SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C.  20549

                              REPORT ON FORM 10-KSB

         [X]   Annual Report  pursuant to Section 13 or 15(d) of the  Securities
               Exchange Act of 1934

               For the fiscal year ended March 31, 1999.


                           Commission File No. 0-28960

                                DECOR GROUP, INC.
                        (Exact name of registrant as specified in its charter)

             Delaware                                     13-3911958
         (State of or other jurisdiction       (IRS Employer Identification No.)
         of incorporation or organization)

         320 Washington Street
         Mt. Vernon, New York                            10553
         (Address of Principal Executive Offices)     (Zip Code)

Registrant's telephone number, including area code: (914) 665-5400

Securities registered pursuant to Section 12(b) of the Act:  None.

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

                   Common Stock, par value $.0001 per share
                               (Title of Class)

               Redeemable Class A Common Stock Purchase Warrants
                               (Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by  Sections  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 the Regulation  S-B is not contained in this form, and no disclosure  will 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. [ X]

Issuer's revenues for its most recent fiscal year were $4,943,837

The  aggregate  market value of the voting stock held by non-  affiliates of the
Registrant,  computed by reference to the closing price of such stock as of June
22, 1999, was approximately $753,000.

Number of shares  outstanding of the Issuer's  Common Stock as of June 22, 1999,
was 2,009,166 shares.

                      DOCUMENTS INCORPORATED BY REFERENCE:


             Registrant's definitive proxy statement to be filed.


<PAGE>



                                     PART I

Item 1.  BUSINESS.

         This Annual Report on Form 10-KSB and the documents incorporated herein
by reference of Decor Group, Inc. contain  forward-looking  statements that have
been made pursuant to the provisions of the Private Securities Litigation Reform
Act of 1995. Such forward-looking  statements are based on current expectations,
estimates and projections  about the Company's  industry , management's  beliefs
and  certain  assumptions  made  by the  Company's  management.  Words  such  as
"anticipates,"  "expects," "intends," "plans," "believes," "seeks," "estimates,"
or  variations of such words and similar  expressions,  are intended to identify
such forward-looking  statements.  These statements are not guarantees of future
performance and are subject to certain risks, uncertainties and assumptions that
are difficult to predict.  Therefore,  actual results may differ materially from
those expressed or forecasted in any such forward- looking statements. Investors
are cautioned not to place undue reliance on these  forward-looking  statements,
which reflects management's analysis only as of the date hereof.

         Decor Group,  Inc., a Delaware  corporation (the "Company" or "Decor"),
was incorporated in March 1996 and formed Artisan  Acquisition  Corporation as a
Delaware  corporation wholly owned by the Company ("AAC").  AAC was incorporated
for the purpose of entering into that certain  Asset  Purchase  Agreement  dated
March 1996 with Artisan  House,  Inc.  ("Artisan  House")  pursuant to which AAC
agreed to purchase  substantially  all of the  operating  assets,  and to assume
certain  liabilities,  of Artisan House. In November 1996 immediately  following
the closing of the initial public offering of the Company's securities,  AAC and
Artisan  House closed on the  transactions  contemplated  by the Asset  Purchase
Agreement  (the "Artisan House  Acquisition").  In January 1997, AAC changed its
name to Artisan House, Inc. ("AHI").

         As a result of the Artisan House Acquisition, the Company, through AHI,
is engaged in  designing,  manufacturing  and  marketing of metal  wall-mounted,
tabletop  and  freestanding  sculptures.  The primary goal of AHI is to supply a
broad spectrum of design driven sculpture and decorative accessories at moderate
prices.  AHI markets its products through a network of independent  commissioned
sales  representatives,  as  well as  through  strategically  located  showrooms
servicing the home furnishing and decorative accessory industries. AHI maintains
showrooms located in High Point, North Carolina and San Francisco, California.

         Typical  customers  of AHI  include  fine  furniture  stores,  interior
decorators,  Sears and Montgomery Wards,  large furniture chains such as Wickes,
and  catalogue  houses such as  Parke-Bell.  For the fiscal year ended March 31,
1999, sales to Sears,  Montgomery Wards, Parke-Bell and Wickes represented 7.3%,
7.2%, 7.2% and 2.3% respectively, of AHI's total sales.

         The Company believes that the home furnishing and decorative  accessory
supply industry will  consolidate as major  retailers  attempt to increase their
"single-sourcing"   in  order  to  reduce  distribution  and  related  expenses.
Initially, the Company's objective was to capitalize on the fragmented nature of
the supply side of the home decorative  accessory industry and the consolidation
of such industry by acquiring  manufacturers  and  distributors  of  art-related
decorative accessories.  The Company still believes this is the preferred way to
proceed in the industry as a whole,  but believes this can best be  accomplished
by merging the Company with and into  Interiors,  Inc., an  affiliated  Delaware
corporation   ("Interiors")  with  Interiors  remaining  as  the  survivor  (the
"Merger").  To accomplish that goal the Company began discussions with Interiors
in the fall of 1997 that resulted in both  companies  entering into an agreement
and plan of merger  dated April 20, 1998 as amended on April 21, 1998  (together
"the  Merger  Agreement")  pursuant to which  Interiors  will offer .5 shares of
Interiors  Class A common  stock for each share of common  stock of the Company.
The  Company's  classes  of  convertible  preferred  stock will be treated as if
converted  to common  stock of the  Company in  accordance  with their  terms of
conversion;  provided,  however, that the 20,000,000 shares of Class B Preferred
Stock of the Company owned by Interiors will be cancelled  without  exchange and
without  any other  consideration  at the  closing  of the  Merger.  The  Merger
requires  approval  of the  stockholders  of the  Company,  and the  Company  is
cooperating  with Interiors in the  preparation  of a Registration  Statement on
Form S-4 to be distributed to the Company's  stockholders  in connection  with a
special  meeting of  stockholders  not yet scheduled.  There can be no assurance
that the Merger  will be  completed  and that the  Company  will  recognize  the
anticipated  benefits that will flow  therefrom.  Within the terms of the merger
agreement, the period for

                                        1

<PAGE>



effecting  the  contemplated  merger has  expired,  however,  the parties are in
continuing discussions with respect to the proposed merger.

         On November 18, 1996, the Company  completed an initial public offering
(the "IPO") pursuant to which the Company sold 345,000 shares of Common Stock to
the public at $10 per share.  The proceeds  from the IPO were used  primarily to
close on the Artisan House Acquisition and to repay certain  indebtedness of the
Company.  The  Company's  shares of Common  Stock trade on the NASD OTC Bulletin
Board and on June 22,  1999 the  closing  bid price for the shares was $.375 per
share.

        On May 6, 1997 the Company  filed an  application  with The Nasdaq Stock
Market,  Inc.  for initial  listing of the  Company's  Common  Stock and Class A
Common Stock Purchase Warrants. The Company's application has been withdrawn.

         The Company's  executive offices are located at 320 Washington  Street,
Mt.  Vernon,  New York  10553,  and the offices of AHI are located at 14625 East
Clark Street, City of Industry, California 91745.

Manufacturing

         AHI  manufactures  substantially  all of its  sculptures and decorative
pieces at its facility in City of  Industry,  California.  Virtually  all of the
products are made of assorted metals, such as brass,  bronze, steel and aluminum
which are then formed and hand finished.  Manufacturing  operations  include the
use of customized  proprietary metal  fabrication  equipment and tools, jigs and
dies  especially  created for AHI.  Production  also includes  finishing,  which
involves  hand  painting  and  toning,   and  a  finishing  process  which  uses
proprietary  techniques which AHI believes substantially improves the appearance
of the product.

         AHI maintains an inventory of various  metal such as brass,  bronze and
stainless  steel and other  materials  for use in its  manufacturing  processes.
AHI's tool and die inventory  allows for the  manufacturing  of a broad range of
designs.  These tools can be used to produce  hundreds  of styles of  decorative
wall sculptures.

         No  single  outside  manufacturer  supplies  more than 10% of AHI's raw
materials  except  McDonald  Packaging  which  supplies  12.7%  (packaging)  and
Industrias Montoya which supplies 18.4% (raw components) and AHI's management is
not aware at this time of any product or  manufacturer  which AHI cannot replace
with a comparable product from an alternative manufacturer.

Products

         AHI's products  include metal  wall-mounted,  tabletop and freestanding
sculpture.  AHI's product styles range from  contemporary to neoclassical,  from
Americana  to  transitional.  AHI also  manufactures  products  based on popular
themes  such as  sports,  music and  nostalgia.  In  addition,  AHI has  several
licensing  programs  pursuant  to which AHI  produces  sculptures  with  designs
derived  from the popular  1940's  movie  entitled,  "Casablanca,"  RCA's Little
Nipper,  and Warner  Bros.  Looney  Tunes  characters.  In total,  AHI  produces
hundreds of different styles within its product line.

License Agreements

         AHI currently manufacturers products pursuant to license agreements for
(i) the cartoon  character,  "Betty Boop", (ii) the movie classic,  "Casablanca"
and (iii) the "Nipper Dog" (the RCA dog).  The "Betty Boop",  "Casablanca,"  and
"Nipper Dog"  licenses  terminate on December 31, 1999,  December 31, 1999,  and
April 30, 1999, respectively.

         On September 24, 1996,  Artisan  entered into a license  agreement with
Warner Bros., a division of Time Warner Entertainment Company, L.P., pursuant to
which Artisan was granted the non-exclusive  right to produce a number of Warner
Bros.  "Looney Tunes" cartoon  characters,  including,  but not limited to, Bugs
Bunny,  Sylvester,  Tweety,  Porky Pig, Road Runner, Daffy Duck, Tasmanian Devil
and  Yosemite  Sam. The license was renewed and now  terminates  on December 31,
2000.


                                        2

<PAGE>



         Generally,  all of the license  agreements  are  non-exclusive,  permit
sales in the United  States and require AHI to make  periodic  royalty  payments
based upon revenues from the sale of licensed works.

Marketing

         AHI markets its products through a network of independent  commissioned
sales  representatives.   Domestically,   AHI  has,  as  of  June  1,  1999,  34
commissioned  sales  representatives.  Internationally,  AHI has distributors in
Taiwan, Australia, the United Kingdom, Belgium and Holland. In addition, AHI has
non-exclusive  representation  in the Middle East, and parts of Europe.  AHI has
permanent  showrooms  located in High Point,  North  Carolina and San Francisco,
California.   These  showrooms  are  strategically   located  in  an  effort  to
efficiently service the home furnishing and decorative accessory industries.

Suppliers

         AHI purchases metal and other materials from a wide variety of sources,
and has at least  two,  and  often  more,  suppliers  for each  item used in its
manufacturing process, and is not dependent upon any one supplier. AHI currently
purchases  from a vendor base of more than 150  suppliers.  While there are many
suppliers  of most  materials,  AHI has  chosen  to limit  the  majority  of its
purchases  to the  one or two  vendors  with  whom  it has  developed  long-term
relationships.  Generally  AHI does not need to enter  into  contracts  with its
suppliers as most merchandise is readily available from multiple sources.

         The suppliers for those  decorative  accessory  products  which are not
manufactured by AHI include items such as marble,  glass,  mirror, and wood. AHI
does not currently  purchase more than 10% of any of these products from any one
outside supplier except McDonald  Packaging which supplies 12.7% (packaging) and
Industrias Montoya which supplies 18.4% (raw components).

Competition

         The sculpture and decorative accessory industry in the United States is
highly  fragmented  and consists  primarily of small,  local  manufacturers  and
assemblers.  Only a few companies are basic manufacturers of metal wall hangings
and sculptures.  However,  there can be no assurance that AHI's position in this
industry will continue in this manner.

         Management  believes  that the sale of  decorative  accessories  in the
wholesale market is also highly fragmented, with thousands of small, specialized
manufacturers and distributors.

         AHI believes that its competitive  advantage lies in its ownership of a
substantial number of models, tools, jigs and dies and its continuing ability to
manufacture  quality  products.  Management  also  believes  that AHI is further
protected by what AHI considers to be its excellent reputation with its customer
base and  management's  estimation that the cost to build tools,  jigs, dies and
molds, make the entry of meaningful competition extremely difficult.  Management
also  believes  that it would be  difficult to establish a trained work force of
skilled crafts people.  However, there can be no assurance that such assets will
continue to afford AHI any competitive advantage.

Trademark Protection

         The trademarks  "Artisan House",  "C. Jere",  "Sauteur",  and "Glendale
Ironworks"  have been  registered  with the United  States  Patent and Trademark
Office ("PTO").  AHI presently makes all appropriate  filings and  registrations
and  takes all other  actions  necessary,  to  protect  all of its  intellectual
property rights.  There can be no assurance,  however,  that AHI will be able to
effectively  protect such  property  rights.  The failure by AHI to protect such
rights from  unlawful and  improper  appropriation  may have a material  adverse
effect on AHI. Although to date no claims have been brought against AHI alleging
that it infringes on the intellectual property rights of others, there can be no
assurance  that such  claims will not be brought  against AHI in the future,  or
that if made,  such claims will not be successful.  In addition to any potential
monetary  liability  for  damage,  AHI could be  required to obtain a license in
order to continue to use the  trademarks  in question or could be enjoined  from
using such  trademarks  if such  license were not made  available on  acceptable
terms. If AHI becomes  involved in such  litigation,  it may divert  significant
Company resources, which could have a material adverse effect on AHI and its

                                        3

<PAGE>



results or  operations,  and, if such a claim were  successful,  AHI's  business
could be materially adversely affected.

Copyright Protection

         The  Company  has been  granted  and  currently  maintains  over  1,038
copyrights  on written and visual  product  designs for metal wall  hangings and
free-standing sculptures, from the United States Copyright Office.

Research and Development

         AHI continually seeks to develop additional product designs and product
concepts and their related tooling,  through product design proposals  submitted
by independent  commissioned  artists. So long as AHI generates  sufficient cash
flow,  AHI  expects  to  continue  to  increase  its  expenditures  for  product
development as it increases its in-house  manufacturing  to expand its finishing
and  fabrication  capabilities.  However,  there can be no  assurance  that such
product development will yield profitable growth.

Government Regulation

         AHI's operations are subject to numerous Federal,  state and local laws
and  regulations  relating  to the  environment  and health and safety and other
regulatory  matters.  Certain  materials  used  in the  manufacturing  of  AHI's
products such as paints,  solvents and other water-based related finishes may be
classified  by Federal and certain  state and local  governments  as  "hazardous
materials."  Control  of those  substances  is  regulated  by the  Environmental
Protection Agency ("EPA") and certain state and local  environmental  protection
agencies which require reports and inspect facilities to monitor compliance.  In
addition,  under  the  Comprehensive  Environmental  Response  Compensation  and
Liability Act  ("CERCLA"),  any generator of hazardous waste sent to a hazardous
waste disposal site is potentially  responsible for the clean up and remediation
costs  required for such site in the event that the site is not properly  closed
by the owner or operator,  irrespective of the amount of waste sent to the site.
AHI's  manufacturing  facilities  have been and will continue to be inspected by
the Occupational Safety and Health Administration and by certain state and local
inspection   agencies  and  departments.   AHI  has  obtained  all  permits  and
anticipates that its facilities and operations will be in substantial compliance
with all material  applicable laws and regulations.  Nevertheless,  no assurance
can be given that AHI will be able to obtain such  permits in the future or that
future events,  such as changes in or modified  interpretations of existing laws
or regulations or enforcement  policies,  may give rise to additional compliance
costs that could have a material adverse effect on the Company.

Employees

         As of June 24, 1999, the Company had a total of 71 full-time employees,
12 of whom are engaged in performing  administrative  functions,  and 59 of whom
are engaged in manufacturing and shipping. The Company and its employees are not
parties to any  collective  bargaining  agreements.  The  Company  believes  its
relationship with all of its personnel is good.

Item 2.  PROPERTIES.

         The  Company  has its  principal  executive  offices at 320  Washington
Street,   Mt.  Vernon,   New  York,  10553  where  the  Company  has  sub-leased
approximately 3,500 square feet of administrative offices from Interiors,  Inc.,
a stockholder of the Company.  AHI's principal  offices,  manufacturing and ware
housing  facilities  are located at 14625 East Clark  Street,  City of Industry,
California  91745.  On November 18,  1996,  AHI had entered into a five (5) year
lease with Henry Goldman, formerly President and Chief Executive Officer of AHI,
for a Los Angeles facility.  The lease is for  approximately  33,000 square feet
and requires a monthly rent payment of $14,203.

         In March of 1999, AHI relocated its operations  from Los Angeles to its
current City of Industry location. Commencing in April of 1999, the Company will
incur approximately  $20,000 per month to a subsidiary of Interiors for building
and facility costs as a result of the March facility relocation.


                                        4

<PAGE>



         AHI also operates two (2) leased showrooms in San Francisco, California
and High Point, North Carolina.

Item 3.  LEGAL PROCEEDINGS.

         None.

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

         None.



                                        5

<PAGE>



                                     PART II

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

         The Company's shares of Common Stock commenced  trading on the NASD OTC
Bulletin Board on the  effectiveness of the Company's initial public offering on
November 12, 1996, under the symbol "DECG".

         The  following  table  indicates  the high and low bid  prices  for the
Company's  Common  Stock for the period from  November  12, 1996 to December 31,
1996,  fourth  quarter  1997 and from April 1, 1998 to March 30, 1999 based upon
information  supplied by the Nasdaq OTC Bulletin Board system.  Prices represent
quotations between dealers without adjustments for retail markups,  markdowns or
commissions,  and may not represent actual  transactions.  The trading volume of
the Company's securities fluctuates and may be limited during certain periods.

                                               Common Stock*

                                        High                    Low

November 12, 1996 though
December 31, 1996                      $18.00                $ 5.375
Fourth Quarter, 1997                   $6.875                $ 2.125
First Quarter, 1998                    $ 4.50                $  .375
Second Quarter, 1998                   $ 1.00                $   .60
Third Quarter, 1998                    $  .80                $   .35
Fourth Quarter, 1998                   $  .80                $  .375
First Quarter, 1999                    $ 1.50                $   .38

* Prices for the period after  December 16, 1996 reflect the Company's 3- for- 1
stock split and the subsequent 1 for 3 reverse stock split in October 1997.

      On June 22,  1999,  the final  quoted  price as  reported  by The NASD OTC
Bulletin Board was $.375 for the Common Stock.  As of June 22, 1999,  there were
2,009,166 shares of Common Stock outstanding, held of record by approximately 73
record holders and approximately 1,400 beneficial owners.


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

OVERVIEW

The discussion below contains forward-looking  statements that involve risks and
uncertainties  relating to the future financial performance of Decor Group, Inc.
[the "Company" or "Decor"],  and actual events or results may differ materially.
In evaluating such statements,  stockholders  and investors should  specifically
consider the various  factors  identified  under the caption  "Factors  That May
Affect  Future  Operating  Results"  which could cause actual  results to differ
materially from those indicated by such forward-looking  statements. The Company
undertakes  no  obligation  to publicly  release the results of any  revision to
these  forward-looking  statements  which  may be  made  to  reflect  events  or
circumstances   after  the  date  hereof  or  to  reflect  the   occurrences  of
unanticipated events.

Decor Group,  Inc. [the  "Company" or "Decor"] was formed in March of 1996.  The
primary  activities  of Decor  prior to the  $3,700,000  acquisition  of Artisan
House,  Inc.  ["Artisan"]  on November 18, 1996,  was  investing  and  financing
activities.  Artisan is engaged in the design,  manufacturing  and  marketing of
metal wall-mounted, tabletop and freestanding sculptures.

On March 3, 1996, the Company issued to Interiors, Inc. 250,000 shares of Series
A Non-Voting  Convertible  Preferred Stock and an option to purchase  20,000,000
shares of Series B Non-Convertible Voting Preferred Stock for $2,000 in exchange
for Interiors, Inc. issuing to the Company 200,000 shares

                                        6

<PAGE>



of Common Stock valued at $600,000  and 200,000  shares of Series A  Convertible
Preferred Stock valued at $1,000,000.  This option was exercised in September of
1996.  The  exchange  of shares  between the Company  and  Interiors,  Inc.  was
pursuant  to the  Company's  intentions  to secure  the  ongoing  and  long-term
availability  of these  services.  On May 28, 1996,  the Company  entered into a
management agreement with Interiors,  Inc. whereby Interiors,  Inc. will provide
the  Company  certain  marketing  and  management  services  [See  Notes  4]. In
September  1997,  the  Company  sold all of the common and  preferred  shares of
Interiors  stock to an  unrelated  party for gross  proceeds  of  $487,127  and,
accordingly,  realized a loss of  $1,112,873.  As of March 31, 1999,  Interiors,
Inc. owned  approximately 90% of the total voting stock outstanding  assuming no
conversion of the Series A and Series C Preferred Stock.

On April 21, 1998, the Company  entered into a merger  agreement with Interiors,
Inc.  ["Interiors"]  whereby each of the issued and outstanding  shares of Decor
common stock shall be converted  into the right to receive a one half share [the
"Exchange  Ratio"] of validly  issued,  fully paid and  nonassessable  shares of
Class A common stock of Interiors.  The Company has received a fairness  opinion
of a qualified  investment  banking firm, to the effect that, the Exchange Ratio
for the conversion of Decor common stock into Interiors' Class A common stock is
fair from a financial  point of view to holders of shares of Decor common stock.
All options and warrants  outstanding  for Decor common stock will be subject to
the same Exchange Ratio for Interiors' Class A common stock. This merger has not
been finalized as of June 23, 1999.

Pursuant to the merger agreement, the outstanding Decor Series A preferred stock
will be converted into Decor common stock and the Decor Series B  nonconvertible
preferred stock will be canceled. If the agreement is terminated by Decor, Decor
is required to pay a $250,000  termination  fee to Interiors  subject to certain
conditions.  Within the terms of the merger agreement,  the period for effecting
the  contemplated  merger has expired,  however,  the parties are in  continuing
discussions with respect to the proposed merger. The Company has not accrued the
$250,000 termination fee.

The  financial  statements  consolidated  the results of Artisan  House with the
Company commencing November 18, 1996, the date of acquisition.

RESULTS OF OPERATIONS - MARCH 31, 1999

The Company had  revenues and cost of revenues for the year ended March 31, 1999
of $4,943,837 and $3,361,253,  respectively. This represents Artisan's sales and
cost of sales  transactions  for the year then ended  which  resulted in a gross
profit of $1,582,584 to the Company.

Revenue  reduction is attributable to the move from the old facility to the City
of Industry  location.  The gross profit decrease is due largely to an effort to
reduce  the  inventory  prior to the  move in  March  1999 and the made to order
manufacturing system installed at Artisan House. The Company believes it will be
able to improve its revenues in fiscal 2000 by a forecasted  volume increase and
to also improve its gross profit in fiscal 2000 by the sharing of  manufacturing
expenses  with  Troy  Lighting,  an  Interior's  subsidiary,  and  the  improved
efficiency of the new Troy facility with the reduction in factory personnel.

The Company had selling,  general and administrative expenses for the year ended
March 31,  1999 of  $4,164,874  of which  approximately  $2,957,000  represented
Artisan's   expenses  for  the  year  then  ended.  The  selling,   general  and
administrative expenses of the Company for the year ended March 31, 1999 include
four  related  party  transactions  with  Interiors:  $215,000  was recorded for
consulting  and  management  services,  $193,661 was recorded for  marketing and
merchandising costs, a $300,000  indemnification expense was recorded for a loan
from United  Credit  Corp.  to Lance  Corporation  on  September  30, 1998 and a
finders fee of $119,000 was paid Henry Goldman, the former owner of AHI.

For the year ended March 31, 1999,  Artisan had an operating  loss of $1,369,238
which  includes a write-down  of goodwill of $826,469.  For the year ended March
31,  1999,  the  Company  reduced  its  operating   expenses  by   approximately
$1,319,000.  A  reduction  of manpower  and  operating  expenses  related to the
Company's administrative and sales functions was implemented in fiscal 1999. The
cost reduction  process should continue  throughout 1999 in conjunction with the
Company's  relocation to the  facilities of Troy  Lighting,  Inc. in March 1999.
Management  believes that in fiscal 2000 by outsourcing  its products to vendors
outside the United States an improved gross profit can be achieved. In addition,
the  minimum  wage  increases  in the  United  States  has  created a  favorable
environment for choosing outsourcing as a means of reducing labor costs. Artisan
House has placed its first containerload order with a foreign

                                        7

<PAGE>



vendor who will deliver packaged, ready-to-sell versions of several of Artisan's
existing  line of products,  the result of which is to reduce costs on the items
affected by between 32% and 43%.  Should the quality and delivery be acceptable,
Artisan will expand this outsourcing  process to additional items and reduce the
cost of goods sold further.

Management  believes that in fiscal 2000,  administrative and sales expenses can
be  decreased  by the  installation  of a new  computer  system and  merging the
administrative and sales functions with those of entities acquired by Interiors,
Inc.  The  restructuring  and  relocation  of  the  Company's  headquarters  and
manufacturing operations that occurred in March 1999 is the result of Interiors,
Inc.'s acquisition of various companies.

The Company  incurred a net loss of $2,698,220 for the year ended March 31, 1999
of which  Artisan  House had a net loss of  approximately  $1,300,000  and Decor
incurred a net loss of approximately  $1,400,000.  The net loss included noncash
expenses of approximately $1,800,000.

The Company's  auditors  rendered a going concern report as of March 31, 1999 as
the Company has suffered recurring losses from operations.

LIQUIDITY AND CAPITAL RESOURCES - MARCH 31, 1999

At March 31, 1999,  Decor had a working capital  deficit of $2,010,712.  For the
year ended March 31, 1999,  the Company used $297,393 for operating  activities,
used $30,490 for  investing  activities  and generated  $278,127 from  financing
activities.  The cash  overdraft  balance  at March 31,  1999 was  approximately
$35,000. Management believes that its short and long-term cash requirements will
be  generated  from  operations  in fiscal 2000  resulting  from its  forecasted
improved  gross  profit and  reduction  of selling,  general and  administrative
expenses.

On November 18, 1996, the Company issued a secured promissory note in the amount
of  $923,496  to the  seller  of  Artisan  House of which  $100,000  was paid in
February of 1997 and the balance will be paid in 60 equal  monthly  installments
of $13,989 with a final payment of $150,000 at maturity  bearing interest at 8%.
The note is  secured  by a  second  interest  on all of  Artisan's  assets.  The
non-interest bearing portion of the note was discounted at 8% which gave rise to
a discount of $48,387.

In connection  with the  acquisition,  the Company  assumed notes payable in the
aggregate  amount of $212,891 of which  approximately  $190,000  was paid off in
connection  with the  closing  of the  acquisition  and the  remaining  notes of
approximately  $18,000 bear interest ranging from 9.5% to 13.4% maturing through
2001. Such notes are collateralized by various equipment of the Company.

On December 31, 1996,  Artisan  entered into a three year  employment  agreement
with  Artisan's  Chief  Operating  Officer and  Treasurer  for (i) a base annual
salary of $100,000;  (ii) a cash bonus equal to ten percent  [10%] of the annual
salary, based upon Artisan's net profit before taxes ["NPBT"];  and (iii) a cash
bonus  equal to five  percent  [5%] of the  increase  in NPBT over the  previous
fiscal year,  not to exceed 40% of the base salary.  The agreement also provides
options to purchase  10,000  shares of the  Company's  common stock per year for
each year of the  agreement  at an  exercise  price  equal to  $.0003  per share
exercisable  after one year for a period of five  years.  The  Company  recorded
deferred  compensation  of $180,000  for the options in the year ended March 31,
1997. For the years ended March 31, 1999 and 1998, the Company amortized $60,000
and $64,285,  respectively,  as compensation expense. In March 1997, the officer
was  elected to the  offices of  President  and Chief  Financial  Officer of the
Company.

The agreement also provides  additional  performance  options to purchase 10,000
shares of the Company's common stock  exercisable for a period of one year at an
exercise price equal to the average closing price of the Company's stock for the
20 days  ending  two days  prior to date of grant for each of the  years  ending
March 31, 1998, 1999 and 2000.  Continued  employment by the Company is required
and the Company must meet or exceed 115% of the prior year's NPBT.

In December of 1997, the officer received 20,000 options,  which represented the
additional 10,000 options due on January 1, 1998 under the employment  agreement
and an additional 10,000 options.  The Company recorded  compensation expense of
$90,000 on January 1, 1998.


                                        8

<PAGE>



On January 2, 1999, the officer received an additional  20,000 options under the
employment  agreement  whereby  the  Company  recorded  compensation  expense of
$10,000 on January 2, 1999. The options vest  immediately  and are not available
for exercise until January 2000 and will expire January 2005.

In March of 1999, the Company accrued a bonus of $35,000 to the  President/Chief
Financial Officer.

In March 1997,  CIDCOA  brought an arbitration  proceeding  against the Company,
currently  settled,  alleging that it had failed to pay CIDCOA  additional  sums
owed to it in connection  with the  Company's  purchase of all of the assets and
assumption of  substantially  all of the liabilities of Artisan.  CIDCOA alleged
that  it  was  owed  a  purchase  price  adjustment.   The  Company  denied  the
allegations,  and  brought  counterclaims  against  CIDCOA  alleging  breach  of
contract,  breach of warranty,  misrepresentation and fraud by CIDCOA. In August
1997, CIDCOA filed a motion seeking to enforce an alleged  settlement  agreement
made by the parties.  In September  1997, the Company  entered into a settlement
agreement with CIDCOA  included in which was the payment of (i) a purchase price
adjustment  of  approximately  $100,000  and  (ii)  $158,438  in lieu of  10,000
registered shares of the Company which were never issued to CIDCOA. In addition,
the  settlement  confirms  that the original  amount of the  promissory  note is
$926,400 and confirms that the monthly payments under the note shall be $13,989,
reinstates the terminated  employment agreement with Henry Goldman [See Note 7A]
and provides for the Company to bring current all disputed  payments and amounts
due Goldman and CIDCOA under the original purchase and employment agreements. In
addition,  the  settlement  modifies  certain  compensation  provisions  of  the
employment   agreement.   Further,   the  settlement   agreement  provides  that
obligations  to CIDCOA and Goldman under the  promissory  note,  the  employment
agreement and Artisan  House's real property lease for its operating  facilities
will be guaranteed by the Company and Interiors, Inc.

The Company entered into an arbitration with  Goldman/CIDCOA  concerning various
financial  compensation  claims on October 29, 1998. A settlement was reached in
January  1999,  that  provided  for (i)  payment of a finders fee of $119,000 on
companies  purchased by Interiors [See Notes 4A and 7A], (ii) the removal of the
restrictive  legend on the stock  issued  pursuant  to H.  Goldman  exercise  of
options in 1997 and (iii) the issuance of stock due in 1998. Goldman/CIDCOA also
withdrew their claims.

On September 15, 1998, Artisan obtained an increased  accounts  receivable based
line of credit for up to $950,000  with  interest at prime plus 5.5%  secured by
all of  Artisan's  assets  and  guaranteed  by Decor  and  Interiors,  Inc.  The
unborrowed  amount  available  under the line of  credit  at March 31,  1999 was
$85,545. At March 31, 1999, Artisan had an outstanding balance of $610,121.  The
line of credit has an expiration  date of June 30, 1999.  The term of the credit
line automatically renews each year unless notice is given by either the Company
or the lender to the other,  respectively  within a period not less than 60 days
prior to  expiration.  No such notice has been given or received by the Company.
The Company is not in  violation of any of the  covenants of the loan.  Interest
expense and collection and processing fees for the year ended March 31, 1999 was
$61,736 and $8,831, respectively.

The line of credit includes a term loan originating in the amount of $100,000 as
of  September  30, 1998.  Principal  payments of $5,000 per month are due on the
loan.

The Company is contingently  liable as guarantor of the debts owed to the lender
of the line of credit by  related  parties  with  aggregate  indebtedness  up to
$14,400,000.

RESULTS OF OPERATIONS - MARCH 31, 1998

The Company had  revenues and cost of revenues for the year ended March 31, 1998
of $5,186,334 and $3,167,620,  respectively. This represents Artisan's sales and
cost of sales  transactions  for the year then ended  which  resulted in a gross
profit of $2,018,714 to the Company.

The Company had selling,  general and administrative expenses for the year ended
March 31,  1998 of  $5,365,426  of which  approximately  $4,104,000  represented
Artisan's expenses for the year then ended.

For  the  year  ended  March  31,  1998,   Artisan  had  an  operating  loss  of
approximately $2,086,000.  Management believed that for the year ended March 31,
1999,  the Company  could  reduce its losses by  increasing  its gross profit by
approximately  $300,000,  and by reducing  operating  expenses by  approximately
$600,000.  A  reduction  of  manpower  and  operating  expenses  related  to the
Company's administrative and sales functions was being implemented.  The process
continued throughout the year

                                        9

<PAGE>



in conjunction with the Company's anticipated relocation to the facilities of an
imminent Interiors,  Inc. metal fabrication  manufacturing business acquisition.
Management  believes that in fiscal 1999 by outsourcing  its products to vendors
outside the United States an improved gross profit can be achieved. In addition,
the recent  minimum wage  increases in the United States has created a favorable
environment for choosing outsourcing as a means of reducing labor costs. Artisan
House is currently in negotiations with two vendors to pursue this plan.

In September of 1997, the Company commenced and approved an exit plan to satisfy
its  various  investor   constituencies   by  improving  the  manufacturing  and
administrative   operations   of  the  Company  for  growth   through   improved
competitiveness,  quality and  effectiveness.  Such  efforts  have  included the
retention  of various  advisors  and  analysis  by  management,  to improve  the
manufacturing  and  administrative  operations of the Company for growth through
improved competitiveness, quality and effectiveness. Essential to the success of
the restructuring plan is Interiors acquisitions of other companies.  This could
provide the  opportunity  for Artisan House to move its facility and improve the
manufacturing process.

Management  believes  that the  restructuring  costs and charges for the cost of
shutting down the current operations are approximately $20,000 and the projected
remaining  lease   obligations  on  the  current  premises  are  $625,000.   The
restructuring  reserve through December 1997 had included an offset for sublease
income,  however,  since  March  31,  1998,  there  had not been any  successful
commitment  in this endeavor  management  has decided to increase the reserve by
approximately  $435,000,  which  represents  management's  previous  estimate of
attainable  sublease  income.  Interiors  closed on two acquisitions in March of
1998.

The Company  incurred a net loss of $4,527,233 for the year ended March 31, 1998
of which  approximately  $2,100,000  was from the Artisan  House  operation  and
$2,400,000 was from the Decor operation.

The Company's  auditors  rendered a going concern report as of March 31, 1998 as
the Company has suffered recurring losses from operations.

LIQUIDITY AND CAPITAL RESOURCES - MARCH 31, 1998

At March 31, 1998, Decor had a working capital deficit of $578,263. For the year
ended  March 31,  1998,  the Company  used  $54,100  for  operating  activities,
generated  $190,983  from  investing   activities  and  utilized  $256,135  from
financing activities. The cash balance at March 31, 1998 was $50,256. Management
believed that in the next twelve months cash  requirements  would be met by cash
provided from operations and the asset based line of credit. Management believes
that its long-term cash needs will be provided by operations and additional debt
and/or equity financing.

On March 3, 1996, the Company issued to Interiors, Inc. 250,000 shares of Series
A Non-Voting  Convertible  Preferred Stock and an option to purchase  20,000,000
shares of Series B Non-Convertible Voting Preferred Stock for $2,000 in exchange
for Interiors, Inc. issuing to the Company 200,000 shares of Common Stock valued
at $600,000 and 200,000 shares of Series A Convertible Preferred Stock valued at
$1,000,000. This option was exercised in September of 1996.

On May 28, 1996, the Company entered into a two year  management  agreement with
Interiors,  Inc.  which  specializes  in the  home  furnishings  and  decorative
accessories  industries.  The agreement calls for a management fee of $90,000 or
1.5% of gross sales,  whichever is greater,  per annum.  The  management  fee of
$90,000 has been accrued and will be paid  quarterly to the extent that there is
excess  cash flow  available  to the  Company as defined  in the  agreement.  No
payment in any  quarter  will  exceed 50% of excess  cash flow as  defined.  The
agreement has a term of two years with renewal  options at the mutual consent of
both  parties.  At March 31,  1997,  the Company had amounts due to Interiors of
$185,285, consisting of $18,750 in management fees and $166,535 of advances. The
Company  accrued  additional  management fees of $90,000 and paid $50,000 during
the year  ended  March  31,  1998.  As of March 31,  1998,  the  Company  has an
outstanding balance due to Interiors of $225,285.  The Company recorded interest
expense for the year ended March 31, 1998 of $16,116 on this obligation.

In September  1997,  the Company sold all of the common and preferred  shares of
Interiors  stock to an  unrelated  party for gross  proceeds  of  $487,127  and,
accordingly, realized a loss of $1,112,873. As of

                                       10

<PAGE>



March 31, 1998,  Interiors,  Inc. owned approximately 79% of the Company's total
voting stock  outstanding  assuming no  conversion  of the Series A and Series C
Preferred Stock.

On June 21, 1996, the Company received  commitments from its stockholders for an
additional  $50,000 in loan proceeds.  However,  the Company received $35,500 in
June 1996 and  $8,000 in July 1996.  The  remaining  balance  for $6,500 was not
required. The notes bear interest at 12% per annum.

On August 9, 1996,  the Company  agreed to issue to Interiors  28,334  shares of
Series C  Non-Voting,  Convertible,  Preferred  Stock for cash of  $425,000.  On
August 23, 1996, the Company  agreed to issue to Interiors an additional  18,750
shares  of  Series  C  Non-Voting,  Convertible,  Preferred  Stock  for  cash of
$281,250.  On September 6 and 13, 1996, the Company agreed to issue to Interiors
an  additional  aggregate  7,850  shares  of Series C  Non-Voting,  Convertible,
Preferred Stock for cash of $117,750.

On August 29, 1996 and  September  13, 1996,  the Company  advanced an aggregate
$50,000  with 10%  interest to a firm that  renders  management  services to the
Company. The Company was repaid on November 16, 1996.

On November 12, 1996, the Company  realized net proceeds of $2,248,033  from the
initial public offering of the Company's common stock.

On November 18, 1996, the Company issued a secured promissory note in the amount
of  $923,496  to the  seller  of  Artisan  House of which  $100,000  was paid in
February of 1997 and the balance will be paid in 60 equal  monthly  installments
of $13,989 with a final payment of $150,000 at maturity  bearing interest at 8%.
The note is  secured  by a  second  interest  on all of  Artisan's  assets.  The
non-interest bearing portion of the note was discounted at 8% which gave rise to
a discount of $48,387.

In connection  with the  acquisition,  the Company  assumed notes payable in the
aggregate  amount of $212,891 of which  approximately  $190,000  was paid off in
connection  with the  closing  of the  acquisition  and the  remaining  notes of
approximately  $18,000 bear interest ranging from 9.5% to 13.4% maturing through
2001. Such notes are collateralized by various equipment of the Company.

On October 30, 1996,  the Seller's  employment  agreement was amended to provide
for the issuance of options to purchase  50,000 shares of the  Company's  common
stock on each of the  first  and  second  anniversaries  of the  agreement.  The
options are exercisable at $.0001 per share  commencing the date of issuance and
expiring in four years. The Company recorded deferred  compensation cost for the
fair value of options in the amount of  $1,000,000  as of November  18, 1996 and
amortized  $178,233 as  compensation  expense for the year ended March 31, 1997.
For the year ended March 31, 1998,  the Company  amortized  $500,000 as deferred
compensation.

In July 1997, there was an attempt to terminate Artisan's  employment  agreement
with the seller. In connection with a settlement  agreement reached in September
1997 with CIDCOA  International,  Inc.  ["CIDCOA"],  formerly  known, as Artisan
House, Inc. [See Note 7], the Company  reinstated the employment  agreement with
the seller and recorded  additional  monies owed to the seller of  approximately
$290,000  whereby  $161,022 is due to the seller at March 31,  1998  pursuant to
this agreement. The employment agreement also provides for additional fees to be
earned by the seller pursuant to certain  acquisitions made by the Company,  its
parent or affiliates.  The Company has expensed  $64,000 in accrued  liabilities
representing an estimate of  compensation  earned by the seller as a consequence
of the two acquisitions made in March of 1998 by Interiors, Inc.

On December 31, 1996,  Artisan  entered into a three year  employment  agreement
with Artisan's Chief Operating Officer and Treasurer for (i) an annual salary of
$100,000;  (ii) a cash bonus  equal to ten percent  [10%] of the annual  salary,
based upon  Artisan's net profit before taxes  ["NPBT"];  and (iii) a cash bonus
equal to five  percent  [5%] of the  increase in NPBT over the  previous  fiscal
year, not to exceed 40% of the base salary.  The agreement also provides options
to purchase 10,000 shares of the Company's common stock for each of the years of
the contract at an exercise  price equal to $.0003 per share  exercisable  after
one year for a period of five years. The Company recorded deferred  compensation
of $180,000 for the 10,000 options.  For the year ended March 31, 1998 amortized
approximately  $55,000 as compensation  expense.  In March 1997, the officer was
elected to the offices of President and Chief Financial Officer of the Company.

                                       11

<PAGE>



In December of 1997, the officer received 20,000 options,  which represented the
additional 10,000 options due on January 1, 1998 under the employment  agreement
and an additional 10,000 options.  The Company recorded  compensation expense of
$90,000 on January 1, 1998.

The agreement also provides  additional  performance  options to purchase 10,000
shares of the Company's common stock  exercisable for a period of one year at an
exercise price equal to the average closing price of the Company's stock for the
20 days  ending  two days  prior to date of grant for each of the  years  ending
March 31, 1998, 1999 and 2000.  Continued  employment by the Company is required
and the Company must meet or exceed 115% of the prior year's NPBT.

In March 1997,  CIDCOA  brought an arbitration  proceeding  against the Company,
currently  settled,  alleging that it had failed to pay CIDCOA  additional  sums
owed to it in connection  with the  Company's  purchase of all of the assets and
assumption of  substantially  all of the liabilities of Artisan.  CIDCOA alleged
that  it  was  owed  a  purchase  price  adjustment.   The  Company  denied  the
allegations,  and  brought  counterclaims  against  CIDCOA  alleging  breach  of
contract,  breach of warranty,  misrepresentation and fraud by CIDCOA. In August
1997, CIDCOA filed a motion seeking to enforce an alleged  settlement  agreement
made by the parties.  In September  1997, the Company  entered into a settlement
agreement with CIDCOA  included in which was the payment of (i) a purchase price
adjustment  of  approximately  $100,000  and  (ii)  $158,438  in lieu of  10,000
registered shares of the Company which were never issued to CIDCOA. In addition,
the  settlement  confirms  that the original  amount of the  promissory  note is
$926,400 and confirms that the monthly payments under the note shall be $13,989,
reinstates the terminated  employment agreement with Henry Goldman [See Note 7A]
and provides for the Company to bring current all disputed  payments and amounts
due Goldman and CIDCOA under the original purchase and employment agreements. In
addition,  the  settlement  modifies  certain  compensation  provisions  of  the
employment   agreement.   Further,   the  settlement   agreement  provides  that
obligations  to CIDCOA and Goldman under the  promissory  note,  the  employment
agreement and Artisan  House's real property lease for its operating  facilities
will be guaranteed by the Company and Interiors, Inc.

Under a termination  agreement with a former employee,  the Company was required
to pay severance in the amount of $3,889 per month for 18 months beginning April
1997.  In addition,  the Company was required to provide  various  other minimal
benefits to the former employee.  The Company recorded a liability for the total
compensation  payments of $70,000 at March 31, 1997.  In June 1997,  the Company
ceased paying the severance pay required under this  termination  agreement.  In
August 1997,  the Company  entered into a settlement  agreement  with the former
employee  which  called for the  payment of $45,000  and the  issuance  of 1,666
shares of the Company's common stock,  with a value of $17,500.  The stock shall
be restricted for a period of twelve months after the date of issuance.

On July 1, 1997,  Artisan  obtained an accounts  receivable based line of credit
for up to $600,000  with interest at prime plus 5.5% secured by all of Artisan's
assets and guaranteed by Decor and Interiors,  Inc. The amount  available  under
the line of credit at March 31, 1998 was  $255,511.  At March 31, 1998,  Artisan
has an  outstanding  balance of $263,427.  The line of credit has an  expiration
date of June 30,  1998.  The term of the credit line  automatically  renews each
year  unless  notice is given by either the  Company or the lender to the other,
respectively within a period not less than 60 days prior to expiration.  No such
notice  has  been  given or  received  by the  Company.  The  Company  is not in
violation  of any  covenants  of the loan.  Interest  expense for the year ended
March 31, 1998 was $19,627.

NEW AUTHORITATIVE PRONOUNCEMENTS

In June  1998,  The  FASB  issued  SFAS  No.  133,  "Accounting  for  Derivative
Instruments and Hedging  Activities."  SFAS No. 133  establishes  accounting and
reporting  standards for derivative  instruments,  including certain  derivative
instruments embedded in other contracts and for hedging activities. SFAS No. 133
requires  that  an  entity   recognize  all  derivatives  as  either  assets  or
liabilities in the statement of financial position and measure those instruments
at fair value.  The  accounting  for  changes in the fair value of a  derivative
depends on the intended use of the  derivative  and how it its  designated,  for
example, gain or losses related to changes in the fair value of a derivative not
designated  as a hedging  instrument  is recognized in earnings in the period of
the  change,  while  certain  types of hedges  may be  initially  reported  as a
component  of  other   comprehensive   income   [outside   earnings]  until  the
consummation of the underlying transaction.


                                       12

<PAGE>



SFAS No. 133 is  effective  for all fiscal  quarters of fiscal  years  beginning
after June 15,  1999.  Initial  application  of SFAS No. 133 should be as of the
beginning  of a fiscal  quarter;  on that date,  hedging  relationships  must be
designated  anew and  documented  pursuant  to the  provisions  of SFAS No. 133.
Earlier application of all of the provisions of SFAS No. 133 is encouraged,  but
it is permitted only as of the beginning of any fiscal quarter.  SFAS No. 133 is
not to be applied  retroactively to financial  statements of prior periods.  The
Company does not currently have any derivative  instruments and is not currently
engaged in any hedging activities.

In April 1998, the American  Institute of Certified  Public  Accountants  issued
Statement  of  Position  ["SOP"]  98-5,  "Reporting  on the  Costs  of  Start-Up
Activities." SOP 98-5 provides  guidance on the financial  reporting of start-up
costs and  organization  costs,  and requires  that such costs to be expensed as
incurred.  SOP 98-5  applies to all  nongovernmental  entities  and is generally
effective  for  fiscal  years  beginning   after  December  15,  1998.   Earlier
application is encouraged in fiscal years for which annual financial  statements
previously  have not been  issued.  The  adoption of SOP 98-5 is not expected to
have a material  impact on results of operations,  financial  position,  or cash
flows of the  Company  as the  Company's  current  policy  is  substantially  in
accordance with SOP 98-5.

The  Financial  Accounting  Standards  Board  ["FASB"]  has had on its  agenda a
project to address certain practice issues regarding Accounting Principles Board
["APB"]  Opinion No. 25,  "Accounting  for Stock Issued to Employees."  The FASB
plans on issuing various  interpretations of APB Opinion No. 25 to address these
practice issues. The proposed effective date of these  interpretations  would be
the  issuance  date of the  final  Interpretation,  which is  expected  to be in
September 1999. If adopted,  the Interpretation  would be applied  prospectively
but would be applied to plan  modification  and grants that occur after December
15, 1998. The FASB's tentative interpretations are as follows:

*  APB Opinion No. 25 has been applied in practice to include in its  definition
   of  employees,  outside  members of the board or  directors  and  independent
   contractors.  The FASB's  interpretation of APB Opinion No. 25 will limit the
   definition of an employee to  individuals  who meet the common law definition
   of an employee [which also is the basis for the distinction between employees
   and nonemployees in the current U.S. tax code].  Outside members of the board
   of directors and independent  contractors would be excluded from the scope of
   APB  Opinion  No. 25 unless  they  qualify as  employees  under  common  law.
   Accordingly,  the  cost  of  issuing  stock  options  to  board  members  and
   independent  contractors not meeting the common law definition of an employee
   will have to be  determined  in  accordance  with  FASB  Statement  No.  123,
   "Accounting for Stock-Based Compensation," and usually recorded as an expense
   in the period of the grant [the service period could be prospective, however,
   see EITF 96-18].

*  Options [or other equity instruments] of a parent company issued to employees
   of a subsidiary  should be considered  options,  etc.  issued by the employer
   corporation in the consolidated financial statements,  and, accordingly,  APB
   Opinion  No.  25 should  continue  to be  applied  in such  situations.  This
   interpretation  would apply to subsidiary  companies only; it would not apply
   to equity method investees or joint ventures.

*  If the terms of an option  [originally  accounted  for as a fixed option] are
   modified during the option term to directly  change the exercise  price,  the
   modified option should be accounted for as a variable option.  Variable grant
   accounting  should be applied  to the  modified  option  from the date of the
   modification until the date of exercise.  Consequently, the final measurement
   of compensation expense would occur at the date of exercise. The cancellation
   of an option and the  issuance  of a new option with a lower  exercise  price
   shortly  thereafter  [for example,  within six months] to the same individual
   should be considered in substance a modified [variable] option.

*  Additional  interpretations  will address how to measure compensation expense
   when a new measurement date is required.

YEAR 2000 COMPLIANCE

Many currently  installed  computer  systems and software  products are coded to
accept  only two digit  entries in the date code  field.  These date code fields
will need to accept four digit  entries to  distinguish  21st century dates from
20th century dates.  As a result,  in less than one year,  computer  systems and
software used by many companies may need to be upgraded to comply with Year 2000
requirements.

                                       13

<PAGE>



Decor and Artisan House will employ the same computer system ["software"] as the
group of Interiors companies.

Interior's has begun a full  evaluation of its Year 2000  compliance  needs with
respect to its computer system and has authorized  funding and contracted with a
Year 2000  consulting  service to meet those needs.  The Company is currently in
the  process  of  restructuring   its  computer  systems  in  order  to  prevent
disruptions  in operations  involving the  transition of dates from 1999 to 2000
and expects to be fully Year 2000 compliant by such time. If due to an unforseen
circumstance,  the Company cannot achieve  complete Year 2000  compliance by the
year 2000, the Company is prepared to institute temporary computer modifications
which will allow it to transition  from the year 1999 to the year 2000 with only
minor  disruptions.  These  disruptions are not anticipated to have any material
effect on Company  operations.  Under a worst  case  scenario,  however,  system
failure or miscalculation could result in an inability to process  transactions,
send  invoices,  accept  customer  orders,  provide  customers with products and
services,  or engage in similar normal  business  activity.  The Company has not
completed its  assessment of potential  Year 2000 related  problems  among third
parties upon which it relies, including its suppliers and customers. Substantial
business interruptions at key suppliers or major customers could have a material
adverse effect on the Company.

Decor and  Artisan  House  originally  planned  on having  the  computer  system
installed and in the process of being  implemented by the third quarter of 1999.
The rapid growth of Interiors has forced  management  to reevaluate  the type of
software necessary to satisfy a variety of company needs.

As Year 2000  preparations  continue,  the Company may discover  additional Year
2000  problems,  may not be able to develop,  implement or test  remediation  or
contingency plans, or may find that the costs of these activities exceed current
expectations and become material. The foregoing factors,  individually or in the
aggregate, could materially adversely affect the Company's operating results and
could make comparison of historic  operating  results and balances  difficult or
not meaningful.

IMPACT OF INFLATION

The Company does not believe that inflation has had a material adverse effect on
sales or  income  during  the  past  periods.  Increases  in  supplies  or other
operating costs could adversely affect the Company's  operations;  however,  the
Company  believes it could increase prices to offset increases in costs of goods
sold or other operating costs.

Item 7.  CONSOLIDATED FINANCIAL STATEMENTS

   The financial  statements and schedules are attached to this report beginning
on page F-1.


                                       14

<PAGE>



DECOR GROUP, INC. AND SUBSIDIARIES
------------------------------------------------------------------------------


INDEX
------------------------------------------------------------------------------



                                                                 Page to Page

Item 7. Consolidated Financial Statements:

   Independent Auditor's Report....................................F-1.....

   Consolidated Balance Sheet as of March 31, 1999.................F-2.....F-3

   Consolidated Statements of Operations for the years ended
   March 31, 1999 and 1998 ........................................F-4.....

   Consolidated Statements of Stockholders' Equity [Deficit]
   for the years ended March 31, 1999 and 1998.....................F-5.....

   Consolidated Statements of Cash Flows for the years
   ended March 31, 1999 and 1998 ..................................F-6.....F-7

   Notes to Consolidated Financial Statements......................F-8.....F-21




                  .   .   .   .   .   .   .   .   .   .   .   .   .



<PAGE>



                          INDEPENDENT AUDITOR'S REPORT


The Board of Directors and Stockholders of
  Decor Group, Inc.
  New York, New York


            We have audited the accompanying consolidated balance sheet of Decor
Group,  Inc.  and its  subsidiaries  as of  March  31,  1999,  and  the  related
consolidated statements of operations,  stockholders' equity [deficit], and cash
flows for each of the two  years in the  period  ended  March  31,  1999.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

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

            In our opinion,  the consolidated  financial  statements referred to
above present  fairly,  in all material  respects,  the  consolidated  financial
position of Decor Group, Inc. and its subsidiaries as of March 31, 1999, and the
results of their  operations,  and their cash flows for each of the two years in
the  period  ended  March  31,  1999,  in  conformity  with  generally  accepted
accounting principles.

            The  accompanying   consolidated   financial  statements  have  been
prepared assuming that Decor Group, Inc. and its subsidiaries will continue as a
going concern. As discussed in Note 11 to the consolidated financial statements,
Decor  Group,  Inc.  and its  subsidiaries  suffered a loss from  operations  of
$2,582,290 for the year ended March 31, 1999 and have a working  capital deficit
of $2,010,712 at March 31, 1999 that raise  substantial doubt about Decor Group,
Inc. and its subsidiaries' ability to continue as a going concern.  Management's
plans in regard to these  matters  are  described  in Note 11. The  consolidated
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.




                                          MOORE STEPHENS, P. C.
                                          Certified Public Accountants.

Cranford, New Jersey
June 12, 1999

                                       F-1

<PAGE>



DECOR GROUP, INC. AND SUBSIDIARIES
------------------------------------------------------------------------------


CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1999.
------------------------------------------------------------------------------



Assets:
Current Assets:
  Cash                                                              $       500
  Accounts Receivables - Net                                            511,072
  Due from Interiors [4C]                                               467,387
  Inventories - Net                                                     270,879
  Prepaid Expenses and Other Current Assets                              26,371
                                                                    -----------

  Total Current Assets                                                1,276,209

Property and Equipment - Net                                             59,094
                                                                    -----------

Other Assets:
  Goodwill - Net                                                        750,000
  Other Assets                                                           16,867
                                                                    -----------

  Total Other Assets                                                    766,867
                                                                    -----------

  Total Assets                                                      $ 2,102,170
                                                                    ===========




The Accompanying Notes are an Integral Part of These Consolidated Financial
Statements.

                                        F-2

<PAGE>



DECOR GROUP, INC. AND SUBSIDIARIES
------------------------------------------------------------------------------


CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1999.
------------------------------------------------------------------------------




Liabilities and Stockholders' Equity [Deficit]:
Current Liabilities:
  Cash Overdraft                                                    $    35,751
  Accounts Payable and Accrued Expenses                                 503,589
  Accrued Compensation and Benefits - Former Officer                     72,997
  Accrued Indemnification - Interiors [4E]                              300,000
  Due to Interiors [4A]                                               1,079,494
  Interest Payable - Related Party                                       58,909
  Due to Stockholders                                                    43,500
  Accrued Costs for Restructuring                                       454,545
  Line of Credit                                                        610,121
  Current Portion of Long-Term Debt                                     128,015
                                                                    -----------

  Total Current Liabilities                                           3,286,921

Long-Term Debt                                                          429,030
                                                                    -----------

  Total Liabilities                                                   3,715,951
                                                                    -----------

Commitments and Contingencies [7]                                            --
                                                                    -----------

Stockholders' Equity [Deficit]:
  Preferred Stock, $.0001 Par Value Per Share,
   35,000,000  Blank Check Shares  Authorized of which
   5,000,000 are Convertible Non-Voting  Series A - 250,000
   Shares  Issued  and  Outstanding;  20,000,000 Non-Convertible
   Voting Series B - 20,000,000  Shares Issued and Outstanding;
   10,000,000 Convertible Non-Voting Series C - 54,934
   Issued and Outstanding                                                 2,030

  Additional Paid-in Capital - Preferred Stock                        2,423,970

  Common Stock - $.0001 Par Value, Authorized 20,000,000
   Shares, 2,009,166 Issued and Outstanding                                 201

  Additional Paid-in Capital - Common Stock                           4,196,732

  Accumulated Deficit                                                (8,180,999)

  Deferred Compensation                                                 (55,715)
                                                                    -----------

  Total Stockholders' Equity [Deficit]                               (1,613,781)
                                                                    -----------

  Total Liabilities and Stockholders' Equity [Deficit]              $ 2,102,170
                                                                    ===========


The Accompanying Notes are an Integral Part of These Consolidated Financial
Statements.

                                        F-3

<PAGE>



DECOR GROUP, INC.
------------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF OPERATIONS
------------------------------------------------------------------------------


                                                             Years ended
                                                               March 31,
                                                         1 9 9 9      1 9 9 8
                                                         -------      -------

Revenues - Net                                         $ 4,943,837  $ 5,186,334

Cost of Revenues                                         3,361,253    3,167,620
                                                       -----------  -----------

  Gross Profit                                           1,582,584    2,018,714
                                                       -----------  -----------

Selling, General and Administrative
  Expenses:
  Administrative Expenses                                  808,594    1,981,184
  Selling Expense                                        1,320,983    1,493,911
  Amortization of Deferred Compensation [7A,7F]            381,167      554,285
  Restructuring Costs                                           --      645,000
  Write-off of Intangibles [2]                             826,469      537,046
  Management and Consulting Fees - Related Party [4A]      215,000       90,000
  Marketing Costs - Related Party [4C]                     193,661           --
  Indemnification Expense - Related Party [4E]             300,000           --
  Compensation Expense - Related Party [7A][9]             119,000       64,000
                                                       -----------  -----------

  Total Selling, General and Administrative Expenses     4,164,874    5,365,426
                                                       -----------  -----------

  [Loss] from Operations                                (2,582,290)  (3,346,712)
                                                       -----------  -----------

Other Income [Expense]:
  Loss on Sale of Investment in Related Party                   --   (1,112,873)
  Interest Income                                              563          --
  Miscellaneous Income                                      37,824       61,800
  Interest Expense                                        (130,002)     (39,410)
  Interest Expense - Related Party                         (24,315)     (90,038)
                                                       -----------  -----------

  Other [Expense] Income - Net                            (115,930)  (1,180,521)
                                                       -----------  -----------

  Net [Loss]                                           $(2,698,220) $(4,527,233)
                                                       ===========  ===========

Net [Loss] Per Common Share:
  Basic and Diluted                                    $     (1.37) $     (2.65)
                                                       ===========  ===========

Weighted Average Number of Common
  Shares Outstanding                                     1,967,499    1,708,343
                                                       ===========   ==========


The Accompanying Notes are an Integral Part of These Consolidated Financial
Statements.

                                        F-4

<PAGE>



DECOR GROUP, INC. AND SUBSIDIARIES
------------------------------------------------------------------------------


CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY [DEFICIT]
------------------------------------------------------------------------------


<TABLE>

                                 Preferred Stock               Common Stock                              Accumulated   Total
                                            Additional                 Additional                           Other  Stockholders'
                                              Paid-in                    Paid-in   Accumulated Deferred Comprehensive Equity
                            Shares   Amount   Capital    Shares  Amount  Capital     Deficit Compensation  Income    [Deficit]

<S>                        <C>        <C>    <C>        <C>       <C>  <C>        <C>          <C>        <C>        <C>
 Balance - March 31, 1997  20,304,934 $2,030 $2,423,970 1,707,500 $171 $4,035,252 $  (955,546) $(991,167) $(787,400) $3,727,310

Issuance of Common Shares
 to Former Employee                --     --         --     1,666   --     17,500          --         --         --      17,500

Exercise of Options                --     --         --    50,000    5         --          --         --         --           5

Issuance of Options for
 20,000 Shares of Common
 Stock to President                --     --         --        --   --     90,000          --         --         --      90,000

Amortization of Deferred
 Compensation                      --     --         --        --   --         --          --    554,285         --     554,285
                                                                                                                      ---------

 Sub-Total                                                                                                            4,389,100
                                                                                                                     ----------

Comprehensive Income:
 Adjustment on Disposal of
  Securities Available for
  Sale                             --     --         --        --   --         --          --         --    787,400     787,400
 Net [Loss] for the year
  ended March 31, 1998             --     --         --        --   --         --  (4,527,233)        --         --  (4,527,233)
                             -------- ------   --------  -------- ----   --------  ----------  ---------  ---------  ----------

 Total Comprehensive Income                                                                                          (3,739,833)
                                                                                                                     ----------

 Balance - March 31, 1998  20,304,934  2,030  2,423,970 1,759,166  176  4,142,752  (5,482,779)  (436,882)        --     649,267

Issuance of Options for
 20,000 Shares of Common
 Stock to President                --     --         --        --   --     10,000          --         --         --      10,000

Exercise of Options                --     --         --    50,000    5         --          --         --         --           5

Amortization of Deferred
 Compensation                      --     --         --        --   --         --          --    381,167         --     381,167

Stock Issued for Service           --     --         --   200,000   20     43,980          --         --         --      44,000

Comprehensive Income:
 Net [Loss] for the year
  ended March 31, 1999             --     --         --        --   --         --  (2,698,220)        --         --  (2,698,220)
                           ---------- ------ ---------- --------- ---- ---------- -----------  ---------  --------- -----------

 Balance - March 31, 1999  20,304,934 $2,030 $2,423,970 2,009,166 $201 $4,196,732 $(8,180,999) $ (55,715) $      -- $(1,613,781)
                           ========== ====== ========== ========= ==== ========== ===========  =========  ========= ===========

</TABLE>

The Accompanying Notes are an Integral Part of These Consolidated Financial
Statements.

                                              F-5

<PAGE>



DECOR GROUP, INC. AND SUBSIDIARIES
------------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF CASH FLOWS
------------------------------------------------------------------------------

                                                              Years ended
                                                               March 31,
                                                         1 9 9 9      1 9 9 8
                                                         -------      -------
Operating Activities:
  Net [Loss]                                           $(2,698,220) $(4,527,233)
  Adjustment to Reconcile Net [Loss] to Net Cash
   [Used for] Operating Activities:
   Loss on Sale of Investment in Related Party                  --    1,112,873
   Write-off of Intangibles                                826,469      537,046
   Amortization of Deferred Compensation                   381,167      554,285
   Accrued Management and Consulting Fees - Related
    Party [4A]                                             215,000       90,000
   Accrued Marketing Costs - Related Party [4C]            193,661           --
   Bad Debt Expense                                             --      208,366
   Amortization of Intangibles                              94,057      126,988
   Depreciation                                             68,517       43,250
   Net Book Value of Transferred Assets for Services            --       13,478
   Stock Issued for Services                                44,000       17,500
   Indemnification Expense - Related Party [4E]            300,000           --
   Options Issued to President                              10,000       90,000
   Moving Costs Paid by Related Party [4A]                 120,209           --
   Finders' Fee Paid by Related Party [4A][9]              119,000           --

  Changes in Assets and Liabilities:
   [Increase] Decrease in:
     Accounts Receivable                                    36,375      361,762
     Inventory                                             316,074      373,065
     Prepaid Expenses                                       73,690        5,612
     Other Assets                                               61      (15,474)

   Increase [Decrease] in:
     Accounts Payable and Accrued Expenses                (177,882)     155,807
     Accrued Compensation and Benefit - Former Officer     (88,025)     161,022
     Accrued Costs for Restructuring                      (190,455)     645,000
     Accrued Interest - Related Party                       58,909       (7,447)
                                                        ----------   ----------

  Net Cash - Operating Activities - Forward               (297,393)     (54,100)
                                                        ----------   ----------

Investing Activities:
  Sale of Property and Equipment                                --        1,979
  Purchase of Property and Equipment                       (30,490)     (39,685)
  Proceeds from Sale of Investment in Related Party             --      487,127
  Additional Acquisition Costs - Settlement Agreement           --     (258,438)
                                                        ----------   ----------

  Net Cash - Investing Activities - Forward                (30,490)     190,983
                                                        ----------   ----------

Financing Activities:
  Advances to Interiors [4C]                              (300,000)     (50,000)
  Advances from Interiors [4A] [4C]                        600,000           --
  Costs Paid on Behalf of Interiors [4C]                  (251,134)    (309,914)
  Proceeds from Line of Credit                             346,693      263,428
  Payment of Notes and Leases Payable                     (117,437)    (159,654)
  Exercise of Options                                            5            5
                                                        ----------   ----------

  Net Cash - Financing Activities - Forward             $  278,127   $ (256,135)

The Accompanying Notes are an Integral Part of These Consolidated Financial
Statements.

                                        F-6

<PAGE>



DECOR GROUP, INC. AND SUBSIDIARIES
------------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF CASH FLOWS
------------------------------------------------------------------------------


                                                               Years ended
                                                                March 31,
                                                           1 9 9 9     1 9 9 8
                                                           -------     -------

  Net Cash - Operating Activities - Forwarded            $ (297,393) $  (54,100)
                                                         ----------  ----------

  Net Cash - Investing Activities - Forwarded               (30,490)    190,983
                                                         ----------  ----------

  Net Cash - Financing Activities - Forwarded               278,127    (256,135)
                                                         ----------  ----------

  Net [Decrease] in Cash                                    (49,756)   (119,252)

Cash - Beginning of Years                                    50,256     169,508
                                                         ----------  ----------

  Cash - End of Years                                    $      500  $   50,256
                                                         ==========  ==========

Supplemental Disclosures of Cash Flow Information:
  Cash paid for the years for:
   Interest                                              $   77,080  $   69,495
   Income Taxes                                          $   10,916  $       --

Supplemental Disclosures of Non-Cash Investing and Financing Activities:
  On  November  18,  1996,  the  Company's  wholly  owned   subsidiary   Artisan
Acquisition  Corp., Inc.  purchased  substantially all of the assets and assumed
certain  liabilities of Artisan House,  Inc. for  approximately  $3,700,000,  of
which  $2,400,000  was paid in cash,  $300,000  in shares  of  common  stock and
approximately  $1,000,000  in notes.  The Company  primarily  acquired  accounts
receivable of approximately $1,100,000,  inventory of approximately $800,000 and
assumed  liabilities  of  approximately  $578,000.   Additionally,  the  Company
recorded  deferred  compensation  for  options  issued to the seller for 100,000
shares of common stock valued at $1,000,000.

  In December of 1997 and January 1999,  the Company  issued options for a total
of 40,000 shares of the  Company's  common stock to its President and recorded a
total of  $100,000  as  compensation  expense  for the two years ended March 31,
1999.

  In March 1999, the Company retired  approximately $66,000 of fully depreciated
leasehold  improvements  for offices in the Company's  Glendale Blvd.  location,
which are no longer in use.

The Accompanying Notes are an Integral Part of These Consolidated Financial
Statements.

                                        F-7

<PAGE>



DECOR GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------



[1] Summary of Significant Accounting Policies

[A] Nature of  Operations  - Decor  Group,  Inc.,  a Delaware  corporation  [the
"Company"  or  "Decor"],  was  incorporated  on March 1, 1996.  The Company is a
subsidiary  of  Interiors,  Inc.  The Company was  organized  for the purpose of
acquiring  Artisan House,  Inc.  ["Artisan"].  The  acquisition was completed on
November   18,  1996.   Artisan  is  engaged  in  the  business  of   designing,
manufacturing,  marketing, selling and distributing metal wall-mounted, tabletop
and freestanding  sculptures.  Artisan manufactures its products at one location
in southern  California  and sells  through sales  representatives  and from its
regional  showrooms to furniture  retailers and department stores throughout the
United  States and  internationally.  The  transaction  was  recorded  under the
purchase method. The Company does not maintain separate divisions,  segments, or
product lines for its business. [See Notes 2 and 6].

[B] Cash  Equivalents  - The  Company's  policy is to classify all highly liquid
investments  with  maturity of three  months or less when  purchased  to be cash
equivalents. There were no cash equivalents at March 31, 1999.

[C] Inventory - Inventory is stated at the lower of cost or market, is comprised
of  materials,  labor and factory  overhead,  and is determined on the first-in,
first-out ["FIFO"] basis.

[D] Property and Equipment - Property and equipment is stated at cost and is net
of  accumulated  depreciation.  The  cost  of  additions  and  improvements  are
capitalized  and  expenditures  for repairs and  maintenance are expensed in the
period  incurred.  Depreciation of property and equipment is provided  utilizing
the  straight-line  method over the  estimated  useful  lives of the  respective
assets as follows:

Vehicles                                 3 Years
Machinery and Equipment              1 - 5 Years
Furniture and Fixtures                   5 Years

Leasehold improvements are amortized utilizing the straight-line method over the
shorter  of  the  remaining  term  of  the  lease  or  the  useful  life  of the
improvement.

[E]  Goodwill  - Amounts  paid in excess of the  estimated  value of net  assets
acquired of Artisan House, Inc. were charged to goodwill. Goodwill is related to
revenues the Company  anticipates  realizing in future years. In connection with
the  acquisition  of  Artisan  House,   Inc.  in  November  1996,   goodwill  of
approximately  $1,800,000 was originally recorded using the purchase method. The
Company had decided to amortize  its  goodwill  over a period of ten years using
the  straight-line  method.   Effective  April  1,  1997  based  upon  operating
management's  experienced  understanding  of the  expected  useful  lives of the
tangible and intangible  assets,  the Company changed its period of amortization
of  goodwill  to twenty  years.  The effect of this  change is to reduce  future
annual  amortization  of goodwill by $75,000.  This change  decreased the fiscal
1998 net loss by $75,000.  Goodwill and other intangible  assets were previously
written off as of September 30, 1997. An amendment was filed in February of 1998
for the  September  1997 Form 10-QSB that reversed the writedown of the goodwill
based upon revised information obtained after the original filing. The Company's
policy is to evaluate the periods of goodwill  amortization to determine whether
later events and  circumstances  warrant revised  estimates of useful lives. The
Company  also  evaluates  whether  the  carrying  value of  goodwill  has become
impaired by comparing  the carrying  value of goodwill to the value of projected
undiscounted  cash flows  from  acquired  assets or  businesses.  Impairment  is
recognized  if the  carrying  value of  goodwill is greater  than the  projected
undiscounted  cash flow from the acquired  assets or business.  Accordingly,  in
March of 1999, the Company  decided to write down the carrying value of goodwill
to $750,000 [See Note 2].



                                       F-8

<PAGE>



DECOR GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #2
------------------------------------------------------------------------------



[1] Summary of Significant Accounting Policies [Continued]

[F] Stock  Options  and Similar  Equity  Instruments  Issued to  Employees - The
Financial  Accounting  Standards  Board ["FASB"]  issued  Statement of Financial
Accounting   Standards   ["SFAS"]   No.   123,   "Accounting   for   Stock-Based
Compensation,"  in October 1995.  SFAS No. 123 uses a fair value based method of
accounting for stock options and similar equity instruments as contrasted to the
intrinsic value based method of accounting  prescribed by Accounting  Principles
Board ["APB"]  Opinion No. 25,  "Accounting  for Stock Issued to Employees." The
Company  adopted  SFAS No. 123 on April 1, 1996 for  financial  note  disclosure
purposes and will continue to apply APB Opinion No. 25 for  financial  reporting
purposes.

[G] Loss  Per  Share - The  Financial  Accounting  Standards  Board  has  issued
Statement of Financial  Accounting  Standards  ["SFAS"] No. 128,  "Earnings  per
Share";  which is effective for financial  statements  issued for periods ending
after December 15, 1997.  Accordingly,  earnings per share data in the financial
statements for the years ended March 31, 1999 and 1998,  have been calculated in
accordance  with SFAS No. 128.  Prior periods  earnings per share data have been
recalculated  as  necessary to conform  prior years data to SFAS No. 128.  Prior
periods'  earnings per share data have been restated to give retroactive  effect
for the one for three reverse stock split in October of 1997.

SFAS No. 128 supersedes  Accounting  Principles  Board Opinion No. 15, "Earnings
per  Share,"  and  replaces  its  primary  earnings  per share  with a new basic
earnings per share  representing the amount of earnings for the period available
to each share of common stock outstanding during the reporting period.  SFAS No.
128 also requires a dual presentation of basic and diluted earnings per share on
the face of the statement of operations for all companies  with complex  capital
structures.  Diluted  earnings per share reflects the amount of earnings for the
period available to each share of common stock outstanding  during the reporting
period,  while giving effect to all dilutive  potential  common shares that were
outstanding during the period,  such as common shares that could result from the
potential exercise or conversion of securities into common stock.

The  computation  of diluted  earnings  per share  does not  assume  conversion,
exercise,  or contingent  issuance of securities that would have an antidilutive
effect on earnings  per share [i.e.,  increasing  earnings per share or reducing
loss per share].  The dilutive  effect of  outstanding  options and warrants and
their   equivalents  are  reflected  in  dilutive  earnings  per  share  by  the
application  of the treasury  stock method which  recognizes the use of proceeds
that could be  obtained  upon  exercise of options  and  warrants  in  computing
diluted  earnings  per share.  It  assumes  that any  proceeds  would be used to
purchase common stock at the average market price during the period. Options and
warrants will have a dilutive  effect only when the average  market price of the
common  stock  during the period  exceeds the  exercise  price of the options or
warrants and the Company reports income from operations.

Potential common shares of 50,000 are not currently dilutive,  but may be in the
future.

[H] Risk  Concentrations - Financial  instruments  that potentially  subject the
Company to  concentrations  of credit risk include cash and accounts  receivable
arising from its normal business activities.  The Company places its cash with a
high credit quality  financial  institution and  periodically  has cash balances
subject to credit risk beyond  insured  amounts.  At March 31, 1999, the Company
had no cash in excess of insured amounts.

The Company  routinely  assesses the financial  strength of its  customers,  and
based upon factors surrounding the credit risk of its customers,  established an
allowance  for  uncollectible  accounts of $137,068 for the fiscal  period ended
March 31,  1999 and as a  consequence,  believes  that its  accounts  receivable
credit risk  exposure  beyond this  allowance  is limited.  The Company does not
require collateral to support financial instruments subject to credit risk.


                                       F-9

<PAGE>



DECOR GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #3
------------------------------------------------------------------------------



[1] Summary of Significant Accounting Policies [Continued]

[I] Use of Estimates - The  preparation  of financial  statements  in conformity
with  generally  accepted  accounting  principles  requires  management  to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting period.
Actual results could differ from those estimates.

[J] Principles of Consolidation - The consolidated  financial statements include
the  accounts of the Company and its  subsidiaries.  All  material  intercompany
accounts and transactions are eliminated.

[K] License  Agreements - The Company currently  manufactures a small segment of
its  products  pursuant  to license  agreements.  Generally,  all of the license
agreements are non-exclusive,  permit sales in the United States and require the
Company to make periodic  royalty  payments based upon revenues from the sale of
licensed works.

[L]  Advertising  Expenses  -  The  Company  incurred  advertising  expenses  of
approximately  $88,000 and $143,000 for the years ended March 31, 1999 and 1998,
respectively.

[2] Acquisition - Artisan

On November 18, 1996, the Company's wholly owned subsidiary Artisan  Acquisition
Corp.,  Inc.  purchased  substantially  all of the  assets and  assumed  certain
liabilities of Artisan for  $3,694,826,  of which a total of $2,400,000 was paid
in cash. A secured  promissory  note for $923,496 was issued to the seller.  The
note provides for the payment to the seller of the following: a) $100,000 within
90 days after the  closing,  b) beginning  120 days after the closing,  60 equal
monthly  payments of $13,989  bearing an  interest  rate of 8%, and c) a balloon
payment of $150,000 concurrent with the 60th installment.  The required payments
under (a) and (c) did not provide for interest and were  discounted at 8% giving
rise to a discount  of $48,387  which will be  amortized  to  interest  expense.
Separately,  the seller was issued  50,000  shares,  giving  effect to the stock
dividend and the reverse stock split, of Decor common stock, valued at $300,000.
Effective  September 8, 1997,  the Company,  pursuant to a settlement  agreement
arising  from  a  dispute  concerning  the  asset  purchase  agreement  paid  an
additional  $258,438  in  cash  and  recorded  goodwill  for  such  amount.  The
transaction was recorded under the purchase  method.  Goodwill of  approximately
$1,800,000  was recorded  and  amortized  over 20 years using the  straight-line
method.  Intangible  assets of $537,046 were written off in March of 1998.  Upon
the Company's  moving its operations in March of 1999,  the Company  reevaluated
its projected  future cash flows and recorded an  impairment  of $826,469  based
upon management's revised and updated operational plans and management's updated
projected  ability to generate  future  positive cash flows as of March 31, 1999
[See Note 1E].  The  remaining  carrying  value of goodwill of $750,000  will be
written  off over  the  remaining  17  years  under  the  straight-line  method.
Operations  of Artisan were  included  with the Company  from  November 19, 1996
onward.  The assets and  liabilities  of Artisan were combined with those of the
Company as of November 18, 1996 [See Note 12 - Restructuring Plan].

[3] Inventories

The components of inventory were as follows:

Raw Materials                           $  207,970
Work-in Process                             12,822
Finished Goods                             110,427
                                        ----------

  Totals                                $  331,219
  ------                                ==========

The Company has set up an allowance for slow moving products of $60,340.


                                      F-10

<PAGE>



DECOR GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #4
------------------------------------------------------------------------------


[4] Related Party Transactions

[A] Due to  Interiors  -  Management  Agreement - On May 28,  1996,  the Company
entered  into  a two  year  management  agreement  with  Interiors,  Inc.  which
specializes in the home furnishings and decorative accessories  industries.  The
agreement  calls  for a  management  fee of  $90,000  or  1.5% of  gross  sales,
whichever is greater,  per annum.  The annual  management fee of $90,000 will be
paid  quarterly  to the extent that there is excess cash flow  available  to the
Company as defined in the  agreement.  No payment in any quarter will exceed 50%
of excess  cash flow as  defined.  The  agreement  has a term of two years  with
renewal  options at the mutual  consent of both parties.  Interest is accrued on
the unpaid management fee.

At March 31,  1997,  the  Company  had amounts  due to  Interiors  of  $185,285,
consisting of $18,750 in management  fees and $166,535 of advances.  The Company
accrued  additional  management  fees of $90,000  [in  accordance  with  amended
agreement  dated February 1997] and paid $50,000 during the year ended March 31,
1998.

On April 2, 1998,  the Board of Directors  amended the February 1997  management
services  agreement  in that it  allowed  the  Company to make  payments  deemed
warranted or necessary to Interiors or third parties on behalf of Interiors [See
Note 4C].

Commencing  December of 1998,  Artisan  incurred  costs  totaling  approximately
$180,000,  which remains unpaid as of March 31, 1999, for various  expenses paid
by Troy  Lighting  primarily  for moving  costs of  approximately  $120,000  and
payroll  costs of  approximately  $40,000.  Interiors  also paid  $119,000  as a
finders fee to the former owner of Artisan House [See Note 9].

The Company  recorded a non-cash  $125,000  of  management  consulting  fees due
Interiors on June 30, 1998,  relating to marketing  and  merchandising  services
provided by the related party to the Company and accrued the  management  fee of
$90,000 during the year ended March 31, 1999. In addition,  the Company received
a $400,000  advance from  Interiors on July 23, 1998. As of March 31, 1999,  the
Company has an outstanding  balance due to Interiors of $1,079,494.  The Company
recorded interest expense for the years ended March 31, 1999 and 1998 of $19,095
and $16,116, respectively, on the unpaid management fee [See Note 16].

[B] Stockholders'  Loans Payable - The Company received $35,500 in June 1996 and
$8,000 in July 1996 in loan  proceeds.  The notes bear interest at 12% per annum
and had a maturity  date of April  1998.  Interest  expense  for the years ended
March 31, 1999 and 1998 was $5,220 and $5,220, respectively.

[C] Due from  Interiors - In March of 1998, the Company  advanced  approximately
$300,000 to Interiors, Inc., $200,000 of which carried interest at the Company's
borrowing  rate.  The  $200,000  was  repaid  with  interest  in  April of 1998.
Throughout  fiscal 1999,  Artisan also incurred  costs,  which were allocated to
Interiors,  totaling  approximately  $224,000 primarily for various employee and
consulting  expenses on behalf of Interiors.  In addition,  Artisan  reduced the
accounts receivable balance due from Interiors in exchange for product marketing
and  merchandising  costs being  incurred by the related  party on behalf of the
Company for $193,661,  which is  classified as consulting  services by a related
party.  As of March 31, 1999,  the balance due on the  intercompany  charges was
$134,515.

During  fiscal  1999,  the  Company  also  incurred  additional  costs for three
entities  acquired by Interiors.  These receivable  transactions,  which have no
impact on the statement of operations,  with the exception of finder's fees paid
to the seller of Artisan House [See Note 7A], are summarized as follows:

o  In fiscal 1999, Artisan incurred costs totaling  approximately $35,000, which
   remains  unpaid as of March  31,  1999,  for  various  expenses  on behalf of
   Vanguard Studios primarily for shared employee and freight costs.

o  In September of 1998, Artisan used $300,000 from its financial line of credit
   for an Interior's acquisition. An additional $2,050 of costs were incurred by
   Artisan in February and March of 1999 for the entity. The balance due Artisan
   from that entity as of March 31, 1999 was  $302,050,  of which  $300,000  was
   repaid in April 1999.

                                      F-11

<PAGE>



DECOR GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #5
------------------------------------------------------------------------------



[4] Related Party Transactions [Continued]

[D]  Indemnification  Agreement - Interiors - In September of 1998,  the Company
recorded  a  $300,000  indemnification  expense  resulting  from  the  Company's
indemnification  of up to $300,000 to United Credit Corporation for an abandoned
acquisition  by Interiors as a result of a business  failure  experienced by the
potential  acquisition  candidate.  The Company believes that it could be liable
for up to  $300,000  as a  result  of their  indemnification  of  United  Credit
Corporation. The Company also believes that this matter will be settled sometime
in fiscal 2000.

[E] Insurance  Allocations - The Company pays an allocated  premium for property
liability and workmens' compensation insurance as a part of the master policy of
Interiors.  The master policy consolidates the various Interiors  entities,  and
produces a lower premium. The Company is allocated the premium based upon sales,
property value and payroll.  The allocated  insurance expense for the year ended
March 31, 1999 was approximately $50,000.

[5] Property and Equipment

Property and equipment consisted of the following:

Machinery and Equipment                 $  175,862
Leasehold Improvements                     111,270
Furniture and Fixtures                     150,244
Office and Computer Equipment               66,058
                                        ----------

Total - At Cost                            503,434
Less: Accumulated Depreciation             444,340
                                        ----------

  Net                                   $   59,094
  ---                                   ==========

Depreciation expense was approximately $68,516 and $43,000, respectively for the
years ended March 31, 1999 and 1998.

[6] Investment in Interiors, Inc. - Related Party

On March 3, 1996, the Company issued to Interiors, Inc. 250,000 shares of Series
A Non-Voting  Convertible  Preferred Stock and an option to purchase  20,000,000
shares of Series B Non-Convertible Voting Preferred Stock for $2,000 in exchange
for Interiors,  Inc. issuing to the Company 66,666 shares of Common Stock valued
at $600,000 and 200,000 shares of Series A Convertible Preferred Stock valued at
$1,000,000. This option was exercised in September of 1996. On May 28, 1996, the
Company  entered  into a  management  agreement  with  Interiors,  Inc.  whereby
Interiors,  Inc.  will  provide the Company  certain  marketing  and  management
services  [See  Note 4A].  The  exchange  of  shares  between  the  Company  and
Interiors,  Inc. was pursuant to the Company's  intentions to secure the ongoing
and long-term  availability  of these  services.  In September 1997, the Company
sold all of the common and preferred  shares of Interiors  stock to an unrelated
party for gross  proceeds  of  $487,127  and,  accordingly,  realized  a loss of
$1,112,873. As of March 31, 1999, Interiors, Inc. owned approximately 90% of the
Company's total voting stock outstanding  assuming no conversion of the Series A
and Series C Preferred Stock [See Note 16[A] - Pending Merger].



                                      F-12

<PAGE>



DECOR GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #6
------------------------------------------------------------------------------


[7] Commitments and Contingencies

[A] Employment Agreement - Seller - On October 30, 1997, the Seller's employment
agreement  dated  November  18, 1996 was amended to provide for the  issuance of
options to purchase  50,000 shares of the Company's  common stock on each of the
first and second anniversaries of the agreement.  The options are exercisable at
$.0001 per share  commencing the date of issuance and expiring in four years. In
December  of 1997,  the seller  exercised  options  for 50,000  shares of common
stock.  Henry  Goldman  pursuant to the terms of the AHI  acquisition  agreement
received  options for an  additional  50,000  shares of common  stock in January
1999.  The Company  recorded  deferred  compensation  cost for the fair value of
options  for  100,000  shares of the  Company's  common  stock in the  amount of
$1,000,000  as of November  18,  1996 and  amortized  $178,233  as  compensation
expense  for the year ended March 31,  1997.  For the years ended March 31, 1999
and 1998, the Company amortized $381,167 and $500,000, respectively, as deferred
compensation.

In July 1997, there was an attempt to terminate Artisan's  employment  agreement
with the seller. In connection with a settlement  agreement reached in September
1997 with CIDCOA  International,  Inc.  ["CIDCOA"],  formerly  known, as Artisan
House, Inc. [See Note 9], the Company  reinstated the employment  agreement with
the seller and recorded  additional  monies owed to the seller of  approximately
$290,000.  There are no monies  outstanding  at March 31, 1999  pursuant to this
agreement. The employment agreement also provides for finder's fees to be earned
by the seller pursuant to certain  acquisitions made by the Company,  its parent
or  affiliates.  The  Company  expensed  $64,000  representing  an  estimate  of
compensation earned by the seller as a consequence of the Vanguard and Artmaster
acquisitions  made by  Interiors,  Inc. in March of 1998.  The Company  expensed
$119,000 in fiscal 1999, which is the compensation due the seller resulting from
Interiors' acquisition in fiscal 1999, which was paid by Interiors [See Notes 4A
and 9].

[B]  Consulting  Agreements  - On January 1, 1997,  the Company  entered  into a
consulting  agreement  with a now former  Director of the Company to provide the
Company with such consulting  services as requested by the Company in connection
with strategic planning, marketing and management issues. The Company has agreed
to pay  $150,000  over three [3] years.  At March 31,  1999,  the  Company  owes
$50,000 to the  director as monies due upon his  resignation,  which was paid in
April of 1999.

[C]  Termination  Agreement  -  Under  a  termination  agreement  with a  former
employee,  the Company was required to pay severance in the amount of $3,889 per
month for 18 months beginning April 1997. In addition,  the Company was required
to provide various other minimal  benefits to the former  employee.  The Company
recorded a liability for the total compensation payments of $70,000 at March 31,
1997.

In June 1997,  the Company  ceased paying the severance pay required  under this
termination  agreement.  In August 1997,  the Company  entered into a settlement
agreement  with the former  employee which called for the payment of $45,000 and
the  issuance of 1,666 shares of the  Company's  common  stock,  with a value of
$17,500.  The stock shall be restricted  for a period of twelve months after the
date of issuance.

[D] Line of Credit - On  September  15,  1998,  Artisan  obtained  an  increased
accounts  receivable and inventory  based line of credit for up to $950,000 with
interest at prime plus 5.5% secured by all of Artisan's assets and guaranteed by
Decor and Interiors, Inc. The amount available under the line of credit at March
31, 1999 was $85,545.  At March 31, 1999, Artisan had an outstanding  balance of
$610,121.  The line of credit has an expiration  date of June 30, 1999. The term
of the credit line  automatically  renews  each year  unless  notice is given by
either the Company or the lender to the other, respectively, within a period not
less than 60 days prior to expiration. No such notice has been given or received
by the Company.  The Company is not in violation of any of the  covenants of the
loan.  Interest  expense and collection  and processing  fees for the year ended
March 31, 1999 was $61,736 and $8,831, respectively.

The line of credit includes a term loan originating in the amount of $100,000 as
of  September  30, 1998.  Principal  payments of $5,000 per month are due on the
loan.

The Company is contingently  liable as guarantor of the debts owed to the lender
of the line of credit by  related  parties  with  aggregate  indebtedness  up to
$14,400,000.

                                      F-13

<PAGE>



DECOR GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #7
------------------------------------------------------------------------------


[7] Commitments and Contingencies [Continued]

[E] Leases - The Company  leases  manufacturing  and office space in  California
from the seller of Artisan.  This operating  lease,  which expires  November 30,
2001 is for Artisan's  operations.  The lease provides for additional rent based
on increases in the Consumer Price Index [See Note 12 - Restructuring Plan].

Commencing in April of 1999,  the Company will incur  approximately  $20,000 per
month to a  subsidiary  of Interiors  for all  building and facility  costs on a
month to month basis as a result of the March facility relocation.

Future minimum lease payments under all operating leases are as follows at March
31, 1999:

Year ended
March 31,
  2000                              $ 247,904
  2001                                246,446
  2002                                145,538
  2003                                 37,520
  2004                                 37,520
  Thereafter                            3,127
                                    ---------

  Total                             $ 718,055
  -----                             =========

Artisan  also  rents  showroom  space  in High  Point,  North  Carolina  and San
Francisco,  California.  The High Point lease  expires April of 2004 and the San
Francisco  lease expires in July of 2001. The current monthly lease payments are
$3,126 for High Point and $1,465 for San Francisco.

Rental expense was $246,972 and $236,197, respectively for the years ended March
31, 1999 and 1998.

[F] Employment  Agreement - President/Chief  Financial Officer - On December 31,
1996,  Artisan  entered into a three year  employment  agreement  with Artisan's
Chief Operating Officer and Treasurer for (i) an annual salary of $100,000; (ii)
a cash  bonus  equal to ten  percent  [10%] of the  annual  salary,  based  upon
Artisan's net profit before taxes ["NPBT"]; and (iii) a cash bonus equal to five
percent  [5%] of the  increase in NPBT over the  previous  fiscal  year,  not to
exceed 40% of the base salary.  The agreement also provides  options to purchase
10,000  shares  of the  Company's  common  stock  per year for each  year of the
agreement at an exercise price equal to $.0003 per share  exercisable  after one
year for a period of five years. The Company recorded  deferred  compensation of
$180,000  for the  options.  For the years ended  March 31,  1999 and 1998,  the
Company amortized $60,000 and $64,285, respectively, as compensation expense. In
March  1997,  the officer  was  elected to the  offices of  President  and Chief
Financial Officer of the Company.

The agreement also provides  additional  performance  options to purchase 10,000
shares of the Company's common stock  exercisable for a period of one year at an
exercise price equal to the average closing price of the Company's stock for the
20 days  ending  two days  prior to date of grant for each of the  years  ending
March 31, 1998, 1999 and 2000.  Continued  employment by the Company is required
and the Company must meet or exceed 115% of the prior year's NPBT.

In December of 1997, the officer received 20,000 options,  which represented the
additional 10,000 options due on January 1, 1998 under the employment  agreement
and an additional 10,000 options.  The Company recorded  compensation expense of
$90,000 on January 1, 1998.

On January 2, 1999, pursuant to an incentive stock option agreement, the officer
received  20,000  options  under the  employment  agreement  whereby the Company
recorded  compensation  expense of $10,000 on January 2, 1999.  The options vest
immediately  and not more than 20% per year are available for exercise at $.0001
per share until January 2000. The options will expire January 2005.

In March of 1999, the Company accrued a bonus of $35,000 to the  President/Chief
Financial Officer.

                                      F-14

<PAGE>



DECOR GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #8
------------------------------------------------------------------------------


[8] Debt
                                         March 31,
                                          1 9 9 9

Acquisition Loan                        $  585,409
Less:  Discount                             28,364
                                        ----------

Total                                      557,045
Less: Current Portion of Long-Term Debt    128,015
                                        ----------

  Long-Term Portion                     $  429,030
  -----------------                     ==========

Annual maturities of notes payable are as follows:

Year ended
March 31,
  2000                        $ 128,015
  2001                          139,472
  2002                          289,558
  Thereafter                         --
                              ---------

  Total                       $ 557,045
  -----                       =========

On November 18, 1996, the Company issued a secured promissory note in the amount
of $923,496 to the seller of Artisan House of which $100,000 was due in February
of 1997 and the balance will be paid in 60 equal monthly installments of $13,989
bearing interest at 8% with a final payment of $150,000 at maturity. The note is
collateralized  by  a  second  interest  on  all  assets  of  the  Company.  The
non-interest  bearing  portion  for  the  $150,000  was  discounted  at 8%.  The
amortization  on this  discount  for the years ended March 31, 1999 and 1998 was
approximately  $10,000 and  $10,000,  respectively,  and has been  amortized  as
interest  expense.  Interest expense for the years ended March 31, 1999 and 1998
was approximately $50,000 and $50,000, respectively, on the note payable.

[9] Legal Proceedings

In March 1997,  CIDCOA  brought an arbitration  proceeding  against the Company,
currently  settled,  alleging that it had failed to pay CIDCOA  additional  sums
owed to it in connection  with the  Company's  purchase of all of the assets and
assumption of  substantially  all of the liabilities of Artisan.  CIDCOA alleged
that  it  was  owed  a  purchase  price  adjustment.   The  Company  denied  the
allegations,  and  brought  counterclaims  against  CIDCOA  alleging  breach  of
contract,  breach of warranty,  misrepresentation and fraud by CIDCOA. In August
1997, CIDCOA filed a motion seeking to enforce an alleged  settlement  agreement
made by the parties.  In September  1997, the Company  entered into a settlement
agreement with CIDCOA  included in which was the payment of (i) a purchase price
adjustment  of  approximately  $100,000  and  (ii)  $158,438  in lieu of  10,000
registered shares of the Company which were never issued to CIDCOA. In addition,
the  settlement  confirms  that the original  amount of the  promissory  note is
$926,400 and confirms that the monthly payments under the note shall be $13,989,
reinstates the terminated  employment agreement with Henry Goldman [See Note 7A]
and provides for the Company to bring current all disputed  payments and amounts
due Goldman and CIDCOA under the original  purchase and  employment  agreements.
Further,  the  settlement  agreement  provides  that  obligations  to CIDCOA and
Goldman under the promissory note, the employment  agreement and Artisan House's
real  property  lease for its  operating  facilities  will be  guaranteed by the
Company and Interiors, Inc.

The Company  entered  into an  arbitration  with the seller  concerning  various
financial  compensation  claims on October 29, 1998. A settlement was reached in
January  1999,  that  provides  for (i) payment of a finder's  fee on  companies
purchased by Interiors of $119,000,  which was paid by Interiors,  [See Notes 4A
and 7A], (ii) the removal of the restrictive legend on the stock issued pursuant
to a H. Goldman  exercise of options in 1997 and (iii) the issuance of stock due
in 1998.

                                      F-15

<PAGE>



DECOR GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #9
------------------------------------------------------------------------------


[10] Capital Stock

[A] Public Offering - On November 18, 1996, the Company  successfully  completed
its initial  public  offering and sold 345,000 shares of Common Stock at $10 per
share  [giving  effect to the reverse  stock split See Note 10D]. As a result of
this  offering,  the  Company  received  net  proceeds  of  $2,236,123  [net  of
$1,240,204 offering expense].

[B] Stock  Dividends - On December 3, 1996,  the Board of  Directors  declared a
dividend on its shares of Common Stock,  distributable to stockholders of record
of the Company as of December 16, 1996 on the basis of two additional  shares of
Common  Stock for each one share of common  stock  previously  outstanding.  All
share data in the financial statements have been adjusted for this dividend.

[C] Series B Preferred Stock Dividend - In January of 1997, the Company issued a
dividend on its Series B Preferred Stock payable to the stockholder of record as
of December  16,  1996 on the basis of 1 share of Series B  Preferred  Stock for
each share of Series B  Preferred  Stock  outstanding.  All share data have been
adjusted for this dividend. In addition,  the resolution was made that if at any
time the Company's  Board of Directors and  stockholders  approve an increase in
the number of  authorized  shares of Series B  Preferred  Stock to not less than
30,000,000  shares,  then the Series B Preferred  stockholder shall be issued an
additional 10,000,000 shares of Series B Preferred.

[D] Reverse Stock Split - Effective October 8, 1997, the Company completed a one
share for three shares  reverse stock split of its common stock.  All shares and
per share amounts have been restated  retroactively.  Any fractional shares were
purchased by the Company at the average  closing bid and ask price of the common
stock of the Company as of October 8, 1997.

[E] Additional Stock Issued - In March of 1998, the Company retained a financial
consulting  firm to  provide  merger and  acquisition  consulting  and  advisory
services in connection  with the pending merger with  Interiors,  Inc. and other
acquisition  candidates.  In May 1998,  the Board of  Directors  of Decor issued
200,000  shares of the  Company's  common stock in exchange  for these  services
valued at $44,000. In July 1998, the Company paid the financial  consulting firm
$200,000  for these  services  performed in fiscal 1999. A total of $244,000 was
expensed in the year ended March 31, 1999.

[F] Preferred Stock - Series A Convertible - Each share shall not have the right
to vote nor to receive  dividends and the liquidation  rate is $.0001 per share.
Each share is  convertible  into one share of Common  Stock,  subject to certain
anti-dilution  provisions.  Series B  Non-Convertible  - Each  share  shall  not
receive  dividends,  but will have the right to vote and the liquidation rate is
$.0001 per share.  Series C Convertible - Each share shall not have the right to
vote nor receive dividends. The liquidation rate is $.0001 per share. Each share
is convertible  commencing  September 1, 1997,  subject to adjustment,  into one
share of common stock, subject to certain anti-dilution provisions.

[11] Going Concern

The  accompanying  financial  statements  have been  prepared on a going concern
basis which  contemplates  the  realization  of assets and the  satisfaction  of
liabilities and commitments in the normal course of business.

Since the  Company's  operations  commenced in April of 1996,  revenues have not
been sufficient to cover the Company's fixed  administrative  costs resulting in
operating losses of $2,582,290 and $3,346,712 for the years ended March 31, 1999
and 1998, respectively.  The Company had a working capital deficit of $2,010,712
and an  accumulated  deficit of  $8,180,999  at March 31, 1999.  The Company was
primarily  funded for the year ended March 31, 1999 by proceeds from the line of
credit and monies advanced by Interiors. Management believes that as a result of
the Company's move in March of 1999 it will be able to continue its  expenditure
reductions  as a  result  of  sharing  many  costs  with  entities  acquired  by
Interiors.

                                      F-16

<PAGE>



DECOR GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #10
------------------------------------------------------------------------------


[11] Going Concern [Continued]

There can be no assurances that management's  plans to reduce operating expenses
and  obtain  additional  financing  to fund its  working  capital  needs will be
successful.  The financial statements do not include any adjustments relating to
the  recoverability  and  classification  of recorded assets, or the amounts and
classification  of liabilities  that might be necessary in the event the Company
cannot continue in existence.

[12] Restructuring Plan

In September of 1997, the Company commenced and approved an exit plan to satisfy
its  various  investor   constituencies   by  improving  the  manufacturing  and
administrative   operations   of  the  Company  for  growth   through   improved
competitiveness,  quality and  effectiveness.  Such  efforts  have  included the
retention  of various  advisors  and  analysis  by  management  to  improve  the
manufacturing and administrative operations of the Company. The Company has been
concentrating on strategies for growth through improved competitiveness, quality
and  effectiveness.  Accordingly,  Artisan  finalized  its planned move into the
facilities of Interior's subsidiary,  Troy Lighting, Inc., and will share common
facilities with Troy commencing in March 1999 [See Note 4C].

As of March 31,  1998,  management  believed  that the  restructuring  costs and
charges for the cost of shutting down the operations were approximately  $20,000
and the projected remaining lease obligations on the premises were $625,000. The
restructuring  reserve through December 1997 had included an offset for sublease
income.  However,  since there had not been any  successful  commitment  in this
endeavor since September of 1997,  management decided to increase the reserve by
approximately  $435,000.  This  represented  management's  previous  estimate of
attainable  sublease  income for the remaining term of 44 months,  and leasehold
improvements.

During the year  ended  March 31,  1999,  the  Company  reduced  the  reserve by
$170,454 which represented the annual lease payments.  Therefore,  the Company's
restructuring  reserve  as of March  31,  1999 of  $454,545,  represents  the 32
remaining months on the lease term.

[13] Income Taxes

The Company and its consolidated  subsidiaries apply the provisions of Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes".

The Company has net operating loss carry forwards of approximately $4,600,000 of
which approximately  $100,000 will expire in 2011,  approximately  $600,000 will
expire in 2012,  approximately $2,400,000 will expire in 2013, and approximately
$1,500,000 will expire in 2014.

The major components of deferred income tax assets and liability are as follows:

Deferred Tax Liability
  Depreciation and Amortization          $   20,000
                                         ==========

Deferred Tax Asset
  Reserves and allowances                 $ 352,000
  Stock based compensation                  152,000
  Net Operating loss carry forwards       1,840,000
                                         ----------

  Total Deferred Tax Assets              $2,344,000
                                         ==========

  Net Deferred Tax Asset Before
   Valuation Allowance                   $2,324,000
   Valuation Allowance                   (2,324,000)
                                         ----------

   Net                                   $       --
   ---                                   ==========

                                      F-17

<PAGE>



DECOR GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #11
------------------------------------------------------------------------------



[13] Income Taxes [Continued]

Due to the  uncertainty  whether the Company will generate  income in the future
sufficient to fully or partially  utilize the net operating loss  carryforwards,
the Company  recorded a valuation  allowance of $2,324,000.  This  represents an
increase in its valuation  allowance of $735,000 over the allowance at March 31,
1998.

[14] Stock Options

In  March  1996,  the  Board  of  Directors  of the  Company  adopted,  and  the
stockholders  of the  Company  approved  the  adoption  of,  the 1996 Stock Plan
[hereinafter called the "1996 Plan"]. The purpose of the 1996 Plan is to provide
an incentive and reward for those executive  officers and other key employees in
a position  to  contribute  substantially  to the  progress  and  success of the
Company,  to closely align  employees with the interests of  stockholders of the
Company by linking  benefits to stock  performance and to retain the services of
such employees,  as well as to attract new key employees. In furtherance of that
purpose,  the 1996  Plan  authorizes  the  grant to  executives  and  other  key
employees of the Company stock options,  restricted stock, deferred stock, bonus
shares,   performance  awards,   dividend  equivalents  rights,   limited  stock
appreciation  rights and other stock-based  awards, or any combination  thereof.
The maximum number of shares of common stock with respect to which awards may be
granted pursuant to the 1996 Plan is initially  250,000 shares.  No options were
granted under the 1996 Plan.

The Company applies Accounting  Principles Board Opinion No. 25, "Accounting for
Stock  Issued to  Employees,"  and related  interpretations,  for stock  options
issued to employees in  accounting  for its stock option  plans.  Pursuant to an
employment agreement and incentive stock option plan entered into December 1996,
compensation   expense  has  been  recognized  for  the  Company's   stock-based
compensation in the amounts of $10,000 and $90,000 for the years ended March 31,
1999 and 1998.  The  exercise  price for all stock  options  issued to employees
during  fiscal years 1999 and 1998 were below the market price of the  Company's
stock at the date of grant.

A summary of the activity under the plan is as follows:
                                                                      Weighted
                                                            Weighted   Average
                                                             Average  Remaining
                                Seller/   President         Exercise Contractual
                                Others    [Note 7F]  Shares   Price     Life
                               --------   ---------  ------   -----     ----

  Outstanding - March 31, 1997  100,000    10,000    110,000  $ .0001
  ----------------------------

Granted                              --    20,000     20,000    .0003
Exercised                       (50,000)       --    (50,000)  (.0001)
Forfeited/Expired                    --        --         --       --
                               --------  --------  ---------  -------

  Outstanding - March 31, 1998   50,000    30,000     80,000    .0002
  ----------------------------

Granted                          50,000    20,000     70,000    .0001
Exercised                       (50,000)       --    (50,000)  (.0001)
Forfeited/Expired               (50,000)       --    (50,000)  (.0001)
                               --------  --------  ---------  -------

  Outstanding - March 31, 1999       --    50,000     50,000  $ .0002
  ---------------------------- ========  ========  =========  =======

  Exercisable - March 31, 1999       --     8,000      8,000    .0002   3 Years
  ---------------------------- ========  ========  =========  ======= =========

Weighted  average fair value of options  granted during fiscal 1999 and 1998 was
$.50 and $4.50, respectively.

                                      F-18

<PAGE>



DECOR GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #12
------------------------------------------------------------------------------



[14] Stock Options [Continued]

Had  compensation  cost been  determined on the basis of fair value  pursuant to
SFAS No. 123, for the shares under employee  options [See Note 7F] for the years
ended  March 31,  1999 and 1998,  net loss and loss per share would have been as
follows:

                                       1 9 9 8      1 9 9 7
                                       -------      -------
Net Loss:
  As Reported                       $(2,698,220) $(4,527,233)
                                    ===========  ===========

  Pro Forma                         $(2,698,218) $(4,527,228)
                                    ===========  ===========

Basic Earnings Per Share:
  As Reported                       $     (1.37) $     (2.65)
                                    ===========  ===========

  Pro Forma                         $     (1.37) $     (2.65)
                                    ===========  ===========

The fair  value  used in the pro  forma  data was  estimated  by using an option
pricing model which took into account as of the grant date,  the exercise  price
and the expected life of the option,  the current price of the underlying  stock
and its expected  volatility,  expected dividends on the stock and the risk-free
interest rate for the expected term of the option.  The following is the average
of the data used for the following items.

        Risk-Free                        Expected         Expected
      Interest Rate     Expected Life   Volatility        Dividends

            6%             2 Years         188%             None

[15] Fair Value of Financial Instruments

At March 31, 1999,  financial  instruments  include cash,  accounts  receivable,
accounts payable, loans to and from related parties and debt. The fair values of
cash,  accounts  receivable,  accounts  payable  and  loans to and from  related
parties  approximates  carrying value because of the short-term  nature of these
instruments.  The fair  value of debt  approximates  carrying  value  since  the
interest rates approximates the Company's cost of capital.

[16] Pending Merger

On April 21, 1998, the Company  entered into a merger  agreement with Interiors,
Inc.  ["Interiors"]  whereby each of the issued and outstanding  shares of Decor
common stock shall be converted  into the right to receive a one half share [the
"Exchange  Ratio"] of validly  issued,  fully paid and  nonassessable  shares of
Class A common stock of Interiors.  The Company has received a fairness  opinion
of a qualified  investment  banking firm, to the effect that, the Exchange Ratio
for the conversion of Decor common stock into Interiors' Class A common stock is
fair from a financial  point of view to holders of shares of Decor common stock.
All options and warrants  outstanding  for Decor common stock will be subject to
the same Exchange Ratio for Interiors' Class A common stock.

Pursuant to the merger agreement, the outstanding Decor Series A preferred stock
will be converted into Decor common stock and the Decor Series B  nonconvertible
preferred stock will be canceled. If the agreement is terminated by Decor, Decor
is required to pay a $250,000  termination  fee to Interiors  subject to certain
conditions.  Within the terms of the merger agreement,  the period for effecting
the  contemplated  merger has expired,  however,  the parties are in  continuing
discussions with respect to the proposed merger. The Company has not accrued the
$250,000 termination fee.


                                      F-19

<PAGE>



DECOR GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #13
------------------------------------------------------------------------------



[17] New Authoritative Pronouncements

In June  1998,  The  FASB  issued  SFAS  No.  133,  "Accounting  for  Derivative
Instruments and Hedging  Activities."  SFAS No. 133  establishes  accounting and
reporting  standards for derivative  instruments,  including certain  derivative
instruments embedded in other contracts and for hedging activities. SFAS No. 133
requires  that  an  entity   recognize  all  derivatives  as  either  assets  or
liabilities in the statement of financial position and measure those instruments
at fair value.  The  accounting  for  changes in the fair value of a  derivative
depends on the intended use of the  derivative  and how it its  designated,  for
example, gain or losses related to changes in the fair value of a derivative not
designated  as a hedging  instrument  is recognized in earnings in the period of
the  change,  while  certain  types of hedges  may be  initially  reported  as a
component  of  other   comprehensive   income   [outside   earnings]  until  the
consummation of the underlying transaction.

SFAS No. 133 is  effective  for all fiscal  quarters of fiscal  years  beginning
after June 15,  1999.  Initial  application  of SFAS No. 133 should be as of the
beginning  of a fiscal  quarter;  on that date,  hedging  relationships  must be
designated  anew and  documented  pursuant  to the  provisions  of SFAS No. 133.
Earlier application of all of the provisions of SFAS No. 133 is encouraged,  but
it is permitted only as of the beginning of any fiscal quarter.  SFAS No. 133 is
not to be applied  retroactively to financial  statements of prior periods.  The
Company does not currently have any derivative  instruments and is not currently
engaged in any hedging activities.

In April 1998, the American  Institute of Certified  Public  Accountants  issued
Statement  of  Position  ["SOP"]  98-5,  "Reporting  on the  Costs  of  Start-Up
Activities." SOP 98-5 provides  guidance on the financial  reporting of start-up
costs and  organization  costs,  and requires  that such costs to be expensed as
incurred.  SOP 98-5  applies to all  nongovernmental  entities  and is generally
effective  for  fiscal  years  beginning   after  December  15,  1998.   Earlier
application is encouraged in fiscal years for which annual financial  statements
previously  have not been  issued.  The  adoption of SOP 98-5 is not expected to
have a material  impact on results of operations,  financial  position,  or cash
flows of the  Company  as the  Company's  current  policy  is  substantially  in
accordance with SOP 98-5.

The  Financial  Accounting  Standards  Board  ["FASB"]  has had on its  agenda a
project to address certain practice issues regarding Accounting Principles Board
["APB"]  Opinion No. 25,  "Accounting  for Stock Issued to Employees."  The FASB
plans on issuing various  interpretations of APB Opinion No. 25 to address these
practice issues. The proposed effective date of these  interpretations  would be
the  issuance  date of the  final  Interpretation,  which is  expected  to be in
September 1999. If adopted,  the Interpretation  would be applied  prospectively
but would be applied to plan  modification  and grants that occur after December
15, 1998. The FASB's tentative interpretations are as follows:

*   APB Opinion No. 25 has been applied in practice to include in its definition
    of  employees,  outside  members of the board or directors  and  independent
    contractors.  The FASB's interpretation of APB Opinion No. 25 will limit the
    definition of an employee to individuals  who meet the common law definition
    of an  employee  [which  also  is the  basis  for  the  distinction  between
    employees and nonemployees in the current U.S. tax code]. Outside members of
    the board of directors and  independent  contractors  would be excluded from
    the scope of APB  Opinion  No. 25 unless  they  qualify as  employees  under
    common law. Accordingly,  the cost of issuing stock options to board members
    and  independent  contractors  not meeting the common law  definition  of an
    employee will have to be determined  in accordance  with FASB  Statement No.
    123,  "Accounting for Stock-Based  Compensation," and usually recorded as an
    expense in the period of the grant [the service period could be prospective,
    however, see EITF 96-18].

*   Options  [or  other  equity  instruments]  of a  parent  company  issued  to
    employees of a subsidiary should be considered  options,  etc. issued by the
    employer  corporation  in  the  consolidated   financial  statements,   and,
    accordingly,  APB  Opinion  No. 25 should  continue  to be  applied  in such
    situations. This interpretation would apply to subsidiary companies only; it
    would not apply to equity method investees or joint ventures.

                                      F-20

<PAGE>



DECOR GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #14
------------------------------------------------------------------------------



[17] New Authoritative Pronouncements

*   If the terms of an option  [originally  accounted for as a fixed option] are
    modified during the option term to directly  change the exercise price,  the
    modified option should be accounted for as a variable option. Variable grant
    accounting  should be applied to the  modified  option  from the date of the
    modification until the date of exercise. Consequently, the final measurement
    of  compensation   expense  would  occur  at  the  date  of  exercise.   The
    cancellation  of an option and the  issuance  of a new  option  with a lower
    exercise price shortly  thereafter  [for example,  within six months] to the
    same  individual  should be  considered  in substance a modified  [variable]
    option.

*   Additional  interpretations will address how to measure compensation expense
    when a new measurement date is required.








                    .   .   .   .   .   .   .   .   .   .   .

                                      F-21

<PAGE>



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

        None.

                                    PART III

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

Directors and Executive Officers

The names and ages of the directors  and  executive  officers of the Company are
set forth below:

Name                 Age                       Position

Dennis D'Amore        49      President and Chief Financial Officer and Director
                              of the Company; Chairman of the Board, President
                              and Chief Operating Officer and Treasurer of AHI.

Max Munn              54      Chairman of the Board and Secretary

James Herman          55      Director



         Dennis  D'Amore has been  President and Chief  Financial  Officer and a
Director  of the  Company  since  March 1997 and  Chairman  of the Board,  Chief
Operating  Officer,  and Treasurer of AHI since January 1997 and President since
July 1997. In June 1998 Mr.  D'Amore was appointed  Executive  Vice President of
Interiors,  Inc.,  by the  controlling  stockholder  of the  Company.  From 1991
through  1996,  Mr.  D'Amore  was a  consultant  to various  private  and public
companies.  From 1989 to 1991, Mr. D'Amore served as Vice President of Sales and
Marketing for Lasco Bathware,  a division of Tomkins Industries,  Inc. From 1988
to 1989, Mr. D'Amore served as President of Colford-D'Amore,  Inc., a management
consulting  firm.  From  1981 to 1988,  Mr.  D'Amore  served as  Executive  Vice
President  and General  Manager of Water Jet  Corporation.  Mr.  D'Amore holds a
Bachelor  of   Engineering-Mechanical   Degree  from  New  York  University  and
subsequently  received  a Masters of  Business  Administration  in Finance  from
Fairleigh Dickinson University.

         Max Munn has been the  Chairman  of the  Board of  Directors  since the
Company's  inception and was the President of the Company from  inception  until
May 1996.  Mr. Munn became  Secretary of the Company in March 1997.  Mr. Munn is
currently  President  and Chief  Executive  Officer and Chairman of the Board of
Director of Interiors,  Inc., which is the majority  stockholder of the Company.
Mr. Munn has been  President of Interiors  since October 1995 and a Director and
principal stockholder since March 1994. From May 1993 to September 1995 Mr. Munn
served as Vice  President of Interiors.  From November 1990 to May 11, 1993, Mr.
Munn served as a consultant to Interiors, Inc., as well as a consultant directly
and indirectly to Imperial  Enterprises,  Inc., a catalog company in Japan,  and
the IEI  Corporation,  a direct  marketer,  in  Princeton,  NJ. Mr. Munn holds a
Bachelor  of  Architecture  from  Massachusetts   Institute  of  Technology  and
subsequently did graduate level study in Art History at Columbia University.

        James  Herman has been a Director of the  Company  since  October  1997.
Since 1983 Mr.  Herman has been a  consultant  and  designer  in the  decorative
accessory and home furnishings industry. Prior thereto Mr. Herman held positions
with M. Grumbacher Inc. and Hunt Manufacturing  Company, Inc., both of which are
manufacturers of art materials.  Mr. Herman holds a Bachelor of Fine Arts degree
from Southwest Missouri in 1970 and a Master of Fine Arts degree from University
of Oregon in 1972.

         There are no family relationships between the officers and directors of
the Company.


                                       15

<PAGE>




Compliance with Section 16(a) of The Securities Exchange Act of 1934

         Section  16(a) of the  Securities  Exchange  Act of 1934  requires  the
Company's  directors and executive  officers,  and persons who own more than ten
percent (10%) of a registered class of the Company's equity securities,  to file
with the Securities  and Exchange  Commission  initial  reports of ownership and
reports of changes in ownership of common stock and other equity  securities  of
the Company.  Officers,  directors and greater than ten percent shareholders are
required by SEC  regulation  to furnish  the Company  with copies of all Section
16(a) forms they file.

         To the Company's knowledge, based solely on its review of the copies of
such reports  furnished to the Company during the year ended March 31, 1999, all
Section 16(a) filing  requirements  applicable  to its  officers,  directors and
greater than ten percent beneficial owners were satisfied.


ITEM 10. EXECUTIVE COMPENSATION.

         The following table sets forth the  compensation  paid to the executive
officers of the Company and its wholly owned subsidiary,  AHI, for the Company's
fiscal year ending March 31, 1999.

                          Summary Compensation Table
                          --------------------------
                  Annual Compensation    Long Term Compensation
                  -------------------    ----------------------
                        Awards                 Payouts
                        ------                 -------
Name                               Other            Securities
and                               Annual Restricted underlying        All Other
Principal                         Compen-   Stock    Options/ LTIP     Compen-
Position        Year Salary Bonus sation  Award(s)$)  SARs  Payouts($) sation($)
------------------------------------------------------------------------------

(a)              (b)   (c)   (d)   (e)      (f)       (g)      (h)      (i)

Dennis D'Amore. 1999 $150,000 --    --        --     20,000     --       --
 ............... 1998 $125,000 --    --        --     20,000     --       --
President and Chief Financial
Officer, Decor Group, Inc., and
Chairman of the Board, President
Chief Operating Officer, and
Treasurer of AHI.

The Company has allocated $115,000 of Dennis D'Amore's salary to Interiors, Inc.
based upon an estimate of time devoted to Interiors duties.


         The  following  table sets forth  certain  information  with respect to
options  granted  during the last fiscal year to the Company's  Chief  Executive
Officer and the other executive officers named in the above Summary Compensation
Table.

Option/SAR Grants In Last Fiscal Year

              Number of  Percent of Total
              Securities  Options/SARS                   Market
              Underlying   Granted to  Exercise or Base Price on
             Options/SARS Employees in    Base Price     Date of
Name           Granted     Fiscal Year     ($/Sh)         Grant  Expiration Date
----           -------     -----------     ------         -----  ---------------
(a)              (b)          (c)           (d)            (e)

Dennis D'Amore  20,000        100%        $.0003          $.50   January 1, 2004

         The  following  table sets forth  certain  information  with respect to
options  exercised  during the last fiscal year by the Company's Chief Executive
Officer and the executive officers named in the Summary  Compensation Table, and
with respect to unexercised  options held by such persons at the end of the last
fiscal year:


                                       16

<PAGE>




Aggregate   Option/SAR  Exercises  In  Last  Fiscal  Year  And  Fiscal  Year-End
Option/SAR Values

                                                                  Value of
                                              Underlying       Unexercised in
                                              Unexercised         the Money
                                             Options/SARS      Options/SARS at
                                             at FY-End (#)       FY-End ($)
                  Acquired on     Value      exercisable/       exercisable/
     Name        Exercise (#)  Realized $    unexercisable      unexercisable
     ----        ------------  ----------    -------------      -------------
      (a)             (b)          (c)            (d)                (e)

Dennis D'Amore        --           --        8,000/42,000      $4,000/$21,000



Employment Agreements

         AHI entered into a three (3) year  employment  agreement  with a former
officer of AHI on November 18, 1996 with (i) an annual salary of $75,000; (ii) a
signing  bonus of  $70,000,  $30,000  of which  was paid at the  closing  of the
Company's  acquisition  of Artisan  House,  Inc. and $40,000 of which is paid in
equal monthly  installments of $3,333.33 during the first year of the employment
agreement, (iii) reimbursement of expenses incurred by the officer for lease and
insurance  payments with respect to his automobile,  (iv) an annual  performance
bonus equal to 1% of AHI's sales in excess of those  achieved by Artisan for the
twelve months ended June 30, 1996, payable within 60 days after the end of AHI's
fiscal year,  with the first and last payments  being  calculated on a pro rated
basis,  (v) 2.5%  (later  amended  to  1.25%) of the  consideration  paid by the
Company in connection with an acquisition of an unrelated third party introduced
to the  Purchaser,  the  Company,  Interiors,  or any  affiliate  of them by the
officer,  and (vi) an annual  performance  bonus equal to 5% of the  increase in
AHI's  export sales in excess of those export sales and 1.25% of the increase in
domestic  sales in excess of the increase in AHI's  domestic  sales  achieved by
Artisan for the twelve months ended June 30, 1996. The Employment Agreement also
contains provisions  protecting the confidential  information of the Company and
restricting the officer from competing with the Company. In July 1997, there was
an attempt to  terminate  Artisan's  employment  agreement  with the seller.  In
connection  with a settlement  agreement  reached in September  1997 with CIDCOA
International, Inc. ["CIDCOA"], formerly known, as Artisan House, Inc. [See Note
9], the Company reinstated the employment agreement with the seller and recorded
additional monies owed to the seller of approximately  $290,000 whereby no money
is  outstanding  at March 31, 1999 pursuant to this  agreement.  The  employment
agreement also provides for additional  fees to be earned by the seller pursuant
to certain  acquisitions  made by the  Company,  its parent or  affiliates.  The
Company expensed $64,000  representing an estimate of compensation earned by the
seller as a consequence of the two acquisitions made by Interiors, Inc. in March
of 1998. The Company expensed $119,000 in fiscal 1999, which is the compensation
due the seller resulting from acquisitions in fiscal 1999.

         On December  31,  1996,  AHI entered  into a three (3) year  employment
agreement (the "Employment Agreement") with Dennis D'Amore pursuant to which Mr.
D'Amore  agreed to serve as AHI's Chief  Operating  Officer and  Treasurer.  AHI
agreed  to pay Mr.  D'Amore  (i) an  annual  salary of  $100,000  (increased  to
$150,000 as of January 1, 1999), (ii) a cash bonus equal to ten percent (10%) of
Mr.  D'Amore's  annual salary based upon AHI's net profit before taxes ("NPBT"),
and (iii) a cash bonus equal to five  percent  (5%) of AHI's  increases  in NPBT
over the fiscal year, not to exceed forty percent (40%) of Mr.  D'Amore's annual
base salary.  The Employment  Agreement provides that Mr. D'Amore is entitled to
receive options to purchase 10,000 shares of the Company's Common Stock for each
of the years of the  contract at an exercise  price of equal to $.0003 per share
exercisable  after one year for a period of five  years.  The  Company  recorded
deferred compensation of $180,000 for the options. For the years ended March 31,
1999 and 1998,  the Company  amortized  $60,000 and  $54,285,  respectively,  as
compensation  expense.  In March 1997, the officer was elected to the offices of
President and Chief Financial Officer of the Company.  The Employment  Agreement
also provides  additional  performance  options to purchase 10,000 shares of the
Company's Common Stock exercisable for a period of one year at an exercise price
equal to the average closing price of the Company's stock for the 20 days ending
two days  prior to date of grant for each of the years  ending  March 31,  1998,
1999, 2000. Continued

                                       17

<PAGE>



employment  of the Company is required  and the Company must meet or exceed 115%
of the prior year's  NPBT.  In December of 1997,  Mr.  D'Amore  received  20,000
options,  which represented the additional 10,000 options due on January 1, 1998
under the Employment Agreement and an additional 10,000 options.

On January 2, 1999, the officer received an additional  20,000 options under the
employment  agreement  whereby  the  Company  recorded  compensation  expense of
$10,000 on January 2, 1999. The options vest  immediately  and are not available
for exercise until January 2000 and will expire January 2005.

In March of 1999, the Company accrued a bonus of $35,000 to the  President/Chief
Financial Officer.

Consulting Agreements

         On January 1, 1997 the Company entered into a Consulting Agreement with
Matthew  Harriton,  a Director of the Company until  October  1997,  pursuant to
which Mr. Harriton  agreed to provide the Company with such consulting  services
as requested by the Company in connection with strategic planning, marketing and
management  issues.  As payment for the services  provided by Mr. Harriton,  the
Company has agreed to pay an aggregate of $150,000 to be paid over the period of
three (3) years from the date of the  agreement.  At March 31, 1999, the Company
owed $50,000 to the director as monies due upon his resignation,  which was paid
in April of 1999.

Stock Option Plans and Agreements

         In March 1996, the Board of Directors of the Company  adopted,  and the
stockholders  of the  Company  approved  the  adoption  of,  the 1996 Stock Plan
(hereinafter called the "1996 Plan"). The purpose of the 1996 Plan is to provide
an incentive and reward for those executive  officers and other key employees in
a position  to  contribute  substantially  to the  progress  and  success of the
Company,  to closely align  employees with the interests of  stockholders of the
Company by linking  benefits to stock  performance and to retain the services of
such employees,  as well as to attract new key employees. In furtherance of that
purpose,  the 1996  Plan  authorizes  the  grant to  executives  and  other  key
employees of the Company stock options,  restricted stock, deferred stock, bonus
shares,   performance  awards,   dividend   equivalent  rights,   limited  stock
appreciation  rights and other stock-based  awards, or any combination  thereof.
The 1996 Plan is expected to provide  flexibility to the Company's  compensation
methods, after giving due consideration to competitive conditions and the impact
of federal tax laws.

         The  maximum  number of shares of Common  Stock  with  respect to which
awards may be granted  pursuant to the 1996 Plan is  initially  250,000  shares.
Shares  issuable under the 1996 Plan may be either treasury shares or authorized
but unissued shares. The number of shares available for issuance will be subject
to adjustment to prevent dilution in the event of stock splits,  stock dividends
or other changes in the capitalization of the Company.

         The 1996 Plan will be  administered  by a committee  consisting  of not
less than two (2)  members  of the Board of  Directors  who are  "disinterested"
within the meaning of Rule 16b-3 promulgated under the Exchange Act and "outside
directors"  within the meaning of Section 162(m) of the Code (including  persons
who may be deemed outside directors by virtue of any transitional rule which may
be adopted by the Internal Revenue Service implementing such Section). The Board
will  determine  the persons to whom  awards will be granted,  the type of award
and, if applicable,  the number of shares to be covered by the award. During any
calendar  year no person may be granted  under the 1996 Plan awards  aggregating
more than 100,000 shares (which number shall be subject to adjustment to prevent
dilution in the event of stock splits,  stock dividends or capitalization of the
Company).

Types of Awards

         Stock  Options.  Options  granted under the 1996 Plan may be "incentive
stock options"  ("Incentive  Options")  within the meaning of Section 422 of the
Code or stock  options which are not  incentive  stock  options  ("Non-Incentive
Options" and,  collectively with Incentive Options,  hereinafter  referred to as
"Options").  The persons to whom Options  will be granted,  the number of shares
subject to each  Option  grant,  the prices at which  Options  may be  exercised
(which shall not be less than the fair market value of shares of Common Stock on
the date of grant), whether an Option will be an Incentive

                                       18

<PAGE>



Option or a Non-Incentive  Option, time or times and the extent to which Options
may be  exercised  and  all  other  terms  and  conditions  of  options  will be
determined by the Committee.

         Each Incentive Option shall terminate no later than ten (10) years from
the date of grant,  except as provided  below with respect to Incentive  Options
granted to 10% Stockholders (as hereinafter  defined. No Incentive Option may be
granted  at any  time  after  October  2005.  Each  Non-Incentive  Option  shall
terminate  no later  than ten (10) years  from the date of grant.  The  exercise
price at which the shares may be purchased  may not be less than the Fair Market
Value of shares of Common  Stock at the time the  Option is  granted,  except as
provided below with respect to Incentive  Options  granted to 10%  Stockholders.
Options granted to executive  officers may not be exercised at any time prior to
six (6) months after the date of grant.

         The  exercise  price  of  an  Incentive  Option  granted  to  a  person
possessing  more than 10% of the total  combined  voting  power of all shares of
stock  of  the  Company  or  a  parent  or   subsidiary  of  the  Company  ("10%
Stockholder")  shall in no event be less than 110% of the Fair  Market  Value of
the shares of the Common Stock at the time the Incentive Option is granted.  The
term of an Incentive  Option granted to a 10% Stockholder  shall not exceed five
(5) years from the date of grant.

         The  exercise  price of the  shares to be  purchased  pursuant  to each
Option shall be paid (i) in full in cash, (ii) by delivery (i.e.,  surrender) of
shares of the  Company's  Common  Stock  owned by the  option at the time of the
exercise of the Option (iii) in  installments,  payable in cash, if permitted by
the  Committee or for any  combination  of the  foregoing.  The  stock-for-stock
payment  method  permits  an  optionee  to  deliver  one (1) or more  shares  of
previously  owned  Common Stock of the Company in  satisfaction  of the exercise
price of subsequent  Options.  The optionee may use the shares  obtained on each
exercise  to  purchase  a larger  number of shares  on the next  exercise.  (The
foregoing assumes an appreciation in value of previously  acquired shares).  The
result of the stock-for-stock  payment method is that the optionee can generally
avoid  immediate tax liability with respect to any  appreciation in the value of
the stock utilized to exercise the Option.

         Shares received by an optionee upon exercise of a Non-Incentive  Option
may not be sold or otherwise  disposed of for a period  determined  by the Board
upon grant of the Option, which period shall be not less than six (6) months nor
more than  three (3)  years  from the date of  acquisition  of the  shares  (the
"Restricted Period"), except that, during the Restricted Period (i) the optionee
may offer the shares to the  Company and the  Company  may,  in its  discretion,
purchase  up to all the  shares  offered at the  exercise  price and (ii) if the
optionee's employment terminates during the Restricted Period (except in limited
instances), the optionee upon written request of the Company, must offer to sell
the shares to the Company at the exercise  price within seven (7) business days.
The Restricted Period shall terminate in the event of a Change in Control of the
Company (as defined),  or at the  discretion of the Board.  After the Restricted
Period,  an optionee wishing to sell must first offer such shares to the Company
at the Fair Market Value.

         Limited Stock  Appreciation  Rights.  The Committee is  authorized,  in
connection  with any Option  granted under the 1996 Plan, to grant the holder of
such Option a limited stock appreciation right ("LSAR"), entitling the holder to
receive, within sixty (60) days following a Change in Control, an amount in cash
equal to the difference  between the exercise price of the Option and the market
value of the Common Stock on the  effective  date of the Change in Control.  The
LSAR may be  granted  in tandem  with an Option  or  subsequent  to grant of the
Option.  The LSAR will only be  exercisable  to the extent the related Option is
exercisable and will terminate if and when the Option is exercised.

         Restricted and Deferred Stock. An award of restricted stock or deferred
stock may be  granted  under  the 1996  Plan.  Restricted  stock is  subject  to
restrictions on  transferability  and other restrictions by the Committee at the
time of grant.  In the event that the  holder of  restricted  stock  cease to be
emplostrictive  period,  restricted  stock  that  is  at  the  time  subject  to
restrictions  shall be  forfeited  and  reacquired  by the  Company.  Except  as
otherwise  provided  by the  Committee  at the time of the  grant,  a holder  of
restricted stock shall have all the rights of a stockholder  including,  without
limitation,  the  right  to vote  restricted  stock  and the  right  to  recover
dividends thereon.  An award of deferred stock is an award that provides for the
issuance  of stock upon  expiration  of a  deferral  period  established  by the
Committee.  Except as otherwise determined by the Committee, upon termination of
employment of the recipient of the award during the applicable  deferral period,
all stock that is at the time subject to deferral

                                       19

<PAGE>



shall be  forfeited  until  such time as the stock  which is the  subject of the
award is issued, the recipient of the award has no rights as a stockholder.

         Dividend  Equivalent Awards. A dividend  equivalent gives the recipient
the right to receive cash or other property equal in value to the dividends that
would be paid if the  recipient  held a  specified  number  of  shares of Common
Stock.  A dividend  equivalent  right may be granted as a  component  of another
award or as a freestanding award.

         Bonus Shares and other Share Based Awards. The 1996 Plan authorizes the
Committee to grant shares as a bonus, or to grant shares or other awards in lieu
of  obligations  of the Company to pay cash under  other  plans or  compensatory
arrangements,  upon such terms as shall be determined by the Committee. The 1996
Plan also  authorizes  the  Committee to grant other forms of awards based upon,
payable  in,  or  otherwise  related  in  whole  or in part  to,  Common  Stock,
including, without limitation,  convertible or exchangeable debentures, or other
debt securities,  other rights convertible or exchangeable into shares, purchase
rights for shares, awards contingent upon performance of the Company, and awards
valued by  reference  to the book  value of  shares of Common  Stock or aware of
securities of, or the performance of, specified subsidiaries.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
         MANAGEMENT.

         The following table sets forth as of June 30, 1998, certain information
with respect to the beneficial  ownership of the Company's  Common Stock and the
Series B Preferred Stock by each person or entity known by the Company to be the
beneficial owner of 5% or more of such shares,  each officer and director of the
Company, and all officers and directors of the Company as a group:

                                                   Shares of    Percentage (%)
                      Shares of                    Series B       of Series B
Name and Address     Common Stock Percentage (%) Preferred Stock Preferred Stock
of Beneficial        Beneficially   of Common    Beneficially     Beneficially
Owner(1)               Owned(2)     Stock Owned     Owned(2)         Owned
--------               --------     -----------     --------         -----

Dennis D'Amore(3)        50,000         2.0%           --              --
Max Munn(4)(5)           67,000         3.0%           --              --
Henry Goldman(6)        250,000        12.4%           --              --
James Herman                 --          --            --              --
Interiors, Inc. (7)          --          --        20,000,000         100%
The Skyes
 Corporation (8)        200,000        10.0%           --              --
All directors and
officers as a group (9) 117,000          --            --              --


   (1)Unless otherwise indicated, the address of each beneficial owner is c/o
      Decor Group, Inc., 320 Washington Street, Mt. Vernon, New York 10553.
   (2)Beneficial ownership as reported in the table above has been determined in
      accordance  with Item 403 of Regulation  S-B of the Securities Act of 1933
      and Rule 13(d)-3 of the Securities Exchange Act.
   (3)Mr. D'Amore is President and Chief Financial Officer and a Director of the
      Company and Chairman of the Board, President,  Chief Operating Officer and
      Treasurer of AHI. Mr.  D'Amore holds options to purchase  50,000 shares of
      Common Stock for a period of five (5) years at an exercise price of $.0003
      per share.
   (4)Mr. Munn is Chairman of the Board and Secretary of the Company.
   (5)Includes 67,000 shares of Common Stock held by Laurie Munn, Mr. Munn's
      wife.  Mr. Munn disclaims beneficial ownership of such shares.
   (6)Mr. Goldman's address is c/o 12841 Bloomfield #305, Studio City, CA 91604.
   (7)Includes 20,000,000 shares of Series B Preferred Stock owned by Interiors,
      Inc. Mr. Munn, Chairman of the Board of the Company, and President, Chief
      Executive Officer and Chairman of the Board of Directors of Interiors may
      vote the shares of Series B Preferred Stock held by Interiors, Inc. on all
      matters presented to the vote of stockholders.  Mr. Munn disclaims
      beneficial ownership of such shares.

                                       20

<PAGE>



   (8)The Skyes Corporation address c/o 430 Chestnut Street, East Hills, New
      York 11576
   (9)Excludes the 20,000,000 shares of Series B Preferred Stock owned by
      Interiors, Inc. as to which all of the directors and officers disclaim
      beneficial ownership.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         In March,  1996,  the Company  issued to certain  investors (i) 913,750
shares of Common Stock to M.D. Funding,  Inc. for cash consideration of $73,100,
(ii) 100,000  shares of Common Stock to Laurie Munn,  the wife of Max Munn,  the
Chairman of the Board of the Company,  for cash  consideration of $8,000,  (iii)
61,250  shares of Common  Stock to Judy Pace for cash  consideration  of $4,900,
(iv) 125,000  shares of Common Stock to First  National  Funding,  Inc. for cash
consideration  of  $10,000,   (v)  62,500  shares  of  Common  Stock  to  Ulster
Investments,  Ltd. for cash  consideration of $5,000,  and (vi) 25,000 shares of
Common Stock to Matthew  Harriton,  a director and formerly the President of the
Company, for cash consideration of $2,000. In addition,  the Company also issued
in March  1996  25,000  shares of Common  Stock and 12,500  Class A Warrants  to
Gordon Brothers Capital Corporation  ("GBCC") for services rendered valued at an
aggregate of $2,000.  Neither GBCC nor any of its affiliates are affiliated with
the Company,  the  Representative,  the  Underwriters or any of their respective
affiliates.  GBCC  assisted  the Company in  identifying  and  negotiating  with
potential acquisition candidates.

         In March 1996, the Company issued to Interiors,  Inc. 250,000 shares of
Class A Convertible  Preferred Stock and an option to purchase 20,000,000 shares
of Class B  Non-Convertible  Voting  Preferred  Stock (the "Series B Option") in
exchange for  Interiors,  Inc.  issuing to the Company  200,000 shares of Common
Stock valued at $600,000 and 200,000  shares of Series A  Convertible  Preferred
Stock valued at  $1,000,000.  The Series B Option was  exercised by Interiors in
September 1996 at an exercise price of $.0001 per share.  Immediately  following
the exercise of the Series B Option,  Interiors  entered into a Voting Agreement
with the  Company  and  Messrs.  Max Munn,  Matt  Harriton  and  Michael  Lulkin
(collectively, the "Voting Trustees") each of whom is a director of the Company.
Under the terms of the Voting  Agreement,  the Voting Trustees have the right to
vote the shares of Series B  Preferred  Stock held by  Interiors  on all matters
presented  to the  stockholders  prior to December  31,  1997. A majority of the
Voting  Trustees  shall  determine  the  manner in which the  shares of Series B
Preferred  Stock are to be voted.  A  unanimous  vote of the Voting  Trustees is
required in order for the Company to enter into certain transactions,  including
any  mergers,  consolidations,   significant  acquisitions,   recapitalizations,
reorganizations or any transaction which would result in Interiors' ownership of
less  than  51% of the  outstanding  voting  stock  of the  Company  (so long as
Interiors  does not sell or transfer  any of the Series B  Preferred  Stock held
thereby).

         In May 1996, the Company  entered into a two year  Management  Services
Agreement with Interiors,  Inc.  ("Interiors").  Interiors has, pursuant to such
agreement,  agreed to advise the Company on the manufacturing,  sale,  marketing
and  distribution  of the  Company's  products as well as providing  the Company
accounting  and  administrative  services and strategic  planning with regard to
joint  ventures,  acquisitions,  and other long term  business  initiatives.  In
exchange for such services, the Company has agreed to pay to Interiors an annual
amount equal to the greater of (i) $75,000 or (ii) 1 1/2% of Excess Cashflow (as
defined in the agreement).  The Management  Services  Agreement is automatically
renewable for an additional one (1) year term unless  terminated by either party
not less than sixty (60) days prior to the end of the term may be  terminated by
the Company or Interiors upon sixty (60) days prior written notice. In the event
that the  Management  Services  Agreement  is  terminated  for any  reason,  the
Company's business may be negatively effected. In such an event, the Company may
be  required  to hire  additional  personnel  or engage one or more  independent
contractors  at an added cost to the Company.  In February 1997, the Company and
Interiors amended the Management  Services Agreement pursuant to which Interiors
agreed  to  advise  the  Company  on  the  manufacturing,  sale,  marketing  and
distribution  of the  Company's  products as well as providing  the Company with
accounting  and  administrative  services and strategic  planning with regard to
joint  ventures,  acquisitions,  and other long term  business  initiatives.  In
exchange for such services, the Company has agreed to pay to Interiors an annual
amount equal to the greater of (i) $90,000 or (ii) 1 1/2% of Excess Cashflow (as
defined in the  agreement).  At March 31,  1997,  the Company had amounts due to
Interiors of $185,285,  consisting of $18,750 in management fees and $166,535 of
advances.  The  Company  accrued  additional  management  fees  of  $90,000  [in
accordance  with amended  agreement dated February 1997] and paid $50,000 during
the year ended March 31, 1998.


                                       21

<PAGE>



         On April 2, 1998,  the Board of  Directors  amended the  February  1997
management  services  agreement in that it allowed the Company to make  payments
deemed  warranted  or  necessary  to  Interiors  or third  parties  on behalf of
Interiors [See Note 4C].

         Commencing   December  of  1998,   Artisan   incurred   costs  totaling
approximately  $180,000,  which remains  unpaid as of March 31, 1999 for various
expenses  paid by Troy  Lighting  primarily  for moving  costs of  approximately
$120,000  and  payroll  costs of  approximately  $40,000.  Interiors  also  paid
$119,000 as a finders fee to the former owner of Artisan House.

         The Company recorded a non-cash $125,000 of management  consulting fees
due Interiors on June 30, 1998, relating to marketing and merchandising services
provided by the related party to the Company and accrued the  management  fee of
$90,000 during the year ended March 31, 1999. In addition,  the Company received
a $400,000  advance from  Interiors on July 23, 1998. As of March 31, 1999,  the
Company has an  outstanding  balance due to Interiors  of $840,285.  The Company
recorded interest expense for the years ended March 31, 1999 and 1998 of $19,095
and $16,116, respectively, on the annual unpaid management fee [Note 16A].

         In  March of 1998,  the  Company  advanced  approximately  $300,000  to
Interiors,  Inc.,  $200,000 of which carried interest at the Company's borrowing
rate. The $200,000 was repaid with interest in April of 1998.  Throughout fiscal
1999,  Artisan also incurred costs,  which was allocated to Interiors,  totaling
approximately  $224,000 primarily for employee and consulting expenses on behalf
of Interiors.  In addition,  Artisan reduced the accounts receivable balance due
from Interiors in exchange for product  marketing and  merchandising  cost being
incurred by the related  party on behalf of the Company for  $193,661,  which is
classified as consulting  services by a related party. As of March 31, 1999, the
balance due on the intercompany charges was $134,515.

         During  fiscal 1999,  the Company also  incurred  additional  costs for
three entities acquired by Interiors. These receivable transactions,  which have
no impact on the  statement of  operations,  with the  exception of finders fees
paid to the seller of Artisan House [See Note 7A], are summarized as follows:

         o     In fiscal 1999,  Artisan  incurred costs  totaling  approximately
               $35,000,  which remains  unpaid as of March 31, 1999, for various
               expenses  on behalf of  Vanguard  Studios  primarily  for  shared
               employee and freight costs.

         o     In September of 1998,  Artisan used  $300,000  from its financial
               line of  credit  for an  Interior's  acquisition.  An  additional
               $2,050 of costs were incurred by Artisan in February and March of
               1999 for the entity.  The balance due Artisan from that entity as
               of March 31, 1999 was $302,050,  of which  $300,000 was repaid in
               April 1999.

         In June 1996,  the Company  borrowed an  aggregate  of $50,000 from the
Company's stockholders, other than Gordon Brothers Capital Corporation, on a pro
rata basis based upon  ownership of the Company's  shares of Common Stock.  Each
lender  received a promissory  note  obligating the Company to repay the loan on
the earlier of (i) fifteen (15) months following the Effective Date or (ii) June
21, 1997.  The Company  utilized the proceeds from the loan for working  capital
purposes. At March 31, 1999 the Company owed $43,000 to stockholders.

         In August 1996,  the Company  agreed to issue 47,084 shares of Series C
Preferred Stock to Interiors,  Inc. in exchange for the payment of $706,250.  In
September  1996,  the Company agreed to issue 7,850 shares of Series C Preferred
Stock to Interiors in exchange for the payment of $117,750.

         In October 1996, the Company effected a  recapitalization  with respect
to its outstanding shares of capital stock (the "Recapitalization"). Pursuant to
the  Recapitalization,  the Company  effected a 1-for-3 reverse stock split with
respect to its shares of Series A Preferred  Stock,  Series B  Preferred  Stock,
Series C Preferred Stock and Common Stock.

         In November and December 1996, Interiors loaned the Company $50,238 and
$60,000,  respectively.  Both of these loans are demand  loans,  callable at any
time by Interiors and bear interest at the rate of eight percent (8%) per annum.
The Company has repaid these loans to Interiors.


                                       22

<PAGE>



         On November 18, 1996, AHI entered into a five (5) year lease with Henry
Goldman.  The lease is for  approximately  33,000  square  feet and  requires  a
monthly rent payment of $14,203.

         On December 31,  1996,  Artisan  entered  into a three year  employment
agreement with Artisan's Chief Operating Officer and Treasurer for (i) an annual
salary of $100,000;  (ii) a cash bonus equal to ten percent  [10%] of the annual
salary, based upon Artisan's net profit before taxes ["NPBT"];  and (iii) a cash
bonus  equal to five  percent  [5%] of the  increase  in NPBT over the  previous
fiscal year,  not to exceed 40% of the base salary.  The agreement also provides
options to purchase  10,000  shares of the  Company's  common stock per year for
each year of the  agreement  at an  exercise  price  equal to  $.0003  per share
exercisable  after one year for a period of five  years.  The  Company  recorded
deferred  compensation of $180,000 for the 10,000  options.  For the years ended
March  31,  1999  and  1998,   the  Company   amortized   $60,000  and  $64,285,
respectively, as compensation expense. In March 1997, the officer was elected to
the offices of President and Chief Financial Officer of the Company.

         The agreement also provides additional  performance options to purchase
10,000 shares of the Company's common stock exercisable for a period of one year
at an exercise price equal to the average  closing price of the Company's  stock
for the 20 days  ending  two days  prior to date of grant  for each of the years
ending March 31, 1998,  1999 and 2000.  Continued  employment  by the Company is
required and the Company must meet or exceed 115% of the prior year's NPBT.

         In  December  of 1997,  the  officer  received  20,000  options,  which
represented  the  additional  10,000  options  due on  January 1, 1998 under the
employment  agreement and an additional  10,000  options.  The Company  recorded
compensation expense of $90,000 on January 1, 1998.

         On January 2, 1999, the officer  received an additional  20,000 options
under the employment agreement whereby the Company recorded compensation expense
of  $10,000  on  January  2, 1999.  The  options  vest  immediately  and are not
available for exercise until January 2000 and will expire January 2005.

         In  March of 1999,  the  Company  accrued  a bonus  of  $35,000  to the
President/Chief Financial Officer.

         On January 1, 1997,  the Company  entered into a  Consulting  Agreement
with Matthew  Harriton,  formerly a Director of the Company  until October 1997,
whereby Mr. Harriton agreed to provide the Company with such consulting services
as requested by the Company in connection with strategic planning, marketing and
management  issues.  As consideration for the services provided by Mr. Harriton,
the Company has agreed to pay to Mr.  Harriton  an  aggregate  of $150,000 to be
paid over the period of three (3) years from the date of the agreement.

         In March of 1998, the Company  retained a financial  consulting firm to
provide merger and  acquisition  consulting and advisory  services in connection
with the pending merger with Interiors,  Inc. and other acquisition  candidates.
In May 1998,  the  Board of  Directors  of Decor  issued  200,000  shares of the
Company's common stock in exchange for these services valued at $44,000. In July
1998, the Company paid the financial consulting firm $200,000 for these services
performed  in fiscal  1999.  A total of $244,000  was expensed in the year ended
March 31, 1999.

Item 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits.

         None

(b)      Current Reports on Form 8-K

         None.



                                       23

<PAGE>


                                 SIGNATURE PAGE


         In  accordance  with  Section  13 or 15(d)  of the  Exchange  Act,  the
registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.


                                    DECOR GROUP, INC.


                                    /s/ Dennis D'Amore
July 9, 1999                        Dennis D'Amore,
                                    President and Chief Operating Officer

       In accordance with the Exchange Act, this report has been signed below by
the following  persons on behalf of the  registrant and in the capacities and on
the dates indicated.

                                    /s/ Dennis D'Amore
July 9, 1999                        Dennis D'Amore,
                                    President and Chief Operating Officer


                                    /s/ Max Munn
July 9, 1999                        Max Munn, Chairman and Secretary

       *Print the name and title of each signing officer under his signature.

       Supplemental  information  to be Furnished with Reports Filed Pursuant to
Section 15(d) of the Exchange Act by Non-reporting Issuers.

       (c) Registrant has not furnished its annual report or proxy  materials to
its security  holders.  Such report and proxy  materials  are to be furnished to
registrant's  security holders  subsequent to the filing of the annual report on
this Form.


                                       24

<PAGE>