UNITED STATES

                                SECURITIES AND EXCHANGE COMMISSION

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

                                            FORM 10-QSB

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

For the quarter ended     September 30, 1996     Commission File Number 333-5553
                      --------------------------         -------------

                                         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 of 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          No   X

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock. As of December 3, 1996 there were 1,637,500 shares of common stock
outstanding.


<PAGE>



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


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




Part I: Financial Information

Item 1.  Financial Statements:

    Balance Sheet as of September 30, 1996 [Unaudited]...............  1......2

    Statements of Operations for the six and three months ended September 30,
    1996 [Unaudited]......................................................  3

    Statement of Stockholders' Equity for the six and three months ended
    September 30, 1996 [Unaudited]........................................  4

    Statements of Cash Flows for the six months ended September 30, 1996
    [Unaudited]........................................................  5......
Notes to Financial Statements.....................................  6......10

Item 2.  Managements' Discussion and Analysis of the Financial Condition
         and Results of Operations..................................  11.....14

Signature...............................................................  15



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


<PAGE>

<TABLE>


Part I:  Financial Information

Item 1:  Financial Statements

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


BALANCE SHEET AS OF SEPTEMBER 30, 1996.
[UNAUDITED]
-----------------------------------------------------------------------------



<S>                                                                               <C>    
Assets:
Current Assets:
  Cash                                                                                 $    718,297
  Note Receivable - Related Party                                                            50,000
  Accrued Interest Receivable - Related Party                                                   432
  Related Party Receivable                                                                    6,500
                                                                                       ------------

  Total Current Assets                                                                      775,229

Non-Current Assets:
  Investment - Related Party                                                              2,087,500
  Investment in Artisan House, Inc.                                                         235,000
  Deferred Offering Costs                                                                    85,658
  Other Assets                                                                                2,000
                                                                                       ------------

  Total Non-Current Assets                                                                2,410,158

  Total Assets                                                                         $  3,185,387
                                                                                       ============


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



                                                  1

<PAGE>

</TABLE>

<TABLE>

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


BALANCE SHEET AS OF SEPTEMBER 30, 1996.
[UNAUDITED]
------------------------------------------------------------------------------



<S>                                                                            <C>    


Liabilities and Stockholders' Equity:
Current Liabilities:
  Accrued Expenses                                                                     $    124,000
  Accrued Interest - Related Party                                                            1,500
  Bridge Loan Payable [Net of Discount of $53,575]                                          196,425
                                                                                       ------------

  Total Current Liabilities                                                                 321,925

Long-Term:
  Stockholders' Loans Payable                                                                50,000
  Deferred Taxes                                                                             91,500

  Total Long-Term                                                                           141,500

Commitments and Contingencies                                                                    --

Stockholders' Equity:
  Preferred  Stock,  $.0001 Par Value Per Share,  35,000,000  Blank Check Shares
  Authorized of which 6,000,000 are Convertible. Convertible Non-Voting Series A
  -  5,000,000  Shares  Authorized,   250,000  Shares  Issued  and  Outstanding;
  Non-Convertible  Voting Series B - 20,000,000  Shares  Authorized - 10,000,000
  Shares Issued and  Outstanding;  Convertible  Non-Voting  Series C - 1,000,000
  Shares
  Authorized - 54,934 Issued and Outstanding                                                  1,030

  Additional Paid-in Capital - Preferred Stock                                            2,424,970

  Common Stock - $.0001 Par Value, Authorized 20,000,000 Shares,
    Issued and Outstanding, 1,312,500 Shares                                                    131

  Additional Paid-in Capital - Common Stock                                                 319,169

  Retained Earnings [Deficit]                                                              (419,338)

  Unrealized Gain on Investment [Available for Sale]                                        396,000
                                                                                       ------------

  Total Stockholders' Equity                                                              2,721,962

  Total Liabilities and Stockholders' Equity                                           $  3,185,387
                                                                                       ============



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

                                                  2
</TABLE>

<PAGE>

<TABLE>


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


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


                                                                       Three months      Six month
                                                                           ended           ended
                                                                       September 30,   September 30,
                                                                          1 9 9 6          1 9 9 6
<S>                                                                    <C>            <C>   

Revenues                                                               $         --    $         --

Cost of Revenues                                                                 --              --
                                                                       ------------    ------------

  Gross Profit                                                                   --              --
                                                                       ------------    ------------

Selling, General and Administrative Expenses:
  Acquisition Fees and Expenses                                                  --          52,829
  Professional Fees                                                           1,000          74,000
  Administrative Expenses                                                    14,067          27,089
                                                                       ------------    ------------

  Total Selling, General and Administrative Expenses                         15,067         153,918
                                                                       ------------    ------------

  [Loss] from Operations                                                    (15,067)       (153,918)
                                                                       ------------    ------------

Other Expense [Income]:
  Interest Income                                                            (1,123)         (1,123)
  Interest Income - Related Party                                              (432)           (432)
  Interest - Cost of Bridge Warrants                                         53,575         160,725
  Interest Expense - Bridge Loans                                             5,000           5,000
  Interest Expense - Related Party                                            1,500           1,500
                                                                       ------------    ------------

  Total Other Expense [Income]                                               58,520         165,670
                                                                       ------------    ------------

  [Loss] Before Provision for Income Taxes                                  (73,587)       (319,588)

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

  Net [Loss]                                                           $    (73,587)   $   (319,588)
                                                                       ============    ============

  [Loss] Per Share                                                     $       (.03)   $       (.11)
                                                                       ============    ============



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

                                                  3

<PAGE>


</TABLE>
<TABLE>

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


STATEMENT OF STOCKHOLDERS' EQUITY
[UNAUDITED]
------------------------------------------------------------------------------


                                   Preferred Stock              Common Stock
                                              Additional                   Additional Retained Unrealized   Total
                                                Paid-in                      Paid-in  Earnings  Gain on Stockholders'
                              Shares   Amount   Capital  Shares   Amount     Capital  [Deficit]Investment Equity
<S>                         <C>          <C> <C>        <C>          <C>    <C>         <C>      <C>      <C>

 Balance - April 1, 1996     250,000      25 1,599,975  1,312,500     131    319,169   (99,750)  187,600  2,007,150

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

10,000,000 Shares of Series B
 Non-Convertible Voting
 Preferred Stock           10,000,000  1,000     1,000        --       --         --        --        --      2,000

Unrealized Gain on Investment
 [Available for Sale]             --      --        --        --       --         --        --   208,400    208,400

Net [Loss] for the six months
 ended September 30, 1996         --      --        --        --       --         --  (319,588)       --   (319,588)
                           ---------  ------ ---------  --------  -------  ---------  --------  --------  ---------

 Balance - September 30, 1996 10,304,934 $  1,030 $2,424,970 1,312,500 131  $319,169  $(419,338)$ 396,000 $2,721,962
                           ============  ======== ========== ========= ====  ========  ========= ========= =========



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

                                                         4

<PAGE>

</TABLE>
<TABLE>


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


STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996.
[UNAUDITED]
------------------------------------------------------------------------------




<S>                                                                               <C> 
operating Activities:
  Net [Loss]                                                                           $   (319,588)
  Adjustment to Reconcile Net [Loss] to Net Cash
    [Used for] Operating Activities:
    Accrued Interest Receivable                                                                (182)
    Interest - Cost of Bridge Warrants                                                      160,725
    Accrued Expenses                                                                        124,000
    Accrued Interest - Related Party                                                          1,500
                                                                                       ------------

  Net Cash - Operating Activities                                                           (33,545)
                                                                                       ------------

Investing Activities:
  Collection of Note Receivable                                                              50,000
  Partial Payment on Acquisition of Artisan House, Inc.                                     (85,000)
  Note Receivable                                                                           (50,000)
  Related Party Receivable                                                                   (6,500)
  Other Assets                                                                               (2,000)
                                                                                       ------------

  Net Cash - Investing Activities                                                           (93,500)
                                                                                       ------------

Financing Activities:
  Proceeds from Sale of Preferred Stock                                                     826,000
  Proceeds from Sale of Common Stock                                                          8,000
  Proceeds from Stockholder Loan                                                             50,000
  Deferred Offering Costs                                                                   (85,658)
                                                                                       ------------

  Net Cash - Financing Activities                                                           798,342
                                                                                       ------------

  Net Increase in Cash                                                                      672,297

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

  Cash - End of Periods                                                                $    718,297
                                                                                       ============

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

Supplemental Disclosures of Non-Cash Investing and Financing Activities:
   During the period  ended March 31, 1996,  the Company  recorded a discount on
the bridge  loan of $214,300  resulting  from the  issuance of warrants  for the
$250,000  bridge loan. For the six months ended  September 30, 1996, the Company
amortized $160,725 as interest expense.


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

                                                  5
</TABLE>

<PAGE>



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



[1] Summary of Significant Accounting Policies

[A] Nature of  Operations  - Decor  Group,  Inc.,  a Delaware  corporation  [the
"Company" or "Decor"], was formed March 1, 1996.

[B]  Earnings Per Share - The number of shares to be used for earnings per share
calculation  purposes will be based on the 1,312,500 common shares issued in the
initial  capitalization  and on the 1,500,000  common shares assumed issued from
the warrants in  connection  with the bridge loan,  as if they were  outstanding
since inception.  Convertible preferred stock is not included because the effect
would be anti-dilutive [See Note 5].

[C] Cash  Equivalents  - The  Company's  policy is to classify all highly liquid
debt  instruments  purchased with an initial maturity of three months or less to
be cash equivalents. There were no cash equivalents at September 30, 1996.

[D] 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.

[E]  Goodwill  - Amounts  paid in excess of the  estimated  value of net  assets
acquired of Artisan House, Inc. will be 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 up to ten years  under the
straight-line  method.  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.

[F] Stock  Options  and Similar  Equity  Instruments  Issued to  Employees - The
Company uses the intrinsic value method to recognize cost in accordance with APB
25 [Accounting for Stock Issued to Employees].

[G] Deferred  Offering  Costs - Offering  costs in  connection  with the initial
public offering will be recorded as a reduction of the proceeds of the offering.

[H] Basis of Presentation - The accompanying  interim  financial  statements are
unaudited  and  have  been  prepared  in  accordance  with the  requirements  of
Regulation S-B and Form 10-QSB and,  therefore,  do not include all  information
and footnotes required by generally accepted accounting principles;  however, in
the opinion of the management of the Company,  the interim financial  statements
include  all  adjustments  which  are  necessary  in order  to make the  interim
financial  statements not misleading.  The results of operations for any interim
period are not  necessarily  indicative of the results for the full year.  These
financial statements should be read in conjunction with the financial statements
and  notes,  thereto,  contained  in the Form SB-2 that was  declared  effective
November 12, 1996.

                                                6

<PAGE>



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


[2] Business Combination - Artisan House

On March 25, 1996,  the Company  entered  into an  agreement to acquire  certain
assets and assume certain  liabilities of Artisan  House,  Inc. for  $3,626,400,
subject to adjustment  prior to closing of which  $150,000 was paid in cash, and
an additional  $2,250,000 will be paid in extension  payments and at the closing
of the  acquisition.  A secured  promissory  note for  $926,400  will be issued,
[subject to  reduction  by a cash  balance of Artisan  House at the closing date
estimated at $173,526 at September  30, 1996] of which  $100,000 will be paid 90
days  after  the  closing  and the  balance  will be  paid in 60  equal  monthly
installments of $10,196 with final payment of $150,000 at maturity with interest
at 8%,  and 50,000  shares of Decor  common  stock  valued at  $300,000  will be
issued.  Artisan  House,  Inc.  is engaged  in the  business  of  manufacturing,
marketing,  selling and distributing  wall hanging  sculptures.  The transaction
will be recorded under the purchase method.

Goodwill of  approximately  $1,400,000 will be amortized over 10 years under the
straight-line  method.  Operations  of Artisan will be included with the Company
from the date of the close of the acquisition onward.

The Company,  intends to enter 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 is to be paid at
closing  and  $40,000 of which is to be paid in 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 the Company's
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,(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  agreement,  and (vi) the
issuance of options to purchase  50,000 shares of the Company's  common stock on
each of the first and second  anniversary  of the  agreement.  The  options  are
exercisable at $.0001 per share  commencing the date of issuance and expiring in
four years.

The following  unaudited pro forma combined  results of operations  accounts 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  and  consulting
agreements.
<TABLE>

                                                     Six months Ended      Year ended
                                                       September 30,        March 31,
                                                          1 9 9 6            1 9 9 6
                                                          -------            -------
<S>                                                   <C>               <C> 

Total Revenues                                        $  2,853,229      $   4,809,422
                                                      ============      =============

Net [Loss]                                            $   (545,246)     $    (520,054)
                                                      ============      =============

Net [Loss] Per Common Share                           $       (.19)     $        (.18)
                                                      ============      =============

Weighted Average Number of Shares Outstanding            2,862,500          2,862,500
                                                      ============      =============

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.

</TABLE>


                                                7

<PAGE>



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



[3] Related Party Transactions

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.

On June 21, 1996, the Company received  commitments from its stockholders for an
additional  $50,000 in loan proceeds.  The Company received $35,500 in June 1996
and $8,000 in July 1996.  The  remaining  balance of $6,500 is to be received in
November  1996. The notes have interest of 12% per annum and matured on November
18, 1996.

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. Interest income of $432 has been accrued through September 30, 1996.

[4] 1996 Stock Option Plan

In  March  1996,  the  Board  of  Directors  of the  Company  adopted,  and  the
stockholders of the Company approved the adoption of the 1996 Stock Option Plan.
The maximum number of shares of common stock with respect to which awards may be
granted pursuant to the 1996 Plan is initially 250,000 shares.

[5] Bridge Loan

On March 31, 1996,  the Company  borrowed an aggregate of $250,000 from nine [9]
lenders  [the  "Bridge  Lenders"].  In exchange for making loans to the Company,
each Bridge Lender received a promissory  note [the "Bridge Note"].  Each of the
Bridge Notes bears  interest at the rate of eight  percent  [8%] per annum.  The
Bridge  Notes are due and payable upon the earlier of (i) March 18, 1997 or (ii)
the  closing  of an  initial  underwritten  public  offering  of  the  Company's
securities.  The  Company  intends  to use a  portion  of the  proceeds  of this
offering  to repay the  Bridge  Lenders.  The Bridge  Lenders  have the right to
receive a total of  1,500,000  Class A Warrants for  1,500,000  shares of common
stock which will be registered in the Company's  first  registration  statement.
The Class A Warrants are exercisable at a price of $5.25 per warrant  commencing
two years from the effective date of the initial public  offering and expire six
years from the effective date of the offering.  The Company  recorded a discount
on the  bridge  notes at June 30,  1996 of  $214,300,  which  will be  amortized
through November 18, 1996, the date on which the notes were repaid.  For the six
months ended September 30, 1996, the Company amortized  $160,725 of the discount
as interest expense.

                                                8

<PAGE>



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




[6] Investment - 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  10,000,000
shares of Series B  Non-Convertible  Voting Preferred Stock at an exercise price
of $.0002 in exchange for Interiors,  Inc. issuing to the Company 200,000 shares
of Common Stock valued at $600,000  and 200,000  shares of Series A  Convertible
Preferred Stock valued at $1,000,000.  The aggregate estimated fair value of the
investment  approximates  carrying  value.  On May 28, 1996, the Company entered
into a management  agreement with Interiors,  Inc. which specializes in the home
furnishings  and decorative  accessories  industries.  The agreement calls for a
management  fee of $75,000 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.  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. As of September 30, 1996,  the per share market value of Interiors,  Inc.'s
common  stock and  Series A  Convertible  Preferred  Stock was $2.438 and $8.00,
respectively.  Accordingly,  a gross unrealized holding loss and gain of $45,834
and  $533,334  existed at  September  30, 1996 on the common  stock and Series A
Convertible Preferred Stock, respectively,  which is reflected net of income tax
effects in the accompanying balance sheet. As of September 30, 1996,  Interiors,
Inc. owns approximately 16% of the Company assuming the 250,000 shares of Series
A Convertible  Preferred  Stock were converted into common stock.  Following the
public offering  Interiors,  Inc. owns  approximately  86.0% of the total voting
stock  outstanding  after the  exercise of the  options to  purchase  10,000,000
shares  of Class B  Preferred  Stock on  September  3,  1996  for  $2,000.  Such
ownership is consistent  with the Company's  intentions  stated above as well as
the provision by Interiors, Inc. of additional equity contributions.

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

[7] Employment Agreement - President

In June 1996, the Company entered into an employment contract with the President
of the  Company for which an initial  base  salary of $117,500  will take effect
upon the close of the acquisition of Artisan House.  In addition,  the agreement
calls for the  granting of options to purchase  5,000  shares of common stock of
the  Company  at an  exercise  price of $5.00  per  share  for each full year of
employment  under the agreement and an annual bonus equal to 2% of the amount by
which the  Company's net sales exceed the Company's net sales for the year ended
June 30, 1997.





                                                9

<PAGE>



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



[8] 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 guaranty of the Company's  Chairman of the Board, and a prepayment
fee of $25,000 in the event of a  prepayment.  In the event that the  Company is
unable to satisfy  such  conditions,  the Company  will not receive the proceeds
from such loan. The Company does not anticipate the  utilization of this line of
credit.

Prime rate at September 30, 1996 was approximately 8%.

[9] Common Stock

In March 1996,  the Company  issued  1,312,500  shares of common  stock to seven
parties for a total of $105,000 of which $103,000 was in cash and $2,000 was for
the fair value of services.

[10] New Authoritative Pronouncements

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  has not  decided if it will adopt SFAS No. 123 or continue to apply APB
Opinion No. 25 for financial  reporting  purposes.  SFAS No. 123 will have to be
adopted for financial  note  disclosure  purposes in any event.  The  accounting
requirements  of SFAS No. 123 are  effective  for  transactions  entered into in
fiscal years that begin after December 15, 1995; the disclosure  requirements of
SFAS No. 123 are effective for financial  statements for fiscal years  beginning
after December 15, 1995.

The FASB has also issued SFAS No. 125,  "Accounting  for Transfers and Servicing
of  Financial  Assets  and  Extinguishment  of  Liabilities."  SFAS  No.  125 is
effective for transfers and servicing of financial assets and  extinguishment of
liabilities  occurring  after  December 31,  1996.  Earlier  application  is not
allowed.  The  provisions  of  SFAS  No.  125  must  be  applied  prospectively;
retroactive  application  is  prohibited.  Adoption  on  January  1, 1997 is not
expected to have a material impact on the Company.

[11] Subsequent Events

[A]  Reverse  Stock  Split  - On  October  16,  1996,  the  Company  effected  a
one-for-two  reverse  split of the Company's  preferred  and common  stock.  The
financial  statements  have been  restated to give  effect to the reverse  stock
split. The reverse stock split did not change the number of shares authorized or
the par value of any class of capital stock.

[B] Initial  Public  Offering - On November  18,  1996,  the Company  closed its
initial  public  offering of 325,000  shares of common stock at $10 per share of
which 25,000 shares of common stock were owned and offered by a stockholder. The
net proceeds from this offering were approximately $2,500,000.



                             .   .   .   .   .   .   .   .   .   .   .

                                                10

<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"] in November of 1996 for approximately $3,626,400 have
 been investing and financing activities [See "Liquidity and Capital
Resources"].  Artisan is engaged in the manufacture, marketing, selling and 
distribution of wall hanging sculptures.

As  a  result  of   negotiations   between  the  Company  and  Interiors,   Inc.
["Interiors"],  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 10,000,000 shares of Series B Non-Convertible Voting Preferred Stock at
an exercise  price of $.0002 in exchange  for the  issuance by  Interiors to the
Company  of  200,000  shares  of Common  Stock  with a market  closing  price of
$600,000  and  200,000  shares of Series A  Convertible  Preferred  Stock with a
market closing price of $1,200,000. The issuance of options instead of stock was
done at the request of Interiors, Inc. On May 28, 1996, the Company entered into
a management agreement with Interiors, Inc. whereby Interiors, Inc. will provide
to the Company certain marketing and management services. The exchange of shares
between the Company and  Interiors is pursuant to the  Company's  intentions  to
ensure the ongoing  and  long-term  availability  of these  services.  It is the
Company's  intention  to maintain a  long-term  position  in its  investment  in
Interiors.  As of September  30,  1996,  the per share  closing  market price of
Interior's Common Stock and Series A Convertible  Preferred Stock was $2.438 and
$8.00,  respectively.  Accordingly,  gross  unrealized  holding loss and gain of
$45,834 and  $533,334  existed at  September  30, 1996 for the Common  Stock and
Series A Convertible  Preferred Stock,  respectively,  which is reflected net of
income tax effects in the accompanying  balance sheet. As of September 30, 1996,
Interiors  will own  approximately  86.0% if the total voting stock  outstanding
assuming  the exercise of the options to purchase  10,000,000  shares of Class B
Preferred  Stock and  conversion  of 250,000  shares of the  Series A  Preferred
Stock.  Such ownership is consistent with the Company's  intentions stated above
as well as the provision by Interiors, Inc. of additional equity contributions.

Artisan House, Inc.

Results of Operations for the eight months ended September 30, 1996

Artisan had income before taxes for the eight months ended September 30, 1996 of
$335,882 and had net income of 201,882  after giving  effect to pro forma income
taxes of $134,000.

The net sales for Artisan House,  Inc. for the eight months ended  September 30,
1996 and 1995 were  $3,777,229  and  $3,157,109,  respectively,  an  increase of
approximately $620,000 or 20%. Sales increased because of the general acceptance
by the marketplace of new products such as "Casablanca", Norman Rockwell scenes,
and musical scenes. In addition,  sales to large catalog houses increased during
the current period.

                                                11

<PAGE>



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



Artisan House, Inc. [Continued]

Results of Operations for the eight months ended September 30, 1996

Artisan's  selling,  general and  administrative  expenses  for the eight months
ended  September  30, 1996 were  $1,309,589  and  $1,101,662,  respectively,  an
increase of  approximately  $208,000 or 19%.  Increases in selling,  general and
administrative   expenses  were  largely  due  to  increased   expenditures  for
advertising,  to support new product  introductions,  and increased  commissions
resulting from sales increases.

Artisan's  interest  expense for the eight months ended  September  30, 1996 and
1995 was approximately $42,000 and $56,000, respectively.

Liquidity and Capital Resources

Artisan House,  Inc. at September 30, 1996 had working capital of  approximately
$1,003,000.  During the eight month periods  ended  September 30, 1996 and 1995,
Artisan generated cash of approximately $365,000 and $24,000, respectively, from
operations.  During the eight months ended September 30, 1996 and 1995,  Artisan
made repayments on stockholder loans of $501,093 and $22,142,  respectively, and
repaid notes  payable of $69,906 and  $35,477,  respectively.  At September  30,
1996, Artisan House's cash balance was $173,526.

Decor Group, Inc.

Results of Operations for the six months ended September 30, 1996

The Company  generated a loss before income taxes of $319,588 for the six months
ended September 30, 1996.

Liquidity and Capital Resources

At September  30,  1996,  Decor had a working  capital of $453,304.  For the six
months  ended  September  30,  1996,  the Company  used  $33,545  for  operating
activities.  For the six months ended September 30, 1996,  investing  activities
utilized  cash  of  $93,500  primarily   comprising  $85,000  utilized  for  the
acquisition  of Artisan  House,  Inc. For six months ended  September  30, 1996,
financing  activities  generated  $798,342  primarily from the sale of preferred
stock for $826,000. The cash balance at September 30,1 996 was $718,297.

The  Company  anticipates  that the net  proceeds  from the public  offering  of
approximately  $2,500,000  will be utilized  to finance the  purchase of Artisan
House, Inc. and for working capital needs.

In March 1996, the Company issued to Interiors,  Inc.  250,000 shares of Class A
Non-Voting  Convertible  Preferred  Stock and an option to  purchase  10,000,000
shares  of  Class B  Non-Convertible  Voting  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.

In May 1996, the Company  entered into a management  agreement  with  Interiors,
Inc.  which  specializes  in the home  furnishings  and  decorative  accessories
industries. The agreement calls for a management fee of $75,000 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.  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.

                                                12

<PAGE>



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



Decor Group, Inc.

Results of Operations for the six months ended September 30, 1996

Liquidity and Capital Resources [Continued]

In June 1996, the Company entered into an employment contract with the President
of the  Company for which an initial  base  salary of $117,500  will take effect
upon the close of the acquisition of Artisan House.  In addition,  the agreement
calls for the  granting of options to purchase  5,000  shares of common stock of
the  Company  at an  exercise  price of $5.00  per  share  for each full year of
employment  under the agreement and an annual bonus equal to 2% of the amount by
which the  Company's net sales exceed the Company's net sales for the year ended
June 30, 1997.

On June 21, 1996, the Company received  commitments from its stockholders for an
additional  $50,000 in loan proceeds.  The Company received $35,500 in June 1996
and $8,000 in July  1996.  The  remaining  balance  of $6,500  was  received  in
November  1996.  The notes have  interest  of 12% per annum and a maturity  date
which is the earlier of 15 months  following  the close of the  proposed  public
offering or June 21, 1998.

On August 9, 1996, the Company agreed to issue to Interiors,  Inc. 28,334 shares
of Series C NonVoting,  Convertible,  Preferred  Stock for cash of $425,000.  On
August 23, 1996,  the Company  agreed to issue to Interiors,  Inc. 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,
Inc. 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. Interest income of $432 has been accrued through September 30, 1996.

Management  believes  that the proceeds of the  offering and the cash  generated
from operating  activities of Artisan House,  Inc. will provide the Company with
sufficient capital to fund ongoing operations for at least 12 months. Management
believes  that capital  requirements  relating to research and  development  and
capital expenditures will be met by funds derived from operations.

New Authoritative Pronouncements

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  has not  decided if it will adopt SFAS No. 123 or continue to apply APB
Opinion No. 25 for financial  reporting  purposes.  SFAS No. 123 will have to be
adopted for financial  note  disclosure  purposes in any event.  The  accounting
requirements  of SFAS No. 123 are  effective  for  transactions  entered into in
fiscal years that begin after December 15, 1995; the disclosure  requirements of
SFAS No. 123 are effective for financial  statements for fiscal years  beginning
after December 15, 1995.

The FASB has also issued SFAS No. 125,  "Accounting  for Transfers and Servicing
of  Financial  Assets  and  Extinguishment  of  Liabilities."  SFAS  No.  125 is
effective for transfers and servicing of financial assets and  extinguishment of
liabilities  occurring  after  December 31,  1996.  Earlier  application  is not
allowed.  The  provisions  of  SFAS  No.  125  must  be  applied  prospectively;
retroactive  application  is  prohibited.  Adoption  on  January  1, 1997 is not
expected to have a material impact on the Company.

                                                13

<PAGE>



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



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.






                                                14

<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: December 6, 1996                      By:/s/ Donald Feldman
                                               ------------------
                                 Donald Feldman,
                      Chief Executive and Financial Officer

                                                15

<PAGE>