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

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


                   For the fiscal year ended December 31, 2001

                        Commission File Number 001-14898

                        ROSEDALE DECORATIVE PRODUCTS LTD
                     _______________________________________

             (Exact name of registrant as specified in its charter)

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

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

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

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

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

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes [X ] No [ ]

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

                                      - 1 -
<PAGE>
The Company's revenues for the year ended December 31, 2001, were
$17,781,160.

As of March 20, 2002, the aggregate market value of the voting stock held
by non-affiliates of the registrant (based on The NASDAQ Stock Market last sale
price of $0.30 on March 20, 2002) was $376,654.

As of March 20, 2002, there were 2,755,514 shares of the registrant's
common stock outstanding.


Documents Incorporated By Reference:

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

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

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

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
























                                       -2-
<PAGE>
PART I.

Item 1.  HISTORY OF THE COMPANY

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

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





                                      - 3 -
<PAGE>
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.

     The Company  designs and  distributes  its owned branded  wallcovering  and
designer  fabric  collections,  as well  as  distributing  other  manufacturers'
wallcoverings on a wholesale basis. Wallcoverings and fabrics sold under Company
brand  names are  manufactured  for the Company on an  outsource  basis by third
party  manufacturers.  Design and distribution of Company brand wallcoverings is
accomplished  through  its  Rosedale  subsidiary,  and to a  increasing  extent,
through its Ontario subsidiary.  Wholesale  distribution of other manufacturers'
wallcoverings is accomplished through the Company's Ontario subsidiary.

     The   Company's   Rosedale    subsidiary   has   received   a   number   of
industry-recognized awards. Since 1994, the Rosedale subsidiary has received the
"Estate Award for Excellence in Wallcovering Design" on many separate occasions.
This  award is  presented  by a leading  trade  publication  in  recognition  of
wallcovering  collections that exhibit  outstanding design  characteristics.  In
addition,  Rosedale  has  received  the  "Hot  Line  Elite"  award  on  numerous
occasions,  which is  presented  by another  leading  trade  publication  to the
wallcovering  producer whose  collections have been cited by independent  retail
stores throughout the United States as top sellers. Its largest distributor, The
Blonder Company,  has also named Rosedale  "Supplier of the Year" (most recently
in 1998) despite the fact that its collections  represent only  approximately 5%
of the total  wallcovering  collections  offered by The Blonder  Company in each
year.

     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  2001,   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 2001,  the  Company's
Ontario subsidiary  distributed  approximately 66 non-Company brand wallcovering
collections to approximately 1,500-2,000 home decorating stores in Canada.

     The  Company  believes  that its  product  mix of  wallcoverings,  designer
fabrics and paints,  along with its newer floor  covering,  wooden window blinds
and ceiling tile offerings presents  significant cross marketing  opportunities.
Rosedale  has  introduced  wallcovering  and fabric  sample  books that  include
coordinated carpets and area rugs - a first in the industry.








                                      - 4 -
<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  Rosedale  subsidiary  has a state of the art computer
aided design (CAD) system, with two workstations,  for the creation and coloring
of wallcovering and fabric designs.  The system provides Rosedale's design staff
with the ability to produce a wide variety of designs and color  schemes and has
reduced the time required for producing finished designs.  The Company's Ontario
subsidiary  maintains a design studio and staff in London,  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 Company's  Rosedale and Cambridge  Studios  brands were  established in
1987 and 1993,  respectively,  and are designed  and  marketed by the  Company's
Rosedale   subsidiary.   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 2000 using an outside designer.  Caledon Designs
was  launched  in  2001 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 London, 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.


                                      - 5 -
<PAGE>
     The Company's  various  brands enable the Company to take  advantage of the
changing nature of the North American wholesale distribution business, including
the growth of large  national  distributors  and a trend  towards  consolidation
among smaller regional distributors. Our broad product mix also covers all major
price categories with the market except the low margin,  mass merchant  business
segment.


Decorative Fabrics and Floor Coverings

     As part of the  Company's  growth  strategy,  its Rosedale  subsidiary  has
expanded its product lines to include  coordinated  products,  namely decorative
fabrics,  soft window treatments and floor coverings.  The Company's  decorative
fabric products are sold under the Kingsway  Fabrics brand name and are intended
to be  utilized  by  consumers  for  draperies,  upholstery  and bed  coverings.
Rosedale has expanded its operations into the coordinated  fabric market to take
advantage  of  a  perceived  trend  towards  coordinated  selling  in  the  home
decorating  industry.  These changes affect the way that products are introduced
into the market as well as the nature of consumer buying habits.

     Designer fabrics represent approximately 10% of Rosedale's annual revenues.
Rosedale  designs  and  markets  two  fabric  collections  per  year,  which are
coordinated  with its  wallcovering  collections.  Recently,  Rosedale has added
coordinated  area rugs and runners to  complement  its  wallcovering  and fabric
offerings.

     The  Company  believes  that  offering  a  combination  of   wallcoverings,
decorative fabrics and floor coverings,  provides significant  opportunities for
cross  merchandising  of the  Company's  products.  This,  in turn,  opens other
markets for the Company's  product lines. For example,  by offering  coordinated
lines of  wallcoverings,  fabrics,  and floor  coverings,  consumers  looking to
purchase  wallcoverings  will be exposed to the  Company's  designer  fabric and
floor  covering  lines.  The  Company  believes  that it is now  able  to  offer
consumers complete home decorating packages that are saleable to a wider variety
of retail stores and consumers.


Third Party Manufacturing

     Wallcovering  manufacturers  in the United  Kingdom,  Canada and the United
States manufacture  company brand  wallcoverings for the Company.  The Company's
Rosedale and Cambridge  Studios lines of  wallcoverings  are manufactured in the
United  Kingdom by Imperial Home Decor Group  ("Borden")  and Zen  Wallcoverings
Ltd.  ("Zen"),  and in Canada by Blue Mountain  Wallcoverings  Ltd. 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

     Designer  fabric  collections,  designed  by the Company and sold under the
Kingsway  Fabrics brand name, are  manufactured in the United States and by four
manufacturers oversees.







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


Wholesale Distribution of Wallcoverings Manufactured by Third Parties

     The Company, 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 1999 and will be introduced into the U.S. market
in early 2002. The Ontario subsidiary has also obtained distribution rights to a
new line of Wooden  window  treatments,  which they will begin to  distribute in
early 2002.  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
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.



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

     In the fourth  quarter of 2000,  decorative  hardware and gift  accessories
were added to the product lines  carried by the retail  store.  These lines grew
steadily  during 2001 and  management  believes that further growth in 2002 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.




                                      - 8 -
<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  60% 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 Ridley Nash brands,  Patton  Wallcoverings,
which  distributes   Caledon  Designs  and  Imperial  Home  Decor  Group,  which
distributes 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.

     In 1993,  Rosedale  embarked on the development of a separate  distribution
network of  wholesalers  throughout  North America to distribute  its decorative
fabrics.  The Company designer fabrics are sold by approximately ten independent
salespersons,  who also sell products  produced by other fabric  companies.  The
other fabrics sold by these salespersons  generally do not compete directly with
the Company's  designer fabrics in either look or price points. The salespersons
are compensated on a commission only basis.  The Company does not have contracts
with any of these salespersons.


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.



                                      - 9 -
<PAGE>
     The Company competes primarily within the residential  wallcovering segment
of the home  decorative  industry,  which is a sector of the  building  supplies
industry that caters to the  do-it-yourself  market.  Currently the wallcovering
segment is 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
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, 2001, the Company  employed 71 (66 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 17 warehouse  workers.  The Company has no unionized  employees  and
believes that its relationship with its employees is satisfactory.









                                     - 10 -
<PAGE>
Item 2.  PROPERTIES AND FACILITIES

     The  Company  leases  facilities  in  Concord,  Ontario  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 $30,000 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. $36,000 per annum with the same terms as the other leases.

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  $830,000.  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.

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

     None.


                                     - 11 -
<PAGE>
                                    PART II.


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

     (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, 2001 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

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

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

     The Company has not paid dividends to date.



                                     - 12 -
<PAGE>
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS 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.


          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 2002

     The Company will continue to take appropriate  steps to continue to improve
performance  in 2002.  The  economy  has shown  some  signs of  turning  around,
especially in the U.S. We continue to source  products for  distribution,  which
complement our existing offering. Selling prices on collections launched in 2002
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 2002  will  have on  total  sales  as the  collections
launched  in 2001 and  prior  are  still  generating  sales  without  any  price
increase.   The  retail  prices  for  the  2002   collections   were   increased
approximately 4%, which will relate to a smaller percentage increase on over-all
sales.  A cutting charge for single rolls,  which was  instituted in 2000,  will
continue to generate  revenue and save  man-hours.  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 fair well for
us in 2002. 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 substantial  double-digit growth again in 2002. The retail
operation  has shown  for the  first  seven  months  of 2002 is  showing  an 11%
increase  over the same period of 2001.  We  anticipate  that the growth will be
approximately  15% over last year.  The Rosedale  division  plans to continue to
grow its Kingsway  Fabrics  Division with  penetration into the contract fabrics
market. This market includes hotels, cruise ships and pleasure craft.
<PAGE>
     The  Ontario   division   hired   Malcolm   Cooper  and  Shannon   Jackman,
internationally known designers,  to develop lines for the world market. Ontario
intends to launch five additional  collections in 2002, which could result in an
additional $1.7 - 2 million in sales.  Coupled with the continued success of the
decorative  ceiling panels program and the introduction of the Wood Blind window
treatments, 2002 will have the potential of being a very profitable year for the
Company.

     Expenses  are being  watched  closely,  with  certain  areas being cut. The
Company anticipates continued savings in cost of sample book production.




                                     - 13 -
<PAGE>
     It is  management's  intention to continue to rationalize the efficiency of
the Company's operations and attain increased profitability in 2002.


Results of Operations

     Fiscal year ended  December 31, 2001  compared to the fiscal year  December
31, 2000

     Revenues for the fiscal year ended  December 31, 2001 were  $17,781,160,  a
16.2% decrease over prior year revenues of $21,216,386. This decrease was due to
mainly a slowdown in the U.S.  economy,  which was further impacted by September
11th.  Canada,  whose  economy is closely tied to the U.S.  showed a substantial
decrease in sales, whereas the export market showed a healthy increase. Sales to
the U.S.  decreased by 16.4%.  Sales in Canada decreased by 24.8%.  Export sales
increased by 141.8%. The retail operation in Toronto increased sales by over 43%
in 2001. The Kingsway Fabrics division's sales continue to increase every year.

     Gross  Profit for the Company for the fiscal year ended  December  31, 2001
was 41.0% of sales,  an increase as  compared to the same period  one-year  ago,
which was 38.4%.  This  increase in gross profit margin can be attributed to the
strength of the U.S. dollar and the price increases established in 2001.


     Selling  expenses for the Company  increased by 3.0% to $3,128,846  for the
fiscal year endedDecember 31, 2001 as compared to $3,036,650 for the fiscal year
ended  December  31, 2000.  A bin expense was  incurred in 2000,  when  Rosedale
Wallcoverings  entered into a  three-year  agreement  with  Sherwin  Williams 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.
Rosedale was  required to buy the bin space,  with the expense  being  allocated
over eighteen months. This has been totally accounted for by the end of 2001.

     General and  administrative  expenses for the Company increased by 3.8%, to
$2,769,075 for the fiscal year ended  December 31, 2001 from  $2,667,969 for the
fiscal  year ended  December  31,  2000.  This  increase is  attributable  to an
increase in the provision for doubtful accounts relating to one customer who has
not been able to maintain the payment schedule anticipated. 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 1999 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  produced revenue
for the fiscal year ended December 31, 2001 of $22,164  compared to $299,785 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.

<PAGE>
     Design studio expenses for the Company  decreased by 6.2% to for the fiscal
year ended  December 31, 2001, to $700,689  versus  $746,804 for the fiscal year
ended December 31, 2000. This decrease is attributable to a further reduction in
wages and  computer  costs.  Design  costs  are now  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.


                                     - 14 -
<PAGE>
     The operating loss for the fiscal year ended December 31, 2001 was $377,626
compared to an operating profit of $1,042,702 for the fiscal year ended December
31, 2000. This significant turnaround in profitability is attributable mainly to
decreased 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
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 the year.

     Interest expense and bank charges for the Company for the fiscal year ended
December  31, 2001  decreased  $170,156 to $255,914  from  $426,070 for the year
ended December 31, 2000.  This decrease in interest  expense is  attributable to
decreased  interest  rates and the waiving of interest on the loans to directors
for the last two years.

     The exchange loss on foreign  exchange  contracts of $41,992 relates to the
new FASB requirement that the ineffective portion of gain or losses attributable
to cash flow hedges be reported in earnings. As the U.S. dollar has strengthened
dramatically  in 2001,  the  contracts we engaged to protect our margins on U.S.
sales had a negative impact on net income.

     The net loss for the fiscal year ended  December 31, 2001 was $889,464,  as
compared to a net profit of  $504,710  for the fiscal  year ended  December  31,
2000.

     The loss per share for the fiscal  year ended  December  31, 2001 was $0.32
compared to a profit per share of $0.18 for the fiscal year ended  December  31,
2000.  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 2001 was 2,757,995 and 2,777,181 for 2000.


Liquidity and Capital Resources

     The  Company had a negative  net change in cash of $626,941  for the fiscal
year ended December 31, 2001.  This was  attributable to paying down of accounts
payable, and capital additions. In addition, the company was able to effectively
manage its inventory resulting in a decrease of $396,842.


     Cash flows used in investing  activities for the fiscal year ended December
31, 2001 were $1,538,320. 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 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 2001.
<PAGE>
     The Company has reviewed their  position on all  guarantees  that they have
issued  and have  determined  that they have no  exposure  on the  contingencies
referred to in the financial  statements.  The Company has also done an in depth
study to review the useful life of our assets and have  determined that there is
no impairment.

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


Item 7.  FINANCIAL STATEMENTS

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


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

     None.

                                     - 15 -
<PAGE>
                                    PART III.


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

Directors and Executive Officers

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

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

         Name                               Age                                 Position
         ------------------------------- ----------- ---------------------------------------------------------------

<S>                                          <C>     <C>
         Alan Fine                           57      Chief Executive Officer and Chairman of the Board
         ------------------------------- ----------- ---------------------------------------------------------------

         Sidney Ackerman                     57      President and Director
         ------------------------------- ----------- ---------------------------------------------------------------

         Norman G. Maxwell                   54      Chief Financial Officer and Director
         ------------------------------- ----------- ---------------------------------------------------------------

         Ken Page                            40      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.

     Alan Fine has served as the Chief  Executive  Officer  and  Chairman of the
Board of Directors of the Company since its inception in May 1998. In 1982,  Mr.
Fine  founded  Rosedale  Wallcoverings  &  Fabrics  Inc.  and has  served as the
President of Rosedale Wallcovering & Fabrics, Inc. since 1987. Mr. Fine has also
served as the Secretary for Ontario Paint & Wallpaper Ltd. since 1978. From 1972
to 1977 Mr. Fine was the Manager of Wallpaper  Distribution  for Ontario Paint &
Wallpaper Ltd.

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

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

     Ken Page has been a Director of the Company since June 1999. Since 1992 Mr.
Page  has  been a  partner  of the law firm of Page  Hill 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.

                                     - 16 -
<PAGE>
Committees of the Board of Directors

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

     The  Compensation  Committee  presently  consists  of,  Ken  Page  and  Sid
Ackerman.  Mr. Page is an independent  director who is not a salaried officer 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 and Alan Fine. 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  has paid  compensation  to one  director  for  acting in such
capacity.  Ken Page received $1,000 Cdn ($645 U.S.) for one meeting  attended in
2001.

     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  to be 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 2001,  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 2001, failed to file on a timely
basis reports required by Section 16(a) of the Securities Exchange Act of 1934.

                                     - 17 -
<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.

                           Summary Compensation Table
<TABLE>
<CAPTION>


                                                                                  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        2001     $ 198,528     $2,317       ----        ----         ----       ----      ----
                  Executive    2000     $ 207,043     $5,518       ----        ----         ----       ----      ----
                  Officer      1999     $ 161,529     $9,541       ----        ----       25,000       ----      ----

Sidney            President    2001     $ 198,528     $ 4,896      ----        ----         ----       ----      ----
Ackerman(1)                    2000     $ 207,043     $ 8,463      ----        ----         ----       ----      ----
                               1999     $ 161,529     $18,245      ----        ----       25,000       ----      ----
----------------- ---------- ---------- ----------- ------------ ---------- ----------- ------------ --------- ----------
</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 2001,  ($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 during the fiscal year.

     No stock  options were granted  during the fiscal year ending  December 31,
2001.

     The  following  table shows the value at December  31, 2001 of  unexercised
options held by the named executive officers:

   Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-end Option
Values
<TABLE>
<CAPTION>

                                                                       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>

                                     - 18 -
<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 is retained as Chief Executive  Officer of the Company at an
annual  salary of  $205,000.  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, 2000. The board unanimously approved the increase.

     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.

                                     - 19 -
<PAGE>
     The 1998 Plan is for a period  for ten  years.  Options  may be  granted to
officers,  directors,  consultants, key employees,  advisors and similar parties
who provide their skills and expertise to the Company. Options granted under the
1998 Plan may be exercisable for up to ten years, may require vesting, and shall
be at an  exercise  price  all as  determined  by the  board.  Options  will  be
non-transferable  except to an  option  holder's  personal  holding  company  or
registered  retirement  savings  plan  and  will  be  exercisable  only  by  the
participant during his or her lifetime.

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

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

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

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

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

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

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

                                     - 20 -

<PAGE>
     On December 31, 2000, the compensation  committee reduced the stock options
granted to the two executive officers from 125,750 to 25,000 each.

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


Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Principal Stockholders

     The following table sets forth certain  information,  as of the date hereof
by the Company with respect to the  beneficial  ownership of the Common Stock by
each beneficial owner of more than 5% of the outstanding shares thereof, by each
director,  each  nominee to become a director  and each  executive  named in the
Summary Compensation Table and by all executive officers, directors and nominees
to become directors of the Company as a group.
<TABLE>
<CAPTION>
-------------------------------------------------------------- ------------------- --------------------------

                                                                Shares of Common
                                                               Stock Beneficially   Approximate Percentage
                                                                     Owned              of Common Stock
Name                                                                                      Outstanding
-------------------------------------------------------------- ------------------- --------------------------
<S>            <C>                                               <C>                    <C>
Sidney Ackerman(2)                                               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.



                                     - 21 -
<PAGE>
     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, 2001, 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
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, 2001, 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 2001.




                                     - 22 -
<PAGE>
     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 $15,495  per  annum,  plus  general
property taxes, payable in equal monthly installments of $1,291 for the property
leased from 1216748  Ontario Inc.  The lease for 966578  Ontario Inc.  calls for
rental payments in the amount of $18,835 per annum plus general  property taxes,
payable in equal monthly  installments of $1,570.  The lease for 1369597 Ontario
Inc.  calls for rental  payments in the amount of $23,242 per annum plus general
property taxes,  payable in equal monthly installments of $1,937. 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 $162,464 and
$147,356, 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 $6,793,000,
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
$534,000,  assignment  of life  insurance of  $1,883,000 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.

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           Certifications

         ________________
                  * Previously filed.
         *


                                     - 23 -
<PAGE>
     (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.

























                                     - 24 -
<PAGE>
                                   SIGNATURES

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

                                          ROSEDALE  DECORATIVE PRODUCTS LTD.

                                           By:  /s/Alan Fine
                                                   Alan Fine, Chairman and Chief
                                                   Executive Officer

                                          Date: January 10, 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/ ALAN FINE                               Chairman, Chief Executive Officer   January 10, 2003
Alan Fine

/s/ SIDNEY ACKERMAN                         President Director                  January 10, 2003
Sidney Ackerman

/s/ NORMAN G. MAXWELL                       Director, Chief Financial Officer,  January 10, 2003
Norman G. Maxwell                           Principal Accounting Officer

/s/ KEN PAGE                                Director                            January 10, 2003
Ken Page
</TABLE>

<PAGE>

                                 CERTIFICATIONS

     I, Alan Fine,  Chief  Executive  Officer of Rosedale  Decorative  Products,
Ltd., certify that:

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

     2. Based on my knowledge, this quarterly 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 we 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  quarterly   report  our   conclusions   about  the
effectiveness of the disclosure  controls and procedures based on our evaluation
as pf 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 function); 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.

     Date:  January 10, 2003                     /s/ Alan Fine
                                                     Alan Fine
                                                     Chief Executive Officer
<PAGE>
                                 CERTIFICATIONS

     I, Norman  Maxwell,  Chief  Financial  Officer,  Secretary and Treasurer of
Rosedale Decorative Products, Ltd., certify that:

     1. I have reviewed this annual report an 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 we 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  quarterly   report  our   conclusions   about  the
effectiveness of the disclosure  controls and procedures based on our evaluation
as pf 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 function);

     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
quarterly  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.

     Date:  January 10, 2003                     /s/ Norman Maxwell
                                                     Norman Maxwell,
                                                     Chief Financial Officer,
                                                     Secretary and Treasurer


<PAGE>
Exhibit 99.1

          Certification Pursuant to 18 U.S.C. Section 1350, As Adopted
            Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002

     I, Alan Fine, Chief Executive Officer of Rosedale  Decorative Products Ltd.
(the "Company"),  certify,  pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, 18 U.S.C. Section 1350, that to the best of my knowledge:

     (1) the Annual  Report on Form  10-QSB of the  Company  for the fiscal year
ended December 31, 2001 (the "Report")  fully complies with the  requirements of
Section 13 (a) or 15 (d) of the Securities  Exchange Act of 1934 (15 U.S.C.  78m
or 78o(d)); and

     (2)  the  information  contained  in the  Report  fairly  presents,  in all
material  respects,  the  financial  condition  and results of operations of the
Company.




Dated: January 10, 2003



                                                    /s/ ALAN FINE
                                                        Alan Fine,
                                                        Chief Executive Officer

          Certification Pursuant to 18 U.S.C. Section 1350, As Adopted
            Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002

     I,  Norman G.  Maxwell,  Chief  Financial  Officer of  Rosedale  Decorative
Products  Ltd.  (the  "Company"),  certifies,  pursuant  to  Section  906 of the
Sarbanes-Oxley  Act of 2002,  18  U.S.C.  Section  1350,  that to the best of my
knowledge:

     (1) the Annual  Report on Form  10-KSB of the  Company  for the fiscal year
ended December 31, 2001 (the "Report")  fully complies with the  requirements of
Section 13 (a) or 15 (d) of the Securities  Exchange Act of 1934 (15 U.S.C.  78m
or 78o(d)); and

     (2)  the  information  contained  in the  Report  fairly  presents,  in all
material  respects,  the  financial  condition  and results of operations of the
Company.




Dated: January 10, 2003



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




<PAGE>
                        ROSEDALE DECORATIVE PRODUCTS LTD.

                   RESTATED CONSOLIDATED FINANCIAL STATEMENTS

                  AS OF DECEMBER 31, 2001 AND DECEMBER 31, 2000

                  TOGETHER WITH REPORT OF INDEPENDENT AUDITORS


















<PAGE>
                        ROSEDALE DECORATIVE PRODUCTS LTD.

                   RESTATED CONSOLIDATED FINANCIAL STATEMENTS

                  AS OF DECEMBER 31, 2001 AND DECEMBER 31, 2000

                  TOGETHER WITH REPORT OF INDEPENDENT AUDITORS


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

<S>                                                                                                          <C>
       Report of Independent Auditors                                                                        1

       Restated Consolidated Balance Sheets as of December 31, 2001 and December 31, 2000                  2 - 3

       Restated Consolidated Statements of Operations for the years ended December 31, 2001,
           December 31, 2000 and December 31, 1999                                                           4

       Restated Consolidated Statements of Cash Flows for the years ended December 31, 2001,
           December 31, 2000 and December 31, 1999                                                         5 - 6

       Restated Consolidated Statements of Changes in Stockholders' Equity for the years ended
           December 31, 2001, December 31, 2000 and December 31, 1999                                        7

       Notes to Restated Consolidated Financial Statements                                                 8 - 26


</TABLE>

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


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





                                               REPORT OF INDEPENDENT AUDITORS


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

We have audited the accompanying restated consolidated balance sheets of
Rosedale Decorative Products Ltd. (incorporated in Canada) as of December 31,
2001 and 2000 and the related restated consolidated statements of operations,
cash flows and changes in stockholders' equity for each of the years ended
December 31, 2001, 2000 and 1999. These restated consolidated financial
statements are the responsibility of the management of Rosedale Decorative
Products Ltd. Our responsibility is to express an opinion on these restated
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 restated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the restated consolidated financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall restated consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the restated consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Rosedale Decorative Products Ltd. as of December 31, 2001 and 2000 and the
results of its operations and its cash flows for each of the years ended
December 31, 2001, 2000 and 1999, in conformity with generally accepted
accounting principles in the United States of America.

The previous auditors' report dated February 11, 2002 has been withdrawn.
The restated consolidated financial statements have been adjusted as described
in note 1.

Since the accompanying restated 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.



                                               /s/ SCHWARTZ LEVITSKY FELDMAN LLP
       Toronto, Ontario                            Schwartz Levitsky Feldman llp
       October 16, 2002                                    Chartered Accountants

<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Restated Consolidated Balance Sheets
As of December 31, 2001 and December 31, 2000
(Amounts expressed in US dollars)
<TABLE>
<CAPTION>
                                                                                      2001               2000

                                                                                        $                  $
                                                                                (restated)          (restated)
                                     ASSETS
       CURRENT ASSETS

<S>                                                                              <C>                 <C>
           Cash                                                                  1,897,453           2,524,394
           Accounts receivable (notes 4 and 9)                                   3,811,530           3,796,829
           Inventory (notes 5 and 9)                                             5,616,597           6,375,981
           Prepaid expenses and sundry assets (note 6)                             368,719             987,573
           Income taxes recoverable                                                 41,858              34,742
                                                                                ----------          ----------

                                                                                11,736,157          13,719,519

       MORTGAGES RECEIVABLE (note 7)                                               309,820             329,096

       PROPERTY, PLANT AND EQUIPMENT (note 8)                                    3,675,749           3,437,929
                                                                                ----------          ----------














                                                                                15,721,726          17,486,544
                                                                                ==========          ==========
</TABLE>
APPROVED ON BEHALF OF THE BOARD

Director

Director

                                                                               2
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Restated Consolidated Balance Sheets
As of December 31, 2001 and December 31, 2000
(Amounts expressed in US dollars)
<TABLE>
<CAPTION>
                                                                                      2001                2000

                                                                                        $                   $
                                                                                (restated)          (restated)
                                   LIABILITIES
       CURRENT LIABILITIES

<S>                                <C>                                           <C>                 <C>
           Bank indebtedness (note 9)                                            4,886,846           4,189,063
           Accounts payable and accrued expenses (note 10)                       4,226,715           4,964,236
           Due to stockholders and directors (note 11)                           1,150,573           1,608,527
                                                                                ----------          ----------

                                                                                10,264,134          10,761,826

       DEFERRED INCOME TAXES                                                       281,140             298,633
                                                                                ----------          ----------

                                                                                10,545,274          11,060,459
                                                                                ----------          ----------

                                                    STOCKHOLDERS' EQUITY

       COMMON STOCK (note 12)                                                    5,029,355           5,038,083

       ADDITIONAL PAID-IN CAPITAL (note 12)                                        142,314             142,314


       ACCUMULATED OTHER COMPREHENSIVE LOSS                                      (509,109)           (157,668)


       RETAINED EARNINGS                                                           513,892           1,403,356
                                                                                ----------          ----------

                                                                                 5,176,452           6,426,085
                                                                                ----------          ----------

                                                                                15,721,726          17,486,544
                                                                                ==========          ==========

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



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

                                                                   2001               2000                1999

                                                                     $                  $                   $
                                                             (restated)           (restated)        (restated)

<S>                                                          <C>                <C>                 <C>
       SALES                                                 17,781,160         21,216,386          16,908,400

       COST OF SALES                                         10,495,673         13,066,808          11,179,513
                                                             ----------         ----------          ----------

       GROSS PROFIT                                           7,285,487          8,149,578           5,728,887
                                                             ----------         ----------          ----------

       OPERATING EXPENSES

           General and administrative                         2,769,075          2,667,969           2,749,065
           Selling                                            3,128,846          3,036,650           2,496,841
           Design studio                                        700,689            746,804             858,821
           Book development costs (recovered)                  (22,164)          (299,785)             112,684
           Amortization                                       1,086,667            955,238             815,374
                                                             ----------         ----------          ----------

       TOTAL OPERATING EXPENSES                               7,663,113          7,106,876           7,032,785
                                                             ----------         ----------          ----------

       OPERATING INCOME (LOSS)                                (377,626)          1,042,702         (1,303,898)

           Cancellation of foreign exchange
              contracts (note 13)                               214,668                 -                   -
           Interest expense                                     255,914            426,070             265,990
           Exchange loss on foreign exchange
              contracts                                          41,992                 -                   -
                                                             ----------         ----------          ----------

       INCOME (LOSS) BEFORE INCOME TAXES                      (890,200)            616,632         (1,569,888)

           Income taxes (recovery) (note 14)                      (736)            111,922             140,719
                                                             ----------         ----------          ----------

       NET INCOME (LOSS)                                      (889,464)            504,710         (1,710,607)
                                                             ==========         ==========          ==========

       Net earnings (loss) per common share,
           basic and diluted (note 16)                           (0.32)               0.18              (0.62)
                                                             ==========         ==========          ==========

       Weighted average number of common
           shares outstanding                                 2,757,995          2,777,181           2,769,997
                                                             ==========         ==========          ==========


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



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

                                                                2001               2000               1999

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

<S>                                                           <C>                  <C>             <C>
           Net income (loss)                                  (889,464)            504,710         (1,710,607)
                                                             ----------         ----------          ----------

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

           Amortization of property, plant
                and equipment                                 1,086,667            955,238            815,374
           Exchange loss on foreign exchange contracts           41,992                 -                  -
           (Increase) decrease in accounts receivable          (243,825)          (586,066)           568,201
           Decrease in inventory                                396,842            739,648            286,443
           (Increase) decrease in prepaid expenses
               and sundry assets                                576,907           (603,943)          (243,091)
           Decrease in deferred policy costs                         -                  -             277,090
           Increase (decrease) in accounts payable
              and accrued expenses                             (501,390)          (128,480)           410,952
           (Increase) decrease in income taxes
              recoverable                                        (9,410)            58,047            (53,110)
           Increase in deferred income taxes                         -              87,800             51,824
                                                             ----------         ----------          ----------

           Total adjustments                                  1,347,783            522,244          2,113,683
                                                             ----------         ----------          ----------

           Net cash provided by operating
               activities                                       458,319          1,026,954            403,076
                                                             ----------         ----------          ----------

       Cash flows from investing activities:

           Purchases of property, plant and
               equipment                                     (1,538,320)        (1,333,203)        (1,424,514)
                                                             ----------         ----------          ----------

           Net cash used in investing activities             (1,538,320)        (1,333,203)        (1,424,514)
                                                             ----------         ----------          ----------

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





                                                                               5
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Restated Consolidated Statements of Cash Flows
For the years ended December 31
(Amounts expressed in US dollars)
<TABLE>
<CAPTION>
                                                                   2001                2000               1999

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

<S>                                                          <C>                <C>                 <C>
            Issuance of common stock                                 -                   -              48,073
            Purchase of treasury stock                           (8,728)           (23,873)                 -
            Proceeds from (repayment of)
              bank indebtedness                                 969,893           (381,318)          1,175,468
            Proceeds from (repayment of) loans from
              stockholders and directors                       (374,041)           109,129            (757,180)
                                                             ----------         ----------          ----------

            Net cash provided by (used in)
              financing activities                              587,124           (296,062)            466,361
                                                             ----------         ----------          ----------

       Effect of foreign currency exchange
           rate changes                                        (134,064)          (114,015)            378,383
                                                             ----------         ----------          ----------

       Net decrease in cash and cash equivalents               (626,941)          (716,326)           (176,694)

       Cash and cash equivalents, beginning of year           2,524,394          3,240,720           3,417,414
                                                             ----------         ----------          ----------

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

       Income taxes paid                                         22,297             50,062             316,810
                                                             ----------         ----------          ----------

       Interest paid                                            287,798            468,354             531,980
                                                             ----------         ----------          ----------
</TABLE>
     The accompanying notes are an integral part of these restated  consolidated
financial statements.



                                                                               6
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Restated 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)
                                                     $              $           $             $                $
                                                                           (restated)    (restated)      (restated)
                                   ---------    -----------     --------   -----------   -----------     ---------
<S>                    <C> <C>     <C>           <C>             <C>        <C>            <C>           <C>
Balance as of December 31, 1998    2,765,000     5,013,883       142,314    2,609,253          --        (336,953)

  Issuance of common stock ....       21,714        48,073          --           --            --            --
      [note 12 (b) (i) (ii)]
  Foreign currency translation          --            --            --           --         413,781       413,781
  Net loss for the year .......         --            --            --     (1,710,607)   (1,710,607)         --
                                   ---------    -----------     --------   -----------   -----------     ---------

Balance as of December 31, 1999    2,786,714     5,061,956       142,314      898,646    (1,296,826)       76,828
                                   =========    ===========     ========   ===========   ===========     =========

  Repurchase for Treasury .....      (22,400)      (23,873)         --           --            --            --
      Stock [note 12 (b) (iii)]
  Foreign currency translation          --            --            --           --        (234,496)     (234,496)
  Net income for the year .....         --            --            --        504,710       504,710          --
                                   ---------    -----------     --------   -----------   -----------     ---------

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

  Repurchase for Treasury .....       (8,800)       (8,728)         --           --            --            --
      Stock [note 12 (b) (iv)]
  Foreign currency translation          --            --            --           --        (351,441)     (351,441)
  Net loss for the year .......         --            --            --       (889,464)     (889,464)         --
                                   ---------    -----------     --------   -----------   -----------     ---------

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

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


                                                                               7
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Restated Consolidated Financial Statements
December 31, 2001 and December 31, 2000
(Amounts expressed in US dollars)




1.       PROPOSED SALE OF SUBSIDIARY AND RESTATMENT 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 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 SEC has 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.

Based on the comments from the SEC and subsequent discussions with the
reviewer, the company has 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                          1999
                                        As                             As                            As
                                        previously                     previously                    previously
                         As restated    reported       As restated     reported       As restated    reported
                         $              $              $               $              $              $

<S>                         <C>            <C>             <C>            <C>            <C>         <C>
     Current assets         11,736,157     12,303,783      13,719,519     14,003,066     14,468,064  14,689,586
     Total assets           15,721,726     16,565,382      17,486,544     18,048,032     17,994,887  18,796,621
     Net earnings (loss)     (889,464)      (565,373)         504,710        292,488    (1,710,607)  (1,528,250)
     Retained earnings         513,892      1,437,473       1,403,356      2,002,846        898,646   1,710,358
     Net earnings (loss)
       per common share         (0.32)         (0.20)            0.18           0.11         (0.62)      (0.55)
</TABLE>

     All applicable notes relating to these adjustments have been restated.





                                                                               8
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Restated Consolidated Financial Statements
December 31, 2001 and December 31, 2000
(Amounts expressed in US dollars)


       2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

           a)   Basis of Presentation

               The  restated  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.

           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.





                                                                               9
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Restated Consolidated Financial Statements
December 31, 2001 and December 31, 2000
(Amounts expressed in US dollars)


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

           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.

           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 SFAS 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.

                                                                              10
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Restated Consolidated Financial Statements
December 31, 2001 and December 31, 2000
(Amounts expressed in US dollars)




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

           k)   Sales

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

           l)   Use of Estimates

               The preparation of financial  statements  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 introduces 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 continued 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,  2001,  due to the wide  variety of
          customers,  markets  and  geographic  areas  to  which  the  company's
          products are sold.




                                                                              11

<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Restated Consolidated Financial Statements
December 31, 2001 and December 31, 2000
(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.

               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 an  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.



                                                                              12
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Restated Consolidated Financial Statements
December 31, 2001 and December 31, 2000
(Amounts expressed in US dollars)



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

           r)   Recently Issued Accounting Standards   (cont'd)

               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.

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


       3.  COMPREHENSIVE INCOME (LOSS)

           The components of comprehensive income are as follows:
<TABLE>
<CAPTION>
                                                                            2001           2000           1999

                                                                              $              $              $
                                                                      (restated)     (restated)     (restated)

<S>                                                                    <C>              <C>        <C>
           NET INCOME (LOSS)                                           (889,464)        504,710    (1,710,607)

           OTHER COMPREHENSIVE INCOME (LOSS)

                Foreign currency translation                           (351,441)       (234,496)      413,781
                                                                     -----------       ---------   -----------

           COMPREHENSIVE INCOME (LOSS)                               (1,240,905)        270,214    (1,296,826)
                                                                     ===========       =========   ===========
</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).







                                                                              13
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Restated Consolidated Financial Statements
December 31, 2001 and December 31, 2000
(Amounts expressed in US dollars)

<TABLE>
<CAPTION>



       4.  ACCOUNTS RECEIVABLE
                                                                                      2001                2000

                                                                                        $                   $
                                                                                (restated)          (restated)

<S>                                                                              <C>                 <C>
           Accounts receivable                                                   4,181,917           4,159,765
           Less:  Allowance for doubtful accounts                                  370,387             362,936
                                                                                -----------         -----------

           Accounts receivable, net                                              3,811,530           3,796,829
                                                                                ===========         ===========

               The  activity  for the  allowance  for  doubtful  accounts  is as
          follows for the years ended December 31:

                                                                                      2001                2000

                                                                                        $                   $
                                                                                 (restated)            (restated)

           Beginning Balance                                                       362,936             436,494
                Provision                                                          296,526              80,779
                Write-off, net of recoveries                                      (289,075)           (154,337)
                                                                                -----------         -----------

           Ending Balance                                                          370,387             362,936
                                                                                ===========         ===========

               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
                                                                                      2001                2000

                                                                                        $                   $
                                                                                  (restated)
           Inventory comprised the following:

                Raw materials                                                      264,038             556,565
                Finished goods                                                   5,352,559           5,819,416
                                                                                -----------         -----------

                                                                                 5,616,597           6,375,981
                                                                                ===========         ===========

                                                                              14
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Restated Consolidated Financial Statements
December 31, 2001 and December 31, 2000
(Amounts expressed in US dollars)




6.       PREPAID EXPENSES AND SUNDRY ASSETS
                                                                                      2001               2000

                                                                                        $                  $
                                                                                (restated)         (restated)

           Prepaid bins                                                                 -             462,778
           Prepaid income taxes [note 18 (a)]                                      225,976            240,037
           Other prepaids and sundry assets                                        142,743            284,758
                                                                                -----------         -----------

                                                                                   368,719            987,573
                                                                                ===========         ===========


       7.  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,
          2003.

                                                                                      2001               2000

                                                                                        $                  $

           1216748 Ontario Inc.                                                    162,464            172,572
           1217576 Ontario Inc.                                                    147,356            156,524
                                                                                -----------         -----------

                                                                                   309,820            329,096
                                                                                ===========         ===========

</TABLE>








                                                                              15
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Restated Consolidated Financial Statements
December 31, 2001 and December 31, 2000
(Amounts expressed in US dollars)


<TABLE>
<CAPTION>


       8.  PROPERTY, PLANT AND EQUIPMENT
                                                                                      2001               2000

                                                                                        $                  $
                                                                                (restated)         (restated)

<S>                                                                                <C>                <C>
           Leasehold improvements                                                  201,576            167,130
           Automobile                                                               40,598             27,854
           Equipment and furniture                                                 309,680            297,603
           Furniture and fixtures                                                  238,741            252,502
           Computer equipment                                                      633,123            594,750
           Cylinders and related design costs                                    5,893,507          5,216,836
                                                                                -----------         -----------

           Cost                                                                  7,317,225          6,556,675
                                                                                -----------         -----------

           Less:  Accumulated amortization

                  Leasehold improvements                                            58,998             34,801
                  Automobile                                                        22,724             19,273
                  Equipment and furniture                                          238,625            238,522
                  Furniture and fixtures                                           207,067            211,539
                  Computer equipment                                               434,614            394,363
                  Cylinders and related design costs                             2,679,448          2,220,248
                                                                                -----------         -----------

                                                                                 3,641,476          3,118,746
                                                                                -----------         -----------

           Net                                                                   3,675,749          3,437,929
                                                                                ===========         ===========

</TABLE>
       9.  BANK INDEBTEDNESS

               The company has  available  credit  facilities up to a maximum of
          $6,793,000  ($10,820,000  Canadian),  which  bear  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  $534,000,
          assignment  of life  insurance of  $1,883,000  on the lives of two key
          officers/ shareholders and assignment of fire insurance.





                                                                              16
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Restated Consolidated Financial Statements
December 31, 2001 and December 31, 2000
(Amounts expressed in US dollars)

<TABLE>
<CAPTION>



       10. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
                                                                                         2001             2000

                                                                                           $                $

           Accounts payable and accrued expenses is comprised
               of the following:

<S>                                                                               <C>              <C>
                Trade payables                                                    4,045,240        4,362,682
                Accrued expenses                                                    181,475          601,554
                                                                                  -----------     -----------

                                                                                  4,226,715        4,964,236
                                                                                  ===========     ===========


       11. 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, 2003.  Interest
          payable on amounts due to directors has been waived.


       12. COMMON STOCK

           a)   Authorized

               An unlimited number of common and preference shares

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

                Issued
                                                                                      2001                2000

                                                                                        $                   $

                2,786,714   Common shares (2000 - 2,786,714)                      5,061,956           5,061,956
                   31,200   Treasury shares (2000 - 22,400)                         (32,601)            (23,873)
                1,265,000   Warrants                                                142,314             142,314
                                                                                  -----------        -----------

                                                                                  5,171,669           5,180,397
                                                                                  ===========        ===========
</TABLE>

           b)   Changes to Issued Share Capital

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




                                                                              17
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Restated Consolidated Financial Statements
December 31, 2001 and December 31, 2000
(Amounts expressed in US dollars)


       12. COMMON STOCK   (cont'd)

           b)   Changes to Issued Share Capital   (cont'd)

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

                    iii)  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.

                    iv) 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.

                    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.


                                                                              18
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Restated Consolidated Financial Statements
December 31, 2001 and December 31, 2000
(Amounts expressed in US dollars)



       12. COMMON STOCK   (cont'd)

           c)   Employee Stock Option Plan   (cont'd)

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

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

                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, 1999                         413,500        336,500           1.00
                Granted                                                       -              -              -
                Exercised                                                     -              -              -
                Expired                                                       -              -              -
                Cancelled                                                201,500      (201,500)           1.00
                                                                        --------      ---------         -------

                Outstanding at December 31, 2000                         615,000        135,000           1.00
                Granted                                                       -              -              -
                Exercised                                                     -              -              -
                Expired                                                       -              -              -
                Cancelled                                                     -              -              -
                                                                        --------      ---------         -------

                Outstanding at December 31, 2001                         615,000        135,000           1.00
                                                                        ========      =========         =======
</TABLE>

                    The  remaining  life of the stock options as of December 31,
               2001 is 7.7 years.

           d)   Purchase Warrants

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

                    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.

                                                                              19
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Restated Consolidated Financial Statements
December 31, 2001 and December 31, 2000
(Amounts expressed in US dollars)




       12. COMMON STOCK   (cont'd)

           d)   Purchase Warrants   (cont'd)

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

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


13.      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.








                                                                              20
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Restated Consolidated Financial Statements
December 31, 2001 and December 31, 2000
(Amounts expressed in US dollars)
<TABLE>
<CAPTION>




       14. INCOME TAXES
                                                                   2001                  2000             1999

                                                                     $                     $                $

<S>                                                               <C>                  <C>              <C>
           a)   Current                                           (736)                24,122           88,895
                Deferred                                             -                 87,800           51,824
                                                            -----------           ------------      -----------

                                                                  (736)               111,922          140,719
                                                            ===========           ============      ===========

           b)   Current income taxes consists of:
                                                                   2001               2000                1999

                                                                     $                  $                   $
                                                             (restated)         (restated)          (restated)
                Amounts calculated at basic Canadian
                    Federal and Provincial Rates              (365,000)            259,000           (675,000)
                Increase (decrease) resulting from:

                Temporary differences                                -             (87,800)            (51,824)
                Part 1.3 large corporation tax                   10,500             17,000              12,500
                Corporate minimum tax                                -               7,500                  -
                Permanent and other difference                   39,000              9,000                  -
                Adjustment to prior year's taxes                     -                  -               79,000
                Change in valuation allowance                   387,764             69,422             724,219
                Losses utilized                                 (73,000)          (250,000)                 -
                                                            -----------           ------------      -----------

                                                                  (736)             24,122              88,895
                                                            ===========           ============      ===========
</TABLE>
           c)       The company has operating losses of approximately $2,491,000
               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:

                                        2002   $  275,000
                                        2004       20,000
                                        2006    1,250,000
                                        2007      247,000
                                        2008      699,000
                                              -----------

                                              $ 2,491,000
                                              ===========


                                                                              21
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Restated Consolidated Financial Statements
December 31, 2001 and December 31, 2000
(Amounts expressed in US dollars)


       15. RELATED PARTY TRANSACTIONS

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

                                                                   2001               2000                1999

                                                                     $                  $                   $

<S>                              <C>                            <C>                        <C>                     <C>
           Mortgage receivable - 1216748 Ontario Inc.           162,464                    172,572                 129,291
           Mortgage receivable - 1217576 Ontario Inc.           147,356                    156,524                 162,619
           Rent paid - 966578 Ontario Inc.                       15,495                      16,159                16,826
           Rent paid - 1216748 Ontario Inc.                      19,369                      16,159                -
           Rent paid - 1369597 Ontario Inc.                      23,242                      18,179                -
</TABLE>

                    See  also  notes  11  and 18 for  additional  related  party
               disclosures.


       16. 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>

                                                                   2001               2000                1999

                                                                     $                  $                   $
<S>                                                           <C>                <C>                 <C>
           Weighted average common
                 stock outstanding assuming dilution          2,757,995          2,777,181           2,769,997
</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.







                                                                              22
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Restated Consolidated Financial Statements
December 31, 2001 and December 31, 2000
(Amounts expressed in US dollars)


       17. SEGMENTED INFORMATION

                    The company has  adopted  FAS No. 131 -  "Disclosures  About
               Segments  of  Enterprise  and Related  Information".  Rosedale is
               engaged primarily in the design,  manufacturing,  marketing,  and
               distribution  and Ontario is engaged  primarily in the  marketing
               and  distribution  of  wallpaper  and  designer  fabrics.   These
               products  are  regarded  as one  segment by the  company.  As the
               company's  reportable  segment  has  been  organized  around  its
               principal  products,  disclosure  of  revenue  by  product is not
               required.

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

                                                                   2001               2000                1999

                                                                     $                  $                   $

<S>                                                          <C>                <C>                  <C>
                United States of America                     10,631,691         12,716,808           9,457,021
                Canada                                        6,052,068          8,045,710           6,655,528
                Other                                         1,097,401            453,868             795,851
                                                            ------------        -----------        ------------

                                                             17,781,160         21,216,386          16,908,400
                                                            ============        ===========        ============
</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>

                                                                   2001               2000                1999

                                                                     $                  $                   $
                                                             (restated)         (restated)          (restated)

<S>                                                           <C>                  <C>               <C>
                United States of America                      (531,827)            302,516           (956,758)
                Canada                                        (302,742)            191,397           (673,334)
                Other                                          (54,895)             10,797            (80,515)
                                                            ------------        -----------        ------------

                                                              (889,464)            504,710         (1,710,607)
                                                            ============        ===========        ============

           b)   The breakdown of identifiable assets by geographic area is as follows:
                                                                                      2001                2000

                                                                                        $                   $
                                                                                (restated)          (restated)

                United States of America                                         4,753,949           1,996,978
                Canada                                                           8,570,286          13,891,875
                Other                                                            2,397,491           1,597,691
                                                                                -----------        ------------

                                                                                15,721,726          17,486,544
                                                                                ===========        ============
</TABLE>

                                                                              23
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Restated Consolidated Financial Statements
December 31, 2001 and December 31, 2000
(Amounts expressed in US dollars)


       17. SEGMENTED INFORMATION   (cont'd)
<TABLE>
<CAPTION>

           c)   Sales to major customers are as follows:
                                                                            2001           2000           1999
                                                                    ------------   -----------    ------------

<S>                                                               <C>                         <C>            <C>
                Sales                                             $    5,346,258  $  7,337,673   $   5,385,915
                                                                    ------------   -----------    ------------

                % of total sales                                             30%            35%             32%
                                                                    ------------   -----------    ------------

                Amounts included in accounts receivable           $    1,413,700  $    918,467  $     649,838
                                                                    ------------   -----------    ------------

           d)   Purchases from major suppliers are as follows:

                                                                            2001           2000           1999
                                                                    ------------   -----------    ------------

                Purchases                                         $    5,958,567  $   4,171,007  $   5,317,789
                                                                    ------------   -----------    ------------

                % of total purchases                                         53%            30%             47%
                                                                    ------------   -----------    ------------

                Amounts included in accounts payable              $    2,402,577  $  1,061,619   $   2,383,245
                                                                    ------------   -----------    ------------
</TABLE>


       18. 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 estimated to be $830,000.  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, 2001,  Rosedale  made payments in respect
               to the above income tax  re-assessments  amounting to $225,976 to
               the Province of Ontario. This amount has been included in prepaid
               expenses and sundry assets.

           b)       The company has guaranteed the mortgages of 1217576  Ontario
               Inc.,  1216748 Ontario Inc. and 966578 Ontario Inc. in the amount
               of $633,000  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, 2001, the  indebtedness  of the
               affiliated companies amounted to $424,000.


                                                                              24
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Restated Consolidated Financial Statements
December 31, 2001 and December 31, 2000
(Amounts expressed in US dollars)




       18. CONTINGENCIES   (cont'd)

           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. in the
               amount of  $1,373,000.  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 $358,000.


       19. COMMITMENTS

           a)       Minimum  payments under operating leases for premises amount
               to approximately  $360,000 per annum,  exclusive of insurance and
               other occupancy  charges.  The future minimum lease payments over
               the next five years are as follows:
<TABLE>
<CAPTION>

                Payable during the following periods:

<S>                                                                                            <C>
                Within one year                                                                $       363,329
                Over one year but not exceeding two years                                              346,550
                Over two years but not exceeding three years                                           295,831
                Over three years but not exceeding four years                                           56,504
                Over four years but not exceeding five years                                            18,835
                                                                                               ----------------

                                                                                               $     1,081,049
                                                                                               ================
           b)       Minimum payments under operating leases for equipment amount
               to  approximately  $7,000 per annum.  The  future  minimum  lease
               payments over the next two years are as follows:

                    Payable during the following periods:

                Within one year                                                                $         6,839
                Over one year but not exceeding two years                                                  888
                                                                                               ----------------

                                                                                               $         7,727
                                                                                               ================

           c)       Minimum  payments under operating leases for vehicles amount
               to  approximately  $34,000 per annum.  The future  minimum  lease
               payments over the next four years are as follows:

                    Payable during the following periods:

                Within one year                                                               $         34,848
                Over one year but not exceeding two years                                               27,239
                Over two years but not exceeding three years                                            23,887
                Over three years but not exceeding four years                                            5,352
                                                                                               ----------------

                                                                                               $        91,326
                                                                                               ================
</TABLE>
                                                                              25
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Restated Consolidated Financial Statements
December 31, 2001 and December 31, 2000
(Amounts expressed in US dollars)




       20. FOREIGN EXCHANGE CONTRACTS

                    As at December 31, 2001, 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 $2,550,000
               (in varying  amounts  from January  through  October  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, 2001.  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, 2001                                        December 31, 2000
                 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                     -             -              -       6,800,000            -      (211,037)
           2002              2,550,000            -        (41,992)             -             -             -

</TABLE>






























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