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

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


                   For the fiscal year ended December 31, 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
56% 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 16% 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 .

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







                                      - 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 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
         ------------------- ---------------- -----------------
         6/30/98                 $7.625            $7.00

         9/30/98                 $9.375            $6.875

         12/31/98                $7.750            $4.562

         3/31/99                 $4.750            $1.750

         6/30/99                 $2.593            $1.000

         9/30/99                 $1.625            $1.000

         12/31/99                $4.000            $1.000

         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. 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. 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. The
retail operation is anticipated to have a substantial double-digit growth again
in 2002. 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.

          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. 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 41.2% 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 ended December 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. In return, 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 decreased by 4.2%,
to $2,555,952 for the fiscal year ended December 31, 2001 from $2,667,969 for
the fiscal year ended December 31, 2000. This decrease relates solely to the
difference in the conversion rate of the U.S. dollar from year to year.

         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 $36,941 compared to
$16,558 for the same period last year.


         Design studio expenses for the Company decreased by 3.5% to for the
fiscal year ended December 31, 2001, to $652,072 versus $675,799 for the fiscal
year ended December 31, 2000. This decrease is attributable to a further
reduction in wages and computer costs.







                                     - 14 -
<PAGE>
         The operating loss for the fiscal year ended December 31, 2001 was
$53,535 compared to an operating profit of $830,480 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 a portion of
their foreign exchange contracts in October 2001, which resulted in a
cancellation fee of $214,668. This was a change in policy by the bank, as they
had allowed the contracts to be rolled forward in the past. 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, 1999. 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 $565,373,
as compared to a net profit of $292,488 for the fiscal year ended December 31,
2000.

         The loss per share for the fiscal year ended December 31, 2001 were
$0.20 compared to a profit per share of $0.11 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 $555,635.

         Cash flows used in investing activities for the fiscal year ended
December 31, 2001 were $1,876,926. 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.


Item 7.  FINANCIAL STATEMENTS

<PAGE>






                        ROSEDALE DECORATIVE PRODUCTS LTD.

                        CONSOLIDATED FINANCIAL STATEMENTS

                  AS OF DECEMBER 31, 2001 AND DECEMBER 31, 2000

                  TOGETHER WITH REPORT OF INDEPENDENT AUDITORS

<PAGE>
                                TABLE OF CONTENTS
<TABLE>
<CAPTION>


<S>                                                                                                          <C>
       Report of Independent Auditors                                                                        1

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

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

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

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

       Notes to Consolidated Financial Statements                                                       8 - 24
</TABLE>


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



                         REPORT OF INDEPENDENT AUDITORS


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

       We have audited the accompanying consolidated balance sheets of Rosedale
       Decorative Products Ltd. (incorporated in Canada) as of December 31, 2001
       and 2000 and the related consolidated statements of operations, cash
       flows and changes in stockholders' equity for each of the years ended
       December 31, 2001, 2000 and 1999. These consolidated financial statements
       are the responsibility of the management of Rosedale Decorative Products
       Ltd. Our responsibility is to express an opinion on these consolidated
       financial statements based on our audits.

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

       In our opinion, the consolidated financial statements referred to above
       present fairly, in all material respects, the financial position of
       Rosedale Decorative Products Ltd. as of December 31, 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.

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




       Toronto, Ontario
       February 11, 2002                                   Chartered Accountants

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


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

                                                                                        $                  $
                                                           ASSETS
       CURRENT ASSETS

<S>                                                                              <C>                 <C>
           Cash                                                                  1,897,453           2,524,394
           Accounts receivable (notes 3 and 9)                                   4,018,712           3,796,829
           Inventory (notes 4 and 9)                                             5,462,180           6,375,981
           Prepaid expenses and sundry assets (note 5)                             883,580           1,271,120
           Income taxes recoverable                                                 41,858              34,742
                                                                                ----------          ----------

                                                                                12,303,783          14,003,066

       DEFERRED PRODUCT COSTS (note 6)                                             559,329             589,786

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

       PROPERTY, PLANT AND EQUIPMENT (note 8)                                    3,392,450           3,126,084
                                                                                ----------          ----------













                                                                                16,565,382          18,048,032
                                                                                ----------          ----------
</TABLE>


       APPROVED ON BEHALF OF THE BOARD

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

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

                                                                               2

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

                                                                                        $                   $
                                                         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
                                                                                ----------          ----------

                                                                                 9,113,561           9,153,299

       DUE TO STOCKHOLDERS AND DIRECTORS (note 11)                               1,150,573           1,608,527

       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                                      (589,034)           (195,670)


       RETAINED EARNINGS                                                         1,437,473           2,002,846
                                                                                ----------          ----------

                                                                                 6,020,108           6,987,573
                                                                                ----------          ----------

                                                                                16,565,382          18,048,032
                                                                                ==========          ==========

</TABLE>

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




                                                                               3
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Consolidated Statements of Operations
For the years ended December 31
(Amounts expressed in US dollars)
<TABLE>
<CAPTION>
                                                                   2001               2000                1999

                                                                     $                  $                   $

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

       COST OF SALES                                         10,448,099         13,066,808          11,179,513
                                                             ----------         ----------          ----------

       GROSS PROFIT                                           7,333,061          8,149,578           5,728,887
                                                             ----------         ----------          ----------

       OPERATING EXPENSES

           General and administrative                         2,555,952          2,667,969           2,749,065
           Selling                                            3,128,846          3,036,650           2,496,841
           Design studio                                        652,072            675,799             791,741
           Book development costs recovered                    (36,941)           (16,558)             (2,593)
           Amortization                                       1,086,667            955,238             815,374
                                                             ----------         ----------          ----------


       TOTAL OPERATING EXPENSES                               7,386,596          7,319,098           6,850,428
                                                             ----------         ----------          ----------

       OPERATING INCOME (LOSS)                                 (53,535)            830,480         (1,121,541)

           Cancellation fee - foreign exchange
              contract (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                      (566,109)            404,410         (1,387,531)

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

       NET INCOME (LOSS)                                      (565,373)            292,488         (1,528,250)
                                                             ----------         ----------          ----------

       Net earnings (loss) per common share,
           basic and diluted (note 16)                           (0.20)               0.11              (0.55)
                                                             ----------         ----------          ----------

       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 consolidated financial
statements.



                                                                               4
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Consolidated Statements of Cash Flows
For the years ended December 31
(Amounts expressed in US dollars)
<TABLE>
<CAPTION>
                                                                   2001               2000               1999

                                                                     $                  $                  $

       Cash flows from operating activities:

<S>                                                           <C>                  <C>            <C>
           Net income (loss)                                  (565,373)            292,488        (1,528,250)
                                                             ----------         ----------        -----------

           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
           Amortization of deferred product costs               323,832            294,954            483,584
           Exchange loss on foreign exchange contracts           41,992                 -                  -
           (Increase) decrease in accounts receivable          (456,879)          (586,066)           568,201
           Decrease in inventory                                555,635            739,648            286,443
           (Increase) decrease in prepaid expenses
               and sundry assets                                321,957           (674,947)          (310,170)
           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                                  1,362,404            746,194          2,530,188
                                                             ----------         ----------        -----------

           Net cash provided by operating
               activities                                       797,031          1,038,682          1,001,938
                                                             ----------         ----------        -----------

       Cash flows from investing activities:

           Purchases of property, plant and
               equipment                                     (1,548,887)        (1,187,768)        (1,283,204)
           Deferred product costs incurred                     (328,039)          (157,164)          (563,271)
                                                             ----------         ----------        -----------

           Net cash used in investing activities             (1,876,926)        (1,344,932)        (1,846,475)
                                                             ----------         ----------        -----------
</TABLE>


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

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

                                                                     $                   $                  $

       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                                            (134,170)           (114,014)           201,482
                                                             ----------          -----------        -----------

       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 consolidated financial
statements.


                                                                               6

<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Consolidated Statements of Changes in Stockholders' Equity
For the years ended December 31
(Amounts expressed in US dollars)
<TABLE>
<CAPTION>

                                    Common                                                              Accumulated
                                     Stock          Common      Additional                                  Other
                                   Number of        Stock        Paid-in    Retained    Comprehensive   Comprehensive
                                     Shares         Amount       Capital    Earnings    Income (loss)   Income (loss)
                                  -----------   -----------     ---------- ----------  --------------- ---------------
                                                      $             $           $               $            $
<S>                                <C>           <C>             <C>        <C>           <C>            <C>
Balance as of December 31, 1998    2,765,000     5,013,883       142,314    3,238,608          --        (388,341)

  Issuance of common stock ....       21,714        48,073          --           --            --            --
      [note 12 (b) (i) (ii)]
  Foreign currency translation          --            --            --           --         455,190       455,190
  Net loss for the year .......         --            --            --     (1,528,250)   (1,528,250)         --
                                  -----------   -----------     ---------- ----------  --------------- ---------------

Balance as of December 31, 1999    2,786,714     5,061,956       142,314    1,710,358    (1,073,060)       66,849
                                  ===========   ===========     ========== ==========  =============== ===============

  Repurchase for Treasury .....      (22,400)      (23,873)         --           --            --            --
      Stock [note 12 (b) (iii)]

  Foreign currency translation          --            --            --           --         262,519)     (262,519)
  Net income for the year .....         --            --            --        292,488       292,488          --
                                  -----------   -----------     ---------- ----------  --------------- ---------------

Balance as of December 31, 2000    2,764,314     5,038,083       142,314    2,002,846        29,969      (195,670)
                                  ===========   ===========     ========== ==========  =============== ===============

  Repurchase for Treasury .....       (8,800)       (8,728)         --           --            --            --
      Stock [note 12 (b) (iv)]
  Foreign currency translation          --            --            --           --        (393,364)      393,364)
  Net loss for the year .......         --            --            --       (565,373)     (565,373)         --
                                  -----------   -----------     ---------- ----------  --------------- ---------------

Balance as of December 31, 2001    2,755,514     5,029,355       142,314    1,437,473      (958,737)     (589,034)
                                  ===========   ===========     ========== ==========  =============== ===============
</TABLE>


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

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




       1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

           a)   Basis of Presentation

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

                (i) Book Development Costs

                  Expenditures relating to the design and distribution of
                  wallpaper and fabric sample books consisting of book
                  development and design costs relating to collections that have
                  not been launched are deferred and amortized over a period of
                  up to five years on a straight-line basis. Proceeds from the
                  sale of sample books to distributors are offset against the
                  book development costs when received.

                (ii) Book Subsidy

                   Sales of completed sample books to retailers are sold at a
                   discount. This discount is deferred and amortized over a
                   period of up to four years on a straight-line basis.

           d)   Cash and Cash Equivalents (Bank Indebtedness)

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

           e)   Other Financial Instruments

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

           f)   Long-term Financial Instruments

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

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




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

           g)   Inventory

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

           h)   Property, Plant and Equipment

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

<TABLE>
<CAPTION>

<S>                                                           <C>                            <C>
                Leasehold improvements                        10%                            Straight-line
                Automobile                                    30%                            Declining balance
                Equipment, furniture and fixtures             20%                            Declining balance
                Computer equipment                            30% and 20%                    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.

           i)   Income taxes

                The company account 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.

           j)   Foreign Currency Translation

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

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

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




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

           k)   Earnings or Loss Per Share

                The company adopted FAS No.128, "Earnings per Share" during
                fiscal 1998, which requires disclosure on the financial
                statements of "basic" and "diluted" earnings (loss) per share.
                Basic earnings (loss) per share is computed by dividing net
                income (loss) by the weighted average number of common shares
                outstanding for the year. Diluted earnings (loss) per share is
                computed by dividing net income (loss) by the weighted average
                number of common shares outstanding plus common stock
                equivalents (if dilutive) related to stock options and warrants
                for each year.

           l)   Sales

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

           m)   Use of Estimates

                The preparation of financial statements requires management to
                make estimates and assumptions that affect 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.

           n)   Long-Lived Assets

                The company adopted the provisions of FAS No. 121, Accounting
                for the Impairment of Long-Lived Assets and for Long-Lived
                Assets to be Disposed of. which has been superceded by FAS No.
                144 [note 1 (s)] FAS No. 121 requires that long-lived assets to
                be held and used by an entity be reviewed for impairment
                whenever events or changes in circumstances indicate that the
                carrying amount of an asset may not be recoverable. Management
                used its best estimate of the undiscounted cash flows to
                evaluate the carrying amount and have determined that no
                impairment has occurred.

           o)   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.

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




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

           p)   Concentrations of Credit Risks

                The company's receivable are unsecured and are generally due in
                30 days. Currently, the company's customers are primarily local,
                national and international users of wallpapers and decorative
                fabrics. The company's receivables do not represent significant
                concentrations of credit risk as at December 31, 2001, due to
                the wide variety of customers, markets and geographic areas to
                which the company's products are sold.

           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.


           r)   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.

           s)   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.

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

                                                                              11
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2001 and December 31, 2000
(Amounts expressed in US dollars)




       2.  COMPREHENSIVE INCOME (LOSS)

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


                                                                            2001           2000           1999

                                                                              $              $              $

<S>                                                                    <C>              <C>        <C>
           NET INCOME (LOSS)                                           (565,373)        292,488    (1,528,250)

           OTHER COMPREHENSIVE INCOME (LOSS)

                Foreign currency translation                           (393,364)       (262,519)      455,190
                                                                       ----------      ---------   -------------

           COMPREHENSIVE INCOME (LOSS)                                 (958,737)         29,969    (1,073,060)
                                                                       ==========      =========   =============
</TABLE>

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


       3.  ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
                                                                                      2001                2000

                                                                                        $                   $

<S>                                                                              <C>                 <C>
           Accounts receivable                                                   4,181,917           4,159,765
           Less:  Allowance for doubtful accounts                                  163,205             362,936
                                                                                ----------           ---------

           Accounts receivable, net                                              4,018,712           3,796,829
                                                                                ==========           =========
</TABLE>
                                                                              12
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Consolidated Financial Statements
December 31, 2001 and December 31, 2000
(Amounts expressed in US dollars)
<TABLE>
<CAPTION>




       4.  INVENTORY
                                                                                      2001                2000

                                                                                        $                   $
           Inventory comprised the following:

<S>                                                                                <C>                <C>
                Raw materials                                                      264,038            556,565
                Finished goods                                                   5,198,142          5,819,416
                                                                                ----------          ---------

                                                                                 5,462,180          6,375,981
                                                                                ==========          =========


        5. PREPAID EXPENSES AND SUNDRY ASSETS
                                                                                      2001               2000

                                                                                        $                  $

           Prepaid bins                                                                 -             462,778
           Prepaid income taxes [note 18 (a)]                                      225,976            240,037
           Other prepaids and sundry assets                                        657,604            568,305
                                                                                ----------          ---------

                                                                                   883,580          1,271,120
                                                                                ==========          =========


       6.  DEFERRED PRODUCT COSTS
                                                                                      2001               2000

                                                                                        $                  $

           Book development costs                                                1,523,073          1,278,994

           Less:  Accumulated amortization                                         963,744            689,208
                                                                                ----------          ---------

           Net Deferred Product Costs                                              559,329            589,786
                                                                                ==========          =========
</TABLE>

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




       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.
<TABLE>
<CAPTION>


                                                                                      2001               2000

                                                                                        $                  $

<S>        <C>                                                                     <C>                <C>
           1216748 Ontario Inc.                                                    162,464            172,572
           1217576 Ontario Inc.                                                    147,356            156,524
                                                                                ----------          ---------

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

       8.  PROPERTY, PLANT AND EQUIPMENT
                                                                                      2001               2000

                                                                                        $                  $

           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                                    5,362,942          4,745,800
                                                                                ----------          ---------

           Cost                                                                  6,786,660          6,085,639
                                                                                ----------          ---------

           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                             2,432,182          2,061,057
                                                                                ----------          ---------

                                                                                 3,394,210          2,959,555
                                                                                ----------          ---------

           Net                                                                   3,392,450          3,126,084
                                                                                ==========          =========

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




       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.


       10. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
<TABLE>
<CAPTION>
                                                                                         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
                                                                                   ==========        =========

</TABLE>

       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
<TABLE>
<CAPTION>
                                                                                      2001                2000

                                                                                        $                   $

<S>             <C>                       <C>     <C>                            <C>                 <C>
                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>

                                                                              15

<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to 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

                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.

                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 has 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.

                                                                              16

<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to 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)

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

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

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

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

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

                                                                              17

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




       12. COMMON STOCK (cont'd)

           d)   Purchase Warrants

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

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

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

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


13.      CANCELLATION FEE - FOREIGN EXCHANGE CONTRACT

           During the year, the company's bankers cancelled a foreign exchange
           contract to hedge against fluctuations in the U.S. dollar which
           resulted in an expense of $214,668. The purpose of the contract was
           to hedge any exposure to the risk that the eventual dollar net cash
           inflows resulting from the sale and purchase of products in foreign
           currencies would not be adversely affected by changes in exchange
           rates. This resulted from a change in the bank's policies as the
           company was allowed to roll forward these contracts in the past.

                                                                              18

<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to 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

                                                                     $                  $                   $
                Amounts calculated at basic Canadian

                    Federal and Provincial Rates              (238,000)            214,719            (619,000)
                Increase (decrease) resulting from:

                Temporary differences                                -             (87,800)            (51,824)
                Part 1.3 large corporation tax                    4,500             16,716              12,500
                Corporate minimum tax                                -               7,406                  -
                Non-deductible expenses                          24,000              8,753                  -
                Adjustment to prior year's taxes                     -                  -               79,000
                Losses utilized                                      -            (135,672)                  -
                Losses carried forward                          208,764                 -              668,219
                                                              ---------           ---------           ---------

                                                                  (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:
<TABLE>
<CAPTION>

<S>        <C>                                                                                   <C>
           2002                                                                                  $     275,000
           2004                                                                                         20,000
           2006                                                                                      1,250,000
           2007                                                                                        247,000
           2008                                                                                        699,000
                                                                                                 -------------
                                                                                                 $   2,491,000
                                                                                                 =============
</TABLE>
                                                                              19

<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to 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.           162,463                    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>

       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          2,771,181           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.

                                                                              20

<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to 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
                                                             ==========         ==========          ==========

                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.

                                                                   2001               2000                1999

                                                                     $                  $                   $

                United States of America                      (388,047)            175,313           (854,764)
                Canada                                        (192,433)            110,918           (601,554)
                Other                                          (34,893)              6,257            (71,932)
                                                              ---------         ----------           ---------

                                                              (565,373)            292,488         (1,528,250)
                                                             ==========         ==========          ==========

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

                                                                                      2001                2000

                                                                                        $                   $

                United States of America                                         4,753,949           1,996,978
                Canada                                                           9,413,942          14,453,363
                Other                                                            2,397,491           1,597,691
                                                                                ----------           ---------

                                                                                16,565,382          18,048,032
                                                                                ==========          ==========
</TABLE>

                                                                              21
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to 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  $     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 indebtedness of affiliated
                companies in the amount of $633,000 through general security
                agreements ranking behind the National Bank of Canada. As at
                December 31, 2001, the indebtedness of the affiliated companies
                amounted to $424,000.


           c)   The company has issued guarantees secured by general security
                agreements for the loans made by the Laurentian Bank of Canada
                to two affiliated holding companies in the amount of $1,373,000.

           d)   The company has issued standby letters of credit in favour of
                the Laurentian Bank of Canada in the amount of $358,000.

                                                                              22

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



<TABLE>
<CAPTION>

       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:

                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>
                                                                              23
<PAGE>
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to 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>

       21  COMPARATIVE FIGURES

           Certain figures in the 2000 and 1999 consolidated financial
           statements have been reclassified to conform with the basis of
           presentation used in 2001.











                                                                              24
<PAGE>

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                           56      Chief Executive Officer and Chairman of the Board

         Sidney Ackerman                     56      President and Director

         Norman G. Maxwell                   54      Chief Financial Officer and Director

         Ken Page                            39      Director

         Gregory Sichenzia                   39      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>
         Gregory Sichenzia has been a Director of the Company since August 1999.
Mr. Sichenzia is a partner of the law firm of Sichenzia Ross Friedman Ference
LLP in New York, New York and has been since May 1999. Prior to that he was a
partner of Singer Zamansky LLP in New York, New York, since November 1996. Prior
to that, and since August 1994, he had been an associate attorney at Schneck
Waeltman Hashmall & Mischel LLP in New York City.


Committees of the Board of Directors

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

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

         The Audit Committee consists of Gregory Sichenzia, 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.

         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 May 2002.
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.
<TABLE>
<CAPTION>

                                                      Summary Compensation Table


                                                                                  Long-Term Compensation

                                                                               Awards                  Payouts

                                                                                        Securities             All
                                                                            Restricted  Underlying             Other
                                                       Other                Stock        Options/    LTIP      Compen-sation
                                                    Compen-sation           Award(s)       SARs      Payouts       ($)
Name              Position   Year (1)     Salary                   Bonus       ($)       (#)(1)(2)     ($)

<S>               <C>          <C>      <C>           <C>          <C>         <C>        <C>          <C>      <C>
Alan Fine(1)      Chief        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:
<TABLE>
<CAPTION>

                           Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-end Option Values

                                                                       Number of securities         Value of unexercised
                                                                      underlying unexercised       in-the-money options at
                                                                        options at fiscal            fiscal year-end ($)
                                                                           year-end (#)

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

<S>                                   <C>                 <C>                <C>    <C>                     <C>
Alan Fine, Chief Executive            0                   0                  25,000/0                       $0/0
Officer

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

                                     - 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
<TABLE>
<CAPTION>

             <S>           <C>
             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*
</TABLE>
        ----------------
                  * 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: March 28, 2002

         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   March 28, 2002
----------------------------------
Alan Fine

/s/ SIDNEY ACKERMAN                         President Director                  March 28, 2002
-----------------------
Sidney Ackerman

/s/ NORMAN G. MAXWELL                       Director, Chief Financial Officer,  March 28, 2002
---------------------                       Principal Accounting Officer
Norman G. Maxwell

/s/ KEN PAGE                                Director                            March 28, 2002
-------------------------------------
Ken Page

/s/ GREGORY SICHENZIA                       Director                            March 28, 2002
------------------------
Gregory Sichenzia




</TABLE>