UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                              Washington D.C. 20549
                                    ---------

                                   FORM 10-QSB

                  Annual Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

For the three months ended     June 30, 1997    Commission File Number   0-28960

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

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

            320 Washington Street
                 Mt. Vernon, New York                          10553
            (Address of principal executive offices)        (Zip code)

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


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the  Securities  and  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 the number of shares  outstanding  of each of the  issuer's  classes of
common stock. As of August 14, 1997 there were 5,122,500  shares of common stock
outstanding.


<PAGE>



DECOR GROUP, INC. AND SUBSIDIARY
------------------------------------------------------------------------------


INDEX
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                                                                    Page to Page


Part I: Financial Information

Item 1. Consolidated Financial Statements:

   Consolidated Balance Sheet as of June 30, 1997 [Unaudited]........ 1....... 2

   Consolidated Statements of Operations for the three months ended
   June 30, 1997 and 1996 [Unaudited].................................. 3.......

   Consolidated Statements of Stockholders' Equity for the three months
   ended June 30, 1997 [Unaudited].................................... 4.......

   Consolidated Statements of Cash Flows for the three months ended
   June 30, 1997 and 1996 [Unaudited]................................ 5....... 6

   Notes to Consolidated Financial Statements [Unaudited]............ 7.......12

Item 2: Management's Discussion and Analysis of Financial
        Condition and Results of Operations..........................13.......16

Signature..............................................................17.......




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



<PAGE>

<TABLE>


Item 1:

DECOR GROUP, INC. AND SUBSIDIARY
------------------------------------------------------------------------------


CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1997.
[UNAUDITED]
------------------------------------------------------------------------------


<S>                                                                    <C>  

Assets:
Current Assets:
  Cash                                                                  $    48,805
  Accounts Receivable [Net of Allowance of $206,417]                        961,195
  Inventories                                                               945,017
  Prepaid Expenses and Other Current Assets                                 152,519
                                                                        -----------

  Total Current Assets                                                    2,107,536

Property and Equipment [Net of Accumulated Depreciation of $411,801]        104,390
                                                                        -----------

Other Assets:
  Investment - Related Party                                                993,800
  Goodwill [Net of Accumulated Amortization of $87,288]                   1,431,611
  Other Intangible Assets [Net of Accumulated Amortization of $35,639]      564,361
  Other Assets                                                               22,488
                                                                        -----------

  Total Other Assets                                                      3,012,260

  Total Assets                                                          $ 5,224,186
                                                                        ===========

</TABLE>


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

                                         1

<PAGE>

<TABLE>


DECOR GROUP, INC. AND SUBSIDIARY
------------------------------------------------------------------------------


CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1997.
[UNAUDITED]
------------------------------------------------------------------------------




<S>                                                                     <C> 

Liabilities and Stockholders' Equity:
Current Liabilities:
  Accounts Payable and Accrued Expenses                                 $   413,689
  Accrued Costs of Acquisition                                               25,263
  Accrued Interest - Related Party                                           12,609
  Due to Stockholders                                                       251,285
  Current Portion of Long-Term Debt                                          87,211
                                                                        -----------

  Total Current Liabilities                                                 790,057

Long-Term Debt                                                              666,724

  Total Liabilities                                                       1,456,781

Commitments and Contingencies [7]                                                --

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

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

  Common Stock - $.0001 Par Value, Authorized 20,000,000 Shares,
   5,122,500 Issued and Outstanding                                             512

  Additional Paid-in Capital - Common Stock                               4,034,911

  Accumulated Deficit                                                    (1,225,401)

  Deferred Compensation                                                    (862,417)

  Unrealized Holding Loss on Investment                                    (606,200)

  Total Stockholders' Equity                                              3,767,405

  Total Liabilities and Stockholders' Equity                            $ 5,224,186
                                                                        ===========
</TABLE>


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

                                         2

<PAGE>


<TABLE>

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


CONSOLIDATED STATEMENTS OF OPERATIONS
[UNAUDITED]
------------------------------------------------------------------------------





                                                              Three months ended
                                                                    June 30,
                                                             1 9 9 7       1 9 9 6
                                                             -------       -------
<S>                                                        <C>         <C>  

Revenues                                                   $1,448,694   $        --

Cost of Revenues                                              750,279            --
                                                           ----------   -----------

  Gross Profit                                                698,415            --
                                                           ----------   -----------

Selling, General and Administrative Expenses:
  Acquisition Fees and Expenses                                    --        52,829
  Administrative Expenses                                     644,324        86,022
  Selling Expense                                             231,575            --
                                                           ----------   -----------

  Total Selling, General and Administrative Expenses          875,899       138,851
                                                           ----------   -----------

  [Loss] from Operations                                     (177,484)     (138,851)
                                                           ----------   -----------

Other Income [Expense]:
  Net Miscellaneous Expense                                   (71,709)           --
  Interest Expense - Related Party                             (5,162)           --
  Interest Expense                                            (15,500)     (107,150)
                                                           ----------   -----------

  Other [Expense] - Net                                       (92,371)     (107,150)
                                                           ----------   -----------

  [Loss] Before Provision for Income Taxes                   (269,855)     (246,001)

Provision for Income Taxes                                         --            --
                                                           ----------   -----------

  Net [Loss]                                               $ (269,855)  $  (246,001)
                                                           ==========   ===========

  [Loss] Per Share                                         $     (.05)  $      (.06)
                                                           ==========   ===========

  Number of Common Shares                                   5,122,500     3,937,500
                                                           ==========   ===========




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

</TABLE>
                                         3

<PAGE>


<TABLE>

DECOR GROUP, INC. AND SUBSIDIARY
------------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
[UNAUDITED]
------------------------------------------------------------------------------


                                       Preferred Stock            Common Stock                            Unrealized
                                                   Additional               Additional                      Holding    Total
                                                     Paid-in                  Paid-inAccumulated Deferred   Loss onStockholders'
                                  Shares    Amount   Capital Shares  Amount   Capital  Deficit CompensationInvestment Equity
<S>                              <C>          <C>   <C>        <C>       <C>  <C>        <C>      <C>        <C>        <C>

 Balance - April 1, 1997         20,304,934   2,030 $2,423,970 5,122,500 512  $4,034,911(955,546) $(991,167) $(787,400)  $3,727,310

Unrealized Gain on Investment          --        --       --      --     --       --        --         --     181,200      181,200

Amortization of Deferred 
Compensation                           --        --       --      --     --       --        --      128,750      --        128,750

Net [Loss] for the three months
 ended  June 30, 1997                  --        --       --      --     --       --    (269,855)        --        --      (269,855)
                                 -------- --------- -------- ------- ------  -------  --------   --------   -------       --------

 Balance - June 30, 1997         20,304,934   2,030 $2,423,970 5,122,500 512  $4,034,911$(1,225,401)$(862,417) $(606,200) $3,767,405
                                 ============ ====== ========== ========= ====  ========== ============ =======  ========== ========


</TABLE>

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

                                               4

<PAGE>


<TABLE>

DECOR GROUP, INC. AND SUBSIDIARY
------------------------------------------------------------------------------


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


                                                              Three months ended
                                                                    June 30,
                                                              1 9 9 7       1 9 9 6

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

<S>                                                        <C>          <C>    

Operating Activities:
  Net Loss                                                 $ (269,855)  $  (246,001)
  Adjustment to Reconcile Net Loss to Net Cash
   [Used for] Operating Activities:
   Amortization of Deferred Compensation                      128,750            --
   Accrued Interest Receivable                                     --           250
   Interest - Cost of Bridge Warrants                              --       107,150
   Amortization of Intangibles                                 30,180            --
   Depreciation                                                11,753            --
   Bad Debt Expense                                            14,099            --

  Changes in Assets and Liabilities:
   [Increase] Decrease in:
     Accounts Receivable                                      142,281            --
     Inventory                                                 15,001            --
     Other Assets                                             (67,880)           --

   Increase [Decrease] in:
     Accounts Payable and Accrued Expenses                   (117,301)      108,000
                                                           ----------   -----------

  Net Cash - Operating Activities                            (112,972)      (30,601)
                                                           ----------   -----------

Investing Activities:
  Cash Paid for Acquisition of Artisan House                       --       (15,000)
  Collections on Note Receivable                                   --        50,000
                                                           ----------   -----------

  Net Cash - Investing Activities                                  --        35,000
                                                           ----------   -----------

Financing Activities:
  Proceeds from Stockholder Loans                              22,500        35,500
  Proceeds from Sale of Common Stock                               --         8,000
  Repayment of Notes Payable                                  (30,231)           --
  Deferred Offering Costs                                          --       (74,658)
                                                           ----------   -----------

  Net Cash - Financing Activities                              (7,731)      (31,158)
                                                           ----------   -----------

  Net Increase in Cash                                       (120,703)      (26,759)

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

  Cash - End of Periods                                    $   48,805   $    20,241
                                                           ==========   ===========

Supplemental Disclosures of Cash Flow Information:
  Cash paid for the periods for:
   Interest                                                $   15,500   $        --
   Income Taxes                                            $       --   $        --


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

                                         5
</TABLE>

<PAGE>



DECOR GROUP, INC. AND SUBSIDIARY
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CONSOLIDATED STATEMENTS OF CASH FLOWS
------------------------------------------------------------------------------




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

  On March 3, 1996,  the Company  issued to Interiors,  Inc.  250,000  shares of
Class A Convertible  Preferred Stock and an option to purchase 20,000,000 shares
of Class B  Non-Convertible  Preferred  Stock in exchange  for  Interiors,  Inc.
issuing to the Company  200,000  shares of Common  Stock  valued at $600,000 and
200,000 shares of Series A Convertible  Preferred Stock valued at $1,000,000 and
a guarantee with respect to certain indebtedness.

  In March 1996,  the Company issued  3,937,500  shares of common stock to seven
parties for  $105,000 of which  $103,000 was in cash and $2,000 was for the fair
value  of  services.  At  March  31,  1996,  $8,000  was  reflected  as a  stock
subscription receivable and was collected on May 21, 1996.

  On  November  18,  1996,  the  Company's  wholly  owned   subsidiary   Artisan
Acquisition  Corp., Inc.  purchased  substantially all of the assets and assumed
certain  liabilities of Artisan House,  Inc. for  approximately  $3,700,000,  of
which  $2,400,000  was paid in cash,  $300,000  in shares  of  common  stock and
$1,050,000  in notes.  The Company  primarily  acquired  accounts  receivable of
approximately  $1,100,000,  inventory  of  approximately  $800,000  and  assumed
liabilities of approximately $578,000.





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

                                         6

<PAGE>



DECOR GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[UNAUDITED]
------------------------------------------------------------------------------



[1] Summary of Significant Accounting Policies

[A] Nature of  Operations  - Decor  Group,  Inc.,  a Delaware  corporation  [the
"Company"  or  "Decor"],  was  incorporated  on March 1, 1996.  The  Company was
organized for the purpose of acquiring  Artisan  House,  Inc.  ["Artisan"].  The
acquisition  was  completed  on  November  18,  1996.  Artisan is engaged in the
business of designing, manufacturing,  marketing, selling and distributing metal
wall-mounted , tabletop and freestanding  sculptures.  Artisan  manufactures its
products  at one  location  in  southern  California  and  sells  through  sales
representatives  and from its  regional  showrooms to  furniture  retailers  and
department  stores  throughout  the  United  States  and  internationally.   The
transaction was recorded under the purchase method.  The Company is a subsidiary
of Interiors, Inc. [See Notes 2 and 8].

[B] Basis of Reporting - The accompanying  unaudited  financial  statements have
been prepared in accordance with generally  accepted  accounting  principles for
interim financial  information and with the instructions to Form 10-QSB and Item
310(b)of Regulation S-B. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting  principles for complete
financial statements. In the opinion of management,  such statements include all
adjustments  which  are  considered  necessary  in  order  to make  the  interim
financial statements not misleading.

[C] Cash  Equivalents  - The  Company's  policy is to classify all highly liquid
investments  with  maturity of three  months or less when  purchased  to be cash
equivalents. There were no cash equivalents at June 30, 1997.

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

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

Vehicles                                 2 Years
Machinery and Equipment              1 - 5 Years
Furniture and Fixtures                   5 Years

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

[F] Marketable Securities - Statement of Financial Accounting Standards ["SFAS"]
No. 115,  "Accounting  for Certain  Investments in Debt and Equity  Securities",
addresses the accounting and reporting for investments in equity securities that
have  readily   determinable  fair  values  and  for  all  investments  in  debt
securities.  Those  investments  are to be classified  into the following  three
categories:   held-to-maturity   debt  securities;   trading   securities;   and
available-for-sale securities.

Management determines the appropriate  classification of its investments in debt
and equity securities at the time of purchase and reevaluates such determination
at each balance sheet date.  Debt securities for which the Company does not have
the intent or ability to hold to maturity are  classified as available for sale,
along with the Company's  investment in equity securities.  Securities available
for sale are  carried  at fair  value,  with any  unrealized  holding  gains and
losses,  net of tax,  reported in a separate  component of shareholders'  equity
until realized.  Trading  securities are securities  bought and held principally
for the purpose of selling them in the near term and are reported at fair value,
with  unrealized  gains and losses  included in operations for the current year.
Held-to-maturity debt securities are reported at amortized cost.



                                        7

<PAGE>



DECOR GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #2
[UNAUDITED]
------------------------------------------------------------------------------



[1] Summary of Significant Accounting Policies [Continued]

[G]  Goodwill  - Amounts  paid in excess of the  estimated  value of net  assets
acquired of Artisan House, Inc. were charged to goodwill. Goodwill is related to
revenues  the Company  anticipates  realizing in future  years.  The Company has
decided  to  amortize  its  goodwill  over  a  period  of  10  years  using  the
straight-line method.  Effective April 1, 1997 based upon operating management's
experienced  understanding  of the  expected  useful  lives of the  tangible and
intangible assets, the Company changed its period of amortization of goodwill to
20 years. The effect of this change will be to reduce future annual amortization
of goodwill  by  $75,000.  The  Company's  policy is to evaluate  the periods of
goodwill  amortization  to  determine  whether  later  events and  circumstances
warrant revised  estimates of useful lives.  The Company also evaluates  whether
the  carrying  value of goodwill has become  impaired by comparing  the carrying
value of  goodwill  to the  value of  projected  undiscounted  cash  flows  from
acquired assets or businesses. Impairment is recognized if the carrying value of
goodwill is less than the  projected  undiscounted  cash flow from the  acquired
assets or business.

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

[I] Offering Costs - Such costs were recorded as a reduction of the net proceeds
of the offering.

[J]  Earnings Per Share - The number of shares to be used for earnings per share
calculation  purposes for June 30, 1996 was based on the 3,937,500 common shares
issued since the initial capitalization and, pursuant to Securities and Exchange
Commission  Staff  Accounting  Bulletin No. 83, on the  4,500,000  common shares
assumed issued from the warrants in connection  with the bridge loan, as if they
were  outstanding  since  inception to June 30, 1996 [the last period in the IPO
Prospectus] and, for June 30, 1997, the 5,122,500 shares  outstanding from April
1, 1997.  Convertible  preferred  stock  options and  warrants  are not included
because the effect would be anti-dilutive.

[K] Risk  Concentrations - Financial  instruments  that potentially  subject the
Company to  concentrations  of credit risk include cash and accounts  receivable
arising from its normal business activities.  The Company places its cash with a
high credit quality  financial  institution and  periodically  has cash balances
subject to credit risk beyond insured amounts. At June 30, 1997, the Company did
not maintain cash in excess of insured amounts.

The Company  routinely  assesses the financial  strength of its  customers,  and
based upon factors surrounding the credit risk of its customers, has established
an  allowance  for  uncollectible  accounts  of $206,417  and as a  consequence,
believes that its accounts receivable credit risk exposure beyond this allowance
is limited. The Company does not require collateral on its accounts receivable.

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

                                        8

<PAGE>



DECOR GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #3
[UNAUDITED]
------------------------------------------------------------------------------



[1] Summary of Significant Accounting Policies [Continued]

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

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

[2] Acquisition - Artisan

On November 18, 1996, the Company's wholly owned subsidiary Artisan  Acquisition
Corp.,  Inc.  purchased  substantially  all of the  assets and  assumed  certain
liabilities of Artisan for  $3,694,826,  of which a total of $2,400,000 was paid
in cash. A secured  promissory  note for $923,496 was issued to the seller.  The
note provides for the payment to the seller of the following: a) $100,000 within
90 days after the  closing,  b) beginning  120 days after the closing,  60 equal
monthly  payments of $13,656  bearing an  interest  rate of 8%, and c) a balloon
payment of $150,000 concurrent with the 60th installment.  The required payments
under (a) and (c) did not provide for interest and were  discounted at 8% giving
rise to a discount  of $53,933  which will be  amortized  to  interest  expense.
Separately,  the  seller  was  issued  150,000  shares,  giving  effect to stock
dividend,  of Decor  common  stock,  valued at  $300,000.  The Company  recorded
additional  accrued costs of the acquisition of  approximately  $125,263,  which
represented  the excess fair value over the prescribed  contract  amounts.  This
liability  has been  adjusted by $100,000 at March 31, 1997 to $25,263 and could
be  subject  to further  adjustment.  The  transaction  was  recorded  under the
purchase  method.   Goodwill  and  other  intangibles   totaling   approximately
$2,119,000 will be amortized between 5-20 years using the straight-line  method.
Operations  of Artisan are  included  with the Company  from  November  19, 1996
onward.  The assets and  liabilities  of Artisan are combined  with those of the
Company as of November 18, 1996.

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

                                             Three months ended
                                                  June 30,
                                                   1 9 9 6

Total Revenues                                   $1,386,976

Net Loss                                         $ (300,765)
                                                 ==========

Net Loss Per Common Share                        $     (.10)
                                                 ==========

Weighted Average Number of Common Shares
  Outstanding                                     3,162,500

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

                                        9

<PAGE>



DECOR GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #4
[UNAUDITED]
------------------------------------------------------------------------------



[3] Inventories

The components of inventory were as follows:

Raw Materials                           $  375,864
Work-in Process                            212,586
Finished Goods                             356,567
                                        ----------

  Totals                                $  945,017
  ------                                ==========

[4] Related Party Transactions

[A] Note Receivable - Interiors - On March 5, 1996, the Company advanced $50,000
with 8% interest to a firm that renders management services to the Company.  The
Company was repaid on April 16, 1996. Interest income of $250 was recorded as of
March 31, 1996. On August 29, 1996 and September 13, 1996, the Company  advanced
an additional $50,000 with 10% interest.  The Company was repaid on November 15,
1996.

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

[C] Due to Stockholder - Interiors - Interest at 8% of approximately  $3,850 has
been  accrued on the  outstanding  balance due to  Interiors of $207,785 for the
three months ended June 30, 1997.

[D] Stockholders'  Loans Payable - The Company received $35,500 in June 1996 and
$8,000 in July 1996 in loan  proceeds.  The notes bear interest at 12% per annum
and have a maturity date in April 1998.
Interest expense for the three months ended June 30, 1997 was $1,305.

[5] Commitment Letter - Secured Loan Agreement

On May 31, 1996, the Company received a commitment letter for a revolving credit
agreement for a maximum loan amount of  $1,100,000.  The agreement  requires the
satisfaction of a number of conditions prior to funding including the completion
of a due diligence review. The terms of the loan include an annual interest rate
of prime plus 4%, a management fee of 3% of sales, a security interest in all of
the Company's accounts receivable,  inventory,  and equipment,  and any proceeds
therefrom,  a personal  guaranty by the Company's  Chairman of the Board,  and a
prepayment  fee of  $25,000.  In the event that the Company is unable to satisfy
such  conditions,  the Company will not receive the proceeds from such loan. Due
to the  consummation  of a new agreement in July 1997,  the Company  anticipates
canceling this commitment letter.

On July 1, 1997,  Artisan  obtained an accounts  receivable based line of credit
for up to $600,000  with interest at prime plus 5.5% secured by all of Artisan's
assets and guaranteed by Decor and Interiors, Inc.


                                       10

<PAGE>



DECOR GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #5
[UNAUDITED]
------------------------------------------------------------------------------



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

On March 3, 1996, the Company issued to Interiors, Inc. 250,000 shares of Series
A Non-Voting  Convertible  Preferred Stock and an option to purchase  20,000,000
shares of Series B Non-Convertible Voting Preferred Stock for $2,000 in exchange
for Interiors, Inc. issuing to the Company 200,000 shares of Common Stock valued
at $600,000 and 200,000 shares of Series A Convertible Preferred Stock valued at
$1,000,000. This option was exercised in September of 1996. On May 28, 1996, the
Company  entered  into a  management  agreement  with  Interiors,  Inc.  whereby
Interiors,  Inc.  will  provide the Company  certain  marketing  and  management
services  [See  Note 4B].  The  exchange  of  shares  between  the  Company  and
Interiors,  Inc. is pursuant to the  Company's  intentions to secure the ongoing
and  long-term  availability  of  these  services.  Accordingly,  the  Company's
intention is to maintain a long-term  position in its  investment  in Interiors,
Inc. The Company has classified its investment as available for sale. As of June
30,  1996,  the per share  market value of  Interiors,  Inc.'s  Common Stock and
Series  A  Convertible  Preferred  Stock  was  $4.25  and  $7.25,  respectively.
Accordingly,  gross unrealized holding gains of $250,000 and $450,000 existed at
June 30,  1996 on the Common  Stock and Series A  Convertible  Preferred  Stock,
respectively.  As of June 30, 1997,  the per share  market  value of  Interiors,
Inc.'s  common  stock and Series A  Convertible  Preferred  Stock was $1.219 and
$3.7500,  respectively.  Therefore,  the  carrying  value at June  30,  1997 was
$993,800.  Accordingly, gross unrealized holding losses of $250,000 and $356,200
existed at June 30, 1997 on the Common Stock and Series A Convertible  Preferred
Stock,  respectively.  As of June 30, 1997, Interiors,  Inc. owned approximately
79% of the Company's  total voting stock  outstanding  assuming no conversion of
the Series A and Series C Preferred Stock.

[7] Commitments and Contingencies

[A]  Employment  Agreement - Seller - Artisan's  employment  agreement  with the
seller was terminated  effective July 8, 1997. Financial payments of amounts due
under the contract are expected to be paid by September 1997.

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

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

In June 1997,  the Company  ceased paying the severance pay required  under this
termination   agreement.   The  Company  is  currently   negotiating  a  revised
termination agreement with the former employee.

[D] Acquisitions - In April 1997, the Company entered into a letter of intent to
acquire  a  decorative  accessories  manufacturer,  based  on  the  west  coast.
Although,  the Company has not entered into a definitive  agreement with respect
to the acquisition of such manufacturer,  the Company is continuing negotiations
regarding the acquisition.

                                       11

<PAGE>



DECOR GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #6
[UNAUDITED]
------------------------------------------------------------------------------


[8] Legal Proceedings

In March 1997, CIDCOA  International,  Inc.  ["CIDCOA"] formerly know as Artisan
House, Inc. brought an arbitration proceeding against the Company, alleging that
it has failed to pay CIDCOA  additional  sums owed to it in connection  with the
Company's  purchase of all of the assets and assumption of substantially  all of
the  liabilities  of Artisan.  CIDCOA  alleges that it is owed a purchase  price
adjustment.  The Company denied the allegations,  and has brought  counterclaims
against   CIDCOA   alleging   breach   of   contract,    breach   of   warranty,
misrepresentation  and fraud by CIDCOA.  In August  1997,  CIDCOA filed a motion
seeking to enforce an alleged  settlement  agreement  made by the  parties.  The
Company denies that any settlement was reached by the parties.  CIDCOA's  motion
is currently pending before JAMS/Endispute.

[9] Capital Stock

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

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

[10] New Authoritative Pronouncements

The  FASB  issued  SFAS No.  128,  "Earnings  Per  Share,"  and  SFAS  No.  129,
"Disclosure of Information  about Capital  Structure" in February 1997. SFAS No.
128  simplifies  the  earnings  per  share  ["EPS"]  calculations   required  by
Accounting Principles Board ["APB"] Opinion No. 15, and related interpretations,
by replacing the  presentation  of primary EPS with a presentation of basic EPS.
SFAS No. 128  requires  dual  presentation  of basic and diluted EPS by entities
with complex capital structures.  Basic EPS includes no dilution and is computed
by dividing  income  available to common  stockholders  by the  weighted-average
number of common  shares  outstanding  for the period.  Diluted EPS reflects the
potential  dilution of securities that could share in the earnings of an entity,
similar  to the  fully  diluted  EPS of APB  Opinion  No.  15.  SFAS No.  128 is
effective for financial  statements issued for periods ending after December 15,
1997,  including  interim periods;  earlier  application is not permitted.  When
adopted,  SFAS No. 128 will require  restatement  of all  prior-period  EPS data
presented;  however,  the Company has not sufficiently  analyzed SFAS No. 128 to
determine  what effect SFAS No. 128 will have on its  historically  reported EPS
amounts.

SFAS No. 129 does not change any previous  disclosure  requirements,  but rather
consolidates existing disclosure requirements for ease of retrieval.

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

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

                                       12

<PAGE>



Item 2.

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


OVERVIEW

Decor Group,  Inc. [the  "Company" or "Decor"] was formed in March of 1996.  The
primary  activities of Decor prior to the  acquisition  of Artisan  House,  Inc.
["Artisan"]  on  November  18,  1996  for  approximately  $3,750,000  have  been
investing and financing  activities  [See  "Liquidity  and Capital  Resources"].
Artisan  is  engaged  in  the  design,  manufacturing  and  marketing  of  metal
wall-mounted, tabletop and freestanding sculptures.

On March 3, 1996, the Company issued to Interiors, Inc. 250,000 shares of Series
A Non-Voting  Convertible  Preferred Stock and an option to purchase  20,000,000
shares of Series B Non-Convertible Voting Preferred Stock for $2,000 in exchange
for Interiors, Inc. issuing to the Company 200,000 shares of Common Stock valued
at $600,000 and 200,000 shares of Series A Convertible Preferred Stock valued at
$1,000,000. This option was exercised in September of 1996. On May 28, 1996, the
Company  entered  into a  management  agreement  with  Interiors,  Inc.  whereby
Interiors,  Inc.  will  provide the Company  certain  marketing  and  management
services  [See  Note 4B].  The  exchange  of  shares  between  the  Company  and
Interiors,  Inc. is pursuant to the  Company's  intentions to secure the ongoing
and  long-term  availability  of  these  services.  Accordingly,  the  Company's
intention is to maintain a long-term  position in its  investment  in Interiors,
Inc. The Company has classified its investment as available for sale. As of June
30,  1996,  the per share  market value of  Interiors,  Inc.'s  Common Stock and
Series  A  Convertible  Preferred  Stock  was  $4.25  and  $7.25,  respectively.
Accordingly,  gross unrealized holding gains of $250,000 and $450,000 existed at
June 30,  1996 on the Common  Stock and Series A  Convertible  Preferred  Stock,
respectively.  As of June 30, 1997,  the per share  market  value of  Interiors,
Inc.'s  common  stock and Series A  Convertible  Preferred  Stock was $1.219 and
$3.7500,  respectively.  Therefore,  the  carrying  value at June  30,  1997 was
$993,800.  Accordingly, gross unrealized holding losses of $250,000 and $356,200
existed at June 30, 1997 on the Common Stock and Series A Convertible  Preferred
Stock,  respectively.  As of June 30, 1997, Interiors,  Inc. owned approximately
79% of the total voting stock outstanding assuming no conversion of the Series A
and Series C Preferred Stock.

On November 12, 1996, the Company  realized net proceeds of $2,248,033  from the
initial public offering of the Company's common stock. The financial  statements
included with this filing include the  transactions  pursuant to the acquisition
of Artisan House and the Company's public offering of securities.  The financial
statements  consolidate the results of Artisan House with the Company commencing
November 18, 1996, the date of acquisition.

In April  1997,  the  Company  entered  into a letter  of  intent  to  acquire a
decorative  accessories  manufacturer,  based on the west coast.  Although,  the
Company  has  not  entered  into a  definitive  agreement  with  respect  to the
acquisition  of  such  manufacturer,  the  Company  is  continuing  negotiations
regarding the acquisition.

RESULTS OF OPERATIONS

The Company had  revenues  and cost of revenues  for the three months ended June
30, 1997 of $1,448,694 and $750,279,  respectively.  This  represents  Artisan's
sales and cost of sales transactions for three months ended June 30, 1997.

The Company had selling and  administrative  expenses for the three months ended
June 30, 1997 of $875,899 of which $599,721  represented  Artisan's expenses for
the three months ended June 30, 1997.

For the three months ended June 30, 1997,  Artisan had earnings before interest,
taxes, depreciation and amortization of $63,979.


                                       13

<PAGE>




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



RESULTS OF OPERATIONS [CONTINUED]

The Company  incurred a net loss of $269,855 for the three months ended June 30,
1997.  This  includes  net income  generated by Artisan  House of  approximately
$11,364 for the three months ended June 30, 1997.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 1997, Decor had working capital of $1,317,479.  For the three months
ended June 30, 1997,  the Company used  $112,972 for  operating  activities  and
$7,731 for financing activities.  The cash balance at June 30, 1997 was $48,805.
Management believes that in the next twelve months cash requirements will be met
by cash provided from operations and the asset based line of credit.  Management
believes  that its  long-term  cash needs will be  provided  by  operations  and
additional debt and/or equity financing.

In May 1996,  the Company  entered into a management  agreement  with  Interiors
which specializes in the home furnishings and decorative accessories industries.
The  agreement  calls for a  management  fee of $90,000  or 1.5% of excess  cash
flows,  whichever  is greater,  per annum.  The  management  fee will be accrued
quarterly  and paid  quarterly  to the  extent  that  there is excess  cash flow
available to the Company.  Excess cash flow is defined in the  agreement to mean
cash flow from  operations  adjusted  to reflect  changes  in  working  capital,
interest payments, principal repayments and capital expenditures.  No payment in
any quarter will exceed 50% of excess cash flow as defined.  The agreement has a
term of two years with renewal options at the mutual consent of both parties.

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

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

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

On November 18, 1996, the Company issued a secured promissory note in the amount
of  $923,496  to the  seller  of  Artisan  House of which  $100,000  was paid in
February of 1997 and the balance will be paid in 60 equal  monthly  installments
of $13,656 with a final payment of $150,000 at maturity  bearing interest at 8%.
The note is  secured  by a  second  interest  on all of  Artisan's  assets.  The
non-interest bearing portion of the note was discounted at 8% which gave rise to
a discount of $51,875.

In connection  with the  acquisition,  the Company  assumed notes payable in the
aggregate  amount of $212,891 of which  approximately  $190,000  was paid off in
connection  with the  closing  of the  acquisition  and the  remaining  notes of
approximately  $23,000 bear interest ranging from 9.5% to 13.4% maturing through
2001. Such notes are collateralized by various equipment of the Company.




                                       14

<PAGE>



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




LIQUIDITY AND CAPITAL RESOURCES [CONTINUED]

The Company,  entered into a three year employment  agreement with the Seller to
be effective as of the closing of the  acquisition  of Artisan  House,  Inc. The
Seller  will be  employed  on a part time  basis  with (i) an  annual  salary of
$75,000,  (ii) a signing bonus of $70,000,  $30,000 of which was paid at closing
and  $40,000  of which is to be paid in twelve  equal  monthly  installments  of
$3,333 during the first year of the employment agreement, (iii) reimbursement of
expenses incurred by the Seller for lease and insurance payments with respect to
an automobile,  (iv) an annual  performance bonus equal to 1% of Artisan's sales
and 5% of the  Artisan's  export  sales in excess of those  achieved  by Artisan
House,  Inc. for the twelve months ended June 30, 1996,  payable  within 60 days
after  the end of the  fiscal  year,  with the  first  and last  payments  being
calculated on a pro rated basis, and (v) 2.5% of the  consideration  paid by the
Company in connection with an acquisition of an unrelated third party introduced
to the Company or its affiliates by the Seller  subject to certain  restrictions
as defined in the employment  agreement.  The agreement was terminated effective
July 8, 1997 and the final payment is expected to be paid by September 1997.

On December 31, 1996, the Artisan entered into a three year employment agreement
with the  Artisan's  Chief  Operating  Officer and  President  for (i) an annual
salary of $100,000;  (ii) a cash bonus equal to ten percent  [10%] of the annual
salary,  based upon the Artisan's net profit before taxes ["NPBT"];  and (iii) a
cash bonus equal to five  percent [5%] of the increase in NPBT over the previous
fiscal year,  not to exceed 40% of the base salary.  The agreement also provides
options to purchase  30,000 shares of the Company's  Common Stock at an exercise
price of equal to  $.0001  per share  exercisable  for a period of six years for
each of the next three years.  For each of the three years ended March 31, 1998,
1999 and 2000  additional  options to purchase  30,000  shares of the  Company's
Common Stock  exercisable for a period of one year at an exercise price equal to
the average closing price of the Company's stock for the 20 days ending two days
prior to date of grant.  Continued employment by Artisan is required and Artisan
must meet or exceed 115% of the prior  year's NPBT.  In March 1997,  the officer
was  elected to the  offices of  President  and Chief  Financial  Officer of the
Company.

In March 1997, CIDCOA  International,  Inc.  ["CIDCOA"] formerly know as Artisan
House, Inc. brought an arbitration proceeding against the Company, alleging that
it has failed to pay CIDCOA  additional  sums owed to it in connection  with the
Company's  purchase of all of the assets and assumption of substantially  all of
the  liabilities  of Artisan.  CIDCOA  alleges that it is owed a purchase  price
adjustment.  The Company denied the allegations,  and has brought  counterclaims
against   CIDCOA   alleging   breach   of   contract,    breach   of   warranty,
misrepresentation  and fraud by CIDCOA.  In August  1997,  CIDCOA filed a motion
seeking to enforce an alleged  settlement  agreement  made by the  parties.  The
Company denies that any settlement was reached by the parties.  CIDCOA's  motion
is currently pending before JAMS/Endispute.

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

In June 1997,  the Company  ceased  paying the  severance  pay required  under a
termination  agreement  to a former  employee  of the  Company.  The  Company is
currently negotiating a revised termination agreement with the former employee.

On July 1,  1997,  Artisan  obtained a line of credit  for up to  $600,000  with
interest at prime plus 5.5% secured by all of Artisan's assets and guaranteed by
Decor and Interiors, Inc.

                                       15

<PAGE>



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




NEW AUTHORITATIVE PRONOUNCEMENTS

The  FASB  issued  SFAS No.  128,  "Earnings  Per  Share,"  and  SFAS  No.  129,
"Disclosure of Information  about Capital  Structure" in February 1997. SFAS No.
128  simplifies  the  earnings  per  share  ["EPS"]  calculations   required  by
Accounting Principles Board ["APB"] Opinion No. 15, and related interpretations,
by replacing the  presentation  of primary EPS with a presentation of basic EPS.
SFAS No. 128  requires  dual  presentation  of basic and diluted EPS by entities
with complex capital structures.  Basic EPS includes no dilution and is computed
by dividing  income  available to common  stockholders  by the  weighted-average
number of common  shares  outstanding  for the period.  Diluted EPS reflects the
potential  dilution of securities that could share in the earnings of an entity,
similar  to the  fully  diluted  EPS of APB  Opinion  No.  15.  SFAS No.  128 is
effective for financial  statements issued for periods ending after December 15,
1997,  including  interim periods;  earlier  application is not permitted.  When
adopted,  SFAS No. 128 will require  restatement  of all  prior-period  EPS data
presented;  however,  the Company has not sufficiently  analyzed SFAS No. 128 to
determine  what effect SFAS No. 128 will have on its  historically  reported EPS
amounts.

SFAS No. 129 does not change any previous  disclosure  requirements,  but rather
consolidates existing disclosure requirements for ease of retrieval.

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

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

IMPACT OF INFLATION

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

                                       16

<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.

                                    Decor Group, Inc.





Date: August 14, 1997               By:/s/ Dennis D'Amore
                                       ------------------
                                        Dennis D'Amore
                                        Chief Executive and Financial Officer

                                       17