AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 23, 1998

REGISTRATION NO. 333-44747

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

AMENDMENT #1

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FORM SB-2

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933
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ROSEDALE DECORATIVE PRODUCTS LTD.

(Name of Small Business Issuer as specified in its charter)

ONTARIO, CANADA N/A 5110
(State or other jurisdiction of (I.R.S. Employer (Primary Standard Industrial
incorporation or organization) Identification Number) Classification Code Number)

731 MILLWAY AVENUE
CONCORD, ONTARIO
CANADA L4K 3S8
(416) 593-4519

(Address and telephone number of principal executive offices)

ALAN FINE, CHIEF EXECUTIVE OFFICER
731 MILLWAY AVENUE
CONCORD, ONTARIO
CANADA L4K 3S8
(416) 593-4519
(Name, address and telephone number of agent for service)

COPIES OF ALL COMMUNICATIONS TO:

GREGORY SICHENZIA, ESQ. ROBERT E. ALTENBACH, P.C.
SICHENZIA ROSS & FRIEDMAN, L.L.P. 1 BUCKHEAD PLAZA
135 WEST 50TH STREET, 20TH FLOOR SUITE 400
NEW YORK, NEW YORK 10020 3060 PEACHTREE ROAD N.W.
TELEPHONE NO.: (212) ATLANTA, GEORGIA 30305
FACSIMILE NO.: (212) TELEPHONE NO. (404) 240-7602
FACSIMILE NO. (404) 262-1222

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APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement
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If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /

THE REGISTRANT HEREBY AMENDS THE REGISTRATION STATEMENT ON SUCH DATE AND
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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CALCULATION OF REGISTRATION FEE

MAXIMUM
AMOUNT MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SECURITY(1) PRICE(1) FEE

Units, each consisting of two shares of Common Stock, no par
value per share, and two Class A Warrants(2)................... 718,750 $ 8.00 $ 5,750,000 $1,696.25
Common Stock, no par value per share, underlying Units........... 1,437,500
Class A Warrants underlying Units................................ 1,437,500
Common Stock, no par value per share, issuable upon exercise of
Class A Warrants(3)............................................ 1,437,500 4.50 6,468,750 $1,908.28
Underwriter's Unit purchase option............................... 1 10 $ 10 $ .01
Units, each consisting of two shares of Common Stock, no par
value per share, and two Class A Warrants, issuable upon
exercise of Underwriter's option............................... 62,500 9.60 $ 600,000 $ 177.00
Common Stock, no par value per share, underlying Underwriter's
Options........................................................ 125,000
Class A Redeemable Warrants issuable upon exercise of
Underwriter's Options(4)....................................... 125,000
Common Stock, no par value per share, issuable upon exercise of
Class A Warrants underlying Underwriter's options(5)........... 125,000 4.50 562,500.00 $ 165.94
Total...................................................... $ 13,381,260.00 $3,947.47

(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.

(2) Includes up to 93,750 Units issuable upon exercise of the Underwriter's
over-allotment option.

(3) Represents shares of Common Stock issuable upon exercise of the Warrants
offered pursuant to this Registration Statement.

(4) Reserved for issuance upon exercise of the Underwriter's Option together
with such indeterminate number of Warrants and/or Common Stock as may be
issuable pursuant to anti-dilution provisions under the Underwriter's
Purchase Option or the Warrants.

(5) Reserved for issuance upon exercise of the Warrants obtained upon exercise
of the Underwriter's Purchase Option.

ROSEDALE DECORATIVE PRODUCTS LTD.

CROSS REFERENCE SHEET

FORM SB-2 ITEM NUMBER AND CAPTION CAPTIONS IN PROSPECTUS
----------------------------------------------------- -----------------------------------------------------

1. Front of Registration Statement and Outside Front
Cover of Prospectus................................ Cover Page

2. Inside Front and Outside Back Cover Pages of
Prospectus......................................... Cover Page, Inside Cover Page, Outside Back Page

3. Summary Information and Risk Factors................. Prospectus Summary, Risk Factors

4. Use of Proceeds...................................... Use of Proceeds

5. Determination of Offering Price...................... Cover Page, Underwriting

6. Dilution............................................. Dilution

7. Selling Securityholders.............................. *

8. Plan of Distribution................................. Prospectus Summary, Underwriting

9. Legal Proceedings.................................... Business

10. Directors, Executive Officers, Promoters and Control
Persons............................................ Management, Principal Stockholders

11. Security Ownership of Certain Beneficial Owners and
Management......................................... Principal Stockholders

12. Description of Securities............................ Description of Securities

13. Interest of Named Experts and Counsel................ *

14. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities..................... Management

15. Organization Within Last Five Years.................. Prospectus Summary, Business

16. Description of Business.............................. Prospectus Summary, Business

17. Management's Discussion and Analysis or Plan of
Operation.......................................... Management's Discussion and Analysis of Financial
Condition and Results of Operations

18. Description of Property.............................. Business

19. Certain Relationships and Related Transactions....... Certain Transactions

20. Market for Common Equity and Related Shareholder
Matters............................................ Front Cover Page, Description of Securities

21. Executive Compensation............................... Management

22. Financial Statements................................. Financial Statements

23. Changes in and Disagreements with Accounts on
Accounting and Financial Disclosure................ *

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* Not Applicable

iii

SUBJECT TO COMPLETION, DATED APRIL 23 , 1998

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

PROSPECTUS

ROSEDALE DECORATIVE PRODUCTS LTD.

833,000 SHARES OF COMMON STOCK AND
833,000 CLASS A REDEEMABLE COMMON STOCK PURCHASE WARRANTS

Rosedale Decorative Products Ltd. (the "Company") is hereby offering to the
public 833,000 shares of common stock, no par value (the "Common Stock"), and
833,000 Class A redeemable common stock purchase warrants (the "Warrants"). The
Common Stock and the Warrants will be offered through J.P. Turner & Company,
L.L.C. (the "Underwriter"). The Shares and Warrants are being sold separately
and will be separately transferable immediately upon issuance. The offering of
the Shares and Warrants hereby is sometimes referred to as the "Offering"
herein.

Each Warrant entitles the holder to purchase one share of Common Stock at an
exercise price of $6.00 per share, subject to adjustment in certain events,
during the four year period commencing one year from the date of this Prospectus
(the "Effective Date"). The Warrants are subject to redemption by the Company at
$.10 per Warrant, at any time commencing one year from the Effective Date (or
earlier with the consent of the Underwriter) and prior to their expiration, on
not less than 30 days' written notice to the holders of the Warrants, provided
the closing bid price per share of Common Stock if traded on the Nasdaq SmallCap
Market, or the last sales price per share if listed on the Nasdaq National
Market or a national exchange has been at least 150% ($9.00 per share) of the
current Warrant exercise price, for a period of 10 consecutive business days
ending on the third day prior to the date upon which the notice of redemption is
given. The Warrants shall be exercisable until the close of the business date
preceding the date fixed for redemption. See "Description of
Securities--Warrants."

Prior to the Offering, there has been no market for the Units, Common Stock
or Warrants, and there can be no assurance that a market will develop for the
Company's securities in the future or that if developed, it will be sustained.
The Company is applying for quotation of the Common Stock and Warrants on the
Nasdaq SmallCap Market under the trading symbols "WALLF" and "WALLW",
respectively, and for listing on the Boston Stock Exchange under the symbols
"WAL" and "WALW", respectively.

The per share public offering price of the Units and the exercise price and
the other terms of the Warrants offered hereby were determined by negotiation
between the Company and the Underwriter and do not necessarily bear any direct
relationship to the Company's assets, earnings, book value per share or other
generally accepted criteria of value. See "Underwriting".

AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK
AND IMMEDIATE AND SUBSTANTIAL DILUTION. SEE "RISK FACTORS" COMMENCING ON PAGE 9
AND "DILUTION" ON PAGE 16.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

UNDERWRITING
DISCOUNTS AND
PRICE TO PUBLIC COMMISSIONS(1)

Per Share.............................................. $6.00 $.60
Per Warrant............................................ $.125 $.0125
Total................................................ $5,102,125 $570,212.50

PROCEEDS TO
THE COMPANY(2)

Per Share.............................................. $5.40
Per Warrant............................................ $.1125
Total................................................ $4,591,912.50

(1) Does not include additional consideration to be received by the Underwriter
in the form of (i) a non-accountable expense allowance equal to 3% of the
gross offering proceeds, (ii) any value attributable to the Underwriter's
Purchase Option ("Underwriter's Warrant") entitling the Underwriter to
purchase up to 83,300 Shares at a price per share equal to 120% of the
initial public offering price per Unit, and (iii) a financial consulting
agreement with the Underwriter for a period of twenty-four months for an
aggregate consideration of $48,000 payable in full on the closing of the
Offering. In addition, the Company has agreed to indemnify the Underwriter
against certain liabilities under the Securities Act of 1933, as amended
(the "Act"). See "Underwriting".

(2) After deducting discounts and commission payable to the Underwriter, but
before payment of the Underwriter's non-accountable expense allowance of
$153,065.75 (or $176,023.31 if the Over-Allotment Option, defined below, is
exercised in full) or the other expenses of the Offering, estimated at
$320,000 payable by the Company. See "Underwriting".

(3) The Company has granted the Underwriter an option, exercisable for 45 days
after the Effective Date to purchase up to an additional 124,950 Shares and
Warrants from the Company upon the same terms and conditions set forth
above, solely for the purpose of covering over-allotments, if any (the
"Over-Allotment Option"). If the Over-Allotment Option is exercised in full,
the total Price to the Public, Underwriting Discounts and Commissions,
Proceeds to the Company will be $5,867,443.75, $586,744.38 and $5,280,699.38
respectively. See "Underwriting."

The Shares and Warrants offered by the Prospectus are being offered by the
Underwriter on a "firm commitment" basis, when, as and if delivered to and
accepted by the Underwriter, subject to prior sale, and other conditions and
legal matters. The Underwriter reserves the right to withdraw, cancel or modify
the Offering and to reject orders, in whole or in part, for the purchase of any
of the securities offered notwithstanding tender by check or otherwise. It is
expected that delivery of the certificates representing the Units will be made
against payment therefor at the offices of the Underwriter, 3340 Peachtree Road,
Suite 450, Atlanta, Georgia 30326 on or about , 1998.

J.P. TURNER & COMPANY, L.L.C.

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The date of this Prospectus is , 1998

CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK AND
WARRANTS OFFERED HEREBY, INCLUDING PURCHASES OF THE COMMON STOCK OR WARRANTS TO
STABILIZE THEIR MARKET PRICE, PURCHASES OF THE COMMON STOCK OR WARRANTS TO COVER
SOME OR ALL OF A SHORT POSITION IN THE COMMON STOCK OR WARRANTS MAINTAINED BY
THE UNDERWRITER AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING".

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMPANY'S
COMMON STOCK ON NASDAQ IN ACCORDANCE WITH RULE 103 OF REGULATION M. "SEE PLAN OF
DISTRIBUTION."

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ENFORCEABILITY OF CIVIL LIABILITIES AGAINST FOREIGN PERSONS

The Company and its officers, directors and auditors are residents of Canada
and substantially all of the assets of the Company are or may be located outside
the United States. As a result, service of process may be effected upon the
Company through the offices of Sichenzia Ross & Friedman LLP in New York, but it
may be difficult for investors to effect service of process within the United
States upon non-resident officers and directors, or to enforce against them
judgments obtained in the United States courts predicated upon the civil
liability provision of the Securities Act or state securities laws. The Company
has been advised by its Canadian legal counsel, Torkin, Manes, Cohen & Arbus
that a judgment of a United States court predicated solely upon civil liability
under the Securities Act would probably be enforceable in Canada if the United
States court in which the judgment was obtained had a basis for jurisdiction in
the matter that was recognized by a Canadian court for such purposes. However,
there is uncertainty whether an action could be brought in Canada in the first
instance on the basis of liability predicated solely upon such laws. If
investors have questions with regard to these issues, they should seek the
advice of their individual counsel. The Company has also been advised by its
Canadian legal counsel Torkin, Manes, Cohen & Arbus that, pursuant to the
Currency Act (Canada), a judgment by a court in any Province of Canada may only
be awarded in Canadian currency. Pursuant to the provision of the Courts of
Justice Act (Ontario), however, a court in the Province of Ontario shall give
effect to the manner of conversion to Canadian currency of an amount in a
foreign currency, where such manner of conversion is provided for in an
obligation enforceable in Ontario.

EXCHANGE RATE DATA

The Company maintains its books of account in Canadian dollars, but has
provided the financial data in this Prospectus in United States dollars with its
audit conducted in accordance with generally accepted auditing standards in the
United States of America. All references to dollar amounts in this Prospectus,
unless otherwise indicated, are in United States dollars.

The following table sets forth, for the periods indicated, certain exchange
rates based on the noon buying rate in New York City for cable transfers in
Canadian dollars. Such rates are the number of United States dollars per one
Canadian dollar and are the inverse of rates quoted by the Federal Reserve Bank
of New York for Canadian dollars per US$1.00. The average exchange rate is based
on the average of the daily exchange rates during such periods. On January 7,
1998, the exchange rate was Cdn.$1.00 per US$.6994.

YEAR ENDED DECEMBER 31,
------------------------------------------

1994 1995 1996 1997
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RATE AT END OF PERIOD............................. $ 0.7128 $ 0.7323 $ 0.7301 $ 0.6999
AVERAGE RATE DURING PERIOD........................ 0.7320 0.7288 0.7333 0.7222
HIGH.............................................. 0.7632 0.7527 0.7513 0.7487
LOW............................................... 0.7103 0.7023 0.7235 0.6945

PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS
(INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS THE
CONTEXT OTHERWISE REQUIRES, THE TERM "COMPANY" REFERS TO ROSEDALE DECORATIVE
PRODUCTS LTD. AND ITS WHOLLY-OWNED SUBSIDIARIES ROSEDALE WALLCOVERINGS & FABRICS
INC. ("ROSEDALE") AND ONTARIO PAINT & WALLPAPER LTD. ("ONTARIO"). EXCEPT AS
OTHERWISE INDICATED HEREIN, THE INFORMATION CONTAINED IN THIS PROSPECTUS GIVES
NO EFFECT TO THE EXERCISE OF (I) THE OVER-ALLOTMENT OPTION, (II) THE
UNDERWRITER'S WARRANTS, (III) WARRANTS OFFERED HEREBY, OR (IV) OPTIONS GRANTED
UNDER THE COMPANY'S STOCK OPTION PLAN. ALL PER SHARE INFORMATION IN THIS
PROSPECTUS HAS BEEN ADJUSTED TO REFLECT A 10,417 FOR ONE STOCK SPLIT OF THE
COMPANY'S COMMON STOCK TO BE EFFECTED IMMEDIATELY PRIOR TO THIS OFFERING.

THE COMPANY

The Company, through its two wholly-owned subsidiaries, Ontario and
Rosedale, designs, markets and distributes high quality residential
wallcoverings and designer fabrics. The Company also operates a retail paint and
wallpaper store located in downtown Toronto, Canada which has been in continuous
operation since 1913. The Company's products include wallpaper and wallpaper
borders (which are collectively referred to as wallcoverings), designer fabrics
and paint.

The Company designs wallcovering and designer fabric collections that it
distributes under its own brand names. Wallcoverings and fabrics sold under
Company brand names are manufactured for the Company on an outsource basis by
third party manufacturers. In addition to selling its own brand name
wallcoverings and fabrics, the Company is also a wholesale distributor of
wallcoverings designed and manufactured by other manufacturers. Wholesale
distribution of other manufacturers' wallcoverings is done through the Company's
Ontario subsidiary. Design and distribution of Company brand wallcoverings is
accomplished mainly through the Rosedale subsidiary and to a lesser extent
through the Ontario subsidiary.

Sales of Company brand wallcoverings accounts for approximately 54% of the
Company's total revenues, and wholesale distribution of wallcoverings under
non-company brand names accounts for approximately 29% of the Company's total
revenues. Sales of designer fabrics accounts for approximately 12% of the
Company's revenues, and the Company's retail paint and wallpaper store generates
approximately 5% of the Company's annual revenues.

In 1996, the Company distributed approximately 26 Company brand wallcovering
and fabric collections to its customer base of wholesale distributors who sold
the Company's products to approximately 10,000 to 20,000 retail wallpaper and
paint stores and interior designers worldwide. In addition, the Company's
Ontario subsidiary distributed approximately 47 non-Company brand wallcovering
collections to approximately 1,700-2,000 home decorating stores in Canada in
1996.

The Company believes that its product mix of wallcoverings, designer fabrics
and paints, along with its newer offerings of floor coverings and ceiling tiles
presents significant cross marketing opportunities. Rosedale has recently
introduced wallcovering and fabric sample books that include coordinated carpets
and area rugs.

The Company intends to expand the products offered by its Ontario subsidiary
to include a line of decorative ceiling tiles for commercial and residential
customers. The decorative ceiling tiles are designed to fit into standard
suspension ceiling frameworks and are embossed with designs that emulate
ceilings

found in many turn of the century buildings. The Company believes that its
decorative ceiling tiles will be attractive to commercial users, such as
restaurants looking to recreate turn of the century decor.

The Company believes that offering a combination of wallcoverings,
decorative fabrics and floor coverings provides significant opportunities for
cross merchandising of the Company's products. For example, by offering
coordinated lines of wallcoverings, fabrics, and floor coverings, consumers
looking to purchase wallcoverings will be exposed to the Company's designer
fabric and floor covering lines. The end result being that the Company's
products are presented to a wider variety of retail stores and consumers
enabling the Company to diversify its customer base.

The Company's strategy is to continue to capitalize on the brand name
recognition enjoyed by many of its product lines and to utilize its distribution
network to distribute a greater variety of products manufactured by third
parties. The Company intends to increase the number of retail locations that
carry products that are either manufactured, designed or distributed by the
Company, to increase the amount of products carried by such stores and to
penetrate other geographic markets including the United States, with special
emphasis on foreign markets.

Rosedale Decorative Products Ltd., was formed under the laws of Ontario,
Canada on May 14, 1997, to consolidate the business of its two wholly-owned
operating subsidiaries, Ontario Paint & Wallpaper Ltd., a company organized
under the laws of the Province of Ontario, Canada ("Ontario"), and Rosedale
Wallcoverings & Fabrics, Inc., a Company organized under the laws of the
Province of Ontario, Canada ("Rosedale"). Unless the context otherwise requires,
the term "Company" refers to Rosedale Decorative Products Ltd. and its
wholly-owned subsidiaries Ontario and Rosedale.

The Company's principal offices are located at , 731 Millway Avenue,
Concord, Ontario, Canada L4K 3S8 and its telephone number is (416) 593-4519.

THE OFFERING

Securities Offered.............. 833,000 Shares of Common Stock and 833,000 Warrants. Each
Warrant shall entitle the holder to purchase one share of
Common Stock at $6.00 per share. The Common Stock and
Warrants will be separately transferable immediately after
the closing of this Offering.

Common Stock Outstanding
Prior to Offering(1).......... 1,250,000

Common Stock to be Outstanding
After Offering(1)............. 2,083,000

Warrants Outstanding
Prior to Offering(1).......... 0

Warrants to be Outstanding
After Offering(1)............. 833,000. Each Warrant is exercisable at an exercise price
of $6.00 per share. The exercise price of the Warrants is
subject to adjustment in certain circumstances. The
Warrants are exercisable during the four year period
commencing one year from the date of the prospectus. The
Warrants are redeemable by the Company commencing one year
from the date of the prospectus (or earlier with the
consent of the Representative) at a price equal to 150% of
the offering price of the Common Stock on 30 days' prior
written notice provided the last sales price of the Common
Stock for 30 consecutive business days equals or exceeds
150% of the current Warrant exercise price. See
"Description of Securities", "Principal Stockholders" and
"Underwriting".

Use of Proceeds................. The net proceeds to the Company from the sale of the
Securities are estimated to be approximately $4,030,000
after deducting commissions and expenses of the Offering,
which expenses are estimated at $1,072,125. The Company
intends to use the net proceeds of this Offering for new
product development, sales and marketing, hiring
additional personnel, the repayment of certain
indebtedness and for working capital and general corporate
purposes including potential synergistic acquisitions. See
"Use of Proceeds."

Proposed Nasdaq SmallCap
Market Symbols(2):............ WALLF; WALLW

Proposed Boston Stock
Exchange Symbols(2):.......... WAL; WALW

Risk Factors.................... The securities offered hereby are speculative, involve a
high degree of risk and immediate substantial dilution,
and should be considered only by investors who can afford
to sustain a loss of their entire investment. See "Risk
Factors" and "Dilution."

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(1) Does not include an aggregate of 1,166,200 shares which may be issued upon
exercise of (i) the Warrants offered hereby; (ii) the Underwriter's Option;
and (iii) the Underwriter's over-allotment option; (iv) other outstanding
options; and (v) 750,000 shares of Common Stock which may be issued pursuant
to an executive bonus plan. See "Management," "Description of Securities"
and "Underwriting."

(2) Notwithstanding quotation on the Nasdaq SmallCap Market and listing on the
Boston Stock Exchange, there can be no assurance that an active trading
market for the Company's securities will develop or, if developed, will be
sustained.

SUMMARY COMBINED FINANCIAL INFORMATION

STATEMENT OF INCOME DATA:

YEAR ENDED DECEMBER 31,
-------------------------------------------
1997 1996 1995
------------- ------------- -------------

Revenues........................................ $ 20,757,423 $ 18,927,369 $ 18,552,166
Gross Profit.................................... 7,407,390 6,625,768 6,946,170
Income from operations.......................... 1,306,002 912,617 429,435
Earnings (loss) per share(1).................... 0.64 0.34 (0.46)
Weighted average number of shares
outstanding(1)................................ 1,250,000 1,250,000 1,250,000

BALANCE SHEET DATA:

DECEMBER 31, 1997
-------------------------------- DECEMBER 31,
AS ADJUSTED(2) ACTUAL 1996
----------------- ------------- -------------

Working capital............................. $ 5,562,966 $ 1,532,966 $ 2,019,038
Total assets................................ 16,794,832 15,694,832 13,042,385
Long-term liabilities....................... 2,966,281 2,966,281 2,622,877
Total liabilities........................... 12,833,809 13,933,809 12,012,282
Total shareholders' equity.................. 5,791,023 1,761,023 1,030,103

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

(1) After giving effect to an approximate 1:10,417 stock split which increased
total shares outstanding from 120 to 1,250,000.

(2) Reflects the issuance of 833,000 shares of Common Stock and 833,000
Warrants, offered hereby and the application of the net proceeds therefrom.

RISK FACTORS

PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS, IN
ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH INVESTMENTS IN THE SECURITIES OFFERED HEREBY. THIS PROSPECTUS CONTAINS
CERTAIN FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE
COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THE
FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET
FORTH BELOW AND ELSEWHERE IN THIS PROSPECTUS. AN INVESTMENT IN THE SECURITIES
OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.

1. UNCERTAINTY OF NEW PRODUCT DEVELOPMENT AND NO ASSURANCE OF MARKET
ACCEPTANCE. The perpetuation of the Company's success is dependent upon
continued name recognition and acceptance of the Company's existing and new
products. No assurances can be made that any or all products will achieve or
maintain consumer acceptance. Continued product development and
commercialization efforts are subject to all of the risks inherent in the
development of new products including achieving market acceptance, competition.
There is no assurance that the Company will be able to develop, manufacture and
distribute new products which achieve market acceptance. See "Business".

2. DEPENDENCE ON SUPPLIERS FOR WHOLESALE DISTRIBUTION. The Company is
dependent upon wallcovering suppliers for non-Company brand name wallcoverings
that the Company distributes for third parties. Wholesale distribution of
non-Company brand name wallcoverings accounts for a significant portion of the
Company's total revenues. Any disruption in the supply of wallcoverings could
have a significant adverse impact upon the Company.

3. DEPENDENCE ON THIRD PARTY MANUFACTURERS FOR COMPANY BRAND NAME
WALLCOVERINGS AND FABRICS. The Company is dependent upon third parties to
manufacture its Company Brand Name wallcovering and fabric collections. The
Company enters into agreements with wallcovering and fabric manufacturers for
each collection that it designs and maintains no long term agreements with its
manufacturers. It is the Company's intention to use current or additional third
parties to manufacture its Company Brand Name wallcoverings and fabrics. The
Company believes that it will be able to enter into arrangements with third
parties to manufacture its products, as needed, however, no assurance can be
given that it will be able to do so on reasonable terms or otherwise.

4. DEPENDENCE ON THIRD PARTY FREIGHT HAULERS. The Company is dependent on
one independent freight hauler to ship approximately 90% of the Company's
products to distribution facilities. The ability of the Company to control its
freight expenses is a significant factor in the Company's gross profit margin.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations." There is no assurance that the Company will be able to maintain
acceptable freight pricing and arrangements. Furthermore, a labor slowdown,
strike or other matters beyond management's control may adversely affect the
Company's ability to ship its products on a timely basis or at all. See
"Business."

5. DEPENDENCE ON MAJOR CUSTOMERS. Approximately 14% of the Company's
revenue is derived from sales to one customer, The Blonder Company. No other
customer accounts for more than 10% of the Company's revenues. There is no
assurance that the Company will maintain its relationship with The Blonder
Company. In the event The Blonder Company does not continue acquiring products
from the Company, the Company's business and results of operations would be
materially adversely effected.

6. UNCERTAINTY AS TO COMPANY'S ABILITY TO EXPAND INTO UNITED STATES AND
OTHER MARKETS. In order to further penetrate the U.S., European, Asian and
Southeast Asian markets, the Company will have to devote significant resources
to advertising and marketing in such countries in order to develop consumer
awareness of its products and to procure sufficient shelf space for its
products. There can be no assurance that the Company will be successful in its
efforts. The Company intends to devote a portion of the net proceeds of this
Offering toward the continued expansion into the U.S., Asian, Southeast Asian
and European. See "Business".

7. INTENSE COMPETITION IN WALLCOVERING/FABRIC MARKET. The Company's
business is subject to significant competition. The Company's primary business
of designing and distributing wallcoverings and decorative fabrics is highly
competitive. The Company competes with other wholesale distributors of
wallcoverings and fabrics and with manufacturers of wallcoverings and fabrics
that maintain their own distribution network. All of the competitors that
manufacturer wallcoverings and fabrics have greater financial resources than the
Company and greater control over the products they distribute. Certain of the
Company's competitors that distribute wallcoverings and fabrics, but do not
manufacture, have greater financial resources than the Company.

The Company's Brand Name wallcoverings and fabrics, such as Concord-TM-,
Ridley Nash-TM-, Rosedale-TM-, Cambridge Studios-TM-, Hamilton House-TM-, and
Kingsway Fabrics-TM- compete with other brands of wallcoverings and fabrics
primarily on the basis of quality, design and color and are therefore subject to
consumers' tastes and preferences which may change at any time. In addition, the
Company Brand Name wallcoverings and fabrics compete against brands produced and
distributed by competitors that may have greater financial resources than the
Company.

The Company's major competitors in the United States are York Wallcoverings,
Eisenhart Wallcoverings and S.A. Maxwell & Co. and its major competitors in
Canada are Imperial Home Decor Group, Sunworthy Wallcoverings, Provincial
Wallcoverings and Decorlux. The company also competes with national and regional
retail distributors, many of which have greater financial and other resources of
the Company. See "Business--Competition".

8. UNCERTAINTIES OF GOVERNMENT REGULATION. The Company is subject to
various Canadian and United States regulations relating to health and safety
standards. Regulations in new markets and future changes in existing regulations
may adversely impact the Company by raising the cost of production. See
"Business-Government Regulation".

9. DEPENDENCE ON KEY PERSONNEL. The Company's future success will depend to
a significant extent on the efforts of key management personnel, Sidney Ackerman
its President, Alan Fine, its Chief Executive Officer. The Company is in the
process of entering into employment agreements with Sidney Ackerman and Alan
Fine. The loss of one or more of these key employees could have a material
adverse effect on the Company's business. The Company has acquired key-person
life insurance policies on Sidney Ackerman and Alan Fine. In addition, the
Company believes that its future success will depend in large part upon its
continued ability to attract and retain highly qualified management, technical
and sales personnel. There can be no assurance that the Company will be able to
attract and retain the qualified personnel necessary for its business. See
"Management".

10. POTENTIAL REVENUE CANADA TAX LIABILITY. In 1992, The Company's Rosedale
subsidiary formed a California corporation for the purpose of manufacturing
window blinds to be sold as an accompaniment to its existing wallcovering and
other products. The window blind company was sold in 1994, and in connection
therewith, Rosedale claimed a business loss deduction on their investment in
such company. Rosedale was subsequently informed by Revenue Canada that the
deduction which it claimed was being allowed as a capital loss and not as a
business loss deduction, and, as a result, Rosedale owed an additional $652,110
in taxes. The Company's Rosedale subsidiary has filed a formal notice of
objection contesting Revenue Canada's classification of its deduction. No
assurance can be given that Rosedale will be able to reach an agreement with the
tax authorities, that the tax authorities will not immediately seek payment of
the taxes, or that the tax authorities will not commence an action or file a
lien against Rosedale in order to recover the taxes. See "Business--Legal
Proceedings."

11. CONTROL BY EXISTING STOCKHOLDERS. Upon the completion of this Offering,
the Company's existing shareholders will collectively beneficially own
approximately 60% (57% if the Underwriters' Over-Allotment Option is exercised
in full) of the Company's outstanding Common Stock. Because of their beneficial
stock ownership, these stockholders will be in a position to continue to elect
the majority

members of the Board of Directors and decide matters requiring stockholder
approval. In addition, Sidney Ackerman, Alan Fine, the Ackerman Family Trust and
454590 Ontario Limited entered into a Common Stock voting agreement which
provides that they agree to vote all of their Shares unanimously in respect of
any matter to be voted on at any meeting of the shareholders of the Company and
to withhold their votes or vote against any such matter regarding which they are
unable to vote their shares unanimously. See "Business-Voting Agreements." See
"Principal Stockholders."

12. NO PRIOR PUBLIC MARKET. Prior to this Offering, there has been no
public market for the Units, Common Stock and/or Warrants. Accordingly, there
can be no assurance that an active trading market will develop and be sustained
upon the completion of this Offering. The initial public offering price of the
Units has been determined by negotiations between the Company and the
Underwriter and does not necessarily bear any relation to the Company's asset
value, earnings or other objective criteria. See "Underwriting." The stock
market has, from time to time, experienced extreme price and volume fluctuations
which often have been unrelated to the operating performance of particular
companies. Although it has no obligation to do so, the Underwriter intends to
engage in market-making activities or solicited brokerage activities with
respect to the purchase or sale of the Units on the Nasdaq SmallCap Market.
However, no assurance can be given that the Underwriter will continue to
participate as a market-maker in the securities of the Company or that other
broker/ dealers will make a market in such securities which may adversely impact
the liquidity of the securities. Regulatory developments and economic and other
external factors, as well as period-to-period fluctuations in financial results,
may also have a significant impact on the market price of such securities. See
"Description of Securities."

13. NEED FOR ADDITIONAL FINANCING. The Company believes that the proceeds
of the Offering will, together with revenues from operations, be sufficient to
finance the Company's working capital requirements for a period of at least 24
months following the completion of the Offering. In addition, a part of the
Company's strategy is to expand its product mix, increase market share, and
develop markets in Europe and Southeast Asia. The continued expansion and
operation of the Company's business beyond such 24 month period and its ability
to expand its business may be dependent upon its ability to obtain additional
financing. There can be no assurance that additional financing will be available
on terms acceptable to the Company, or at all. In the event that the Company is
unable to obtain such additional financing as it becomes necessary, the Company
may not be able to achieve all of its business plans. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

14. IMMEDIATE AND SUBSTANTIAL DILUTION. This Offering involves an immediate
and substantial dilution to investors. Purchasers of Shares in the Offering will
incur an immediate dilution of $3.22 per Share in the net tangible book value of
their investment from the initial public offering price, which dilution amounts
to approximately 54% of the initial public offering price per Share. Investors
in the Offering will pay $6.00 per Share, excluding the value of the Warrants,
as compared with an average cash price of $1.41 per share of Common Stock paid
by existing stockholders. See "Dilution."

15. BROAD DISCRETION IN APPLICATION OF PROCEEDS BY
MANAGEMENT. Approximately 49.6% of the net proceeds of this offering will be
applied towards new product development and 9.4% of the net proceeds of this
Offering will be applied to working capital and general corporate purposes.
Accordingly, management of the Company will have broad discretion over the use
of proceeds. See "Use of Proceeds".

16. SHARES ELIGIBLE FOR FUTURE SALE. Of the 2,083,000 shares of Common
Stock of the Company to be outstanding upon completion of this Offering,
1,250,000 shares shall be "restricted securities," which are owned by
"affiliates" of the Company, as those terms are defined in Rule 144 promulgated
under the Act. Absent registration under the Act, the sale of such shares is
subject to Rule 144, as promulgated under the Act. All of the "restricted
securities" are eligible for resale under Rule 144. In general, under Rule 144,
subject to the satisfaction of certain other conditions, a person, including an
affiliate of the Company, who has beneficially owned restricted shares of Common
Stock for at least one year is permitted to sell in a brokerage transaction,
within any three-month period, a number of shares that does not exceed the
greater

of 1% of the total number of outstanding shares of the same class, or if the
Common Stock is quoted on Nasdaq or a stock exchange, the average weekly trading
volume during the four calendar weeks preceding the sale. Rule 144 also permits
a person who presently is not and who has not been an affiliate of the Company
for at least three months immediately preceding the sale and who has
beneficially owned the shares of Common Stock for at least two years to sell
such shares without regard to any of the volume limitations as described above.
Holders of 1,250,000 shares of Common Stock are affiliates of the Company. All
of the Company's shareholders who are affiliates have agreed not to sell or
otherwise dispose of any of their shares of Common Stock now owned or issuable
upon the exercise of any option for a period of 18 months from the Effective
Date, without the prior written consent of the Underwriter. No prediction can be
made as to the effect, if any, that sales of shares of Common Stock or the
availability of such shares for sale will have on the market prices of the
Company's securities prevailing from time to time. The possibility that
substantial amounts of Common Stock may be sold under Rule 144 into the public
market may adversely affect prevailing market prices for the Common Stock and
Warrants and could impair the Company's ability to raise capital in the future
through the sale of equity securities. See "Shares Eligible for Future Sale".

17. NO DIVIDENDS AND NONE ANTICIPATED. To date, no dividends have been
declared or paid on the Common Stock, and the Company does not anticipate
declaring or paying any dividends in the foreseeable future, but rather intends
to reinvest profits, if any, in its business. Investors should, therefore, be
aware that it is unlikely that any dividends will be paid on the Common Stock in
the foreseeable future. See "Dividends".

18. RISK OF LOW PRICE STOCKS. The Company has applied to list the Units,
Common Stock and Warrants on the Boston Stock Exchange ("BSE") and expects to
list its securities on this exchange and it is anticipated that such securities
will also be traded on the Nasdaq SmallCap Market. If the Company's securities
are delisted from the BSE, they could become subject to Rule 15g-9 under the
Exchange Act, which imposes additional sales practice requirements on
broker-dealers which sell such securities to persons other than established
customers and accredited investors. For transactions in securities covered by
Rule 15g-9, a broker-dealer must make a special suitability determination for
the purchaser and have received the purchaser's written consent to the
transaction prior to the sale. Consequently, such rule may adversely affect the
ability of broker-dealers to sell the Company's securities and may adversely
affect the ability of purchasers in this Offering to sell in the secondary
market any of the Company's securities acquired hereby.

19. UNDERWRITER'S INFLUENCE ON THE MARKET. A significant amount of the
Units offered may be sold to customers of the Underwriter. Such customers
subsequently may engage in transactions for the sale or purchase of such Units
and may otherwise effect transactions in such securities. If they participate in
the market, the Underwriter may exert substantial influence on the market, if
one develops, for the Units, Common Stock and Warrants. Such market-making
activity may be discontinued at any time. The price and liquidity of the Units,
Common Stock and Warrants may be significantly affected by the degree, if any,
of the Underwriter's participation in such market. See "Underwriting."

20. POSSIBLE RESTRICTIONS IN MARKET-MAKING ACTIVITIES IN THE COMPANY'S
SECURITIES. The Underwriter has advised the Company that it intends to make a
market in the Company's securities. Regulation M, which was adopted to replace
Rule 10b-6 and certain other rules promulgated under the Exchange Act, may
prohibit the Underwriter from engaging in any market-making activities with
regard to the Company's securities for a period of five business days (or such
other applicable period as Regulation M may provide) prior to any solicitation
by the Underwriter of the exercise of Warrants until the latter of the
termination of such solicitation activity or the termination (by waiver or
otherwise) of any right that the Underwriter may have to receive a fee for the
exercise of the Warrants following such solicitation. As a result, the
Underwriter may not be able to provide a market for the Company's securities
during certain periods when

the Warrants are exercisable. Any cessation of the Underwriter's market-making
activities could have an adverse effect on the market price of the Company's
securities. See "Underwriting."

21. POSSIBLE ADVERSE EFFECT OF PENNY STOCK REGULATIONS ON THE LIQUIDITY OF
THE COMPANY'S SECURITIES. The Company intends to apply for listing of its
securities on the Nasdaq SmallCap Market. In the absence of the Common Stock
being quoted on Nasdaq and if the Common Stock is not listed on an exchange,
trading in the Common Stock would be covered by Rule 15g-9 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") if the Common
Stock is a "penny stock." Under such rule, broker-dealers who recommend such
securities to persons other than established customers and accredited investors
must make a special written suitability determination for the purchaser and
receive the purchaser's written agreement to a transaction prior to sale.
Securities are exempt from this rule if the market price is at least $5.00 per
share.

The Commission adopted regulations that generally define a penny stock to be
any equity security that has a market price of less than $5.00 per share,
subject to certain exceptions. Such exceptions include an equity security listed
on Nasdaq, and an equity security issued by an issuer that has (i) net tangible
assets of at least $2,000,000, if such issuer has been in continuous operation
for three years, (ii) net tangible assets of at least $5,000,000, if such issuer
has been in continuous operation for less than three years, or (iii) average
revenue of at least $6,000,000 for the preceding three years. Unless an
exception is available, the regulations require the delivery, prior to any
transaction involving a penny stock, of a disclosure schedule explaining the
penny stock market and the risks associated therewith.

If the Company's Common Stock were to become subject to the regulations
applicable to penny stocks, the market liquidity for the Common Stock and
Warrants would be severely affected, limiting the ability of broker-dealers to
sell the Common Stock and Warrants and the ability of purchasers in this
Offering to sell their Common Stock and Warrants in the secondary market. There
is no assurance that trading in the Common Stock and Warrants will not be
subject to these or other regulations that would adversely affect the market for
such securities.

22. POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS. The Warrants
offered hereby are redeemable, in whole or in part, at a price of $.10 per
Warrant, commencing one year after the Effective Date (or earlier with the
consent of the Underwriter) and prior to their expiration; provided that (i)
prior notice of not less than 30 days is given to the Warrantholders; (ii) the
closing bid price of the Common Stock if traded on the Nasdaq SmallCap Market,
or the last sales price per share if listed on the Nasdaq National Market or a
national exchange, on each of the 10 consecutive business days ending on the
third business day prior to the date on which the Company gives notice of
redemption has been at least 250% ($11.25 per share) of the current Warrant
exercise price; and (iii) Warrantholders shall have exercise rights until the
close of the business day preceding the date fixed for redemption. Notice of
redemption of the Warrants could force the holders to exercise the Warrants and
pay the Exercise Price at a time when it may be disadvantageous for them to do
so, or to sell the Warrants at the current market price when they might
otherwise wish to hold them, or to accept the redemption price, which may be
substantially less than the market value of the Warrants at the time of
redemption. See "Description of Securities-Warrants."

23. ISSUANCE OF ADDITIONAL SECURITIES. The Board of Directors of the
Company will have authority to issue an unlimited number of Class A Special
Shares with voting liquidation, conversion and other rights without the consent
or vote of the shareholders of the Company. The issuance of additional Class A
Special Shares by the Company's Board of Directors may adversely dilute the
proportionate equity interest and voting power of holders of Common Shares,
including investors under this offering. See "Description of Securities; Class A
Special Shares."

24. REQUIREMENTS OF CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATION IN
CONNECTION WITH THE EXERCISE OF THE WARRANTS. The Warrants offered hereby are
not exercisable unless, at the time of exercise, (i) there is a current
prospectus relating to the Common Stock issuable upon the exercise of the
Warrants under an

effective registration statement filed with the Securities and Exchange
Commission, and (ii) such Common Stock is then qualified for sale or exempt
therefrom under applicable state securities laws in the jurisdictions in which
the various holders of Warrants reside. There can be no assurance, however, that
the Company will be successful in maintaining a current registration statement.
After a registration statement becomes effective, it may require updating by the
filing of a post-effective amendment. A post-effective amendment is required (i)
any time after nine months subsequent to the effective date when any information
contained in the prospectus is over sixteen months old, (ii) when facts or
events have occurred which represent a fundamental change in the information
contained in the registration statement, or (iii) when any material change
occurs in the information relating to the plan or distribution of the securities
registered by such registration statement. The Company anticipates that this
Registration Statement will remain effective for at least nine months following
the date of this Prospectus or until September , 1998 assuming a post
effective amendment is not filed by the Company. The Warrants will be separately
tradeable and separately transferable from the Common Stock offered hereby
immediately commencing on the Effective Date. The Company intends to qualify the
Warrants and the shares of Common Stock issuable upon exercise of the Warrants
in a limited number of states, although certain exemptions under state
securities ("blue sky") laws may permit the Warrants to be transferred to
purchasers in states other than those in which the Warrants were initially
qualified. The Company will be prevented, however, from issuing shares of Common
Stock upon exercise of the Warrants in those states where exemptions are
unavailable and the Company has failed to qualify the Common Stock issuable upon
exercise of the Warrants. The Company may decide not to seek, or may not be able
to obtain, qualification of the issuance of such Common Stock in all of the
states in which the holders of the Warrants reside. In such a case, the Warrants
of those holders will expire and have no value if such Warrants cannot be
exercised or sold. See "Description of Securities".

25. NON-REGISTRATION IN CERTAIN JURISDICTIONS OF SHARES UNDERLYING THE
WARRANTS. Although the Common Stock and the Warrants will not knowingly be sold
to purchasers in jurisdictions in which they are not registered or otherwise
qualified for sale, purchasers may buy the Common Stock or Warrants in the
aftermarket or may move to jurisdictions in which the shares of Common Stock
issuable upon exercise of the Warrants are not so registered or qualified during
the period that the Warrants are exercisable. In such event, the Company could
be unable to issue shares to those persons desiring to exercise their Warrants
unless and until the shares could be registered or qualified for sale in the
jurisdiction in which such purchasers reside, or an exemption to such
qualification exists or is granted in such jurisdiction. If the Company was
unable to register or qualify the shares in a particular state and no exemption
to such registration or qualification was available in such jurisdiction, in
order to realize any economic benefit from the purchase of the Warrants, a
holder might have to sell the Warrants rather than exercising them. No assurance
can be given, however, as to the ability of the Company to effect any required
registration or qualification of the Common Stock or Warrants in any
jurisdiction in which registration or qualification has not already been
completed. See "Description of Securities--Warrants."

26. NO FORMAL DISTRIBUTION AGREEMENT. The Company does not maintain formal
agreements with its distributors, as is the practice in the industry. Therefore,
there can be no assurance that the Company will be able to find distributors to
distribute its products under terms and conditions that are reasonable to the
Company. Any future inability to provide for distribution under terms and
conditions that are reasonable may have a material adverse impact on the
Company's profitability. See "Business-Marketing and Distribution."

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of Securities
offered hereby at public offering prices of $6.00 per Share and $.125 per
Warrant, after deducting underwriting commissions and offering expenses to be
paid by the Company, is estimated to be $4,030,000. The Company expects to apply
the net proceeds of the Offering as follows:

APPROXIMATE PERCENTAGE OF
APPLICATION OF PROCEEDS AMOUNT NET PROCEEDS
- ------------------------------------------------------------------ ------------ ---------------

New Product Development(1)........................................ $ 2,000,000 49.6%
Sales and Marketing(2)............................................ 320,000 7.9%
Hire Additional Personnel(3)...................................... 180,000 4.5%
Payment of Financial Advisory Fee(4).............................. 50,000 1.3%
Repayment of Trade Payables(5).................................... 1,100,000 27.3%
Working Capital(6)................................................ 380,000 9.4%
------------ ---
Total....................................................... 4,030,000 100%
------------ ---
------------ ---

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

(1) The net proceeds allocated to new product development are expected to be
applied towards the development of new lines of wallcoverings and designer
fabrics as well as the development of new products such as decorative
ceiling tiles and floor coverings.

(2) The net proceeds allocated to marketing and sales are expected to be applied
towards the promotion of the Company's brands in their respective markets,
including North America, Europe and Southeast Asia, and expansion of the
Company's markets in the United States and Asia over the next 24 months. The
proceeds are expected to be applied to market research, distributor
incentive programs and sales person incentive programs.

(3) The Company anticipates hiring additional sales and operations employees and
has allocated these net proceeds to fund certain incremental costs over the
next 24 months.

(4) $50,000 will be paid to the Underwriter pursuant to a twelve month financial
advisory agreement, all of which is payable upon consummation of the
Offering.

(5) The net proceeds allocated to trade payables are expected to be applied
towards (i) payment of overdue accounts with certain suppliers which include
The Borden Company, and Zen Wallcoverings and (ii) payments required to
finance the increase in the Company's product inventories of Company brand
wallcoverings and designer fabrics as well as paints and, to a lesser
extent, non Company brand wallcoverings necessary to service the Company's
continued growth and expansion of its markets.

(6) The net proceeds allocated to working capital includes funds for general
corporate purposes such as financing accounts receivable and payment of
trade payables.

The foregoing represents the Company's estimate of the allocation of the net
proceeds of the Offering, based upon the current status of its operations and
anticipated business needs. It is possible, however, that the application of
funds will differ considerably from the estimates set forth herein due to
changes in the economic climate and/or the Company's planned business operations
or unanticipated complications, delays and expenses, as well as any potential
acquisitions that the Company may consummate, although no specific acquisition
has been identified. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Any reallocation of the net proceeds will
be at the discretion of the Board of Directors of the Company.

Any additional net proceeds realized from the exercise of the Over-Allotment
Option (up to approximately $665,827) will be added to the Company's working
capital.

Pending application, the net proceeds will be invested principally in
short-term certificates of deposit, money market funds or other short-term
interest-bearing investments.

The Company estimates that the net proceeds from this Offering will be
sufficient to meet the Company's liquidity and working capital requirements for
a period of 24 months from the completion of this Offering. In the event that
the Company consummates any acquisition, although no specific acquisition has
been identified, and no plans, proposals or arrangements currently exist in this
regard, such funds will be derived from the funds currently allocated to working
capital or from revenues generated from the Company's operations.

DIVIDEND POLICY

The Company has never paid or declared dividends on its Common Stock. The
payment of cash dividends, if any, in the future is within the discretion of the
Board of Directors and will depend upon the Company's earnings, its capital
requirements, financial condition and other relevant factors. The Company
intends, for the foreseeable future, to retain future earnings for use in the
Company's business.

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
December 31, 1997 and as adjusted to reflect the sale of 833,000 Shares of
Common Stock and 833,000 Warrants, offered hereby. The information provided
below should be read in conjunction with the other financial information
included elsewhere in this Prospectus.

DECEMBER 31, 1997
-----------------------

ACTUAL AS ADJUSTED
---------- -----------
Long-term liabilities, less current maturities...................... 2,966,281 2,966,281
Shareholders' equity:
Capital Stock, unlimited shares authorized: 1,250,000 issued and
outstanding(1); and 2,083,000 issued and outstanding as
adjusted.......................................................... 163 4,030,163
Foreign currency transaction adjustment............................. (175,205) (175,205)
Retained earnings................................................... 1,936,065 1,936,065
Total shareholders' equity........................................ 1,761,023 5,791,023
Total capitalization.............................................. 4,727,304 8,757,304

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

(1) Represents the rollover of 120 shares in the existing companies into
1,250,000 shares of Common Stock of the Company. Does not include 750,000
shares of Common Stock provided for issuance under the Company's Stock
Option Plan.

(2) Reflects the issuance of 833,000 shares of Common Stock by the Company in
connection with this Offering. Does not include 750,000 shares of Common
Stock provided for issuance under the Company's Stock Option Plan.

DECEMBER 31, 1997
-----------------

(3) Trade Payables............................................................................. $ 6,358,585
Repayment of trade payables from offering proceeds (see use of proceeds).................... (1,100,000)
-----------------
Balance..................................................................................... $ 5,258,585
-----------------
-----------------

DILUTION

Dilution represents the difference between the initial public offering price
paid by the purchasers in the Offering and the net tangible book value per share
immediately after completion of the Offering. Net tangible book value per Share
represents the amount of the Company's total assets minus the amount of its
liabilities and intangible assets divided by the number of shares outstanding.
As of December 31, 1997, the net tangible book value of the Company's Common
Stock was $1,761,023 or $1.41 per share. Without taking into account any changes
in net tangible book value after December 31, 1997, other than to give effect to
the sale of the Units offered hereby and the receipt of the net proceeds of this
Offering, the pro forma net tangible book value of the Company as of December
31, 1997 would have been $5,791,0230 or $2.78 per share. Consequently, there
will be an immediate increase in net tangible book value of $1.37 per Share to
the existing shareholders and an immediate substantial dilution (i.e. the
difference between the offering price of $6.00 per share, assuming no value is
attributed to the Warrants, and the pro forma net tangible book value per Share
after the Offering) of $3.22 or 54% to new investors purchasing the Shares
offered hereby.

The following table illustrates, as of December 31, 1997, this per share
dilution:

Public offering price per Share............................... $ 6.00
Net tangible book value before Offering(1).................. $ 1.41
Increase per Share attributable to new investors............ $ 1.37
Pro forma net tangible book value per Share after
Offering(1)................................................. $ 2.78
---------
Dilution per Share to new investors(1)........................ $ 3.22
---------
---------

The following table summarizes, as of December 31, 1997, the total number of
shares of Common Stock purchased from the Company, the total consideration paid,
and the average price per share paid by the existing shareholders and by new
investors who purchase Units pursuant to this Offering. The computation excludes
any value ascribed to or proceeds relating to the Warrants.

PERCENTAGE PERCENTAGE AVERAGE
SHARES UNDERLYING OF TOTAL AGGREGATE OF TOTAL PRICE
UNITS PURCHASED(1) SHARES CONSIDERATION CONSIDERATION PER SHARE
------------------ ------------- ------------- ----------------- -------------

Existing
Shareholders...... 1,250,000 60% $ 1,761,023 26% 1.41
New Investors....... 833,000 40% $ 4,998,000 74% 6.00
---------- --- ------------- ---
Total......... 2,083,000 100% $ 6,759,023 100%
---------- --- ------------- ---
---------- --- ------------- ---

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

(1) This information does not include (i) 750,000 Shares that may be issued
under the Company's Stock Option Plan, (ii) 83,300 Shares issuable upon the
exercise of the Underwriters' Option and (iii) 124,950 Shares and Warrants
available from the Company under the over-allotment option.

SELECTED FINANCIAL DATA

The following table sets forth selected historical financial data and other
operation information of the Company. The selected historical financial data in
the table for the years ended December 31, 1997 and 1996 is derived from the
audited financial statements of the Company. The selected financial data set
forth below should be read in conjunction with the Company's financial
statements and notes thereto and with the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

STATEMENT OF OPERATIONS DATA:

YEARS ENDED DECEMBER 31,
-------------------------------------------
1997 1996 1995
------------- ------------- -------------

Total revenues...................................................... $ 20,757,423 $ 18,927,369 $ 18,552,166
Total costs and expenses............................................ 19,957,595 18,503,798 19,125,056
Net income (loss)................................................... 799,828 423,571 (572,890)
Net income (loss) per common share(1)............................... 0.64 0.34 (0.46)
Weighted average common shares outstanding(1)....................... 1,250,000 1,250,000 1,250,000

BALANCE SHEET DATA:

DECEMBER 31, 1997
----------------------------- DECEMBER 31,
AS ADJUSTED(2) ACTUAL 1996
-------------- ------------- -------------

Working capital.................................................... $ 5,562,966 $ 1,532,966 $ 2,164,962
Total assets....................................................... 16,794,832 15,694,832 13,042,385
Total liabilities.................................................. 12,833,809 13,933,809 11,866,358
Total stockholders' equity......................................... 5,791,023 1,761,023 1,176,027

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

(1) Reflects the issuance of 1,250,000 shares of Common Stock of the Company in
exchange for all of the outstanding common stock of the predecessor
companies.

(2) Reflects the issuance of 833,000 shares of Common Stock and 833,000
Warrants, offered hereby and the application of the net proceeds therefrom.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

The statements contained in this Prospectus that are not historical are
forward looking statements, including statements regarding the Company's
expectations, intentions, beliefs or strategies regarding the future. Forward
looking statements include the Company's statements regarding liquidity,
anticipated cash needs and availability and anticipated expense levels. All
forward looking statements included in this prospectus are based on information
available to the Company on the date hereof, and the Company assumes no
obligation to update any such forward looking statement. It is important to note
that the Company's actual results could differ materially from those in such
forward looking statements. Among the factors that could cause actual results to
differ materially are the factors detailed in the risks discussed in the " Risk
Factors" section included in this Prospectus at page 9.

The wallcoverings, decorative fabrics and paint markets are highly
competitive and consists of foreign and domestic manufacturers and distributors
most of whom are larger and have greater resources than the Company.

The Company's future success as a designer and distributor of high quality
wallcoverings and designer fabrics will be influenced by several factors
including the ability of the Company to efficiently meet the quality and design
requirements of its customers, management's ability to evaluate the public's
quality and design requirements and to achieve market acceptance of its
wallcoverings and designer fabrics collections. Further factors impacting the
Company's operations are increases in expenses associated with continued sales
growth, the ability of the Company to control costs, to develop products with
satisfactory profit margins and the ability to develop and manage the
introduction of new product lines and competition.

The Company's customer base is divided among national and regional wholesale
distributors, professional interior designers and large retail chains in the
United States and Canada. The Blonder Company accounts for 14 % of the Company's
sales. No other customer accounts for more than 10% of the Company's sales.
Approximately 21.54% of the Company's sales are to national distributors, 21.51%
are to regional distributors, 0.42% to interior designers and 16.22% to retail
chains. The remaining 40.31% are to independent retail stores.

The Company is not dependent upon any major customers for a significant
portion of its revenues. However approximately 12 customers account for 44% of
the Company's revenues. These include The Blonder Company, Color Your World, Key
Wallcoverings, Gardner Wallcoverings, Fashion Wallcoverings, Seabrook
Wallcoverings, Images Wallcoverings, Atlas Wallcoverings, G & W Wallcoverings,
Hunter & Co., Sears Canada and Walltrends.

RESULTS OF OPERATIONS

FISCAL YEAR ENDED DECEMBER 31, 1997 COMPARED TO FISCAL YEAR ENDED DECEMBER
31, 1996.

Revenues for the fiscal year ended December 31, 1997 were $20,757,423, a
9.67% increase over year revenues of $18,927,369. This increase was due to
greater acceptance of product lines in the market, increased market share from
the independent retail stores, increase in residential real estate sales and
expansion of the export market coupled with the improving economic climate in
North America.

Gross profit for the Company for the fiscal year ended December 31, 1997 was
35.69% of sales, an improvement as compared to the fiscal year ended December
31, 1996 which was 35.00%. This positive change can be attributed to higher
prices, more efficient buying practices and a higher mix of sales to the
independents and an increase in sales to independent retail stores.

Selling expenses for the Company decreased by 4.76% in the fiscal year ended
December 31, 1997 as compared to the fiscal year ended December 31, 1996. This
decrease is attributable primarily to a reduction in freight costs and warehouse
wages.

General and administrative expenses for the Company increased by 9.37% in
the fiscal year ended December 31, 1997 as compared to the fiscal year ended
December 31, 1996. In 1996, management payroll was reduced as part of a cost
reduction plan.

Rosedale develops wallpaper and fabric books which are created for each
collection and sold through distributors. The majority of expenditures for the
creation of these books are incurred in the quarter before the launch of the
collection. Some expenditure is incurred as early as six to eight months in
advance. Revenues generated from the sale of books are netted from the costs
incurred in the same period and the net amount is shown on the income statement.
Because expenditures are made in the quarter before the launch, there is not
always a matching of revenues and expenses e.g. costs for a January launch would
be recorded the last quarter of the fiscal year, whilst the revenue would be
recorded in the following year. The Company ensures that there are form orders
on hand from customers before significant expenditures are incurred to produce
the books. Therefore, there are no speculative risks in their production. Book
development costs for the fiscal year ended December 31, 1997 was $189,566
compared to a recovery of ($278,079) for the same period last year. This is
attributable to delays in the launching of certain collections during 1997.

Design studio expenses for the Company decreased $72,576 to $826,796 for the
fiscal year ended December 31, 1997 versus the same period last year. This
reduction is attributable lower staff requirements as a result of the
implementation of the CAD/CAM design computer system for the studio. Prior to
the implementation of the CAD system, all coloring of new designs and color
changes to existing designs as well as the creation of non sophisticated designs
were done manually. This process required approximately 10 designers (4 full
time and 6 free lance). With the CAD system, the whole process will be
computerized requiring only three designers (2 full time and 1 freelance).

Income from operations increased $393,385 to $1,306,002 for the fiscal year
ended December 31, 1997 versus the prior year. This increase in income from
operation is directly a result for continued sales growt5h and improved margins
coupled with strict cost control.. In addition, for fiscal 1997, the Company
revised its estimate of the useful lies for cylinders and related design costs
extending the amortization period to five years from three years on a straight-
line basis.

This change was necessary to more accurately reflect the estimated useful
lives of the cylinders and related design costs. As the result, the current
year's amortization charge was reduced by approximately $480,000.

Interest expense for the Company for the fiscal year ended December 31, 1997
decreased 10.84% to $209,403 from $234,865 for the fiscal year ended December
31, 1996. This decrease in interest expense is directly attributable to lower
interest rates and the offset of interest earned on the mortgages.

Insurance premiums on life insurance policies taken out by the Company on
the lives of three of its executives have been presented below operating income
because of the magnitude of the premiums. Premium expense for the fiscal year
ended December 31, 1997 decreased 1.50% to $188,963 from $191,845 reflecting an
increase in the capitalization of premiums to the cash surrender values of the
life insurance policies.

Net income for the fiscal year ended December 31, 1997 was $799,8288 as
compared to $423,571 for the fiscal year ended December 31, 1996 an increase of
$376,257 or 88.83%. $174,202 or 46.30% of this increase pertains to a cumulative
effect of a change in accounting principle for book development and design
costs. In 1997, the company changed the accounting principle for recognition of
book development and design costs from a full write-off to a deferral over three
years. The subsidy represent the discount between the costs of the sample books
and the price at which they are sold to major retailers. The company

considers that it is more appropriate to recognize the production of sample
books of wallpaper as an asset, as there is enduring value which should be
recognized over the life of the collection. The balance of the increase in net
income of 53.70% is attributable mainly to the following factors:

- A change in the useful life for cylinders and related design costs from
three years to five years.

- deferral of expenses relating to book development, and design costs for
launches of collections in the following year.

- higher prices for product lines

- better mix of sales

- stricter cost control

FISCAL YEAR ENDED DECEMBER 31, 1996, COMPARED TO FISCAL YEAR ENDED DECEMBER
31, 1995

Revenues for the fiscal year December 31, 1996 were $18,927,369, a 2.02%
increase over the prior year revenues of $18,552,166. This marginal increase is
a direct result of a turnaround in the Canadian economy resulting in a larger
volume of sales to independent retail stores.

Gross profit for the Company for the fiscal year ended December 31, 1996 was
35%, a 2.44% decrease as compared to the prior year which was 37.44%. This
decrease is attributable to clearance sales of old collections and overstocks
and a reduction in sales to the United States in 1996 which are at higher
margins

Selling expenses for the Company decreased by 10.72% to $2,437,567 for the
fiscal year ended December 31, 1996 from $2,730,318 for the fiscal year ended
December 31, 1995. This decrease in selling expenses is attributable to stricter
cost control and consolidation of sales territories.

General and administrative expenses for the Company decreased by 15.91% from
$2,382,302 to $2,003,119 in the fiscal year ended December 31, 1996 as compared
to the fiscal year ended December 31, 1995. This significant decrease in general
and administrative expenses is attributable to a reduction in management payroll
as part of a cost reduction plan, a $441,200 reversal in unpaid management
bonuses from 1993 and stricter costs controls.

Book development recovery for the fiscal year ended December 31, 1996
provided income to the Company of $278,079, an increase of $97,840 in recoveries
over the same period for the prior year. This increase was due to increased
sales and improved timing and launches of collections.

Income from operations increased $483,182 in fiscal 1996 from $429,435 to
$912,617, an increase of 112%. As a percentage of sales, income improved to
4.82% as compared to 2.31% for 1996. The increase is as direct result of sales
growth and improved growth margin.

Interest expense decreased $523,795 in fiscal 1996 from $758,660 in fiscal
1995 to $234,865 in fiscal 1996. In 1995, approximately $519,000 was either paid
or accrued in the financial statements as interest expense on the loans taken
out with the Laurentian Bank of Canada to fund premiums on $22,000,000 of life
insurance taken out by the Company on the lives of three key executives. In
1996, the unutilized portion of these loans which were previously invested in
term deposits were collapsed and the proceeds used to pay down the loans. This
resulted in a significant reduction in interest expense.

Insurance premiums increased marginally by $1,258 from $190,587 to $191,845.
These premiums represent the estimated annual expense portion of the premiums on
the insurance policies on the lives of two executives and one shareholder.

Net income for 1996 was $423,571 compared to a loss of $572,890 for 1995.
This significant turnaround is directly attributable to increased sales
especially to independent retail stores resulting from an improved economic
climate in North America, high prices and more efficient buying practices. In

addition, strict cost control and the reduction in interest expense assisted in
the Company being able to achieve this turnaround.

LIQUIDITY AND CAPITAL RESOURCES

In fiscal 1995, the Company had a net increase in cash of $30,139 from
operations which represented the residual balance from bank borrowings. The
Company continued to acquire inventory in the amount of $1,183,734 financed
primarily from an add back of amortization of $595,176 and collections of
accounts receivable of $754,099. Bank indebtedness increased by $1,914,752,
which was used to purchase capital equipment of $902,570 and inventory of
$1,183,734 and to pay trade payables in the amount of $460,691.

In 1996, the Company used net cash in operating activities of $27,194. The
principal source cash was from net income of $423,571, a decrease in inventory
of $676,507 and an add-back of amortization of $651,143. The Company purchased
capital equipment of $871,703 which was financed primarily from loans from
directors of $510,298, long-term debt of $510,414 and proceeds from bank
indebtedness of $410,106. During the year the Company negotiated special payment
terms with certain major suppliers and implemented strict budgetary and
financial controls. As a result, the company was able to pay down suppliers in
the amount of $1,299,429. As a result although receivables increased $487,558,
the Company was able to increase cash by $464,297.

The Company used cash of $637,168 in operating activities for the fiscal
year ended December 31, 1997 as compared to the fiscal year ended December 31,
1996 when it generated cash of $464,297. Cash was used principally for product
costs, $572,655, accounts receivable, $964,145, inventory $1,222,626, property
plant and equipment, $945,933 and financing two mortgages in the amount of
$415,044 held by related companies. The principal source of cash was from net
income--$799,828, add-back of amortization, $572,655 and account payable,
$1,549,646. Net cash provided from financing activities fiscal 1996 was $833,533
which was provided by proceeds from bank indebtedness--$520,267, proceeds from
long-term debt, $134,616 and loans from the directors, $135,634.

The Company has secured credit arrangements with the National Bank of Canada
in the amount of Cdn.$7,910,000. Of this amount, Ontario has Cdn.$2,750,000 by
way of a demand operating loan and Cdn.$1,250,000 by way of line of credit and
Rosedale has Cdn.$3,500,000 by way of an operating loan and/ or letters of
credit on a revolving demand loan agreement and Cdn.$250,00,000 by way of an
operating loan bulge. The credit facilities bear interest at rates varying
between the bank's prime rate and prime plus 1.5%. All borrowings are
collaterized by the assets of the Company.

The Company will receive net proceeds of this Offering in an amount
estimated to be $4,030,000. The Company believes that the net proceeds of the
Offering, coupled with income from operations and the credit facilities of
Ontario and Rosedale will fulfill the Company's working capital needs for at
least the next two years. AS the Company continues to grow, bank borrowings, or
other debt placements and equity offerings may be considered, in part, or in
combination, as the situation warrants.

BUSINESS

HISTORY OF THE COMPANY

The Company commenced operations as a single retail store, Ontario Paint &
Wallpaper Limited, in 1913 and has operated as a family owned business since its
inception. The focus of the business during its early years was the sale of
paint to homeowners and major contractors. The retail store is still in
operation in its original location and has become a Toronto landmark. In the
early 1970's, Ontario Paint & Wallpaper Limited diversified into wallpaper
distribution. In 1981, the Company's Rosedale subsidiary commenced operations
under the name Desart Wallcoverings Inc. In 1988, Desart Wallcoverings Inc.
changed its name to Rosedale Wallcoverings Inc. and in 1995 the name was changed
to Rosedale Wallcoverings & Fabrics Inc. Over the years, the Company has become
one of the largest independent wholesale wallpaper distributors in Canada. In
the early 1990's the Company continued to diversify by designing wallcovering
collections for distribution in Canada, the United States, Europe, South America
and Asia.

On May 14, 1997 the Company was formed by the shareholders of Rosedale and
Ontario for the purpose of consolidating the business of the two subsidiaries.

GENERAL

The Company, through its two wholly-owned subsidiaries, Ontario and
Rosedale, designs, markets and distributes residential wallcoverings and
designer fabrics. The Company also operates a retail paint and wallpaper store
located in downtown Toronto, Canada which has been in continuous operation since
1913. The Company's products include wallpaper and wallpaper borders (which are
collectively referred to as wallcoverings), designer fabrics and paint.

The Company designs wallcovering and designer fabric collections that it
distributes under its own brand names. Wallcoverings and fabrics sold under
Company brand names are manufactured for the Company on an outsource basis by
third party manufacturers. In addition to selling its own brand name
wallcoverings and fabrics, the Company is also a wholesale distributor of
wallcoverings designed and manufactured by other manufacturers. Wholesale
distribution of other manufacturers' wallcoverings is done through the Company's
Ontario subsidiary. Design and distribution of Company brand wallcoverings is
accomplished primarily through its Rosedale subsidiary and to a lesser extent
through its Ontario subsidiary.

The Company's Rosedale subsidiary has received a number of industry
recognized awards. Since 1994, the Rosedale subsidiary has been received the
"Estate Award for Excellence in Wallcovering Design" on four separate occasions.
This award is presented by a leading trade publications and is given in
recognition of wallcovering collections that exhibit outstanding design
characteristics. In addition, Rosedale has received the "Hot Line Elite" award
on numerous occasions which is presented by another leading trade publication to
the wallcovering producer whose collections have been cited by independent
retail stores throughout the United States as top sellers. Rosedale has also
twice been named "Supplier of the Year" by its largest distributor, The Blonder
Company, most recently in 1997. Rosedale achieved the honor of being The Blonder
Company's supplier of the year twice despite the fact that its collections
represent only approximately 5% of the total wallcovering collections offered by
The Blonder Company in each year.

Sales of Company Name Brand wallcoverings accounts for approximately 54% of
the Company's total revenues and wholesale distribution of wallcoverings under
non-company brand names accounts for approximately 29% of the Company's total
revenues. Sales of designer fabrics accounts for approximately 12% of the
Company's revenues and the Company's retail paint and wallpaper store generates
approximately 5% of the Company's annual revenues.

The Company distributed approximately 26 Company brand wallcovering and
fabric collections to approximately 10,000 to 20,000 retail wallpaper and paint
stores worldwide in 1996. In addition, the

Company's Ontario subsidiary distributed approximately 47 non-Company brand
wallcovering collections to approximately 1,700-2,000 home decorating stores in
Canada in 1996.

COMPANY BRANDS

The Company designs and distributes approximately 10 different lines of
wallcoverings and fabrics sold under the Company's own brand names each year. A
variety of wallcovering and fabric collections are sold under each of the
Company's brand names. Each wallcovering collection sold by the Company consists
of a variety of coordinated wallpapers, borders and fabrics. Collections take
approximately twelve months to develop and are generally available in the
marketplace for a minimum of 2 years after launch. The Company's Rosedale
subsidiary designs and distributes 6 wallcovering collections and 2 fabric
programs per year, sold under 5 brand names, and the Ontario subsidiary designs
and distributes 2 wallcovering collections per year, sold under 2 brand names.
Such products are distributed to approximately 10,000 to 20,000 retail stores
and interior designers worldwide.

Wallcovering and designer fabric collections are developed by the Company's
design staff using a variety of color schemes to create thematically consistent
collections. Each collection is tailored to fit the particular target market for
the brand name for which the collection is being created. The Company's
management, design, marketing and sales staff approve collections for production
based upon their assessment of the commercial potential of those collections in
each of the Company's target markets.

Each of the Company's subsidiaries maintains its own design studio and
creative staff. Rosedale's design studio is located in its Concord, Ontario
facility. Recently, the Company's Rosedale subsidiary installed a state of the
art computer aided design (CAD) system, with two workstations, for the creation
and coloring of wallcovering and fabric designs. The system provides Rosedale's
design staff with the ability to produce a wide variety of designs and color
schemes and has reduced the time required for producing finished designs. The
Company's Ontario subsidiary maintains a design studio and staff in London,
England.

Company brand name wallcoverings and fabrics include; Rosedale, Cambridge
Studios, Hamilton House, Kingsway Fabrics, Concord and Ridley Nash. The
Company's brand name wallcoverings and fabrics are targeted for middle and upper
middle income consumers and to the high end interior designer market where the
Company's wallcoverings can compete based upon quality and design. The Company
does not design wallcovering and fabric collections for the lower end of the
market where competition is based primarily upon price.

The Company's Rosedale and Cambridge Studios brands were established in 1987
and 1993, respectively, and are designed and marketed by the Company's Rosedale
subsidiary. The Concord and Ridley Nash lines of wallcoverings were established
in 1992 and 1995, respectively, and are designed by the design staff of the
Company's Ontario subsidiary. The Company produces approximately 8 different
lines of wallcoverings under its Rosedale, Cambridge Studios, Concord and Ridley
Nash brands each year. Wallcovering collections sold under all four brand names
are targeted to middle to and upper middle income consumers.

The Company's Hamilton House brand, which was introduced in 1995 by the
Company's Rosedale subsidiary in order to provide the Company with a brand which
is specifically designed for the interior design market and decorator boutiques.
With the addition of the Hamilton House brand line of wallcoverings, Rosedale's
product mix was expanded to cover all major price categories from the middle
level market through to the high end interior designer market.

The Concord and Ridley Nash brands were established by the Company's Ontario
subsidiary to provide Ontario with its own brand name of wallpaper products for
introduction into the United States market. Both brands are created in London,
England by the Company's design staff. The Company designs and distributes one
wallcovering collection per year under each brand name. Both lines of
wallcoverings are targeted for middle to upper income consumers.

The Company's various brands enable the Company to take advantage of the
changing nature of the North American wholesale distribution business, including
the growth of large national distributors as well as the trend towards
consolidation amongst the smaller regional distributors, and to broaden its
product mix to cover all major price categories with the market with the
exception of the low margin, mass merchant business.

DECORATIVE FABRICS AND FLOOR COVERINGS

As part of the Company's growth strategy, its Rosedale subsidiary has
recently expanded its product lines to include coordinated products, namely
decorative fabrics, soft window treatments and floor coverings. The Company's
decorative fabric products are sold under the Kingsway Fabrics brand name and
are intended to be utilized by consumers for draperies, upholstery and bed
coverings. The expansion into the coordinated fabric market has been undertaken
in order to take advantage of the tremendous trend towards coordinated selling
in the home decorating industry. These changes encompass the way that products
are introduced into the market as well as the nature of consumer buying habits.

Designer fabrics represent approximately 12% of Rosedale's annual revenues.
Rosedale designs and markets two fabric collections per year which are
coordinated with its wallcovering collections. Recently, Rosedale has added
coordinated area rugs and runners to compliment its wallcovering and fabric
offerings.

The Company believes that offering a combination of wallcoverings,
decorative fabrics and floor coverings provides significant opportunities for
cross merchandising of the Company's products. This in turn opens other markets
for the Company's product lines. For example, by offering coordinated lines of
wallcoverings, fabrics, and floor coverings, consumers looking to purchase
wallcoverings will be exposed to the Company's designer fabric and floor
covering lines. The Company believes that it is now able to offer consumers a
complete home decorating package. The end result being that the Company's
products are saleable to a wider variety of retail stores and consumers.

THIRD PARTY MANUFACTURING

Company brand wallcoverings are manufactured for the Company by wallcovering
manufacturers in the United Kingdom, Canada and the United States. The Company's
Rosedale and Cambridge Studios lines of wallcoverings are manufactured in the
United Kingdom by Borden Wallcoverings Ltd. ("Borden") and Zen Wallcoverings
Ltd. ("Zen"). Borden manufacturers the majority of the Company's wallcoverings
and has been a contract manufacturer with the Company since 1985. The Company's
Hamilton House brand is manufactured in the United States by Hawthorne
Wallcoverings. The Company's wallcoverings are also manufactured in Canada by
Blue Mountain Wallcoverings Ltd. and Sunworthy Wallcoverings Inc.

Designer fabric collections designed by the Company and sold under the
Kingsway Fabrics brand name are manufactured in the United States by two
manufacturers, Santee Print Works Ltd. ("Santee") and New London Textiles, Inc.
("New London").

The Company generally enters into contracts with its manufacturers to
produce its designs to the Company's specifications on a "make and ship" basis
which means that the manufacturers hold no inventory of the Company's products.
The Company's products are manufactured on a pattern by pattern basis. The terms
and conditions of production are outlined by the Company in written instructions
provided to the manufacturers for each new design that the Company produces. The
Company maintains

the exclusive copyrights to each of its designs and the manufacturers do not
have rights to sell the Company's designs unless permitted by the Company.

WHOLESALE DISTRIBUTION OF WALLCOVERINGS MANUFACTURED BY THIRD PARTIES

The Company, through its Ontario subsidiary is a wholesale distributor of
wallcoverings designed and produced by manufacturers located in the United
Kingdom and Canada. The Company markets wallcovering collections produced by
third party manufactures under each manufacturer's brand names. The Company has
distribution agreements with John Wilman Limited ("John Wilman") and Vymura
International PLC ("Vymura"), located in the United Kingdom, and with Norwall
Group Inc. ("Norwall"), located in Canada. The Company's distribution agreements
with John Wilman, Vymura and Norwall provide the Company with the exclusive
Canadian distribution rights for each manufacturers' wallcovering lines. The
Company believes that its position as one of the few remaining distributors not
owned by a manufacturing facility, makes it an attractive distributor to
manufacturers that do not want to sell their products to competitive
manufacturers for distribution.

NEW PRODUCTS

The Company intends to expand the products offered by its Ontario subsidiary
to include a line of retro art decorative ceiling tiles for commercial and
residential customers. The decorative ceiling tiles are designed to fit into
standard suspension ceiling frameworks and are embossed with designs that
emulate ceilings found in many turn of the century buildings. This provides
commercial and residential customers with the ability to add victorian style
ceilings to their decor. The Company believes that its decorative ceiling tiles
will be attractive to commercial users, such as restaurants looking to recreate
the look of the late 1800's.

RETAIL OPERATION

The Company's retail operation, Ontario Paint & Wallpaper, has been in
continuous operation since 1913 and the store has become a landmark in
metropolitan Toronto. The retail store sells Benjamin Moore paints and related
sundry products, including wallcoverings to customers ranging from individual
homeowners to large industrial accounts. The store offers a full line of
wallcoverings, include all brands distributed by the Company. The majority of
Ontario Paint & Wallpaper's paint sales are made to local movie studios for set
designs and to commercial customers for apartment and office buildings. Sales to
commercial customers have been growing steadily over the past two years. The
retail store is the largest single source distributor of Benjamin Moore Paints
in Canada.

The retail store offers special services to attract and maintain commercial
customers. The store maintains detailed records of paint purchases by commercial
customers. Commercial customers that have purchased paint in the past can order
additional paint simply by telephoning the store and indicating which area of
their building requires paint. The store manager then retrieves the stored
information about the building, selects the correct paint colors for the
commercial customer and then delivers the paint to the customer. In addition,
the Company has a portable paint scanner which provides retail store employees
with the ability to visit a building and scan the building's paints and return
to the store where the scanned information is transferred to a paint mixer which
then mixes matching paint colors.

The paint store is also the setting for a monthly home decorating television
show which is broadcast from the store. The television show is hosted by City
T.V., and provides practical advice on home painting and repairs. The television
show is taped from the store in front of a live audience. In June 1997, the
retail store also began presenting bi-monthly seminars for homeowners providing
elementary to advanced instruction on various painting techniques. The seminars
are conducted in conjunction with a local TV personality. The program has been
quite successful with all classes being oversold.

MARKETING AND DISTRIBUTION (COMPANY BRANDS)

The Company distributes its brand name wallcoverings and fabrics in the
United States and Canada through regional and national distributors. The Company
appoints a single distributor to a particular geographical area and their
territories generally do not overlap. The Company does not maintain formal
distribution agreements with its distributors, as is the custom in the industry.
It is understood and common practice in the industry that neither the
distributor nor the manufacturer is obligated to maintain a relationship other
than on a collection by collection basis. It is the Company's policy that each
of its distributors is obligated to purchase every collection the Company
markets or forfeit its right to be a Company distributor.

In addition the Company sells directly to selected large national and
regional retail chains and specialty stores that specialize in the sale of
wallcoverings and designer fabrics.

The Company markets and promotes its products through the distribution and
sale of sample books. The Company prepares a sample book for each of its Company
brand collections of wallcoverings and fabrics designs. The majority of the
sample books prepared by the Company contain partial sheets of wallpaper,
coordinated borders and fabrics. Recently, the Company has added coordinated
floor coverings to its sample books. In addition, sample books contain
photographs of model room settings demonstrating how the Company's
wallcoverings, coordinated designer fabrics and floor coverings look in
simulated home environments. By offering coordinated wallcoverings and fabric
collections in its sample books, the Company is able to have its entire product
line shown to a wider variety of end users. The Company also produces sample
books which contain only designer fabric samples which it distributes to fabric
wholesalers. In 1996, the Company distributed over 80,000 Company brand
wallcovering sample books and 12,000 Company brand designer fabric sample books.

The number of sample books that the Company prepares for any given
collection is determined based upon orders from the Company's distributors. The
distributors inform the Company how many books they will require for each
collection and the Company produces the sample books. The Company does not
produce sample books unless a distributor has requested them. The Sample books
are sold to distributors and the distributors, in turn, place the sample books
with retail and interior design customers who ultimately sell the Company's
products to consumers. In addition to purchasing the Company's sample books,
each distributor is also required to purchase inventory for each pattern in each
collection.

It takes between 10 to 12 months from the time that the Company approves
designs for a collection to the shipping of sample books for that collection.
Recently, the Company's Rosedale subsidiary began producing preview copies of
its sample books using its in house computer aided design ("CAD") system. This
allows Rosedale to preview its collections to distributors and to make changes
to its collections based upon feedback from distributors before the final
printing of sample books. This has resulted in a large cost saving to the
Company. Rosedale believes that this innovation will also allow it to more
specifically tailor its collections and sample books to consumer trends in the
markets on a more timely basis.

CANADIAN DISTRIBUTION

The Company sells approximately 45% of its wallcoverings and fabrics in
Canada through its Ontario subsidiary. The balance of its sales are through
regional distributors and national chains such as Color Your World and Sears
Canada. Regional distributors include Crown Wallcoverings, the largest
distributor to the Canadian interior design market, Images Wallcoverings and
Odyssey. Images Wallcoverings Ltd. and Odyssey Designs Inc., both are
distributors located on the west coast of Canada.

UNITED STATES DISTRIBUTION

Approximately 49% of the Company's wallcovering sales are made in the United
States. Distribution of the Company's wallcoverings in the United States is done
through sales to national and regional

distributors as well as sales to large retail wallpaper chains. Regional
distributors in the United States include Walltrends, Hunter & Co., Key
Wallcoverings, G&W Distributors, Fashion Wallcoverings, Atlas Wallcoverings,
Eisenhardt Wallcoverings and Aztec. National distributors include The Blonder
Company, which distributes the Company's Cambridge Studios brand, and Seabrook
Wallcoverings, which distributes the Company's Hamilton House line of
wallcoverings.

The Company also sells directly to retail chains in the United States which
include Wallpapers to Go, Sherwin Williams, Gardener Wallcoverings, Horners and
Tretiaks.

In 1993, Rosedale embarked on the development of a separate distribution
network of wholesalers throughout North America for the purpose of distributing
its decorative fabrics. The Company designer fabrics are sold by approximately
ten independent salespersons who also sell products produced by other fabric
companies. The other fabrics sold by these salespersons generally do not compete
directly with the Company's designer fabrics in either look or price points. The
salespersons are compensated on a commission only basis. The Company does not
have contracts with any of these salespersons.

WALLCOVERING MARKET

Over two billion rolls of wallcoverings were sold worldwide in 1994, with
over 161 million rolls sold in Canada and the United States and over 500 million
rolls of residential wallcoverings were sold in Europe during the same period.
Sales of wallcoverings tend to have a direct relationship to the level of home
renovations and the economy in general, but have little relationship to new
housing starts.

The trend at the distribution level of the industry has been towards a
market characterized by fewer distributors with higher distribution volumes. The
Company has developed strong relationships with independent regional
distributors. The Company is also well positioned to take advantage of growth in
mass merchandising through its relationship with its national distributors and
large retail chains. In addition, the Company hopes to penetrate alternative
fabric markets such as apparel and soft goods industries.

PATENTS AND TRADEMARKS

The Company trademarks the names of each of its collections and brand names.
In addition, the Company copyrights designs created for its Company brand
wallcovering and fabrics.

GOVERNMENT REGULATION

The Company is subject to various Canadian regulations relating to health
and safety standards applicable warehouse operations. The Company must comply
with Canadian federal regulations administered by the Workman's Compensation
Board, relating to worker safety issues in its warehouse facility. Although the
cost of compliance with such regulations is not material, changes to existing
regulations may have a material adverse effect on the Company's business and
result of operations. The Company is also subject to U.S. Federal Regulations
relating to imports of goods and the North American Free Trade Agreement on its
products that it exports to the United States. Although the cost of compliance
with such regulations is not material, changes to existing regulations may have
a material adverse effect on the Company's business and result of operations.

EMPLOYEES

As of October 9, 1997, the Company employs 64 (62 on a full time basis)
persons, which includes 8 senior executives, 18 sales staff persons (16 full
time, 2 part time), 8 designers, 17 support staff persons and 13 warehouse
workers. The Company has no unionized employees and believes that its
relationship with its employees is satisfactory.

PROPERTIES AND FACILITIES

The Company leases facilities in Concord, Ontario for each of its
subsidiaries. The Company leases an approximately 78,000 square foot facility
for its Ontario subsidiary. The lease was amended July 13, 1995 and expires on
October 31, 2004 with an annual base rent of Cdn. $260,027. The building houses
Ontario's executive offices, warehouse and showroom. The Company leases a 47,000
square foot facility for its Rosedale subsidiary. The lease for the Rosedale
facility runs through October 31, 2004 and has a base annual rent of
Cdn.$176,640. The Rosedale subsidiary houses its design facilities, executive
offices, warehouse and showroom. Management believes that this space is adequate
for its design and warehouse needs in the foreseeable future. Management also
believes that there is ample room for expansion in the future.

The Company also leases space for its retail paint store, located in
downtown Toronto, from a company owned by Alan Fine, Chief Executive Officer of
the Company, and Sid Ackerman, the Company's President. The lease calls for
rental payments in the amount of Cdn. $24,000 per annum, plus general sales
taxes, payable in equal monthly instalments of Cdn. $2,000. The lease is for a
one year term, automatically renewable from year to year unless terminated in
writing by either the landlord or the tenant on 30 days written notice. See
"Certain Transactions."

LEGAL PROCEEDINGS

The Company is involved in legal proceedings with two former suppliers.
Economy Color Card, Co., Inc., a supplier of wallcovering sample books, filed a
claim against the Company's Rosedale subsidiary seeking payment of Cdn.
$83,715.04 for amounts allegedly due for certain wallcovering sample books. The
Company believes that it has a meritorious defense and intends to vigorously
contest the action. Ernst & Young, Inc. has filed a claim against each of the
Company's subsidiaries as receiver and manager of Cape Breton Wallcoverings, a
former wallcovering supplier. Ernst & Young, Inc. is seeking damages of
approximately Cdn$133,700 for amounts it claims were due Cape Breton
Wallcoverings from Rosedale and Ontario. The Company believes that it has a
meritorious defense and intends to vigorously contest the action.

The Company is involved in legal proceedings with Revenue Canada. The
Revenue Canada proceeding involves the Company's challenge to a Revenue Canada
decision to disallow a business loss deduction taken by Rosedale for losses it
incurred when attempting to create a startup company in California. Rosedale
started the California company in 1992 to make window blinds as an adjunct to
its wallcovering and fabric business. The California company's growth did not
meet the Company's expectations and subsequently was sold in 1994. Rosedale
claimed losses incurred during the operation of the California business as a
business loss deduction on its 1994 tax return. Revenue Canada allowed the
deduction as a capital loss only. Rosedale has filed a formal notice of
objection to Revenue Canada's classification of the deduction. In the event that
Revenue Canada's decision is upheld, Rosedale would be required to pay $652,110
plus interest to satisfy its tax obligation. The Company believes that it has a
meritorious defense and is working to try to settle the matter. The Company is
not aware of any other material legal proceedings pending or threatened against
the Company.

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information concerning the Directors
and Executive Officers of the Company:

NAME AGE POSITION
- ----------------------------- --- ---------------------------------------------------------

Alan Fine.................... 52 Chief Executive Officer and Chairman of the Board
Sidney Ackerman.............. 52 President and Director
Norman G. Maxwell............ 49 Chief Financial Officer, Operations Manager and Director
Sheldon Isenberg............. 54 Treasurer, Corporate Secretary and Director

Set forth below is a biographical description of each director and executive
officer of the Company based on information supplied by each of them.

Alan Fine has served as the Chief Executive Officer and Chairman of the
Board of the Company since its inception in May 1997. In 1982, Mr. Fine founded
Rosedale Wallcoverings & Fabrics Inc. and since that time he has served as the
President of Rosedale Wallcovering & Fabrics, Inc. Mr. Fine has also served as
the Secretary and Treasurer for Ontario Paint & Wallpaper Ltd since 1978. From
1972 to 1977 Mr. Fine was the Manager of Wallpaper Distribution for Ontario
Paint & Wallpaper Ltd.

Sidney Ackerman has served as the President of the Company since its
inception in May 1997. In 1971, Mr. Ackerman was responsible for the development
of Ontario Wallcoverings which became the wallpaper distribution arm of Ontario
Paint & Wallpaper Ltd. In December 1978, Mr. Ackerman was elected Director and
Treasurer of Ontario Paint & Wallpaper Ltd. Since 1994, Mr. Ackerman has served
as the President of Ontario Paint & Wallpaper Ltd.

Norman G. Maxwell has been Chief Financial Officer and Operations Manager of
the Company since its inception in May 1997 and has served as a director of the
Company since May 1997. Prior thereto, since 1992, Mr. Maxwell has served as the
Vice President of Finance with Ontario. From 1989 to 1992, Mr. Maxwell served as
the Comptroller of Ontario. Mr. Maxwell has been in the wallcovering industry
for over 20 years and has been a Certified Management Accountant since 1977.

Sheldon Isenberg has served and the Company's Treasurer, Corporate Secretary
and Director since May, 1997. Prior thereto, from 1992 to 1997 Mr. Isenberg was
the General Manager, Wallpaper Manufacturing for the Company's Rosedale
subsidiary. Mr. Isenberg completed the Chartered Accounting Course at Queen's
University in 1964 and prior to joining the Company, he worked for a national
apparel manufacturer where he attained the position of Executive Vice President.

COMPENSATION OF DIRECTORS

The Company has not paid compensation to any director for acting in such
capacity. The Company is currently reviewing its policy on compensation of
outside directors and may pay outside directors in the future.

EXECUTIVE COMPENSATION

The following table sets forth certain information regarding compensation
paid by the Company during each of the last two fiscal years to the Company's
Chief Executive Officer and to each of the Company's executive officers who
earned in excess of $100,000.

SUMMARY COMPENSATION TABLE

ANNUAL COMPENSATION
OTHER
-------------------- ANNUAL
YEAR SALARY($) BONUS($) COMPENSATION
--------- --------- --------- -------------

NAME AND PRINCIPAL POSITION
- -------------------------------------------------
Alan Fine(1)..................................... 1997 173,360 -- 7,020
Chief Executive Officer 1996 41,068 121,003 8,582
1995 195,250 67,755 11,635
1994 163,994 -- 11,692

Sidney Ackerman(1)............................... 1997 173,360 -- 9,595
President 1996 41,068 121,003 8,621
1995 195,250 67,755 6,898
1994 163,994 -- 4,254

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

(1) Reflects total compensation received from both the Company's Ontario and
Rosedale subsidiaries.

EMPLOYMENT AGREEMENTS

On the Effective Date, Alan Fine and Sidney Ackerman will both have three
year employment agreements with the Company's Rosedale subsidiary and the
Company's Ontario subsidiary respectively. Alan Fine will be retained as Chief
Executive Officer of the Company at an annual salary of $160,000. Sidney
Ackerman will be retained as President of the Company at an annual salary of
$160,000.

The employment agreements with Alan Fine and Sidney Ackerman provide that
upon the death of any of the two employees that three years full salary will be
paid to the employee's estate in a lump sum payment. They also provide for
reimbursement of reasonable business expenses.

Alan Fine and Sidney Ackerman are entitled to bonuses of up to $10,000 each
based on achieving sales, profitability and good management goals as
predetermined by the Board of Directors or compensation committee and other
subjective criteria as determined by the Board of Directors or compensation
committee.

Alan Fine and Sidney Ackerman shall each receive $20,000 per year additional
compensation including car allowance, insurance and retirement savings matched
contributions by the Company and such other perquisites.

Upon the resignation, retirement upon reaching the age of 60 or based upon
any wrongful termination of either Alan Fine or Sidney Ackerman, the Company
shall pay the employee a lump sum resignation allowance of three years salary.

In the event that there is a change in control of the Company, through an
acquisition where any person acquires more than 50% of the shares of the
Company, an amalgamation, consolidation or merger with another corporation
resulting in at least 50% of the voting shares of the surviving corporation
being controlled by a new acquirer or the sale directly or otherwise of all of
the assets of the Company to a third party in a non-distress situation, then the
Company shall pay to Alan Fine and Sidney Ackerman a lump sum payment equal to
the sum of one and one-half times their respective annual salaries paid or
payable in respect of the most recently completed fiscal year.

STOCK OPTION PLAN

After the effective date of this Offering, the Company intends to adopt a
Stock Option Plan (the "1998 Plan"), pursuant to which 750,000 shares of Common
Stock are reserved for issuance.

The 1998 Plan will be administered by the compensation committee or the
board of directors, who determine among other things, those individuals who
shall receive options, the time period during which the options may be partially
or fully exercised, the number of shares of Common Stock issuable upon the
exercise of the options and the option exercise price.

The 1998 Plan will be for a period for ten years. Options may be granted to
officers, directors, consultants, key employees, advisors and similar parties
who provide their skills and expertise to the Company. Options granted under the
1998 Plan may be exercisable for up to ten years, may require vesting, and shall
be at an exercise price all as determined by the board. Options will be
non-transferable except to an option holder's personal holding company or
registered retirement savings plan and except by the laws of descent and
distribution or a change in control of the Company, as defined in the 1998 Plan,
and are exercisable only by the participant during his or her lifetime. Change
in control includes (i) the sale of substantially all of the assets of the
Company and merger or consolidation with another, or (ii) a majority of the
board changes other than by election by the shareholders pursuant to board
solicitation or by vacancies filled by the board caused by death or resignation
of such person.

If a participant ceases affiliation with the Company by reason of death,
permanent disability or retirement at or after age 70, the option remains
exercisable for three months from such occurrence but not beyond the option's
expiration date. Other termination gives the participant three months to
exercise, except for termination for cause which results in immediate
termination of the option.

Options granted under the 1998 Plan, at the discretion of the compensation
committee or the board, may be exercised either with cash, Common Stock having a
fair market equal to the cash exercise price, the participant's personal
recourse note, or with an assignment to the Company of sufficient proceeds from
the sale of the Common Stock acquired upon exercise of the Options with an
authorization to the broker or selling agent to pay that amount to the Company,
or any combination of the above.

The exercise price of an option may not be less than the fair market value
per share of Common Stock on the date that the option is granted in order to
receive certain tax benefits under the Income Tax Act of Canada (the "ITA"). The
exercise price of all future options will be at least 85% of the fair market
value of the Common Stock on the date of grant of the options. A benefit equal
to the amount by which the fair market value of the shares at the time the
employee acquires them exceeds the total of the amount paid for the shares or
the amount paid for the right to acquire the shares shall be deemed to be
received by the employee in the year the shares are acquired pursuant to
paragraph 7(1) of the ITA. Where the exercise price of the option is equal to
the fair market value of the shares at the time the option is granted, paragraph
110(1)(d) of the ITA allows a deduction from income equal to one quarter of the
benefit as calculated above. If the exercise price of the option is less than
the fair market value at the time it is granted, no deduction under paragraph
110(1)(d) is permitted. Options granted to any non-employees, whether directors
or consultants or otherwise will confer a tax benefit in contemplation of the
person becoming a shareholder pursuant to subsection 15(1) of the ITA.

Options under the 1998 Plan must be issued within ten years from the
effective date of the 1998 Plan.

Any unexercised options that expire or that terminate upon an employee's
ceasing to be employed by the Company become available again for issuance under
the 1998 Plan.

The 1998 Plan may be terminated or amended at any time by the board of
directors, except that the number of shares of Common Stock reserved for
issuance upon the exercise of options granted under the 1998 Plan may not be
increased without the consent of the shareholders of the Company.

INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

The by-laws of the Company provide that the Company shall indemnify to the
fullest extent permitted by Canadian law directors and officers (and former
officers and directors) of the Company. Such indemnification includes all costs
and expenses and charges reasonably incurred in connection with the

defense of any civil, criminal or administrative action or proceeding to which
such person is made a party by reason of being or having been an officer or
director of the Company if such person was substantially successful on the
merits in his or her defense of the action and he or she acted honestly and in
good faith with a view to the best interests of the Company, and if a criminal
or administrative action that is enforced by a monetary penalty, such person had
reasonable grounds to believe his or her conduct was lawful.

The Underwriting Agreement provides for reciprocal indemnification between
the Company and the Underwriter against certain liabilities in connection with
this Offering, including liabilities under the Securities Act.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
and the Underwriter pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses,
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person or by the Underwriter in connection with
the securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information, as of the date hereof,
and as adjusted to give effect to the sale of 833,000 Units, each Unit
consisting of one shares of Common Stock and one Warrants, by the Company with
respect to the beneficial ownership of the Common Stock by each beneficial owner
of more than 5% of the outstanding shares thereof, by each director, each
nominee to become a director and each executive named in the Summary
Compensation Table and by all executive officers, directors and nominees to
become directors of the Company as a group, both before and after giving effect
to the Offering.

PERCENTAGE OF OUTSTANDING COMMON STOCK BENEFICIALLY OWNED

NUMBER OF SHARES OF
COMMON STOCK BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED OFFERING OFFERING
- ----------------------------------------------------- ------------------- ----------- -----------

Sidney Ackerman(2)................................... 312,500 25% 15%
Alan Fine(3)......................................... 468,750 37.5% 22.50%
Rosalyn Fine(4)...................................... 156,250 12.5% 7.50%
The Ackerman Family Trust(5)......................... 312,510 25% 15%
All Executive Officers and Directors as a Group(2)
persons............................................ 781,250 62.5% 37.5%

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

(1) Unless otherwise indicated, the address is c/o Rosedale Decorative Products
Ltd., 731 Millway Avenue, Concord, Ontario, Canada L4K 3S8.

(2) Does not include 312,500 shares of Common Stock held by the Ackerman Family
Trust. Includes 88,500 shares of Common Stock owned by 1274152 Ontario Inc.
of which Sidney Ackerman is a 25% owner.

(3) Includes 234,375 shares of Common Stock owned by 454590 Ontario Limited of
which Alan Fine is the sole shareholder and includes 66,375 shares of Common
Stock owned by 1274152 Ontario Inc. of which Alan Fine is a 18.75% owner.

(4) Includes 44,250 shares of Common Stock owned by 1274152 Ontario, Inc. of
which Rosalyn Fine is a 12.5% owner. Rosalyn Fine is the former wife of Alan
Fine and the sister of Sidney Ackerman.

(5) The Ackerman Family Trust owns 312,500 shares of Common Stock, including
88,500 shares of Common Stock owned by 1274152 Ontario, Inc. of which The
Ackerman Family Trust is a 25% owner, held in trust for the benefit of
Sidney Ackerman's wife and two minor children. Sheldon Shapiro and Fred
Stoppell are trustees of The Ackerman Family Trust. Under the terms of the
trust instrument, the trustees have the power to vote the shares.

VOTING AGREEMENT

Effective November 1997, Sidney Ackerman, Alan Fine, The Ackerman Family
Trust and 454590 Ontario Limited (the "Shareholders"), entered into a Common
Stock voting agreement. Pursuant to the terms of the voting agreement, each of
the Shareholders agrees to vote all of their Shares unanimously in respect of
any matter to be voted on at any meeting of the shareholders of the Company. In
the event the Shareholders cannot express unanimity or any of them abstains from
voting then the Shareholders agree to vote all of their Shares against such
matter or withhold all of their votes in respect of such matter as applicable
and to so instruct their proxies. The provisions of the voting agreement shall
apply to any shares in the capital stock of the Company to which voting rights
attach which may be issued to the Shareholders at any time during the term of
the voting agreement and any shares in the capital stock of the Company which
are issued in replacement of any shares or after acquired shares. The voting
agreement does not

apply to any shares that are sold or transferred to a Shareholder and does not
apply to any shares that are sold or transferred to a third party in an
arm's-length transaction.

The voting agreement terminates upon Sidney Ackerman or Alan Fine being no
longer employed by the Company or any of its subsidiaries or the date upon which
any Shareholder divests itself of all shares in an arm's-length transaction for
fair market consideration, whichever is earlier.

CERTAIN TRANSACTIONS

In 1995, Alan Fine, Chief Executive Officer of the Company and Sidney
Ackerman, President of the Company each loaned funds to the Company's Ontario
and Rosedale subsidiaries. As at December 31, 1997, the outstanding amounts of
loans made by Alan Fine to Ontario and Rosedale were $358,851 and $523,694,
respectively, and the outstanding amount of the loans made by Sidney Ackerman to
Ontario and Rosedale were $295,727 and $361,519, respectively. These loans are
secured by the real or personal property of Rosedale and Ontario and bear
interest at a rate equal to the prime rate of interest charged by the National
Bank of Canada plus 1.5% per annum and are payable on demand.

In 1995, 521305 Ontario Inc., which was the sole shareholder of Rosedale,
loaned funds to Rosedale and was granted a general security interest in the real
and personal property of Rosedale. As at December 31, 1997, the outstanding
balance of the loan was $238,945. The loan bears interest at a rate equal to the
prime rate of interest charged by the National Bank of Canada plus 1.5%. The
prime rate charged by the National Bank of Canada as of September 30, 1997 was
4.75%.

Alan Fine, Chief Executive Officer of the Company, and Sidney Ackerman,
President of the Company, own all of the issued and outstanding capital stock of
966578 Ontario Inc. and 976168 Ontario Inc. The Company leases space for its
retail store, located in downtown Toronto, from 966578 Ontario Inc. The lease
calls for rental payments in the amount of $16,800 per annum, plus general sales
taxes, payable in equal monthly instalments of $1,400. The lease is for a one
year term, automatically renewable from year to year unless terminated in
writing by either the landlord or the tenant on 30 days written notice.

In 1995, two related companies, 966578 Ontario Inc. and 976168 Ontario Inc.
were loaned funds by the Company. As of December 31, 1997, the Company had
outstanding loans receivable from 966578 Ontario Inc. and 976168 Ontario Inc. in
the amount of $12,409 and $24,475, respectively. The loans bear interest at a
rate equal to the prime rate of interest as charged by the National Bank of
Canada plus 1.5% and are payable on demand.

The Company has second mortgages from two related companies, 1216748 Ontario
Inc. and 1217576 Ontario Inc., both of which are 50% owned by Sidney Ackerman,
President and Alan Fine, Chief Executive Officer. The principal amount of the
loans from 1216748 Ontario Inc. and 1217576 Ontario Inc. are $208,344 and
$194,340, respectively. The mortgages are secured by land and buildings and bear
interest at 9% per annum and are payable on demand.

The Company has available credit facilities up to a maximum of $5,700,700
which bear interest at rates varying between the bank's prime rate and prime
plus 1.5%. The credit facilities are personally guaranteed, up to $723,000, by
each of Alan Fine and Sidney Ackerman, up to $1,445,000 by 521305 Ontario Inc.
and 1010037 Ontario Inc., and up to $595,000 by 1216748 Ontario Inc. and 1217576
Ontario Inc.

All future transactions and loans between the Company and its officers,
directors and 5% shareholders will be on terms no less favorable than could be
obtained from unaffiliated third parties and will be approved by a majority of
the independent, disinterested directors of the Company.

DESCRIPTION OF SECURITIES

The total authorized capital stock of the Company consists of an unlimited
number of shares of Common Stock, with no par value, and an unlimited number of
shares of Preferred Stock, with no par value per share. The following
descriptions contain all material terms and features of the Securities of the
Company, are qualified in all respects by reference to the Certificate of
Incorporation and By laws of the Company, copies of which are filed as Exhibits
to the Registration Statement of which this Prospectus is a part.

COMMON STOCK

The Company is authorized to issue an unlimited number of shares of Common
Stock, no par value per share, of which as of the date of this Prospectus
1,250,000 shares of Common Stock are outstanding, not including the Shares
offered herein.

The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of shareholders. Holders of Common
Stock are entitled to receive ratably dividends as may be declared by the board
of directors out of funds legally available therefor. In the event of a
liquidation, dissolution or winding up of the Company, holders of the Common
Stock are entitled to share ratably in all assets remaining, if any, after
payment of liabilities. Holders of Common Stock have no preemptive rights and
have no rights to convert their Common Stock into any other securities.

Pursuant to the Business Corporation Act, Ontario ("BCA"), a shareholder of
an Ontario Corporation has the right to have the corporation pay the shareholder
the fair market value for his shares of the corporation in the event such
shareholder dissents to certain actions taken by the corporation such as
amalgamation or the sale of all or substantially all of the assets of the
corporation and such shareholder follows the procedures set forth in the BCA.

WARRANTS

Warrants will be issued pursuant to a Warrant Agreement between the Company
and Continental Stock Transfer & Trust Co. (the "Transfer and Warrant Agent")
and will be in registered form. Each Warrant entitles its holder to purchase,
during the four year period commencing on the date of this Prospectus, one share
of Common Stock at an exercise price of $6.00 per share, subject to adjustment
in accordance with the anti-dilution and other provision referred to below.

The Warrants may be redeemed by the Company at any time commencing one year
from the date of this Prospectus (or earlier with the consent of the
Representative) and prior to their expiration, at a redemption price equal to
150% of the offering price of the Common Stock per Warrant, on not less than 30
days' prior written notice to the holders of such Warrants, provided that the
closing bid price of the Common Stock if traded on the Nasdaq SmallCap Market,
or the last sale price per share of the Common Stock, if listed on the Nasdaq
National Market or on a national exchange, is at least 150% ($9.00 per share,
subject to adjustment) of the exercise price of the Warrants for a period of 10
consecutive business days ending on the third day prior to the date the notice
of redemption is given. Holders of Warrants shall have exercise rights until the
close of the business day preceding the date fixed for redemption.

The exercise price and the number of shares of Common Stock purchasable upon
the exercise of the Warrants are subject to adjustment upon the occurrence of
certain events, including stock dividends, stock splits, combinations or
classification of the Common Stock. The Warrants do not confer upon holders any
voting or any other rights of shareholders of the Company.

No Warrant will be exercisable unless at the time of exercise the Company
has filed with the Commission a current prospectus covering the issuance of
Common Stock issuable upon the exercise of the Warrant and the issuance of
shares has been registered or qualified or is deemed to be exempt from
registration or qualification under the securities laws of the state of
residence of the holder of the Warrant.

The Company has undertaken to use its best efforts to maintain a current
prospectus relating to the issuance of shares of Common Stock upon the exercise
of the Warrants until the expiration of the Warrants, subject to the terms of
the Warrant Agreement. While it is the Company's intention to maintain a current
prospectus, there is no assurance that it will be able to do so. See "Risk
Factors-Requirements of Current Prospectus and State Blue Sky Registration in
Connection with the Exercise Warrants".

CLASS A SPECIAL SHARES

The Company's Articles of Incorporation authorize the issuance of an
unlimited number of shares of Class A Special Shares with designations, rights
and preferences determined from time to time by its Board of Directors.
Accordingly, the Company's Board of Directors is empowered, without stockholder
approval, to issue Class A Special Shares with voting, liquidation, conversion,
or other rights that could adversely affect the rights of the holders of the
Common Stock. Although the Company has no present intention to issue any shares
of its Class A Special Shares, there can be no assurance that it will not do so
in the future.

TRANSFER AGENT, REGISTRAR AND REDEEMABLE WARRANT AGENT

The transfer agent, registrar and warrant agent for the Common Stock and
Warrants is Continental Stock Transfer & Trust Co., New York, New York.

SHARES ELIGIBLE FOR FUTURE SALE

Upon the consummation of this Offering, the Company will have 2,083,000
shares of Common Stock outstanding. In addition, the Company has reserved for
issuance 750,000 shares upon the exercise of options eligible for grant under
the Company's Stock Option Plan. Of the shares to be issued and outstanding
after this Offering, the 833,000 Shares offered hereby (plus any additional
Shares sold upon exercise of Warrants offered hereby and exercise of the
Over-Allotment Option) will be freely tradeable without restriction or further
registration under the Act, except for any shares purchased or held by an
"affiliate" of the Company (in general, a person who has a control relationship
with the Company) which will be subject to the limitations of Rule 144 adopted
under the Act ("Rule 144"). In general, under Rule 144, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
the Company, who has beneficially owned restricted shares of Common Stock for at
least one year is permitted to sell in a brokerage transaction, within any
three-month period, a number of shares that does not exceed the greater of 1% of
the total number of outstanding shares of the same class, or if the Common Stock
is quoted on Nasdaq or a stock exchange, the average weekly trading volume
during the four calendar weeks preceding the sale. Rule 144 also permits a
person who presently is not and who has not been an affiliate of the Company for
at least three months immediately preceding the sale and who has beneficially
owned the shares of Common Stock for at least two years to sell such shares
without regard to any of the volume limitations as described above. The
remaining 1,250,000 shares of Common Stock are "restricted securities" as that
term is defined under Rule 144, and may not be sold unless registered under the
Act or exempted therefrom. Of the 1,250,000 restricted shares, all will be
eligible to be sold in accordance with the exemptive provisions and the volume
limitations of Rule 144 90 days after the Effective Date, however, the Company's
directors and executive officers, (who hold in the aggregate 781,250 shares),
have agreed not to sell, offer to sell or otherwise dispose of the their shares
of the Company's Common Stock until 24 months from the Effective Date, except
pursuant to gifts or pledges in which the donee or pledgee agrees to be bound by
such restrictions, without the prior written consent of the Underwriter.
Further, officers and directors whose compensation exceeds $100,000 per year or
who own 5% or more of the Company's outstanding common stock shall enter into 3
to 5 year lock-up agreements subject to a 20% per year lock out provision. These
agreements are enforceable only by the parties thereto, and are subject to
rescission or amendment at any time without approval of other stockholders.

Sales of the Company's Common Stock by certain of the present stockholders
in the future, under Rule 144, may have a depressive effect on the price of the
Company's Common Stock.

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

The following describes the principal United States federal income tax
consequences of the purchase, ownership and disposition of the Common Stock and
the Warrants and upon the exercise, redemption or expiration of the Warrants by
a Warrant holder, that is a citizen or resident of the United States or a United
States domestic corporation or that otherwise will be subject to United States
federal income tax (a "U.S. Holder"). This summary is based on the United States
Internal Revenue Code of 1986, as amended (the "Code"), administrative
pronouncements, judicial decisions and existing and proposed Treasury
Regulations, changes to any of which subsequent to the date of this Prospectus
may affect the tax consequences described herein. This summary discusses only
the principal United States federal income tax consequences to those beneficial
owners holding the securities as capital assets within the meaning of Section
1221 of the Code and does not address the tax treatment of a beneficial owner
that owns 10% or more of the Common Stock. It does not address the consequences
applicable to certain specialized classes of taxpayers such as certain financial
institutions, insurance companies, dealers in securities or foreign currencies,
or United States persons whose functional currency (as defined in Section 985 of
the Code) is not the United States dollar. Persons considering the purchase of
these securities should consult their tax advisors with regard to the
application of the United States and other income tax laws to their particular
situations. In particular, a U.S. Holder should consult his tax advisor with
regard to the application of the United States federal income tax laws to his
situation.

COMMON STOCK

A U.S. Holder generally will realize, to the extent of the Company's current
and accumulated earnings and profits, foreign source ordinary income on the
receipt of cash dividends, if any, on the Common Stock equal to the United
States dollar value of such dividends determined by reference to the exchange
rate in effect on the day they are received by the U.S. Holder (with the value
of such dividends computed before any reduction for any Canadian withholding
tax). U.S. Holders should consult their own tax advisors regarding the treatment
of foreign currency gain or loss, if any, on any dividends received which are
converted into United States dollars on a date subsequent to receipt. Subject to
the requirements and limitations imposed by the Code, a U.S. Holder may elect to
claim Canadian tax withheld or paid with respect to dividends on the Common
Stock as a foreign credit against the United States federal income tax liability
of such holder. Dividends on the Common Stock generally will constitute "passive
income" or, in the case of certain U.S. Holders, "financial services income" for
United States foreign tax credit purposes. U.S. Holders who do not elect to
claim any foreign tax credits may claim a deduction for Canadian income tax
withheld. Dividends paid on the Common Stock will not be eligible for the
dividends received deduction available in certain cases to United States
corporations.

Upon a sale or exchange of a share of Common Stock, a U.S. Holder will
recognize gain or loss equal to the difference between the amount realized on
such sale or exchange and the tax basis of such Common Stock. Any such gain or
loss will be capital gain or loss, and will be long term capital gain or loss if
at the time of sale or exchange the Common Stock has been held for more than one
year.

WARRANTS

No gain or loss will be recognized by the holder of a Warrant upon the
exercise of the Warrant. The cost basis of the Common Stock acquired upon such
exercise will be the cost basis of the Warrant plus any additional amount paid
upon the exercise of the Warrant. Gain or loss will be recognized upon the
subsequent sale or exchange of the Common Stock acquired by the exercise of the
Warrant, measured by the difference between the amount realized upon the sale or
exchange and the cost basis of the Common Stock so acquired.

If a Warrant is not exercised, but is sold or exchanged (whether pursuant to
redemption or otherwise), gain or loss will be recognized upon such event,
measured by the difference between the amount realized by the holder of the
Warrant as a result of sale, exchange or redemption and the cost basis of the
Warrant.

If a Warrant is not exercised and is allowed to expire, the Warrants will be
deemed to be sold or exchanged on the date of expiration. In such event, the
holder of the Warrant will recognize a loss to the extent of the cost basis of
the Warrant.

Generally, any gain or loss recognized as a result of the foregoing will be
a capital gain or loss and will either be long-term or short-term depending upon
the period of time the Common Stock sold or exchanged or the Warrant sold,
exchanged, redeemed, or allowed to expire, as the case may be, was held. A
holding period of more than one year results in long-term gain or loss
treatment. If a Warrant is exercised, the holding period of the Common Stock so
acquired will not include the period during which the Warrant was held.

THIS SUMMARY IS OF GENERAL NATURE ONLY AND IS NOT INTENDED TO BE, AND SHOULD NOT
BE CONSTRUED TO BE, LEGAL OR TAX ADVICE TO ANY PROSPECTIVE INVESTOR AND NO
REPRESENTATION WITH RESPECT TO THE TAX CONSEQUENCES TO ANY PARTICULAR INVESTOR
IS MADE.

INVESTMENT CANADA ACT

The Investment Canada Act is a Federal Canadian statute which regulates the
acquisition of control of existing Canadian businesses and the establishment of
new Canadian businesses by an entity that is a "non-Canadian" as that term is
defined in the Investment Canada Act.

The Company believes that it is not currently a "non-Canadian" for purposes
of the Investment Canada Act. Generally, a company will be deemed to be
"non-Canadian under the Investment Canada Act if control of the Company is held
by non-Canadian residents. If the Company were to become a "non-Canadian" in the
future, acquisitions of control of Canadian businesses by the Company would
become subject to the Investment Canada Act. Generally, the direct acquisition
by a "non-Canadian" of an existing Canadian business with gross assets of
$5,000,000 or more is reviewable under the Investment Canada Act, with a
threshold of $168 million for 1996 for "NAFTA investors" as defined under the
Investment Canada Act.

Indirect acquisitions of existing Canadian businesses (with gross assets
over certain threshold levels) as well as acquisitions of businesses related to
Canada's cultural heritage or national identity (regardless of the value of
assets involved) may also be reviewable under the Investment Canada Act. In
addition, acquisitions of control of existing investments to establish new,
unrelated businesses are not generally reviewable but do require that a notice
of the investment be given under the Investment Canada Act. An investment in a
new business that is related to the non-Canadian's existing business in Canada
is not notifiable under the Investment Canada Act unless such investment relates
to Canada's cultural heritage or national identity.

Investments which are reviewable under the Investment Canada Act are
reviewed by the Minister, designated as being responsible for the administration
of the Investment Canada Act. Reviewable investments may not be implemented
prior to the Minister determining that the investment is likely to be of "net
benefit to Canada" based on the criteria set out in the Investment Canada Act.

UNDERWRITING

The Company has agreed to sell, and the Underwriter has agreed, subject to
the terms and conditions of the Underwriting Agreement, to purchase from the
Company on a firm commitment basis, the respective number of Shares and Warrants
set forth opposite their names below.

The Underwriter has advised the Company that it proposes to offer the Shares
and Warrants to the public at the public offering price set forth on the cover
page of this Prospectus and that they may allow to selected dealers who are
members of the NASD, concessions of not in excess of $. per Share and $
per Warrant, of which not more than $. per Share and $ per Warrant may
be re-allowed to certain other dealers who are members of the NASD. After the
public offering, the public prices, concessions and reallowances may be changed
by the Underwriter.

The Underwriting Agreement further provides that the Underwriter will
receive from the Company a non-accountable expense allowance of 3% of the
aggregate public offering price of the Shares and Warrants sold (including any
Shares and Warrants sold pursuant to the Underwriters' Over-Allotment Option),
which allowance amounts to $153,063.75 (or $176,023.31 if the Underwriter's
Over-Allotment Option is exercised in full).

The Company has granted to the Underwriter the Over-Allotment Option, which
is exercisable for a period of 45 days after the Closing, to purchase up to an
aggregate additional (up to 15% of the Units being offered) at the public
offering price, less underwriting discounts and commissions, solely to cover
over-allotments, if any.

The Underwriter has informed the Company that the Underwriter will not make
sales of the Units offered by this Prospectus to accounts over which they
exercise discretionary authority.

The Company has agreed to sell to the Underwriter for a price of $.01 per
Warrant the Underwriter's Option to purchase 83,300 Shares of Common Stock and
83,300 Warrants exclusive of the Over-Allotment Option. The Underwriter's Option
will be nonexercisable for one year after the date of this Prospectus.
Thereafter, for a period of four years, the Underwriter's Option will be
exercisable at $7.20 per Share and $.15 per Warrant. The Underwriter's Option is
not transferable for a period of one year after the date of this Prospectus,
except to officers and stockholders of the Underwriter and to members of the
selling group and their officers and partners. The Warrants underlying the
Underwriter's Option shall have an exercise price of $6.00 per share of Common
Stock.

For the life of the Underwriter's Option, the holders thereof are given, at
nominal costs, the opportunity to profit from a rise in the market price of the
Company's securities with a resulting dilution in the interest of other
shareholders. Further, the holders may be expected to exercise the Underwriters'
Option at a time when the Company would in all likelihood be able to obtain
equity capital on terms more favorable than those provided in the Underwriters'
Option.

The Company has agreed that upon closing of this Offering, it will for a
period of not less than three years, invite a designee of the Underwriter to
attend all meetings of the board of directors. Such designee will be entitled to
the same notices and communications sent by the Company to its directors and to
attend directors meetings, but will not be entitled to vote or be compensated
therefor.

The Company has agreed to retain the Underwriter as a financial consultant
for a period of twenty-four months to commence on the closing of this Offering,
at a monthly fee of $2,000 all of which ($48,000) shall be payable in advance on
the closing of the Offering. Pursuant to this agreement, the Underwriter will be
obligated to provide general financial advisory services to the Company on an
"as needed" basis with respect to possible future financing or acquisitions by
the Company and related matters. The agreement does not require the Underwriter
to provide any minimum number of hours of consulting services to the Company.

The public offering price of the Shares and Warrants offered hereby and the
exercise price and other terms of the Warrants have been determined by
negotiation between the Company and the Underwriter. Factors considered in
determining the offering price of the Shares and Warrants offered hereby and the
exercise price of the Warrants included the business in which the Company is
engaged, the Company's financial condition, an assessment of the Company's
management, the general condition of the securities markets and the demand for
similar securities of comparable companies.

The Company has agreed, for a period of two years from the date of this
Prospectus not to issue any shares of Common Stock, in any public underwritten
offering without first providing the Underwriter with the right of first refusal
to underwrite and manage such offering.

In connection with this Offering, the Underwriter and selling group members
and their respective affiliates may engage in transactions that stabilize,
maintain or otherwise affect the market price of the Common Stock and Warrants.
Such transactions may include stabilization transactions effected in accordance
with Rule 104 of Regulation M, pursuant to which such persons may bid for or
purchase Common Stock or Warrants for the purpose of stabilizing their
respective market prices. The Underwriter also may create a short position for
the account of the Underwriter by selling more shares of Common Stock or
Warrants in connection with the Offering than they are committed to purchase
from the Company, and in such case may purchase shares of Common Stock or
Warrants in the open market following completion of the Offering to cover all or
a portion of such short position. The Underwriter may also cover all or a
portion of such short position by exercising the Over-Allotment Option. In
addition, the Underwriter may impose "penalty bids" under contractual
arrangements with the Underwriter whereby it may reclaim from an Underwriter (or
dealer participating in the Offering) for the account of other Underwriter, the
selling concession with respect to Shares and Warrants that are distributed in
the Offering but subsequently purchased for the account of the Underwriter in
the open market. Any of the transactions described in this paragraph may result
in the maintenance of the price of the Common Stock and Warrants at a level
above that which might otherwise prevail in the open market. None of the
transactions described in this paragraph is required, and, if they are
undertaken they may be discontinued at any time.

Commencing one year after the date of this Prospectus, the Company will pay
the Underwriter a fee of 5% of the exercise price of each Warrant exercised,
provided (i) the market price of the Common Stock on the date the Warrant was
exercised was greater than the Warrant exercise price on that date; (ii) the
exercise price of the Warrant was solicited by a member of the NASD; (iii) the
Warrant was not held in discretionary account; (iv) the disclosure of
compensation arrangements was made both at the time of this Offering and at the
time of exercise of the Warrant; (v) the solicitation of the exercise of the
Warrant was not a violation of Regulation M promulgated under the Exchange Act;
and (vi) the Warrant holder designates in writing which broker-dealer made the
solicitation. The Underwriter and any other soliciting broker-dealers may be
prohibited from engaging in any market-making activities or solicited brokerage
activities with regard to the Company's securities during the periods prescribed
by Regulation M, five business days (or other applicable period as Regulation M
may provide) before the solicitation of the exercise of any Warrant until the
later of the termination of such solicitation activity or the termination of any
right the Underwriters and any other soliciting broker/dealer may have to
receive a fee for the solicitation of the exercise of the Warrants.

The foregoing is a summary of the material terms of the Underwriting
Agreement, the Underwriter's Option and the Consulting Agreement. Reference is
made to the copies of the Underwriting Agreement, the Underwriter's Option and
the Consulting Agreement, which are filed as exhibits to the Registration
Statement of which this Prospectus forms a part.

LEGAL MATTERS

Certain legal matters relating to Ontario law, including the validity of the
issuance of the Common Stock and Warrants offered herein, will be passed upon
for the Company by Torkin, Manes, Cohen & Arbus. Certain legal matters in
connection with the Offering will be passed upon for the Company by its United
States counsel, Sichenzia Ross & Friedman, L.L.P., 135 West 50th Street, 20th
Floor, New York, New York 10020. Sichenzia Ross & Friedman, L.L.P. has served,
and continues to serve, as counsel to the Underwriter in matters unrelated to
this Offering. Certain legal matters will be passed upon for the Underwriter by
Robert E. Altenbach, Esq.

EXPERTS

The combined financial statements of Ontario Wallcoverings Ltd. and Rosedale
Wallcoverings & Fabrics Inc. for each of the fiscal years ended December 31,
1997 and 1996, appearing in this Prospectus and Registration Statement have been
audited by Schwartz Levitsky Feldman, Chartered Accountants, as set forth in
their reports thereon appearing elsewhere herein and in the Registration
Statement, and are included in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement under the
Act with respect to the Securities offered hereby. This Prospectus omits certain
information contained in the Registration Statement and the exhibits thereto,
and reference is made to the Registration Statement and the exhibits thereto for
further information with respect to the Company and the Securities offered
hereby. Each such statement is qualified in its entirety by such reference. The
Registration Statement, including exhibits and schedules filed therewith, may be
inspected without charge at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549 and at the regional offices of the Commission located at 7 World
Trade Center, Suite 1300, New York, New York 10048, and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such materials may be obtained from the Public Reference Section of the
Commission, Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, and its public reference facilities in New York, New York and Chicago,
Illinois upon payment of the prescribed fees. Electronic registration statements
filed through the Electronic Data Gathering, Analysis, and Retrieval System are
publicly available through the Commission's Website (http://www.sec.gov). At the
date hereof, the Company was not a reporting company under the Securities
Exchange Act of 1934, as amended.

ONTARIO PAINT & WALLPAPER LIMITED AND
ROSEDALE WALLCOVERINGS AND FABRICS INC.

COMBINED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 1997, AND DECEMBER 31, 1996
TOGETHER WITH AUDITORS' REPORT

TABLE OF CONTENTS

PAGE
---------

Report of Independent Auditors......................................................................... F-2

Combined Balance Sheets as of December 31, 1997 and December 31, 1996.................................. F-3

Combined Statements of Income for the years ended December 31, 1997
December 31, 1996 and December 31, 1995.............................................................. F-4

Combined Statements of Cash Flows for the years ended December 31, 1997
December 31, 1996 and December 1, 1995............................................................... F-5

Combined Statements of Stockholders' Equity for the years ended December 31, 1997, 1996, 1995 and
1994................................................................................................. F-6

Notes to Combined Financial Statements................................................................. F-7-F-19

F-1

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders of
Ontario Paint & Wallpaper Limited and
Rosedale Wallcoverings and Fabrics Inc.

We have audited the accompanying combined balance sheets of Ontario Paint &
Wallpaper Limited and Rosedale Wallcoverings and Fabrics Inc. (incorporated in
Canada) as of December 31, 1997 and 1996 and the related combined statements of
income, cash flows and changes in stockholders' equity for the years ended
December 31, 1997, 1996 and 1995. These combined financial statements are the
responsibility of the management of Ontario Paint & Wallpaper Limited and
Rosedale Wallcoverings and Fabrics Inc. Our responsibility is to express an
opinion on these combined financial statements based on our audits.

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

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Ontario Paint &
Wallpaper Limited and Rosedale Wallcoverings and Fabrics Inc. as of December 31,
1997 and 1996 and the results of their operations and their cash flows for the
years ended December 31, 1997, 1996 and 1995, in conformity with generally
accepted accounting principles in the United States of America.

Toronto, Ontario Schwartz Levitsky Feldman

April 16, 1998 Chartered Accountants

F-2

ONTARIO PAINT & WALLPAPER LIMITED AND
ROSEDALE WALLCOVERINGS AND FABRICS INC.

COMBINED BALANCE SHEETS

AS OF DECEMBER 31,

(AMOUNTS EXPRESSED IN US DOLLARS)

1997 1996
------------- -------------

ASSETS
CURRENT ASSETS
Cash............................................................................. $ 442,655 $ 1,079,823
Accounts receivable (note 2)..................................................... 4,683,912 3,914,762
Inventory (note 3)............................................................... 7,193,831 6,277,999
Prepaid expenses and sundry assets............................................... 180,096 135,859
------------- -------------
12,500,494 11,408,443
LOANS RECEIVABLE FROM AFFILIATED COMPANIES (note 4)................................ 36,884 64,545
DEFERRED PRODUCT COSTS (note 5).................................................... 641,028 --
DEFERRED POLICY COSTS (note 6)..................................................... 182,873 126,369
MORTGAGES RECEIVABLE (note 7)...................................................... 402,684 --
PROPERTY, PLANT AND EQUIPMENT (note 8)............................................. 1,930,869 1,443,028
------------- -------------
15,694,832 13,042,385
LIABILITIES
CURRENT LIABILITIES
Bank indebtedness (note 9)....................................................... 3,970,943 3,598,780
Accounts payable and accrued expenses (note 10).................................. 6,741,431 5,470,806
Income taxes payable............................................................. 172,538 200,429
Current portion of long-term debt (note 11)...................................... 82,616 119,390
------------- -------------
10,967,528 9,389,405
LONG-TERM DEBT (note 11)........................................................... 996,981 871,418
LOANS PAYABLE TO STOCKHOLDERS (note 12)............................................ 238,945 252,209
ADVANCES FROM DIRECTORS (note 13).................................................. 1,539,791 1,470,066
DEFERRED INCOME TAXES.............................................................. 190,564 29,184
------------- -------------
13,933,809 12,012,282
------------- -------------
STOCKHOLDERS' EQUITY
CAPITAL STOCK (note 14)............................................................ 163 163
CUMULATIVE TRANSLATION ADJUSTMENT.................................................. (175,205) (106,297)
RETAINED EARNINGS (note 16)........................................................ 1,936,065 1,136,237
------------- -------------
1,761,023 1,030,103
------------- -------------
15,694,832 13,042,385
------------- -------------
------------- -------------

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

F-3

ONTARIO PAINT & WALLPAPER LIMITED AND
ROSEDALE WALLCOVERINGS AND FABRICS INC.

COMBINED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31,

(AMOUNTS EXPRESSED IN US DOLLARS)

1997 1996 1995
---------- ---------- ----------

SALES................................................. $20,757,423 $18,927,369 $18,552,166
COST OF SALES......................................... 13,350,033 12,301,621 11,605,996
---------- ---------- ----------
GROSS PROFIT.......................................... 7,407,390 6,625,748 6,946,170
---------- ---------- ----------
OPERATING EXPENSES
Selling............................................. 2,321,585 2,437,576 2,730,318
General and administrative.......................... 2,190,786 2,003,119 2,382,302
Book development costs (recovery)................... 189,566 (278,079) (180,239)
Design studio....................................... 826,796 899,372 988,638
Amortization........................................ 572,655 651,143 595,716
---------- ---------- ----------
TOTAL OPERATING EXPENSES.............................. 6,101,388 5,713,131 6,516,735
---------- ---------- ----------
OPERATING INCOME...................................... 1,306,002 912,617 429,435
Interest expense.................................... 209,403 234,865 758,660
Insurance premiums.................................. 188,963 191,845 190,587
---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES..................... 907,636 485,907 (519,812)
Income taxes (note 15).............................. 282,010 62,336 53,078
---------- ---------- ----------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE................................ 625,626 423,571 (572,890)
Cumulative effect of change in accounting principle
[note 1 -C-]...................................... 174,202 -- --
---------- ---------- ----------
NET INCOME (LOSS)..................................... 799,828 423,571 (572,890)
---------- ---------- ----------
---------- ---------- ----------
EARNINGS PER SHARE [note 14 (e)]

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

F-4

ONTARIO PAINT & WALLPAPER LIMITED AND
ROSEDALE WALLCOVERINGS AND FABRICS INC.

COMBINED STATEMENTS OF CASH FLOWS

(AMOUNTS EXPRESSED IN US DOLLARS)

1997 1996 1995
------------- ------------- -------------

Cash flows from operating activities:
Net income (loss).................................................. $ 799,828 $ 423,571 $ (572,890)
------------- ------------- -------------
Adjustments to reconcile net income to net cash provided by (used
in) operating activities:
Amortization....................................................... 572,655 651,143 595,716
Increase in deferred product costs................................. (658,762) -- --
Increase in accounts receivable.................................... (964,145) (487,558) 754,099
(Increase) decrease in inventory................................... (1,222,626) 676,507 (1,183,734)
Increase in prepaid expenses and sundry assets..................... (51,588) (51,405) (60,055)
(Decrease) increase in accounts payable and accrued expenses....... 1,549,646 (1,299,429) (460,691)
Increase (decrease) in income taxes payable........................ (20,144) 30,642 (10,121)
Increase in deferred income taxes.................................. 168,015 29,335 --
------------- ------------- -------------
Total adjustments................................................ (626,949) (450,765) (364,786)
------------- ------------- -------------
Net cash provided by (used in) operating activities................ 172,879 (27,194) (937,676)
------------- ------------- -------------
Cash flows from investing activities:
Increase in deferred policy costs.................................. (63,854) (25,227) (22,148)
Purchases of property, plant and equipment......................... (945,933) (871,703) (902,570)
Increase in mortgages receivable................................... (415,044) -- --
------------- ------------- -------------
Net cash used in investing activities.............................. (1,424,831) (896,930) (924,718)
------------- ------------- -------------
------------- ------------- -------------
Cash flows from financing activities:
Proceeds from bank indebtedness.................................... 540,267 410,106 1,914,752
(Repayment of) proceeds from loans with affiliated companies....... 25,789 (37,034) (25,501)
Proceeds from long-term debt....................................... 134,616 510,414 212,735
Repayment of stockholders' loans................................... (2,793) -- --
Proceeds from loans with directors................................. 135,654 510,298 (225,764)
------------- ------------- -------------
Net cash provided by financing activities.......................... 833,533 1,393,784 1,876,222
------------- ------------- -------------
Effect of foreign currency exchange rate changes................... (218,749) (5,363) 16,311
------------- ------------- -------------
Net (decrease) increase in cash and cash equivalents............... (637,168) 464,297 30,139
Cash and cash equivalents Beginning of year........................ 1,079,823 615,526 585,387
------------- ------------- -------------
End of year........................................................ 442,655 1,079,823 615,526
------------- ------------- -------------
------------- ------------- -------------
Income taxes paid.................................................. 135,302 59,553 45,146
------------- ------------- -------------
------------- ------------- -------------
Interest paid...................................................... 299,421 358,756 452,972
------------- ------------- -------------
------------- ------------- -------------

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

F-5

ONTARIO PAINT & WALLPAPER LIMITED AND
ROSEDALE WALLCOVERINGS AND FABRICS INC.

COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY

(AMOUNTS EXPRESSED IN US DOLLARS)

COMMON
CLASS A STOCK CUMULATIVE
NUMBER OF NUMBER OF RETAINED TRANSLATION
SHARES SHARES AMOUNT EARNINGS ADJUSTMENTS
------------- ------------- ----------- ------------ -----------

Balance as of December 31, 1994..................... 20 220 $ 163 $ 1,432,227 $ (133,610)
Foreign currency translation...................... -- -- -- -- 32,381
Net loss for the year............................. -- -- -- (572,890) --
--- --- ----- ------------ -----------
Balance as of December 31, 1995..................... 20 220 163 859,337 (101,229)
Adjustment due to prior years' income tax
reassessments (note 16)......................... -- -- -- (146,671) --
--- --- ----- ------------ -----------
As restated....................................... 20 220 163 712,666 (101,229)
Foreign currency translation...................... -- -- -- -- (5,068)
Net income for the year........................... -- -- -- 423,571 --
--- --- ----- ------------ -----------
Balance as of December 31, 1996..................... 20 220 163 1,136,237 (106,297)
Foreign currency translation...................... -- -- -- -- (68,910)
Net income for the year........................... -- -- -- 799,828 --
--- --- ----- ------------ -----------
Balance as of December 31, 1997..................... 20 220 163 1,936,065 (175,205)
--- --- ----- ------------ -----------
--- --- ----- ------------ -----------

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

F-6

ONTARIO PAINT & WALLPAPER LIMITED AND
ROSEDALE WALLCOVERINGS AND FABRICS INC.

NOTES TO COMBINED FINANCIAL STATEMENTS

(AMOUNTS EXPRESSED IN US DOLLARS)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A) BASIS OF PRESENTATION

The combined financial statements of Ontario Paint & Wallpaper Limited
("Ontario") and Rosedale Wallcoverings and Fabrics Inc. ("Rosedale") combine the
accounts of the following companies as at their respective year ends:

Ontario Paint & Wallpaper Limited............... December 31, 1997 and 1996
Rosedale Wallcoverings and Fabrics Inc.......... December 31, 1997 and 1996

All material inter-company accounts and transactions have been eliminated.

B) PRINCIPAL ACTIVITIES

The companies, Ontario Paint and Wallpaper Limited and Rosedale
Wallcoverings and Fabrics Inc. were incorporated in Canada on December 3, 1971
and April 7, 1981 respectively. The companies are principally engaged in the
designing, manufacturing and marketing of wallpapers and decorative fabrics in
Canada, U.S. and Europe.

C) DEFERRED PRODUCT COSTS

Expenditures relating to the design and distribution of wallpaper and fabric
sample catalogues consisting of book development and design costs relating to
collections that have not been launched are deferred and amortized over a
three-year period on a straight-line basis. Proceeds from the sale of sample
catalogues are offset against the book development costs when received.

The deferral of a portion of book development and design costs represents a
change in accounting principle from a full write-off to a deferral over three
years.

D) CASH AND CASH EQUIVALENTS (BANK INDEBTEDNESS)

Cash and cash equivalents (bank indebtedness) includes cash on hand, amounts
due from and to banks, and any other highly liquid investments purchased with a
maturity of three months or less. The carrying amounts approximate fair values
because of the short maturity of those instruments.

E) OTHER CURRENT FINANCIAL INSTRUMENTS

The carrying amount of the companies' accounts receivable and payable
approximates fair value because of the short maturity of these instruments.

F) LONG-TERM FINANCIAL INSTRUMENTS

The fair value of each of the companies' long-term financial assets and debt
instruments is based on the amount of future cash flows associated with each
instrument discounted using an estimate of what the companies' current borrowing
rate for similar instruments of comparable maturity would be.

F-7

ONTARIO PAINT & WALLPAPER LIMITED AND
ROSEDALE WALLCOVERINGS AND FABRICS INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(AMOUNTS EXPRESSED IN US DOLLARS)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

G) INVENTORY

Inventory is valued at the lower of cost and fair market value. Cost is
determined on the first-in, first-out basis.

H) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are recorded at cost and are amortized on the
basis of their estimated useful lives at the undernoted rates and methods:

Leasehold improvements 10% Straight-line
Cylinders and related design costs 5 years Straight-line
Equipment furniture and fixtures 20% Declining balance
Computer equipment 30% and 20% Declining balance
Automobile 30% Declining balance

Amortization for assets acquired during the year are recorded at one- half
of the indicated rates, which approximate when they were put into use.

The amortization period for cylinders and related design costs was extended
from a period of three years to a five year period to more accurately reflect
their estimated useful lives. This change resulted in a reduction in the
amortization charge by approximately $480,000.

I) INCOME TAXES

The companies account for income tax under the provisions of Statement of
Financial Accounting Standards No. 109 , which requires recognition of deferred
tax assets and liabilities for the expected future tax consequences of events
that have been included in the financial statements or tax returns. Deferred
income taxes are provided using the liability method. Under the liability
method, deferred income taxes are recognized for all significant temporary
differences between the tax and financial statement bases of assets and
liabilities.

J) FOREIGN CURRENCY TRANSLATION

The companies maintain their books and records in Canadian dollars. Foreign
currency transactions are translated using the temporal method. Under this
method, all monetary items are translated into Canadian funds at the rate of
exchange prevailing at balance sheet date. Non- monetary items are translated at
historical rates. Income and expenses are translated at the rate in effect on
the transaction dates. Transaction gains and losses are included in the
determination of earnings for the year.

The translation of the financial statements from Canadian dollars ("CDN $")
into United States dollars is performed for the convenience of the reader.
Balance sheet accounts are translated using closing exchange rates in effect at
the balance sheet date and income and expense accounts are translated using an
average exchange rate prevailing during each reporting period. No representation
is made that the Canadian dollar amounts could have been, or could be, converted
into United Sates dollars at the rates on the respective dates and or at any
other certain rates. Adjustments resulting from the translation are included in
the cumulative translation adjustments in stockholders' equity.

F-8

ONTARIO PAINT & WALLPAPER LIMITED AND
ROSEDALE WALLCOVERINGS AND FABRICS INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(AMOUNTS EXPRESSED IN US DOLLARS)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

K) SALES

Sales represents the invoiced value of goods supplied to customers. Sales
are recognized upon delivery of goods and passage of title to customers.

L) NET INCOME PER WEIGHTED AVERAGE COMMON STOCK

Net income per common stock is computed by dividing net income for the year
by the weighted average number of common stock outstanding as presented on a
pro-forma basis as explained in note 14 (d).

M) USE OF ESTIMATES

The preparation of financial statements requires management to make
estimates and assumptions that affect certain reported amounts of assets and
liabilities and disclosures 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.

N) ACCOUNTING CHANGES

On January 1, 1996, the companies adopted the provisions of SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets to
be Disposed Of. SFAS No. 121 requires that long-lived assets to be held and used
by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. SFAS No. 121 is effective for financial statements for fiscal years
beginning after December 15, 1995. Adoption of SFAS No. 121 did not have a
material impact on the companies' result of operations.

In December 1995, SFAS No. 123, Accounting for Stock-Based Compensation, was
issued. It introduced the use of a fair value-based method of accounting for
stock-based compensation. It encourages, but does not require, companies to
recognize compensation expense for stock- based compensation to employees based
on the new fair value accounting rules. Companies that choose not to adopt the
new rules will continue to apply the existing accounting rules contained in
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees. However, SFAS No. 123 requires companies that choose not to adopt the
new fair value accounting rules to disclose pro forma net income and earnings
per share under the new method. SFAS No. 123 is effective for financial
statements for fiscal years beginning after December 15, 1995. The companies
have adopted the disclosure provisions of SFAS No. 123.

2. ACCOUNTS RECEIVABLE

1997 1996
------------ ------------

Accounts receivable................................................................... $ 4,788,725 $ 4,799,124
Less: Allowance for doubtful accounts................................................. 104,813 884,362
------------ ------------
Accounts receivable, net.............................................................. 4,683,912 3,914,762
------------ ------------
------------ ------------

F-9

ONTARIO PAINT & WALLPAPER LIMITED AND
ROSEDALE WALLCOVERINGS AND FABRICS INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(AMOUNTS EXPRESSED IN US DOLLARS)

2. ACCOUNTS RECEIVABLE (CONTINUED)

During 1997, two accounts receivable amounting to approximately $780,000,
previously provided for were written off against the allowance for doubtful
accounts.

3. INVENTORY

1997 1996
------------ ------------

Inventory comprised the following:
Raw materials......................................................................... $ 41,678 $ 140,035
Finished goods........................................................................ 7,152,153 6,137,964
------------ ------------
7,193,831 6,277,999
------------ ------------
------------ ------------

4. LOANS RECEIVABLE FROM AFFILIATED COMPANIES

The loans receivable from affiliated companies which are related through
common ownership bear interest at prime plus 1.5%, have no specific repayment
terms, and are not expected to be repaid prior to January 1, 1999.

5. DEFERRED PRODUCT COSTS

1997 1996
---------- ----------

Book development costs.................................................................... $ 848,996 $ --
Deferred software costs................................................................... 62,915 --
---------- ----------
Cost...................................................................................... 911,911 --
---------- ----------
---------- ----------
Less: Accumulated amortization............................................................
Book development costs.................................................................. 208,299 --
Deferred software costs................................................................. 12,584 --
---------- ----------
270,883 --
---------- ----------
Net Deferred Product Costs................................................................ 641,028 --
---------- ----------
---------- ----------

6. DEFERRED POLICY COSTS

Deferred policy costs represents the prepaid portion of premiums on the life
insurance policies referred to in note 21.

F-10

ONTARIO PAINT & WALLPAPER LIMITED AND
ROSEDALE WALLCOVERINGS AND FABRICS INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(AMOUNTS EXPRESSED IN US DOLLARS)

7. MORTGAGES RECEIVABLE

Second mortgages from companies related through common ownership, secured by
land and buildings, bear interest at 9% and are payable on demand. No repayments
are expected prior to January 1, 1999.

1997 1996
---------- ----------

1216748 Ontario Inc....................................................................... $ 209,073 $ --
1217576 Ontario Inc....................................................................... 193,611 --
---------- ----------
402,684 --
---------- ----------
---------- ----------

The fair value of the mortgages receivable is estimated to be $350,000.

8. PROPERTY, PLANT AND EQUIPMENT

1997 1996
------------ ------------

Leasehold improvements................................................................ $ 31,331 $ 32,700
Automobile............................................................................ 20,057 20,933
Equipment and furniture............................................................... 255,335 266,346
Furniture and fixtures................................................................ 301,585 297,688
Computer and equipment................................................................ 335,796 308,867
Cylinders and related design costs.................................................... 3,057,727 2,277,325
------------ ------------
Cost.................................................................................. 4,001,831 3,203,859
------------ ------------
Less: Accumulated amortization
Leasehold improvements.............................................................. $ 10,448 $ 7,635
Automobile.......................................................................... 16,485 15,608
Equipment and furniture............................................................. 184,572 174,174
Furniture and fixtures.............................................................. 196,837 177,847
Computer and equipment.............................................................. 228,903 209,073
Cylinders and related design costs.................................................. 1,433,717 1,176,494
------------ ------------
2,070,962 1,760,831
------------ ------------
Net Assets............................................................................ 1,930,869 1,443,028
------------ ------------
------------ ------------

9. BANK INDEBTEDNESS

The companies have available credit facilities up to a maximum of $5,700,000
($7,910,000 Canadian), which bear interest at rates varying between the bank's
prime rate and prime plus 1.5%. The indebtedness is secured by general
assignments of book debts, pledge of inventory under Section 427 of the Bank Act
of Canada, general security agreements providing a first floating charge over
all assets, guarantees and postponement of claims to a maximum of $722,000 each
from two officers, guarantees and postponement of claims to a maximum of
$1,450,000 from the parent companies, guarantees from affiliated companies up

F-11

ONTARIO PAINT & WALLPAPER LIMITED AND
ROSEDALE WALLCOVERINGS AND FABRICS INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(AMOUNTS EXPRESSED IN US DOLLARS)

9. BANK INDEBTEDNESS (CONTINUED)

to $595,000, assignment of life insurance of $1,450,000 on the lives of two key
officers and assignment of fire insurance.

10. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

1997 1996
------------ ------------

Accounts payable and accrued expenses is comprised of the following:
Trade payables...................................................................... $ 6,358,585 $ 5,201,663
Accrued expenses.................................................................... 382,846 269,143
------------ ------------
6,741,431 5,470,806
------------ ------------
------------ ------------

11. LONG-TERM DEBT

1997 1996
------------ -----------

a) Settlement Payable

Subsequent to December 31, 1997, Rosedale agreed to a $290,733 settlement of a
claim initiated by a third party. The terms of payments are as follows:

$18,248 monthly for January to March, 1997, $7,242 monthly thereafter. The fair
value of the settlement payable is estimated to be $158,000....................... $ 165,231 $ 291,843
------------ -----------
b) Insurance Loan

Amount in excess of cash surrender values of life insurance policies (note 21)
which is payable on demand but is expected to become due for payment in the year
2004. The loan bears interest at prime plus 1.5% and is secured by letters of
guarantee from a major Canadian Chartered Bank and a second collateral mortgage on
the assets of the companies....................................................... 914,366 698,965
------------ -----------
1,079,597 990,808
Less: Current portion............................................................. (82,616) (119,390)
------------ -----------
Long-term portion................................................................. 996,981 871,418
------------ -----------
------------ -----------

12. LOANS PAYABLE TO STOCKHOLDERS

Stockholder's advances are secured by general security agreements, bears
interest at prime plus 1.5%, have no specific repayment terms, and the
stockholders are not expected to demand repayment prior to January 1, 1999.

F-12

ONTARIO PAINT & WALLPAPER LIMITED AND
ROSEDALE WALLCOVERINGS AND FABRICS INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(AMOUNTS EXPRESSED IN US DOLLARS)

13. ADVANCES FROM DIRECTORS

Advances from directors are secured by general security agreements, bears
interest at prime plus 1.5%, have no specific repayment terms, and the directors
are not expected to demand repayment prior to January 1, 1999.

14. CAPITAL STOCK

A) ONTARIO PAINT & WALLPAPER LIMITED

AUTHORIZED

500,020 Class A Preference shares, 8% non-cumulative, non-voting,
redeemable at $12,500 per share
25,000 Class B Preference shares, 8% non-cumulative, non-voting,
redeemable at paid upamount
249,980 Common shares

ISSUED

1997 1996
----- -----

20 Class A Preference shares............................................ $ 1 $ 1
20 Common shares........................................................ 2 2
-- --
3 3
-- --
-- --

B) ROSEDALE WALLCOVERINGS AND FABRICS INC.

AUTHORIZED

3,600 Preference shares, 9% non-cumulative, non-voting, redeemable at the
amount paid up plus a premium of 10%
4,000 Common shares

ISSUED

1997 1996
--------- ---------

100 Common shares $ 160 $ 160
--------- ---------

F-13

ONTARIO PAINT & WALLPAPER LIMITED AND
ROSEDALE WALLCOVERINGS AND FABRICS INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(AMOUNTS EXPRESSED IN US DOLLARS)

14. CAPITAL STOCK (CONTINUED)

C) ISSUED--COMBINED

1997 1996
--------- ---------

20 Class A Preference shares $ 1 $ 1
120 Common shares 162 162
--------- ---------
163 163
--------- ---------
--------- ---------

D) WEIGHTED AVERAGE NUMBER OF COMMON SHARES

On May 14, 1997, a newly incorporated holding company, Rosedale Decorative
Products Ltd. (the "Registrant"), was formed by the shareholders of the
companies for the purpose of consolidating and reorganizing their 100% ownership
interests in anticipation of an initial public offering. This reorganization
will be carried out using the pooling of interests method.

For the purpose of determining earnings per share, the weighted average
number of common shares has been presented on a pro-forma basis, on the
assumption that the reorganisation was completed as at December 31, 1997.

This reorganization will result in the transfer of all the outstanding
common shares of the parent companies of Ontario and Rosedale currently held by
the Fine and Ackerman families to the Registrant in exchange for 1,250,000
common shares of the Registrant.

After giving effect to the above transaction, there will be 1,250,000 issued
common shares of the Registrant. Accordingly, the earnings per share data
presented are based on the total weighted average number of common shares on a
pro-forma basis of 1,250,000.

E) EARNINGS PER SHARE

1997 1996 1995
--------- --------- ---------

Pro-forma earnings per share before impact of change in accounting
principle.......................................................... 0.50 0.34 (0.46)
--------- --------- ---------
--------- --------- ---------
Pro-forma earnings per share after impact of change in accounting
principle.......................................................... 0.64 0.34 (0.46)
--------- --------- ---------
--------- --------- ---------

F-14

ONTARIO PAINT & WALLPAPER LIMITED AND
ROSEDALE WALLCOVERINGS AND FABRICS INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(AMOUNTS EXPRESSED IN US DOLLARS)

15. INCOME TAXES

1997 1996
---------- ----------

a) Current.......................................................................... 113,995 33,152
Deferred......................................................................... 168,015 29,184
---------- ----------
282,010 62,336
---------- ----------
---------- ----------
b) Current income taxes comprised as follows:

1997 1996
---------- ----------

Amount calculated at basic Canadian federal and provincial rates................. $ 371,806 $ 213,800
Increase (decrease) representing from:
Timing differences............................................................... (168,015) (29,184)
Adjustment to prior year taxes................................................... 40,497 --
Non-deductible expenses.......................................................... 90,400 91,189
Application of losses carry-forward.............................................. (220,693) (242,653)
---------- ----------
113,995 33,152
---------- ----------
---------- ----------

c) Deferred income taxes represented the tax charges derived from temporary
differences between amortization of property, plant and equipment and
amounts deducted from taxable income.

d) Rosedale has operating losses of approximately $770,000 which is expected
to he used to reduce future taxable income. The potential tax benefit
relating to the losses have been recognized in the accounts to the extent
that they reduce deferred taxes. The deductibility of these losses if
available expires as follows:

2001.............................................................. $ 432,000
2002.............................................................. 312,000
2004.............................................................. 26,000
---------
$ 770,000
---------
---------

Rosedale has been reassessed by Revenue Canada and the Province of Ontario for
fiscal year ended December 31, 1993 and December 31, 1994 in the amount of
approximately $665,000 [see note 19 (b)]. Should the assessments be upheld,
the benefits of these losses may not be realized.

16. INCOME TAX REASSESSMENTS

Retained earnings at the beginning of 1995 and 1996 previously reported as
$1,432,227 and $859,337, respectively, have been restated to $1,285,556 and
$712,666, respectively to reflect a correction resulting from prior years'
income tax reassessments for fiscal years 1994 and prior. The comparative 1996
figures have also been restated.

F-15

ONTARIO PAINT & WALLPAPER LIMITED AND

NOTES TO COMBINED FINANCIAL STATEMENTS

(AMOUNTS EXPRESSED IN US DOLLARS)

17. RELATED PARTY TRANSACTIONS

Amounts due from or paid to companies which are related through common
ownership.

1997 1996
---------- ---------

Loan -- 966578 Ontario Inc................................................................. $ 10,345 $ --
Loan -- 976168 Ontario Inc................................................................. 24,467 27,699
Mortgage receivable -- 1216748 Ontario Inc................................................. 192,640 --
Mortgage receivable -- 1217576 Ontario Inc................................................. 178,544 --
Rent paid -- 966578 Ontario Inc............................................................ 17,648 20,534

18. SEGMENTED INFORMATION

Rosedale is engaged primarily in the design, manufacturing, marketing, and
distribution whilst Ontario is engaged primarily in the marketing and
distribution of wallpaper and designer fabrics.

a) The breakdown of sales by geographic area is as follows:

YEAR ENDED DECEMBER 31, 1997
------------------------------------------

ONTARIO ROSEDALE TOTAL
------------ ------------- -------------
United States of America............................................. $ 747,267 $ 9,133,266 $ 9,880,533
Canada............................................................... 7,472,673 1,712,487 9,185,160
Other................................................................ 1,120,901 570,829 1,691,730
------------ ------------- -------------
9,340,841 11,416,582 20,757,423
------------ ------------- -------------
------------ ------------- -------------

YEAR ENDED DECEMBER 31, 1996
------------------------------------------

ONTARIO ROSEDALE TOTAL
------------ ------------- -------------
United States of America............................................. $ 1,166,573 $ 9,233,118 $ 10,399,691
Canada............................................................... 6,067,758 1,530,499 7,598,257
Other................................................................ 113,887 815,534 929,421
------------ ------------- -------------
7,348,218 11,579,151 18,927,369
------------ ------------- -------------
------------ ------------- -------------

YEAR ENDED DECEMBER 31, 1995
------------------------------------------

ONTARIO ROSEDALE TOTAL
------------ ------------- -------------
United States of America............................................. $ 1,739,101 $ 9,478,947 $ 11,218,048
Canada............................................................... 5,086,322 1,335,491 6,421,813
Other................................................................ 157,391 754,914 912,305
------------ ------------- -------------
6,982,814 11,569,352 18,552,166
------------ ------------- -------------
------------ ------------- -------------

F-16

ONTARIO PAINT & WALLPAPER LIMITED AND

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(AMOUNTS EXPRESSED IN US DOLLARS)

18. SEGMENTED INFORMATION (CONTINUED)

b) The companies' accounting records do not readily provide information on
net income by geographic area. Management is of the opinion that the proportion
of net income based principally on sales, presented below, would fairly present
the results of operations by geographic area.

YEAR ENDED DECEMBER 31, 1997
----------------------------------

ONTARIO ROSEDALE TOTAL
---------- ---------- ----------
United States of America..................................................... $ 24,524 $ 255,256 $ 279,780
Canada....................................................................... 245,245 49,775 295,020
Other........................................................................ 36,787 14,039 50,826
---------- ---------- ----------
306,556 319,070 625,626
---------- ---------- ----------
---------- ---------- ----------

YEAR ENDED DECEMBER 31, 1996
----------------------------------

ONTARIO ROSEDALE TOTAL
---------- ---------- ----------
United States of America..................................................... $ 18,298 $ 238,089 $ 256,387
Canada....................................................................... 94,922 46,381 141,303
Other........................................................................ 1,144 24,737 25,881
---------- ---------- ----------
114,364 309,207 423,571
---------- ---------- ----------
---------- ---------- ----------

YEAR ENDED DECEMBER 31, 1995
------------------------------------

ONTARIO$ ROSEDALE TOTAL
---------- ----------- -----------
United States of America................................................... $ 35,805 $ (551,406) $ (515,601)
Canada..................................................................... 91,762 (107,417) (15,755)
Other...................................................................... 15,755 (57,289) (41,534)
---------- ----------- -----------
125,701 (508,004) (572,890)
---------- ----------- -----------
---------- ----------- -----------

c) The breakdown of identifiable assets by geographic area is as follows:

YEAR ENDED DECEMBER 31, 1997
-----------------------------------------

ONTARIO ROSEDALE TOTAL
------------ ------------ -------------
United States of America.............................................. $ -- $ 1,149,550 $ 1,149,550
Canada................................................................ 5,920,090 7,213,301 13,133,391
Other................................................................. 514,791 897,100 1,411,891
------------ ------------ -------------
6,434,881 9,259,951 15,694,832
------------ ------------ -------------
------------ ------------ -------------

F-17

ONTARIO PAINT & WALLPAPER LIMITED AND

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(AMOUNTS EXPRESSED IN US DOLLARS)

18. SEGMENTED INFORMATION (CONTINUED)

YEAR ENDED DECEMBER 31, 1996
-----------------------------------------
ONTARIO ROSEDALE TOTAL
------------ ------------ -------------

United States of America.............................................. $ -- $ 1,053,006 $ 1,053,006
Canada................................................................ 5,077,164 6,023,127 11,100,291
Other................................................................. 305,455 583,633 889,088
------------ ------------ -------------
5,382,619 7,659,766 13,042,385
------------ ------------ -------------
------------ ------------ -------------

d) Sales to major customers are as follows:

1997 1996 1995
------------ ------------ -------------

Sales................................................................. $ 2,890,783 $ 1,968,456 $ 2,313,870
% of total sales...................................................... 14% 10% 12%
Amounts included in accounts receivable............................... $ 298,595 $ 365,794 $ 148,372

e) Purchases from major suppliers are as follows:

1997 1996 1995
------------ ------------ -------------

Purchases............................................................. $ 8,070,027 $ 6,101,860 $ 6,859,565
% of total purchases.................................................. 52% 49% 53%
Amounts included in accounts payable.................................. $ 3,101,539 $ 2,480,178 $ 1,792,158

19. CONTINGENCIES

a) The company is contingently liable under contested lawsuits amounting to
approximately $31,000. Management is of the opinion that the company's defence
is meritorious and the lawsuit will result in no material loss. Accordingly, no
provision is included in the accounts for possible related losses. Should any
expenditures be incurred by the company for resolution of these lawsuits, it
will be charged to the operations of the year in which such expenditures are
incurred.

b) Rosedale has been re-assessed by Revenue Canada and the Province of
Ontario for fiscal years ended December 31, 1993 and December 31, 1994 for
additional taxes estimated to be $664,000 ($950,000 Canadian). The company has
objected to these re-assessments and has no obligation to pay the portion
relating to Revenue Canada in the amount of $440,000 ($617,000 Canadian) until
the objections have been processed. No provision has been made in the accounts
for the additional taxes.

F-18

ONTARIO PAINT & WALLPAPER LIMITED AND

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(AMOUNTS EXPRESSED IN US DOLLARS)

20. COMMITMENTS

Minimum payments under operating leases for premises amount to approximately
$330,000 per annum, exclusive of insurance and other occupancy charges. The
leases expires on October 31, 2004. The future minimum lease payments over the
next four years are as follows:

1997
------------

Payable during the following periods:
Within one year................................................................................... $ 329,787
Over one year but not exceeding two years......................................................... 329,787
Over two years but not exceeding three years...................................................... 329,787
Over three years but not exceeding four years..................................................... 329,787
Over four years but not exceeding five years...................................................... 329,787
Thereafter........................................................................................ 661,065
------------
$ 2,310,000

21. LIFE INSURANCE POLICIES

The companies are the beneficiaries of life insurance policies with The
Prudential of America Life Insurance Company (Canada) ("PruCan") taken out on
the lives of three of the officers for a total insured value of $22 million. In
consideration for this benefit, the companies agreed to fund the premiums
payable on the policies. Funding is being provided by advances from the
Laurentian Bank of Canada ("Laurentian").

The Laurentian has a legal right of set-off of the cash surrender values of
the life insurance policies against the debt owing to it by the companies.
Accordingly the related assets and liabilities have been offset in the financial
statements.

The amounts offset were as follows:

Cash surrender value of life insurance policies................................. $2,030,532
Advances........................................................................ $(2,030,532)

The amount in excess of the cash surrender value of the life insurance
policies is included in long-term debt (see note 11).

The advances from Laurentian are payable on demand but are expected to
become due for payment in the year 2004. The companies are liable for the
interest on the advances. Security is provided by first charges on the insurance
policies, letters of credit from a major Canadian chartered bank and general
security agreements creating a second over all corporate assets.

F-19

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The by-laws of the Company provide that the Company shall indemnify
directors and officers of the Company. The pertinent section of Canadian law is
set forth below in full. In addition, upon effectiveness of this registration
statement, management intends to obtain officers and directors liability
insurance.

See the second and third paragraphs of Item 28 below for information
regarding the position of the Securities and Exchange Commission (the
"Commission") with respect to the effect of any indemnification for liabilities
arising under the Securities Act of 1933, as amended (the "Securities Act").

Section 136 of the Canadian Business Corporation Act provides as follows:

(1) INDEMNIFICATION OF DIRECTORS--A corporation may indemnify a director
or officer of the corporation, a former director or officer of the
corporation or a person who acts or acted at the corporation's request as a
director or officer of a body corporate of which the corporation is or was a
shareholder or creditor, and his or her heirs and legal representatives,
against all costs, charges and expenses, including an amount paid to settle
an action or satisfy a judgment, reasonably incurred by him or her in
respect of any civil, criminal or administrative action or proceeding to
which he or she is a party by reason of being or having been a director or
officer of such corporation or body corporate, if,

(a) he or she acted honestly and in good faith with a view to the
best interests of the corporation; and

(b) in the case of a criminal or administrative action or proceeding
that is enforced by a monetary penalty, he or she has reasonable grounds
for believing that his or her conduct was lawful.

(2) INDEM.--A corporation may, with the approval of the court, indemnify
a person referred to in subsection (1) in respect of an action by or behalf
of the corporation or body corporate to procure a judgment n its favor, to
which the person is made a party by reason of being or having been a
director or an officer of the corporation or body corporate, against all
costs, charges and expenses reasonably incurred by the person in connection
with such action if he or she fulfills the conditions set out in clauses
(1)(a) and (b).

(3) IDEM.--Despite anything in this section, a person referred to in
subsection (1) is entitled to indemnity from the corporation in respect of
all costs, charges and expenses reasonably incurred by him in connection
with the defense of any civil, criminal or administrative action or
proceeding to which he or she is made a party by reason of being or having
been a director or officer of the corporation or body corporate, if the
person seeking indemnity;

(a) was substantially successful on the merits in his or her defense
of the action or proceeding; and

(b) fulfills the conditions set out in clauses (1)(a) and (b).

(4) LIABILITY INSURANCE--A corporation may purchase and maintain
insurance for the benefit of any person referred to in subsection (1)
against any liability incurred by the person,

(a) in his or her capacity as a director or officer of the
corporation, except where the liability relates to the person's failure
to act honestly and in good faith with a view to the best interests of
the corporation; or

(b) in his or her capacity as a director or officer of another body
corporate where the person acts or acted in that capacity at the
corporation's request, except where the liability relates to the

II-1

person's failure to act honestly and in good faith with a view to the
best interests of the body corporate.

(5) APPLICATION TO COURT--A Corporation or a person referred to in
subsection 91) may apply to the court for an order approving an indemnity
under this section and the court may so order and make any further order it
thinks fit.

(6) IDEM--Upon application under subsection (5), the court may order
notice to be given to any interested person and such person is entitled to
appear and be heard in person or by counsel.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the estimated expenses in connection with the
issuance and distribution of the securities offered hereby.

SEC registration fee........................................... $ 3,603.64
NASD registration fee.......................................... 1,721.49
Nasdaq SmallCap Market listing fee............................. 15,000.00
Boston Stock Exchange listing fee.............................. 7,500.00
Printing and engraving......................................... 90,000
Accountants' fees and expenses................................. 25,000.00
Legal fees..................................................... 157,000
Transfer agent's and warrant agent's fees and expenses......... 5,000.00
Blue Sky fees and expenses..................................... 52,500.00
Underwriter's non-accountable expense allowance................ 153,063.75
Underwriter's consulting agreement............................. 48,000
Miscellaneous.................................................. 3,523.62
----------
Total.................................................... $561,912.50
----------
----------

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

In the past three years the Company has issued securities to a limited
number of persons as described below. Except as indicated, there were no
underwriters involved in the transactions and there were no underwriting
discounts or commissions paid in connection therewith:

In , the Company issued an aggregate of 1,250,000 shares of
its common stock to Sidney Ackerman, Alan Fine, Rosalyn Fine, The Ackerman
Family Trust and various other companies under their control, collectively or
individually, in exchange for their shares in 521305 Ontario Inc. and 1010037
Ontario Inc.

ITEM 27. EXHIBITS

EXHIBIT
NO. DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------------------

1.1 Form of Underwriting Agreement

1.2 Form of Selected Dealers Agreement

1.3 Form of Agreement Among Underwriters*

3.1(a) Articles of Incorporation of Registrant

3.1(b) Articles of Amendment

3.2 By-Laws of Registrant

II-2

EXHIBIT
NO. DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------------------

4.1 Form of Underwriters' Purchase Option

4.2 Form of Warrant Agreement

4.3 Specimen Common Stock Certificate*

4.4 Specimen Class A Redeemable Common Stock Purchase Warrant*

5.1 Opinion of Singer Zamansky LLP*

9.1 Form of Voting Agreement*

10.1 Form of Financial Advisory Agreement with Underwriters

10.2 1998 Stock Option Plan*

10.3 Leases of Company's Facilities*

10.4 Employment Agreement with Alan Fine*

10.5 Employment Agreement with Sidney Ackerman*

10.6 National Bank of Canada Demand Loan with Rosedale*

10.7 National Bank of Canada Demand Loan with Ontario*

10.7 National Bank of Canada Demand Credit Facility with Rosedale*

10.8 National Bank of Canada Demand Credit Facility with Ontario*

21.1 List of Subsidiaries of Registrant*

23.1 Consent of Schwartz Levitsky Feldman, the Company's Independent Auditors

23.2 Consent of Singer Zamansky LLP (incorporated into Exhibit 5.1)*

23.3 Consent of Torkin, Manes, Cohen & Arbus*

25.1 Powers of Attorney (see Page II-5)*

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

(*) To be filed by amendment

ITEM 28. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the small business
issuer pursuant to any charter provision, by-law, contract arrangements,
statute, or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the small business issuer in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the small business issuer
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

The undersigned small business issuer hereby undertakes:

(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement: (i) To include
any Prospectus required by section 10(a)(3) of the Act; (ii) To reflect in
the Prospectus any facts or events arising after the effective date of the
registration

II-3

statement (or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement; (iii) To include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.

(2) That, for the purpose of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the Offering of
such securities at that time shall be deemed to be the initial bona fide
Offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the Offering.

(4) For determining any liability under the Act, treat the information
omitted from the form of Prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in a form of Prospectus
filed by the small business issuer under Rule 424(b)(1), or (4) or 497(h),
under the Act as part of this registration statement as of the time the
Commission declared it effective.

(5) For determining any liability under the Act, treat each
post-effective amendment that contains a form of Prospectus as a new
registration statement at that time as the initial bona fide Offering of
those securities.

II-4

SIGNATURES

Pursuant to the requirements of the Act, the Registrant certifies that it
has reasonable grounds to believe that it meets all of the requirement for
filing on Form SB-2 and has duly caused this Amendment No. 1 to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Province of Ontario, Canada on April , 1998.

ROSEDALE DECORATIVE PRODUCTS LTD.

By: /s/ ALAN FINE By: /s/ SIDNEY ACKERMAN
----------------------------------- -----------------------------------
Alan Fine Sidney Ackerman

Pursuant to the requirements of the Act, this Amendment No. 1 to the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

We, the undersigned officers and directors of ROSEDALE DECORATIVE PRODUCTS
LTD. hereby severally constitute and appoint Sidney Ackerman and Alan Fine, our
true and lawful attorneys-in-fact and agents with full power of substitution for
us and in our stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement and all
documents relating thereto, and to file the same, with all exhibits thereto and
other documents in connection therewith with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing necessary or advisable
to be done in and about the premises, as fully to all intents and purposes as
they might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitutes, may lawfully do or cause to
be done by virtue hereof.

SIGNATURE TITLE DATE
- --------------------------------------------- --------------------------------------------- -------------------

/s/ ALAN FINE
------------------------------------ Chairman of the Board of Directors and Chief April , 1998
Alan Fine Executive Officer

/s/ SIDNEY ACKERMAN
------------------------------------ President and Director April , 1998
Sidney Ackerman

/s/ NORMAN MAXWELL
------------------------------------ Chief Financial Officer/Principal Accounting April , 1998
Norman Maxwell Officer, Operations Manager and Director

/s/ SHELDON ISENBERG
------------------------------------ Treasurer, Corporate Secretary and Director April , 1998
Sheldon Isenberg

II-5

EXHIBIT INDEX

EXHIBIT
NO. DESCRIPTION PAGE
- ----------- ------------------------------------------------------------------------------------------------- ---------

1.1 Form of Underwriting Agreement

1.2 Form of Selected Dealers Agreement*

1.3 Form of Agreement Among Underwriters*

3.1(a) Articles of Incorporation of Registrant**

3.1(b) Articles of Amendment**

3.2 By-Laws of Registrant**

4.1 Form of Underwriters' Purchase Option*

4.2 Form of Warrant Agreement

4.3 Specimen Common Stock Certificate*

4.4 Specimen Class A Redeemable Common Stock Purchase Warrant*

5.1 Opinion of Singer Zamansky LLP*

9.1 Form of Voting Agreement*

10.1 Form of Financial Advisory Agreement with Underwriters*

10.2 1998 Stock Option Plan*

10.3 Leases of Company's Facilities*

10.4 Employment Agreement with Alan Fine*

10.5 Employment Agreement with Sidney Ackerman*

10.6 National Bank of Canada Demand Loan with Rosedale*

10.7 National Bank of Canada Demand Loan with Ontario*

10.7 National Bank of Canada Demand Credit Facility with Rosedale*

10.8 National Bank of Canada Demand Credit Facility with Ontario*

21.1 List of Subsidiaries of Registrant*

23.1 Consent of Schwartz Levitsky Feldman, the Company's Independent Auditors

23.2 Consent of Singer Zamansky LLP (incorporated into Exhibit 5.1)*

23.3 Consent of Torkin, Manes, Cohen & Arbus*

25.1 Powers of Attorney (see Page II-5)*

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

( *) To be filed by amendment

(**) Previously filed