash flows.

                In September 2000, the FASB issued SFAS No. 140,  Accounting for
                Transfers and Servicing of Financial Assets and  Extinguishments
                of  Liabilities.  This  statement is effective for transfers and
                servicing of financial assets and  extinguishment of liabilities
                occurring  after  March 31,  2001.  SFAS No.  140 also  includes
                provisions that require additional  disclosures in the financial
                statements for fiscal years ending after December 15, 2000. This
                statement  is not  expected  to have a  material  impact  on the
                company's  financial  position,  results of operations  and cash
                flows.


                                      F-11
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2000 and December 31, 1999
(Amounts expressed in US dollars)




       2.  COMPREHENSIVE INCOME (LOSS)

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

                                                                   2000               1999               1998

                                                                     $                  $                  $

<S>                                                             <C>            <C>                  <C>
           NET INCOME (LOSS)                                    292,488        (1,528,250)          1,050,553

           OTHER COMPREHENSIVE INCOME (LOSS)

                Foreign currency translation                   (262,519)          455,190            (161,351)
                                                              ----------       -----------          ----------

           COMPREHENSIVE INCOME (LOSS)                           29,969        (1,073,060)            889,202
                                                              ==========       ===========          ==========

</TABLE>
           The  foreign  currency  translation  adjustments  are  not  currently
           adjusted for income taxes as the company is located in Canada and the
           adjustments  relate to the  translation  of the financial  statements
           from Canadian dollars into United States dollars, which are done only
           for the convenience of the reader as disclosed in note 1(j).


       3.  ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
                                                                                         2000             1999

                                                                                           $                $


<S>                                                                                 <C>              <C>
           Accounts receivable                                                      4,159,765        3,778,086
           Less:  Allowance for doubtful accounts                                     362,936          436,494
                                                                                   ----------        ---------

           Accounts receivable, net                                                 3,796,829        3,341,592
                                                                                   ==========        ==========
</TABLE>

                                       F-12
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2000 and December 31, 1999
(Amounts expressed in US dollars)




       4.  INVENTORY
<TABLE>
<CAPTION>

                                                                                         2000             1999

                                                                                           $                $
           Inventory is comprised the following:

<S>                                                                                   <C>              <C>
                Raw materials                                                         556,565          353,694
                Finished goods                                                      5,819,416        7,031,679
                                                                                    ---------        ---------

                                                                                    6,375,981        7,385,373
                                                                                    =========        =========


       5.  PREPAID EXPENSES AND SUNDRY ASSETS
                                                                                         2000             1999

                                                                                           $                $

           Prepaid bins                                                               462,778               -
           Prepaid income taxes [note 19(a)]                                          240,037          207,857
           Other prepaids and sundry assets                                           568,305          418,217
                                                                                    ---------        ---------

                                                                                    1,271,120          626,074
                                                                                    =========        =========

           The amount recorded as prepaid bins represent the cost of shelf space
           to display the  company's  products as part of a marketing  agreement
           with a major customer. These costs were incurred in order to generate
           revenues with that customer over the next fiscal year.


       6.  LOAN RECEIVABLE FROM AFFILIATED COMPANY

           The loan receivable from affiliated company, which is related through
           common ownership,  bears interest at prime plus 1.5%, has no specific
           repayment  terms and is not expected to be repaid prior to January 1,
           2002.


       7.  DEFERRED PRODUCT COSTS
                                                                                         2000            1999

                                                                                           $               $

           Book development costs                                                   1,278,994        1,793,139

           Less:  Accumulated amortization                                            689,208          931,773
                                                                                    ---------        ---------

           Net Deferred Product Costs                                                 589,786          861,366
                                                                                    =========        =========

</TABLE>

                                      F-13
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2000 and December 31, 1999
(Amounts expressed in US dollars)




       8.  MORTGAGES RECEIVABLE

           Second mortgages, from companies related through common ownership are
           secured by land and buildings, bear interest at 9% and are payable on
           demand. No repayments are expected prior to January 1, 2002.
<TABLE>
<CAPTION>

                                                                                         2000            1999

                                                                                           $               $

<S>        <C>                                                                        <C>             <C>
           1216748 Ontario Inc.                                                       172,572          179,291
           1217576 Ontario Inc.                                                       156,524          162,619
                                                                                    ---------        ---------

                                                                                      329,096          341,910
                                                                                    =========        =========


       9.  PROPERTY, PLANT AND EQUIPMENT
                                                                                         2000            1999

                                                                                           $               $

           Leasehold improvements                                                     167,130           35,303
           Automobile                                                                  27,854           19,879
           Equipment and furniture                                                    297,603          302,796
           Furniture and fixtures                                                     252,502          255,879
           Computer equipment                                                         594,750          535,155
           Cylinders and related design costs                                       4,745,800        5,180,649
                                                                                    ---------        ---------

           Cost                                                                     6,085,639        6,329,661
                                                                                    ---------        ---------

           Less:  Accumulated amortization

                  Leasehold improvements                                               34,801           16,779
                  Automobile                                                           19,273           18,145
                  Equipment and furniture                                             238,522          233,263
                  Furniture and fixtures                                              211,539          209,137
                  Computer equipment                                                  394,363          346,385
                  Cylinders and related design costs                                2,061,057        2,604,247
                                                                                    ---------        ---------

                                                                                    2,959,555        3,427,956
                                                                                    ---------        ---------

           Net                                                                      3,126,084        2,901,705
                                                                                    =========        =========
</TABLE>


                                      F-14
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2000 and December 31, 1999
(Amounts expressed in US dollars)




       10. BANK INDEBTEDNESS

           The  company  has  available  credit  facilities  up to a maximum  of
           $6,549,000,  which bear interest at rates varying  between the bank's
           prime rate plus  0.25% and prime  plus  1.25%.  The  indebtedness  is
           secured by general  assignments  of book debts,  pledge of  inventory
           under  Section  427  of the  Bank  Act of  Canada,  general  security
           agreements  providing  a  first  floating  charge  over  all  assets,
           guarantees and postponement of claims to a maximum of $1,667,000 from
           the company,  guarantees  from  affiliated  companies up to $567,000,
           assignment  of life  insurance of  $2,000,000 on the lives of two key
           officers/ shareholders and assignment of fire insurance.


       11. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
<TABLE>
<CAPTION>
                                                                                         2000             1999

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

<S>                                                                                 <C>              <C>
                Trade payables                                                      4,362,682        4,840,934
                Accrued expenses                                                      601,554          448,812
                                                                                    ---------        ---------

                                                                                    4,964,236        5,289,746
                                                                                    =========        =========

</TABLE>

       12. LONG-TERM DEBT

           As at December 31, 1999, the company  transferred  its life insurance
           policies  and  the  related  bank  loans  to  two  holding  companies
           ("holdcos") of two shareholders/key  officers. These holdcos directly
           own 20.67% of the issued common stock of the company and  accordingly
           the excess of the bank loans over the cash  surrender  values of life
           insurance   policies  was  reflected  in  due  to  stockholders   and
           directors.  During  the fiscal  year ended  December  31,  2000,  the
           company  borrowed this excess in the amount of $697,833 from the bank
           for working capital using the cash surrender values as security . The
           terms of these loans are currently  under  negotiation,  but they are
           not expected to be repaid prior to January 1, 2002.


       13. DUE TO STOCKHOLDERS AND DIRECTORS

           Stockholders' and directors  advances are secured by general security
           agreements,  bear  interest  at the  National  Bank of  Canada  prime
           lending rate plus 1.5%,  are without  specific terms of repayment and
           are not expected to be repaid prior to January 1, 2002.



                                      F-15
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2000 and December 31, 1999
(Amounts expressed in US dollars)




       14. COMMON STOCK

           a)   Authorized

                An unlimited number 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.

                Issued
<TABLE>
<CAPTION>
                                                                                         2000             1999

                                                                                           $                $

<S>             <C>                       <C>     <C>                               <C>              <C>
                2,786,714   Common shares (1999 - 2,786,714)                        5,061,956        5,061,956
                   22,400   Treasury shares (1999 - nil)                              (23,873)               -
                1,265,000   Warrants                                                  142,314          142,314
                                                                                    ---------        ---------

                                                                                    5,180,397        5,204,270
                                                                                    =========        =========
</TABLE>

       b)  Changes to issued share capital

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

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

                    iii) On July 29, 1998,  the company  issued  165,000  common
               shares to the public.

                   The proceeds  received from the issuance was $6,158,857  with
                   related costs (net of income taxes)  amounting to $1,002,662.
                   Net proceeds included the deferred income tax recoveries.

                    iv) On October 8, 1999,  the company issued 15,000 shares of
               common stock to its U.S.  legal counsel as part of a retainer for
               legal  representation in connection with a Public Registration of
               Securities. The fair value of these shares was measured using the
               stock  price of $2.0938  at  October  8, 1999,  being the date of
               commitment.

                    v) On August 30, 1999, the company entered into an agreement
               with a New York  research  company,  First Hudson  Research,  LLC
               ("FHR") to obtain use of that company's "AwareNet" service.  This
               service allowed the use of FHR's proprietary  e-mail data base to
               send  information  about the company to interested third parties.
               The agreement  included a provision for the issuance of shares to
               a value of  $16,666  at a share  price  determined  by an average
               seven  day bid and ask  price  prior to the  commencement  of the
               e-mail campaign. Based on this measurement criteria, 6,714 common
               shares were issued to FHR at an average price of $2.4822 16

                                      F-16
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2000 and December 31, 1999
(Amounts expressed in US dollars)




       14. COMMON STOCK   (cont'd)

           b)   Changes to issued share capital   (cont'd)

                    vi)  On May 8,  2000,  the  company  announced  that  it was
               implementing a repurchase program for up to 200,000 shares of its
               common   Stock.   During  the  fiscal   year,   the  company  has
               re-purchased 22,400 shares of its common stock.

           c)   Employee 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 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  holders
                personal holding company or registered  retirement  savings plan
                and are exercisable  only by the  participant  during his or her
                lifetime.

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

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

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

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

                The 1998 Plan may be  terminated  or  amended at any time by the
                board of  directors,  except that the number of shares of Common
                Stock reserved for issuance upon the exercise of options granted
                under the 1998 Plan may not be increased  without the consent of
                the stockholders of the Company.

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

                On December 31, 2000,  the  Compensation  Committee  reduced the
                stock options  granted to the two key executives from 125,750 to
                25,000 each. No other terms or conditions were changed.



                                      F-17
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2000 and December 31, 1999
(Amounts expressed in US dollars)



       14. COMMON STOCK (cont'd)

           c)   Employee Stock Option Plan   (cont'd)

                During the fiscal year no options were granted.
<TABLE>
<CAPTION>

                                                                     Shares            Shares
                                                                  Available           Subject           Option
                                                                  For Grant        to Options           Prices

                <S>                                               <C>                 <C>               <C>
                Outstanding at December 31, 1998                    750,000                -                -

                Granted                                           (336,500)           336,500             1.00

                Exercised                                                -                 -                -

                Expired                                                  -                 -                -

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

                Outstanding at December 31, 1999                    413,500           336,500             1.00

                Granted                                                  -                 -                -

                Exercised                                                -                 -                -

                Expired                                                  -                 -                -

                Cancelled                                           201,500         (201,500)             1.00
                                                                  ---------         ---------             -----

                Outstanding at December 31, 2000                    615,000           135,000             1.00
                                                                  =========         =========             =====
</TABLE>

                The remaining  life of the stock options as of December 31, 2000
                is 8.7 years.

           d)   Purchase Warrants

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

                                      F-18
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2000 and December 31, 1999
(Amounts expressed in US dollars)




       14. COMMON STOCK (cont'd)

           d)   Purchase Warrants (cont'd)

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

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

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


       15. INCOME TAXES
<TABLE>
<CAPTION>
                                                                                       2000               1999

                                                                                         $                  $

<S>                                                                                <C>                  <C>
           a)   Current                                                            24,122               88,895
                Deferred                                                           87,800               51,824
                                                                                  -------              -------
                                                                                  111,922              140,719
                                                                                  =======              =======

</TABLE>


                                      F-19
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2000 and December 31, 1999
(Amounts expressed in US dollars)




       15. INCOME TAXES (cont'd)
<TABLE>
<CAPTION>
                                                                                       2000               1999

                                                                                         $                  $
           b)   Current income taxes consists of:

                Amounts calculated at basic Canadian Federal and Provincial
<S>                                                                                  <C>              <C>
                    Rates                                                            214,719          (619,000)
                Increase (decrease) resulting from:

                Temporary differences                                                 (87,800)         (51,824)
                Part 1.3 large corporation tax                                         16,716           12,500
                Corporate minimum tax                                                   7,406               -
                Non-deductible expenses                                                 8,753               -
                Adjustment for prior year's taxes                                          -            79,000
                Losses utilized                                                      (135,672)               -
                Losses carried forward                                                     -           668,219
                                                                                      -------          -------
                                                                                       24,122           88,895
                                                                                      =======          =======
</TABLE>

           c)   Deferred  income taxes  represent  the tax charges  derived from
                temporary  differences between  amortization of property,  plant
                and equipment and amounts  deducted  from taxable  income.  As a
                consequence  of  the  issuance  of  common  stock  during  1998,
                issuance  costs  were  incurred  which  are  deductible  for tax
                purposes for a period up to five years.  The resulting  deferred
                income taxes  recoverable has been applied to the issue expenses
                [note 14(b)(iii)].

           d)   The company has  operating  losses of  approximately  $2,064,000
                which is expected to be used to reduce  future  taxable  income.
                The potential tax benefit relating to the losses,  in the amount
                of approximately  $400,000,  has been recognized in the accounts
                as a  reduction  to  the  deferred  income  tax  liability.  The
                deductibility of these losses if available expires as follows:

                2001                                                $     61,000
                2002                                                     292,000
                2004                                                      21,000
                2006                                                   1,428,000
                2007                                                     262,000
                                                                      ----------
                                                                    $  2,064,000
                                                                      ==========


                Rosedale  has been  reassessed  by Canada  Customs  and  Revenue
                Agency  ("CCRA")  and the  Province of Ontario for fiscal  years
                ended  December  31, 1993 and December 31, 1994 for income taxes
                in the amount of  approximately  $860,000 (see note 18).  Should
                the assessments be upheld,  the benefit of the losses previously
                utilized and the balance available for 2001 would be denied.

                                      F-20
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2000 and December 31, 1999
(Amounts expressed in US dollars)




       16. RELATED PARTY TRANSACTIONS

           Amounts  due from or paid to  companies  which  are  related  through
           common ownership are as follows:
<TABLE>
<CAPTION>

                                                                                      2000                1999

                                                                                        $                   $

<S>                              <C>                                                  <C>                      <C>
           Mortgage receivable - 1216748 Ontario Inc.                                 172,572                  179,291
           Mortgage receivable - 1217576 Ontario Inc.                                 156,524                  162,619
           Rent paid - 966578 Ontario Inc.                                             16,159                   16,826
           Rent paid - 1216748 Ontario Inc.                                            16,159                        -
           Rent paid - 1369597 Ontario Inc.                                            18,179                        -
</TABLE>

           See also notes 12 and 13


       17. SEGMENTED INFORMATION

           The company has adopted FAS No. 131 - "Disclosures about segments  of
           enterprise and related information".

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

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

                                                                            2000           1999           1998

                                                                              $              $              $

<S>                                                                   <C>             <C>            <C>
                United States of America                              12,716,808      9,457,021      9,749,412
                Canada                                                 8,045,710      6,655,528      8,065,013
                Other                                                    453,868        795,851      1,156,367
                                                                      ----------     ----------     ----------
                                                                      21,216,386     16,908,400     18,970,792
                                                                      ==========     ==========     ==========
</TABLE>

                                      F-21
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2000 and December 31, 1999
(Amounts expressed in US dollars)




       17. SEGMENTED INFORMATION   (cont'd)

                The  companies'   accounting  records  do  not  readily  provide
                information on net income (loss) by geographic area.  Management
                is of the opinion that the proportion of net income (loss) based
                principally on sales,  presented below, would fairly present the
                results of operations by geographic area.
<TABLE>
<CAPTION>

                                                                            2000           1999           1998

                                                                              $              $              $

<S>                                                                      <C>          <C>              <C>
                United States of America                                 175,313      (854,764)        535,782
                Canada                                                   110,918      (601,554)        451,738
                Other                                                      6,257       (71,932)         63,033
                                                                      ----------     ----------     ----------
                                                                         292,488    (1,528,250)      1,050,553
                                                                      ==========     ==========     ==========
</TABLE>


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

                                                                                      2000                1999

                                                                                        $                   $

<S>                                                                              <C>                 <C>
                United States of America                                         1,996,978           2,625,466
                Canada                                                          14,480,385          14,363,537
                Other                                                            1,597,691           1,807,618
                                                                                ----------          ----------
                                                                                18,075,054          18,796,621
                                                                                ==========          ==========
</TABLE>


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

                                                                            2000           1999           1998


<S>                                                               <C>                 <C>                 <C>
                Sales                                             $      7,337,673    $     5,385,915     $     6,957,178
                                                                         ---------          ---------           ---------
                % of total sales                                                35%                32%                 37%
                                                                         ---------          ---------           ---------

                Amounts included in accounts receivable           $        918,467     $      649,838     $       811,291
                                                                         =========          =========           =========
</TABLE>


                                      F-22
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2000 and December 31, 1999
(Amounts expressed in US dollars)




       17. SEGMENTED INFORMATION   (cont'd)

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

                                                                            2000           1999           1998


<S>                                                               <C>             <C>            <C>
                Purchases                                         $    4,171,007  $   5,317,789  $   6,610,748
                                                                       ---------      ---------      ---------

                % of total purchases                                         30%            47%            57%
                                                                       ---------      ---------      ---------

                Amounts included in accounts payable
                     and accrued liabilities                      $    1,061,619  $   2,383,245  $   2,339,508
                                                                       ---------      ---------      ---------

</TABLE>

       18. CONTINGENCIES

           a)   The company has been  re-assessed  by Canada Customs and Revenue
                Agency  ("CCRA")  and the  Province of Ontario for fiscal  years
                ended  December 31, 1993 and  December  31, 1994 for  additional
                corporate income taxes estimated to be $860,000. The company has
                objected to these  re-assessments  and has no  obligation to pay
                the portion relating to CCRA in the amount of $560,000 until the
                objections have been processed.  Since the company considers the
                re-assessments to be incorrect,  no liability has been set up in
                the  accounts.  Should  all or  part  of the  re-assessments  be
                upheld,  the additional income taxes would be taken into account
                in the year of occurrence.

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


                As at December 31, 2000,  Rosedale  made  payments in respect to
                the above income tax re-assessments amounting to $240,037 to the
                Province  of Ontario.  This amount has been  included in prepaid
                expenses and sundry assets.

           b)   The  company  has  guaranteed  the  indebtedness  of  affiliated
                companies  in the amount of $673,000  through  general  security
                agreements  ranking  behind the National  Bank of Canada.  As at
                December 31, 2000, the indebtedness of the affiliated  companies
                amounted to $498,000.

           c)   The company has issued guarantees  secured  by  general security
                agreements for the loans made by the Laurentian Bank  of  Canada
                to the holdcos. (see note 12)

           d)   The  company has issued a standby letter of credit in the amount
                of $534,000 to a customer.

           e)   The  company  has  issued standby letters of credit in favour of
                the Laurentian Bank of Canada in the amount of $380,000.

                                      F-23
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2000 and December 31, 1999
(Amounts expressed in US dollars)




       19. COMMITMENTS

           a)   Minimum  payments under operating  leases for premises amount to
                approximately  $310,000 per annum,  exclusive  of insurance  and
                other occupancy charges. The leases expire during 2003 and 2004.
                The future  minimum lease  payments over the next four years are
                as follows:
<TABLE>
<CAPTION>

                Payable during the following periods:

<S>                                                                                            <C>
                Within one year                                                                $       310,571
                Over one year but not exceeding two years                                              310,571
                Over two years but not exceeding three years                                           294,435
                Over three years but not exceeding four years                                          242,673
                                                                                                     ---------

                                                                                               $     1,158,250
                                                                                                     =========

           b)   Minimum  payments under operating leases for equipment amount to
                approximately  $13,000  per  annum.  The  future  minimum  lease
                payments over the next three years are as follows:

                Payable during the following periods:

                Within one year                                                                $        12,984
                Over one year but not exceeding two years                                                7,264
                Over two years but not exceeding three years                                               944
                                                                                                     ---------

                                                                                               $        21,192
                                                                                                     =========

           c)   Minimum  payments under operating  leases for vehicles amount to
                approximately  $19,000  per  annum.  The  future  minimum  lease
                payments over the next four years are as follows:

                Payable during the following periods:

                Within one year                                                               $         19,447
                Over one year but not exceeding two years                                               16,773
                Over two years but not exceeding three years                                            11,694
                Over three years but not exceeding four years                                            7,501
                                                                                                     ---------

                                                                                               $        55,415
                                                                                                     =========
</TABLE>

                                      F-24
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2000 and December 31, 1999
(Amounts expressed in US dollars)




       20. FOREIGN EXCHANGE CONTRACTS

           As at December 31, 2000, the Company had outstanding foreign exchange
           contracts  to sell U.S.  dollars  to the  National  Bank of Canada to
           hedge against  fluctuations in foreign  currency.  The purpose of the
           Company's  foreign  exchange  hedging  activities  is to protect  the
           Company  from the risk  that the  eventual  dollar  net cash  inflows
           resulting   from  the  sale  and  purchase  of  products  in  foreign
           currencies  will not be  adversely  affected  by changes in  exchange
           rates.  It is  the  Company's  policy  to  use  derivative  financial
           instruments  to reduce foreign  risks.  Fluctuations  in the value of
           these hedging  instruments are offset by fluctuations in the value of
           the underlying  exposures being hedged. As the contracts are settled,
           the  related  gains  or  losses,  if  any,  will be  reported  in the
           statements  of financial  position  and income.  There is a potential
           risk of non-performance by the National Bank of Canada, the financial
           institution  that  the  Company  has  the  Foreign  Forward  Exchange
           Contracts with.  However,  given the National  Bank's  prominence and
           financial   condition,   the  Company  believes  that  this  risk  is
           insignificant.  The  cash  requirements  arise as the  contracts  are
           exercised to the value of $6,800,000 (in varying amounts from January
           through  October  2001).  The following  table presents the aggregate
           notional  principal  amounts,  carrying values and fair values of the
           Company's  foreign  exchange  contracts  outstanding  at December 31,
           2000.  Deferred  gains and losses on forward  exchange  contracts are
           recognized  in  earnings  when the future  purchases  and sales being
           hedged are  recognized.  The Company does not hold or issue financial
           instruments  for trading  purposes.  The estimated fair values of the
           derivatives  used to hedge the Company's  risks will  fluctuate  over
           time.
<TABLE>
<CAPTION>

                            December 31, 2000                                               December 31, 1999
                      -------------------------------------------  -------------------------------------------
           Forward          Notional                                     Notional
           Exchange        Principal      Carrying           Fair       Principal       Carrying          Fair
           Contracts         Amounts         Value         Values         Amounts         Values        Values
           ---------- -------------- -------------  -------------  --------------  ------------- -------------

           <S>            <C>             <C>           <C>        <C>                 <C>            <C>
           2000                   -             -              -   $    7,350,000             -       (70,771)
           2001           $6,800,000            -      ($211,037)              -              -             -
</TABLE>













                                      F-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/Alan Fine
                                                   Alan Fine, Chairman and Chief
                                                   Executive Officer

                                          Date: April 3, 2001

         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/ ALAN FINE                       Chairman, Chief Executive Officer           April 3, 2001
Alan Fine

/s/ SIDNEY ACKERMAN                 President Director                          April 3, 2001
Sidney Ackerman

/s/ NORMAN G. MAXWELL               Director, Chief Financial Officer,          April 3, 2001
Norman G. Maxwell                   Principal Accounting Officer

/s/ GREGORY SICHENZIA               Director                                    April 3, 2001
Gregory Sichenzia
</TABLE>