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, 1998.


                           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                          (Zip Code)
              Executive Offices)

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 $5,186,334.

      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, 1998, was approximately $806,088.

Number of shares  outstanding of the Issuer's  Common Stock as of June 22, 1998,
was 1,959,166 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  and  major  department  stores  such as Sears  and JC  Penny,  large
furniture chains such as Wickes,  and catalogue  houses such as Parke-Bell.  For
the fiscal  year ended March 31,  1998,  sales to JC Penny,  Sears,  Parke-Bell,
Wickes represented 7.2%, 6.7%, 7.6% and 2.7% 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 owed 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  currently  scheduled for August 1998. There can
be no  assurance  that the Merger will be  completed  and that the Company  will
recognize the anticipated benefits that will flow therefrom.


<PAGE>





      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,  1998 the  closing  bid price for the  shares was $.50 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 1755  Glendale
Boulevard, Los Angeles, California 90026.

Manufacturing

      AHI manufactures substantially all of its sculptures and decorative pieces
at its facility in Los Angeles,  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 13.5% (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,  June 30, 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 terminates on December 31, 1998.

      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.


<PAGE>



Marketing

      AHI markets its  products  through a network of  independent  commissioned
sales  representatives.  Domestically,  AHI has, as of June 1, 1998, twenty four
(24) 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, Taiwan 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 13.5% (raw  components).  Products  purchased
from suppliers are produced  exclusively  for AHI and therefore are not commonly
available.

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


<PAGE>



Copyright Protection

      The Company has been granted and currently  maintains  over 954 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 22, 1998, the Company had a total of 84 full-time employees, 17
of whom are engaged in performing  administrative  functions, and 67 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,  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 warehousing facilities and
factory showroom are located at 1755 Glendale Boulevard, Los Angeles, California
(the "Los Angeles Facility").  On November 18, 1996, AHI entered into a five (5)
year lease with Henry Goldman, formerly President and Chief Executive Officer of
AHI, for the Los Angeles facility.  The lease is for approximately 33,000 square
feet and  requires a monthly rent payment of $14,203.  AHI has  determined  that
there is substantial  manufacturing  and warehousing  space available in the Los
Angeles  area if AHI were  required  to  expand or  relocate  some or all of its
current facilities.

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


<PAGE>





      Item 3. LEGAL PROCEEDINGS.

      None.

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

      None.

                                     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 March 31, 1997
and from April 1, 1997 to March 30, 1998 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

First Quarter, 1997           $6.5625                 $4.688
Second Quarter, 1997          $6.3125                 $3.50
Third Quarter, 1997           $5.625                  $1.50
Fourth Quarter, 1997          $6.875                  $2.125

First Quarter, 1998           $4.50                   $0.375

* 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  1998,  the  final  quoted  price as  reported  by The NASD OTC
Bulletin  Board was $.50 for the Common Stock.  As of June 22, 1998,  there were
1,709,176 shares of Common Stock outstanding, held of record by approximately 47
record holders and approximately 1,400 beneficial owners.


<PAGE>



Item 6

DECOR GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
------------------------------------------------------------------------------



OVERVIEW

     Decor Group,  Inc. [the  "Company" or "Decor"] was formed in March of 1996.
The primary  activities of Decor prior to the acquisition of Artisan House, Inc.
["Artisan"] on November 18, 1996 for approximately $3,700,000, 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 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 Note 4A]. 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, 1998,  Interiors,  Inc. owned approximately 79% 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 will receive 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.

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

RESULTS OF OPERATIONS

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.





<PAGE>



DECOR GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
------------------------------------------------------------------------------



RESULTS OF OPERATIONS [CONTINUED]

For  the  year  ended  March  31,  1998,   Artisan  had  an  operating  loss  of
approximately $2,086,000.  Management believes that for the year ended March 31,
1999,  the  Company  can  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 is currently being implemented. The
process will  continue  throughout  the year 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.

Management also believes that in fiscal 1999,  administrative and sales expenses
can be decreased by the  installation  of a new computer  system and merging the
administrative and sales functions with the acquisition  candidate of Interiors,
Inc.  Interiors has advised the Company of its intent to provide the funding for
the  acquisition  through  private  placement  of  either  stock or  subordinate
debentures.

Management believes the planned restructuring and relocation of its headquarters
and  manufacturing  operations,  together  with the  subletting  of its  present
facilities, will occur in October of 1998 in conjunction with space that will be
made available to it as a result of Interiors,  Inc.'s imminent acquisition of a
metal fabrication manufacturing business with excess, underutilized capacity.

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.


<PAGE>



DECOR GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
------------------------------------------------------------------------------



LIQUIDITY AND CAPITAL RESOURCES

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
believes  that in the next twelve months cash  requirements  will 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 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.


<PAGE>



DECOR GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
------------------------------------------------------------------------------



LIQUIDITY AND CAPITAL RESOURCES [CONTINUED]

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.

     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.





<PAGE>



DECOR GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
------------------------------------------------------------------------------



LIQUIDITY AND CAPITAL RESOURCES [CONTINUED]

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.

RESULTS OF OPERATIONS   [MARCH 31, 1997]

Decor had  revenues  and cost of revenues  for the period  April 1, 1996 through
March  31,  1997 of  $2,003,084  and  $990,514,  respectively.  This  represents
Artisan's sales and cost of sales  transactions for the period November 19, 1996
through March 31, 1997.

Decor had acquisition fees, selling and  administrative  expenses for the period
April 1, 1996 through March 31, 1997 of $1,625,324 of which $945,305 represented
Artisan's expenses for the period November 19, 1996 through March 31, 1997.

The Company  incurred a net loss of $855,796  for the year ended March 31, 1997.
This includes net income generated by Artisan House of approximately $55,000 for
the period November 19, 1996 through March 31, 1997.




<PAGE>



DECOR GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
------------------------------------------------------------------------------



LIQUIDITY AND CAPITAL RESOURCES       [MARCH 31, 1997]

At March 31, 1997,  Decor had working capital of $1,422,042.  For the year ended
March 31, 1997, the Company used $410,159 for operating activities. For the year
ended March 31, 1997, investing activities utilized cash of $2,204,589 primarily
comprising  $2,250,000  utilized for the acquisition of Artisan House,  Inc. For
year ended March 31, 1997,  financing  activities generated $2,737,256 primarily
from the sale of common stock in  connection  with the initial  public  offering
with net  proceeds  of  $2,236,123.  The cash  balance  at  March  31,  1997 was
$169,508.

In March  1996,  the  Company  issued  to  Interiors  250,000  shares of Class A
Non-Voting  Convertible  Preferred  Stock and an option to  purchase  20,000,000
shares  of  Class B  Non-Convertible  Voting  Preferred  Stock in  exchange  for
Interiors  issuing  to the  Company  200,000  shares of Common  Stock  valued at
$600,000 at March 31, 1996 and 200,000 shares of Series A Convertible  Preferred
Stock  valued at  $1,000,000  at March 31, 1996.  As of March 31, 1997,  the per
share market value of Interior's common stock and Series A Convertible Preferred
Stock was $1.06 and $3.00, respectively.  Therefore, the carrying value at March
31, 1997 was $812,600.  Accordingly, gross unrealized holding losses of $387,400
and  $400,000  existed  at March  31,  1997 on the  common  stock  and  Series A
Convertible Preferred Stock, respectively.

NEW AUTHORITATIVE PRONOUNCEMENTS

     The FASB has issued SFAS No. 130,  "Reporting  Comprehensive  Income." SFAS
No. 130 is effective for fiscal years beginning after December 15, 1997. Earlier
application is permitted.  Reclassification of financial  statements for earlier
periods  provided  for  comparative  purposes is  required.  SFAS No. 130 is not
expected to have a material impact on the Company.

     The FASB has  issued  SFAS  No.  131,  "Disclosures  About  Segments  of an
Enterprise and Related Information." SFAS No. 131 changes how operating segments
are  reported in annual  financial  statements  and  requires  the  reporting of
selected  information  about  operating  segments in interim  financial  reports
issued to  shareholders.  SFAS No. 131 is effective for periods  beginning after
December  15,  1997,  and  comparative  information  for earlier  years is to be
restated.  SFAS No. 131 need not be applied to interim  financial  statements in
the  initial  year of its  application.  SFAS No.  131 does not have a  material
impact on the Company.

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.


<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, 1998...............F-2......F-3

   Consolidated Statements of Operations for the years ended
   March 31, 1998 and 1997 ......................................F-4......

   Consolidated Statements of Stockholders' Equity for the
   years ended March 31, 1998 and 1997...........................F-5......

   Consolidated Statements of Cash Flows for the years
   ended March 31, 1998 and 1997 ................................F-6......F-7

   Notes to Consolidated Financial Statements....................F-8......F-20




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



<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,  1998,  and  the  related
consolidated statements of operations,  stockholders' equity, and cash flows for
the years ended March 31, 1998 and 1997. 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, 1998, and the
results of their operations,  and their cash flows for the years ended March 31,
1998 and 1997, 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
$3,346,712 for the year ended March 31, 1998 and have a working  capital deficit
of $578,263 at March 31, 1998 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
May 21, 1998

                                       F-1

<PAGE>



Item 7:

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


CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1998.
------------------------------------------------------------------------------


<TABLE>

Assets:
Current Assets:
<S>                                                                     <C>        
  Cash                                                                  $    50,256
  Accounts Receivable [Net of Allowance of $149,646]                        547,447
  Due from Related Party                                                    309,914
  Inventories                                                               586,953
  Prepaid Expenses and Other Current Assets                                 100,061
                                                                        -----------
  Total Current Assets                                                    1,594,631

Property and Equipment [Net of Accumulated Depreciation of $441,923]         97,121
                                                                        -----------
Other Assets:
  Goodwill [Net of Accumulated Amortization of $156,780]                  1,670,526
  Other Assets                                                               16,928
                                                                        -----------
  Total Other Assets                                                      1,687,454

  Total Assets                                                          $ 3,379,206
                                                                        ===========

</TABLE>



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, 1998.
------------------------------------------------------------------------------



<TABLE>

Liabilities and Stockholders' Equity:
Current Liabilities:
<S>                                                                     <C>        
  Accounts Payable and Accrued Expenses                                 $   717,222
  Due to Related Party                                                      225,285
  Due to Stockholders                                                        43,500
  Accrued Compensation and Benefits - Former Officer                        161,022
  Accrued Costs for Restructuring                                           645,000
  Line of Credit                                                            263,428
  Current Portion of Long-Term Debt                                         117,437
                                                                        -----------
  Total Current Liabilities                                               2,172,894

Long-Term Debt                                                              557,045

  Total Liabilities                                                       2,729,939

Commitments and Contingencies [7]                                                --

Stockholders' Equity:
  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,
   1,759,166 Issued and Outstanding                                             176

  Additional Paid-in Capital - Common Stock                               4,142,752

  Accumulated Deficit                                                    (5,482,779)

  Deferred Compensation                                                    (436,882)

  Total Stockholders' Equity                                                649,267

  Total Liabilities and Stockholders' Equity                            $ 3,379,206
                                                                        ===========

</TABLE>


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

                                        F-3

<PAGE>



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


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


<TABLE>


                                                                 Years ended
                                                                  March 31,
                                                              1 9 9 8    1 9 9 7
                                                              -------    -------

<S>                                                        <C>         <C>       
Revenues                                                   $5,186,334  $2,003,084

Cost of Revenues                                            3,167,620     990,514
                                                           ----------  ----------

  Gross Profit                                              2,018,714   1,012,570
                                                           ----------  ----------

Selling, General and Administrative
  Expenses:
  Administrative Expenses                                   2,045,184     824,817
  Selling Expense                                           1,493,911     521,674
  Amortization of Deferred Compensation                       554,285     188,833
  Restructuring Costs                                         645,000          --
  Write-off of Intangibles                                    537,046          --
  Management Fee - Related Party                               90,000      90,000
                                                           ----------  ----------

  Total Selling, General and Administrative
   Expenses                                                 5,365,426   1,625,324
                                                           ----------  ----------

  [Loss] from Operations                                   (3,346,712)   (612,754)
                                                           ----------  ----------

Other Income [Expense]:
  Loss on Sale of Investment in Related Party              (1,112,873)         --
  Interest Income                                                  --       3,426
  Miscellaneous Income                                         61,800          --
  Interest Expense - Related Party                            (39,410)     (7,447)
  Interest Expense                                            (90,038)   (239,974)
  Interest Income - Related Party                                  --         953
                                                           ----------  ----------

  Other [Expense] Income - Net                             (1,180,521)   (243,042)
                                                           ----------  ----------

  Net [Loss]                                               $(4,527,233)$ (855,796)
                                                           =========== ==========

Net [Loss] Per Common Share:
  Basic                                                    $    (2.65) $     (.47)
                                                           ==========  ==========

  Diluted                                                  $    (2.65) $     (.47)
                                                           ==========  ==========

Weighted Average Number of Common
  Shares Outstanding                                        1,708,343   1,832,333

Dilutive Potential Common Shares:
  Warrants and Options                                             --          --
                                                           ----------  ----------

  Adjusted Weighted Average Common Shares                   1,708,343   1,832,333
                                                           ==========  ==========

</TABLE>

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


<TABLE>


                                       Preferred Stock              Common Stock                      Unrealized
                                                 Additional                  Additional               Holding              Total
                                                   Paid-in                     Paid-in  Accumulated  Deferred   Loss on Stockholders
                                  Shares  Amount   Capital   Shares  Amount    Capital    Deficit  Compensation Investment  Equity



<S>              <C> <C>          <C>     <C>    <C>        <C>       <C>    <C>        <C>           <C>      <C>       <C>       
 Balance - March 31, 1996         250,000 $   25 $1,599,975 1,312,500 $ 131  $  319,169 $   (99,750)  $     -- $187,600  $2,007,150

54,934 Shares of Series C
  Convertible Non-Voting
  Preferred Stock                  54,934      5    823,995        --    --          --          --         --       --     824,000

20,000,000 Shares of Series
 B Non-Convertible
 Voting Preferred Stock        20,000,000  2,000         --        --    --          --          --         --       --       2,000

Net Proceeds from Sale of
 Common Stock from
 Initial Public Offering               --     --         --   345,000    35   2,236,088          --         --       --   2,236,123

Issuance of Stock in
 Connection with Acquisition           --     --         --    50,000     5     299,995          --         --       --     300,000

Unrealized Loss on Investment
 [Net of Income Taxes]                 --     --         --        --    --          --          --           -- (975,000) (975,000)

Deferred Compensation in
 Connection With Issuance of
 Stock Options                         --     --         --        --    --   1,180,000          --  (1,180,000)      --         --

Amortization of Deferred
 Compensation                          --     --         --        --    --          --          --     188,833       --    188,833

Net Loss for the year ended
 March 31, 1997                        --     --         --        --    --          --    (855,796)         --       --   (855,796)
                               ---------- ------ ---------- --------- -----  ----------    ---------  --------- -------- ----------

 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

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

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

Adjustment on Disposal of
 Securities Available for Sale         --     --         --        --    --          --          --         --   787,400    787,400

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

Net [Loss] for the year ended
 March 31, 1998                        --     --         --        --    --          --  (4,527,233)        --        -- (4,527,233)
                               ---------- ------ ---------- ---------  ----  ---------- -----------  ---------  --------  ----------

 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
                               ========== ====== ========== =========  ====  ========== ===========  ========== ======== ==========

</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
------------------------------------------------------------------------------
<TABLE>


                                                                 Years ended
                                                                  March 31,
                                                             1 9 9 8      1 9 9 7
                                                             -------      -------

Operating Activities:
<S>                                                        <C>         <C>        
  Net [Loss]                                               $(4,527,233)$ (855,796)
  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                                   537,046          --
   Amortization of Deferred Compensation                      554,285     188,833
   Accrued Management Fees - Related Party                     90,000          --
   Bad Debt Expense                                           208,366      19,900
   Amortization of Intangibles                                126,988      98,293
   Depreciation                                                43,250      14,082
   Interest - Cost of Bridge Warrants                              --     214,300
   Net Book Value of Transferred Assets for Services           13,478          --
   Stock Issued for Services                                  107,500          --

  Changes in Assets and Liabilities:
   [Increase] Decrease in:
     Accounts Receivable                                      361,762    (131,823)
     Inventory                                                373,065    (155,350)
     Prepaid Expenses                                           5,612         250
     Other Assets                                             (15,474)     18,528

   Increase [Decrease] in:
     Accounts Payable and Accrued Expenses                    155,807     178,624
     Accrued Compensation and Benefit - Former Officer        161,022          --
     Accrued Costs for Restructuring                          645,000          --
     Accrued Interest - Related Party                          (7,447)         --
                                                           ----------  ----------

  Net Cash - Operating Activities - Forward                   (54,100)   (410,159)
                                                           ----------  ----------

Investing Activities:
  Sale of Property and Equipment                                1,979          --
  Purchase of Property and Equipment                          (39,685)     (4,589)
  Proceeds from Sale of Investment in Related Party           487,127          --
  Cash Paid for Acquisition of Artisan House                       --  (2,250,000)
  Additional Acquisition Costs - Settlement Agreement        (258,438)         --
                                                           ----------  ----------

  Net Cash - Investing Activities - Forward                $  190,983  $(2,254,589)

</TABLE>


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
------------------------------------------------------------------------------
<TABLE>

                                                                 Years ended
                                                                  March 31,
                                                              1 9 9 8    1 9 9 7
                                                              -------    -------

<S>                                                        <C>         <C>        
  Net Cash - Operating Activities - Forwarded              $  (54,100) $ (410,159)
                                                           ----------  ----------

  Net Cash - Investing Activities - Forwarded                 190,983  (2,254,589)
                                                           ----------  ----------

Financing Activities:
  Monies Advanced to Interiors                               (309,914)         --
  Payments on Payable to Interiors                            (50,000)     50,000
  Proceeds from Line of Credit                                263,428          --
  Proceeds from Stockholder Loans                                  --     411,785
  Proceeds from Sale of Common Stock in Connection
   with Initial Public Offering                                    --   2,236,123
  Proceeds from Sale of Preferred Stock                            --     826,000
  Payment of Notes and Leases Payable                        (159,654)   (553,652)
  Payment of Stockholder Loans                                     --    (183,000)
  Exercise of Options                                               5          --
                                                           ----------  ----------

  Net Cash - Financing Activities - Forward                  (256,135)  2,787,256
                                                           ----------  ----------

  Net [Decrease] Increase in Cash                            (119,252)    122,508

Cash - Beginning of Years                                     169,508      47,000
                                                           ----------  ----------

  Cash - End of Years                                      $   50,256  $  169,508
                                                           ==========  ==========

Supplemental Disclosures of Cash Flow Information:
  Cash paid for the years for:
   Interest                                                $   69,495  $   26,218
   Income Taxes                                            $       --  $       --
</TABLE>

Supplemental Disclosures of Non-Cash Investing and Financing Activities:
  During the period  ended March 31,  1996,  the Company  recorded a discount of
$214,300  on a bridge loan  resulting  from the  issuance  of  warrants  for the
$250,000 bridge loan. For the period ended March 31, 1997, the Company amortized
$214,300 as interest expense.

  On March 3, 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  Preferred  Stock 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 and
a guarantee with respect to certain indebtedness [See Note 6].

  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,  the Company  issued  options for 20,000  shares of the
Company's  common stock to its  President and recorded  $90,000 as  compensation
expense.

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. [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, 1998.

[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.  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 less than the  projected  undiscounted  cash flow
from the acquired assets or business.

Goodwill has been amortized using the straight-line method over twenty years. In
connection  with the  acquisition  of Artisan  House,  Inc.  in  November  1996,
goodwill of approximately $1,800,000 was recorded using the purchase method.

                                       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 year ended March 31, 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.

Potential common shares of 80,000 are not currently dilutive,  but may be in the
future.

For the year ended March 31, 1997,  the number of shares to be used for earnings
per share  calculation  purposes  was based on a) the  1,312,500  common  shares
issued since the initial capitalization and, pursuant to Securities and Exchange
Commission  Staff  Accounting  Bulletin No. 83, on the  1,500,000  common shares
assumed issued from the warrants in connection  with the bridge loan, as if they
were  outstanding  since  inception to June 30, 1996 [the last period in the IPO
Prospectus] and b) for after the IPO: the 1,312,500 shares outstanding from July
1, 1996 through  November 18, 1996 and the  1,707,500  shares  outstanding  from
November 18, 1996 to March 31, 1997.

[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, 1998, the Company
had approximately $179,200 in cash in excess of insured amounts.


                                       F-9

<PAGE>



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



[1] Summary of Significant Accounting Policies [Continued]

[H]  Risk  Concentrations  [Continued]  - 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  approximately  $150,000 for the fiscal  period ended March 31, 1998
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.

[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.

[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  is being  amortized  over 20 years using the  straight-line  method.
Intangible  assets of $537,046 were written off in March of 1998.  Operations of
Artisan are included with the Company from November 19, 1996 onward.  The assets
and liabilities of Artisan are combined with those of the Company as of November
18, 1996.

The following unaudited pro forma combined results of operations account for the
acquisition as if it had occurred at the beginning of the periods presented. The
pro forma results give effect to amortization  of goodwill and other  intangible
assets,  interest expense,  employment  contracts,  consulting  agreements,  and
options issued.
                                                 Year ended
                                                  March 31,
                                                   1 9 9 7

Total Revenues                                   $5,575,105

Net [Loss]                                       $(1,566,743)

Net [Loss] Per Common Share                      $     (.84)
Weighted Average Number of Common Shares
  Outstanding                                     1,863,583

These pro forma amounts may not be  indicative  of results that  actually  would
have  occurred if the  combination  had been in effect on the date  indicated or
which may be obtained in the future.



                                      F-10

<PAGE>



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



[3] Inventories

The components of inventory were as follows:

Raw Materials                           $  259,396
Work-in Process                            229,340
Finished Goods                              98,217
                                        ----------

  Totals                                $  586,953
  ------                                ==========

[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 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.

[B] Due to  Interiors  - 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
[Note 16A].

[C] 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 year ended March 31, 1998 was $5,220.

[D] 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.

[5] Property and Equipment

Property and equipment consisted of the following:

Machinery and Equipment                 $  175,862
Leasehold Improvements                     151,559
Furniture and Fixtures                     145,565
Office and Computer Equipment               66,058
                                        ----------

Total - At Cost                            539,044
Less: Accumulated Depreciation            (441,923)

  Net                                   $   97,121
  ---                                   ==========

Depreciation expense was approximately $43,000 and $14,000, respectively for the
years ended March 31, 1998 and 1997.

                                      F-11

<PAGE>



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



[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, 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 [See Note 16[A] - Pending Merger].

[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. 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 9], 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 already made by Interiors, Inc. in March of 1998.

[B]  Consulting  Agreements  - On January 1, 1997,  the Company  entered  into a
consulting  agreement with a 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,  1998,  the  Company  accrued
$131,000 to the director as monies due upon his resignation.

On March 1, 1997, Artisan entered into a consulting agreement to provide Artisan
with such consulting services as requested in connection with the stabilization,
updating and transition of Artisan's  accounting systems.  The Company agreed to
pay $11,500 per month for the term of the Consulting Agreement. The initial term
of the Consulting Agreement was three [3] months with two, one month extensions.
This agreement expired in July 1997.

                                      F-12

<PAGE>



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



[7] Commitments and Contingencies [Continued]

[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 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 had 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 of the  covenants of the loan.  Interest
expense for the year ended March 31, 1998 was $19,627.

[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].

Future minimum lease payments under all operating leases are as follows at March
31, 1998:

Year ended
March 31,
  1999                              $ 245,088
  2000                                190,572
  2001                                189,114
  2002                                100,856
  Thereafter                                -
                                    ---------

  Total                             $ 725,630
  -----                             =========

Artisan  also  rents  showroom  space  in High  Point,  North  Carolina  and San
Francisco,  California.  The High Point lease  expires April of 1999 and the San
Francisco  lease expires in July of 1998. The current monthly lease payments are
$3,126 for High Point and $1,098 for San Francisco.

Rental expense was $236,197 and $92,766,  respectively for the years ended March
31, 1998 and 1997.


                                      F-13

<PAGE>



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



[7] Commitments and Contingencies [Continued]

[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 10,000 options.  For the year ended March 31, 1998, the Company
amortized  $54,285 as  compensation  expense.  In March  1997,  the  officer was
elected to the offices of President and Chief Financial Officer of the Company.

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.

[8] Debt
                                         March 31,
                                          1 9 9 8

Acquisition Loan                        $  712,857
Less:  Discount                             38,375
                                        ----------

Total                                      674,482
Less: Current Portion of Long-Term Debt    117,437

  Long-Term Portion                     $  557,045
  -----------------                     ==========

Annual maturities of notes payable are as follows:

Year ended
March 31,
  1999                        $ 117,437
  2000                          128,015
  2001                          139,472
  2002                          289,558
  Thereafter                         --
                              ---------

  Total                       $ 674,482
  -----                       =========




                                      F-14

<PAGE>



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



[8] Debt [Continued]

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  year  ended  March  31,  1998  was
approximately  $10,000  and has been  amortized  as interest  expense.  Interest
expense for the year ended March 31, 1998 was approximately  $50,000 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.

[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 1 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.

                                      F-15

<PAGE>



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



[10] Capital Stock [Continued]

[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 a valuation for the exchange  rates for the stock to
be exchanged in connection  with the pending  merger with  Interiors,  Inc. [See
Note 16A]. 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.

[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 $3,346,712  and $612,754 for the years ended March 31, 1998
and 1997,  respectively.  The Company had a working  capital deficit of $578,263
and an  accumulated  deficit of  $5,482,779  at March 31, 1998.  The Company was
primarily funded for the year ended March 31, 1998 by its line of credit and the
sale of its investment in Interiors, Inc. [See Note 6].

As part of a  restructuring  plan adopted in September of 1997,  the Company has
taken steps to further reduce its selling,  general and  administrative  expense
for  its  operating  activities  in an  effort  to  generate  future  cash  from
operations.  A  reduction  of manpower  and  operating  expenses  related to the
Company's administrative and sales functions is currently being implemented. The
process will  continue  throughout  the year in  conjunction  with the Company's
anticipated relocation to the facilities of an Interiors, Inc.
metal fabrication manufacturing business.

At March 31,  1998,  the Company had amounts  available on its line of credit of
approximately  $256,000.  It does not have any other  additional  commitments to
secure financing.  There is no assurance that the Company will be able to secure
financing  in the  future  and  that  even if the  Company  is  able  to  obtain
financing,  such financing will be available on terms acceptable to the Company.
If the Company's  plans change,  or if the  assumptions or estimates prove to be
inaccurate,  or if the Company is unable to raise more funds  through  equity or
debt financing, this could have an adverse impact on the Company.

The Company does believe,  however,  that its pending merger with Interiors will
help by  providing  the Company  access to an expanded  working  capital line of
credit in addition  to a credit  facility  for the  purchase  of  machinery  and
equipment which is contemplated to be provided through Interiors, Inc. to all of
its subsidiaries  upon their  successful  completion of a credit review process.
The credit facility could reduce the Company's interest rate on its borrowings.



                                      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  operations  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 is
concentrating on strategies for growth through improved competitiveness, quality
and   effectiveness.   In  order  for  the  restructure  plan  to  be  completed
successfully, management believes that Interiors acquisitions of other companies
could provide the opportunity for Artisan House to move its facility and improve
the  manufacturing  process.  Interiors  closed on two  acquisitions in March of
1998.

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  $645,000.   The
restructuring  reserve through December 1997 had included an offset for sublease
income.  However,  since there has not been any  successful  commitment  in this
endeavor since September of 1997, management has decided to increase the reserve
by approximately $435,000.  This had represented  management's previous estimate
of attainable sublease income for the remaining term of 44 months.

[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 $3,100,000 of
which approximately  $100,000 will expire in 2011,  approximately  $600,000 will
expire in 2012, and approximately $2,400,000 will expire in 2013.

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                 $ 144,000
  Stock based compensation                  225,000
  Net Operating loss carry forwards       1,240,000

  Total Deferred Tax Assets              $1,609,000

  Net Deferred Tax Asset Before
   Valuation Allowance                   $1,589,000
   Valuation Allowance                   (1,589,000)
                                         ----------

   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 $1,589,000.  This  represents an
increase in its valuation  allowance of $937,000 over the allowance at March 31,
1997.

[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.  Compensation
expense has been  recognized for the Company's  stock-based  compensation in the
amounts of $554,285  and  $188,833  for the years ended March 31, 1998 and 1997.
The exercise price for all stock options issued to employees during fiscal years
1998 and 1997 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
                                                 Exercise   Contractual
                                       Shares      Price       Life

  Outstanding - April 1, 1996                -- $      --
  ---------------------------

Granted                                 125,000     .0001
Exercised                               (15,000)    .0001
Forfeited/Expired                            --        --
                                     ---------- ---------

  Outstanding - March 31, 1997          110,000     .0001     4 Years
  ----------------------------                               ========

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

  Outstanding - March 31, 1998           80,000 $   .0002
  ----------------------------       ========== =========

  Exercisable - March 31, 1998           52,000     .0001     3 Years
  ----------------------------       ========== =========    ========




                                      F-18

<PAGE>



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



[14] Stock Options [Continued]

Had  compensation  cost for the Company's stock options issued to employees been
determined  based upon the fair value at the grant date for stock options issued
under these plans  pursuant to the  methodology  prescribed  under SFAS No. 123,
Accounting  for  Stock-Based  Compensation,  the Company's net loss and loss per
share would not have  changed on a proforma  basis.  The  weighted  average fair
value of stock options  granted to employees used in  determining  the pro forma
amounts  is  estimated  at $4.50 for the year  ended  March 31,  1998  using the
Black-Scholes  option-pricing model for the pro forma amounts with the following
weighted average assumptions:

                                   March 31,
                                    1 9 9 8

Risk-free Interest Rate              5.73%
Expected Life                       5 Years
Expected Volatility                 149.41%
Expected Dividends                   None

If compensation  cost had been determined on the basis of fair value pursuant to
SFAS No. 123,  net income and net  earnings  per share as reported  would not be
materially affected.

[15] Fair Value of Financial Instruments

At March 31, 1998  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] Subsequent Events

[A]  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 will
receive 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.

In March of 1998,  the  Company  retained a  financial  consulting  firm to
provide merger and  acquisition  consulting and advisory  servicesin  connection
with the  pending  merger  with  Interiors,  Inc..  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.

[B] Loan Repayment - On April 2, 1998, the Company received $200,000,  including
interest,  from  Interiors  as  repayment  for  the  advances  of  approximately
$300,000.



                                      F-19

<PAGE>



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



[17] New Authoritative Pronouncements

The FASB has issued SFAS No. 130,  "Reporting  Comprehensive  Income." SFAS
No. 130 is effective for fiscal years beginning after December 15, 1997. Earlier
application is permitted.  Reclassification of financial  statements for earlier
periods  provided  for  comparative  purposes is  required.  SFAS No. 130 is not
expected to have a material impact on the Company.

The FASB has  issued  SFAS  No.  131,  "Disclosures  About  Segments  of an
Enterprise and Related Information." SFAS No. 131 changes how operating segments
are  reported in annual  financial  statements  and  requires  the  reporting of
selected  information  about  operating  segments in interim  financial  reports
issued to  shareholders.  SFAS No. 131 is effective for periods  beginning after
December  15,  1997,  and  comparative  information  for earlier  years is to be
restated.  SFAS No. 131 need not be applied to interim  financial  statements in
the  initial  year of its  application.  SFAS No.  131 does not have a  material
impact on the Company.




                    .   .   .   .   .   .   .   .   .   .   .

                                      F-20

<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          48   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                53   Chairman of the Board and Secretary

James Herman            54   Director

Donald Graves           53   Vice President of Sales and Marketing of AHI.



       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. the majority 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.


<PAGE>





     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.

       Donald Graves has been the  Vice-President  of Sales and Marketing of AHI
since March 1997. From 1995 through 1996, Mr. Graves was Vice President of Sales
and Marketing for Knape & Vogt a $170 million manufacturer of hardware products.
From 1991 to 1995,  Mr. Graves  served as Vice  President of Sales and Marketing
for Lasco Bathware,  a division of Tomkins  Industries,  Inc. From 1990 to 1991,
Mr. Graves served as National  Sales  Manager for Lasco  Bathware.  From 1975 to
1990,  Mr. Graves served as Vice  President of Sales and Marketing for the Filon
Division of Standard Oil. Mr. Graves holds a Bachelor Arts Degree from Dartmouth
College and subsequently received a Masters of Business  Administration from the
Columbia University School of Business.

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

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, 1998, 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, 1998.
<TABLE>

                           Summary Compensation Table

                        Annual Compensation    Long-Term Compensation
                                               Awards       Payouts
                                                                          Securities                   All other
Name and Principal                            Other Annual Restricted     underlying   LTIP Payouts   compensation 
   Position          Year Salary       Bonus  Compensation Stock award($) options/SARs     ($)            ($)
     (a)              (b)     (c)      (d )   (e)          (f)            (g)              (h)          (i)

<S>                   <C>    <C>                                                                                 
Dennis D'Amore        1998   $125,000        --     --         --               --             --              --
 President and Chief
 Financial Officer,
 Decor Group, Inc.,
 and Chairman of the
 Board, President
 Chief Operating
 Officer, and
 Treasurer of AHI.

Donald Graves.........1998         --       --     --         --               --             --              --
 Vice President of Sales and
  Marketing, Artisan House, Inc.
</TABLE>

*Mr.  D'Amore  received  $100,000 per annum until December 31, 1997 and $125,000
per annum beginning January 1, 1998.



<PAGE>





     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
<TABLE>

                   Number of Securities  Percent of Total
                   Underlying Options/    Percent of Total                Exercise or Base 
                   SAR Options            Options/SARS Granted            Base Price         Market Price
Name               Granted                to Employees in Fiscal Year     ($/Shr             on Date of Grant   Expiration Date

(a)                (b)                     (c)                            (d)                (e)

<S>                <C>                     <C>                            <C>                <C>                        <C>    
Dennis D'Amore     20,000                  100%                           $.0003             $6.875             January 1, 2004
</TABLE>

     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:

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

                Shares                Number of    Value of
               Acquired on  Value     Securities   Unexercised in the
 Name          Exercise (#) Realized $Underlying   Money
 ----          ------------ ----------
                                      Unexercised  Options/SARS at
                                      Options/SARS FY-End ($)
                                      at FY-End (#)exercisable/
                                      exercisable/ unexercisable
                                                   -------------
                                      unexercisable
                                      -------------

(a)              (b)           (c)      (d)             (e)

Dennis D'Amore   __            __             2,000/28,000   $8,500/$119,000


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%  (llater  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  salesachieved  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 officer.  In
connection  with a settlement  agreement  reached in September  1997 with CIDCOA
International, Inc. ("CIDCOA") formerly known as AHI, the Company reinstated the
employment agreement with the former officer and recorded additional monies owed
to him of  approximately  $290,000  whereby  $161,022 is due to him at March 31,
1998 pursuant to this agreement.


<PAGE>





     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
$125,000 as of January 1, 1998), (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 10,000  options.  For the year ended
March 31, 1998, the Company amortized $54,285 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
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.  The Company
recorded compensation expense of $90,000 on January 1, 1998.

      On January  14,  1997,  the  Company  entered  into a two year  employment
agreement  with Donald  Graves  pursuant  to which Mr.  Graves will serve as the
Company's Vice  President of Sales and Marketing.  The Company agreed to pay Mr.
Graves (1) an annual  salary of  $90,000,  (2) a cash bonus equal to two percent
(2%) of net sales  growth of the Company in excess of ten percent  (10%)  growth
over the  Company's  previous  fiscal  year,  and (3) a cash bonus  equal to one
percent (1%) of AHI's gross margin less selling  expenses  increased  over AHI's
prior  fiscal  year,  provided  that  AHI's net sales  increase a minimum of ten
percent (10%) over that same period.

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.

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.


<PAGE>





      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 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.


<PAGE>





      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 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.



<PAGE>




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


Dennis D'Amore(3)   30,000       *            --                 --

Max Munn(4)(5)      67,000       *            --                 --

Henry Goldman(6)   200,000     11.1%          --                 --

James Herman          --         --           --                 --

Interiors, Inc. (7)    --        --      20,000,000             100%

The Skyes
Corporation (8)    200,000      11.1%        --                  --

All directors and
officers as a
group (9)           97,000       --           --                 --


   * indicates ownership of less than 1%.

      (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
            30,000  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.
      (8)   The Skyes Corporation address c/o 430 Chestnut Street, East Hill,
            New York    
      (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.



<PAGE>




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  NonConvertible  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).  Additionally,  the  amendment  provides  that  the
Management  Services  Agreement  may not be modified  in any manner  without the
unanimous  consent of the Board of Directors of the Company.  For the year ended
March 31, 1998 the Company paid Interiors $50,000 under the Management Agreement
and owes Interiors $225,285. The Company recorded interest expense of $16,116 on
this obligation for the year ended March 31, 1998.



<PAGE>



      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, 1998 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.

      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, the Company  entitled Dennis  D'Amore,  the Company's
President  and Chief  Financial  Officer to be granted an option to  purchase an
aggregate of 30,000  shares of Common  Stock at an exercise  price of $.0003 per
share,  for a period  of five (5)  years,  in  accordance  with the terms of the
Employment  Agreement  entered  into  between the Company and Mr.  D'Amore.  Mr.
D'Amore is also entitled to receive options to purchase twenty thousand (20,000)
shares of the Company's Common Stock under the terms of the Company's 1996 Stock
Plan (the "Performance Options").  The Performance Options are exercisable for a
period of one (1) year following the date of grant at an exercise price equal to
the average  closing  price as reported on the NASD OTC  Bulletin  Board for the
twenty  (20)  trading  days  ending two (2)  trading  days prior to the date the
Performance Options are granted to Employee.

      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 1998,  the Company  retained a firm to render  ongoing  investment
banking and other related consulting  services to the Company in connection with
the proposed merger between the Company and Interiors,  Inc. In return for these
services,  the Company issued $200,000 shares of its common stock to the firm in
May of 1998.

Item 13.EXHIBITS AND REPORTS ON FORM 8-K

(a)   Consolidated Financial Statements:

      Independent Auditor's Report

      Consolidated Balance Sheet as of March 31, 1998

      Consolidated Statements of Operations for the years ended March 31, 1998
      and 1997

      Consolidated Statements of Stockholders' Equity for the years ended
      March 31, 1998 and 1997

      Consolidated Statements of Cash Flows for the years ended March 31, 1998
      and 1997

      Notes to Consolidated Financial Statements

(b)   None.


<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
June 13, 1998                       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
June 13, 1998                       Dennis D'Amore,
                                    President and Chief Operating Officer


                                    /s/ Max Munn
June 13, 1998                       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.
<PAGE>