SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549______________________

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 June 30, 2004.                                             
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|    | or                                                                                        
|    |                                                                                           
||_| | Transition report pursuant to Section 13 or 15 (d) of
      the Securities Act of 1934 for
|    | the transition period from ___________ to ___________
      .                             



|Commission File Number001-31260______________________Decorize, Inc.(Exact name of registrant as specified in its charter)______________________
|-----------------------------------------------------------------------------------------------------------------------------------------------

|Delaware                 | 43-193180                           
|------------------------ | ------------------------------------
|(State of Incorporation) | (IRS Employer Identification Number)

1938
  E. Phelps
  Springfield, MO 65802
  (417) 879-3326(Address,zip code and telephone number, including area code, of
  registrants principal executive offices)______________________

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

Securities registered pursuant to Section 12 (g) of the Act:
  Common Stock, $0.001 par value

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

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

The registrants revenues for the fiscal year ended June 30, 2004,
  were $12,056,856.

At
  September 10, 2004, there were 13,136,735 outstanding shares of the registrants
  Common Stock. At September 10, 2004, the total aggregate market value of the
  6,056,759 shares of voting stock held by non-affiliates of the registrant was
  $4,118,596 based upon a closing bid of the registrants Common Stock as
  reported by The American Stock Exchange on that date of $0.68 per share. The
  term affiliates is deemed, for this purpose only, to refer to directors, officers
  and holders of 5% or more of the Common Stock of the registrant.

Documents Incorporated By Reference:

Portions of the Registrants Proxy Statement for the Annual Meeting of Shareholders to be held on October 13, 2004  Part III



|DECORIZE, INC.
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|PART I        
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|PART II       
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|PART III      
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|PART IV       
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|SIGNATURES    



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|FORWARD-LOOKING STATEMENTS
|--------------------------

This Annual Report on Form 10-KSB contains forward-looking statements.  The words intend, anticipate, believe, estimate, plan and
expect, and similar expressions as they relate to us, are included to identify these forward-looking statements. Forward-looking statements include those that address activities, developments or events that we expect or anticipate will
or may occur in the future. All statements other than statements of historical facts contained in this Annual Report, including statements regarding our future financial position, business strategy, budgets, projected costs and plans and objectives
of management for future operations, are forward-looking statements.  The actual outcome of the events described in these forward-looking statements could differ materially.  Risks, uncertainties and assumptions that could cause actual results to
differ materially from the expectations reflected in the forward-looking statements include, among other things:

- the risks associated with growth;
- our inability to purchase and manufacture merchandise at attractive prices;
- changes in consumer demand and preferences that cause people to desire products
    other thanthose traditionally offered by Decorize; and
- risks associated with our lack of liquidity.

These factors expressly qualify all subsequent oral and written forward-looking statements attributable to us or persons acting on our behalf.

A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. We have chosen these assumptions or bases in good faith and we
believe that they are reasonable. However, we caution you that assumed facts or bases almost always vary from actual results, and the differences between assumed facts or bases and actual results can be material, depending on the circumstances. When
considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this Annual Report.  Except for our ongoing obligations to disclose material information as required by the federal securities laws,
we do not have any intention or obligation to update forward-looking statements after we distribute this Annual Report.

Readers are referred to the caption Risk
  Factors appearing at the end of Item 1 of this report for additional factors that may affect our forward-looking statements. In
  light of these risks, uncertainties and assumptions, the forward-looking events discussed in this report might not occur. We undertake
  no obligation to update or revise our forward-looking statements, whether as a result of new information, future events or otherwise.



PART I

Item 1. DESCRIPTION OF BUSINESS

| | General
| | -------



Our company, headquartered in Springfield, Missouri,
  is a manufacturer and wholesaler of imported home furnishings and accessories. We founded decorize.com, LLC, the company that became
  Decorize, Inc. in March 2000 to create a direct source to business home furnishings and accessories company designed to
  serve both large and small retailers in the United States, with products delivered from the Far East. We became a publicly traded company
  in July 2001 through a reverse merger with a reporting company named Guidelocator.com and adopted its fiscal year end of June 30. Guidelocator.com
  was a development stage company that was formed to provide an internet database containing information on fishing guides around the
  world. The merger has been accounted for as a recapitalization of Decorate, a predecessor of Decorize. After the merger, Decorizes
  common stock traded on the over-the-counter market until it became listed for trading on the American Stock Exchange in March 2002.
  We did not pursue any fishing guide related business after the merger, and our company has focused on the sale of furniture and home
  décor products to our wholesale customers since that time. We completed the acquisition of GuildMaster in June 2001, and the
  acquisition of Faith Walk in July 2001, following the Guidelocator.com merger, which expanded our operations in the home accents and
  accessories business. In July 2003, we created WestWay Enterprises, Ltd., a wholly-owned foreign subsidiary, located in Shenzhen, China;
  and in October 2003, we created Pt. Niaga Merapi, also a wholly-owned foreign subsidiary, to conduct final assembly and finishing operations
  near Yogyakarta, Indonesia.



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The operations and the product focus of Decorize, GuildMaster, and Faith Walk were
  separate and distinct in mid-2001, but since our completion of the acquisition and merger transactions, all three entities have combined
  their activities into one company and all have migrated to the Decorize business model, which relies on manufacturing and importing
  our home furnishings products direct from the Far East to our retailers sites in the United States. More than 90% of the products
  we sold during our most recent fiscal year were manufactured by suppliers located in the Far East. We ceased our remaining domestic
  production at the end of March 2004 and have now completed our plan to replace all of the domestic product volume with goods from our
  overseas suppliers. Prior to this fiscal year, our products were marketed under the separate brand names of decorize.com, GuildMaster,
  and Falk Walk Designs. During the current year, we implemented changes to define our brand names by the market segments they serve.
  For product primarily designed and marketed to the specialty retailer, we have maintained the brand identity of GuildMaster so that
  we may continue to build on the customers awareness of that brand. Products we design and source for the large retailer segment
  are now exclusively marketed under the Decorize brand name.

We use our source to business model to serve two distinct market segments, the source to large retailer segment and the source to specialty retailer segment. The source to large
retailer segment is comprised of customers that we believe can benefit from our pricing, delivery times and custom design capability. The specialty retailer segment includes small retailers, high-end department stores, and designers or decorators,
that in our experience, have paid premium prices and have been unable to directly source home furnishings and accents from overseas. The price of our products includes the cost of freight to the United States port of entry, which reduces the
uncertainty about ocean freight costs that would otherwise be borne directly by the specialty retailer. Also, because we have a significantly higher volume of shipments than our individual customers would have, we are able to negotiate lower per
item shipping rates on the ocean freight, allowing us to pass through a lower cost than a small retailer would obtain on its own account.

During fiscal year 2004, the revenue mix of the business segments was approximately 27% from specialty retailers and 73% from large retailers. Based on our limited operating history, the mix has remained relatively
unchanged.  However, as we focus additional resources on the specialty retailer segment, management expects the revenue mix between the business segments to eventually become spread more evenly. Nevertheless, we cannot predict with certainty whether
or how our business mix will change in the future.

| | Decorize
| | --------

We source our products from a network of manufacturing
  partners in the Far East, principally China, Indonesia, the Philippines, Thailand, and Vietnam. Working in concert with our third-party
  logistics providers, we stage products in facilities located in those countries for shipment directly to our large retailer customers
  in the United States. We are able to pass on lower prices to large retailers because we eliminate or reduce the additional costs that
  are required in the traditional model for building substantial product inventories, multiple stage warehousing and multiple handling
  levels by a third-party. The products sourced to be moved through our specialty retailers channel are shipped from the Far East directly
  to our fulfillment center in Springfield, Missouri.

| | GuildMaster
| | -----------

We acquired GuildMaster in June of 2001.
  GuildMaster was founded in 1981 and is well recognized in the industry for its design uniqueness. From its beginning, the GuildMaster
  brand has predominantly focused on custom, high-end, home accent products. We have leveraged the GuildMaster name to market and brand
  the products we sell through our specialty retailer channel. Prior to the current fiscal year, its products were either produced to
  its specifications by manufacturers located in the Far East or were manufactured in its Springfield, Missouri facility. As of March
  31, 2004, we transitioned the production of all its designs to manufacturers located in the Far East.



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| | Faith Walk
| | ----------

Faith Walk Designs is a corporation, founded by J. Michael Sandel and his spouse that we acquired in July 2001. Prior to acquisition, Faith Walk sourced its products in unpainted form from
domestic suppliers and added design finishing in its Houston, Texas manufacturing facility. Under our business model, all formerly Faith Walk branded designs are manufactured entirely by our suppliers in the Far East. In addition, all of Faith
Walks designs are now marketed under the GuildMaster brand name.

| | WestWay Enterprises, Ltd.
| | -------------------------

In July 2003, we created WestWay Enterprises, Ltd., a wholly-owned foreign subsidiary located in Shenzhen, China.  The formation of this subsidiary was required because of local regulations affecting our ability to employ
personnel locally. WestWay employs six personnel, who primarily manage quality control and quality assurance for product manufactured by suppliers within the country of China.

| | P.T. Niaga Merapi
| | -----------------

In October 2003, we created P.T. Niaga Merapi, a wholly-owned foreign subsidiary
  with its offices located near Yogyakarta, Indonesia. We created this foreign subsidiary to comply with local regulations and requirements
  for Decorize to employ local residents. The primary purpose of this group is to be responsible for quality control and assurance within
  the country of Indonesia, where a substantial amount of our GuildMaster product is manufactured. In April 2004, to further improve our
  product quality, we acquired a facility to conduct light manufacturing, final assembly, and finishing operations. We believe this operation
  allows us to consistently provide a more unique and higher quality product than previously available from third party manufacturers
  within the country. In addition, through this new finishing facility, we are able to better package our finished products for shipping,
  thus reducing the amount of losses incurred during the transportation process, due to faulty or less than adequate packaging.

| | Business Strategy
| | -----------------

Our objective in evaluating and designing our business
  model is to enable our company to surpass competitors in our industry on product value, item uniqueness, selection and delivery options
  of imported home furnishings products by improving our use of information technology, logistics processes and our direct sourcing business
  model. We believe our customers focus on those factors when choosing a home furnishings supplier, and if we can exceed the offerings
  of our competitors, we will increase our market share at the cost of our competitors.

Our source to business model for the large retailers, eliminates several layers of handling and warehousing by importers and distribution centers. Products are sourced in the Far East and
shipped directly to retailers in the United States.  We believe that a majority of our industry competitors ship product through several levels of warehouse facilities, which we estimate would increase the cost of our products by up to
15%.

The business model for our specialty retailer customers leverages our unique design and foreign production capabilities. Our manufacturing facility in Indonesia allows us to maintain a higher
level of product quality than previously found from manufacturers within that country.  In addition to product quality, our facility also allows us to insure the quality and adequacy of the product packaging, thus reducing returns due to freight
damage and increasing customer satisfaction.

We have developed support systems for
  manufacturing of our products in the Far East, which provide product development support and quality assurance supervision in the production,
  packaging and shipping of our private label products. A very important element of our business model is a concentration on designing
  and customizing proprietary product lines to meet specific customer needs. This model enables us to provide high-volume, high quality
  proprietary products to large retailers at attractive prices and offers small retailers access to a broad range of accessories and accent
  furniture which was previously not available to them.



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Our support systems consist primarily of quality control personnel who oversee our manufacturing done by our suppliers in the Far East. We believe our overseas employees are an integral part of
the direct shipping method that we prefer. We do not believe that our business model could be successful without the oversight, management and first-hand knowledge of our foreign regional suppliers provided by our overseas manufacturing support
team. Recently, Decorize has begun to expand the roles of our overseas support team beyond mere quality control into areas of product development and product procurement of items that are available in the Far East, and which would not likely have
become part of our product offerings without our overseas staff. Currently, our company employs 93 persons overseas, and we may increase that number to suit our level of production and design. The focus will continue to be on quality control,
regarding items such as consistency to design requests, manufacturing quality and packaging and delivery issues, but we will continue to seek opportunities for them to provide assistance on procurement and development of possible product offerings.

We are expanding our product sourcing, development and warehousing operations in the Far East to support the increasing volumes of product sourced there under our business model. At the same
time, we are continuing to build our sales and distribution channels in the United States in order to improve our ability to present our products and services to a growing customer base.

To improve our operational effectiveness, we continue to develop new and existing technological solutions. These solutions provide us the information we need to closely work with suppliers to
plan production and delivery times. In addition, we utilize technology to track customer orders, production status and deliveries so we may meet demanding customer expectations. We will continue to seek upgrades in our technological infrastructure
that improve operating efficiencies, improve customer service capabilities and improve quality and cost control in our operations.

Although we are currently focusing our efforts on limited categories and products which are most productive for us, our long-term strategy includes the acquisition or in-house development of
additional product categories that will enable us to offer a broad line of accessories, accent furniture, and related categories. Potential product categories into which we may expand our product offerings include specialty lighting, gifts,
institutional furnishings, ironwork and florals, which are product areas in which we are not currently well-represented. We also intend to develop our current staff and management and operational infrastructure in order to pursue marketing
opportunities that we have identified in new product areas in customer markets that we are not currently pursuing.  In that regard, we intend for our overseas support systems to increasingly be responsible for developing new product offerings by
researching items that may be available in the overseas market for which they are responsible.  We expect that we will need to raise additional external funds to implement our growth strategy in a timely fashion.  To that end, we expect to evaluate
various financing opportunities in private or public markets and will arrange financing when appropriate terms are available.

| | Merchandise
| | -----------

We design, market and sell through our distribution chain a variety of imported home furnishings and home accent items such as hand-painted or traditionally finished armoires, chests, tables,
chairs, painted furniture, paintings, sculpture, tapestries, other fine art pieces, various hand-made ceramics, candles, lamps and similar accessory items. Accent furniture includes items such as occasional tables, end tables, mirrors, wicker chairs
and tables, and ottomans.  Accessories include items such as wood, rattan, glass or ceramic bowls, statuettes, vases, candles and candleholders, baskets, boxes, lamps and bath items. Wall art includes a variety of traditional art such as framed oil
paintings or prints, but it includes many other types of materials and designs including fabrics, woven materials and collages.

Our product offerings are now marketed
  and sold through two distinct brands, Decorize and GuildMaster, each of which has a slightly different product mix that is driven by
  its customer focus. Decorize branded products are typically more proprietary in nature and often developed to meet the specific requirements
  of our large retailer customers. Our large retailer customers market our products to their retail consumers through their brick and
  mortar store locations. The product mix we supply to those retailers depends upon their perception of their customers tastes and
  demands. Our GuildMaster branded products are typically marketed toward specialty retailers, high-end department stores, designers and
  decorators who market our products to consumers that shop at their brick and mortar store locations. The product mix is determined by
  analyzing current and future trends and tastes in the marketplace. We maintain approximately 1,000 unique items in our supply chain
  and periodically review, add, and drop products based upon the demand in the marketplace.



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Since our inception, we have not experienced any significant difficulty in manufacturing or otherwise obtaining quality merchandise in adequate volumes and at suitable prices.

| | Suppliers
| | ---------

We have developed a network of more than 100 supply partners in China, the Philippines, Thailand, Indonesia and Vietnam that manufacture most of the products we sell to our customers. For the
year ended June 30, 2004, Decorizes top ten vendors accounted for approximately 70% of our total purchases. During the time spent arranging the production of our goods with overseas manufacturers, Decorize and its supply partners are developing a
better understanding of each others needs and requirements. As our supply partners become more familiar with Decorizes business model and products, they become more adept at meeting our design and manufacturing needs, which gives us
greater confidence in continuing to direct orders to those overseas vendors who have demonstrated success in working with us and increasing our reliance on particular supply partners for meeting our overseas manufacturing needs. However, we believe
that none of our suppliers is material to our business individually, since there are a number of alternative suppliers available to manufacture our products in both the Far East and other parts of the world. We currently estimate that the largest of
those suppliers will represent less than 20% of our product purchases during any fiscal year. We work closely with our overseas suppliers to ensure that they manufacture and ship products that meet our requirements.

The raw materials used by our suppliers, such as wood products, metal, glass and ceramics are readily available in many places throughout the world. Because of the availability of replacement
raw materials, we do not anticipate any significant difficulties in obtaining suitable raw materials for the manufacture of our products, even if there is ever a shortage of those materials in any particular country or region in which our suppliers
are located.

The relationship with our logistics companies provides us with state-of-the-art staging and warehousing facilities in the countries from which we source products. However, if it is necessary,
we have alternative sources for those staging and warehousing services.

| | Customers
| | ---------

The current customer base for our brands includes approximately twelve large retailers and more than a thousand small retailers, designers and decorators.  During the year ended June 30, 2004,
our customer revenues were approximately $12.1 million. Although our top five customers in the past year accounted for approximately 66% of our revenues, our business plan for growing our business are expected to result in greater revenue
diversification.  During fiscal 2004, our top five customers from the standpoint of revenues were Home Depot Expo, Sears  The Great Indoors, La-Z-Boy, CBK,Ltd., and Hancock Fabrics. Our purchase orders with our customers are completed on a
purchase-by-purchase basis, and we have not entered into any long-term purchase agreements with any customers, nor are there any formal volume commitments from any of them.

| | Industry and Competition
| | ------------------------

We estimate that the premium home accents and accessories market segment of the home furnishings industry in which we compete includes approximately 26,000 companies that account for approximately $40 billion of sales at
the wholesale level. We believe that there are no dominant competitors within the premium home accents and accessories market segment of the home furnishings industry. Furthermore, we are not aware of any other competitor in the industry that relies
on the Decorize source to business model for delivery of its home furnishings products.



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There is intense competition in our industry. However, we believe that our low-cost business model, the ability to provide highly customized products, our successful selection/design of fashion trends, our large number of
products, our low inventory requirements and our intensive customer service practices, will attract a growing number of customers and will allow us to increase revenues rapidly. Our model is not protected from duplication and it is possible that
other companies will compete with us by using a similar approach in conducting their business.

| | Foreign Market Risks
| | --------------------

As an importer of manufactured products from several countries in the Far East, our business is subject to political risks that are beyond our control. Since our inception, we have perceived the greatest risk relative to
our supply chain to come from our suppliers located in China. This perception arises because most of our products are manufactured in China, as evidenced by the fact that during fiscal 2004, approximately 64% of the products manufactured by our
third party suppliers were manufactured in China. However, we believe that the globalization movement and the recent focus on reduction of tariffs and the planned ongoing reductions should provide a beneficial tariff environment for importers. We
believe that the recent entry of China into the World Trade Organization should substantially reduce the risk that China might take political actions that would restrict its trade with the United States or the rest of the world. Our strategy to
minimize our exposure to the political risks of any one country has been to develop manufacturing partners in multiple countries. All of the products offered by Decorize are available from multiple supply sources in several different countries,
which we believe protects us from the political risks of any one country or region.

We are also subject to governmental regulations and tariff policies, which may change from time to time. We believe that the increased globalization of the United States retail economy, which has been spurred in part by
the WTO and also the broadened reach of consumers because of the expansion of retail capabilities of the internet, are causing a global shift in attitudes toward the preference for a more open world-wide economy. These trends should favor the
reduction of tariffs and expansion of international trade, which should benefit our business.

| | Warehousing and Distribution
| | ----------------------------

An important aspect of our success involves our ability to reduce or eliminate warehousing of our products and the related direct expenses and management costs that would be required. The greater part of the products we
sell are to large retailers. The products for these customers are not warehoused at our expense, since we have those products shipped directly from our manufacturers in the Far East to our customers stores or distribution centers. The products
we sell to the specialty retailer market are shipped from the Far East to our fulfillment center in Springfield, Missouri.  From our fulfillment center, goods are then shipped to our customers via common and contract carriers throughout the United
States and Canada. Quick and efficient distribution is required to meet customer needs, and we are continually pursuing improvements in our delivery process.

Our ability to track orders and merchandise delivery in a detailed and timely manner is an essential requirement for us to eliminate excess warehouse and retail capacity under our direct ship
model. In response to this need for detailed order information, Decorize developed a tracking system with our logistics provider which utilizes computer and internet technology to track the transport and storage of our goods down to the SKU level.
The logistics technology we use lets us know in real time where our merchandise is at all times and when those products will be delivered to our customers.  We can also track costs in the same detailed and timely fashion using this technology.
Since we first began developing our direct ship model, we have consistently sought the services of those logistics providers which have the capabilities to make the technology available to us, since the ability to track our orders, merchandise and
costs is such a significant benefit to that shipping model. Decorize has no intellectual property rights in the tracking process or the technology used in the tracking process, however, we believe that there are a significant number of other
logistics suppliers that would be able to provide the same technology and, with our assistance, duplicate the tracking process that we currently use.



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| | Management Information Systems
| | ------------------------------

We maintain a corporate local area network computer system, which integrates purchase orders, imports, transportation, distribution, and financial systems. Expenditures for continuing upgrades of management information
systems are anticipated in the foreseeable future to refine and update these systems.

| | Trademarks and Tradenames
| | -------------------------

We completed the registration for the service mark "The Worlds Décor...Right to your Door," on September 2, 2002, with the United States Patent and Trademark office. The registration for The Worlds
Décor  Right to your Door will terminate in 10 years from the date of grant, or may be cancelled after 6 years if we do not file the appropriate documents evidencing our continued use of that mark. Our application for the service
mark Decorize was filed in April 2002 and registration was granted in August 2003.

In addition, we have common law rights to the use of decorize.com and The Worlds Décor.Right to your Store, however, we have not chosen to complete an application for registration
of those marks at this time.

| | Employees
| | ---------

As of June 30, 2004, our company and its subsidiaries employed 133 persons, including 93 in the Far East. Our employees are not represented by any union. We have not experienced any work stoppage due to labor disagreements
and we believe that our employee relations are good.



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Risk Factors

Our limited operating history makes it difficult for us to evaluate our future business prospects and make decisions based on those estimates of our future performance.

The concept for our business model was developed in 2000. The acquisitions of our two operating subsidiaries were completed in June 2001 and July 2001, respectively. Even though GuildMaster and
Faith Walk Designs have operated independently for some time, we have a limited operating history in our current combined form, which makes it difficult to evaluate our business on the basis of historical operations. Also, our largest brand in terms
of revenues, Decorize, which accounted for approximately 72.5% of our sales in fiscal 2004, has only been operational since March 2000.  As a consequence, our past results may not be indicative of future results. Although this is true for any
business, it is particularly true for us because of our limited operating history. Reliance on historical results may hinder our ability to anticipate and timely adapt to increases or decreases in sales, revenues or expenses. For example, if we
overestimate our future sales for a particular period or periods based on our historical growth rate, we may increase our overhead and other operating expenses to a greater degree than we would have if we correctly anticipated the lower sales level
for that period and reduced our controllable expenses accordingly. If we make poor budgetary decisions as a result of unreliable historical data, we could be less profitable or incur losses, which may result in a decline in our stock
price.

We have incurred losses historically, and we may not be able to attain or maintain profitability.

We incurred a net loss of $4.4 million for the fiscal year ended June 30, 2004, which was an increase of 266% over the $1.2 million loss in fiscal 2003.  Although our revenues increased
significantly since the beginning of fiscal 2002, we have not maintained profitability. We cannot assure you that our operating losses will decline, even if our sales increase dramatically. We will need to generate greater revenues and improve our
operating margins to achieve and maintain profitability in the future. If our operating losses continue on a long-term basis, we may experience a shortage of working capital that could adversely affect our business or our ability to continue our
business, in which case our stock price may decline, perhaps significantly, and you could lose the value of your investment.

Our customers have no obligation to purchase from us, which may result in sudden declines in sales.

Our customer mix currently consists of approximately twelve large retailers and more than a thousand specialty retailers, department stores, designers and decorators. We do not have supply
agreements or other volume commitments that are binding on our customers, and our sales originate solely from individual purchase orders that we negotiate with our individual customers. As a consequence, our customers are not obligated to purchase
any amount of our products and they may choose to stop or decrease their level of product purchases from us at any time, without giving us prior notice.  This could cause our sales to fluctuate, and we could experience a sudden and unexpected
decline in sales. We could experience unexpected operational losses if our customer sales were to decline significantly without notice. Furthermore, our revenue projections are subject to greater uncertainty than if we had volume commitments from
one or more of our largest customers. Although our top five customers in fiscal year 2004 accounted for approximately 66% of our revenues, we cannot assure you that these customers, or any of our customers, will continue to purchase our products in
significant volume, or at all.



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We are implementing a strategy to grow and expand our business, which is expensive and may not generate increases in our revenues.

We intend to expand our business, and we are incurring expenses associated with our growth and expansion.  Although we recently raised funds through private offerings to implement our growth
strategy, these funds may not be adequate to offset all of the expenses we incur in expanding our business. We have hired additional employees overseas and continue upgrading our technological infrastructure to improve quality and cost controls,
operating efficiency and customer service capabilities.  We will need to generate greater revenues to offset expenses associated with our growth, and we may be unsuccessful in achieving greater revenues, despite our attempts to grow our business.
If our growth strategies do not result in increased revenues, we may have to abandon our plans for further growth or even reduce the current size of our operations.

We may need to raise additional funds, and these funds may not be available when we need them.

Based on our current plans, we are adjusting our operating expenses so that cash generated from operations and from working capital financing and other short term financing is expected to be
sufficient for the foreseeable future to fund our operations at our currently forecasted levels.  However, if our forecasts are inaccurate, we will need to raise additional funds. In addition, we expect that we will need to raise additional funds if
we decide to pursue more rapid expansion, the development of new or enhanced services and products, appropriate responses to competitive pressures, or the acquisition of complementary businesses or technologies, or if we must respond to
unanticipated events that require us to make additional investments. There can be no assurance that additional financing will be available when needed on favorable terms, or at all. If these funds are not available when we need them, then we may
need to change our business strategy and reduce our rate of growth.

We must effectively manage the growth of our operations, or we may outgrow our current infrastructure.

During the period from June 1, 2001 to June 30, 2004, our total number of employees increased from 7 to 133, including 93 employees in Asia.  During our intial periods of operation as a
combined entity, we experienced a high rate of sales growth, which at times exceeded the capacity of our infrastructure and resulted in a backlog of customer orders and product quality issues. The decline in revenues for the current fiscal year is
to some degree a result of our previous demand exceeding our infrastructural capacity. We have resolved those capacity issues by hiring additional personnel and upgrading our technology infrastructure, and we will continue pursuing additional sales
growth for our company. If we expand too quickly, or if our infrastructure does not improve rapidly enough, our customer orders could again outpace our ability to meet our customers needs, which could force us to delay or reduce customer
orders.  Expanding our infrastructure will be expensive, and will require us to train our workforce, and improve our financial and managerial controls to keep pace with the growth of our operations.

We may engage in acquisitions, which will consume resources and may be unsuccessful or unprofitable.

We may explore the possibility of acquiring other
  businesses; however, acquisitions are not always successful or profitable. Any future acquisitions could expose us to risks, including
  risks associated with assimilating new operations, technologies and personnel; diversion of resources from our existing businesses;
  inability to generate revenues sufficient to offset associated acquisition costs; and risks associated with the maintenance of uniform
  standards, controls, procedures and policies. Acquisitions may also result in additional expenses from amortizing acquired intangible
  assets. If we attempt an acquisition and are unsuccessful in its completion, we will likely incur significant expenses without any benefit
  to our company. If we are successful in completing an acquisition, the risks and other problems we face may ultimately make the acquisition
  unprofitable. Failed acquisition transactions and underperforming completed acquisitions would burden us with significant costs without
  any corresponding benefits to us, which could cause our stock price to decrease, perhaps significantly.



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We face substantial competition from numerous sources, many of which have access
  to better resources.

Competition in the wholesale market for home furnishings
  is intense. We compete with a diverse group of wholesalers ranging from internet businesses to traditional brick-and-mortar companies,
  many of which have greater resources than Decorize. We believe that barriers to entry in the wholesale furniture and home furnishings
  market are not significant and start-up costs are relatively low, so our competition may increase in the future. Our belief that there
  are minimal barriers to entry is based on our observation that operations such as ours do not require the wholesalers to own warehouses,
  showrooms and factories to operate, which we think is because (i) our direct ship business model can be operated with minimal warehousing
  needs and costs, which are significantly less than traditional models, (ii) wholesale product orders can be placed after receipt of
  customer orders, in order to further reduce warehousing needs, (iii) samples can be shown to customers at little or no cost, without
  the necessity of showroom space for actual product, (iv) if a competitor wants showroom space, it is typically available for lease at
  competitive rates in most United States markets, and (v) all manufacturing can be done by third party suppliers, so there is no need
  to own or lease a manufacturing facility. New competitors may be able to launch new businesses similar to ours, and current competitors
  may replicate our business model, at a relatively low cost. If wholesalers with significantly greater resources than Decorize decide
  to replicate our business model, they may be able to quickly gain recognition and acceptance of their business methods and products
  through marketing and promotion. We may not have the resources to compete effectively with current or future competitors. If we are
  unable to effectively compete, we will lose sales to our competitors and our revenues will decline.

Our directors have the ability to significantly influence any matters to be decided by the stockholders, which may prevent or delay a change in control of our company.

The
  current members of our Board of Directors beneficially own, in the aggregate,
  approximately 43.3% of our common stock, on a fully diluted basis. As a result,
  if they choose to vote in concert, our directors are collectively able to significantly
  influence the outcome of any corporate matters submitted to our stockholders
  for approval, including any transaction that might cause a change in control,
  such as a merger or acquisition. It is unlikely that stockholders in favor of
  a matter that is opposed by the board of directors, would be able to obtain
  the number of votes necessary to overrule the board.

Because we do not manufacture our products in the United States, a disruption in the delivery of imported products may have a greater effect on us than on our competitors.

We import products that we have manufactured, purchased or had manufactured for us overseas. Merchandise imported directly from these overseas manufacturers currently accounts for approximately all of our total purchases.
Because we import all of our products and deliver them directly to our customers, we believe that disruptions in shipping deliveries may have a greater effect on us than on competitors who manufacture and warehouse products in the United States.
Deliveries of our products may be disrupted through factors such as:

| | (i)   | raw material shortages, work stoppages, strikes and political unrest;                            
| | ----- | -------------------------------------------------------------------------------------------------
| | (ii)  | problems with ocean shipping, including work stoppages and shipping container
      shortages;   
| | (iii) | increased inspections of import shipments or other factors causing delays in
      shipments; and
| | (iv)  | economic crises, international disputes and wars.                                                

For example, we experienced significant delays in
  shipments due to a dockworkers dispute on the West Coast in fiscal 2003. The delays from this dispute resulted in the cancellation of
  some customer orders, since we could not obtain products from overseas in a timely manner. Although we managed to minimize the impact
  of the delays, a longer dispute could have placed us at a serious disadvantage to some of our competitors. Most of our competitors warehouse
  products they import from overseas, which allows them to continue delivering their products for the near term, despite overseas shipping
  disruptions. If our competitors are able to deliver products when we cannot, our reputation may be damaged and we may lose customers
  to our competitors.



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Currently, the products we buy abroad are priced in United States dollars, so we are not directly affected by changes in foreign exchange rates. If we are required to pay for goods in foreign
currencies in the future, then we would be affected by fluctuating currency exchange rates. In that event, we will attempt to enter into foreign currency exchange contracts with major financial institutions to hedge the overseas purchase
transactions and limit our exposure to those fluctuations. If we were not able to successfully protect ourselves against those currency rate fluctuations, then our profits on the products subject to those fluctuations would also fluctuate and could
cause us to be less profitable or incur losses, even if our business is doing well.

We may need to substantially increase our marketing efforts in order to grow our business, which is expensive.

In order to grow our business, we will need to develop and maintain widespread recognition and acceptance of Decorize, our business model, and our products. We believe that we have presented
our product offering to only a small percentage of the large and medium sized retailer market. Currently, we rely primarily on word of mouth from our existing customers and contacts we develop personally through industry events to promote and market
Decorize. In order to successfully grow Decorize, we may need to significantly increase our financial commitment to creating awareness and acceptance of Decorize among retailers, which would be expensive. In fiscal year 2004, marketing and
advertising expenses were $189,000, which is approximately 3% of our operational expenses for that year. If we fail to successfully market and promote our business, we could lose current customers to our competitors, or our growth efforts may be
ineffective. If we incur significant expenses promoting and marketing Decorize, it could cause our profitability to decline.

Our businesses are not diversified, which could result in significant fluctuations in our operating results.

All of our business is involved in the retail and wholesale marketing of furniture and other home products, and accordingly is dependent upon trends in the home furnishings sector. Downturns in
the home furnishings sector could have a material adverse effect on our business. A downturn in the home furnishings sector may reduce our stock price, even if our business is successful.

We have not paid dividends in the past, and do not anticipate paying dividends in the future.

We have not paid or declared cash dividends to the holders of our common stock, and do not intend to do so in the foreseeable future. We intend to use any excess funds from our operations to operate and grow Decorize. We
cannot assure you that we will ever pay dividends to the holders of our common stock.

Our forward-looking statements may prove to be inaccurate.

This Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, including statements about Decorizes forecasts,
expectations, beliefs, performance, plans, strategy, objectives, and intentions.  Although we believe that the forecasts, expectations, beliefs, performance, plans, strategy, objectives and intentions reflected in, or suggested by, those
forward-looking statements are reasonable, it is possible that one or more, or even all, of them may not be achieved or realized.  Factors that could cause actual results to differ materially from the forward-looking statements made in this
prospectus are set forth in this Risk Factors section. All forward-looking statements attributable to Decorize are qualified in their entirety by those cautionary statements. Forecasts are particularly likely to be inaccurate, especially over long
periods of time.

|Item 2. DESCRIPTION OF PROPERTIES
|---------------------------------

Our corporate headquarters are based in a single leased building of approximately 9,600 square feet in Springfield, Missouri. The rent for this space is $3,500 per month and the facilities are in good condition. The
initial term of the lease for our corporate headquarters terminated on April 15, 2004, and we exercised our option to renew the lease for another one-year term ending April 15, 2005. We have a second option to renew the lease for another one-year
period at the end of the current renewal term. We anticipate that if additional space is required within the next 12 months for our headquarters, then such space will be available in the Springfield area on a reasonable commercial basis.



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We lease and operate a 41,250 square foot fulfillment center in Springfield, Missouri.  The lease agreement currently provides for a monthly rent payment of $9,860. The lease on the building
terminates on November 30, 2006, and there are options to renew the lease for two additional five-year periods.  The Springfield facility is in good condition, and we believe the space is adequate for our operations in the foreseeable future.

We also lease additional design studio and office space of approximately 1,950 square feet in Houston, Texas.  The rental agreement for this facility requires an $840 monthly rent payment and
terminates on November 30, 2004. We anticipate renewing the lease prior to its expiration.

We lease and operate our own showroom of approximately 8,951 square feet in High Point, North Carolina. The High Point showroom lease terminates on October 31, 2009. The rent for the period
beginning November 1, 2003 and ending October 31, 2004 is $9,656.30 per month, from November 1, 2004 to October 31, 2005 is $9,680.70 per month, from November 1, 2005 to October 31, 2008 is $9,866.30 per month and from November 1, 2008 to October
31, 2009 is $10,162 per month. We have an option to renew the lease for one five-year period.

Finally, pursuant to agreements with independent sales representative groups, we lease varying amounts of floor space at eight regional showrooms throughout the United States.  The monthly
rental payments vary between $500 and $2,440.

We maintain insurance for physical loss on all properties described above, and we believe that the amount of this insurance coverage provides adequate protection.

Item 3. LEGAL PROCEEDINGS

We are not aware of any legal proceedings pending or threatened against us that we expect would have a material adverse effect on our financial condition or results of operations.

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

No matters were submitted to a vote of our security holders during the fourth quarter of the year ended June 30, 2004.



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PART II

Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Shares of our common stock began trading on The American Stock Exchange on March 8, 2002, under the symbol DCZ. The following table summarizes the highest and lowest reported sales price per share for all
fiscal quarters of 2004, and 2003.

|                    | High |      | Low
|------------------- | ---- | ---- | ---
|                    |      |      |    
|Fourth Quarter 2004 | $    | 1.19 |    
|Third Quarter 2004  |      | 1.10 |    
|Second Quarter 2004 |      | 1.52 |    
|First Quarter 2004  |      | 1.75 |    
|Fourth Quarter 2003 |      | 1.77 |    
|Third Quarter 2003  |      | 1.90 |    
|Second Quarter 2003 |      | 2.39 |    
|First Quarter 2003  |      | 3.20 |    

We had approximately 722 beneficial owners of our common stock, including 85 of which were holders of record, as of September 2, 2004.

We have not paid cash dividends on our common stock since its inception. The board of directors does not anticipate payment of any cash dividends in the foreseeable future and intends to continue its present policy of
retaining earnings for reinvestment in our operations.

The following table summarizes as of June 30, 2004, the shares of common stock authorized for issuance under our equity compensation plans:

Equity Compensation Plan Information

|**Plan category**            | **Number of securities to be****issued upon exercise of** **outstanding options,** **warrants and rights** |         | **Weighted average**
      **exercise price of** **outstanding options,** **warrants and rights** |  | **Number of securities**
      **remaining available for** **future issuance under** **equity compensation plans**
|---------------------------- | ---------------------------------------------------------------------------------------------------------- | ------- | ------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------
|                             |                                                                                                            |         |                                                                                                   |  |                                                                                                                   
|Equity compensation plans    |                                                                                                            |         |                                                                                                   |  |                                                                                                                   
|approved by security holders |                                                                                                            | 923,261 |                                                                                                   |  |                                                                                                                   
|Equity compensation plans    |                                                                                                            |         |                                                                                                   |  |                                                                                                                   
|not approved by security     |                                                                                                            |         |                                                                                                   |  |                                                                                                                   
|holders                      |                                                                                                            |        |                                                                                                   |  |                                                                                                                   
|                             |                                                                                                            |         |                                                                                                   |  |                                                                                                                   
|Total                        |                                                                                                            | 923,261 |                                                                                                   |  |                                                                                                                   

Item 6. MANAGEMENTS DISCUSSION AND ANALYSIS

| | Critical Accounting Policies
| | ----------------------------

The preparation of financial statements in conformity
  with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect
  the amounts reported in the accompanying financial statements and related footnotes. Management bases its estimates and assumptions
  on historical experience, observance of industry trends and various other sources of information and factors. Actual results could differ
  from these estimates. Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties,
  and potentially could result in materially different results under differing assumptions and conditions. Decorize believes the following
  critical accounting policies require managements most difficult, subjective and complex judgments.



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Goodwill Effective July 2001, we adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill
and Other
Intangible Assets, which was issued by the Financial Accounting Standards Board (FASB) in July 2001.  SFAS NO. 142 required that an intangible asset that is acquired shall be initially recognized and measured based on its fair value. SFAS No. 142
also provided that goodwill should not be amortized, but shall be tested for impairment annually, or more frequently if circumstances indicate potential impairment, through a comparison of fair value to its carrying amount. Decorize did not identify
or record any impairment with the adoption of this new standard.

Revenue Recognition Revenue is recognized when the earnings process is complete and the risks and rewards of ownership of the goods have
transferred to the customer, which is generally considered to have occurred upon receipt of the products by the customer.

Allowances for Doubtful Accounts We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers
to make required payments. We perform ongoing credit evaluation of our customers financial condition and if the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional
allowances would likely be required. Actual collections could differ materially from our estimates.

Accounting for Business Combinations The companies that we have acquired have all been accounted for as business combinations. Under the purchase
method of accounting, the cost, including transaction costs, are allocated to the underlying net assets, based on their respective estimated fair values. The excess of the purchase price over the estimated fair values of the net assets acquired is
recorded as goodwill.

The judgments made in determining the
  estimated fair value and expected useful lives assigned to each class of assets and liabilities acquired can significantly impact net
  income. For example, different classes of assets will have useful lives that differ. Consequently, to the extent a longer-lived asset
  is ascribed greater value under the purchase method than a shorter-lived asset, there may be less amortization recorded in a given period.

Stock Options In accordance with Accounting Principles Board (APB) No. 25 and related interpretations, we use the intrinsic value-based method for
measuring stock-based compensation cost with required pro forma disclosures of compensation expense determined under the fair value method of SFAS No. 123,Accounting for Stock-Based Compensation. For options that have been modified we have applied Financial Accounting Standards Board Interpretation No. 44 (Fin 44),Accounting for Certain Transactions Involving Stock Compensation, an
Interpretation of APB No. 25, effective July 1, 2000. We have also adopted SFAS No. 148,Accounting for Stock-based Compensation  Transition and Disclosure.

Results of Operations and Comparison of Prior Year Periods

The following table presents certain items included in Decorizes consolidated statements of operations, a copy of which is included in this prospectus, and the percentage of total revenues for the periods indicated.
All such data should be read in conjunction with, and is qualified in their entirety by reference to, our financial statements and accompanying notes.



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Fiscal Years Ended June 30, 2004 and 2003

|                    | 2004 |            |   | 2003  |    |  | Change |           
|------------------- | ---- | ---------- | - | ----- | -- |  | ------ | ----------
|                    |      |            |   |       |    |  |        |           
|Sales (net)         | $    | 12,056,856 |   | 100.0 | %  |  | $      | 15,563,406
|Cost of sales       |      | 9,964,834  |   | 82.6  | %  |  |        | 9,688,209 
|                    |      |            |   |       |    |  |        |           
|Gross profit        |      | 2,092,022  |   | 17.4  | %  |  |        | 5,875,197 
|Operating expenses  |      | 5,706,453  |   | 47.3  | %  |  |        | 6,364,689 
|                    |      |            |   |       |    |  |        |           
|Operating loss      |      | (3,614,431 | ) | (30.0 | )% |  |        | (489,492  
|Total other expense |      | 832,508    |   | 6.9   | %  |  |        | 662,913   
|                    |      |            |   |       |    |  |        |           
|Net loss            |      | (4,446,939 | ) | (36.9 | )% |  |        | (1,152,405
|                   

Our sales are derived primarily from the sale of home furnishing and home décor products to large and specialty retailers. Sales for the year ended June 30, 2004, decreased $3.5 million or 22.5% to $12.1 million
compared to $15.6 million for the year ended June 30, 2003. The decrease in revenues for fiscal 2004 from fiscal 2003 is due to several factors.  First, we have experienced some quality issues with several vendors throughout fiscal 2004. Also
notable was a $2.1 million decrease in sales to large retailers compared to the prior year. We believe the remnants of a languid economy impacted the rate at which orders were written by our large retailers during the first half of fiscal 2004.
Furthermore, a portion of the decline in revenues can be attributed to a significant decrease from our prior year sales volume with a particular customer. We continue to receive orders from that customer, but at a reduced level compared to prior
years. Our management is focusing its marketing efforts to increase sales volumes with existing customers while simultaneously developing a broader large retailer base, in order to diminish the effect of any one customer on our operations. In
addition, sales returns and allowances increased by $0.3 million for fiscal 2004 from fiscal 2003, due to quality issues with a select number of overseas vendors. We believe that we have presented our product and services to only a small part of the
much larger number of large and medium sized retailers who would find our offerings attractive and would order product from us. We intend to continue marketing our goods aggressively to large retail customers and expect that as a result we will
continue to increase our sales to them substantially on a dollar-to-dollar comparative basis. Pricing in our industry is very competitive and we must focus on selling more goods to more customers at very competitive prices in order to increase our
revenues.  Furthermore, management has aggressively taken measures to improve product quality, including the management of our own finishing and final assembly facility in Indonesia.

Our company has existed in its present form only since July 2001, so we do not have an extensive history of sales information as a combined entity. However, based on sales since July 2001, and our evaluation of the
historic operating results of Faith Walk and GuildMaster, it appears that we have the highest volume of sales during our first two fiscal quarters, which accounted for approximately 57.7% of fiscal 2004 sales, and that the remaining quarters,
accounting for the other 42.3% of sales for 2004, are not quite as strong.  We believe that part of the reason for the increase in sales for the quarters ending September 30, 2003, and December 31, 2003, as compared to the two following quarters, is
due to several big projects for large retailers gearing up for the holiday months. Other than the growth of our enterprise, we have not observed any other significant seasonal patterns.

The cost of sales for the year ended June 30, 2004, increased as a percentage of sales to 82.6% compared to 62.2% for the year ended June 30, 2003. The percentage increase in costs for the year ended June 30, 2004, compared
to the prior year, was due in part to substantial increases in ocean freight rates. In addition, we experienced a shift to high volume, low margin orders throughout fiscal year 2004. During fiscal year 2004, we incurred $0.4 million of expense
associated with decreased domestic production and recorded a $0.5 million write-down for excess inventory. The increase in our cost of sales resulted in a decrease of our gross margin to 17.4% in fiscal year 2004 compared to 37.8% in fiscal year
2003.



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|*Operating Expenses*
|--------------------

During the year ended June 30, 2004, our operating expenses decreased $.7 million to $5.7 million, compared to $6.4 million for the same period last year. However, the decrease in revenues caused operating expenses, as a
percentage of revenues, to increase 6.4% to 47.3% for fiscal 2004.  The dollar decrease in operating expenses for fiscal 2004 was due to the net effect of decreases in certain expenses partially offset by increases in others.  The increases were
predominantly non-cash in nature.  We recorded approximately $360,000 in non-cash charges associated with the issuance of 340,000 shares of common stock for investor relations services during the third quarter of fiscal 2004.  We recorded an
additional $65,000 of non-cash expense associated with the issuance of 65,000 shares of common stock to fulfill our severance obligations to Mr. Baker during the third quarter of fiscal 2004. The decrease in expenses was due primarily to the
cessation of operations in Houston, Texas, and the elimination of approximately $0.6 million of expenses related to those operations, compared to fiscal 2003. The increase in operating expenses as a percentage of sales is directly attributable to
the decrease in sales and the fixed cost nature of certain operating expenses.

*Other Expense*

Other expense for the year ended June 30, 2004, consisted principally of $0.8 million of interest expense compared to $0.7 million of interest expense for the year ended June 30, 2003. This increase during 2004 was
primarily due to the $0.6 million non-cash charge related to the amortization of discount on convertible debt for 2004 versus $0.5 million for 2003.

|*Net Loss*
|----------

Loss from operations increased to $3.6 million in fiscal 2004 from $0.5 million in fiscal year 2003. As a percentage of sales, the loss from operations increased to 30.0% in fiscal 2004
compared to 3.1% in fiscal year 2003 due to the effects of significant decreases in sales volume and gross margins.

We
  recorded a net loss of $4.4 million in fiscal 2004, compared to $1.2 million
  in fiscal year 2003. As a percentage of sales, our net loss increased to 36.9%
  in fiscal 2004 compared to 7.4% in fiscal year 2003. A significant portion of
  our losses were non-cash charges of $0.4 million and $0.1 million for stock
  compensation expense and $0.6 million and $0.5 million for amortization of debt
  discount in fiscal year 2004 and 2003 respectively.

Net loss per share increased to $0.37 per share in fiscal year 2004,
  from $0.11 per share in fiscal 2003.

*Inflation*

We do not believe our business is materially affected by inflation. We anticipate that any increase in costs of goods sold and operating costs caused by inflation will be passed on to our customers through increases in
price per unit.

|Liquidity and Capital Resources
|-------------------------------

We had working capital of approximately ($0.1) million at June 30, 2004, compared with $1.9 million at June 30, 2003. Cash and cash equivalents and short-term investments were $0.5 million at
June 30, 2004, compared to $0.1 million at June 30, 2003. Cash used in operating activities decreased from $1.1 million in fiscal year 2003 to $0.2 million in fiscal year 2004. The principal operating uses of cash during fiscal 2004 were
attributable to the net loss of $4.4 million, and a $0.6 million reduction in payables. The amount of cash used during the current period was reduced by certain items providing or not requiring cash. Inventory provided $2.3 million and a reduction
in receivables and due from factor provided $1.3 million. Furthermore, $0.2 million in depreciation and amortization, $0.4 million for the compensatory issuance of common stock, and another $0.6 million for the accretion of debt discount did not
require cash.

Investing activities during the year ended June 30, 2004, consumed $0.2 million in cash. This amount related to the acquisition of computer equipment and improvements in our technological
infrastructure.



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During the year ended June 30, 2004, our cash provided from financing activities amounted to $0.7 million. This is principally attributable to investment capital raised of $0.5 million and
proceeds from issuance of stockholders notes payable of $1.5 million offset by principal payments of $0.2 million on debt, payment of $0.2 million relating to a registration of Decorizes common stock, and $1.0 million in advances from
factor.

We anticipate that our working capital need will increase as our business grows. As of June 30, 2004, our working capital was approximately ($0.1) million. In particular, we require cash to
fund the purchase and manufacturing of products for shipment to customers. We expect that these working capital requirements can be met through our ongoing relationships with asset-based lenders that have provided similar funding to us in the form
of factored accounts receivable and borrowing against qualified inventories.

In order to provide improved working capital liquidity and credit risk exposure, our company and its global subsidiaries regularly sell the majority of our accounts receivable under global
factoring arrangements with CIT Commercial Services, a unit of CIT Group, Inc. Under our factoring agreement with CIT, we sell our accounts receivable on a pre-approved, non-recourse basis.  Accounts receivable sold are subject to pre-approval by
the factor.  We do not retain any interest in, or control of, the accounts receivable sold.  Our company does not bear any credit risk relating to the sold receivables other than with regard to customer disputes that may require us to reacquire such
disputed receivables from the factor.  A portion of the sale proceeds is withheld by the factor for a period of time pursuant to the factoring agreement, which is reflected as due from factor on the balance sheet.  Advances of amounts due from
factor bear interest 1.0%, plus the JPMorgan rate, and may be offset against amounts due to our company at the factors option. For the year ended June 30, 2004, our company and its subsidiaries factored $12.5 million in accounts receivable and
received $10.9 million in cash from CIT. The factoring service fees were $69,119 and the interest paid on cash advances from the factor, amounted to $81,288 for the year ended June 30, 2004.

We were in violation of the minimum net worth covenants in the CIT factoring agreement
  atDecember 31, 2003. On February 25, 2004, we entered into a Second Amendment
  to Factoring Agreement and Waiver with CIT, which included amendments to the existing factoring agreement that eliminated certain restrictions
  on making dividends, distributions or redemptions of outstanding stock and eliminated the financial covenants for tangible net worth
  and net income. We are currently in compliance with our obligations and covenants under the amended factoring agreement. For the amendment
  and waiver, we reimbursed CIT $1,000 in legal fees and other related expenses.

On July 1, 2003, we secured a $150,000 line of credit,
  bearing interest at 7% annually, and maturing October 1, 2003, with Liberty Bank for use as operating capital. The line of credit was
  secured by a $150,000 Certificate of Deposit from James K. Parsons, who was then serving as the President and Chief Executive Officer
  and a director of our company. The line of credit has been paid off in its entirety.

In
  October 2003, we obtained a 12-month line of credit in the amount of $800,000
  from Mr. Parsons, with principal amounts outstanding bearing interest at a per
  annum rate equal to the prime rate plus 1.25% . The amounts outstanding under
  a $150,000 promissory note issued to Mr. Parsons on July 17, 2003, were rolled
  into the line of credit and the $150,000 promissory note was cancelled. In consideration
  for Mr. Parsons agreement to establish the line of credit, we issued warrants
  to Mr. Parsons exercisable for 500,000 shares of Decorize common stock at an
  exercise price of $1.45 per share. The warrants are exercisable immediatelyand expire September 30, 2006. On December 10, 2003, pursuant to an amended
  and restated line of credit promissory note executed by our company in favor
  of Mr. Parsons, the principal amount of the line of credit was increased to
  $1,000,000, and the line of credit was secured by a subordinate security interest
  in our inventory. In consideration for the increase in the line of credit, we
  issued warrants to Mr. Parsons to purchase an additional 200,000 shares of Decorize
  common stock at an exercise price of $1.20 per share, on the same terms as the
  warrants originally issued in connection with the line of credit. The warrants
  issued in connection with the Parsons line of credit have a relative fair value
  equal to $302,097, which has been recorded as a discount against the carrying
  value of the note and will be amortized to interest expense over the term of
  the debt. As of June 30, 2004, $1,000,000 in principal was outstanding under
  the line of credit. On September 10, 2004 the due dates of this line of credit
  and Mr. Parsons term note were extended to July 31, 2006.



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On April 29, 2004, our company and SRC agreed upon
  terms for a short-term $500,000 line of credit to be provided by SRC to our company. In connection with the loan, we executed a secured
  line of credit promissory note, bearing interest at prime plus 0.5%, with monthly payments of interest beginning in June 2004 and continuing
  until the note becomes due on September 30, 2004. The note is secured by all of theCompanys
  assets located in Springfield, Missouri, excluding any real property or accounts receivable. Our company and SRC agreed that the $500,000
  loan is being provided as an alternative to SRCs guaranty of a bank facility, and we agreed to issue SRC contingent warrants for
  500,000 shares of common stock in connection with any draws on the credit line, on the same terms as previously agreed in connection
  with the private placement of preferred stock. The parties agreed that SRC remains obligated to provide a guaranty for up to a $1,000,000
  credit facility obtained by our company in the future, which may be used to repay the SRC note. The parties further agreed that if we
  obtain such a line of credit, and any contingent warrants would be payable to SRC pursuant to the terms of the private placement, then
  the number of warrant shares to be issued by our company will be reduced by the number of contingent warrant shares we issued in connection
  with the $500,000 short-term facility.

On May 5, 2004, we borrowed the full $500,000 under the short-term facility provided by SRC. The proceeds of the loan will be used for working capital purposes. We issued SRC warrants for
500,000 shares of Decorize common stock, which have an initial exercise price equal to $1.40 per share. The warrants expire ratably on May 5, 2007, 2008 and 2009.

In connection with our $500,000 private placement of preferred stock to SRC Holdings Corporation in February 2004, we entered into agreements to exchange an aggregate $1,410,200 of debt owed to
a principal stockholder and three of its current and former executive officers for shares of Decorize common stock. We issued 409,700 shares of common stock to NEST USA, Inc. in exchange for a $409,700 principal reduction in its existing convertible
term note. In addition to those shares of common stock, we issued a second amended and restated note to NEST USA, which had an initial principal balance equal to the remaining $210,497 owed to NEST USA and a new schedule of payments providing for
monthly payments of $10,000 each beginning February 1, 2004, and ending December 31, 2005, at which time all amounts due under the second amended and restated note would be due in full. We amended certain outstanding warrants held by NEST USA to
extend their expiration date to December 31, 2005, and issued another set of warrants to NEST USA that are exercisable for 400,000 shares of common stock at an initial exercise price equal to $1.40 per share, which terminate on December 31, 2006.
The carrying value of this debt has fully discounted due to the associated warrants, and the resulting discount is being amortized to interest expense over the term of the note.

At
  the time of the preferred stock private placement, the Company also issued warrants
  to acquire up to 600,000 shares of common stock to existing shareholder Quest
  Capital Alliance, L.L.C. These warrants are exercisable at an initial exercise
  price of $1.40 per share and terminate on a proportional basis on the third,
  fourth and fifth anniversaries of their issuance.

Additionally, Mike Sandel, a Vice President and director, and Jon Baker and James Parsons, co-founders and former CEOs of our company, exchanged outstanding notes for shares of common stock
pursuant to separate agreements entered into by each of them with our company. We exchanged an aggregate $1,000,500 in outstanding principal and accrued interest under three separate promissory notes for 1,000,500 shares of common stock, on the
basis of $1.00 per share. We issued 75,000 shares to Mr. Parsons, 550,500 shares to Mr. Sandel, and 375,000 shares to Mr. Baker, and the outstanding principal amounts of the noteholders promissory notes were reduced accordingly. As a result of the
exchange, the outstanding principal amount of Mr. Parsons note was reduced to $850,000, Mr. Sandels note and an unpaid interest was paid in full, the outstanding principal amount of Mr. Bakers promissory note was paid in full, and we
issued a subordinated promissory note due December 2004, bearing interest at 6% per annum, as payment for the $56,451 of interest accrued on Mr. Bakers note.

We believe that additional financing
  will be needed to meet the capital requirements associated with our growth objectives. We will evaluate alternatives for obtaining debt
  and equity financing to meet our capital requirements, or to retire debt we have incurred in the acquisition of GuildMaster and Faith
  Walk, as we deem appropriate. There is no assurance that such financing will be available on terms that will be acceptable to us. The
  inability to secure such financing could have a material adverse effect on our ability to maintain our business or to achieve our growth
  objectives.



|18
|--



Total Contractual Cash and Other Obligations

The following table summarizes our long-term debt, capital lease obligations, and operating lease obligations as of June 30, 2004.

|                                     | Total     |  | Less than 1
      Year |  | 1-3 Years |  | 4 - 5 Years |  | After 5
      Years
|------------------------------------ | --------- |  | ---------------------- |  | --------- |  | ----------- |  | -------------------
|                                     |           |  |                        |  |           |  |             |  |                    
|Aggregate amount of principal to be  |           |  |                        |  |           |  |             |  |                    
|paid on the outstanding long-term    |           |  |                        |  |           |  |             |  |                    
|debt                                 | 110,888   |  | 70,831                 |  | 40,057    |  |            |  |                   
|Principal payments due on notes      |           |  |                        |  |           |  |             |  |                    
|payable to stockholders              | 2,273,588 |  | 550,451                |  | 1,723,137 |  |            |  |                   
|Future minimum lease payments        |           |  |                        |  |           |  |             |  |                    
|under capital leases                 | 116,907   |  | 50,870                 |  | 66,037    |  |            |  |                   
|Future minimum lease payments        |           |  |                        |  |           |  |             |  |                    
|under noncancelable operating leases | 920,330   |  | 267,641                |  | 531,925   |  | 120,764     |  |                   
|                                     |           |  |                        |  |           |  |             |  |                    
|Totals                               | 3,421,713 |  | 939,793                |  | 2,361,156 |  | 120,764     |  |                   
|                                     |           |  |                        |  |           |  |             |  |                    

**Off-Balance Sheet Arrangements**

We have no off-balance sheet arrangements that have or are reasonably likely to
  have a current or future effect on our financial condition, revenues, expenses, results of operations, liquidity, capital expenditures
  or capital resources, and that are material to our shareholders.

|19
|--





|Item 7. FINANCIAL STATEMENTS
|----------------------------

DECORIZE, INC.
  FINANCIAL STATEMENTS
  JUNE 30, 2004 and 2003

|                                                                 | **Page(s)**
|---------------------------------------------------------------- | -----------
|                                                                 |            
|Report of Independent Registered Public Accounting
      Firm    | F-2        
|Consolidated Balance Sheets for June 30, 2004
      and 2003     | F-3        
|Consolidated Statements of Operations for the Years
      ended  | F-5        
|June 30, 2004 and 2003                                           |            
|Consolidated Statements of Changes in Stockholders
      Equity | F-6        
|for the Years ended
      June 30, 2004 and 2003                 |            
|Consolidated Statements of Cash Flows for the
      Years ended  | F-7        
|June 30, 2004 and 2003                                           |            
|Notes to Financial Statements for the Years ended                | F-9        
|June 30, 2004 and 2003                                           |            



Report of Independent Registered Public Accounting Firm

Audit Committee, Board of Directors and Stockholders
  Decorize, Inc.Springfield, Missouri

We have audited the accompanying consolidated balance sheets of Decorize, Inc. as of June 30, 2004 and 2003, and the related consolidated statements of operations, stockholders equity and cash flows for the years then
ended. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Decorize, Inc. as of June 30, 2004 and 2003, and the results of its operations and
its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

|BKD,LLP
|-------

|July 30, 2004,
      except for Note 10 as to which the date is September 10, 2004Springfield, Missouri
|-------------------------------------------------------------------------------------------------------

F-2





|Decorize, Inc.Consolidated Balance SheetsJune 30, 2004 and 2003
|---------------------------------------------------------------

|Assets         |                              |                                                          |           |           |     
|-------------- | ---------------------------- | -------------------------------------------------------- | --------- | --------- | ----
|               |                              |                                                          | 2004      |           | 2003
|               |                              |                                                          |           |           |     
|Current Assets |                              |                                                          |           |           |     
|               | Cash and cash equivalents    | $                                                        | 414,900   |           | $   
|               | Certificate
      of deposit |                                                          | 76,733    |           |     
|               | Receivables                  |                                                          |           |           |     
|               |                              | Trade accounts receivable, net of allowance 2004
      - |           |           |     
|               |                              | $194,983,
      2003 - $287,530                          | 68,586    |           |     
|               |                              | Due from factor, net of advances 2004 - $980,398,        |           |           |     
|               |                              | 2003 - $1,570,553                                        |           | 334,318   |     
|               |                              | Other                                                    |           | 15,484    |     
|               | Inventories                  |                                                          | 769,576   |           |     
|               | Prepaid expenses and other   |                                                          | 94,270    |           |     
|               |                              |                                                          |           |           |     
|               |                              | Total current
      assets                               |           | 1,773,867 |     
|               |                              |                                                          |           |           |     
|               | Property and equipment, net  |                                                          | 400,856   |           |     
|               | Goodwill                     |                                                          | 3,258,938 |           |     
|               | Other                        |                                                          | 7,491     |           |     
|               |                              |                                                          |           |           |     
|               |                              |                                                          |           | 3,667,285 |     
|               |                              |                                                          |           |           |     
|               |                              |                                                          | $         | 5,441,152 |     
|               |                              |                                                          |           |           |     

|See Notes to Consolidated Financial Statements | F-3
|---------------------------------------------- | ---



|Liabilities
      and Stockholders Equity               |      |            |      |   |            |  
|-------------------------------------------------------- | ---- | ---------- | ---- | - | ---------- | -
|                                                         | 2004 |            | 2003 |  
|                                                         |      |            |      |   |            |  
|Current
      Liabilities                                |      |            |      |   |            |  
|Accounts
      payable                                   | $    | 806,865    |      | $ | 1,432,387  |  
|Accrued
      salaries and commissions                   |      | 127,122    |      |   | 151,984    |  
|Other
      accrued expenses                             |      | 244,078    |      |   | 316,368    |  
|Current portion
      of capital lease obligations       |      | 40,478     |      |   | 49,200     |  
|Current
      portion of long-term debt                  |      | 70,831     |      |   | 285,900    |  
|Current
      portion of notes payable to stockholders   |      | 550,451    |      |   |           |  
|                                                         |      |            |      |   |            |  
|Total current liabilities                                |      | 1,839,825  |      |   | 2,235,839  |  
|Capital
      lease obligations, less current portion    |      | 52,029     |      |   | 97,134     |  
|Long-term
      debt, less current portion               |      | 40,057     |      |   | 72,620     |  
|Notes
      payable to stockholders                      |      | 1,723,137  |      |   | 1,803,010  |  
|                                                         |      |            |      |   |            |  
|Total liabilities                                        |      | 3,655,048  |      |   | 4,208,603  |  
|                                                         |      |            |      |   |            |  
|Stockholders
      Equity                               |      |            |      |   |            |  
|Preferred
      stock, 8% cumulative, convertible,       |      |            |      |   |            |  
|redeemable,
      $.001 par value; authorized 10,000,000 |      |            |      |   |            |  
|shares;
      issued and outstanding 2004  500,000      |      |            |      |   |            |  
|shares,
      2003 - none                                |      | 500        |      |   |           |  
|Common
      stock, $.001 par value; 50,000,000          |      |            |      |   |            |  
|authorized,
      issued and outstanding 2004           |      |            |      |   |            |  
|13,136,735
      shares, 2003  11,270,693 shares        |      | 13,137     |      |   | 11,271     |  
|Additional
      paid-in capital                         |      | 9,582,431  |      |   | 7,272,369  |  
|Accumulated
      deficit                                |      | (7,809,964 | )    |   | (3,347,902 | )
|                                                         |      |            |      |   |            |  
|Total
      stockholders equity                         |      | 1,786,104  |      |   | 3,935,738  |  
|                                                         |      |            |      |   |            |  
|                                                         | $    | 5,441,152  |      | $ | 8,144,341  |  
|                                                         |      |            |      |   |            |  

F-4





|Decorize, Inc.Consolidated Statements of OperationsYears Ended June 30, 2004 and 2003
|-------------------------------------------------------------------------------------

|                                                       | 2004 |            | 2003 |  
|------------------------------------------------------ | ---- | ---------- | ---- | -
|                                                       |      |            |      |  
|Net Sales                                              | $    | 12,056,856 |      | $
|Cost of Goods Sold                                     |      | 9,964,834  |      |  
|                                                       |      |            |      |  
|Gross Profit                                           |      | 2,092,022  |      |  
|                                                       |      |            |      |  
|Operating Expenses                                     |      |            |      |  
|Selling,
      general and administrative              |      | 5,410,598  |      |  
|Stock compensation                                     |      | 64,350     |      |  
|Depreciation
      and amortization                    |      | 231,505    |      |  
|                                                       |      |            |      |  
|                                                       |      | 5,706,453  |      |  
|                                                       |      |            |      |  
|Operating Loss                                         |      | (3,614,431 | )    |  
|                                                       |      |            |      |  
|Other Income (Expense)                                 |      |            |      |  
|Interest income                                        |      | 2,184      |      |  
|Interest expense                                       |      | (812,067   | )    |  
|Other                                                  |      | (22,625    | )    |  
|                                                       |      |            |      |  
|                                                       |      | (832,508   | )    |  
|                                                       |      |            |      |  
|Loss Before Income Taxes                               |      | (4,446,939 | )    |  
|Provision for Income Taxes                             |      |           |      |  
|                                                       |      |            |      |  
|Net Loss                                               | $    | (4,446,939 | )    | $
|                                                       |      |            |      |  
|Basic
      and Diluted Loss Per Common Share          | $    | (.37       | )    | $
|                                                       |      |            |      |  
|Basic
      and Diluted Weighted Average Common Shares |      |            |      |  
|Outstanding                                            |      | 12,059,481 |      |  
|                                                       |      |            |      |  

|See Notes to Consolidated Financial Statements | F-5
|---------------------------------------------- | ---





Decorize, Inc.Consolidated Statements of Stockholders Equity
  Years Ended June 30, 2004 and 2003

|                                      | Preferred
      Stock |  | Common
      Stock |     |                          |            |                           |   |        |  |   |           |  
|------------------------------------- | --------------------- |  | ------------------ | --- | ------------------------ | ---------- | ------------------------- | - | ------ |  | - | --------- | -
|                                      |                       |  |                    |     | AdditionalPaid-inCapital |            | Accumulated
      Deficit |   |        |  |   |          
|                                      | Shares                |  | ParValue           |     | Shares                   |            | Par
      Value           |   |        |  |   | Total     |  
|                                      |                       |  |                    |     |                          |            |                           |   |        |  |   |           |  
|Balance,
      June 30, 2002          |                      |  | $                  |    |                          | 10,432,774 |                           | $ | 10,433 |  | $ | 5,976,542 |  
|Stock compensation expense            |                       |  |                    |     |                          |            |                           |   |        |  |   |           |  
|related to stock
      options issued |                       |  |                    |     |                          |            |                           |   |        |  |   |           |  
|under Equity Incentive
      Plan     |                      |  |                    |    |                          |           |                           |   |       |  |   | 32,500    |  
|Compensatory issuance of              |                       |  |                    |     |                          |            |                           |   |        |  |   |           |  
|common stock                          |                      |  |                    |    |                          | 34,348     |                           |   | 35     |  |   | 51,838    |  
|Net proceeds from issuance of         |                       |  |                    |     |                          |            |                           |   |        |  |   |           |  
|common stock                          |                      |  |                    |    |                          | 803,571    |                           |   | 803    |  |   | 898,989   |  
|Discount
      recorded on amended    |                       |  |                    |     |                          |            |                           |   |        |  |   |           |  
|convertible term
      note           |                      |  |                    |    |                          |           |                           |   |       |  |   | 312,500   |  
|Net loss                              |                      |  |                    |    |                          |           |                           |   |       |  |   |          |  
|                                      |                       |  |                    |     |                          |            |                           |   |        |  |   |           |  
|**Balances,
      June 30, 2003**     |                      |  |                    |    |                          | 11,270,693 |                           |   | 11,271 |  |   | 7,272,369 |  
|Compensatory issuance of              |                       |  |                    |     |                          |            |                           |   |        |  |   |           |  
|common stock for
      services       |                      |  |                    |    |                          | 340,000    |                           |   | 340    |  |   | 353,260   |  
|Fees associated with the registration |                       |  |                    |     |                          |            |                           |   |        |  |   |           |  
|of outstanding
      common stock     |                      |  |                    |    |                          |           |                           |   |       |  |   | (333,349  | )
|Issuance of common stock related      |                       |  |                    |     |                          |            |                           |   |        |  |   |           |  
|to conversion of
      long-term      |                       |  |                    |     |                          |            |                           |   |        |  |   |           |  
|debt, net of issuance costs           |                      |  |                    |    |                          | 409,700    |                           |   | 410    |  |   | 401,430   |  
|Issuance of common stock related      |                       |  |                    |     |                          |            |                           |   |        |  |   |           |  
|to conversion of
      shareholders  |                       |  |                    |     |                          |            |                           |   |        |  |   |           |  
|debt                                  |                      |  |                    |    |                          | 1,000,500  |                           |   | 1,000  |  |   | 989,568   |  
|Compensatory issuance of              |                       |  |                    |     |                          |            |                           |   |        |  |   |           |  
|common stock per
      severance      |                       |  |                    |     |                          |            |                           |   |        |  |   |           |  
|agreement                             |                      |  |                    |    |                          | 65,000     |                           |   | 65     |  |   | 64,285    |  
|Net proceeds from issuance of         |                       |  |                    |     |                          |            |                           |   |        |  |   |           |  
|preferred stock
      and common      |                       |  |                    |     |                          |            |                           |   |        |  |   |           |  
|stock                                 | 500,000               |  |                    | 500 |                          | 36,197     |                           |   | 36     |  |   | 507,102   |  
|Dividends declared                    |                      |  |                    |    |                          |           |                           |   |       |  |   |          |  
|Discounts
      recorded on           |                       |  |                    |     |                          |            |                           |   |        |  |   |           |  
|stockholder
      notes               |                      |  |                    |    |                          |           |                           |   |       |  |   | 315,878   |  
|Issuance of common stock related      |                       |  |                    |     |                          |            |                           |   |        |  |   |           |  
|to exercise of
      stock options    |                      |  |                    |    |                          | 14,645     |                           |   | 15     |  |   | 11,888    |  
|Net
      loss                        |                      |  |                    |    |                          |           |                           |   |       |  |   |          |  
|                                      |                       |  |                    |     |                          |            |                           |   |        |  |   |           |  
|**Balances,
      June 30, 2004**     | 500,000               |  | $                  | 500 |                          | 13,136,735 |                           | $ | 13,137 |  | $ | 9,582,431 |  
|                                      |                       |  |                    |     |                          |            |                           |   |        |  |   |           |  

|See Notes to Consolidated Financial Statements | F-6
|---------------------------------------------- | ---



Decorize,
  Inc. Consolidated Statements of Cash Flows 
  Years Ended June 30, 2004 and 2003


|                                                            | 2004 |            |   | 2003 |  
|----------------------------------------------------------- | ---- | ---------- | - | ---- | -
|                                                            |      |            |   |      |  
|Operating Activities                                        |      |            |   |      |  
|Net loss                                                    | $    | (4,446,939 | ) |      | $
|Items not requiring (providing)
      cash                  |      |            |   |      |  
|Depreciation
      and amortization                         |      | 231,505    |   |      |  
|Compensatory
      issuance of common stock and stock       |      |            |   |      |  
|options                                                     |      | 417,950    |   |      |  
|Amortization
      of debt discount included in interest    |      |            |   |      |  
|expense                                                     |      | 554,126    |   |      |  
|Loss
      on disposal of property and equipment            |      | 22,022     |   |      |  
|Changes in                                                  |      |            |   |      |  
|Trade
      accounts receivable                             |      | 278,345    |   |      |  
|Due
      from factor                                       |      | 1,048,793  |   |      |  
|Inventories                                                 |      | 2,276,455  |   |      |  
|Prepaid
      expenses and other current assets             |      | 46,449     |   |      |  
|Accounts
      payable                                      |      | (625,522   | ) |      |  
|Accrued
      expenses and other                            |      | (9,242     | ) |      |  
|                                                            |      |            |   |      |  
|Net
      cash used in operating activities                 |      | (206,058   | ) |      |  
|                                                            |      |            |   |      |  
|                                                           
|Investing Activities                                        |      |            |   |      |  
|Purchase of property and
      equipment                    |      | (84,443    | ) |      |  
|Purchase
      of certificate of deposit                    |      | (76,733    | ) |      |  
|Proceeds from disposal
      of property and equipment      |      | 1,850      |   |      |  
|                                                            |      |            |   |      |  
|Net
      cash used in investing activities                 |      | (159,326   | ) |      |  
|                                                            |      |            |   |      |  
|                                                           
|Financing Activities                                        |      |            |   |      |  
|Principal payments on
      long-term debt                  |      | (197,122   | ) |      |  
|Principal
      payments on stockholders notes payable     |      |           |   |      |  
|Proceeds
      from issuance on stockholders notes payable |      | 1,500,000  |   |      |  
|Principal payments on
      capital lease obligations       |      | (53,826    | ) |      |  
|Issuance of common stock,
      net of related expenses     |      | 49,403     |   |      |  
|Issuance of preferred
      stock, net of related expenses  |      | 458,250    |   |      |  
|Stock registration costs                                    |      | (174,177   | ) |      |  
|Fees
      associated with the conversion of debt to equity |      | (19,109    | ) |      |  
|Advances
      from (repayment to) factor, net              |      | (904,851   | ) |      |  
|                                                            |      |            |   |      |  
|Net
      cash provided by financing activities             |      | 658,568    |   |      |  
|                                                            |      |            |   |      |  
|                                                           
|Increase (Decrease) in Cash and Cash Equivalents            |      | 293,184    |   |      |  
|                                                           
|Cash and Cash Equivalents, Beginning of Year                |      | 121,716    |   |      |  
|                                                            |      |            |   |      |  
|                                                           
|Cash and Cash Equivalents, End of Year                      | $    | 414,900    |   |      | $
|                                                            |      |            |   |      |  

|See Notes to Consolidated Financial Statements | F-7
|---------------------------------------------- | ---





|Decorize,
      Inc.Consolidated Statements
      of Cash FlowsYears Ended June 30, 2004 and 2003
|-------------------------------------------------------------------------------------------------

|Supplemental
      Cash Flows Information                   |   |           |  |   |        
|----------------------------------------------------------- | - | --------- |  | - | -------
|Interest
      paid                                         | $ | 126,036   |  | $ | 210,019
|Common
      stock warrants issued in connection with       |   |           |  |   |        
|note payable                                                | $ | 327,766   |  | $ | 113,126
|Debt
      converted to common stock                        | $ | 1,410,107 |  |   |       
|Deferred
      fees associated with successful stock        |   |           |  |   |        
|registration reclassified
      to paid-in capital          | $ | 249,498   |  |   |       
|Accrued
      interest converted to debt principal          | $ | 56,451    |  |   |       
|Beneficial
      conversion option associated with note     |   |           |  |   |        
|payable                                                     |   |          |  | $ | 199,374
|Promissory
      note issued to stockholder in exchange for |   |           | 
|repayment of note payable                                   |   |          |  | $ | 288,607
|Capital
      lease obligations incurred for property and   |   |           |  |   |        
|equipment                                                   |   |          |  | $ | 124,328

F-8



Decorize,
  Inc. 
  Notes to Financial Statements 
  June 30, 2004 and 2003

Note 1: Nature
  of Operations and Summary of Significant Accounting Policies

| | Nature
      of Operations
| | --------------------------

> Decorize, Inc. (Decorize)
>     and its subsidiaries, collectively (the Company), is a manufacturer
>     and wholesaler of imported home furnishings and home accent items. Products
>     are sold primarily to retailers in the United States.

| | Principles of Consolidation
| | ---------------------------

> The consolidated financial
>     statements include the accounts of Decorize, Inc. and its wholly owned subsidiaries,
>     P.T. Niaga Merapi, Westway Enterprises Limited, GuildMaster, Inc. and Faith
>     Walk Designs, Inc. All significant intercompany accounts and transactions
>     have been eliminated in consolidation.

| | Use of Estimates
| | ----------------

> The preparation of financial
>     statements in conformity with accounting principles generally accepted in
>     the United States of America 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.

| | Cash Equivalents
| | ----------------

> The Company considers
>     all liquid investments with original maturities of three months or less to
>     be cash equivalents. At June 30, 2003, cash equivalents consisted primarily
>     of a certificate of deposit.

| | Accounts Receivable
| | -------------------

> Accounts receivable are
>     stated at the amount billed to customers. The Company provides an allowance
>     for doubtful accounts, which is based upon a review of outstanding receivables,
>     historical collection information and existing economic conditions. Accounts
>     receivable are ordinarily due 30 to 60 days after the issuance of the invoice.
>     Delinquent receivables are written off based on individual credit evaluation
>     and specific circumstances of the customer. Provision (credit) for bad debts
>     was $32,351 and $(79,355) for the years ended June 30, 2004 and 2003, respectively.
>   The Company has established
>     relationships with several major customers. Sales to one customer accounted
>     for 23.6% and 29.5% of total sales for the years ended June 30, 2004 and 2003,
>     respectively. Sales for the years ended June 2004 and 2003 to another customer
>     accounted for an additional 23.2% and 21.8% of total sales, respectively.
>     The Company grants credit to customers who meet the Companys preestablished
>     credit requirements and generally does not require collateral to secure payment
>     of accounts receivable.

|F-9
|---





|Decorize,
      Inc.Notes to Financial StatementsJune 30, 2004 and 2003
|-----------------------------------------------------------------------

| | Due From
      Factor
| | ---------------------

> The Company regularly
>     sells the majority of its accounts on a pre-approved, nonrecourse basis under
>     global factoring agreements. Accounts receivable sold are subject to preapproval
>     by the factor. The Company does not retain any interest in, or control of,
>     the accounts receivable sold. The Company does not bear any credit risk relating
>     to the sold receivables other than with regard to customer disputes that may
>     require the Company to reacquire the disputed receivables from the factor.
>     A portion of the sale proceeds is withheld by the factor for a period of time
>     pursuant to the factoring agreement, which is reflected as due from factor
>     on the consolidated balance sheet. Advances of amounts due from factor bear
>     interest at prime, and may be offset against amounts due to the Company at
>     the factors option.

| | Inventory Pricing
| | -----------------

> Inventories consist primarily
>     of finished and unfinished home furnishings and accessories. Inventories are
>     stated at the lower of cost or market. Cost is determined using the first-in,
>     first-out (FIFO) method and includes the cost of ocean freight and duties.

| | Property and Equipment
| | ----------------------

> Property and equipment
>     are stated at cost less accumulated depreciation and are depreciated over
>     the estimated useful life of each asset. Leasehold improvements are amortized
>     over the shorter of the lease term or the estimated useful lives of the improvements.
>     Depreciation has been computed by applying the straight-line method to each
>     asset category over their estimated lives, as follows:



|Category                           | Estimated Life |  | Balance at
      June 30, 2004 |         | Balance at
      June 30, 2003
|---------------------------------- | -------------- |  | ------------------------------ | ------- | ------------------------------
|                                   |                |  |                                |         |                               
|                                  
|Automobiles                        | 5 years        |  | $                              | 34,728  |                               
|Warehouse and production equipment | 5-7 years      |  |                                | 35,518  |                               
|Computer software                  | 3 years        |  |                                | 178,482 |                               
|Office and computer equipment      | 3-7 years      |  |                                | 524,944 |                               
|Leasehold improvements             | Lease term     |  |                                | 92,734  |                               
|                                   |                |  |                                |         |                               
|                                  
|Total                              |                |  |                                | 866,406 |                               
|Less accumulated depreciation      |                |  |                                | 465,550 |                               
|                                   |                |  |                                |         |                               
|                                  
|Property and equipment, net        |                |  | $                              | 400,856 |                               
|                                   |                |  |                                |         |                               

F-10






|Decorize,
      Inc.Notes to Financial StatementsJune 30, 2004 and 2003
|-----------------------------------------------------------------------

| | Impairment
      of Long-lived Assets
| | -------------------------------------

> Long-lived assets are
>     reviewed for impairment whenever events or changes in circumstances indicate
>     the carrying amount of an asset may not be recoverable. When events or changes
>     in circumstances indicate an asset may not be recoverable, the Company estimates
>     the future cash flows expected to result from the use of the asset. If the
>     sum of the expected undiscounted future cash flows is less than the carrying
>     value of the asset, an impairment loss is recognized. The impairment loss
>     is recognized by measuring the difference between the carrying value of the
>     assets and the estimated fair value of the assets. The Companys estimates
>     of fair values are based on the best information available and require the
>     use of estimates, judgments and projections as considered necessary. The actual
>     results may vary significantly. No impairment losses have been recorded in
>     2004 and 2003.

| | Goodwill
| | --------

> The
>     Company applies the provisions of Statement of Financial Accounting Standards
>     No. 142, Goodwill and Other Intangible Assets (SFAS No. 142), SFAS
>     No. 142 requires that an intangible asset that is acquired shall be initially
>     recognized and measured based on its fair value. SFAS No. 142 also provides
>     that goodwill should not be amortized, but shall be tested for impairment
>     annually, or more frequently if circumstances indicate potential impairment,
>     through a comparison of fair value to its carrying amount. The Company has
>     not recorded a charge as a result of the required impairment tests in 2004
>     and 2003.

| | Income
      Taxes
| | ------------------

> Deferred tax assets and
>     liabilities are recognized for the tax effects of differences between the
>     financial statement and tax bases of assets and liabilities. A valuation allowance
>     is established to reduce deferred tax assets if it is more likely than not
>     that a deferred tax asset will not be realized. Decorize, Inc. files consolidated
>     income tax returns with its subsidiaries.

| | Revenue
      Recognition
| | -------------------------

> Revenue from the sale
>     of the Companys products is recognized as products are delivered to
>     customers. Any customer deposits relate to amounts received in advance from
>     customers for unshipped orders.

| | Advertising
      Costs
| | -----------------------

> The Company expenses advertising
>     costs as they are incurred. Advertising expense for the years ended June 30,
>     2004 and 2003, was $188,548 and $123,161, respectively.



F-11




|Decorize,
      Inc.Notes to Financial StatementsJune 30, 2004 and 2003
|-----------------------------------------------------------------------

| | Loss Per
      Share
| | --------------------

> Basic and diluted loss
>     per share are computed by dividing the net loss increased by dividends declared
>     on preferred stock by the weighted-average number of common shares outstanding
>     during the period and excludes the otherwise dilutive effects of outstanding
>     convertible preferred stock, stock options and warrants as their effects would
>     be antidilutive.
>   Net
>         loss, as reported
>       $
>       (4,446,939
>       )Add:
>         Dividends declared on preferred stock
>       
>       (15,123
>       )Loss
>         available to common shareholders
>       
>       (4,462,062
>       )Weighted
>         average shares outstanding
>       
>       12,059,481Basic
>         and diluted loss per share
>       $
>       (0.37
>       )

| | Stock-based
      Compensation
| | ------------------------------

> At June 30, 2004 and 2003,
>     the Company had a stock-based employee compensation plan, as more fully described
>     in Note 6. The Company accounts for this plan under the recognition
>     and measurement principles of APB Opinion No. 25, Accounting for Stock
>     Issued to Employees, and related Interpretations. Stock-based employee
>     compensation cost is reflected in net loss, as some options granted under
>     those plans had an exercise price below the market value of the underlying
>     common stock on the grant date. The following table illustrates the effect
>     on net loss and loss per share if the Company had applied the fair value provisions
>     of FASB Statement No. 123, Accounting for Stock-Based Compensation,
>     to stock-based employee compensation.



|                                            | Year
      Ended June 30 |           
|------------------------------------------- | ------------------------ | ----------
|                                            | 2004                     |           
|                                            |                          |           
|                                           
|Loss
      available to common shareholders | $                        | (4,462,062
|Add
      stock-based employee              |                          |           
|compensation
      expense                  |                          |           
|included
      in reported net loss         |                          | 64,350    
|Less
      total stock-based employee       |                          |           
|compensation
      expense                  |                          |           
|determined
      under the fair value       |                          |           
|based
      method                          |                          | (147,764  
|                                            |                          |           
|                                           
|Pro
      forma net loss                    | $                        | (4,545,476
|                                            |                          |           
|                                           
|Loss
      per share                        |                          |           
|                                           
|Basic
       as reported                   | $                        | (0.37     
|                                            |                          |           
|                                           
|Basic
       pro forma                     | $                        | (0.38     
|                                            |                          |           
|                                           
|Diluted
       as reported                 | $                        | (0.37     
|                                            |                          |           
|                                           
|Diluted
       pro forma                   | $                        | (0.38     
|                                            |                          |           

|F-12
|----





|Decorize,
      Inc.Notes to Financial StatementsJune 30, 2004 and 2003
|-----------------------------------------------------------------------

> 

| | Preferred
      Stock
| | ---------------------

> During 2004 the Company
>     issued 500,000 shares of Series A Convertible Preferred Stock. Each preferred
>     share is convertible into one common share (subject to certain anti-dilution
>     provisions). Conversion is at the shareholders option, or mandatory
>     if the market price of the common stock exceeds $2.50 for 10 consecutive trading
>     days. Dividends are cumulative and accrue 8% per year, payable in arrears.
>     Preferred shares may be redeemed at the shareholders option for $1.00
>     each plus accrued dividends in three equal annual payments beginning February
>     13, 2007, or earlier at the option of the Company (subject to a redemption
>     premium). Holders of Series A preferred stock are entitled to elect up to
>     two of the Companys Board of Directors while 500,000 or more shares
>     of Series A preferred stock are outstanding. All accrued preferred stock dividends
>     must be paid before any dividends may be distributed common shareholders,
>     and in the event of liquidation the preferred stock ranks prior to common
>     to the extent of its redemption value.

| | Financial
      Instruments
| | ---------------------------

> The carrying amounts of
>     the Companys financial instruments, which consist principally of cash,
>     certificates of deposit, accounts receivable, accounts payable and notes payable;
>     approximate fair value.

| | Recent
      Accounting Standards
| | ---------------------------------

> In August 2001, the FASB
>     issued SFAS No. 144,Accounting
>     for the Impairment or Disposal of Long-lived Assets and for Long-lived Assets
>     to Be Disposed Of, which resolves significant implementation
>     issues that had evolved since the issuance of SFAS No. 121. SFAS No. 144 also
>     establishes a single accounting model for long-lived assets to be disposed
>     of by sale. The Company adopted SFAS No. 144 in the first quarter of fiscal
>     2003. Adoption of SFAS No. 144 had no impact on the Companys consolidated
>     results of operations or financial position.
>   In 2003, the Financial
>     Accounting Standards Board issued Interpretation 46R, Consolidation of Variable
>     Interest Entities (FIN 46R). FIN 46R requires the consolidation of variable
>     interest entities in which an enterprise absorbs a majority of the entitys
>     expected losses, receives a majority of its residual returns, or both, as
>     a result of ownership, contractual or other financial interests in the entity.
>     The Company adopted FIN 46R in the first quarter of fiscal 2004. Adoption
>     of FIN 46R had no impact on the Companys consolidated results of operations
>     or financial position.

| | Reclassifications
| | -----------------

> Certain reclassifications
>     have been made to the 2003 financial statements to conform to the 2004 financial
>     statement presentation. These reclassifications had no effect on net loss.



|F-13
|----



Decorize,
  Inc. 
  Notes to Financial Statements 
  June 30, 2004 and 2003

Note 2: Inventories

|                     | 2004 |         | 2003
|-------------------- | ---- | ------- | ----
|                     |      |         |     
|                    
|Raw
      materials  | $    | 154,522 |     
|Work-in-process      |      | 39,588  |     
|Finished
      units |      | 575,466 |     
|                     |      |         |     
|                    
|                     | $    | 769,576 |     
|                     |      |         |     

Note 3: Debt

|                                                    | 2004 |         | 2003
|--------------------------------------------------- | ---- | ------- | ----
|                                                    |      |         |     
|Note
      payable, bank (A)                        | $    | 72,577  |     
|Convertible
      note payable, net of discount (B) |      | 38,311  |     
|                                                    |      |         |     
|                                                    |      | 110,888 |     
|Less
      current maturities                       |      | 70,831  |     
|                                                    |      |         |     
|                                                    | $    | 40,057  |     
|                                                    |      |         |     

|(A) | Note payable to bank
      in monthly installments of $2,951, including interest at the banks
      prime rate plus 1% (5.75% at June 30, 2004), through August 2006, secured
      by inventories and accounts receivable. This loan requires the Company to
      maintain certain covenants, the more important of which restrict certain
      capital transactions and payment of dividends.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                   
|(B) | The Company issued a
      convertible term note in the amount of $750,000 and three year warrants
      to purchase an aggregate of 300,000 shares of common stock to NestUSA on
      February 26, 2002.                                                                                                                                                                                        

> The estimated fair value
>     of the warrants and beneficial conversion terms related to this convertible
>     note payable amounted to $276,515 and $473,485, respectively, and were recorded
>     as a discount on the note. The discount was amortized to interest expense
>     over the two-year term of the convertible note payable using the interest
>     method.
>   On January 1, 2003, an
>     amended and restated convertible term note was issued which created new payment
>     terms, extended the conversion option and required issuance of three year
>     warrants for an additional 216,000 shares of the Companys common stock
>     at an exercise price of $2.80 per share that expire February 26, 2005. Principal
>     and interest at 6% per annum were payable monthly in the amount of $17,500
>     commencing on January 31, 2003, continuing until January 31, 2004, when the
>     monthly payments were scheduled to increase to $53,351. In April 2003, the
>     note holder agreed to defer $5,000 of the monthly payments of principal for
>     April, May and June, which were paid as additional $5,000 principal payments
>     in July, August and September of 2003.
>   As of January 1, 2003,
>     the estimated fair values of the warrants and beneficial conversion terms
>     related to this convertible note were recognized as additional discounts to
>     the carrying value of the note of $113,126 and $199,374, respectively, with
>     an offsetting credit to paid-in capital. The aggregate discount on the convertible
>     note as of January 1, 2003, was equal to its $750,000 face value. This discount
>     is being amortized to interest expense over the revised note term using the
>     interest method.



|F-14
|----



Decorize,
  Inc. 
  Notes to Financial Statements 
  June 30, 2004 and 2003



> In February 2004, the
>     Company issued 409,700 shares of common stock to NestUSA, Inc. in exchange
>     for a $409,700 principal reduction in the existing convertible term note.
>     The second amended and restated convertible note to NestUSA had an initial
>     principal balance of $210,497, bears interest at 6% and provides for monthly
>     payments of $10,000 each beginning February 1, 2004, with the balance due
>     December 31, 2005. The balance due on the note is convertible into common
>     stock at $1.00 per share for the term of the note. In connection with this
>     transaction, the Company also amended certain outstanding warrants held by
>     NestUSA to extend their expiration date to December 31, 2005, and issued another
>     set of warrants to NestUSA exercisable for 400,000 shares of common stock
>     at $1.40 per share, that expire on December 31, 2006. The fair value of the
>     new and extended warrants was recorded as a discount, reducing the carrying
>     value of the note to zero. The discount is being amortized to interest expense
>     over the revised term of the note using the interest method. During the years
>     ended June 30, 2004 and 2003 the amortization of discounts on this convertible
>     note resulted in non-cash interest expense of $370,352 and $463,625, respectively.
>   The aggregate annual maturities
>     of long-term debt at June 30, 2004, are as follows:



|Year Ended June 30                        | AggregatePrincipalMaturities |         
|----------------------------------------- | ---------------------------- | --------
|                                          |                              |         
|                                         
|2005                                      | $                            | 190,022 
|2006                                      |                              | 34,184  
|2007                                      |                              | 5,872   
|                                          |                              |         
|                                         
|Total aggregate principal payments        |                              | 230,078 
|                                         
|Less current portion                      |                              | (70,831 
|Less unamortized portion of debt discount |                              | (119,190
|                                          |                              |         
|                                         
|Long-term debt                            | $                            | 40,057  
|                                          |                              |         



|F-15
|----





|Decorize,
      Inc.Notes to Financial StatementsJune 30, 2004 and 2003
|-----------------------------------------------------------------------

> Notes payable to stockholders
>     at June 30, 2004, consists of the following unsecured notes:



|                       |   | 2004      |  |   | 2003     
|---------------------- | - | --------- |  | - | ---------
|                       |   |           |  |   |          
|                      
|Note
      payable (C) | $ | 845,461   |  | $ | 925,000  
|Note
      payable (D) |   |          |  |   | 375,000  
|Note
      payable (E) |   | 56,451    |  |   |         
|Note
      payable (F) |   |          |  |   | 214,240  
|Note
      payable (G) |   |          |  |   | 288,770  
|Note
      payable (H) |   | 877,676   |  |   |         
|Note payable
      (I) |   | 494,000   |  |   |         
|                       |   |           |  |   |          
|                      
|                       | $ | 2,273,588 |  | $ | 1,803,010
|                       |   |           |  |   |          

| | (C) | Stockholder
      note payable, interest at prime plus 1%, due at maturity, July 31, 2004.
      The due date of this note was extended to July 31, 2006 subsequent to year
      end (see *Note 10*). The carrying value of this note is shown net
      of unamortized discount of $122,324 and $0 as of June 30, 2004 and 2003,
      respectively.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (D) | Stockholder
      note payable, interest at prime plus 1%, due at maturity, July 31, 2004.
      This note payable was paid in full by issuance of Company common stock.                                                                                                                                                                              
| | (E) | Stockholder
      note payable, interest at prime plus 1%, due at maturity, December 31, 2004.                                                                                                                                                                                                                                                        
| | (F) | Stockholder
      note payable, interest at 6.75% due at maturity, July 31, 2004. This note
      payable was paid in full by issuance of Company common stock.                                                                                                                                                                                       
| | (G) | Stockholder
      note payable, bearing interest at 5.75%, due at October 25, 2005. This note
      payable was paid in full by issuance of Company common stock.                                                                                                                                                                                     
| | (H) | Stockholder
      note payable, interest at prime plus 1.25%, due at maturity, September 30,
      2004. The due date of this note was extended to July 31, 2006 subsequent
      to year end (see *Note 10*).                                                                                                                                        
| | (I) | Stockholder
      note payable, interest at prime plus .5%, due at maturity, September 30,
      2004.                                                                                                                                                                                                                                                

> The prime rate of interest
>     at June 30, 2004 was 4.25% .
>   Year
>         Ended June 30
>       AggregatePrincipalMaturities2005
>       $
>       550,4512006
>       
>       2007
>       
>       1,845,461Total
>         principal due on shareholder notes payable
>       
>       2,395,912Less
>         current portion
>       
>       (550,451
>       )Less
>         unamortized portion of debt discount
>       
>       (122,324
>       )Long-term
>         shareholder notes payable
>       $
>       1,723,137

| | Leases
| | ------

> The Company leases various
>     plant, office and showroom facilities and certain other equipment under agreements
>     accounted for as operating leases. These leases expire through April 2008
>     and certain leases contain renewal options.
>   The Company also leases
>     equipment under agreements accounted for as capital leases. The assets under
>     capital leases are amortized on a straight-line basis over the term of the
>     lease, and lease amortization is included in depreciation expense. Property
>     and equipment included $214,998 and $87,970 of assets under capital lease
>     less $40,675 and $19,008 of accumulated depreciation at June 30, 2004 and
>     2003, respectively.

|F-16
|----



Decorize,
  Inc. 
  Notes to Financial Statements 
  June 30, 2004 and 2003

Future minimum
  payments for noncancelable capital and operating leases with initial or remaining
  terms of one year or more at June 30, 2004, are as follows:



|                                                     | Operating |         | Capital
|---------------------------------------------------- | --------- | ------- | -------
|                                                     | Leases    |         | Leases 
|                                                     |           |         |        
|2005                                                 | $         | 267,641 |        
|2006                                                 |           | 235,973 |        
|2007                                                 |           | 177,556 |        
|2008                                                 |           | 118,396 |        
|2009
      and beyond                                |           | 120,764 |        
|                                                     |           |         |        
|                                                     |           |         |        
|                                                     | $         | 920,330 |        
|                                                     |           |         |        
|Less
      amount representing interest              |           |         |        
|                                                     |           |         |        
|Present
      value of future minimum lease payments |           |         |        
|Less
      current portion                           |           |         |        
|                                                     |           |         |        
|                                                     |           |         |        
|                                                     |           |         |        
|                                                     |           |         |        

> Total rent expense incurred
>     under operating leases amounted to $434,410 and $474,450 for the year ended
>     June 30, 2004 and 2003, respectively.

|Note 4: Stockholders Equity
|----------------------------

> The Company agreed to
>     prepare a registration statement covering the common stock issued pursuant
>     to sale of the Units and the associated warrants. The Company further pledged
>     to use its best efforts to cause the registration statement for the common
>     stock to be made effective by the SEC and to maintain the effectiveness of
>     the registration statement until all such common stock has been resold by
>     the initial owners. During 2003, the Company deferred $159,172 of costs related
>     to this registration, which were included in other assets on the 2003 consolidated
>     balance sheet. These costs offset additional paid-in capital when the registration
>     became effective in January 2004.
>   In December 2002, the
>     Company completed a private placement of 785,714 shares of common stock, and
>     warrants to acquire an additional 785,714 shares of common stock at an initial
>     exercise price of $2.80 per share. Each purchaser received a warrant to purchase
>     one share of common stock for each share of common stock purchased in the
>     private placement. The aggregate purchase price for the common stock and the
>     warrants was $1,100,000, based on a price per share of common stock equal
>     to $1.40. As a cost of this private offering, the Company paid $60,000 and
>     issued 17,857 shares of common stock, together with warrants for an aggregate
>     of 171,428 shares of common stock, as brokerage fees, to parties acting on
>     the Companys behalf in such placement. The warrants are exercisable
>     at $1.40 per share for 42,857 shares, at $2.80 per share for 42,857 shares,
>     at $1.68 per share for 42,857 shares and at $3.36 per share for 42,857 shares.
>     All of the warrants have an exercise period of three years, except for the
>     warrants exercisable for 42,857 shares at a price of $2.80 per share, which
>     have an exercise period of five years.



|F-17
|----





|Decorize,
      Inc.Notes to Financial StatementsJune 30, 2004 and 2003
|-----------------------------------------------------------------------

> On January 2, 2004, the
>     Company issued 340,000 shares of common stock to a stockholder of the Company
>     as compensation for investor relations services provided to the Company.
>   On February 6, 2004, the
>     Company issued 65,000 shares of common stock to Jon Baker, co-founder and
>     former CEO, pursuant to his separation agreement.
>   On July 17, 2003, the
>     Company issued a promissory note to Jim Parsons, co-founder and former CEO
>     in the amount of $150,000 with an interest rate equal to the prime rate plus
>     1%, maturing in 90 days. In October 2003, the Company obtained a 12-month
>     line of credit in the amount of $800,000 from Mr. Parsons, with outstanding
>     principal bearing interest at a variable per annum rate equal to the prime
>     rate plus 1.25% . The amounts outstanding under the $150,000 promissory note
>     to Mr. Parsons were rolled into the line of credit and the $150,000 promissory
>     note was cancelled. In consideration for Mr. Parson's agreement to establish
>     the line of credit, the Company issued warrants to Mr. Parsons exercisable
>     for 500,000 shares of Decorize common stock at an exercise price of $1.45
>     per share, based on the market price of the common stock at the time the note
>     was issued. The warrants were exercisable immediatelyand expire if
>     not exercised by September 30, 2006. On December 10, 2003, pursuant to an
>     amended and restated line of credit promissory note executed by the Company
>     in favor of Mr. Parsons, the principal amount of the line of credit was increased
>     by an additional $200,000 to $1,000,000, which was subsequently borrowed by
>     the Company against the credit line. In consideration for the increase in
>     the line of credit, the Company granted Mr. Parsons a subordinate security
>     interest in the Company's inventory and issued warrants to Mr. Parsons to
>     purchase an additional 200,000 shares of Decorize common stock at an exercise
>     price of $1.20 per share, and otherwise on the same terms as the warrants
>     originally issued in connection with the line of credit. The warrants issued
>     in connection with the Parsons line of credit have a relative fair value equal
>     to $302,097, which has been recorded as a discount against the carrying value
>     of the note and is being amortized to interest expense over the term of the
>     debt. As of June 30, 2004, $1,000,000 in principal was outstanding under the
>     line of credit.
>   In connection with the
>     Companys $500,000 private placement of preferred stock to SRC Holdings
>     Corporation in February 2004, the Company entered into agreements to exchange
>     an aggregate $1,410,200 of debt owed to a principal stockholder and three
>     of its current and former executive officers for shares of Company common
>     stock. The Company issued 409,700 shares of common stock to Nest USA, Inc.
>     in exchange for a $409,700 principal reduction in its existing convertible
>     term note. In addition to those shares of common stock, the Company issued
>     a second amended and restated note to Nest USA (seeNote
>     3).
>   At the time of the preferred
>     stock private placement, the Company also issued warrants to acquire up to
>     600,000 shares of common stock to existing shareholder, Quest Capital Alliance,
>     L.L.C. These warrants are exercisable at an initial exercise price of $1.40
>     per share and terminate on a proportional basis on the third, fourth and fifth
>     anniversaries of their issuance.
>   Additionally, Mr. Parsons,
>     Mike Sandel, a Vice President and director, and Mr. Baker exchanged outstanding
>     notes for shares of common stock pursuant to separate agreements entered into
>     by each of them with the Company. The Company exchanged an aggregate $1,000,500
>     in outstanding principal and accrued interest under three separate promissory
>     notes for 1,000,500 shares of common stock, on the basis of $1.00 per share.
>     The Company issued 75,000 shares to Mr. Parsons, 550,500 shares to Mr. Sandel,
>     and 375,000 shares to Mr. Baker, and the outstanding principal amounts of
>     the noteholders' promissory notes were reduced accordingly. As a result of
>     the exchange, the outstanding principal amount of Mr. Parsons note was
>     reduced to $850,000, Mr. Sandels note including interest was paid in
>     full, the outstanding principal amount of Mr .Baker's promissory note was
>     paid in full, and the Company issued a subordinated promissory note due December
>     2004, bearing interest at 6% per annum, as payment for the $56,451 of interest
>     accrued on Mr. Bakers note.

|F-18
|----



Decorize,
  Inc. 
  Notes to Financial Statements 
  June 30, 2004 and 2003



Note 5: Income Taxes

> The provision for income
>     taxes includes these components:

|                              | 2004 |   | 2003
|----------------------------- | ---- | - | ----
|                              |      |   |     
|Taxes
      currently payable | $    |  |     
|Deferred
      income taxes   |      |  |     
|                              |      |   |     
|Income
      tax expense      | $    | 0 |     
|                              |      |   |     



> A reconciliation of income
>     tax expense at the statutory rate to the Companys actual income tax
>     expense is shown below:

|                                                            | 2004 |            | 2003
|----------------------------------------------------------- | ---- | ---------- | ----
|                                                            |      |            |     
|                                                           
|Computed at the statutory rate (34%)                        | $    | (1,511,959 | )   
|Increase (decrease) resulting from                          |      |            |     
|Nondeductible expenses                                      |      | 183,209    |     
|State income taxes                                          |      | (156,323   | )   
|Changes in the deferred
      tax asset valuation allowance |      | 1,479,584  |     
|Other                                                       |      | 5,489      |     
|                                                            |      |            |     
|                                                           
|Actual
      tax expense                                    | $    | 0          |     
|                                                            |      |            |     

F-19



Decorize,
  Inc. 
  Notes to Financial Statements 
  June 30, 2004 and 2003

> The tax effects
>     of temporary differences related to deferred taxes shown on the balance sheets
>     were:



|                                                        | 2004 |            | 2003
|------------------------------------------------------- | ---- | ---------- | ----
|                                                        |      |            |     
|Deferred
      tax assets                               |      |            |     
|Allowance
      for doubtful accounts                   | $    | 74,094     |     
|Accrued
      compensated absences                      |      | 13,300     |     
|Inventories                                             |      | 39,754     |     
|Capital
      lease obligations                         |      | 3,957      |     
|Unamortized
      discount on beneficial debt terms     |      | 33,063     |     
|Net
      operating loss carryforwards                  |      | 2,327,173  |     
|Charitable
      contribution carryforwards and other   |      | 16,869     |     
|                                                        |      |            |     
|                                                        |      | 2,508,210  |     
|                                                        |      |            |     
|Deferred
      tax liabilities                          |      |            |     
|Property
      and equipment                            |      | (12,645    | )   
|Prepaid
      expenses                                  |      | (20,729    | )   
|Inventory
      adjustment                              |      | (57,640    | )   
|                                                        |      |            |     
|                                                        |      | (91,014    | )   
|                                                        |      |            |     
|                                                       
|Net
      deferred tax asset before valuation allowance |      | 2,417,196  |     
|                                                        |      |            |     
|                                                       
|Valuation
      allowance                               |      |            |     
|Beginning
      balance                                 |      | (937,612   | )   
|(Increase)
      decrease during the period             |      | (1,479,584 | )   
|                                                        |      |            |     
|                                                       
|Ending
      balance                                    |      | (2,417,196 | )   
|                                                        |      |            |     
|                                                       
|Net
      deferred tax asset                            | $    | 0          |     
|                                                        |      |            |     

> For the years ended June
>     30, 2004 and 2003, the Company recorded a valuation allowance for the full
>     amount of the net deferred tax asset otherwise recorded due to the losses
>     causing uncertainty as to the realizability of the deferred tax assets in
>     future years. As of June 30, 2004 and 2003, the Company had approximately
>     $6,000,000 and $2,100,000, respectively, of net operating loss carryforwards
>     available to offset future federal income taxes. The carryforwards expire
>     in varying amounts from 2021 to 2024, if unused. Utilization of the net operating
>     loss carryforwards may be subject to certain limitations as a result of changes
>     in ownership of the Company.

|Note 6: Employee Stock Plans
|----------------------------

| | Stock Option Plan
| | -----------------

> The Company has elected
>     to follow APB Opinion No. 25,Accounting
>     for Stock Issued to Employees,
>     and related interpretations in accounting for its employee stock options rather
>     than the alternative fair value accounting provided under SFAS No. 123.
>   The Company has a stock
>     options plan (1999 Equity Incentive Plan) providing for incentive and nonqualified
>     stock options up to which 3,000,000 shares of common stock are available to
>     issuance to employees, officers, directors and consultants. Options granted
>     under this plan may expire as much as 10 years from the date of the grant
>     at prices determined by the Board of Directors.



|F-20
|----





|Decorize,
      Inc.Notes to Financial
      StatementsJune 30, 2004 and 2003
|-----------------------------------------------------------------------------



> A summary of the Companys
>     stock option activity and related information for the years ended June 30,
>     2004 and 2003, is presented below:

|                                 | 2004       |   | 2003
|-------------------------------- | ---------- | - | ----
|                                 | Shares     |   |     
|                                 |            |   |     
|                                
|Outstanding, beginning of year   | 878,606    |   |     
|Granted                          | 1,310,100  |   |     
|Exercised                        | (14,645    | ) |     
|Forfeited                        | (1,250,800 | ) |     
|                                 |            |   |     
|                                
|Outstanding, end of year         | 923,261    |   |     
|                                 |            |   |     
|                                
|Options exercisable, end of year | 766,243    |   |     

> The fair value of options
>     granted is estimated on the date of the grant using the Black-Scholes option-pricing
>     model with the following weighted average assumptions:

|                                                            |   | 2004               |   |  |   | 2003               |  
|----------------------------------------------------------- | - | ------------------ | - |  | - | ------------------ | -
|                                                            |   |                    |   |  |   |                    |  
|                                                           
|Dividend
      per share                                    | $ |                   |   |  | $ |                   |  
|Risk-free
      interest rate                               |   | 3.26               | % |  |   | 4.3                | %
|Weighted
      average expected life of options             |   | 4
      to 5 years |   |  |   | 4
      to 5 years |  
|Expected
      volatility of the Companys common stock     |   |                    |   |  |   |                    |  
|market
      price                                          |   | .7300              |   |  |   | 1.0084             |  
|                                                           
|Weighted
      average fair value of options granted during |   |                    |   |  |   |                    |  
|the
      year                                              |   | $.69               |   |  | $ | 1.74               |  

> The following table summarizes
>     information about stock options under the plan outstanding at June 30, 2004:

|                               |  |                          |  | Options Outstanding                                     |  | Options Exercisable                
|------------------------------ |  | ------------------------ |  | ------------------------------------------------------- |  | -----------------------------------
|Range of Exercise
      Prices |  | Number
      Outstanding |  | Weighted Average
      Remaining Contractual
      Life |  | WeightedAverage
      ExercisePrice
|                               |  |                          |  |                                                         |  |                                    
|                              
|$0.80 to $1.15                 |  | 242,761                  |  | 6.1 years                                               |  | $0.97                              
|$1.20 to $1.22                 |  | 530,500                  |  | 6.8 years                                               |  | $1.21                              
|$1.40                          |  | 150,000                  |  | 6.7 years                                               |  | $1.40                              



|F-21
|----



Decorize,
  Inc. 
  Notes to Financial Statements 
  June 30, 2004 and 2003

> The Company
>     granted stock options to certain executives, employees and directors on various
>     dates during 2004 and 2003. The exercise price of these options granted is
>     equal to the market price on the date of the grant. There is no recorded expense
>     related to grants of these options. 
>     On October 22, 2003, the Company granted 380,550 options at $1.22 per share,
>     the fair market value on that date. The options were granted under the 1999
>     Equity Incentive Plan, have a 7- year life and various vesting periods.
>   On December 10, 2003,
>     the Board of Directors approved the cancellation of 601,050 options granted
>     on various dates with various vesting periods, held by employees and directors
>     of the Company. In exchange, the Company granted 601,050 stock options to
>     employees and directors on December 10, 2003, under the Companys 1999
>     Equity Incentive Plan. The options granted have a 7- year life, vest immediately
>     and have an exercise price of $1.20 per share, representing the fair market
>     value of the Companys common stock on that date.
>   On February 6, 2004, the
>     Company granted options to a former executive pursuant to his separation agreement.
>     The Company has recorded $64,350 of stock compensation expense related to
>     these options in fiscal 2004.
>   At the time of the preferred
>     stock private placement, the Company also issued warrants to acquire up to
>     600,000 shares of common stock to existing stockholder, Quest Capital Alliance,
>     L.L.C. These warrants are exercisable at an initial exercise price of $1.40
>     per share and terminate on a proporational basis on the third, fourth and
>     fifth anniversaries of their issuance.

Note 7: Significant Estimates
    and Concentrations

> Accounting principles
>     generally accepted in the United States of America require disclosure of certain
>     significant estimates and current vulnerabilities due to certain concentrations.
>     Those matters include the following:

| | General Litigation
| | ------------------

> The Company is subject
>     to claims and lawsuits that arise primarily in the ordinary course of business.
>     It is the opinion of management that the disposition or ultimate resolution
>     of such claims and lawsuits will not have a material adverse effect on the
>     consolidated financial position of the Company.

| | Major Supplier
| | --------------

> The Company purchases
>     approximately 20% of its principal products from one supplier. There are a
>     limited number of suppliers for these products.

| | ***Foreign
      Assets***
| | --------------------------

> As of June 30, 2004,
>     net assets located outside the United States totaled approximately $349,000.
>     These assets consisted principally of the inventory and equipment of the Pt.
>     Niaga Merapi facility in Indonesia totaling approximately $209,000 and products
>     located in China at vendor's facilities or in transit to the United States
>     from China of approximately $140,000. As of June 30, 2003, net foreign assets
>     consisted of products at vendor's facilities or in transit to the United States
>     of approximately $107,500 and $163,000 from Indonesia and China, respectively.



|F-22
|----



|Decorize,
      Inc.Notes to Financial
      StatementsJune
      30, 2004 and 2003
|-----------------------------------------------------------------------------------

|Note 8: Profit-sharing Plan
|---------------------------

| | Profit-sharing Plan
| | -------------------

> The Company has a 401(k)
>     profit-sharing plan covering substantially all employees. The Companys
>     contributions to the plan are determined annually by the Board of Directors.
>     There were no Company contributions to the plan for 2004 or 2003.

|Note 9: Future Liquidity Needs
|------------------------------

> The Company has incurred
>     losses and recurring negative cash flows since formation. Management is evaluating
>     and implementing strategies to mitigate these conditions during the next fiscal
>     year. These include establishing and expanding relationships with key customers,
>     renewed focus on specialty retail customers, better margin management through
>     improved operational processes, selective reductions of operating overhead
>     and seeking additional sources of equity and debt financing.
>   Management believes that
>     additional financing will be needed to meet the capital requirements associated
>     with the Companys growth objectives. Management will evaluate alternatives
>     for obtaining new debt and equity financing to meet future capital requirements,
>     or to retire debt as deemed appropriate. There is no assurance that such financing
>     will be available on terms that will be acceptable to the Company. As of June
>     30, 2004, the Company had $500,000 available of a $1,000,000 line of credit
>     facility guaranteed by SRC Holdings Corporation. Management believes this
>     line of credit will meet short-term working capital requirements but there
>     is no assurance that additional such funds, if needed, will be available in
>     the future.

Note 10: Subsequent
  Events

> On September 10, 2004
>     the Company modified two of its stockholder notes payable to extend their
>     due dates to July 31, 2006. These notes had outstanding principal balances
>     totaling $1,845,461 at June 30, 2004 and have been classified as long-term
>     liabilities on the balance sheet, net of the related discount of $122,324.
>     In connection with the extension of these notes, a new security agreement
>     was entered into with the shareholder, which provides a subordinated security
>     interest in the inventories of the Company as collateral for the debt.



|F-23
|----



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

> None.

Item 8A. CONTROLS AND PROCEDURES.

> We carried out an evaluation
>     of the effectiveness of the design and operation of our disclosure controls
>     and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15 as of June
>     30, 2004, the end of our fourth fiscal quarter, which is the last period presented
>     in this report. The evaluation was carried out under the supervision of our
>     Chief Executive Officer and Chief Financial Officer and with the participation
>     of our management group and our audit committee. Based upon that evaluation,
>     the Chief Executive Officer and the Chief Financial Officer concluded that
>     our disclosure controls and procedures are effective in ensuring that information
>     that is required to be included in our filings with the Commission is recorded,
>     processed, summarized and reported within the time periodsspecified
>     by the Commission, and that such information is accumulated and communicated
>     to our management, including our Chief Executive Officer and Chief Financial
>     Officer, as appropriate to allow timely decisions regarding required disclosure.
>     There have been no significant changes in our internal controls or in other
>     factors that could significantly affect internal controls, nor were any corrective
>     actions required with regard to significant deficiencies and material weaknesses.

PART III

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

> Code of Ethics
>   Our Board of Directors
>     has adopted a code of ethics that applies to our Chief Executive Officer (our
>     principal executive officer) and our Chief Financial Officer (our principal
>     financial officer and principal accounting officer). We will provide to any
>     person, without charge and upon request, a copy of this code of ethics. All
>     such requests should be mailed to: Decorize, Inc., 1938 E. Phelps, Springfield,
>     MO 65802, Attention: Gaylen Ball.
>   All other information
>     required by this Item 9 is incorporated by reference to the disclosure under
>     the captions Election of Directors  Nominees, Election
>     of Directors  Audit Committee, Election of Directors 
>     Management and Executive Compensation  Section 16(a) Beneficial
>     Ownership Reporting Compliance in our proxy statement for the Annual
>     Meeting of Stockholders to be held on October 13, 2004.

Item 10. EXECUTIVE COMPENSATION

> The information required
>     by this Item 10 is incorporated by reference to the disclosure under the captions
>     Executive Compensation and Election of Directors 
>     Attendance and Compensation in our proxy statement for the Annual Meeting
>     of Stockholders to be held on October 13, 2004.

Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

> The information required
>     by this Item 11 is incorporated by reference to the disclosure under the caption
>     Security Ownership of Certain Beneficial Owners and Management
>     in our proxy statement for the Annual Meeting of Stockholders to be held on
>     October 13, 2004.

Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

> The information required
>     by this Item 12 is incorporated by reference to the disclosure under the caption
>     Executive Compensation - Certain Relationships and Related Transactions
>     in our proxy statement for the Annual Meeting of Stockholders to be held on
>     October 13, 2004.





|20
|--



PART IV Item 13. EXHIBITS AND REPORTS ON FORM 8-K


> (a) Exhibits
>   Reference is made to
>       the Exhibit Index on page E-1 for a list of all exhibits filed or incorporated
>       herein by reference as a part of this report.
>   (b)Reports on
>     Form 8-K
>   During the fourth quarter
>       of fiscal year 2004, we filed one report on Form 8-K. We filed this report
>       on May 17, 2004, to disclose a press release announcing the addition of
>       two members of our Board of Directors and the appointment of the Chairman
>       of our Audit Committee.

Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

BKD, LLPCertified Public Accountants auditedour consolidated financial statements as of June 30, 2004, 2003, and 2002. Previously, the June 30, 2002 consolidated financial statements were audited by Ernst & Young, LLP. Our consolidated financial statements as of June 30, 2001
were audited by Kirkpatrick, Phillips & Miller, P.C.

Audit Fees

The aggregate fees billed during the year ended June 30, 2004 by BKD, LLPfor professional services rendered in
connection with the audits of our June 30, 2004 and 2003 consolidated financialstatements were $65,800 and $6,755, respectively. Ernst & Young, LLP billed us $107,965 in
connection with their audit of the June 30, 2002 financial statements during 2003. Kirkpatrick, Phillips & Miller P.C. billed us $5,090 during 2003 for professional services rendered in connection with their audit of our financial statements as
of June 30, 2001.

Fees billed by BKD, LLPfor reviews of our interim financial statements for inclusion with quarterly reports on Form
10QSB totaled $15,295 and $7,000 during the fiscal years ended June 30, 2004 and 2003, respectively. Ernst & Young, LLP billed us $15,700 during 2003 for their review of interim financial statements included with Form 10QSB. Kirkpatrick,
Phillips & Miller P.C. billed us $1,555 during 2003 for reviews relating interim financial statements included in quarterly reports of Form 10QSB.

Fees billed by BKD, LLP for professional services rendered in connection with various registration statements during fiscal years ended June 30, 2004 and 2003 of $59,035 and $38,765,
respectively. During 2003, Ernst & Young, LLP billed fees of $46,300 and Kirkpatrick, Phillips & Miller P.C. charged $23,290.

Audit-Related Fees

During the fiscal years ended June 30, 2004 and 2003, we incurred professional fees for other audit-related assurance services from BKD, LLPtotaling $54,405 and $2,155, respectively.

Tax Fees

Fees billed by BKD, LLPfor professional services rendered in connection with tax compliance, tax advice and tax
planning were $27,498 and $23,485 for the fiscal years ended June 30, 2004 and 2003, respectively. Ernst & Young, LLP billed us $4,585 for such services during 2003.

Other Fees

We did not pay for any other professional accounting services during the fiscal year ended June 30, 2004 and 2003.



|21
|--



|Audit Committee
|---------------

The audit committee approves all audit, tax and other consulting services to be rendered by outside accountants prior to the work being performed, and evaluates the impact that provision of
such services has upon the independence of Decorize's auditors.



|22
|--





|SIGNATURES
|----------

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

|                               | DECORIZE,
      INC.
|------------------------------ | --------------------
|                               |                     
|Date: September 13,
      2004 | By:                 
|                               |                     
|                               |                     
|                               |                     

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on September 13, 2004.



|**Name**                 |  | **Title**                                                
|------------------------ |  | ---------------------------------------------------------
|                         |  |                                                          
|/s/ Stephen R. Crowder   |  | President, Chief Executive Officer and Director          
|                         |  | (principal executive officer)                            
|Stephen
      R. Crowder |  |                                                          
|                         |  |                                                          
|/s/ Brent S. Olson       |  | Vice President of Finance and Treasurer (principal       
|                         |  | financial officer and principal
      accounting officer)
|Brent S. Olson           |  |                                                          
|                         |  |                                                          
|/s/ Kevin Bohren         |  | Chairman of the Board                                    
|                         |  |                                                          
|Kevin Bohren             |  |                                                          
|                         |  |                                                          
|/s/ James K. Parsons     |  | Executive Vice President and Director                    
|                         |  |                                                          
|James K. Parsons         |  |                                                          
|                         |  |                                                          
|/s/ Richard Chalker      |  | Director                                                 
|                         |  |                                                          
|Richard Chalker          |  |                                                          
|                         |  |                                                          
|/s/ Fabian Garcia        |  | Director                                                 
|                         |  |                                                          
|Fabian Garcia            |  |                                                          
|                         |  |                                                          
|/s/ J. Michael Sandel    |  | Vice President and Director                              
|                         |  |                                                          
|J. Michael Sandel        |  |                                                          
|                         |  |                                                          
|/s/ Ron Jones            |  | Director                                                 
|                         |  |                                                          
|Ron Jones                |  |                                                          
|                         |  |                                                          
|/s/ Timothy M. Dorgan    |  | Director                                                 
|                         |  |                                                          
|Timothy M. Dorgan        |  |                                                          
|                         |  |                                                          
|/s/ Steve Fox            |  | Director                                                 
|                         |  |                                                          
|Steve Fox                |  |                                                          

23



DECORIZE
  CORPORATION 
  Index to Exhibits 
  (Item 13(a))

|**Exhibit** |  |                                                                                                                                                                                                            
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|**Number**  |  | **Description**                                                                                                                                                                                            
|            |  |                                                                                                                                                                                                            
|           
|2.1         |  | Agreement and Plan of Merger between Decorate, Inc. and
      decorize.com, L.L.C., dated June 18, 2001. (1)                                                                                               
|2.2         |  | Agreement and Plan of Merger by and among JB Express, Inc., GuildMaster,
      Inc., James K. Parsons, Ellen L. Parsons and Jon T. Baker, dated June 18,
      2001. (1)                                   
|2.3         |  | Securities Exchange Agreement between Guidelocator.com, Inc. and
      the shareholders of Decorate, Inc., dated June 29, 2001. (2)                                                                        
|2.4         |  | Certificate of Merger issued by the State of Delaware for the merger
      of Guidelocator.com with and into Decorize, Inc., dated July 5, 2001. (2)                                                       
|2.5         |  | Articles of Merger issued by the State of Texas for the merger of
      Guidelocator.com with and into Decorize Inc., dated July 6, 2001. (2)                                                              
|2.6         |  | Agreement and Plan of Merger by and among Decorize, Inc., Step of
      Faith, Inc., Faith Walk Designs, Inc., John Michael Sandel and Kitty Sandel,
      dated July 31, 2001. (3)                        
|2.7         |  | Letter Agreement between John Michael Sandel, Kitty Sandel and Decorize,
      Inc., dated July 31, 2001. (3)                                                                                              
|2.8         |  | Letter Agreement #2 between John Michael Sandel, Kitty Sandel and
      Decorize, Inc., dated July 31, 2001.(3)                                                                                            
|2.9         |  | Certificate of Ownership and Merger issued by the State of Delaware
      for the merger of Decorate, Inc. with and into Decorize, Inc., dated July
      27, 2001. (1)                                    
|2.10        |  | Articles of Merger issued by the State of Missouri for the merger
      of Decorate, Inc. with and into Decorize Inc., dated August 6, 2001. (1)                                                           
|4.1         |  | Form of Decorize, Inc. Stock Certificate. (1)                                                                                                                                                              
|4.2         |  | Form of Securities Purchase Agreement between Decorize, Inc. and
      the Purchasers set forth on the signature pages thereto, together with
      all exhibits and schedules. (4)                        
|4.3         |  | Securities Purchase Agreement, dated as of February 26, 2002, by
      and between Decorize, Inc. and NestUSA, Inc., together with all exhibits
      and schedules. (5)                                   
|4.4         |  | Subscription Agreement dated November 11, 2001, between Decorize,
      Inc. and Fabian Garcia. (6)                                                                                                        
|4.5         |  | Form of Securities Purchase Agreement between Decorize, Inc. and
      the Purchasers set forth on the signature pages thereto, dated December
      2, 2002, together with all exhibits and schedules. (7)
|4.6         |  | Securities Purchase Agreement between Decorize, Inc. and Quest Capital
      Alliance, L.L.C., dated November 18, 2002, together with all exhibits and
      schedules. (7)                                
|10.1        |  | Promissory Note dated June 15, 2001 between Decorate, Inc. and Jon
      T. Baker. (1)                                                                                                                     
|10.2        |  | Promissory Note dated June 15, 2001 between Decorate, Inc. and James
      K. Parsons. (1)                                                                                                                 
|10.3        |  | Employment Agreement between Decorate, Inc. and Jon T. Baker dated
      June 15, 2001. (1)                                                                                                                
|10.4        |  | Employment Agreement between Decorate, Inc. and James K. Parsons
      dated June 15, 2001. (1)                                                                                                            
|10.5        |  | Separation Agreement between Decorize, Inc. and Jon T. Baker dated
      August 25, 2003. (12)                                                                                                             
|10.6        |  | Promissory Note dated July 31, 2001 between Decorize, Inc. and John
      Michael Sandel and Kitty Sandel.(3                                                                                               
|10.7        |  | Employment Agreement between Decorize, Inc. and John Michael Sandel
      dated July 31, 2001. (3)                                                                                                         
|10.8        |  | Decorize, Inc. 1999 Stock Option Plan. (8)                                                                                                                                                                 
|10.9        |  | Form of Employee Incentive Stock Option Notice and Agreement. (8)                                                                                                                                          
|10.10       |  | Lease Agreement between C. R. Wehr, Jr. and GuildMaster, Inc. dated
      December 1, 1996 for land and commercial structure at 2655 North Airport
      Commerce Avenue, Springfield, Missouri. (1)       
|10.11       |  | Lease dated June 23, 1997 between Phoenix Home Life Mutual Insurance
      Company and GuildMaster, Inc. for furniture showroom space in High Point,
      North Carolina. (1)                             
|10.12       |  | Sublease agreement dated June 9, 1998 between Southern Accessories
      Today, Inc. and GuildMaster, Inc. for showroom space in the Atlanta Merchandise
      Mart, Atlanta, Georgia. (1)                 
|10.13       |  | Note and security agreements by and among GuildMaster, Inc., Sac
      River Valley Bank and the U.S. Small Business Administration dated August
      13, 1996. (1)                                       
|10.14       |  | Lease Agreement between Faith Walk Designs, Inc. and Republic Leasing
      Company dated May 18, 1998.(1)                                                                                                 
|10.15       |  | Equipment Lease between Faith Walk Designs, Inc. and Monex Leasing
      dated January 29, 1998. (1)                                                                                                       
|13.         |  | 2004 Annual Report to Stockholders. (11)                                                                                                                                                                   
|16.1        |  | Letter from Kirkpatrick, Phillips & Miller, CPAs, P.C.
      (9)                                                                                                                                          



|16.2  |  | Letter from Ernst & Young LLP. (10)                                                                                                                                     
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|31(a) |  | Certification by Stephen Crowder, President and Chief Executive
      Officer of the Registrant, pursuant to 1 CFR 240.13a  14(a) or 17
      CFR 240.15d  14(a). (13)
|31(b) |  | Certification by Brent Olson, Vice President of Finance and Treasurer
      of the Registrant, pursuant to 17 CFR 240.13a  14(a) or 17 CFR 240.15d
       14(a). (13) 
|32(a) |  | Certification of CEO pursuant to 18 U.S.C. Section 1350 as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (13)                                
|32(b) |  | Certification of CFO pursuant to 18 U.S.C. Section 1350 as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (13)                                
|99.1  |  | Proxy Statement of Registrant. (14)                                                                                                                                     

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|(12)
|(13)
|(14)
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