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 ACTOF 1934


                   For the fiscal year ended December 31, 2002

                        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. [ ]


     The Company's revenues for the year ended December 31, 2002, were
$21,193,725.

     As of March 28, 2003, the aggregate market value of the voting stock held
by non-affiliates of the registrant (based on The OTC.BB Stock Market last sale
price of $0.22 on March 28, 2003) was $276,213.

     As of March 20, 2003, there were 2,755,514 shares of the registrant's
common stock outstanding.
<PAGE>
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. The pro-forma impact of the sale of the subsidiary can be found
in note 1 of the consolidated financial statements.

General

     The Company, through its two wholly owned subsidiaries, Ontario and
Rosedale, designs, markets and distributes residential wallcoverings and
designer fabrics. 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), designer fabrics, area
rugs, ceiling panels and paint.

     Sales of Company's name brand wallcoverings account for approximately 62%
of the Company's total revenues and wholesale distribution of wallcoverings
under non-company brand names accounts for approximately 18% of the Company's
total revenues. Sales of designer fabrics account for approximately 10% of the
Company's revenues and the Company's retail paint and wallpaper store generates
approximately 10% of the Company's annual revenues.

     In 2002, the Company distributed approximately 27 Company brand
wallcovering and fabric collections to approximately 10,000 to 20,000 retail
wallpaper and paint stores worldwide. In addition, in 2002, the Company's
Ontario subsidiary distributed approximately 66 non-Company brand wallcovering
collections to approximately 1,500-2,000 home decorating stores in Canada.

     In anticipation of the sale of the company's subsidiary Rosedale in 2003,
Ontario has been actively developing its own design studio and has retained a
team of designers with fresh ideas to cater to the discriminating consumer and a
competitive industry. Ontario's objective is to maintain market share in the
wallpaper industry by aggressively marketing these new collections and to
actively expand its customer base in North America and abroad. To achieve this
objective, the company has combined its product mix of wallcoverings and paints,
along with its newer floor covering, wooden window blinds and ceiling tile
offerings to present significant cross marketing opportunities.


                                       3
<PAGE>
Company Brands

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

     Wallcovering and designer fabric 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.

     Each of the Company's subsidiaries maintains its own design studio and
creative staff. Rosedale's design studio is located in its Concord, Ontario
facility. The Company's Ontario subsidiary maintains a design studio and staff
in Manchester, England and has just hired a design staff and installed a CAD
system at their location in Concord to expand their own lines.

     Company brand name wallcoverings and fabrics include; Rosedale, Cambridge
Studios, Hamilton House, Kingsway Fabrics, Concord, Bridle Path, Sweetwater,
Caledon, Glenayr and Ridley Nash. The Company's brand name wallcoverings and
fabrics 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 and
fabric collections for the lower end of the market where competition is based
primarily upon price.

     The Concord , Glenayr and Ridley Nash lines of wallcoverings were
established in 1992, 1995, and 1996, respectively and are designed by the design
staff of the Company's Ontario subsidiary. Ontario launched Bridle Path Designs
in 2001 using an outside designer. Caledon Designs was launched in 2002 as was
Sweetwater. Each year, the Company produces approximately ten different lines of
wallcoverings under its Rosedale, Cambridge Studios, Concord, Bridle Path,
Glenayr, Caledon, Sweetwater and Ridley Nash brands. Wallcovering collections
sold under all eight brand names are targeted to middle to and upper
middle-income consumers.

     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 Manchester, England by the Company's design staff. The
Company designs and distributes one wallcovering collection per year under each
brand name. Both lines of wallcoverings are targeted for middle to upper income
consumers.

     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.

                                       4
<PAGE>
Third Party Manufacturing

     Wallcovering manufacturers in the United Kingdom, Canada and the United
States manufacture company brand wallcoverings for the Company. Although the
Company does have a contract with one of 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

     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, through its Ontario subsidiary, is a wholesale distributor of
wallcoverings designed and produced by manufacturers located in the United
Kingdom and Canada. The Company markets wallcovering collections produced by
third party manufactures under each manufacturer's brand names. The Company has
distribution agreements with IHDG located in the U.S. and with Norwall Group
Inc. ("Norwall"), located in Canada. The Company's distribution agreements with
IHDG 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 2003. The Ontario subsidiary has also obtained distribution rights to a
new line of Wooden window treatments, which they commenced to distribute in
early 2001. They have also began distributing a new product called Wallpapers
for Windows, which has received world wide interest. 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

                                       5
<PAGE>
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 two
years. The retail store is the largest single source distributor of Benjamin
Moore Paints in Canada.

     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 2002 and management believes that further growth in 2003 will
occur.


Marketing and Distribution (Company Brands)

     The Company distributes its brand name wallcoverings and fabrics in the
United States and Canada through regional and 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.

     In addition the Company sells directly to selected large national and
regional retail chains and specialty stores that specialize in the sale of
wallcoverings and designer fabrics.

     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 and fabrics designs. The majority of the
sample books prepared by the Company contain partial sheets of wallpaper,
coordinated borders and fabrics. Recently, the Company has added coordinated
floor coverings to its sample books. In addition, sample books contain
photographs of model room settings demonstrating how the Company's
wallcoverings, coordinated designer fabrics and floor coverings look in
simulated home environments. By offering coordinated wallcoverings and fabric
collections in its sample books, the Company is able to present its entire
product line to a wider variety of end users. The Company also produces sample
books, which contain only designer fabric samples, which it distributes to
fabric wholesalers.

     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.

                                       6
<PAGE>
     It takes between 10 to 12 months from the time that the Company approves
designs for a collection to the shipping of sample books for that collection.
The Company has begun producing preview copies of its sample books using its in
house computer aided design ("CAD") system. This system allows Rosedale &
Ontario to preview its collections to distributors and to make changes to its
collections based upon feedback from distributors before the final printing of
sample books. This has resulted in a significant cost saving to the Company. The
Company believes that this innovation will also allow it to more specifically
tailor its collections and sample books to consumer trends in the markets on a
more timely basis.


Canadian Distribution

     The Company sells approximately 28% of its wallcoverings and fabrics in
Canada through its Ontario subsidiary. The balance of its sales is through
regional distributors and national chains such as Color Your World and Sears
Canada. Regional distributors include Crown Wallcoverings, the largest
distributor to the Canadian interior design market and Images Wallcoverings.
Images Wallcoverings Ltd. is a distributor located on the west coast of Canada
and is also a sub distributor for Ontario.


United States Distribution

     Approximately 62% 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 and regional distributors as well as sales to large
retail wallpaper chains. Regional distributors of the Company's products in the
United States include Hunter & Co., Key Wallcoverings, G&W Distributors, Fashion
Wallcoverings, Olney Wallcoverings, Eisenhart Wallcoverings and Aztec. National
distributors include The Blonder Company, which distributes the Company's
Cambridge Studios, Sweetwater and Glenayr brands, Patton Wallcoverings, which
distributes Caledon Designs and Imperial Home Decor Group, which distributes
Ridley Nash and other lines of Wallcoverings under their own label.

     The Company also sells directly to retail chains in the United States,
which include Wallpapers to Go, Sherwin Williams, Gardener Wallcoverings,
Horners and Tretiaks.


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 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 fragmented, comprised of many small and medium sized companies with
no single large company dominating the market. Management believes that several
of the companies within this segment may consider consolidation and may be
acquisition targets for the Company in the future, although there can be no
assurances that the Company will be able to identify such acquisition target or
consummate an acquisition on terms that are acceptable to the Company.

     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

                                       7
<PAGE>
it is well positioned to take advantage of growth in mass merchandising through
relationships with its national distributors and large retail chains. In
addition, the Company hopes to penetrate alternative fabric markets such as
apparel and soft goods industries.


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
wallcovering and fabrics.


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, 2002, the Company employed 69 (64 on a full time basis)
persons, which includes 7 senior executives, 26 sales staff persons (22 full
time, 4 part time),10 design studio (9 full time, 1 part time), 11 support staff
persons and 15 warehouse workers. The Company has no unionized employees and
believes that its relationship with its employees is satisfactory.



Item 2.  PROPERTIES AND FACILITIES

     The Company leases facilities in Concord, Ontario for each of its
subsidiaries. The Company leases an approximately 78,000 square foot facility
for its Ontario subsidiary. 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
Ontario's executive offices, warehouse and showroom and the executive offices of
Rosedale Decorative Products. The Company leases a 47,000 square foot facility
for its Rosedale subsidiary. The lease for the Rosedale facility runs through
October 31, 2004, and has a base annual rent of Cdn.$176,640. The Rosedale
subsidiary houses the subsidiary's design facilities, executive offices,
warehouse and showroom. Rosedale leases space in High Point, North Carolina that
runs through March 1, 2003, with an annual base rent of US $20,137. This
facility houses a showroom for the fabric division.

     The Company also leases space for its retail paint store, located in
downtown Toronto, from two companies owned by Alan Fine, Chief Executive Officer
of the Company, and Sid Ackerman, the Company's President. These leases calls
for rental payments in the amount of Cdn. $24,000 and $24,000 per annum, plus
property taxes, payable in equal monthly installments of Cdn. $2,000 and $2,500
respectively. The leases are for a five-year term. The Company leases space for
its retail paint store from a company owned by Sid Ackerman. This lease calls
for payments of Cdn. $30,000 per annum with the same terms as the other leases.


                                       8
<PAGE>
Item 3.  LEGAL PROCEEDINGS

     The Company is involved in legal proceedings with Canada Customs and
Revenue Agency ("CCRA"). The CCRA proceeding involves the Company's challenge to
a CCRA decision to disallow a business loss deduction taken by Rosedale for
losses it incurred when attempting to create a startup company in California.
Rosedale started the California company in 1992 to make window blinds as an
adjunct to its wallcovering and fabric business. The California company's growth
did not meet the Company's expectations and subsequently was sold in 1994.
Rosedale claimed losses incurred during the operation of the California business
as a business loss deduction on its 1994 tax return. CCRA allowed the deduction
as a capital loss only. Rosedale has filed a formal notice of objection to
CCRA's classification of the deduction. In the event that CCRA's decision is
upheld, Rosedale would be required to pay the taxes plus interest to satisfy its
tax obligation. The Company believes that it has a meritorious defense and is
working to try to settle the matter. The value of the tax assessment is
approximately $819,000. The Company is not aware of any other material legal
proceedings pending or threatened against the Company.

     Although the Company is not a party in the following legal proceeding, Alan
Fine, the Company's Chief Executive Officer, and Sidney Ackerman, the Company's
President, are engaged in litigation with each other in the Ontario (Canada)
Superior Court of Justice. Mr. Fine commenced the action against Mr. Ackerman on
April 26, 2001. The suit states that there is a Voting Trust Agreement ("VTA")
between Mr. Fine and Mr. Ackerman, which requires that the two vote their
shareholdings together. The VTA does not provide an exit mechanism to either
shareholder and does not enable them to separate their shareholdings. Mr. Fine
is seeking relief to ensure the parties enter in a buy-sell agreement to provide
for the orderly exit of one or the other. Both parties are vigorously working
towards an amicable settlement. With the closing of the sale of the Rosedale
subsidiary to Alan Fine, it is expected that these lawsuits will be withdrawn.

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

                  None.


                                       9
<PAGE>
                                    PART II.


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

     (a) The high and low bid price of the Company's common stock for each
quarter since its initial public offering which commenced on June 18, 1998,
through the close of its fiscal year on December 31, 2002 are as follows:

         ------------------- ---------------- -----------------

         Date                     High              Low
         ------------------ ---------------- -----------------



         3/31/00                 $2.1250           $0.63
         6/30/00                 $1.188            $0.031
         9/30/00                 $1.063            $0.563
         12/31/00                $1.063            $0.25
         3/31/01                  $1.30            $0.44
         6/30/01                  $1.05            $0.20
         9/30/01                  $0.86            $0.51
         12/31/01                 $0.55            $0.27
         3/31/02                  $0.40            $0.25
         6/30/02                  $0.51            $0.21
         9/30/02                  $0.35            $0.21
         12/31/02                 $0.48            $0.23

         ------------------- ---------------- -----------------

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

     The Company has not paid dividends to date.


Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
        FINANCIAL CONDITION

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.

                                       10
<PAGE>
     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 2003

     Management's plans for 2003 include only the operations of the Ontario
subsidiary as the sale of Rosedale closed on March 24, 2003.

     The Company will continue to take appropriate steps to continue to improve
performance in 2003. The economy has continued to be slow, especially in the
U.S, but we have been able to show growth in the U.S. We continue to source
products for distribution, which complement our existing offering. Selling
prices on collections launched in 2003 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 2003 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 4%, 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 2003. New overseas
customers have been obtained in 2002, which we would anticipate increasing sales
by approximately 5%. The retail operation is anticipated to have a double-digit
growth again in 2003. We anticipate that the growth will be approximately 15%
over last year.

     Expenses are being watched closely, with certain areas being cut. It is
management's intention to continue to rationalize the efficiency of the
Company's operations and attain increased profitability in 2003.


Results of Operations

     Fiscal year ended December 31, 2002 compared to the fiscal year December
31, 2001

     Revenues for the fiscal year ended December 31, 2002 were $21,193,725, a
19.2% increase over prior year revenues of $17,781,160. This increase was due to
the launch of additional collections by the Ontario division, which increased
our sales by 24.2% in the U.S. market. Retail sales continue to have double
digit increases with a growth of 16% in 2002.

                                       11
<PAGE>
     Gross Profit for the Company for the fiscal year ended December 31, 2002
was 40.1% of sales, a slight decrease as compared to the same period one-year
ago, which was 41.0%. This decrease in gross profit margin can be attributed to
the selling of slow and obsolete inventory.

     Selling expenses for the Company decreased by 1.6% to $3,079,880 for the
fiscal year ended December 31, 2002 as compared to $3,128,846 for the fiscal
year ended December 31, 2001. A bin expense was incurred in the second half of
2002, compared to a full years expense recorded in 2001. Rosedale Wallcoverings
renewed a three-year agreement with Sherwin Williams in 2002 to supply stock to
their stores. Bin Expense is the cost of buying wallpaper bin space in major
chains. Before you can display your product in Sherwin Williams stores, you are
required to purchase the space that you will be occupying.

     General and administrative expenses for the Company decreased by 7.0%, to
$2,576,277 for the fiscal year ended December 31, 2002 from $2,769,075 for the
fiscal year ended December 31, 2001. This decrease is attributable to an
increase in the provision for doubtful accounts in 2001 relating to one customer
who has not been able to maintain the payment schedule anticipated. The
provision for this customer remains adequate for 2002. Our bad debt expense
experience has been relatively consistant over the past four years with the
exception of the write-off of IHDG (filed Chapter 11) in 2000 and the additional
provision required in 2001.

     Rosedale develops wallpaper and fabric sample books, which are created for
each collection and sold through distributors. The majority of expenditures for
the creation of sample books are incurred in the quarter before the introduction
of a collection. Some expenditures are incurred as early as eight to ten months
in advance. Revenues generated from the sales of sample books are netted from
the costs incurred in the same period and the net amount is shown on the income
statement. Because expenditures are made in the quarter before the launch of a
collection, there is not always a matching of revenues and expenses e.g. costs
for a January launch would be recorded in the 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, 2002 of $191,046 compared to a revenue of
$22,164 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 a result, prior years financial statements have been restated. 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 increased by 10.0% to for the fiscal
year ended December 31, 2002, to $770,657 versus $700,689 for the fiscal year
ended December 31, 2001. This increase is attributable to a full years expenses
being recorded for the design studio created in April 2001 in the Ontario
division. 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. As a result, prior years financial statements have been restated.

     The operating income for the fiscal year ended December 31, 2002 was
$557,295 compared to an operating loss of $377,626 for the fiscal year ended
December 31, 2001. This significant turnaround in profitability is attributable
mainly to increased sales volumes.

     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

                                       12
<PAGE>
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, 2002 decreased 5.9% to $240,773 from $255,914 for the year ended
December 31, 2001. This decrease in interest expense is attributable to
decreased average borrowings and lower interest rates during the year.

     The exchange loss on foreign exchange contracts of $7,520 relates to the
FASB requirement that the ineffective portion of gain or losses attributable to
cash flow hedges be reported in earnings.

     The net income for the fiscal year ended December 31, 2002 was $164,358, as
compared to a net loss of $889,464 for the fiscal year ended December 31, 2001.

     The earnings per share for the fiscal year ended December 31, 2002 was
$0.06 compared to a loss per share of $0.32 for the fiscal year ended December
31, 2001. 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 2002 was 2,755,514 and 2,757,995 for 2001.


Liquidity and Capital Resources

     The Company had a net decrease in cash flows of $711,017 for the fiscal
year ended December 31, 2002. This was attributable to paying down of bank debt
and capital additions.

     Cash flows used in investing activities for the fiscal year ended December
31, 2002 were $1,893,433. This reflected capital addition for cylinders, designs
and engravings for new collections. It is the Company's intention to utilize a
good portion of the funds from operations to develop new product lines of
wallpaper plus continue the development of floor coverings, ceiling tiles and
other product lines to complement our product offer. The fluctuation in the cash
flow is caused by the launch of new collections throughout the year. The
majority of the new collections are launched in the Spring and Fall of each
year. The cost of launching a new collection can exceed $500,000 per collection
with the majority of these costs expended within the first nine months of every
year. The Company launched 8 new collections in 2002.

     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.

                                       13
<PAGE>
Item 7.  FINANCIAL STATEMENTS

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










                        ROSEDALE DECORATIVE PRODUCTS LTD.

                        CONSOLIDATED FINANCIAL STATEMENTS

                  AS OF DECEMBER 31, 2002 AND DECEMBER 31, 2001

                  TOGETHER WITH REPORT OF INDEPENDENT AUDITORS

                        (Amounts expressed in US dollars)






<PAGE>
                        ROSEDALE DECORATIVE PRODUCTS LTD.

                        CONSOLIDATED FINANCIAL STATEMENTS

                  AS OF DECEMBER 31, 2002 AND DECEMBER 31, 2001

                  TOGETHER WITH REPORT OF INDEPENDENT AUDITORS

                        (Amounts expressed in US dollars)

<TABLE>
<CAPTION>

                                TABLE OF CONTENTS


<S>                                                                                          <C>
       Report of Independent Auditors                                                          1

       Consolidated Balance Sheets as of December 31, 2002 and December 31, 2001             2 - 3

       Consolidated Statements of Operations for the years ended December 31, 2002,
           December 31, 2001 and December 31, 2000                                             4

       Consolidated Statements of Cash Flows for the years ended December 31, 2002,
           December 31, 2001 and December 31, 2000                                           5 - 6

       Consolidated Statements of Changes in Stockholders' Equity for the years ended
           December 31, 2002, December 31, 2001 and December 31, 2000                          7

       Notes to Consolidated Financial Statements                                            8 - 29




</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, 2002 and
2001 and the related consolidated statements of operations, cash flows and
changes in stockholders' equity for each of the years ended December 31, 2002,
2001 and 2000. 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 consolidated
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall consolidated 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, 2002 and 2001 and the results of its
operations and its cash flows for each of the years ended December 31, 2002,
2001 and 2000, in conformity with generally accepted accounting principles 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.


Toronto, Ontario                                /s/Schwartz Levitsky Feldman llp
April 2, 2003                                              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, 2002 and December 31, 2001
(Amounts expressed in US dollars)
<TABLE>
<CAPTION>
                                                                                      2002               2001

                                                                                        $                  $
                                                                                                    (restated)
                                                           ASSETS
       CURRENT ASSETS

<S>                                                                              <C>                 <C>
           Cash and cash equivalents                                             1,186,436           1,897,453
           Accounts receivable (notes 4 and 10)                                  3,973,605           3,811,530
           Inventory (notes 5 and 10)                                            5,886,464           5,616,597
           Prepaid expenses and sundry assets (note 6)                             332,031             368,719
           Income taxes recoverable                                                     -               41,858
                                                                               ------------        ------------


                                                                                11,378,536          11,736,157

       LOAN RECEIVABLE FROM AFFILIATED COMPANY (note 7)                             41,975              -

       MORTGAGES RECEIVABLE (note 8)                                               312,805             309,820

       PROPERTY, PLANT AND EQUIPMENT (note 9)                                    4,279,689           3,675,749
                                                                               ------------        ------------








                                                                                16,013,005          15,721,726
                                                                               ============        ============

</TABLE>

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

APPROVED ON BEHALF OF THE BOARD

Director

Director
                                                                               2
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Consolidated Balance Sheets
As of December 31, 2002 and December 31, 2001
(Amounts expressed in US dollars)
<TABLE>
<CAPTION>
                                                                                      2002               2001

                                                                                        $                  $
                                                                                                    (restated)
                                   LIABILITIES
       CURRENT LIABILITIES

<S>                                <C>                                           <C>                 <C>
           Bank indebtedness (note 10)                                           4,710,636           4,886,846
           Accounts payable and accrued expenses (note 11)                       4,575,714           4,226,715
           Income taxes payable                                                      6,682                  -
           Due to stockholders and directors (note 12)                             919,427           1,150,573
                                                                               ------------        ------------

                                                                                10,212,459          10,264,134

       DEFERRED INCOME TAXES                                                       410,624             281,140
                                                                               ------------        ------------

                                                                                10,623,083          10,545,274
                                                                               ------------        ------------

                              STOCKHOLDERS' EQUITY

       COMMON STOCK (note 13)                                                    5,029,355           5,029,355

       ADDITIONAL PAID-IN CAPITAL (note 13)                                        142,314             142,314


       ACCUMULATED OTHER COMPREHENSIVE LOSS                                       (459,997)           (509,109)


       RETAINED EARNINGS                                                           678,250             513,892
                                                                               ------------        ------------

                                                                                 5,389,922           5,176,452
                                                                               ------------        ------------

                                                                                16,013,005          15,721,726
                                                                               ============        ============

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





                                                                               3
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Consolidated Statements of Operations
For the years ended December 31
(Amounts expressed in US dollars)
<TABLE>
<CAPTION>
                                                                   2002               2001                2000
                                                                     $                  $                   $
                                                                                (restated)          (restated)


<S>                                                          <C>                <C>                 <C>
       SALES                                                 21,193,725         17,781,160          21,216,386


       COST OF SALES                                         12,696,305         10,495,673          13,066,808
                                                            ------------       ------------        ------------


       GROSS PROFIT                                           8,497,420          7,285,487           8,149,578
                                                            ------------       ------------        ------------
       OPERATING EXPENSES


           General and administrative                         2,576,277          2,769,075           2,667,969
           Selling                                            3,079,880          3,128,846           3,036,650
           Design studio                                        770,657            700,689             746,804
           Book development costs (recovered)                   191,046            (22,164)           (299,785)
           Amortization                                       1,322,265          1,086,667             955,238
                                                            ------------       ------------        ------------


       TOTAL OPERATING EXPENSES                               7,940,125          7,663,113           7,106,876
                                                            ------------       ------------        ------------

       OPERATING INCOME (LOSS)                                  557,295           (377,626)          1,042,702


           Cancellation of foreign exchange
              contracts (note 14)                                    -             214,668                  -
           Interest expense                                     240,773            255,914             426,070
           Exchange loss on foreign exchange
              contracts                                           7,520             41,992                  -
                                                            ------------       ------------        ------------


       INCOME (LOSS) BEFORE INCOME TAXES                        309,002           (890,200)            616,632


           Income taxes (recovery) (note 15)                    144,644               (736)            111,922
                                                            ------------       ------------        ------------

       NET INCOME (LOSS)                                        164,358           (889,464)            504,710
                                                            ============       ============        ============

       Net earnings (loss) per common share,
           basic and diluted (note 17)                             0.06              (0.32)               0.18
                                                            ============       ============        ============

       Weighted average number of common
           shares outstanding                                 2,755,514          2,757,995           2,777,181
                                                            ============       ============        ============
</TABLE>

 See Pro-forma impact from sale of subsidiary subsequent to year end in note 1.

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

                                                                               4
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Consolidated Statements of Cash Flows
For the years ended December 31
(Amounts expressed in US dollars)
<TABLE>
<CAPTION>
                                                                   2002               2001               2000

                                                                     $                  $                  $
                                                                                (restated)         (restated)
       Cash flows from operating activities:

<S>                                                             <C>              <C>                  <C>
           Net income (loss)                                    164,358           (889,464)           504,710
                                                            ------------       ------------        ------------

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

           Amortization of property, plant
                and equipment                                 1,322,265          1,086,667            955,238
           Exchange loss on foreign exchange contracts            7,520             41,992              -
           Increase in accounts receivable                     (125,935)          (243,825)          (586,066)
           (Increase) decrease in inventory                    (216,755)           396,842            739,648
           (Increase) decrease in prepaid expenses
               and sundry assets                                 40,427            576,907           (603,943)
           Increase (decrease) in accounts payable
              and accrued expenses                              302,188           (501,390)          (128,480)
           (Increase) decrease in income taxes                   49,170             (9,410)            58,047
           Increase in deferred income taxes                    127,364                 -              87,800
                                                            ------------       ------------        ------------

           Total adjustments                                  1,506,244          1,347,783            522,244
                                                            ------------       ------------        ------------

           Net cash provided by operating
               activities                                     1,670,602            458,319          1,026,954
                                                            ============       ============        ============

       Cash flows from investing activities:

           Purchases of property, plant and
               equipment                                     (1,893,433)        (1,538,320)        (1,333,203)
                                                            ============       ============        ============

           Net cash used in investing activities             (1,893,433)        (1,538,320)        (1,333,203)
                                                            ============       ============        ============


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


                                                                               5
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Consolidated Statements of Cash Flows
For the years ended December 31
(Amounts expressed in US dollars)
<TABLE>
<CAPTION>
                                                                   2002               2001               2000

                                                                     $                  $                  $
                                                                                (restated)         (restated)
       Cash flows from financing activities:

<S>                                                        <C>                       <C>               <C>
            Purchase of treasury stock                               -               (8,728)           (23,873)
            Proceeds from (repayment of)
              bank indebtedness                                (224,332)            969,893           (381,318)
            Loan to affiliated company                          (42,170)                  -                  -
            Proceeds from (repayment of) loans from
              stockholders and directors                       (243,358)           (374,041)           109,129
                                                            ------------       ------------        ------------

            Net cash provided by (used in)
              financing activities                             (509,860)            587,124           (296,062)
                                                            ------------       ------------        ------------

       Effect of foreign currency exchange
           rate changes                                          21,674            (134,064)          (114,015)
                                                            ------------       ------------        ------------

       Net decrease in cash and cash equivalents               (711,017)           (626,941)          (716,326)

       Cash and cash equivalents, beginning of year           1,897,453           2,524,394          3,240,720
                                                            ------------       ------------        ------------

       Cash and cash equivalents, end of year                 1,186,436           1,897,453          2,524,394
                                                            ============       ============        ============

       Income taxes paid                                         32,170              22,297             50,062
                                                            ============       ============        ============

       Interest paid                                            230,608             287,798            468,354
                                                            ============       ============        ============

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




                                                                               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                                                                             Accumulated
                                     Stock          Common           Additional                                           Other
                                  Number of         Stock             Paid-in         Retained      Comprehensive     Comprehensive
                                    Shares          Amount            Capital         Earnings      Income (loss)     Income (loss)
                                                      $                  $                $                 $                 $
<S>                               <C>              <C>                 <C>              <C>             <C>              <C>
Balance as of December 31, 1999
 (restated)                       2,786,714        5,061,956           142,314          898,646                              76,828

Repurchase for Treasury Stock
  [note 13(b)(i)]                   (22,400)         (23,873)                -                -                 -                 -
 Foreign currency translation             -                -                 -                -          (234,496)         (234,496)
 Net income for the year                  -                -                 -          504,710           504,710                 -


Balance as of December 31,
 2000 (restated)                  2,764,314        5,038,083           142,314        1,403,356           270,214          (157,668)


 Repurchase for Treasury             (8,800)          (8,728)                -                -                 -                 -
  Stock [note 13(b)(ii)]
 Foreign currency translation             -                -                 -                -          (351,441)         (351,441)
 Net loss for the year                    -                -                 -         (889,464)         (889,464)                -


Balance as of December 31,
 2001 (restated)                  2,755,514        5,029,355           142,314          513,892        (1,240,905)         (509,109)


 Foreign currency translation             -                -                 -                -            49,112            49,112
 Net income for the year                  -                -                 -          164,358           164,358                 -

Balance as of December 31, 2002   2,755,514        5,029,355           142,314          678,250           213,470          (459,997)

</TABLE>

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

                                                                               7
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2002 and December 31, 2001
(Amounts expressed in US dollars)




1.   SALE OF SUBSIDIARY AND RESTATEMENT TO FINANCIAL STATEMENTS

     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.

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

     The pro-forma impact of the sale on the 2002 and 2001 financial
     statements is as follows:
<TABLE>
<CAPTION>

                                                                                                         2002
                                                                    Audited       Adjustments        Pro-forma
                                                                -----------------------------------------------
<S>                                                              <C>              <C>                <C>
           Current assets                                        11,378,536       (4,696,760)        6,681,776
           Total assets                                          16,013,005       (6,967,544)        9,045,461
           Sales                                                 21,193,725       (9,887,432)       11,306,293
           Gross profit                                           8,497,420       (3,831,030)        4,666,390
           Net earnings (loss)                                      164,358         (168,447)          (4,089)
           Net earnings (loss) per share                               0.06            (0.06)           (0.00)


                                                                                                         2001
                                                                    Audited       Adjustments        Pro-forma
                                                                -----------------------------------------------
           Current assets                                        11,736,157       (4,607,398)        7,128,759
           Total assets                                          15,721,726       (6,689,172)        9,032,554
           Sales                                                 17,781,160       (7,554,530)       10,226,630
           Gross profit                                           7,285,487       (3,131,154)        4,154,333
           Net earnings (loss)                                    (889,464)            59,599        (829,865)
           Net earnings (loss) per share                             (0.32)              0.02           (0.30)
</TABLE>

     The SEC reviewed the Proxy Statement and as a result of this review,
     the SEC had comments pertaining to the accounting for prepaid and deferred
     expenses and the evaluation of the provision for doubtful accounts as
     reported in the company's 2001 10K and 2002 10Q's. The SEC's position was
     that certain prepaid expenses and deferred costs should be written-off and
     that the allowance for doubtful accounts appeared to be low.


                                                                               8
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2002 and December 31, 2001
(Amounts expressed in US dollars)




1.   SALE OF SUBSIDIARY AND RESTATEMENT TO FINANCIAL STATEMENTS   (cont'd)

     Based on the comments from the SEC and subsequent discussions with the
     reviewer, the company re-evaluated the adequacy of the allowance for
     doubtful accounts and restated the amounts for prepaid expenses and
     deferred product costs. As a result, the company increased the allowance
     for doubtful accounts as at December 31, 2001, and expensed the prepaid
     expenses and deferred product costs previously capitalized. These
     restatements resulted in the following adjustments to net loss as at
     December 31, 2001; decrease in amortization of $223,744; increase in cost
     of sales of $47,574; increase in general and administrative expenses of
     $213,123; an increase design studio of $48,617; and an increase in book
     development costs of $238,521. In addition, engravings and designs of
     $283,299 has been reallocated from deferred product costs to property,
     plant and equipment. The increase in net loss resulting from the
     adjustments amounted to $324,091.

     The effect of the restatement to prepaid expenses and deferred product
     costs for years prior to 2001 resulted in a retroactive adjustment to
     retained earnings as at December 31, 2000 of $599,490.

     The following table presents the effects of the aforementioned adjustments:

<TABLE>
<CAPTION>

                                                        2001                             2000
                                                                  As previously                    As previously
                                                 As restated          reported      As restated    reported
                                                _____________     ______________   ____________    _____________
                                                       $              $                 $              $

<S>                                               <C>              <C>             <C>              <C>
         Current assets                           11,736,157       12,303,783      13,719,519       14,003,066
         Total assets                             15,721,726       16,565,382      17,486,544       18,048,032
         Net earnings (loss)                        (889,464)        (565,373)        504,710          292,488
         Retained earnings                           513,892        1,437,473       1,403,356        2,002,846
         Net earnings (loss)
            per common share                          (0.32)           (0.20)            0.18             0.11
</TABLE>

     All applicable notes relating to these adjustments have been restated.


2.   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"), respectively.

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


                                                                               9
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2002 and December 31, 2001
(Amounts expressed in US dollars)




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

           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 subsidiaries Ontario and
               Rosedale. These subsidiaries were incorporated in Canada on
               December 31, 1971 and April 7, 1981 respectively.

          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 fair market
               value. Cost is determined on the first-in, first-out basis.

          g)   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
                Automobile                                    30%                            Declining balance
                Equipment, furniture and fixtures             20%                            Declining balance
                Computer equipment                            20% and 30%                    Declining balance
                Cylinders and related design costs            20%                            Straight-line
</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.



                                                                              10
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2002 and December 31, 2001
(Amounts expressed in US dollars)



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

          h)   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.

               Effects of changes in enacted tax laws on deferred tax
               assets and liabilities are reflected as adjustments to tax
               expense in the period of enactment. Deferred tax assets may be
               reduced, if deemed necessary based on a judgmental assessment of
               available evidence, by a valuation allowance for the amount of
               any tax benefits which are more likely, based on current
               circumstances, not expected to be realized.

          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 FAS 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.

          j)   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.

          k)   Sales

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



                                                                              11
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2002 and December 31, 2001
(Amounts expressed in US dollars)



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

          l)   Use of Estimates

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

          m)   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 which has been superceded by
               FAS No. 144 [note 2 (r)] .FAS No. 144 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.

          n)   Stock Based Compensation

               In December 1995, FAS 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, FAS 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. FAS No. 123 is effective for financial
               statements for fiscal years beginning after December 31, 1995.
               The company has adopted the disclosure provisions of FAS No. 123.

          o)   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,
               2002, due to the wide variety of customers, markets and
               geographic areas to which the company's products are sold.




                                                                              12
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2002 and December 31, 2001
(Amounts expressed in US dollars)




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

           p)   Derivative Instruments and Hedging Activities

               The company adopted FAS 133, "Accounting for Derivative
               Instruments and Hedging Activities," as amended by FAS 138,
               "Accounting for Certain Derivative Instruments and Certain
               Hedging Activities." Changes in the fair value of derivatives
               that do not qualify for hedge treatment, as well as the
               ineffective portion of a particular hedge, must be recognized
               currently in earnings. Changes in the ineffective portion of a
               derivative instrument are recognized in earnings in the current
               period as required by FAS 133.

               The company does not use derivative financial instruments
               for speculative trading purposes, nor does it hold or issue
               leveraged derivative financial instruments.

           q)  Comprehensive Income

               In 1999, the company adopted the provisions of SFAS No. 130
               "Reporting comprehensive Income". This standard requires
               companies to disclose comprehensive income in their financial
               statements. In addition to items included in net income,
               comprehensive income includes items currently charged or credited
               directly to stockholders' equity, such as the changes in
               unrealised appreciation (depreciation) of securities and foreign
               currency translation adjustments.

          r)   Recently Issued Accounting Standards

               FAS No. 141 - Business Combinations and FAS No. 142 -
               Goodwill and Other Intangible Assets. FAS No. 141 requires that
               companies use only the purchase method for acquisitions occurring
               after June 30, 2001. FAS No. 142 required that goodwill and
               intangible assets acquired after June 30, 2001 should no longer
               be amortized but reviewed annually for impairment.

               FAS No. 143 - Accounting for asset retirement obligations -
               this standard requires that entities record the fair value of a
               liability for an asset retirement obligation in the period in
               which it is incurred. This standard is effective for fiscal years
               beginning after June 15, 2002.

               FAS No. 144 - Accounting for the impairment or disposal of
               long-lived assets. This standard supercedes FAS No. 121 -
               Accounting for the impairment of long-lived assets and for
               long-lived assets to be disposed of. This standard requires that
               businesses recognize impairment when the financial statement
               carrying amount of long-lived asset or asset group exceeds its
               fair value and is not recoverable. The provisions of this
               Statement are effective for financial statements issued for
               fiscal years beginning after December 15, 2001.





                                                                              13
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2002 and December 31, 2001
(Amounts expressed in US dollars)




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

          r)   Recently Issued Accounting Standards   (cont'd)

               FAS No. 145 - Rescission of FASB Statements No.4, 44 and 64,
               Amendment of FASB Statement No. 13, and Technical Corrections.
               FAS 145 updates, clarifies and simplifies existing accounting
               pronouncements. FAS 145 rescinds Statement No.4, which required
               all gains and losses from extinguishment of debt to be aggregated
               and, if material, classified as extraordinary items, net of
               related income tax effect. As a result, the criteria in APB
               Opinion No. 30 will now be used to classify those gains and
               losses because Statement No. 4 has been rescinded. Statement No.
               44 was issued to establish accounting requirements for the
               effects of transition to provisions of the Motor Carrier Act of
               1980. Because the transition has been completed, Statement No. 44
               is no longer necessary.

               FAS No. 146 - Accounting for Cost Associated with Exit or
               Disposal Activities. FAS 146 requires companies to recognize
               costs associated with exit or disposal activities when they are
               incurred rather than at the date of a commitment to an exit or
               disposal plan. Previous accounting guidance was provided by
               Emerging Issues Task Force ("EITF") Issue No. 94-3. FAS 146
               replaces EITF94-3. The Statement is to be applied prospectively
               to exit or disposal activities initiated after December 31, 2002.

               FAS No.147 - Acquisition of certain Financial Institutions,
               an amendment of FAS 72 and 144 and FAS interpretation number 9
               issued October 2002 and relates to acquisitions of financial
               institutions.

               FAS No.148 - Accounting for Stock Based Compensation -
               Transition and Disclosure, an amendment of FAS 123 issued
               December 2002 and permits two additional transition methods for
               entities that adopt the fair value based method of accounting for
               stock based employee compensation to avoid the ramp-up effect
               arising from prospective application. This statement also
               improves the prominence and clarity of the pro-forma disclosures
               required by FAS 123.

               The company believes that the above standards would not have
               a material impact on its financial position, results of
               operations or cash flows.












                                                                              14
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2002 and December 31, 2001
(Amounts expressed in US dollars)




       3.  COMPREHENSIVE INCOME (LOSS)
<TABLE>
<CAPTION>

           The components of comprehensive income are as follows:
                                                                            2002           2001           2000

                                                                              $              $              $
                                                                                     (restated)     (restated)

<S>                                                                      <C>          <C>              <C>
           NET INCOME (LOSS)                                             164,358      (889,464)        504,710

           OTHER COMPREHENSIVE INCOME (LOSS)

                Foreign currency translation                              49,112      (351,441)       (234,496)
                                                                        _________   ___________       __________

           COMPREHENSIVE INCOME (LOSS)                                   213,470    (1,240,905)        270,214
                                                                        =========   ===========       ==========
</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 as disclosed in note 2(i).


       4.  ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
                                                                                      2002               2001

                                                                                        $                  $

                                                                                                     (restated)

<S>                                                                              <C>                 <C>
           Accounts receivable                                                   4,316,575           4,181,917
           Less:  Allowance for doubtful accounts                                  342,970             370,387
                                                                                __________          ___________

           Accounts receivable, net                                              3,973,605           3,811,530
                                                                                ==========          ===========
</TABLE>

     The activity for the allowance for doubtful accounts is as follows for
     the years ended December 31:
<TABLE>
<CAPTION>

                                                                                      2002                2001

                                                                                        $                   $
                                                                                                    (restated)

<S>                                                                                <C>                 <C>
           Beginning Balance                                                       370,387             362,936
                Provision                                                            4,670             296,526
                Write-off, net of recoveries                                      (32,087)           (289,075)
                                                                                __________          ___________

           Ending Balance                                                          342,970             370,387
                                                                                ==========          ===========
</TABLE>


                                                                              15
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2002 and December 31, 2001
(Amounts expressed in US dollars)




4.   ACCOUNTS RECEIVABLE (cont'd)

     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 becomes uncollectable could
     differ from those estimated.


5.   INVENTORY
<TABLE>
<CAPTION>
                                                                                      2002                2001

                                                                                        $                   $
                                                                                                    (restated)
     Inventory comprised the following:

<S>                                                                                <C>                 <C>
                Raw materials                                                      711,056             264,038
                Finished goods                                                   5,175,408           5,352,559
                                                                                __________          ___________

                                                                                 5,886,464           5,616,597
                                                                                ==========          ===========
</TABLE>

<TABLE>
<CAPTION>

6.   PREPAID EXPENSES AND SUNDRY ASSETS
                                                                                      2002                2001

                                                                                        $                   $
                                                                                                    (restated)

<S>                                   <C>                                          <C>                 <C>
           Prepaid income taxes [note 19 (a)]                                      228,154             225,976
           Other prepaids and sundry assets                                        103,877             142,743
                                                                                __________          ___________

                                                                                   332,031             368,719
                                                                                ==========          ===========

</TABLE>

7.   LOAN RECEIVABLE FROM AFFILIATED COMPANY

     The loan receivable from related company is unsecured, bears no
     interest and is without specific terms of repayment and is not expected to
     be repaid prior to January 1, 2004. Imputed interest on the loan has been
     calculated at a rate of prime plus 1.5%.





                                                                              16
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2002 and December 31, 2001
(Amounts expressed in US dollars)


<TABLE>
<CAPTION>


8.   MORTGAGES RECEIVABLE

     Second mortgages, from companies related through common ownership are
     secured by land and buildings, bears interest at 9% and are payable on
     demand. No repayments are expected prior to January 1, 2004.

                                                                                      2002               2001

                                                                                        $                   $

<S>        <C>                                                                     <C>                 <C>
           1216748 Ontario Inc.                                                    164,029             162,464
           1217576 Ontario Inc.                                                    148,776             147,356
                                                                                __________          ___________

                                                                                   312,805             309,820
                                                                                ==========          ===========


       9.  PROPERTY, PLANT AND EQUIPMENT
                                                                                      2002               2001

                                                                                        $                   $
                                                                                                    (restated)

           Leasehold improvements                                                  316,684            201,576
           Automobile                                                               40,989             40,598
           Equipment and furniture                                                 338,122            309,680
           Furniture and fixtures                                                  249,582            238,741
           Computer equipment                                                      720,890            633,123
           Cylinders and related design costs                                    7,251,966          5,893,507
                                                                                __________          ___________

           Cost                                                                  8,918,233          7,317,225
                                                                                __________          ___________
           Less:  Accumulated amortization

                  Leasehold improvements                                            96,005             58,998
                  Automobile                                                        28,357             22,724
                  Equipment and furniture                                          257,818            238,625
                  Furniture and fixtures                                           217,166            207,067
                  Computer equipment                                               513,730            434,614
                  Cylinders and related design costs                             3,525,468          2,679,448
                                                                                __________          ___________

                                                                                 4,638,544          3,641,476
                                                                                __________          ___________

           Net                                                                   4,279,689          3,675,749
                                                                                ==========          ===========

</TABLE>

                                                                              17
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2002 and December 31, 2001
(Amounts expressed in US dollars)


10.   BANK INDEBTEDNESS

     The company has available credit facilities up to a maximum of
     $7,873,000 ($12,420,000 Canadian), which bears interest at rates varying
     between the bank's prime rate plus 0.25% and prime plus 0.75%. 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
     from affiliated companies up to $539,000, assignment of life insurance of
     $1,902,000 on the lives of two key officers/ stockholders and assignment of
     fire insurance.

11.   ACCOUNTS PAYABLE AND ACCRUED EXPENSES
<TABLE>
<CAPTION>
                                                                                      2002                2001

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

<S>                                                                                 <C>              <C>
                Trade payables                                                      3,203,529        4,045,240
                Accrued expenses                                                    1,372,185          181,475
                                                                                   __________       ___________

                                                                                    4,575,714        4,226,715
                                                                                   ==========       ===========

</TABLE>
12.   DUE TO STOCKHOLDERS AND DIRECTORS

     Stockholders' and directors advances are secured by general security
     agreements, bears interest at the National Bank of Canada prime lending
     rate plus 1.5%, are without specific terms of repayment and are not
     expected to be repaid prior to January 1, 2004. Interest payable on amounts
     due to directors has been waived.


                                                                              18
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2002 and December 31, 2001
(Amounts expressed in US dollars)




13.   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.
<TABLE>
<CAPTION>

               Issued
                                                                                   2002                2001

                                                                                     $                   $

<S>             <C>                                                              <C>                 <C>
                2,786,714   Common shares                                        5,061,956           5,061,956
                   31,200   Treasury shares                                        (32,601)            (32,601)
                1,265,000   Warrants                                               142,314             142,314
                                                                                 __________         ___________

                                                                                 5,171,669           5,171,669
                                                                                 ==========         ===========
</TABLE>
          b)   Changes to Issued Share Capital

                i)  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 2000, the company re-purchased
                    22,400 shares of its common stock.

                ii) During 2001, the company repurchased 8,800 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 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.

                                                                              19
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2002 and December 31, 2001
(Amounts expressed in US dollars)




13.   COMMON STOCK (cont'd)

          c)   Employee Stock Option Plan   (cont'd)

               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.

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

                                                                          Shares         Shares
                                                                       Available        Subject         Option
                                                                       For Grant     to Options         Prices


<S>                                     <C> <C>                          <C>            <C>               <C>
                Outstanding at December 31, 2000                         615,000        135,000           1.00
                Granted                                                       -              -              -
                Exercised                                                     -              -              -
                Expired                                                       -              -              -
                Cancelled                                                     -              -              -


                Outstanding at December 31, 2001                         615,000        135,000           1.00
                Granted                                                       -              -              -
                Exercised                                                     -              -              -
                Expired                                                       -              -              -
                Cancelled                                                     -              -              -


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

</TABLE>

               The remaining life of the stock options as of December 31,
               2002 is 6.7 years.

                                                                              20
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2002 and December 31, 2001
(Amounts expressed in US dollars)




13.   COMMON STOCK (cont'd)

          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,
               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 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.

               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.






                                                                              21
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2002 and December 31, 2001
(Amounts expressed in US dollars)



14.   CANCELLATION OF FOREIGN EXCHANGE CONTRACTS

     The company entered into several foreign exchange contracts with its
     principal banker National Bank of Canada to sell US dollars at
     pre-determined monthly rates extending for a period of one year. The
     purpose of these contracts was to ensure that the company's cash flow was
     not adversely affected by any material fluctuation in the rate of exchange
     between the US and Canadian currencies resulting from the settlement of
     accounts denominated in US dollars. A significant portion of the company's
     sales is denominated in US dollars. The company enters into these contracts
     based on management's estimates of the timing of the collection of US
     dollars receivables. Since these contracts do not result in a perfect
     hedge, any realized and unrealised gains and losses that result are
     reported in the current period's statement of operations.

     Several of the foreign exchange contracts entered into were intended
     to reduce the fluctuation risk of a major US customer's receivables. When
     this customer filed for Chapter 11, the company's obligation to honour
     these contracts remained outstanding with the bank. The bank allowed the
     company to roll forward these contracts on a month to month basis allowing
     the company an extended period of time to honour them from collection of
     other US dollar receivables. However, the company was unable to collect
     sufficient US receivables to settle the contracts and in October 2001, the
     bank amended its policy to no longer allow these contracts to be rolled
     forward. This resulted in an immediate expense consisting of the difference
     between the contract value and the market value of the US dollar to the
     Canadian dollar as of October 31, 2001.

     As this was a one-time cancellation cost, the impact on the company's
     market risk profile was not significantly affected. The company continues
     to enter into foreign exchange contracts to reduce its exposure to foreign
     exchange fluctuations. It is the intention of the company to settle these
     contracts as they mature.


15.  INCOME TAXES
<TABLE>
<CAPTION>
                                                                   2002                  2001             2000

                                                                     $                     $                $
                                                                                     (restated)       (restated)

<S>                                                              <C>                    <C>             <C>
           a)   Current                                          17,280                 (736)           24,122
                Deferred                                        127,364                    -            87,800
                                                               ---------               ------         ---------

                                                                144,644                 (736)          111,922
                                                               =========               ======         =========

</TABLE>


                                                                              22
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2002 and December 31, 2001
(Amounts expressed in US dollars)




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

          b)   Current income taxes consists of:
                                                                 2002               2001                2000

                                                                   $                  $                   $
                                                                                 (restated)          (restated)
<S>                                                             <C>              <C>                   <C>
                Amounts calculated at basic Canadian
                    Federal and Provincial Rates                111,000           (365,000)            259,000
                Increase (decrease) resulting from:

                Temporary differences                          (127,364)                -              (87,800)
                Part 1.3 large corporation tax                    5,000             10,500              17,000
                Corporate minimum tax                            14,000                 -                7,500
                Permanent and other difference                   40,000             39,000               9,000
                Change in valuation allowance                   174,644            387,764              69,422
                Losses utilized                                (200,000)           (73,000)           (250,000)
                                                              ----------          ---------           ---------

                                                                 17,280               (736)             24,122
                                                              ==========          =========           =========
</TABLE>

         c)    The company has operating losses of approximately $2,316,000
               which is expected to be used to reduce future taxable income. The
               potential tax benefit relating to these losses, has been
               recognized in the accounts as a reduction to the deferred income
               tax liability. The deductibility of these losses expires as
               follows:
<TABLE>
<CAPTION>

<S>        <C>                                                                              <C>
           2006                                                                             $          898,000
           2007                                                                                        249,000
           2008                                                                                        706,000
           2009                                                                                        463,000
                                                                                            ------------------

                                                                                            $        2,316,000
                                                                                            ==================
</TABLE>

                                                                              23
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2002 and December 31, 2001
(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>

                                                                   2002               2001                2000

                                                                     $                  $                   $

<S>                              <C>                            <C>                <C>                  <C>
           Mortgage receivable - 1216748 Ontario Inc.           164,029            162,464              172,572
           Mortgage receivable - 1217576 Ontario Inc.           148,776            147,356              156,524
           Rent paid - 966578 Ontario Inc.                       15,287             15,495               16,159
           Rent paid - 1216748 Ontario Inc.                      15,287             19,369               16,159
           Rent paid - 1369597 Ontario Inc.                      19,108             23,242               18,179
</TABLE>

     See also notes 7, 12 and 19 for additional related party disclosures.


17.  EARNINGS/LOSS PER SHARE

     The company has adopted FAS No. 128, earnings per share, which
     requires presentation, in the consolidated statement of income, of both
     basic and diluted earnings per share.
<TABLE>
<CAPTION>

                                                                   2002               2001                2000

                                                                     $                  $                   $
<S>                                                           <C>                <C>                 <C>
           Weighted average common
                 stock outstanding assuming dilution          2,755,514          2,757,995           2,777,181
                                                              =========         ===========         ==========
</TABLE>

     The outstanding options and warrants were not included in the
     computation of the fully diluted earnings per common share as the effect
     would be anti-dilutive.


18. 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.





                                                                              24
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2002 and December 31, 2001
(Amounts expressed in US dollars)




18.  SEGMENTED INFORMATION (cont'd)

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

                                                                   2002               2001                2000

                                                                     $                  $                   $

<S>                                                          <C>                <C>                 <C>
                United States of America                     13,202,250         10,631,691          12,716,808
                Canada                                        6,586,816          6,052,068           8,045,710
                Other                                         1,404,659          1,097,401             453,868
                                                             ----------         -----------         ----------

                                                             21,193,725         17,781,160          21,216,386
                                                             ==========         ===========         ==========
</TABLE>

     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>

                                                                   2002               2001                2000

                                                                     $                  $                   $
                                                                                (restated)          (restated)

<S>                                                             <C>              <C>                   <C>
                United States of America                        102,384          (531,827)             302,516
                Canada                                           51,081          (302,742)             191,397
                Other                                            10,893           (54,895)              10,797
                                                             ----------         -----------         ----------

                                                                164,358          (889,464)             504,710
                                                             ==========         ===========         ==========

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

                                                                                      2002                2001

                                                                                        $                   $
                                                                                                    (restated)

<S>                                                                              <C>                 <C>
                United States of America                                         3,364,335           4,753,949
                Canada                                                           8,760,130           8,570,286
                Other                                                            3,888,540           2,397,491
                                                                                -----------         ----------

                                                                                16,013,005          15,721,726
                                                                                ===========         ==========
</TABLE>



                                                                              25
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2002 and December 31, 2001
(Amounts expressed in US dollars)




18.  SEGMENTED INFORMATION (cont'd)

           c)   Sales to major customers are as follows:
<TABLE>
<CAPTION>
                                                                            2002           2001           2000
                                                                      ----------    -----------     ----------

<S>                                                               <C>             <C>            <C>
                Sales                                             $    5,558,582  $    5,346,258 $   7,337,673
                                                                      ----------    -----------     ----------

                % of total sales                                             26%            30%            35%
                                                                      ----------    -----------     ----------

                Amounts included in accounts receivable           $    1,242,685  $    1,413,700 $     918,467
                                                                      ----------    -----------     ----------

           d)   Purchases from major suppliers are as follows:

                                                                            2002           2001           2000
                                                                      ----------    -----------     ----------

                Purchases                                         $    7,894,193  $   5,958,567  $   4,171,007
                                                                      ----------    -----------     ----------

                % of total purchases                                         62%            53%            30%
                                                                      ----------    -----------     ----------

                Amounts included in accounts payable              $    2,664,783  $   2,402,577  $   1,061,619
                                                                      ----------    -----------     ----------

</TABLE>

19.  CONTINGENCIES

           a)  Rosedale 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 of approximately $417,000 plus interest
               estimated to be $402,000. The company has objected to these
               re-assessments and has no obligation to pay the portion relating
               to CCRA in the amount of $570,000 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, 2002, Rosedale made payments in respect
               to the above income tax re-assessments amounting to $228,154 to
               the Province of Ontario. This amount has been included in prepaid
               expenses and sundry assets.



                                                                              26
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2002 and December 31, 2001
(Amounts expressed in US dollars)


19.  CONTINGENCIES (cont'd)

          b)   The company has guaranteed the mortgages of 1217576 Ontario
               Inc., 1216748 Ontario Inc. and 966578 Ontario Inc. in the amount
               of $640,000 through general security agreements ranking behind
               the National Bank of Canada. These affiliated companies are
               rental properties owned jointly by two directors and
               stockholders. As at December 31, 2002, the indebtedness of the
               affiliated companies amounted to $383,000.

          c)   The company has issued guarantees secured by general
               security agreements for the loans made by the Laurentian Bank of
               Canada to 1369597 Ontario Inc. and 1369598 Ontario Inc. As at
               year- end, the indebtedness of these companies amounted to
               approximately $886,000. 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.

          d)   The company has issued standby letters of credit in favour
               of the Laurentian Bank of Canada in the amount of $361,000.


20.  COMMITMENTS

          a)   Minimum payments under operating leases for premises amount
               to approximately $369,000 per annum, exclusive of insurance and
               other occupancy charges. The future minimum lease payments over
               the next five years are as follows:

               Payable during the following periods:
<TABLE>
<CAPTION>

<S>                                                                                           <C>
               Within one year                                                                $       369,000
               Over one year but not exceeding two years                                              298,000
               Over two years but not exceeding three years                                            57,000
               Over three years but not exceeding four years                                           19,000
                                                                                              ---------------

                                                                                              $       743,000
                                                                                              ===============
</TABLE>
                                                                              27
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2002 and December 31, 2001
(Amounts expressed in US dollars)




20.  COMMITMENTS (cont'd)

          b)   Minimum payments under operating leases for equipment amount
               to approximately $6,000 per annum. The future minimum lease
               payments over the next two years are as follows:

               Payable during the following periods:
<TABLE>
<CAPTION>

<S>                                                                                           <C>
               Within one year                                                                $         6,000
               Over one year but not exceeding two years                                                5,000
               Over two years but not exceeding three years                                             5,000
               Over three years but not exceeding four years                                            5,000
               Over four years but not exceeding five years                                             2,000
                                                                                              ---------------

                                                                                              $        23,000
                                                                                              ===============
</TABLE>

          c)   Minimum payments under operating leases for vehicles amount
               to approximately $27,000 per annum. The future minimum lease
               payments over the next four years are as follows:

               Payable during the following periods:
<TABLE>
<CAPTION>

<S>                                                                                          <C>
               Within one year                                                               $         27,000
               Over one year but not exceeding two years                                               24,000
               Over two years but not exceeding three years                                             6,000
                                                                                              ---------------

                                                                                              $        57,000
                                                                                              ===============


</TABLE>





                                                                              28
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2002 and December 31, 2001
(Amounts expressed in US dollars)




21.  FOREIGN EXCHANGE CONTRACTS

     As at December 31, 2002, 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. The related realized and unrealized
     gains or losses, if any, are reported in the statements of cash flows and
     operations. 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 $4,320,000 (in varying amounts from January through August
     2002). 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, 2002. Deferred gains and losses on
     forward exchange contracts are recognized in earnings. 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, 2002                              December 31, 2001
                           -----------------                              -----------------
                 Forward      Notional                                    Notional
                Exchange     Principal      Carrying           Fair      Principal      Carrying          Fair
               Contracts       Amounts         Value         Values        Amounts        Values        Values
               ---------     ---------      --------       --------      ---------      --------      ---------
                                    $             $              $              $             $             $

                <S>          <C>                <C>        <C>          <C>             <C>           <C>
                    2001            -             -              -       2,550,000            -       (41,992)
                    2002     4,320,000            -        (48,711)             -             -             -
</TABLE>

                                                                              29
<PAGE>
Item 8. CHANGES IN ACCOUNTANTS AND DISAGREEMENTS WITH ACCOUNTANTS ON
        ACCOUNTING AND FINANCIAL DISCLOSURE

         None.

                                    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:
<TABLE>
<CAPTION>

         Name                               Age      Position

<S>                                          <C>     <C>
         Sidney Ackerman                     57      President and Director

         Norman G. Maxwell                   55      Chief Financial Officer and Director

         Ken Page                            40      Director

         Janet Hendry                        64      Director
</TABLE>

     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.


                                       14
<PAGE>
     Ken Page has been a Director of the Company since June 2000. Since 1992 Mr.
Page is 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.


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 2002, 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 2002, failed to file on a timely
basis reports required by Section 16(a) of the Securities Exchange Act of 1934.

                                       15
<PAGE>
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
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        2002     $ 195,822      ----        ----        ----        ----        ----      ----
                  Executive    2001     $ 198,528     $2,317       ----        ----        ----        ----      ----
                  Officer      2000     $ 207,043     $5,518       ----        ----        ----        ----      ----

Sidney            President    2002     $ 195,822     $4,784       ----        ----        ----        ----      ----
Ackerman(1)                    2001     $ 198,528     $4,896       ----        ----        ----        ----      ----
                               2000     $ 207,043     $8,463       ----        ----        ----        ----      ----
----------------- ---------- ---------- ----------- ------------ ---------- ----------- ------------ --------- ----------
</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 2002, ($205,000 U.S.
based on an effective exchange rate of $1.50).

     (2) Options under the 1998 Plan were granted on August 19, 1999 at the most
recent closing price of the Company's shares as traded on NASDAQ, specifically,
$1.00 per share on August 18, 1999.

                       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,
2000, 2001 and 2002.

     The following table shows the value at December 31, 2002 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>                     <C>
Alan Fine, Chief Executive            0                   0                  25,000/0                       $0/0
Officer

Sidney Ackerman, President            0                   0                  25,000/0                       $0/0
---------------------------- --------------------- ---------------- --------------------------- ------------------------------
</TABLE>

                                       16
<PAGE>

Employment Agreements

     On the effective date of the Company's Registration Statement, Alan Fine
and Sidney Ackerman both entered into five year employment agreements with the
Company. Alan Fine was retained as Chief Executive Officer of the Company at an
annual salary of $205,000 until the closing of the sale of Rosedale on March 24,
2003. 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, 2001. The board unanimously approved the increase. On January 1, 2003 the
employment contracts for Alan Fine and Sidney Ackerman were renewed for a period
of one year under the same terms.

     The employment agreements with Alan Fine and Sidney Ackerman provide that
upon the death of any of the two employees that three years full salary will be
paid to the employee's estate in a lump sum payment. The agreements also provide
for reimbursement of reasonable business expenses.

     Alan Fine and Sidney Ackerman are entitled to bonuses of up to $10,000 each
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.

     Alan Fine and Sidney Ackerman shall each 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 of either Alan Fine or Sidney Ackerman, 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 Alan Fine and 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.

     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.


                                       17
<PAGE>
     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.

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

     The Company's Code of Ethics is filed as an exhibit to this registration
statement.



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

                                       18
<PAGE>
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)                                               516,726                18.7%
Alan Fine (3)                                                    548,781                19.9%
Rosalyn Fine (4)                                                 201,219                 7.3%
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 (two persons)                                       1,065,507                38.7%
</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.

     (3) Includes 404,706.5 shares of Common Stock owned by 1369598 Ontario Inc.
of which Alan Fine and Rosalyn Fine are shareholders.

     (4) Includes 57,143.5 shares of Common Stock owned by 1274152 Ontario, Inc.
of which Rosalyn Fine is a 100% owner. Rosalyn Fine is the former wife of Alan
Fine and the sister of Sidney 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 2,755,514 shares of common stock
outstanding as of December 31, 2002, 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.


Voting Agreement

     In the event the Shareholders cannot express unanimity or any of them
abstains from voting then the Shareholders agree to vote all of their Shares
against such matter or withhold all of their votes in respect of such matter as
applicable and to so instruct their proxies. The provisions of the voting
agreement shall apply to any shares in the capital stock of the Company to which
voting rights attach which may be issued to the Shareholders at any time during
the term of the voting agreement and any shares in the capital stock of the
Company which are issued in replacement of any shares or after acquired shares.
The voting agreement does not apply to any shares that are sold or transferred
to a Shareholder and does not apply to any shares that are sold or transferred

                                       19
<PAGE>
to a third party in an arm's-length transaction. The voting agreement terminates
upon Sidney Ackerman or Alan Fine being no longer employed by the Company or any
of its subsidiaries or the date upon which any Shareholder divests itself of all
shares in an arm's-length transaction for fair market consideration, whichever
is earlier.

     Information regarding ownership of certain beneficial owners and management
will appear under the caption "Ownership of Securities" in the Information
Statement and is incorporated herein by reference.



Item 12.   CERTAIN TRANSACTIONS

     In 1995, Alan Fine, Chief Executive Officer of the Company and Sidney
Ackerman, President of the Company each loaned funds to the Company's Ontario
and Rosedale subsidiaries. As at December 31, 2002, the outstanding amounts of
loans made by Alan Fine to Ontario and Rosedale were $156,888 and $381,972,
respectively, and the outstanding amount of the loans made by Sidney Ackerman to
Rosedale was $305,185. These loans are secured by a general security agreement
on the personal property of Rosedale and Ontario and bear interest at a rate
equal to the prime rate of interest charged by the National Bank of Canada plus
1.5% per annum and are payable on demand. Interest was waived for the year 2002.

     Alan Fine, Chief Executive Officer of the Company, and Sidney Ackerman,
President of the Company, own 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 $15,287 per annum, plus general
property taxes, payable in equal monthly installments of $1,274 for the property
leased from 1216748 Ontario Inc. The lease for 966578 Ontario Inc. calls for
rental payments in the amount of $15,287 per annum plus general property taxes,
payable in equal monthly installments of $1,274. The lease for 1369597 Ontario
Inc. calls for rental payments in the amount of $19,108 per annum plus general
property taxes, payable in equal monthly installments of $1,592. The leases are
for a five-year term.

     The Company has second mortgages from two related companies, 1216748
Ontario Inc. and 1217576 Ontario Inc., both of which are 50% owned by Sidney
Ackerman, President and Alan Fine, Chief Executive Officer. The principal amount
of the loans from 1216748 Ontario Inc. and 1217576 Ontario Inc. are $164,029 and
$148,776, 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 $7,873,000,
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 $1,570,000 from the
Company and its subsidiaries, guarantees from affiliated companies up to
$539,000, assignment of life insurance of $1,902,000 on the lives of two key
officers 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.

                                       20
<PAGE>
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)
        21      List of Subsidiaries of Registrant*
        99.1    Sarbanes-Oxley Certifications
        99.2    Code of Ethics and Business Conduct of Officers, Directors
                and Employees of Company
         ________________
                  * Previously filed.



     (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.

                None.



Item 14.    Controls and Procedures.

As of December 31, 2002, an evaluation was performed under the supervision
and with the participation of the Company's management, including the Chief
Executive Officer and the Chief Financial Officer, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures. Based
on that evaluation, the Company's management, including the Chief Executive
Officer and the Chief Financial Officer, concluded that the Company's disclosure
controls and procedures were effective as of December 31, 2002. There have been
no significant changes in the Company's internal controls or in other factors
that could significantly affect internal controls subsequent to December 31,
2002.

                                       21
<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: April 14,2003

     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                         April 14, 2003
Sidney Ackerman

/s/ NORMAN G. MAXWELL               Director, Chief Financial Officer,          April 14, 2003
Norman G. Maxwell                   Principal Accounting Officer

/s/ KEN PAGE                        Director                                    April 14, 2003
Ken Page

/s/ JANET HENDRY                    Director                                    April 14, 2003
</TABLE>



                                       22
<PAGE>
                                  CERTIFICATION

     I, Sidney Ackerman, certify that:

     1. I have reviewed this annual report on Form 10-KSB of Rosedale Decorative
Products Ltd.;

     2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

     3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

     4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

          a) designed such disclosure controls and procedures to ensure that
     material information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this annual report is being
     prepared;

          b) evaluated the effectiveness of the registrant's disclosure controls
     and procedures as of a date within 90 days prior to the filing date of this
     annual report (the "Evaluation Date"); and

          c) presented in this annual report our conclusions about the
     effectiveness of the disclosure controls and procedures based on our
     evaluation as of the Evaluation Date;

     5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

          a) all significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to record,
     process, summarize and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and

          b) any fraud, whether or not material, that involves management or
     other employees who have a significant role in the registrant's internal
     controls; and

     6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

April 14, 2003

/s/ SIDNEY ACKERMAN
Sidney Ackerman
President

                                       23
<PAGE>
                                  CERTIFICATION

     I, Norman G. Maxwell, certify that:

     1. I have reviewed this annual report on Form 10-KSB of Rosedale Decorative
Products Ltd.;

     2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

     3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

     4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

          a) designed such disclosure controls and procedures to ensure that
     material information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this annual report is being
     prepared;

          b) evaluated the effectiveness of the registrant's disclosure controls
     and procedures as of a date within 90 days prior to the filing date of this
     annual report (the "Evaluation Date"); and

          c) presented in this annual report our conclusions about the
     effectiveness of the disclosure controls and procedures based on our
     evaluation as of the Evaluation Date;

     5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

          a) all significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to record,
     process, summarize and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and

          b) any fraud, whether or not material, that involves management or
     other employees who have a significant role in the registrant's internal
     controls; and

     6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

April 14, 2003

/s/ NORMAN G. MAXWELL
Norman G. Maxwell
Chief Financial Officer

                                       24