SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                    FORM 10-Q

(Mark one)

|X|   Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
      of 1934

                For the quarterly period ended December 31, 2001
                               ------------------

|_|   Transition report under Section 13 or 15(d) of the Exchange Act

For the transition period from _____________________to________________________

                         Commission file number 0-24352
                                     -------

                                 INTERIORS, INC.
                                 ---------------
             (Exact Name of Registrant as Specified in Its Charter)

                               Delaware 13-3590047
                               ------------------
                (State or Other Jurisdiction of (I.R.S. Employer
               Incorporation or Organization) Identification No.)

                91 French Avenue, Braintree, Massachusetts 02184
               ---------------------------------------------------
                    (Address of Principal Executive Offices)

                                 (781) 848-2133
                                 --------------
                (Issuer's Telephone Number, Including Area Code )

      Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 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 |_|

      State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: As of December 31, 2001, the
registrant had 48,549,743 outstanding shares of Class B Common Stock.



<PAGE>

                                 INTERIORS, INC.

                                Table Of Contents

PART I   FINANCIAL INFORMATION

Item 1.  Financial Statements

Consolidated Balance Sheets as of December 31, 2001 and June 30, 2001...      3

Consolidated Statements of Operations for the Three and Six Months Ended
December 31, 2001 and 2000..............................................    4-5

Consolidated Statements of Cash Flows for the Six Months Ended
December 31, 2001 and 2000..............................................      6

Notes to Consolidated Financial Statements...............................  7-14

Item 2.  Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................... 15-18

PART II OTHER INFORMATION

Item 1.  Legal Proceedings ..............................................    19

Item 2.  Changes in Securities and Use of Proceeds ......................    19

Item 3.  Defaults Upon Senior Securities ................................    19

Item 5.  Other Information...............................................    20

Item 6.  Exhibits and Reports on Form 8-K................................    20

Signatures...............................................................    21




                                        2


<PAGE>
                        Interiors, Inc. and Subsidiaries

                           Consolidated Balance Sheets

                             (amounts in thousands)







                                               December 31,       June 30,
                                                  2001              2001
                                               (Unaudited)       (Restated)
                                              --------------    -----------

                            Assets

Current Assets:
Cash and cash equivalents                      $     23        $    411
Other current assets                              2,195             395
                                               ---------        --------

Total Current Assets                              2,218             806
                                               ---------        --------

Other Assets, net                                  -                114
                                               ---------        --------

Total Assets                                   $ 2,218         $    920
                                               =========        ========



                      Liabilities and Stockholders' Deficit

Current Liabilities:
Notes payable and current maturities
 of longterm debt                              $   8,005       $  5,484
Accounts payable                                     713          1,544
Accrued expenses                                  10,895          3,509
Liabilities of businesss held for
 disposition, net                                   -             6,647
                                               ---------        --------
Total current liabilities                         19,613         17,184
                                               ---------        --------

LongTerm Debt, less current maturities            17,088             -
                                               ---------        --------

Stockholders' Deficit:
 Preferred stock, $.01 par value, 5,300,000
  shares authorized:
 Series A Redeemable Convertible Preferred
  Stock, $.01 par value, 2,870,000 shares
  authorized, 804,937 shares issued and
  outstanding                                          8                8
 Series E Redeemable Convertible Preferred
  Stock, $1,000 liquidation value, 2,000
  shares authorized, 1,000 shares issued and
  outstanding at June 30, 2001                      -               1,000
 Series F 6% Preferred Stock, $.01 par value,
  100,000 shares authorized 100,000 shares
  issued and outstanding at December 31, 2001      1,000             -
Class A common stock, $.001 par value,
 60,000,000 shares authorized 41,191,743 and
 48,549,743 shares issued and outstanding at
 December 31, and June 30, 2001, respectively         42               49
Class B common stock, $.001 par value, 2,500,000
 shares authorized, $0 and 2,455,000 shares
 issued and outstanding at December 31 and
 June 30, 2001                                      -                   2
Treasury stock, at cost, 44,771 and 7,402,771
 shares at December 31 and June 30, 2001,
 respectively                                        (41)            (629)
Additional paid-in capital                        68,553           66,119
Accumulated deficit                             (104,045)         (79,351)
Note receivable                                     -              (3,462)
                                               ---------         --------
TOTAL STOCKHOLDERS' DEFICIT                      (34,483)         (16,264)
                                               ---------         --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY     $   2,218       $      920
                                               =========         ========



             The accompanying notes are an integra part of these
                        consolidated financial statements





                                        3
<PAGE>

                        Interiors, Inc. and Subsidiaries

                      Consolidated Statements of Operations

                  (amounts in thousands except per share data)

                                   (Unaudited)


                                                     Six Months Ended
                                                        December 31,
                                            ----------------------------------
                                                2001               2000
                                            -----------         -----------
Net Sales                                   $    -              $    -

Cost of Sales                                    -                   -
                                            -----------         -----------
Gross Profit                                     -                   -
                                            -----------         -----------

Selling, General and Administrative
 Expenses                                       1,977               2,389
                                            -----------         -----------
Total Operating Expenses                        1,977               2,389
                                            -----------         -----------
Loss Before Other Income (Expenses)            (1,977)             (2,389)

Other Income (Expenses)
 Interest expense                              (7,524)             (1,304)
                                            -----------         -----------
Other Income (Expenses)                        (7,524)             (1,304)
                                            -----------         -----------
Loss from continuing operations before
 income tax                                    (9,501)             (3,693)

Provision for income tax                         -                     (7)
                                            -----------         -----------
Loss from continuing operations                (9,501)             (3,700)

Loss from discontinued operations             (14,975)             (1,483)
                                            -----------         -----------
Net Loss                                      (24,476)             (5,183)

Imputed Preferred Stock Dividend                 (218)               (175)
                                            -----------         -----------
Loss available to common shareholders       $ (24,694)           $ (3,868)
                                            ===========         ===========


Basic and diluted loss per share available
 to common shareholders
Continuing                                  $   (0.22)           $  (0.09)
Discontinued                                    (0.35)              (0.03)
                                            -----------         -----------
                                            $   (0.57)           $  (0.12)
                                            ===========         ===========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING                             43,549              44,357
                                            ===========         ===========






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





                                        4

<PAGE>

                        Interiors, Inc. and Subsidiaries

                      Consolidated Statements of Operations

                  (amounts in thousands except per share data)

                                   (Unaudited)


                                                   Three Months Ended
                                                      December 31,
                                            ----------------------------------
                                                2001               2000
                                            -----------         -----------
Net Sales                                   $    -              $    -

Cost of Sales                                    -                   -
                                            -----------         -----------
Gross Profit                                     -                   -
                                            -----------         -----------

Selling, General and Administrative
 Expenses                                         806               1,326
                                            -----------         -----------
Total Operating Expenses                          806               1,326
                                            -----------         -----------
Loss Before Other Income (Expenses)              (806)             (1,326)

Other Income (Expenses)
 Interest expense                              (7,095)               (782)
                                            -----------         -----------
Other Income (Expenses)                        (7,095)               (782)
                                            -----------         -----------
Loss from continuing operations before
 income tax                                    (7,901)             (2,108)

Provision for income tax                         -                     (7)
                                            -----------         -----------
Loss from continuing operations                (7,901)             (2,115)

Loss from discontinued operations             (15,224)             (2,237)
                                            -----------         -----------
Net Loss                                      (23,125)             (4,352)

Imputed Preferred Stock Dividend                 (109)                (32)
                                            -----------         -----------
Loss available to common shareholders       $ (23,234)           $ (4,384)
                                            ===========         ===========


Basic and diluted loss per share available
 to common shareholders
Continuing                                  $   (0.18)           $  (0.04)
Discontinued                                    (0.35)              (0.05)
                                            -----------         -----------
                                            $   (0.53)           $  (0.09)
                                            ===========         ===========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING                             43,494              44,357
                                            ===========         ===========






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





                                        5
<PAGE>

                        Interiors, Inc. and Subsidiaries

                      Consolidated Statements of Cash Flows

                             (amounts in thousands)


                                   (Unaudited)





                                                     Six Months Ended
                                                        December 31,
                                            ----------------------------------
                                                2001               2000
                                            -----------         -----------

CASH FLOWS FROM OPERATING ACTIVITES
Net loss from continuing operations         $ (9,501)          $    (3,700)
Adjustment to reconcile net loss to net
 cash used by operating activities
 Interest accretion on debt conversion         3,015                  -

 Changes in Assets and Liabilities:
 Decrease (increase) in prepaid expenses
  and other assets                               114                  (458)
(Decrease) increase in accounts payable
  and accrued expenses                          (831)                  634
                                            -----------         -----------
Net cash used in continuing operations        (7,203)               (3,524)
Net cash provided by discontinued
 operations                                    1,491                   303
                                            -----------         -----------
Net Cash Used In Operations                   (5,712)               (3,221)
                                            -----------         -----------
Cash Flows From Financing Activities
(Repayments) borrowings from Foothill
 under revolving loans                        (5,968)                5,958
Borrowings under Martin Road agreement         3,178                  -
Repurchase of Claa A common stock               -                   (2,729)
Receipt from discontinued business units       8,114                  -
                                            -----------         -----------
Net Cash Provided By Financing Activities      5,324                 3,229
                                            -----------         -----------
Net (Decrease) Increase In Cash                 (388)                    8
Cash, beginning of period                        411                  -
                                            -----------         -----------
Cash, end of period                         $     23           $         8
                                            ===========         ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during the period for interest
 and taxes                                  $   -              $      -
                                            ===========         ============






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


                                        6

<PAGE>


                        Interiors, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                                December 31, 2001

1. Basis of Presentation.

Business

      The financial statements included herein are unaudited and have been
prepared by Interiors, Inc., a Delaware corporation ("Interiors"), in accordance
with accounting principles generally accepted in the United States and pursuant
to the rules and regulations of the Securities and Exchange Commission. In the
opinion of management, these statements include all adjustments necessary to
present fairly the financial condition of Interiors and its subsidiaries (the
"Company"), as of December 31, 2001 and the results of operations of the Company
for the three and six-month periods ended December 31, 2001 and 2000.

      The Company's results of operations during the three and six months ended
December 31, 2001 are not necessarily indicative of any future results. The
financial statements included in this report should be read in conjunction with
the financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 2001. In addition, see
Note 2 regarding discontinued operations.

      Throughout 2000 and 2001, the Company had difficulty integrating many of
the businesses it had recently acquired. The Company also defaulted on the high
interest rate debt obligations undertaken to finance its acquisition strategy.
Therefore, in an effort to generate cash needed to reduce the Company's debt and
maximize shareholder value, the Board of Directors adopted a formal plan during
the second half of 2000 to sell substantially all of the recently acquired
businesses. The Company retained DN Partners, an investment-banking firm, to
assist in the sale of the various businesses. The proceeds from the sale of
these businesses were used to repay debt. As of January 23, 2002, the Company
had completed the sales of all of these businesses with the exception of Petals,
which was foreclosed on (See Note 2).

Going Concern Matters

      The accompanying consolidated financial statements have been prepared on a
going concern basis that contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. For the years
ended June 30, 2001 and 2000, the Company had net losses of $39,192,000 and
$18,581,000, respectively. The net loss for the fiscal year 2001 includes
$28,600,000 representing estimated losses on the disposal of businesses. The
loss from continuing operations for the six months ended December 31, 2001 and
2000 was $9,501,000 and $3,700,000, respectively. In addition, as of December 31
and June 30, 2001, the Company classified $4,826,000 and $27,070,000 of its long
term debt as current liabilities, including debt applicable to discontinued
operations, because of its failure to meet certain requirements contained in the
agreements governing these instruments. These factors and the items discussed
below raise substantial doubt about the Company's ability to continue as a going
concern.

Limited Liquidity

      At December 31, 2001, the Company had negative working capital of
approximately $17,396. The Company continues to experience working capital
limitations, which materially impair its ability to generate positive cash flow.
The cash proceeds received from the sales of all the business units were used to
repay debt. The Company's credit facility provides for availability based upon
inventory and account receivable levels and, accordingly, the Company has
experienced limitations on the availability under this facility. The sale of
Concepts during fiscal 2002 was used to repay outstanding debt obligations. If
the Company continues to experience working capital limitations it will
materially impact the Company's financial condition and results of operations.

                                       7

<PAGE>

Loss on Disposal of Businesses; Failure to Satisfy Obligations

      At June 30, 2001, the Company estimated that as a result of the disposal
of all discontinued operations the Company will incur a net loss. In addition,
as of December 31, 2001, the Company's continuing operations had a working
capital deficit of $17,396 and reported a loss of $23,351,000. The Company has
completed its plan to discontinue its operations .

2. Discontinued Operations.

      During the second quarter of fiscal 2001, in an effort to generate cash
needed to reduce the Company's high interest rate debt and maximize shareholder
value, the Company's Board of Directors adopted a formal plan to sell various
businesses including, without limitation, Petals, Inc. ("Petals"), Stylecraft
Lamps, Inc. ("Stylecraft"), Habitat Solutions, Inc. ("Habitat") and the West
Coast operations ("West Coast'). The Company retained DN Partners, an investment
-banking firm, to assist in the sale of the various businesses. The West Coast
is comprised of the operations of Troy and CSL, which were sold in February
2001, Windsor Art, Inc. ("Windsor"), which was sold in June 2001, and Artisan
House, Inc. ("Artisan"), a wholly owned subsidiary of Decor Group, Inc.
("Decor"), which was sold in August 2001. Habitat is comprised of Concepts 4,
Inc. ("Concepts") which was sold in January 2002, and Model Home Interiors, Inc.
("Model"), which was sold in April 2001. The Company sold Stylecraft on October
1, 2001 and Petals was foreclosed on in December 2001. The Company's APF Master
Framemakers ("APF")division was sold in December 2001. During the second quarter
of fiscal 2001, the Company accounted for these business units as discontinued
operations. As of December 31, 2001, the Company's wholly owned subsidiary,
Concepts, which was sold in January 2002, was considered sold. The consolidated
financial statements for the period ended December 31, 2000 have been restated
to reflect the discontinued operations.

      In August 2001, the Company completed the sale of stock of Artisan by
receiving net proceeds of $640,000 comprised of cash of $605,000 and an 8% note
for $35,000. Decor retained $463,000 of Foothill debt, which was repaid with the
proceeds from the sale. The loss on the disposal of this business unit was
approximately $1,100,000.

      Cash received of $2,731,000 from the sales of Windsor and Artisan was used
to repay outstanding borrowings under the Foothill revolving loans. Of this
amount, $2,126,000 from the sale of Windsor became available from escrow in
early July 2001.

      On October 1, 2001, the Company completed the sale of substantially all of
the assets of Stylecraft to Stylecraft Acquisition, Inc. for $24,700,000 in
cash. The cash proceeds were used to repay debt owed to Foothill in the amount
of $9,900,000, the Investors Note (as defined below) in the amount of
$5,200,000, the Limeridge Note and the Endeavour Note (both as defined below) in
the aggregate amount of $2,800,000, a real estate mortgage owed to Bank of
America in the amount of $2,200,000 and the Landis Note (as defined below) in
the amount of $500,000. As part of the transaction, a personal loan of Max Munn,
the Company's Chief Executive Officer, in the amount of $250,000, owed to Jimmy
Webster, the Chief Executive of Stylecraft, was transferred to the Company and
the Company set up a corresponding receivable from Mr. Munn. The Company also
paid an aggregate of approximately $1,200,000 out of $2,400,000 of retention
incentives owed to its executive officers. The Company paid approximately
$600,000 in fees and expenses. The remaining balance of approximately $2,300,000
was used for general working capital purposes of the Company. The gain on the
disposal of this business unit was approximately $16,200,000.

      On December 24, 2001 the Company entered into a Debt Restructuring
Agreement (the "Debt Restructuring Agreement") with Limeridge LLC, The Endeavour
Capital Fund, S.A. and The Endeavour Capital Investment Fund, S.A. (the
Endeavour entities collectively, "Endeavour"). Pursuant to the Debt
Restructuring Agreement, the Company, among other things, agreed to (i) permit
the uncontested foreclosure by Limeridge and Endeavour on the collateral
securing certain indebtedness for borrowed money owed by the Company to
Limeridge and Endeavour (all of the capital stock of Petals) and (ii) cede
control of the Company to Paladin Trading Company Ltd. through the issuance of

                                       8

<PAGE>

the Series F Preferred Stock to Paladin. Paladin was designated by Limeridge
under the Debt Restructuring Agreement to acquire the Series F Preferred Stock
from the Company.

      Under the Debt Restructuring Agreement, the Company restructured and
reduced the Company's obligations for borrowed money to certain of its
creditors, including, without limitation, Limeridge, Endeavour, Landis,
Investors, Berman and Jimmy Webster.

      Pursuant to the Debt Restructuring Agreement, on the Foreclosure Date, the
Company delivered to Limeridge and Endeavour legal and beneficial title to the
shares of capital stock in Petals owned by the Company in satisfaction of
$7,350,000 of the total indebtedness owed by the Company to Limeridge and
Endeavour.

      The Company amended and restated the original Limeridge and Endeavour
Notes by issuing to Limeridge and Endeavour, Amended and Restated Secured
Convertible Notes due December 31, 2008 in the original principal amount of
$15,115,372 and $1,972,417, respectively (the "Amended and Restated Notes"). The
Amended and Restated Notes bear interest at a rate of 6.0% per annum. The
obligations of the Company under these notes are secured by a subordinated
security interest in all of the assets of the Company and each of its
subsidiaries, and in all of the outstanding shares of capital stock of the
Company's subsidiaries owned by the Company and/or each of its subsidiaries.

      Limeridge and Endeavour may convert their respective notes into that
number of shares of common stock of the Company which is determined by dividing
the principal dollar amount of the note being converted by the conversion price,
which shall be equal to 85% of the lesser of (i) the closing bid price of the
common stock of the Company on December 27, 2001, or (ii) the average closing
bid prices of the common stock of the Company for the five consecutive trading
days immediately preceding a conversion date, subject to adjustment. In regards
to this conversion privilege the Company has recognized a beneficial conversion
of $3,015,000. However, if the Company merges with or acquires an entity with
a pre-acquisition valuation of $15 million or more, then the conversion price
will be fixed based upon a discount mutually agreed upon by the Company and
Limeridge or Endeavour, as the case may be, from the closing price of the common
stock of the Company prior to the date of consummation of such transaction.

      The remaining $1 million of the total indebtedness owed by the Company to
Limeridge and Endeavour was satisfied by the issuance by the Company to Paladin
of the Series F Preferred Stock.

       Pursuant to the Debt Restructuring Agreement and an Assignment and
Assumption Agreement dated as of December 27, 2001 (the "Assignment and
Assumption Agreement") by and between Foothill and Martin Road, Ltd. ("Martin
Road"), on the Foreclosure Date, Martin Road acquired all of the outstanding
indebtedness for borrowed money, plus all accrued interest thereon and costs
associated therewith, owed by the Company to Foothill. In exchange therefor
Martin Road paid to Foothill approximately $2 million, the full amount owed by
the Company to Foothill on the Foreclosure Date. In connection therewith, Martin
Road acquired by assignment all of Foothill's first priority liens and other
rights in and to the assets and properties of the Company and its subsidiaries,
including, without limitation, Petals, but excluding the assets and properties
of the Company's APF Master Framemakers Division.

       In addition, on the Foreclosure Date, Martin Road made available to the
Company $1.1 million under the assigned credit facility from Foothill, as a
senior secured line of credit. On the Foreclosure Date, the Company borrowed the
full amount to pay $1.1 million to Landis in exchange for which Landis released
certain claims against Max Munn and agreed to permit the Company to assign the
remaining $1 million obligation to APF Acquisition Corp., ("APF"), the purchaser
of the APF Master Framemakers division.

       In connection with the Debt Restructuring Agreement, Petals issued to
Investors, Berman and Webster individual Second Amended and Restated Promissory
Notes dated December 27, 2001 in the aggregate principal amounts of $2,386,761,
$239,805 and $692,062 respectively, thus relieving the Company of such
obligations and Max Munn of his personal obligations.

                                       9
<PAGE>

       On December 27, 2001, pursuant to the terms of an Asset Purchase
Agreement dated as of December 24, 2001 by and among APF, Max Munn, Laurie Munn
and the Company, the Company sold all of the assets and certain liabilities
relating to its APF Master Framemakers Division ("APF Master"), to APF. APF is
wholly-owned by Laurie Munn, the spouse of Max Munn, the former Chairman, Chief
Executive Officer and President of the Company.

       The purchase price was $1,750,000, consisting of: (i) the assumption by
APF of $1 million owed by the Company to Landis, as evidenced by a secured
promissory note of APF in favor of Landis and (ii) a secured promissory note of
APF in favor of the Company in the principal amount of $750,000 (the "APF
Note"), subject to reduction.

       The APF Note matures on December 27, 2005 (the "Maturity Date"), and
bears interest at the rate of 10.0% per annum until June 30, 2002, and 7.0% per
annum from June 30, 2002 until the Maturity Date. The principal amount of the
APF Note is payable in two installments. The first installment of $500,000 is
due and payable on December 27, 2003. The second installment of $250,000,
together with all interest accrued, is due and payable on the Maturity Date. The
second installment of the APF Note will be automatically cancelled if (i) by
March 31, 2002, APF is able to obtain for the Company a full and complete
release of the Company's obligations under its lease for its offices at 320
Washington Street, Mount Vernon, New York from the owner of such property, and
(ii) APF prepays the first installment of the APF Note by December 27, 2002.

       The obligations of APF under the APF Note are secured by a security
interest in all of the assets of APF and by a pledge by Max Munn and Laurie Munn
of all of the capital stock they own in APF. In addition, the obligations of the
APF agreement and the APF Note are personally guaranteed by Max Munn and Laurie
Munn.

       In addition, the Company retained Max Munn as a consultant until June 30,
2002. The Company shall pay Mr. Munn a fee of $10,000 per month for his
services. Under the consulting agreement Mr. Munn will receive a bonus of
$150,000 from the Company if APF repays the full amount outstanding under the
APF Note by December 31, 2002.

       Upon the consummation of the APF acquisition, Mr. and Mrs. Munn
transferred back to the Company for cancellation all of the shares of Class B
Common Stock and Series E Preferred Stock of the Company they owned. In
connection with the redemption and cancellation of such shares, the Company
released Mr. and Mrs. Munn from all indebtedness and other liabilities owed by
them to the Company in connection with their original purchase of shares
(aggregating approximately $3.5 million).

       On January 23, 2002, the Company completed the sale of all of the
outstanding capital stock of Concepts 4 to Homada LLC ("Homada"), pursuant to
the terms and conditions of that certain Stock Purchase Agreement, dated as of
January 16, 2002, by and among the Company, Habitat Solutions, Inc. and Homada.
Homada is owned by the management and former shareholders of Concepts 4.

        At the time of sale, the Company owed over $5 million to former
shareholders of Concepts 4 in purchase price installments and promissory notes
relating to the Company's original acquisition of Concepts 4. Approximately $1.9
million was currently due and payable and was secured by a pledge of 10 million
shares of the Company's common stock. Homada assumed the indebtedness of the
Company to the former shareholders of Concepts 4 plus payment of an additional
$1.5 million. $750,000 was paid in cash at closing, $125,000 was paid by
execution and delivery of an unsecured promissory note of Homada, which was paid
on January 30, 2002, and $625,000 was paid by execution and delivery of an
unsecured promissory note of Homada which is payable over five years. As a
result of the sale, the 10 million shares of Company stock held as collateral
for the indebtedness was returned to the Company and retired. All cash proceeds
from the sale of Concepts 4 were paid directly to the Company's first priority
senior secured lender. Additional contingent purchase consideration may be
payable based upon the achievement of certain operating results of Concepts 4
over the next three years.

                                       10
<PAGE>

      As of June 30, 2001, the losses incurred on the sales of businesses which
occurred as of such date and the anticipated sales of the other businesses were
estimated to result in a net loss. During the first quarter of fiscal 2002, the
Company sold the stock of Artisan and, on October 1, 2001, it sold the assets of
Stylecraft.

      During the second quarter of fiscal 2002, Petals was foreclosed upon.
During the third quarter of fiscal 2002 the Company sold the stock of Concepts
4.

      Depreciation expense on a computer system that is no longer being
implemented by the discontinued operations are reported in discontinued
operations.

      Depreciation and amortization assigned to the businesses reported as
discontinued operations represents the amounts applicable to fixed assets and
other intangible assets, excluding goodwill, which is presented separately.


                                       11
<PAGE>


3. Debt.

Debt outstanding as of December 31 and June 30, 2001 is as follows:

                                            (amounts in thousands)
                                         --------------------------
                                                  December 31,
                                                     2001
                                                  -----------
Revolving Loan (a)                                $   3,178
15% Convertible Demand Notes (b)                        140
12% Convertible Demand Notes (c)                        686
Promissory Note - Landis (d)                           -
10% Convertible Debenture - Petals (e)                2,000
Capital lease obligations (f)                         2,000
Limeridge and Endeavour (g)                          17,088
                                                  ----------
Total                                                25,092
Less current portion                                 (8,004)
                                                  ----------
Long term portion                                 $  17,088
                                                  ==========


(a) In June 2000, the Company and Foothill entered into the Foothill Agreement
as more fully discussed in Note 2 - Discontinued Operations. The interest rates
on the revolving loan is prime plus 1.25% and on the term loans is prime plus
1.50%. As of March 1, 2001, the interest rates were increased to prime plus 2.5%
on the revolving loan. The credit facility contains financial and other
covenants, including minimum net worth, and earnings before interest, income
taxes and depreciation and amortization. Borrowings under the credit facility
are secured by substantially all the assets of the Company, including accounts
receivable and inventory. This debt is classified as current liabilities at June
30, 2000 because Foothill had the right to accelerate this obligation in the
event other debt obligations which were currently in default were accelerated by
other lenders.

       Pursuant to the Debt Restructuring Agreement and the Assignment and
Assumption Agreement dated as of December 27, 2001 by and between Foothill and
Martin Road, on the Foreclosure Date Martin Road acquired all of the outstanding
indebtedness for borrowed money, plus all accrued interest thereon and costs
associated therewith, owed by the Company to Foothill. In exchange therefor
Martin Road paid to Foothill approximately $2 million, the full amount owed by
the Company to Foothill on the Foreclosure Date. In connection therewith, Martin
Road acquired by assignment all of Foothill's first priority liens and other
rights in and to the assets and properties of the Company and its subsidiaries,
including, without limitation, Petals, but excluding the assets and properties
of the Company's APF Master Framemakers Division.

       In addition, on the Foreclosure Date, Martin Road made available to the
Company $1.1 million under the assigned credit facility from Foothill, as a
senior secured line of credit. On the Foreclosure Date, the Company borrowed the
full amount to pay $1.1 million to Landis in exchange for which Landis released
certain claims against Max Munn and agreed to permit the Company to assign the
remaining $1 million obligation to APF Acquisition Corp., ("APF"), the purchaser
of the APF Master Framemakers division.

(b) Issued to four accredited investors and convertible into Class A Shares at
$1.50 per share.

(c) Issued to five accredited investors and convertible into Class A Shares at
$1.125 per share and accrued interest.

(d) In July 2000, the Company issued to Donald M. Landis a $2,000,000 promissory
note due July 27, 2001 (the "Landis Note"). The note requires the payment of
monthly interest at an annual rate of 14%, accrues interest at 4%, which is
payable at maturity, and is secured by the assets of the Company. The note
replaces two separate $1,000,000 promissory notes with 24% and 16% interest
rates previously issued to Mr. Landis and the Landis Brothers Corporation,
respectively. The note is personally guaranteed by Mr. Munn, Chairman, President
and Chief Executive Officer of the Company, and his spouse.

                                       12

<PAGE>

        Pursuant to the Debt Restructuring Agreement dated as of December 27,
2001 Martin Road made available to the Company $1.1 million under the assigned
credit facility from Foothill, as a senior secured line of credit. On the
Foreclosure Date, the Company borrowed the full amount to pay $1.1 million to
Landis in exchange for which Landis released certain claims against Max Munn and
agreed to permit the Company to assign the remaining $1 million obligation to
APF Acquisition Corp., ("APF"), the purchaser of the APF Master Framemakers
division.

(e) Issued to DMB Property Ventures LP in connection with the acquisition of
Petals, Inc. The note was originally due March 23, 2001 and convertible into
Class A Shares at $2.00 per share.

(f) On December 24, 2001 the Company entered into a Debt Restructuring Agreement
with Limeridge and endeavour. Of the total balance of the indebtedness owed to
Limeridge and Endeavour, the Company amended and restated the original Limeridge
and Notes by issuing: (i) to Limeridge and Endeavor Amended and Restated Secured
Convertible Notes due December 31, 2008 in the original principal amount of
$15,115,372 and $1,972,417, respectively. The Notes bear interest at a rate of
6.0% per annum. The obligations of the Company under these notes are secured by
a subordinated security interest in all of the assets of the Company and each of
its subsidiaries, and in all of the outstanding shares of capital stock of the
Company's subsidiaries owned by the Company and/or each of its subsidiaries.

      Limeridge and Endeavour may convert their respective notes into that
number of shares of common stock of the Company which is determined by dividing
the principal dollar amount of the note being converted by the conversion price,
which shall be equal to 85% of the lesser of (i) the closing bid price of the
common stock of the Company on December 27, 2001, or (ii) the average closing
bid prices of the common stock of the Company for the five consecutive trading
days immediately preceding a conversion date, subject to adjustment. In regards
to this conversion privilege the Company has recognized a beneficial conversion
of $3,015,000. However, if the Company merges with or acquires an entity with
a pre-acquisition valuation of $15 million or more, then the conversion price
will be fixed based upon a discount mutually agreed upon by the Company and
Limeridge or Endeavour, as the case may be, from the closing price of the common
stock of the Company prior to the date of consummation of such transaction.

4. Earnings (Loss) Per Share.

      Basic earnings per share is computed by dividing net loss by weighted
average number of shares of common stock outstanding during each period. Diluted
loss per share is computed by dividing net loss by the weighted average number
of shares of common stock, common stock equivalents and potentially dilutive
securities outstanding during each period. Diluted loss per common share is not
presented because it is anti-dilutive.

      For purposes of this calculation, common shares include both Class A
Common Stock, par value $.001 per share ("Class A Shares"), and Class B Common
Stock, par value $.001 per share, of the Company. Net earnings per diluted share
amounts ("diluted EPS") were computed assuming there was no potential dilution
from the exercise of outstanding stock options, warrants and other securities
since the exercise price was higher than the market price. All periods presented
include a deduction for the dividend requirement of the Company's 10% Series A
Cumulative Convertible Preferred Stock, par value $.01 per share ("Series A
Preferred Shares"), Series B Preferred Stock, par value $.01 per share ("Series
B Preferred Shares"), and Series E Preferred Stock, $1,000 per share liquidation
value ("Series E Preferred Shares").

                                       13

<PAGE>

5. Related Party.

      In connection with the sale of Stylecraft, the personal loan for $250,000
of Mr. Munn, owed to Mr. Webster, the Chief Executive Officer of Stylecraft, was
transferred to the Company and the Company set up a corresponding receivable
from Mr. Munn.

     In connection with the Debt Restructuring Agreement, Petals issued to
Webster an individual Second Amended and Restated Promissory Notes dated
December 27, 2001 in the aggregate principal amounts of $692,062 respectively,
thus relieving Max Munn of his personal obligations.

6. Subsequent Events.

     On January 23, 2002, the Company completed the sale of all of the
outstanding capital stock of Concepts 4 to Homada LLC ("Homada"), pursuant to
the terms and conditions of the Stock Purchase Agreement, dated as of January
16, 2002, by and among the Company, Habitat Solutions, Inc. and Homada. Homada
is owned by the management and former shareholders of Concepts 4.

        At the time of sale, the Company owed over $5 million to former
shareholders of Concepts 4 in purchase price installments and promissory notes
relating to the Company's original acquisition of Concepts 4. Approximately $1.9
million was currently due and payable and was secured by a pledge of 10 million
shares of the Company's common stock. Homada assumed the indebtedness of the
Company to the former shareholders of Concepts 4 plus payment of an additional
$1.5 million. $750,000 was paid in cash at closing, $125,000 was paid by
execution and delivery of an unsecured promissory note of Homada, which was paid
on January 30, 2002, and $625,000 was paid by execution and delivery of an
unsecured promissory note of Homada which is payable over five years. As a
result of the sale, the 10 million shares of Company stock held as collateral
for the indebtedness was returned to the Company and retired. All cash proceeds
from the sale of Concepts 4 were paid directly to the Company's first priority
senior secured lender. Additional contingent purchase consideration may be
payable based upon the achievement of certain operating results of Concepts 4
over the next three years.

        The sale has been reflected as if it had occurred as of December 31,
2001.

                                       14
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation.

Overview

      Interiors, Inc., a Delaware corporation ("Interiors" or the "Company"),
has sold all of its operations. The Company's principal office is located in
Braintree, Masachusetts.

Ability to Continue as a Going Concern

      The report of the Company's independent public accountants in connection
with the Company's financial statements as of and for the years ended June 30,
2001 and 2000 contain an explanatory paragraph as to the Company's ability to
continue as a going concern.

Liquidity and Capital Resources

      The consolidated financial statements that accompany this Form 10-Q have
been prepared on a going concern basis that contemplates the realization of
assets and the satisfaction of liabilities as discussed below and in Note 2 -
"Discontinued Operations."

      Since the beginning of the fiscal year, the Company has primarily used its
cash to support operating activities. The Company's primary sources of cash
during this period have been borrowings under the Foothill revolving loan
agreement. At December 31, 2001, the Company had a working capital deficit of
$17,396,000.

      Net cash used in continuing operating activities during the six months
ended December 31, 2001 and 2000 was $7,203,000 and $3,524,000 respectively. The
greater net cash usage during the six months ended December 31, 2001 compared to
the six months ended December 31, 2000, is principally due to increased net loss
from continuing operations.

      Net cash provided by financing activities during the six-month period
ended December 31, 2001 and 2000 was $5,324,000 and $3,229,000 respectively,
representing the net borrowing during the respective periods and cash received
from discontinued business units.

      On March 19, 2001, Petals and Stylecraft, wholly owned subsidiaries of the
Company, executed a Senior Subordinated Secured Note due March 14, 2002 (the
"Investors Note") in favor of Interiors Investors, LLC, a Delaware limited
liability company ("Interiors Investors") in the original principal amount of
$5,000,000. The Investors Note is subordinated to the Company's obligations owed
to Foothill, secured by substantially all of the Company's assets and guaranteed
by Interiors and the Company's Chairman, President and Chief Executive Officer
and his spouse. The Investors Note accrues interest at 16% per annum until
September 30, 2001 and 18% thereafter and is payable monthly commencing May 31,
2001. From time to time, the Company is required to prepay the Investors Note
out of the proceeds of the sale of the assets or capital stock of the Company's
subsidiaries. Interiors Investors is owned by Robert Berman, who controls Berman
Industries, Inc., Stylecraft's largest vendor ("Berman Industries"), and Jimmy

                                       15

<PAGE>

Webster, Stylecraft's Chief Executive Officer. The Company received net proceeds
of $4,941,000, of which $2,000,000 was loaned to Stylecraft to pay accounts
payable owed to Berman Industries, $2,941,000 was loaned to Petals for working
capital requirements, of which $450,000 was paid to Foothill on behalf of
Interiors to pay down the revolving loan. In connection with the sale of
Stylecraft, the Company repaid $3.0 million principal amount of the Investors
Note and the interest rate was increased to 20.0%

      On March 19, 2001, Petals, Stylecraft and Interiors Investors entered into
a letter agreement (the "Investors Letter Agreement") pursuant to which upon the
sale of the assets or capital stock of Petals and/or Stylecraft, the Company is
obligated to pay Interiors Investors $2,200,000 plus $125,000 for each calendar
month after October 1, 2001 until such event occurs. The Investors Letter
Agreement expires on March 19, 2004. The amount is included as part of the
calculation of a gain or loss on discontinued operations. In connection with the
Stylecraft transaction, the Company paid Interiors Investors $2,200,000 to
satisfy its obligations under the Investors Letter Agreement. .

      As of October 1, 2001, the Company entered into Amendment No. 6 to Loan
Documents and Third Extended Forbearance Agreement with Foothill (the "Foothill
Amendment No. 6") pursuant to which Foothill agreed to forbear from taking any
action to collect the amounts owed to them until December 14, 2001 or (ii) a
default under the Foothill Amendment No. 6. The fee charged by Foothill for such
forbearance was $300,000. The Company's maximum borrowing under its credit
facility was reduced from $13,500,000 to $2,335,000.

       As part of the sale of Stylecraft, on September 28, 2001, Petals,
Stylecraft and Interiors Investors entered into a letter agreement (the "Second
Investors Letter Agreement") pursuant to which upon the sale of the assets or
capital stock of Petals, the Company is obligated to pay Interiors Investors
$200,000 plus $30,000 for each calendar month after April 1, 2002 until such
event occurs. The Second Investors Letter Agreement expires on September 28,
2004. The amount will be included as part of the calculation of a gain or loss
on discontinued operations. In addition, Petals issued a promissory note due
March 31, 2002 in the amount of $224,894 in favor of Berman Industries, Inc.,
Stylecraft's largest vendor. The Company also issued a note in the amount of
$665,000 (the "Webster Note") to Jimmy Webster as compensation triggered by the
sale of Stylecraft. The Webster Note is personally guaranteed by Max Munn and
his spouse and secured by all capital stock in the Company owned by Mr. Munn and
his wife.

      As part of the Stylecraft transaction, the Company entered into the
Comprehensive Amendment, Guaranty and Security Agreement dated as of September
28, 2001, pursuant to which the Company granted Limeridge and Endeavour a
security interest in substantially all of the Company's assets in exchange for
such parties' forbearance from foreclosing on the Limeridge Note and the
Endeavour Note until December 31, 2001 notwithstanding that the Company remains
in default with respect to the Limeridge Note and the Endeavour Note. The
security interest is subordinated to the security interests securing the
Foothill debt, the Investors Note and the Landis Note.

      On December 24, 2001 the Company entered into a Debt Restructuring
Agreement (the "Debt Restructuring Agreement") with Limeridge LLC, The Endeavour
Capital Fund, S.A. and The Endeavour Capital Investment Fund, S.A. (the
Endeavour entities collectively, "Endeavour"). Pursuant to the Debt
Restructuring Agreement, the Company, among other things, agreed to (i) permit
the uncontested foreclosure by Limeridge and Endeavour on the collateral
securing certain indebtedness for borrowed money owed by the Company to
Limeridge and Endeavour (all of the capital stock of Petals) and (ii) cede
control of the Company to Paladin Trading Company Ltd. through the issuance of
the Series F Preferred Stock to Paladin. Paladin was designated by Limeridge
under the Debt Restructuring Agreement to acquire the Series F Preferred Stock
from the Company.

      Under the Debt Restructuring Agreement, the Company restructured and
reduced the Company's obligations for borrowed money to certain of its
creditors, including, without limitation, Limeridge, Endeavour, Landis,
Investors, Berman and Jimmy Webster.

                                       16
<PAGE>

      Pursuant to the Debt Restructuring Agreement, on the Foreclosure Date, the
Company delivered to Limeridge and Endeavour legal and beneficial title to the
shares of capital stock in Petals owned by the Company in satisfaction of
$7,350,000 of the total indebtedness owed by the Company to Limeridge and
Endeavour.

      The Company amended and restated the original Limeridge and Endeavour
Notes by issuing to Limeridge and Endeavour, Amended and Restated Secured
Convertible Notes due December 31, 2008 in the original principal amount of
$15,115,372 and $1,972,417, respectively (the "Amended and Restated Notes"). The
Amended and Restated Notes bear interest at a rate of 6.0% per annum. The
obligations of the Company under these notes are secured by a subordinated
security interest in all of the assets of the Company and each of its
subsidiaries, and in all of the outstanding shares of capital stock of the
Company's subsidiaries owned by the Company and/or each of its subsidiaries.

      Limeridge and Endeavour may convert their respective notes into that
number of shares of common stock of the Company which is determined by dividing
the principal dollar amount of the note being converted by the conversion price,
which shall be equal to 85% of the lesser of (i) the closing bid price of the
common stock of the Company on December 27, 2001, or (ii) the average closing
bid prices of the common stock of the Company for the five consecutive trading
days immediately preceding a conversion date, subject to adjustment. In regards
to this conversion privilege the Company has recognized a beneficial conversion
of $3,015,000. However, if the Company merges with or acquires an entity with
a pre-acquisition valuation of $15 million or more, then the conversion price
will be fixed based upon a discount mutually agreed upon by the Company and
Limeridge or Endeavour, as the case may be, from the closing price of the common
stock of the Company prior to the date of consummation of such transaction.

      The remaining $1 million of the total indebtedness owed by the Company to
Limeridge and Endeavour was satisfied by the issuance by the Company to Paladin
of the Series F Preferred Stock.

       Pursuant to the Debt Restructuring Agreement and an Assignment and
Assumption Agreement dated as of December 27, 2001 (the "Assignment and
Assumption Agreement") by and between Foothill and Martin Road, Ltd. ("Martin
Road"), on the Foreclosure Date Martin Road acquired all of the outstanding
indebtedness for borrowed money, plus all accrued interest thereon and costs
associated therewith, owed by the Company to Foothill. In exchange therefor
Martin Road paid to Foothill approximately $2 million, the full amount owed by
the Company to Foothill on the Foreclosure Date. In connection therewith, Martin
Road acquired by assignment all of Foothill's first priority liens and other
rights in and to the assets and properties of the Company and its subsidiaries,
including, without limitation, Petals, but excluding the assets and properties
of the Company's APF Master Framemakers Division.

       In addition, on the Foreclosure Date, Martin Road made available to the
Company $1.1 million under the assigned credit facility from Foothill, as a
senior secured line of credit. On the Foreclosure Date, the Company borrowed the
full amount to pay $1.1 million to Landis in exchange for which Landis released
certain claims against Max Munn and agreed to permit the Company to assign the
remaining $1 million obligation to APF Acquisition Corp., ("APF"), the purchaser
of the APF Master Framemakers division.

       In connection with the Debt Restructuring Agreement, Petals issued to
Investors, Berman and Webster individual Second Amended and Restated Promissory
Notes dated December 27, 2001 in the aggregate principal amounts of $2,386,761,
$239,805 and $692,062 respectively, thus relieving the Company of such
obligations and Max Munn of his personal obligations.

       On December 27, 2001, pursuant to the terms of an Asset Purchase
Agreement dated as of December 24, 2001 by and among APF, Max Munn, Laurie Munn
and the Company, the Company sold all of the assets and certain liabilities
relating to its APF Master Framemakers Division ("APF Master"), to APF. APF is
wholly-owned by Laurie Munn, the spouse of Max Munn, the former Chairman, Chief
Executive Officer and President of the Company.

       The purchase price was $1,750,000, consisting of: (i) the assumption by
APF of $1 million owed by the Company to Landis, as evidenced by a secured
promissory note of APF in favor of Landis and (ii) a secured promissory note of

                                       17

<PAGE>

APF in favor of the Company in the principal amount of $750,000 (the "APF
Note"), subject to reduction.

       The APF Note matures on December 27, 2005 (the "Maturity Date"), and
bears interest at the rate of 10.0% per annum until June 30, 2002, and 7.0% per
annum from June 30, 2002 until the Maturity Date. The principal amount of the
APF Note is payable in two installments. The first installment of $500,000 is
due and payable on December 27, 2003. The second installment of $250,000,
together with all interest accrued, is due and payable on the Maturity Date. The
second installment of the APF Note will be automatically cancelled if (i) by
March 31, 2002, APF is able to obtain for the Company a full and complete
release of the Company's obligations under its lease for its offices at 320
Washington Street, Mount Vernon, New York from the owner of such property, and
(ii) APF prepays the first installment of the APF Note by December 27, 2002.

       The obligations of APF under the APF Note are secured by a security
interest in all of the assets of APF and by a pledge by Max Munn and Laurie Munn
of all of the capital stock they own in APF. In addition, the obligations of the
APF agreement and the APF Note are personally guaranteed by Max Munn and Laurie
Munn.

       In addition, the Company retained Max Munn as a consultant until June 30,
2002. The Company shall pay Mr. Munn a fee of $10,000 per month for his
services. Under the consulting agreement Mr. Munn will receive a bonus of
$150,000 from the Company if APF repays the full amount outstanding under the
APF Note by December 31, 2002.

       Upon the consummation of the APF acquisition, Mr. and Mrs. Munn
transferred back to the Company for cancellation all of the shares of Class B
Common Stock and Series E Preferred Stock of the Company they owned. In
connection with the redemption and cancellation of such shares, the Company
released Mr. and Mrs. Munn from all indebtedness and other liabilities owed by
them to the Company in connection with their original purchase of shares
(aggregating approximately $3.5 million).

       On January 23, 2002, the Company completed the sale of all of the
outstanding capital stock of Concepts 4 to Homada LLC ("Homada"), pursuant to
the terms and conditions of that certain Stock Purchase Agreement, dated as of
January 16, 2002, by and among the Company, Habitat Solutions, Inc. and Homada.
Homada is owned by the management and former shareholders of Concepts 4.

        At the time of sale, the Company owed over $5 million to former
shareholders of Concepts 4 in purchase price installments and promissory notes
relating to the Company's original acquisition of Concepts 4. Approximately $1.9
million was currently due and payable and was secured by a pledge of 10 million
shares of the Company's common stock. Homada assumed the indebtedness of the
Company to the former shareholders of Concepts 4 plus payment of an additional
$1.5 million. $750,000 was paid in cash at closing, $125,000 was paid by
execution and delivery of an unsecured promissory note of Homada, which was paid
on January 30, 2002, and $625,000 was paid by execution and delivery of an
unsecured promissory note of Homada which is payable over five years. As a
result of the sale, the 10 million shares of Company stock held as collateral
for the indebtedness was returned to the Company and retired. All cash proceeds
from the sale of Concepts 4 were paid directly to the Company's first priority
senior secured lender. Additional contingent purchase consideration may be
payable based upon the achievement of certain operating results of Concepts 4
over the next three years.

Impact of Inflation

      The Company does not believe that inflation has had a material adverse
effect on sales or income during the past several years. Increases in supplied
and other operating costs could adversely effect the Company's operations,
however, the Company believes that it should be able to increase prices to
offset increases in cost of goods sold or other operating costs.

                                       18
<PAGE>

Item 3. Quantitative and Qualitative Disclosures About Market Risk

      The Company is exposed to market risk related to changes in interest rates
based primarily on its financing activities. As of December 31, 2001,
approximately $ of the Company's total liabilities was subject to floating rates
of which $ is applicable to discontinued operations and $ is applicable to
continuing operations. The Company does not enter into financial instruments for
hedging, speculation or for trading purposes.

Forward Looking Statements

      When used in this Quarterly Report on Form 10-Q, the words "may," "will,"
"should," "expect," "believe," "anticipate," "continue," "estimate," "project,"
"intend" and similar expressions are intended to identify forward-looking
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act regarding events, conditions and financial trends that
may affect the Company's future plans of operations, business strategy, results
of operations and financial condition. The Company wishes to ensure that such
statements are accompanied by meaningful cautionary statements pursuant to the
safe harbor established in the Private Securities Litigation Reform Act of 1995.
Prospective investors are cautioned that any forward-looking statements are not
guarantees of future performance and are subject to risks and uncertainties and
that actual results may differ materially from those included within the
forward-looking statements as a result of various factors. Such forward-looking
statements should, therefore, be considered in light of various important
factors, including those set forth herein and others set forth from time to time
in the Company's reports and registration statements filed with the Securities
and Exchange Commission. The Company disclaims any intent or obligation to
update such forward-looking statements.


                        INTERIORS, INC. AND SUBSIDIARIES
                                     PART II
                                OTHER INFORMATION

Item 1. Legal Proceedings.

      Matrix Funding Corporation v. Stylecraft Lamps, Interiors, Inc and Petals,
Inc. This matter was brought by the plaintiff in the Third Judicial District
Court of Salt Lake County, Salt Lake Department, State of Utah and relates to
the non-payment of a computer equipment lease. The equipment covered by the
lease is not integral to the Company's business. The plaintiff obtained a
default judgment in the amount of approximately $1,900,000 in damages. The
plaintiff has offered to settle the matter for significantly less than the
amount of the judgment. The Company is currently considering this offer. The
Company has accrued such judgment amount in its financials.

Item 2. Changes in Securities and Use of Proceeds.

      In November 2001, the Company retired 7,261,103 Class A Shares that were
returned to the Company in connection with the sale of Model Home Interiors,
Inc.

      Upon the consummation of the APF acquisition, in December 2001, Mr. and
Mrs. Munn transferred back to the Company for cancellation all of the shares of
Class B Common Stock and Series E Preferred Stock of the Company they owned. In
connection with the redemption and cancellation of such shares, the Company
released Mr. and Mrs. Munn from all indebtedness and other liabilities owed by
them to the Company in connection with their original purchase of shares
(aggregating approximately $3.5 million).

Item 3. Defaults Upon Senior Securities.

      As of December 31, 2001, the Company had $940,000 of accrued and unpaid
dividends on its Series A Preferred Shares for $805,000 and $26,000 on its
Series E Preferred shares.

                                       19

<PAGE>

Item 5. Other Information.

None


Item 6. Exhibits and Reports on Form 8-K.

(a)  Exhibits

None

(b) Reports on Form 8-K

None

                                       20

<PAGE>

                                   SIGNATURES

      Pursuant to the requirements 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.

                                                          INTERIORS, INC.


 Dated: February 19, 2002                            By: /s/ Mark Allen
                                                         --------------
                                                             Mark Allen
                                                             President