Form SB-2/A

SB-2/A 1 formsb2a_091503amend3.htm FORM SB-2A Form SB-2/A



   As filed with the Securities and Exchange Commission on September 16, 2003
                                                  Registration No. 333-101677

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                               AMENDMENT NO. 3
                                       TO
                                    FORM SB-2
             REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

                                 DECORIZE, INC.
                 (Name of small business issuer in its charter)

          Delaware                          5020                   43-1931810
--------------------------------   ---------------------------  ------------------
  (State or jurisdiction of       (Primary Standard Industrial (I.R.S. Employer
incorporation or organization)     Classification Code Number)  Identification No.)

                                1938 East Phelps
                           Springfield, Missouri 65802
  (417) 879-3326 (Address and telephone number of principal executive offices
           and principal place of business)


             James K. Parsons, President and Chief Executive Officer
                                1938 East Phelps
                           Springfield, Missouri 65802
(417)                        879-3326 (Name, address and telephone number of
                             agent for service)


                                    Copy to:
                               Lance M. Hardenburg
                             Hallett & Perrin, P.C.
                          2001 Bryan Street, Suite 3900
                               Dallas, Texas 75201
                                 (214) 953-0053

Approximate date of proposed sale to the public: as soon as practicable after
this registration statement becomes effective.

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,
please check this box. [ x ]

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 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(d) under
the Securities Act, check the following box and list the Securities Act
registration statement 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, check
the following box. [ ]


                         CALCULATION OF REGISTRATION FEE


------------------------------------- -------------- ---------------------- ----------------------- --------------------
                                         Amount        Proposed Maximum        Proposed Maximum
 Title of Each Class of Securities        to be       Offering Price per          Aggregate              Amount of
          to be Registered             Registered          Share(1)             Offering Price       Registration Fee
------------------------------------- -------------- ---------------------- ----------------------- --------------------
Common Stock, $.001 par value           3,292,427           $1.375                $4,527,090              $367(2)
------------------------------------- -------------- ---------------------- ----------------------- --------------------

(1)      Estimated solely for purposes of calculating the amount of the
         registration fee pursuant to the provisions of Rule 457(c), based upon
         the average of the high and low trading prices reported on the American
         Stock Exchange on September 11, 2003.
(2)      A registration fee of $538 was previously paid by the registrant on December  6, 2002.



The registrant hereby amends this registration statement on such date or 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 the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.


--------------------------------------------------------------------------------
The information in this prospectus is not complete and may be changed.  We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective.  This prospectus is not an
offer to sell these securities and we are not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
--------------------------------------------------------------------------------

                 Subject to completion, dated September 16, 2003



                                 DECORIZE, INC.

                          Common Stock, $.001 par value

                                3,292,427 Shares

         The selling stockholders named in this prospectus may use this
prospectus to offer and sell up to 3,292,427 shares of our common stock from
time to time, including 1,043,571 shares that are currently outstanding,
1,713,142 shares that are issuable to the selling stockholders upon exercise of
outstanding warrants and 535,714 shares that are issuable upon conversion of a
convertible term note. The selling stockholders will receive all the proceeds
from the sale of the offered shares. See "Selling Stockholders" on page 9 of
this prospectus.


         Our common stock is traded on the American Stock Exchange under the
symbol "DCZ". The last reported sales price of the common stock on The American
Stock Exchange on September 11, 2003, was $1.40 per share.


         The securities offered in this prospectus involve a high degree of
risk. See "Risk Factors" beginning on page 3 of this prospectus to read about
certain factors you should consider before deciding whether to invest in our
common stock.

         Decorize, Inc. is a Delaware corporation. Our principal executive
offices are located at 1938 E. Phelps, Springfield, Missouri, 65802 and our
phone number is (417) 879-3326. In this prospectus, references to "Decorize,"
"we," "us" and "our" refer to Decorize, Inc. and its subsidiaries.


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

     Neither the Securities and Exchange Commission nor any state securities
    commission has approved or disapproved of these securities or determined
      if the prospectus is truthful or complete. Any representation to the
                         contrary is a criminal offense.
                           --------------------------



               The date of this prospectus is September 16, 2003.

                                       i


                                TABLE OF CONTENTS

Prospectus Summary...................................................1
         Our Company.................................................1
         The Offering................................................1
         Summary Financial Information...............................2
Risk Factors.........................................................3
Cautionary Statement Concerning Forward-Looking Statements...........7
Use of Proceeds......................................................8
Determination of Offering Price......................................8
Selling Stockholders.................................................9
Plan of Distribution................................................11
Directors, Executive Officers, Promoters and Control Persons........12
Security Ownership of Certain Beneficial Owners and Management......15
Description of Securities...........................................17
Description of Business.............................................19
Management's Discussion and Analysis of Financial Condition
  and Results of Operations.........................................26
Description of Property.............................................31
Certain Relationships and Related Transactions......................32
Market for Common Equity and Related Stockholder Matters............34
Executive Compensation..............................................35
Changes in and Disagreements with Accountants on
  Accounting and Financial Disclosure...............................38
Legal Matters.......................................................39
Experts  ...........................................................39
Other Available Information.........................................39
Index to Financial Statements......................................F-1



                                       ii


                               PROSPECTUS SUMMARY


         Investors should pay particular attention to the information regarding
investment risks related to Decorize and this offering of its common stock that
are included in the section entitled "Risk Factors" on page 3 of this
prospectus.

Our Company


         Decorize is a home furnishings and accents company that was founded in
March 2000 and became a publicly-traded company in July 2001 through a reverse
merger with Guidelocator, Inc., a development stage company that was formed to
provide an internet database containing information on fishing guides around the
world. The merger has been accounted for as a recapitalization of Decorate,
Inc., a predecessor to Decorize. We did not pursue any fishing guide related
business after the merger, and our company has focused on the sale of furniture
and home decor products to national and local retailers and individual interior
decorators since that time. More than 80% of the products sold during our most
recent fiscal quarter were manufactured for us by suppliers located in the Far
East. Shares of Decorize common stock traded on the over-the-counter market
until Decorize's common stock became listed for trading on the American Stock
Exchange in March 2002.

         Our home furnishings business operates as a "source to business"
supplier, which is designed to serve both large and small United States retail
customers. We ship the majority of our products directly from overseas
manufacturers to our retail customers, and we are not aware of any competitors
to Decorize that have adopted our model. We believe that product value, item
uniqueness, product selection and delivery options are the primary factors that
influence our customers' purchasing decisions. Decorize's objective in
evaluating our shipping methods, pricing, product offerings and other aspects of
our business model has been to determine how to enable Decorize to surpass the
offerings of industry competitors with respect to these major factors. We are
continuing to transition manufacturing that is done for or by Decorize in the
United States to our suppliers in the Far East.

         Decorize operates as one business unit with three brands: decorize.com,
GuildMaster and Faith Walk Designs. We acquired GuildMaster in June 2001, and
completed the acquisition of Faith Walk in July 2001. Each of our brands
operated as a separate company prior to being acquired by Decorize. For more
information about our business, see "Description of Business" on page 19 of this
prospectus.


Terms of the Offering 

Common stock offered by
our selling stockholders             3,292,427 shares

Common stock to be
outstanding after the offering       13,519,549 shares (assumes all warrants and
                                     convertible securities are exercised and that all
                                     shares offered are sold)

Use of Proceeds                      We will not receive any proceeds from the sale
                                     of the common stock offered by the selling
                                     stockholders.

American Stock Exchange symbol       DCZ


                                       1



Summary Financial Information


         Below is a table summarizing our consolidated financial information.
The summary financial data set forth below have been derived from our audited
and unaudited financial statements included in this prospectus beginning on page
F-1. All financial data contained in this prospectus represent historical
information and do not necessarily indicate our future results.

                                                              Year Ended          Year Ended
                                                              une 30, 2002      June 30, 2003
                                                              ------------      -------------
Statement of Operations Data:                                                    (Unaudited)
Net sales                                                        $14,081,833        $ 15,404,514
Gross profit                                                       4,941,465           5,790,197
Operating expenses                                                 6,561,754           6,279,689
Loss from operations                                             (1,620,289)           (489,492)
Other expenses                                                     (363,853)           (662,913)
Loss before  income taxes                                        (1,984,142)         (1,152,405)
Net loss                                                         (2,016,842)         (1,152,405)
Basic loss per share                                                  (0.20)              (0.11)
Diluted loss per share                                                (0.20)              (0.11)
Weighted average common shares outstanding - basic                10,306,274          10,913,004
Weighted average common and dilutive shares outstanding           10,306,274          10,913,004


                                                                                As of June 30, 2003
                                                                                -------------------
Balance Sheet Data:                                                                  (Unaudited)
Working capital                                                                 $      1,913,302
Total assets                                                                           8,144,341
Capital lease obligations, less current maturities                                        97,134
Long-term debt, less current portion                                                      72,620
Notes payable to stockholders                                                          1,803,010
Stockholders' equity                                                                   3,935,738



                                       2


                                  RISK FACTORS

         The value of our business and an investment in our common stock is
subject to the significant risks inherent in our business. Investors should
consider carefully the risks and uncertainties described below and the other
information in this prospectus. If any of the events described below actually
occur, our profitability may decline or we may incur losses, which in turn could
cause the price of our common stock to decline, perhaps significantly.

                          Risks Related To Our Company

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


         The concept for Decorize's business model was developed in 2000. The
acquisitions of our two operating subsidiaries were completed in June 2001 and
July 2001, respectively. Even though these two operating subsidiaries have
operated independently for some time, we have a limited operating history in our
current combined form, which makes it difficult to evaluate our business on the
basis of historical operations. Also, our largest brand, decorize.com, which
accounted for approximately 58% of our sales in fiscal 2003, has only been
operational since April 2000. As a consequence, our past results may not be
indicative of future results. Although this is true for any business, it is
particularly true for us because of our limited operating history. Reliance on
historical results may hinder our ability to anticipate and timely adapt to
increases or decreases in sales, revenues or expenses. For example, if we
overestimate our future sales for a particular period or periods based on our
historical growth rate, we may increase our overhead and other operating
expenses to a greater degree than we would have if we correctly anticipated the
lower sales level for that period and reduced our controllable expenses
accordingly. If we make poor budgetary decisions as a result of unreliable
historical data, we could be less profitable or incur losses, which may result
in a decline in our stock price.

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

         We incurred a net loss of $1,152,405 for the fiscal year ended June 30,
2003. Although our revenues increased significantly since the beginning of
fiscal 2002, our operating expenses have decreased slightly. We cannot assure
you that our profit levels will continue to grow, even if sales continue to
increase. We will need to generate greater revenues to achieve and maintain
profitability in the future. If our operating losses continue on a
long-term basis, our stock price may decline, perhaps significantly, and you
could lose the value of your investment.


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


         Our customer mix currently consists of approximately twelve large
retailers, and more than a thousand small retailers, designers and decorators.
We do not have supply agreements or other volume commitments that are binding on
our customers, and our sales originate solely from individual purchase orders
that we negotiate with our individual customers. As a consequence, our customers
are not obligated to purchase any amount of our products and they may choose to
stop or decrease their level of product purchases from us at any time, without
giving us prior notice. This could cause our sales to fluctuate, and we could
experience a sudden and unexpected decline in sales. We could experience
unexpected operational losses if our customer sales were to decline
significantly without notice. Furthermore, our revenue projections are subject
to greater uncertainty than if we had volume commitments from one or more of our
largest customers. Although our top five customers in fiscal year 2003 accounted
for approximately 59% of our revenues in that year, we cannot assure you that
these customers, or any of our customers, will continue to purchase our products
in significant volume, or at all.


                                       3


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


         We intend to expand our business, and we are incurring expenses
associated with our growth and expansion. Although we recently raised funds
through private offerings to implement our growth strategy, these funds may not
be adequate to offset all of the expenses we incur in expanding our business. As
part of our growth strategy, we have expanded our technology infrastructure by
installing new telephony and information systems at a cost in excess of
$150,000. In addition, during the last fiscal year we hired additional personnel
in the United States and overseas, which caused our operating expenses to
increase. We intend to hire additional employees overseas and to continue
upgrading our technological infrastructure to improve quality and cost controls,
operating efficiency, and customer service capabilities. We will need to
generate greater revenues to offset expenses associated with our growth, and we
may be unsuccessful in achieving greater revenues, despite our attempts to grow
our business. If our growth strategies do not result in increased revenues, we
may have to abandon our plans for further growth or even reduce the current size
of our operations.


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


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


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


         During the period from June 1, 2001 to June 30, 2003, our total number
of employees increased from 7 to 60, including 8 employees in Asia. We
experienced high sales growth in fiscal years 2002, which at times exceeded the
capacity of our infrastructure and resulted in a backlog of customer orders.
Although we were able to resolve those capacity issues by hiring additional
personnel and upgrading our technology infrastructure, we will continue pursuing
additional sales growth for our company. If we expand too quickly, or if our
infrastructure does not improve rapidly enough, our customer orders could again
outpace our ability to meet our customers' needs, which could force us to delay
or reduce customer orders. Expanding our infrastructure will be expensive, and
will require us to train our workforce, and improve our financial and managerial
controls to keep pace with the growth of our operations.


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

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

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

         Competition in the wholesale market for home furnishings is intense. We
compete with a diverse group of wholesalers ranging from internet businesses to
traditional brick-and-mortar companies, many of which have greater

                                       5



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


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

         The current members of our Board of Directors beneficially own, in the
aggregate, approximately 53.8% of our common stock, on a fully diluted basis.
Our directors will continue to own a significant portion of the common stock
after completion of the offering by the selling stockholders. As a result, if
they choose to vote in concert, our directors are collectively able to
significantly influence the outcome of any corporate matters submitted to our
stockholders for approval, including any transaction that might cause a change
in control, such as a merger or acquisition. It is unlikely that stockholders in
favor of a matter that is opposed by the board of directors, would be able to
obtain the number of votes necessary to overrule the board.

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

         We primarily import products that we have purchased or had manufactured
for us overseas. Merchandise imported directly from these overseas manufacturers
currently accounts for approximately 92% of our total purchases. Because we
import the majority of our products and deliver them directly to our customers,
we believe that disruptions in shipping deliveries may have a greater effect on
us than on competitors who manufacture or warehouse products in the United
States. Deliveries of our products may be disrupted through factors such as:

     o    raw material shortages, work stoppages, strikes and political unrest;
     o    problems with ocean shipping, including work stoppages and shipping
          container shortages;
     o    increased inspections of import shipments or other factors causing
          delays in shipments; and
     o    economic crises, international disputes and wars.


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


If we were required to purchase our imported products in foreign currencies
instead of United States dollars, we would be subject to currency rate
fluctuations.

         Currently, the products we buy abroad are priced in United States
dollars, so we are not directly affected by changes in foreign exchange rates.
If we are required to pay for goods in foreign currencies in the future, then we
would be affected by fluctuating currency exchange rates. In that event, we will
attempt to enter into foreign currency exchange contracts with major financial
institutions to hedge the overseas purchase transactions and limit

                                       5

our exposure to those fluctuations. If we were not able to successfully protect
ourselves against those currency rate fluctuations, then our profits on the
products subject to those fluctuations would also fluctuate and could cause us
to be less profitable or incur losses, even if our business is doing well.

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


         In order to grow our business, we will need to develop and maintain
widespread recognition and acceptance of Decorize, our business model, and our
products. We believe that we have presented our product offering to only a small
percentage of the large and medium sized retailer market. Currently, we rely
primarily on word of mouth from our existing customers and contacts we develop
personally through industry events to promote and market Decorize. In order to
successfully grow Decorize, we may need to significantly increase our financial
commitment to creating awareness and acceptance of Decorize among retailers,
which would be expensive. In fiscal year 2003, marketing and advertising
expenses were $38,200, which is less than 1% of our operational expenses for
that year. If we fail to successfully market and promote our business, we could
lose current customers to our competitors, or our growth efforts may be
ineffective. If we incur significant expenses promoting and marketing Decorize,
it could cause our profitability to decline.


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


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


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


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


                         Risks Related To This Offering

Future sales of our common stock in the public market, or the perception that
such sales could occur, could cause our stock price to decline, even if our
business is doing well.

         The market price of our common stock could drop if a substantial number
of shares are issued, particularly if they are sold in the public market or if
the market perceives that such sales could occur. An excess number of available
shares on the market is likely to depress our stock price. We have issued a
number of warrants, options and convertible securities that are currently
outstanding, including:


          o    warrants to purchase up to 2,303,142 shares of our stock, at
               exercise prices ranging from $1.40 to $4.00, 1,713,142 of which
               shares are being registered for resale by Decorize on behalf of
               the selling stockholders;


          o    convertible securities for the purchase of up to 535,714 shares
               of common stock at an average conversion price of $1.40 per
               share, all of which are being registered for resale in this
               offering; and

          o    options to purchase 843,906 shares of common stock under our
               employee stock incentive plan.


In addition to the securities listed above, we may issue up to 2,156,094
additional shares under our employee stock incentive plan.


         Pursuant to this prospectus, on behalf of the selling stockholders we
are registering and listing for sale on AMEX, 3,292,427 shares of common stock,
including 1,713,142 shares that are issuable to the selling stockholders upon
exercise of outstanding warrants and 535,714 shares that are issuable upon
conversion of a convertible term

                                       6

note. These shares are described in the "Selling Stockholders" section on page 9
of this prospectus. After these shares are registered, they may be sold in the
public market, which could cause the market price of our common stock to drop by
increasing the number of shares offered for sale to the public. An overabundance
of available shares on the market may limit the price growth potential of our
common stock even if our business is doing well, because the available supply
may exceed the demand for our shares. In addition, these securities may impair
our ability to raise needed capital by depressing the price at which we could
sell our common stock.

The current public market for our common stock is limited and highly volatile,
which generally affects the price of our common stock.

         The shares of common stock offered pursuant to this prospectus will be
listed for trading on AMEX. However, we have only been listed on AMEX since
March 2002, and trading activity in our common stock should be considered
sporadic, illiquid and highly volatile. An active trading market for our common
stock may not exist in the future. Even if a market for the common stock offered
pursuant to this prospectus continues to exist, investors may not be able to
resell their common stock at or above the purchase price for which such
investors purchased such shares.

Because of our low stock price, we may become subject to "penny stock"
regulations, which place restrictions on the trading of our stock.

         The SEC has 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 exemptions. Decorize is currently exempt from complying with
the SEC's penny stock regulations because our common stock is listed for trading
on AMEX. However, we could become subject to the penny stock regulations if we
are delisted from AMEX or if the SEC expands the coverage of its penny stock
regulations so that AMEX listing is no longer an exemption. The penny stock
regulations provide that, unless an exemption is available, a penny stock
transaction must be preceded by the delivery of a disclosure schedule explaining
the penny stock market and its risks. In addition, under these regulations
broker/dealers who recommend penny stocks to persons other than established
customers and certain accredited investors must make a special written
suitability determination for the purchaser and receive the purchaser's written
agreement to the proposed transaction prior to the sale. If we become subject to
penny stock regulations, it would be more difficult for investors to purchase or
sell our common stock due to the additional restrictions imposed by those
regulations, which could depress our stock price.

Our forward-looking statements may prove to be inaccurate.

         This prospectus and the Registration Statement on Form SB-2 of which
this prospectus is a part, contain "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act, including statements about Decorize's forecasts, expectations, beliefs,
performance, plans, strategy, objectives, and intentions. Although we believe
that the forecasts, expectations, beliefs, performance, plans, strategy,
objectives and intentions reflected in, or suggested by, those forward-looking
statements are reasonable, it is possible that one or more, or even all, of them
may not be achieved or realized. Factors that could cause actual results to
differ materially from the forward-looking statements made in this prospectus
are set forth in this "Risk Factors" section and elsewhere in this prospectus.
All forward-looking statements attributable to Decorize are qualified in their
entirety by those cautionary statements. Forecasts are particularly likely to be
inaccurate, especially over long periods of time.

           CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

         This prospectus and the Registration Statement on Form SB-2 of which
this prospectus is a part contain forward-looking statements. The words
"intend," "anticipate," "believe," "estimate," "plan" and "expect," and similar
expressions as they relate to us, are included to identify these forward-looking
statements. Forward-looking statements include those that address activities,
developments or events that we expect or anticipate will or may occur in the
future. All statements other than statements of historical facts contained in
this prospectus and the registration statement, including statements regarding
our future financial position, business strategy, budgets, projected costs and
plans and objectives of management for future operations, are forward-looking
statements. The actual outcome of the events described in these forward-looking
statements could differ materially. Risks,

                                       7


uncertainties and assumptions that could cause actual results to differ
materially from the expectations reflected in the forward-looking statements
include, among other things:

          o    the risks associated with growth;

          o    our inability to purchase and manufacture merchandise at
               attractive prices;

          o    changes in consumer demand and preferences that cause people to
               desire products other than those traditionally offered by
               Decorize; and

          o    risks associated with our lack of liquidity.

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

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

                                 USE OF PROCEEDS

         This prospectus has been distributed solely to permit the selling
stockholders to offer and sell shares of our common stock to the public.
Decorize is not offering shares for sale, and it will receive no proceeds from
the resale of shares by the selling stockholders. However, we have received
proceeds from the original issuance of the outstanding shares covered by this
prospectus. In addition, we will receive proceeds in the amount of the exercise
price of the warrants, or the conversion price of the convertible note, for
shares of common stock issued in exchange for those securities that are covered
by this prospectus. Assuming exercise of all such warrants, the gross proceeds
to us from the exercise of all such warrants would be $4,590,798. We intend to
use any proceeds from exercise of such warrants for working capital and general
corporate purposes. If the convertible note issued to NestUSA is converted into
shares of common stock, our long-term liabilities would be reduced by the amount
of principal and accrued interest converted into such shares.

                         DETERMINATION OF OFFERING PRICE


         This offering is being effected solely to allow the selling
stockholders to offer and sell the shares of our common stock to the public. The
selling stockholders may offer for resale some or all of their shares at the
time and price that they choose. On any given day, the price per share is likely
to be based on the bid price for our common stock as quoted on AMEX on the date
of sale, unless shares are sold in private transactions. Consequently, we cannot
currently make a determination of the price at which shares offered for resale
pursuant to this prospectus may be sold.




                                       8

SELLING STOCKHOLDERS

The table appearing below sets forth the beneficial ownership of our
common stock by the selling stockholders as of September 5, 2003, and after
giving effect to the sale of the shares of common stock offered hereby. Except
as otherwise noted, each of the selling stockholders named below has sole voting
and investment power with respect to the shares of common stock beneficially
owned by that selling stockholder. The table also sets forth (a) the name of
each selling stockholder, (b) the number of shares of common stock beneficially
owned by each selling stockholder, (c) the number of shares of common stock that
may be sold in this offering by each selling stockholder, and (d) the number and
percentage of shares of common stock each selling stockholder will beneficially
own after the offering, assuming they sell all of the shares offered. Beneficial
ownership is determined in accordance with the rules of the SEC and generally
includes voting or investment power with respect to securities. Shares of common
stock that are issuable upon the exercise of outstanding options, warrants,
convertible securities or other purchase rights, to the extent exercisable
within sixty days of the date of this prospectus, are treated as outstanding for
purposes of computing each selling stockholder's percentage ownership of
outstanding shares.

Number of Shares Number of Shares Percentage of Shares
Name of Beneficially Owned Number of Shares Beneficially Owned Beneficially Owned
Beneficial Owner before the Offering Offered for Sale after the Offering(1) after the Offering
---------------- ------------------- ---------------- --------------------- ------------------

NestUSA, Inc. 1,211,714(2) 1,211,714 0 *
Quest Capital Alliance 914,286(3) 914,286 0 *
Pequot Scout Fund, L.P. 330,000(4) 330,000 0 *
Pequot Navigator Offshore 170,000(5) 170,000 0 *
Fund, L.P.
Gryphon Master Fund 285,714(6) 285,714 0 *
Gary Stein Roth IRA 71,428(7) 71,428 0 *
Jack DeArmon 40,000(8) 40,000 0 *
Joanna DeArmon 40,000(9) 40,000 0 *
Fabian Garcia 263,070(10) 40,000 223,070 1.88%
J. Richard Iler 42,857 (11) 42,857 0 *
Robert J. Smith 102,857 (12) 42,857 60,000 *
Stonegate Securities, Inc. 17,857(13) 17,857 0 *
Scott R. Griffith 46,429 (14) 28,572 0 *
Robert R. Blakely 28,572 (15) 28,572 0 *
Jesse B. Shelmire 46,427 (16) 28,570 0 *

*Less than 1%.

(1) Assumes that all of the securities offered hereby are sold.
(2) Includes 80,000 shares issuable upon exercise of warrants at an
exercise price of $4.00 per share, 535,714 shares (as adjusted from an initial
300,000 shares in accordance with the antidilution provisions of such instrument
due to the private placement completed in November and December of 2002)
issuable upon conversion of a convertible term note, in the original principal
amount of $750,000, at a conversion price of $1.40 per share, 300,000 shares
issuable upon exercise of warrants at an exercise price of $1.50 per share, and
216,000 shares issuable upon exercise of warrants at an exercise price of $2.80
per share. Marwan M. Atalla is the President of this selling stockholder and has
the right to exercise control over the voting and disposition of the shares of
Decorize common stock owned by it.
(3) Includes 100,000 shares issuable upon exercise of warrants at an
exercise price of $4.00 per share and 357,143 shares issuable upon exercise of
warrants at an exercisable price of $2.80 per share. Steven W. Fox is the
general manager of Quest Capital Alliance and controls the right to vote and
dispose of the shares of Decorize common stock owned by Quest Capital Alliance.
(4) Includes 165,000 shares issuable upon the exercise of warrants at
an exercise price of $2.80 per share. We have been informed that Pequot Capital
Management, Inc. ("PCM") is the investment manager of Pequot Scout Fund, L.P.
Voting and investment control over the shares of Decorize common stock owned by
Pequot Scout Fund, L.P. is shared at PCM by Arthur J. Samberg and Kevin O'Brien,
the sole executive officers and directors of PCM. Mr. Samberg is the controlling
stockholder of PCM.

         (5) Includes 85,000 shares issuable upon the exercise of warrants at an
exercise price of $2.80 per share. We have been informed that PCM is the
investment manager of Pequot Navigator Offshore Fund, L.P. Voting and investment
control over the shares of Decorize common stock owned by Pequot Scout Fund,
L.P. is shared at PCM by Arthur J. Samberg and Kevin O'Brien, the sole executive
officers and directors of PCM. Mr. Samberg is the controlling stockholder of
PCM.
         (6) Includes 142,857 shares issuable upon the exercise of warrants at
an exercise price of $2.80 per share. We have been informed that E.B. Lyon IV is
the authorized agent of Gryphon Master Fund, and has the right to vote and
exercise control over the disposition of the shares of Decorize common stock
owned by Gryphon Master Fund.
         (7) Includes 35,714 shares issuable upon the exercise of warrants at an
exercise price of $2.80 per share. We have been informed that Gary Stein is the
individual who has the right to exercise control over the voting and disposition
of the shares of Decorize common stock owned by Gary Stein Roth IRA.
         (8)      Includes  20,000 shares issuable  upon  exercise of warrants
at an exercise  price of $4.00 per share.
         (9) Includes 20,000 shares issuable upon exercise of warrants at an
exercise price of $4.00 per share. (10) Mr. Garcia serves as a director of
Decorize. Includes 20,000 shares issuable upon exercise of warrants at an
exercise price of $3.00 per share and stock options to purchase 70,000 shares of
common stock under the Decorize stock option plan.
         (11) Includes 21,429 shares issuable upon exercise of warrants at an
exercise price of $1.68 per share and 21,428 shares issuable upon exercise of
warrants at an exercise price of $3.36 per share.
         (12) Includes 21,428 shares issuable upon exercise of warrants at an
exercise price of $1.68 per share and 21,429 shares issuable upon exercise of
warrants at an exercise price of $3.36 per share.
         (13) We have been informed that voting and investment control over the
shares of Decorize common stock owned by Stonegate Securities, Inc. is shared by
Scott R. Griffith, its President, and Jesse B. Shelmire, its
Secretary-Treasurer, who are the authorized representatives of Stonegate.
         (14) Includes 14,286 shares issuable upon exercise of warrants at an
exercise price of $1.40 per share, and 14,286 shares issuable upon exercise of
warrants at an exercise price of $2.80 per share. Also includes 17,857 shares
held by Stonegate, which may be deemed to be beneficially owned by Mr. Griffith
as a result of his shared control over the voting and investment of those
shares; however, Mr. Griffith disclaims any beneficial ownership of the shares
owned by Stonegate.
         (15) Includes 14,286 shares issuable upon exercise of warrants at an
exercise price of $1.40 per share, and 14,286 shares issuable upon exercise of
warrants at an exercise price of $2.80 per share.
         (16) Includes 14,285 shares issuable upon exercise of warrants at an
exercise price of $1.40 per share, and 14,285 shares issuable upon exercise of
warrants at an exercise price of $2.80 per share. Also includes 17,857 shares
held by Stonegate, which may be deemed to be beneficially owned by Mr. Shelmire
as a result of his shared control over the voting and investment of those
shares; however, Mr. Shelmire disclaims any beneficial ownership of the shares
owned by Stonegate.

         The selling stockholders acquired the shares of common stock offered by
this prospectus, including those issuable under the convertible note and
warrants, from Decorize in various private placements completed by Decorize,
which are described below:

          o    a private placement of a 6% convertible term note in the original
               principal amount of $750,000, which is convertible into 535,714
               shares of common stock (as adjusted from an initial 300,000
               shares in accordance with the antidilution provisions of such
               note due to the private placement completed in December 2002),
               and warrants exercisable for another 300,000 shares of common
               stock at an exercise price of $1.50 per share (as adjusted from
               an initial exercise price of $3.00 per share) on February 26,
               2002. The convertible term note was amended effective January 1,
               2003, to adjust the principal and interest payment schedule, and
               in connection with the amendment of the note, we issued the
               holder of the note new warrants for an additional 216,000 shares,
               at an exercise price of $2.80 per share;

          o    a private placement of 220,000 units at prices between $2.25 and
               $2.50 per unit, with each unit consisting of one share of common
               stock and a five-year warrant to acquire an additional share of
               common stock at an initial exercise price of $4.00 per share,
               which was closed on February 27, 2002;



                                       10

          o    a private placement of 20,000 shares of common stock at a price
               of $2.50 per share and warrants to acquire an additional 20,000
               shares of common stock at an initial exercise price of $3.00 per
               share on May 6, 2002; and


          o    a private placement of 785,714 shares of common stock at a price
               of $1.40 per share and warrants to acquire an additional 785,714
               shares of common stock at an initial exercise price of $2.80 per
               share, which had two separate closings on November 19, 2002 and
               December 2, 2002. Decorize issued an additional set of warrants
               for an aggregate 85,714 shares to employees of Stonegate
               Securities, Inc., the placement agent that acted on Decorize's
               behalf in such placements, at the direction of Stonegate, with
               42,857 shares being issuable for an exercise price equal to $1.40
               per share, 42,857 shares being issuable for an exercise price
               equal to $2.80 per share. In addition, Decorize issued an
               additional 17,857 shares of common stock to Stonegate as a
               portion of its placement fee. Decorize also issued warrants to
               Mr. Smith and Mr. Iler, as consideration for acting as financial
               advisors in connection with the offering, which were exercisable
               for 42,857 shares at an exercise price equal to $1.68 per share
               and 42,857 shares at an exercise price equal to $3.36 per share.


         Decorize is registering the shares of the selling stockholders pursuant
to certain registration rights granted to them under registration rights
agreements entered into in connection with the private placements. The offering
of the shares will terminate as of the date on which all shares offered hereby
have been sold.

                              PLAN OF DISTRIBUTION

         The selling stockholders may offer the shares of common stock from time
to time in open market transactions (which may include block transactions) or
otherwise in the over-the-counter market through AMEX or in private transactions
at prices relating to prevailing market prices or at negotiated prices. The
selling stockholders may effect such transactions by selling the shares to or
through broker-dealers, and such broker-dealers may receive compensation in the
form of discounts, concessions or commissions from the selling stockholders
and/or purchasers of the shares for whom such broker-dealers may act as agent or
to whom they sell as principal or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions). The selling
stockholders and any broker-dealer acting in connection with the sale of the
shares offered hereby may be deemed to be "underwriters" within the meaning of
the Securities Act of 1933, as amended, in which event any discounts,
concessions or commissions received by them, which are not expected to exceed
those customary in the types of transactions involved, or any profit on resales
of the shares by them, may be deemed to be underwriting commissions or discounts
under the Securities Act. The offering of the shares will terminate upon the
earlier to occur of the sale of all the shares and the date on which all of the
shares offered hereby that have not been sold are eligible for resale under the
Securities Act, without the volume limitations of Rule 144 of the Securities
Act.

         Decorize is registering the sale of the common stock held by the
selling stockholders in satisfaction of its obligations under registration
rights agreements that it entered into with each of the selling stockholders in
connection with the private offerings in which such stockholders acquired their
shares of common stock, common stock warrants and the convertible note. In those
registration rights agreements, Decorize agreed to pay the costs, expenses and
fees incurred in connection with the registration of the selling stockholders'
shares, which we estimate to be approximately $201,000 (excluding selling
commissions and brokerage fees incurred by the selling stockholders). Decorize
also agreed to indemnify the selling stockholders, in connection with its
registration of the sale of their shares of Decorize common stock, against any
losses or damages to which they become subject under applicable state or federal
securities laws that arise from an actual or alleged untrue statement of a
material fact in this prospectus or the related registration statement or from
an actual or alleged omission to state a material fact that causes the
statements made in this prospectus or the registration statement to be
misleading. However, Decorize is not responsible for indemnifying any selling
stockholder against those liabilities to the extent that they arise from an
untrue statement or omission that is made in reliance upon and in conformity
with written information provided to Decorize from such stockholder for use in
the preparation of this prospectus and the related registration statement. The
selling stockholders agreed in return to indemnify Decorize against losses or
damages arising from such untrue statements or omissions that are made in
reliance upon the written information provided by those selling stockholders,
but each stockholder's liability is limited to the proceeds received by such
stockholder for the registration of the sale of its shares under this
prospectus.


                                       11

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

The executive officers and directors of Decorize are as follows:

Name Age Position
---- --- --------

Kevin Bohren 45 Chairman of the Board
James K. Parsons 54 Director, President and CEO
John E. Bagalay, Jr. 69 Director
Timothy M. Dorgan 50 Director
Fabian Garcia 43 Director
Jon T. Baker 51 Director
J. Michael Sandel 52 Director and Vice President
Alex Budzinsky 60 Executive Vice President and Chief Financial Officer
Brent Olson 34 Vice President - Finance and Treasurer
Gaylen Ball 51 Secretary and Director of Human Resources

Each of our directors was elected to his current term at the annual meeting of
Decorize's stockholders held in November 2002, except for Dr. Bagalay, who was
appointed by the Board of Directors on December 12, 2002, to fill the vacancy
created by our increasing the number of members on our Board of Directors. Each
director serves for a term that begins on the date of the annual meeting of
stockholders at which he is elected, or the date of his appointment by the board
to fill a vacancy, as applicable, and continues until the next annual meeting of
our stockholders at which his successor is elected and qualified or his earlier
resignation or removal. Our directors are not elected in alternating years, and
they all serve concurrent terms.

Additional personal information with respect to our executive officers
and directors is provided below.

KEVIN BOHREN. Mr. Bohren was elected a director of Decorize on June 29, 2001,
and was appointed as the Chairman of the Board on August 25, 2003, following the
resignation of Mr. Baker as Chairman of the Board, President and Chief Executive
Officer. Mr. Bohren serves as Chairman of the Executive Committee and as a
member of the Audit Committee. Mr. Bohren is also Chairman of the Board of
BigTick Financial Services, Inc., a financial services start-up company in
Chicago, Illinois. Prior to his involvement with BigTick, Mr. Bohren served as
Vice President, Business Development and Communications with RLX Technologies.
From January 1997 to October 1998, Mr. Bohren served as President and Chief
Executive Officer of Traveling Software Company. Mr. Bohren worked with Compaq
Computer Corp. for 14 years until January 1997, serving in various capacities
including Vice President and General Manager of the Commercial Desktop Division,
Vice President for Consumer Product Marketing, and Vice President for Systems
Marketing. While there, he successfully launched the Presario(TM), Compaq's
first consumer desktop brand. Since 1996, Mr. Bohren has served as President and
Chief Executive Officer of LapLink.com, a remote communications software
company. He serves on the Board of Directors for ReplyTV, a digital video
recorder and service; the Tomorrow Factory, a start-up e-commerce infrastructure
company; and Amerson Music Ministries. Mr. Bohren earned a bachelor of arts
degree from the University of Minnesota.

JAMES K. PARSONS. Mr. Parsons was appointed by the Board of Directors as
President and Chief Executive Officer on August 25, 2003, to serve in that
capacity until the Board of Directors appoints a permanent Chief Executive
Officer to replace Mr. Baker, who resigned on that date. Mr. Parsons also serves
as a member of the Executive Committee. He has served as director and Executive
Vice President of Decorize since June 29, 2001. Mr. Parsons co-founded
decorize.com. From 1983 to the present, Mr. Parsons has served as President of
GuildMaster, which he founded and co-owned, and which is now a wholly-owned
subsidiary of Decorize. GuildMaster has been recognized as a design leader in
the industry and has created such successful brands as the Arnold Palmer Home
Collection, Tin Revival and America Country West. Previously, Mr. Parsons
founded and owned a collection of home furnishings-related businesses in
Springfield, Missouri and a design studio in Kansas City, Missouri. Mr. Parsons
graduated from Evangel University with a Bachelor of Science degree.



JOHN E. BAGALAY, JR., PhD. Dr. Bagalay was appointed a director of Decorize on
December 12, 2002, by the unanimous vote of our Board of Directors. He was
appointed to the Audit Committee at the same time and has been elected as its
Chairman. Dr. Bagalay also serves as a member of the Executive Committee. Dr
Bagalay has served as Senior Advisor to the Chancellor of Boston University
since January 1998. He is a director and serves as Chairman of Wave Systems
Corp. Dr. Bagalay also served as Chief Operating Officer of Eurus Technologies,
Inc. from January 1999 to December 1999 and Chief Financial Officer of Eurus
International, Limited (formerly known as Eurus Technologies, Inc.) since
January 1999. He served as the President and CEO of Cytogen Corporation from
January 1998 to January 1999 and Chief Financial Officer from October 1997 to
September 1998. Prior to that time, he served as Managing Director, Community
Technology Fund, the venture capital affiliate of Boston University from
September 1989 to December 1997, and was the former General Counsel of Lower
Colorado River Authority, Texas Commerce Bancshares, Inc. and Houston First
Financial Group. Dr. Bagalay currently serves as a director of Wave Systems
Corp., Cytogen Corporation, and several privately held companies.



TIMOTHY M. DORGAN. Mr. Dorgan was elected as director of Decorize on June 29,
2001. Mr. Dorgan serves on the Audit Committee. Since January 2003, Mr. Dorgan
has served as General Manager of J. Brown and Associates, the Specialty
Marketing Division of Grey Advertising. From May 2000, Mr. Dorgan has served as
President of TMD Consulting, a firm specializing in e-commerce and nurturing
emerging, new economy businesses. From May 1999 to May 2000, Mr. Dorgan served
as Senior Vice President e-commerce of Follett Higher Education Group, a
privately-held company whose core business is the management of 630 college
bookstores. From January 1995 to May 1999, Mr. Dorgan served as Executive Vice
President Product Management and Marketing of Peapod, Inc., an online grocery
shopping and delivery service company. Mr. Dorgan also served as President of
Ketchum Advertising - Chicago, a worldwide marketing services firm, and
President of Noble & Associates - Chicago, an integrated marketing service
company that focused on the food category. Mr. Dorgan earned a bachelor of
science degree from the University of Illinois.

FABIAN GARCIA. Mr. Garcia was elected a director of Decorize on June 29, 2001.
From August 2003 to the present, Mr. Garcia has served as President,
Asia-Pacific Division of Colgate - Palmolive Company. From April 2002 to August
2003, Mr. Garcia served as Sr. Vice President International for The Timberland
Co., where he was charged with growing Timberland's international brand. From
August 1996 to December 2001, Mr. Garcia served as President of Chanel Asia
Pacific, managing the most important sources of income for the high-end French
brand. Mr. Garcia managed the total Chanel business in Asia Pacific, including
high end fashion, fine jewelry and watches, fragrances and cosmetics. From
January 1994 to May 1996, Mr. Garcia served as Vice President and General
Manager of Max Factor-Japan. From 1989 to 1994, he served as Managing Director
for Procter & Gamble in Venezuela. Mr. Garcia completed his Chemical Engineering
studies in Venezuela.

JON T. BAKER. Mr. Baker was elected a director and Chairman of the Board of
Decorize on June 29, 2001, and appointed President and Chief Executive Officer
on the same day. Mr. Baker resigned his position as Chairman of the Board,
President and Chief Executive Officer effective on August 25, 2003, but he is
continuing to serve as a director. Mr. Baker co-founded decorize.com, which
subsequently changed its name to Decorate, Inc., and then was merged into
Decorize following the merger with Guidelocator in March 2000. From July 1997 to
May 2000, Mr. Baker served as Managing Partner of GuildMaster, Inc., a home
furnishings manufacturer located in Missouri, now a wholly owned subsidiary of
Decorize. From October 1992 to June 2000, Mr. Baker owned and operated Baker
McCormick Group, Inc., a national leadership consulting and training company
with clients ranging from Sprint to Anheuser Busch, Inc. Previously, Mr. Baker
served as President and Chief Operating Officer of Noble Communications, a
marketing communications company. He also served as Division Chairman for Earle,
Palmer, Brown, a marketing services firm. Mr. Baker began his career in
marketing with Procter & Gamble. He has been responsible for building brands for
Stouffers, B.F. Goodrich, Tyson Foods, and Ralston Purina. Mr. Baker graduated
from Kent State University with a degree in Advertising.


J. MICHAEL SANDEL. Mr. Sandel was appointed as Vice President and a director of
Decorize as of July 31, 2001 in conjunction with Decorize's acquisition of Faith
Walk, of which he was a co-owner. Mr. Sandel and his wife, Kitty Sandel, founded
Faith Walk in 1985 to focus on upscale hand-painted furniture. In 1997, the
Sandels opened a retail outlet related to Faith Walk under the name Odds & Ends,
L.P., the assets of which were contributed to Faith Walk in July 2001. Mr.
Sandel studied for two years at the University of Houston working toward an arts
degree. Subsequently, as an artist and designer, he opened and operated a retail
store focused on the floral category of

                                       13

furnishings which was owned by the Sandels for approximately five years and
operated under the name of Golden Mushroom.

ALEX BUDZINSKY. Mr. Budzinsky was appointed Executive Vice President and Chief
Financial Officer in January 2002. From September through December 2001, he
taught Finance at the University of San Diego. From July 1998 to April 2001, he
was Executive Vice President and Director of United America eHealth
Technologies, Inc., a provider of healthcare information technology. From
September 1996 to July 1998, Mr. Budzinsky served at various times as President,
Chairman, CEO and Director of Archangel Diamond Corporation, a diamond
exploration and mining company which discovered and was developing a major
diamond deposit in Russia. Mr. Budzinsky participated as founder and senior
manager in several other venture companies. He previously spent 20 years in
corporate finance and investment banking with Citibank, Dean Witter, Merrill
Lynch and others. Mr. Budzinsky received his MBA degree from the University of
Chicago, a masters degree from Rutgers University and a bachelor of arts degree
from John Carroll University.

BRENT OLSON. Mr. Olson was appointed Vice President of Finance and Treasurer of
Decorize on June 29, 2001. He also served as Chief Financial Officer of Decorize
from June 2001 until January 2002. Beginning in January 2001, Mr. Olson held
similar positions with Decorate, Inc. During the period from June 1995 to
January 2001, Mr. Olson worked for John Q. Hammons Hotels, Inc., an owner and
operator of 53 hotel properties nationwide. While there he served as Auditor,
Accountant and Corporate Accounting Manager. Mr. Olson earned a BS in Accounting
from Southwest Missouri State University.

GAYLEN BALL. Ms. Ball was appointed Corporate Secretary and Director of Human
Resources of Decorize on June 29, 2001, and she served as Office Manager of
decorize.com from its inception. From 1982 to March 2000, Ms. Ball worked for
Noble Communications Co. serving as Data Processing Manager for the research
division, Director of MIS, and Director of Human Resources.

Each of our principal officers is elected by, and serves at the pleasure of, the
Board of Directors.


                                       14



         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


      The following table sets forth certain information regarding beneficial
ownership of the common stock as of September 5, 2003, by (i) all persons known
by Decorize to be the owner of record or beneficially of more than five percent
of the outstanding common stock, (ii) each director of Decorize, (iii) each
executive officer of Decorize listed in the Summary Compensation Table set forth
under the caption "Executive Compensation," on page 35 of this prospectus, and
(iv) all directors and executive officers as a group. Except pursuant to
applicable community property laws and except as otherwise indicated, each
stockholder identified in the table possesses sole voting and investment power
with respect to his shares.


                  Name                           Shares Beneficially Owned(1)                      Percent of Shares (2)
                  ----                           ------------------------------                    ---------------------


NestUSA, Inc.                                                        1,211,714(3)                                   9.8%
     1800 Bering Drive, Suite 755
     Houston, TX  77057
Quest Capital Alliance                                                 914,286(4)                                   7.8%
     3140 East Division
     Springfield, MO
Jon T. Baker                                                            2,330,741                                  20.7%
     1938 E. Phelps
     Springfield, MO 65802
James K. Parsons                                                        2,932,970                                  26.0%
     1938 E. Phelps
     Springfield, MO 65802
Kevin Bohren                                                           421,908(5)                                   3.7%
     P.O. Box 6632
     Avon, CO 81620
Timothy M. Dorgan                                                       65,768(6)                                   0.6%
     350 May Avenue
     Glen Ellyn, IL 60137
Fabian Garcia                                                          263,070(7)                                   2.3%
     8 A Camden Park
     Singapore 299799
J. Michael Sandel                                                         161,443                                   1.4%
     10825 Barley Lane, Suite D
     Houston, TX 77070
Shane Matthews                                                          71,128(8)                                   0.6%
     1938 E. Phelps
     Springfield, MO 65802
John E. Bagalay, Jr., PhD.                                                  4,348                                  0.03%
     1938 E. Phelps
     Springfield, MO 65802
Alex Budzinsky                                                         130,667(9)                                   1.1%
     1938 E. Phelps
     Springfield, MO 65802
All Executive Officers and                                              6,416,354                                  54.9%
   Directors as a Group (9 persons)(10)
----------------------------

(1)      Beneficial ownership has been determined in accordance with Rule 13d-3
         under the Securities Exchange Act of 1934 and unless otherwise
         indicated, represents securities for which the beneficial owner has
         sole voting and investment power. Any securities held in the name of,
         and under, the voting and investment authority of a spouse of an
         executive officer or director have been excluded.
(2)      Reflects the number of shares outstanding on September 5, 2003, and
         with respect to the percentage calculated for each individual
         shareholder or group of shareholders, it is assumed that such
         shareholder or


                                       15



         group exercises all of the stock options owned by such
         individual or group that are exercisable currently or within 60 days of
         September 5, 2003.
(3)      Includes 80,000 shares issuable upon exercise of warrants at an
         exercise price of $4.00 per share, 535,714 shares (as adjusted from an
         initial 300,000 shares in accordance with the antidilution provisions
         of such instrument due to the private placement completed in November
         and December of 2002) issuable upon conversion of a convertible term
         note, in the original principal amount of $750,000, at a conversion
         price of $1.40 per share, 300,000 shares issuable upon exercise of
         warrants at an exercise price of $1.50 per share, and 216,000 shares
         issuable upon exercise of warrants at an exercise price of $2.80 per
         share. Marwan M. Atalla is the President of this selling stockholder
         and has the right to exercise control over the voting and disposition
         of the shares of Decorize common stock owned by it.
(4)      Includes 100,000 shares issuable upon exercise of warrants at an
         exercise price of $4.00 per share and 357,143 shares issuable upon
         exercise of warrants at an exercisable price of $2.80 per share. Steven
         W. Fox is the general manager of Quest Capital Alliance and controls
         the right to vote and disposition of the shares of Decorize common
         stock owned by Quest Capital Alliance.
(5)      Includes 10,000 shares issuable upon the exercise of stock options
         granted under Decorize's stock option plan, at an exercise price equal
         to $2.60 per share, and another 70,000 shares issuable under warrants
         at an exercise price of $2.00 per share.
(6)      Includes 10,000 shares issuable upon the exercise of stock options
         granted under Decorize's stock option plan, at an exercise price equal
         to $2.60 per share.
(7)      Includes 10,000 shares issuable upon the exercise of stock options
         granted under Decorize's stock option plan, at an exercise price equal
         to $2.60 per share, 20,000 shares issuable under employee stock options
         with an exercise price equal to $3.95 per share, and another 20,000
         shares issuable under employee stock options with an exercise price
         equal to $2.40 per share. Also includes 20,000 shares issuable upon
         exercise of warrants at an exercise price of $3.00 per share.
(8)      Includes 39,941 shares issuable upon the exercise of stock options
         granted under Decorize's 1999 Stock Option Plan, at an exercise price
         equal to $1.13 per share, and another 3,333 shares issuable under
         employee stock options with an exercise price equal to $2.65 per share.
(9)      Includes 100,000 shares issuable upon exercise of stock options granted
         under Decorize's 1999 Stock Option Plan, at an exercise price equal to
         $2.70 per share, and another 40,000 shares issuable under employee
         stock options at an exercise price equal to $2.40 per share.
(10)     Includes all executive officers and directors of Decorize, as a group,
         as of September 5, 2003.


                                       16



                            DESCRIPTION OF SECURITIES

         Our authorized stock consists of 50 million shares of common stock, par
value $.001 per share, and 10 million shares of preferred stock, $.001 stated
value per share. The following is a summary of the terms and provisions of our
capital stock and the material applicable terms of our certificate of
incorporation and bylaws. You should also review our certificate of
incorporation and bylaws, which are included as exhibits to the registration
statement of which this prospectus is a part.

Common Stock

         We are authorized to issue up to 50 million shares of common stock,
each of which is entitled to one vote per share. The holders of our common
stock:

          o    have equal ratable rights to dividends from funds legally
               available therefor, when, as and if declared by our Board of
               Directors;

          o    are entitled to share ratably in all of our company's assets
               available for distribution to holders of common stock upon
               liquidation, dissolution or winding up of Decorize's affairs; and

          o    do not have preemptive, subscription or conversion rights and
               there are no redemption or sinking fund provisions or rights.

         Holders of our common stock do not have cumulative voting rights, which
means that the holders of more than 50% of the outstanding shares voting for the
election of directors can elect all of the directors to be elected, if they so
choose, and in such event the holders of the remaining shares will not be able
to elect any of our directors.

Preferred Stock

         Our Board of Directors is authorized, without further action by the
stockholders, to issue up to 10 million shares of preferred stock and to
establish, without stockholder approval, one or more classes or series of
Decorize preferred stock having the number of shares, designations, relative
voting rights, dividend rates, liquidation and other rights, preferences, and
limitations that our Board of Directors may designate. No shares of our
preferred stock are issued or outstanding. The issuance of our preferred stock
could adversely affect the voting power of holders of our common stock and
restrict their rights to receive payments upon our liquidation. It could also
have the effect of delaying, deferring or preventing a change in control of
Decorize. We have no present plan to issue any shares of preferred stock.

Delaware Anti-Takeover Law and Certain Charter and Bylaw Provisions

         Board of Directors. Our certificate of incorporation provides that the
number of members of our Board of Directors will be fixed from time to time in
the manner established in our bylaws, which provide that our Board of Directors
will set the number of members of our Board or Directors by a duly adopted
resolution. In addition, under our certificate of incorporation, directors may
be removed only for cause by the affirmative vote of a majority of the
then-outstanding shares of our capital stock entitled to vote. Cause for removal
is defined by the certificate of incorporation as (i) conviction of a felony
that is no longer subject to appeal, (ii) adjudication by a court of competent
jurisdiction that the director is liable for gross negligence, recklessness or
misconduct in the performance of his duty to the corporation in a matter of
substantial importance to the corporation, which is no longer subject to appeal,
or (iii) the director is adjudicated to be mentally incompetent by a court of
competent jurisdiction, in a manner that directly affects his ability as a
director, which adjudication is no longer subject to appeal. Our bylaws provide
that vacancies on our Board of Directors will be filled by the affirmative vote
of a majority of the remaining directors, even if less than a quorum, and that
the newly elected director shall serve for the unexpired term of his or her
predecessor. The likely effect of the limitations on the removal of directors
and filling of vacancies is an increase in the time required for the
stockholders to change the composition of our Board of Directors. The provisions
in our certificate of incorporation relative to fixing the numbers of directors,
the election and the removal of directors are subject to the rights of holders
of preferred stock which may be established by our Board of Directors pursuant
to

                                       17


our certificate of incorporation in order to permit the holders of preferred
stock to elect directors under specified circumstances.

         Our bylaws provide that nominations for the election of directors may
be made by the Board of Directors, by a proxy committee appointed by the Board
of Directors or by any stockholder entitled to vote in the election of
directors. Under our bylaws, stockholders intending to nominate director
candidates for election must give proper advance notice to the secretary of
Decorize at least 90 days prior to the anniversary date of the immediately
preceding annual meeting of stockholders. However, in the case of a director
that is not standing for reelection, a stockholder may give notice of a nominee
for the vacated directorship any time before the close of business on the 10th
day following written notice from the Board of Directors stating that such
directorship is to be elected and the name of the Board of Directors' nominee.
The chairman of any stockholder meeting may refuse to acknowledge the nomination
of any person who is not nominated in compliance with the procedure established
in the bylaws. Although this does not give the Board of Directors any power to
approve or disapprove stockholder nominations for the election of directors, it
may have the effect of precluding a contest for the election of directors if
these procedures are not followed precisely.

         Stockholder Meetings. Our certificate of incorporation provides that
special meetings of the stockholders may be called only by the Chairman of the
Board of Directors, the Chief Executive Officer or by a majority of the members
of our Board of Directors. The foregoing provisions could have the effect of
delaying until the next stockholders' meeting stockholder actions that are
favored by the holders of a majority of the outstanding voting securities of
Decorize.

         Special Vote Required for Business Combinations. We are subject to the
provisions of Section 203 of the Delaware General Corporation Law, an
anti-takeover law, and provisions in our certificate of incorporation which
relate to transactions with interested stockholders. Subject to certain
exceptions, Section 203 prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved in
a prescribed manner. For purposes of Section 203, a "business combination"
includes mergers, asset sales having an aggregate market value equal to 10% or
more of either the aggregate market value of all the assets of the corporation
determined on a consolidated basis or the aggregate market value of all the
outstanding stock of the corporation, and other transactions resulting in a
financial benefit to the interested stockholder. An "interested stockholder" is
generally a person who, together with affiliates and associates, owns (or within
three years prior to the date of determination of whether the person is an
"interested stockholder" did own) 15% or more of the corporation's outstanding
voting stock.


                                      18



                             DESCRIPTION OF BUSINESS

         General


         Our company, headquartered in Springfield, Missouri, is a manufacturer
and wholesaler of imported home furnishings and home accent items. Decorize,
Inc. does business under the names "decorize.com," "GuildMaster" and "Faith
Walk."


         We became a publicly traded company in July 2001 through a reverse
merger with a reporting company named Guidelocator.com and adopted its fiscal
year end of June 30. Guidelocator.com was a development stage company that was
formed to provide an internet database containing information on fishing guides
around the world. The merger has been accounted for as a recapitalization of
Decorate, a predecessor of Decorize. After the merger, Decorize's common stock
traded on the over-the-counter market until it became listed for trading on the
American Stock Exchange in March 2002. We did not pursue any fishing guide
related business after the merger, and our company has focused on the sale of
furniture and home decor products to our wholesale customers since that time. We
completed the acquisition of GuildMaster in June 2001, and the acquisition of
Faith Walk in July 2001, following the Guidelocator.com merger, which expanded
our operations in the home accents and accessories business.


         The operations and the product focus of decorize.com, GuildMaster, and
Faith Walk were separate and distinct in mid-2001, but since our completion of
the acquisition and merger transactions, all three entities have combined their
activities into one company and all have migrated to the Decorize business
model, which relies on manufacturing and importing our home furnishings products
direct from the Far East to our retailers' sites in the United States. More than
80% of the products we sold during our most recent fiscal quarter were
manufactured by suppliers located in the Far East. Our direct shipping model
allows us to minimize the use of intermediate warehousing facilities, which
significantly reduces our cost of delivering products to our customers. Reducing
those costs gives us greater flexibility in pricing and improves our gross
margins. Decorize continues to manufacture a small amount of its GuildMaster
product in its Springfield, Missouri facility, but it is gradually replacing the
product volume in those facilities with goods from our overseas suppliers. We
have maintained the separate brand identities of GuildMaster and Faith Walk so
that we can continue to build on the customer awareness of those brands. Even
though there is substantial commonality in product categories and in business
practices between the three Decorize companies, each of them has its own areas
of concentration:


          *    Faith Walk focuses on designing hand-painted furniture and
               accessories;

          *    GuildMaster focuses on designing wall art and special designer
               collections; and

          *    decorize.com focuses on designing and customizing furniture,
               accent pieces, and accessories to meet the design needs of large
               retailers.

         We founded decorize.com, the company that became Decorize, in March
2000 with the intention of creating a direct "source to business" home
furnishings and accents company that was designed to serve both large and small
United States retail customers with products delivered directly from the Far
East to those United States retailers on orders as small as $1,000. Our
objective in evaluating our shipping methods, pricing, product offerings and
other aspects of our business model is to enable our operating companies to
surpass competitors in our industry on product value, item uniqueness, selection
and delivery options of imported home furnishings products by improving our use
of information technology, logistics processes and our direct sourcing business
model. We believe that our customers focus on those factors when choosing a home
furnishings supplier, and if we can exceed the offerings of our competitors, we
will continue increasing market share at the cost of our competitors.

         We use our "source to business" model to serve two distinct market
segments, the source to large business segment and the source to small business
segment. The source to large business segment is comprised of large retailers
that we believe can benefit from our pricing, delivery times and custom design
capability. The small business segment includes small retailers, designers and
decorators that, in our experience, have paid premium prices and have been
unable to directly source home furnishings and accents from overseas. We provide
products to those small retailers at lower prices on an "international freight
included" basis that we believe has not previously

                                       19


been made available to them by our competitors in the home furnishings industry.
The price of our products includes the cost of freight to the United States port
of entry, which reduces the uncertainty about ocean freight costs that would
otherwise be borne directly by the small retailer. Also, because we have a
significantly higher volume of shipping orders than our individual customers
would have, we are able to negotiate lower per item shipping rates on the ocean
freight that we arrange, allowing us to pass through a lower cost than a small
retailer would obtain on its own account.


         Our current customer revenue mix for all three Decorize business units
is approximately twenty percent from small business and eighty percent from
large business customers. Based on our limited operating history, we expect to
experience commensurate levels of sales increases in both our large and small
business segments. As a result, we do not anticipate any significant changes in
our customer mix in the foreseeable future, however, we cannot predict with
certainty whether or how our business mix will change in the future.


         decorize.com


         Our decorize.com brand sources its products from a network of
manufacturing partners in the Far East, principally China, the Philippines,
Thailand, Indonesia and Vietnam. Working in concert with our third-party
logistics providers, we stage products in facilities located in those countries
for shipment directly to our retail customers in the United States. We call this
our "source to business" model, which enables us to provide our customers with
pricing that we believe is substantially below traditional wholesale levels in
the home furnishings industry. We are able to pass on lower prices to our
customers because we eliminate or reduce the additional costs that are required
in the traditional model for building substantial product inventories, multiple
stage warehousing and multiple handling levels by a third-party. We estimate
that if we transitioned our delivery methods back to the more traditional model,
which is still used by a majority of our competitors, that increased delivery
costs would cause our costs of goods sold to increase by up to 15%, which would
likely result in a significant increase in the prices that would have to be paid
by our customers and a decrease in our operating margins.


         GuildMaster


         GuildMaster is a Missouri corporation that we acquired in June 2001.
When we acquired GuildMaster, all of the stock of GuildMaster was owned by Jon
T. Baker, one of our directors, James K. Parsons, our President and Chief
Executive Officer, and Ellen Parsons, his spouse. The purchase price for
GuildMaster was $2.5 million, which we paid by issuing a $375,000 promissory
note to Mr. Baker and by issuing common stock worth approximately $2,125,000 to
Mr. Baker, Mr. Parsons and Mrs. Parsons. We also assumed a $925,000 debt owed by
GuildMaster to Mr. Parsons, by issuing a $925,000 promissory note. The notes are
due in full on July 31, 2004 (pursuant to modifications made soon after the end
of fiscal year 2002); however, the interest payable on Mr. Baker's note will be
paid on December 31, 2004, pursuant to the separation agreement signed in
connection with his resignation on August 25, 2003. As part of the transaction,
we entered into employment agreements with Mr. Baker and Mr. Parsons. You can
find information about these employment agreements and Mr. Baker's separation
agreement in "Executive Compensation" on page 35 of this prospectus.


         The GuildMaster brand includes custom, high-end, home accent products
that are either produced to its specifications by manufacturers located in the
Far East or are manufactured in our Springfield, Missouri facility. GuildMaster
ships a major part of its products directly to customers from the overseas
factories of those manufacturers. It also warehouses some products at the
Springfield facility and ships available inventory to retailers throughout the
country.

         Decorize has substantially increased the level of product obtained from
the Far East by GuildMaster since it was acquired in June 2001, and we estimate
that this production shift will continue in the near future. During fiscal 2003,
GuildMaster produced approximately 26% of its products domestically in its
Springfield facilities (calculated on the portion of sales revenue attributable
to such products), which in turn represented 8% of our overall product revenues.
Decorize estimates that during the most recently ended quarter, domestic
production of GuildMaster's items was less than 30% of its overall production,
and less than 10% of Decorize's production on a consolidated basis for that time
period. Our current business plan contemplates a continued shift of
GuildMaster's production from its domestic suppliers to suppliers in the Far
East, but we cannot provide an exact timetable for when all production will be
transferred overseas. Decorize intends to push production to suppliers based on
cost, reliability

                                       20


and product quality, and if those factors shift to the advantage of certain
other suppliers in the future, then our demand for third-party production is
anticipated to shift in the same manner to those other suppliers.


         Faith Walk

         Faith Walk is a Missouri corporation that we acquired in July 2001.
Prior to the acquisition, Faith Walk was owned by J. Michael Sandel and his
spouse. The purchase price for Faith Walk was $1.1 million. We paid $284,000 of
the purchase price in cash. The remainder of the purchase price was paid by
issuing a $216,000 promissory note, and by issuing common stock worth
approximately $510,000 to Mr. Sandel and his spouse. The note is due in full on
July 31, 2004 (pursuant to modifications made subsequent to the end of fiscal
year 2002). As part of the transaction, we entered into an employment agreement
with Mr. Sandel. You can find information about Mr. Sandel's employment
agreement in "Executive Compensation" on page 35 of this prospectus.


         Faith Walk has historically sourced its products in unpainted form from
United States suppliers and added design finishing in its Houston, Texas
manufacturing facility. Under our new "source to business" strategy, the Faith
Walk brand is creating designs to be manufactured entirely by our suppliers in
the Far East and then directly shipping finished products to our retail clients
in the United States. We believe that our direct shipping method will allow
Decorize to reduce prices for Faith Walk items to its customers for its current
product offerings, while still increasing its gross margins, by eliminating
unnecessary third party warehousing and handling costs. Faith Walk began
transitioning its product offerings to our "source to business" model in late
2001. Faith Walk has transitioned all of its manufacturing to the Far East, and
as of January 31, 2003, the standard prices for its products had dropped an
average of approximately 40% after adopting our direct shipping method, as
compared to price levels at the beginning of its transition a year earlier.


         Business Strategy


         The Decorize "source to business" model eliminates several layers of
handling and warehousing by importers and retailers. Products are sourced in the
Far East and shipped directly to retailers in the United States. We estimate
that a majority of our industry competitors ship product through several levels
of third party warehouse facilities, which our management estimates would
increase the cost of our products by up to 15%. Our objectives in designing our
business model are based on the assumption that our competitors are experiencing
similar impacts on the cost and timing of the shipping of their products to
retail and wholesale customers in the United States.


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

         Our support systems consist primarily of quality control personnel who
oversee our manufacturing done by our suppliers in the Far East. Although they
are new to the Decorize team, our overseas employees are viewed by Decorize as
an integral part of our successful transition to the direct shipping method that
we prefer. We do not believe that our transition could be accomplished without
the oversight, management and first-hand knowledge of our foreign regional
suppliers provided by our overseas manufacturing support team. Our overseas
support team is headed by a manager who recently relocated to China, after
spending several years at our headquarters as a key member of our operations and
logistic teams. Recently, Decorize has begun to expand the roles of our overseas
support team beyond mere quality control into areas of product development and
product procurement of items that are available in the Far East, and which would
not likely have become part of our product offerings without our overseas staff.
Currently, Decorize employs eight persons overseas, but we intend to hire
several more this year. The focus will continue to be on quality control,
regarding items such as consistency to design requests, manufacturing quality
and packaging and delivery issues, but we will continue to seek opportunities
for them to provide assistance on procurement and development of possible
product offerings.

         We are expanding our product sourcing, development and warehousing
operations in the Far East to support the increasing volumes of product sourced
there under our business model. At the same time, we are


                                       21


continuing to build our sales staff in the United States in order to improve our
ability to present our products and services to a growing customer base.


         On the operational level, we continue to implement and improve
technology solutions that enable us to work closely with suppliers, as well as
customers to plan and track orders, production status, and deliveries in order
to meet demanding production and delivery timelines. We are currently installing
new telephony and information systems at a cost in excess of $150,000. Our new
information systems are designed to increase our internal operating efficiency
and improve internal communication capabilities, to track the status of our
products and to improve communications with our overseas vendors, our third
party logistics suppliers, and our United States customers. One example of our
communications improvements is the process developed by Decorize and our
third-party logistics suppliers that makes it possible to track orders and the
delivery of merchandise to our customers, which is essential to our direct ship
business model since we have little retail or warehousing capabilities of our
own to rely upon. See "- - Warehousing and Distribution". We will continue to
seek upgrades in our technology infrastructure that improve operating
efficiencies, improve customer service capabilities and/or improve quality and
cost control in our operations. There are no specific upgrades currently planned
for 2004, however, our current forecasts call for us to spend up to $100,000
toward technology upgrades for each fiscal year.

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


         Merchandise

         We manufacture and sell imported home furnishings and home accent items
such as chests, tables, chairs, painted furniture, paintings sculpture
tapestries, other fine art pieces, various hand-made ceramics, candles, lamps
and similar accessory items. Products designed and manufactured by us include a
broad array of home furnishings, including larger furniture items such as
hand-painted or traditionally finished armoires, chests, large tables and
chairs. Accent furniture includes items such as occasional tables, end tables,
mirrors, wicker chairs and tables and ottomans. Accessories include items such
as wood, rattan, glass, or ceramic bowls, statuettes, vases, candles and
candleholders, baskets, boxes, lamps and bath items. Wall art includes a variety
of traditional art such as framed oil paintings or prints, but it includes many
other types of materials and designs including fabrics, woven materials and
collages. Faith Walk focuses on designing hand-painted furniture and
accessories, GuildMaster focuses on designing wall art and special designer
collections, and decorize.com focuses on designing and customizing furniture,
accent pieces, and accessories to meet the design needs of large retailers.

         Currently, decorize.com focuses on the following product lines:


                  - the design and supply of custom furniture, such as
         traditionally finished armoires, tables, chairs and storage units,
         which are intended for frequent use by the consumer;

                  - the design and supply of accent pieces for the home, such as
         mirrors, wicker chairs and tables, ottomans, and lamps, which are
         designed as much for their aesthetic value as for their actual utility;
         and

                  - the design and supply of accessory items, such as lamps,
         candles, glass and ceramic bowls and figurines, vases and boxes, which
         primarily fulfill the design needs of the retail customer.




                                       22


The main customers of decorize.com are typically large retailers, who market the
products supplied by Decorize to the end user retail customers that shop at
their brick and mortar store locations. The product mix supplied to those
retailers depends upon their perception of customer demand of the consumers who
shop and purchase product at those store locations.

         The main product lines for GuildMaster are the following:

                  - the design and manufacture of wall art, including
         tapestries, paintings and decorative ceramic and glassware for the
         home; and

                  - the design and production of special designer collections of
         home accent items, such as candles, glass and ceramic bowls and
         figurines, vases and boxes.

The main customers of GuildMaster are typically large retailers, who market the
products supplied by GuildMaster to the end user retail customers that shop at
their brick and mortar store locations. The product mix supplied to those
retailers depends upon their perception of customer demand of the consumers who
shop and purchase product at those store locations.


         Faith Walk's principal product offerings are hand painted furniture and
accessories for the home. Faith Walk products include specialty armoires,
chests, large tables and chairs, which are typically used by home consumers who
wish a more lively decor than may be offered by more traditional furniture
products. In addition, Faith Walk offers hand painted accessories that are
purchased by more high-end consumers. Some of these accessory items include
mirrors, vases, table lamps and candleholders. Faith Walk historically had those
items manufactured for it in the United States, but completed the hand painting
and design of the specialty products itself. However, under our direct shipping
model, it has transitioned to a supplier base in Asia that completes the
manufacture and final preparation of those hand painted items. Faith Walk
supplies a substantial portion of its product to small retailers and independent
designers who market and sell the product directly to their clients.


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

         Suppliers


         We have developed a network of more than 30 supply partners in China,
the Philippines, Thailand, Indonesia and Vietnam that manufacture most of the
products we sell to our customers. For the year ended June 30, 2003, Decorize's
top ten vendors accounted for approximately 40% of our total purchases. During
the time spent arranging the production of our goods with overseas
manufacturers, Decorize and its supply partners are developing a better
understanding of each other's needs and requirements. As our supply partners
become more familiar with Decorize's business model and products, they become
more adept at meeting our design and manufacturing needs, which gives us greater
confidence in continuing to direct orders to those overseas vendors who have
demonstrated success in working with us and increasing our reliance on
particular supply partners for meeting our overseas manufacturing needs.
However, we believe that none of our suppliers is material to our business
individually, since there are a number of alternative suppliers available to
manufacture our products in both the Far East and other parts of the world. We
currently estimate that the largest of those suppliers will represent less than
38% of our product purchases during any fiscal year. We work closely with our
overseas suppliers to ensure that they manufacture and ship products that meet
our requirements.


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

         Our relationship with our logistics companies provides us with
state-of-the-art staging and warehousing facilities in the Philippines and
China. However, if it is necessary, Decorize has alternative sources for those
staging and warehousing services.



                                       23

         Customers


         The current customer base for our three brands includes approximately
twelve large retailers and more than a thousand small retailers, designers and
decorators. During the year ended June 30, 2003, our customer revenues were
approximately $15.4 million. Although our top five customers in the past year
accounted for approximately 59% of our revenues, the continuing growth of our
business and the number of our customers is expected to result in greater
revenue diversification. During fiscal 2003, our top five customers from the
standpoint of revenues were Home Depot Expo, Sears - The Great Indoors,
Dillards, Rooms To Go and Hancock Fabrics. Our purchase orders with our
customers are completed on a purchase-by-purchase basis, and we have not entered
into any long-term purchase agreements with any customers, nor are there any
formal volume commitments from any of them.


         Industry and Competition


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

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


            Foreign Market Risks


            As an importer of manufactured products from several countries in
the Far East, our business is subject to political risks that are beyond our
control. Since our inception, we have perceived the greatest risk relative to
our supply chain to come from our suppliers located in China. This perception
arises because most of our products are manufactured in China, as evidenced by
the fact that during fiscal 2003, over 65% of the products manufactured by our
third party suppliers were manufactured in China. However, we believe that the
globalization movement and the recent focus on reduction of tariffs and the
planned ongoing reductions should provide a beneficial tariff environment for
importers. We believe that the recent entry of China into the World Trade
Organization should substantially reduce the risk that China might take
political actions that would restrict its trade with the United States or the
rest of the world. Our strategy to minimize our exposure to the political risks
of any one country has been to develop manufacturing partners in multiple
countries. All of the products offered by Decorize are available from multiple
supply sources in several different countries, which we believe protects us from
the political risks of any one country or region.


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


                                       24


            Warehousing and Distribution

            An important aspect of our success involves our ability to reduce or
eliminate warehousing of our products and the related direct expenses and
management costs that would be required. The greater part of the products sold
by our operating divisions are not warehoused at our expense, since we have
those products shipped directly from our manufacturers in the Far East to the
retailer stores or distribution centers operated by our retail customers. We
deliver goods via large shipping containers to certain customers and use common
and contract carriers to distribute smaller amounts of merchandise to other
customers. Quick and efficient distribution is required to meet customer needs,
and we are continually pursuing improvements in the delivery process.

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

            Management Information Systems

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

            Trademarks and Tradenames


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


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

            Employees


            As of June 30, 2003, we employed 60 persons, including 8 in the Far
East, 57 of whom were employed on a full-time basis. Our employees are not
represented by any union. We have not experienced any work stoppage due to labor
disagreements and we believe that our employee relations are good.



                                       25




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

         Critical Accounting Policies

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

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

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

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

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

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


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



                                       26


Results of Operations and Comparison of Prior Year Periods

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

              Fiscal Years Ended June 30, 2003 (Unaudited) and 2002


                                            2003                           2002                     Chance
                                            ----                           ----                     ------
                                        (Unaudited)                                            
Sales (net)                           15,404,514         100.0%    14,081,833        100.0%     1,322,681     -%
Cost of sales                          9,614,317           62.4     9,140,368          64.9       473,949  (2.5)
Gross profit                           5,790,197           37.6     4,941,465          35.1       848,732   2.5
Operating expenses                     6,279,689           40.8     6,561,754          46.6     (282,065)  (5.8)
Operating loss                         (489,492)          (3.2)   (1,620,289)        (11.5)     1,130,797   8.3
Total other expense                      662,913            4.3       363,853           2.6       299,060   1.7
Income tax expense                             -              -        32,700             -      (32,700)    -
Net loss                             (1,152,405)          (7.5)   (2,016,842)        (14.3)       864,437   6.8


Sales


         Our sales are derived primarily from the sale of home furnishing and
home decor products to large and small retailers. Sales for the year ended June
30, 2003, increased $1.3 million or 9% to $15.4 million compared to $14.1
million for the year ended June 30, 2002. The percentage increase of revenues
for fiscal 2003 over fiscal 2002 is due in part to the relatively smaller base
of revenues that we had in fiscal 2002, which in turn was due to the fact that
Decorize was still in its initial startup and reorganization phase. The $1.3
million increase in sales is due primarily to increased sales to new and
existing customers, which we believe is evidence of customer acceptance of our
services, products and prices, as indicated by initial and repeat orders from
new and recently new customers, and to a lesser extent from increases in sales
to several of our historical large customers. We believe that we have presented
our product offering to only a small part of the much larger number of large and
medium sized retailers who would find our offerings attractive and would order
product from us. We intend to continue marketing our goods aggressively to large
retail customers and expect that as a result we will continue to increase our
sales to them substantially on a dollar-to-dollar comparative basis. However, we
do not believe that future rates of comparable sales increases will be as high
on a percentage basis as they were in our most recent fiscal quarters or the
fiscal year 2003. Pricing in our industry is very competitive and we must focus
on selling more goods to more customers at very competitive prices in order to
increase our revenues.

         Decorize has existed in its present form only since July 2001, so we do
not have an extensive history of sales information as a combined entity.
However, based on Decorize's sales since July 2001, and our evaluation of the
historic operating results of Faith Walk and GuildMaster, it appears that we
have the highest volume of sales during our first two fiscal quarters, which
accounted for approximately 60.5% of fiscal 2003 sales, and that the remaining
quarters, accounting for the other 39.5% of sales for 2003, are not quite as
strong. We believe that part of the reason for the increase in sales for the
quarters ending September 30, 2002, and December 31, 2002, as compared to the
two following quarters, is due to the fact that we had a large retailer delay a
big shipment from the fourth quarter of 2002 to first quarter of 2003 as well as
several big projects for large retailers gearing up for the holiday months.
Other than the growth of our enterprise, we have not observed any other
significant seasonal patterns.


Cost of Sales

         The cost of sales for the year ended June 30, 2003, decreased as a
percentage of sales to 62.4% compared to 64.9% for the year ended June 30, 2002.
The percentage decrease of costs for the year ended June 30, 2003,

                                       27


compared to the prior year, was the result of a change in freight carriers,
ongoing price negotiations with vendors, and Decorize's efforts to better track
freight charges in inventory on an interim basis. The decrease in our cost of
sales resulted in an increase in our gross margin to 37.6% in fiscal year 2003
compared to 35.1% in fiscal year 2002.

Operating Expenses


         During the year ended June 30, 2003, our operating expenses decreased
$.3 million to $6.3 million, compared to $6.6 million for the same period last
year. The net decrease was principally attributable to a decrease in stock
compensation of $713,000 and a $103,000 decrease in marketing expenses,
minimized by increases of $310,000 in payroll and related expenses, $100,000 in
professional fees, and $116,000 in travel. Payroll and related expenses
increased in the first part of 2003 as we needed additional staff to facilitate
the growth of our operations, but decreased in the latter part of the year as we
reduced some positions to reflect the actual level of sales we were experiencing
in that period. The increase in professional fees was due to the heavy activity
in securities transactions and regulatory filings. Travel expense increased
because of numerous trips to Asia and the Pacific Rim to develop new product and
expenses related to seeking additional financing sources. The large reduction in
stock compensation expense was due to the small amount of stock options to be
expensed during the current year period compared to the prior year period.
Furthermore, for the year ended June 30, 2003, operating expenses included
$84,373 related to the issuance of stock and stock options, and $214,955 of
depreciation and amortization. Operating expenses decreased as a percentage of
sales 5.8% to 40.8% for the year ended June 30, 2003, compared to 46.6% for the
same period last year. The reduction of operating expenses as a percentage of
sales is directly attributable to the increase in sales, efficiencies found in
combined operations, and the fixed cost nature of certain expenses.


Other Expense

         Other expense for the year ended June 30, 2003, consisted principally
of $714,374 of interest expense compared to $364,000 of interest expense for the
year ended June 30, 2002. This increase during 2003 was primarily due to the
$463,625 charge related to the amortization of discount on convertible debt.

Net Loss 


         Loss from operations decreased to $.5 million in fiscal 2003 from $1.6
million in fiscal year 2002. As a percentage of sales, the loss from operations
decreased to 3.2% in fiscal 2003 compared to 11.5% in fiscal year 2002 due to
the effects of significant sales volume increases, increased margins and a
reduction in operating expenses.

         We recorded a net loss of $1.2 million in fiscal 2003, compared to $2.0
million in fiscal year 2002. As a percentage of sales, our net loss decreased to
7.5% in fiscal 2003 compared to 14.3% in fiscal year 2002. Our losses are
considered to be a normal part of our expanding operations as a start-up
business. As we continue to grow, we expect to become more profitable. A
significant portion of our fiscal year 2003 losses were non-cash charges of
$84,373 for stock compensation expense and $463,625 for amortization of debt
discount related to conversion rights and warrants associated with the $750,000
convertible note financing completed in February 2002.

         Net loss per share decreased to $.11 per share in fiscal year 2003,
from $0.20 per share in fiscal 2002.


Inflation

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

                                       28


Fiscal Year Ended June 30, 2002 and Twelve Month Period Ended June 30, 2001

Sales

         Our sales are derived primarily from the sale of home furnishing and
home decor products to large and small retailers. During fiscal year 2002, sales
increased approximately $13.0 million to $14.1 million from $1.1 million in the
period from March 6, 2000 (inception) through June 30, 2001. Approximately $5.2
million of the increase is attributable to the purchase of GuildMaster, and $2.3
million resulted from the purchase of Faith Walk. Sales from our decorize.com
division increased to $6.6 million from $1.0 million in the period from March 6,
2000 (inception) through June 30, 2001.

Cost of Sales

         Cost of sales decreased as a percentage of sales to 64.9% for fiscal
year 2002 from 71.5% in the period from March 6, 2000 (inception) through June
30, 2001. The decrease in our cost of sales was due primarily to better purchase
prices because of our increased volume of purchases. The decrease in our cost of
sales resulted in an increase in our gross margin to 35.1% in fiscal year 2002
compared to 28.5% in the period from March 6, 2000 (inception ) through June 30,
2001.

Operating Expenses

         Operating expenses increased to $6.6 million in fiscal year 2002 from
$1.7 million in fiscal year 2001, an increase of $4.9 million. The increases in
these expenses were primarily attributable to the acquisitions of GuildMaster
and Faith Walk. In addition, fiscal year 2002 included $754,000 of non-cash
charges for stock option expense. As a percentage of sales, our operating
expenses decreased to 46.6% in fiscal year 2002, from 150.4% in the period from
March 6, 2000 (inception) to June 30, 2001, due to the effects of significant
sales volume increases.

Other Expenses

         Depreciation and amortization was $125,000 for the fiscal year 2002 and
$45,000 for the period from March 6, 2000 (inception) to June 30, 2001. This
increase resulted primarily form the acquisitions of GuildMaster and Faith Walk.

         Other expense increased to $364,000 in fiscal year 2002 from $134,000
in the period from March 6, 2000 (inception) to June 30, 2001. Of this increase
$125,000 was attributable to the amortization of debt discount related to
conversion rights and warrants attached to the $750,000 convertible note
financing completed in February 2002. The balance of the increase was mostly due
to the interest expense associated with the stockholders' notes payable.

Net Income (Loss)

         Loss from operations increased to $1.6 million in fiscal year 2002 from
$1.4 million in the period from March 6, 2000 (inception) to June 30, 2001. As a
percentage of sales, the loss from operations decreased to 11.5% in fiscal year
2002 compared to 121.9% in the period from March 6, 2000 (inception) to June 30,
2001 due to the effects of significant sales volume increases.

         We recorded a net loss of $2.0 million in fiscal year 2002, compared to
$1.5 million in the period from March 6, 2000 (inception) to June 30, 2001. As a
percentage of sales, our net loss decreased to 14.3% in fiscal year 2002,
compared to 130.9% in the period from March 6, 2000 (inception) to June 30,
2001. Our losses are considered to be a normal part of our expanding operations
as a start-up business. As we continue to grow, we expect to become more
profitable. A significant portion of our fiscal year 2002 losses were non-cash
charges of $754,000 for stock compensation expense and $125,000 for amortization
of debt discount related to conversion rights and warrants associated with the
$750,000 convertible note financing completed in February 2002.

         Net loss per share decreased to $0.20 per share in fiscal year 2002,
from $0.32 per share in the period from March 6, 2000 (inception) to June 30,
2001.




                                       29


Liquidity and Capital Resources


         We had working capital of $1.9 million at June 30, 2003, compared with
$1.8 million at June 30, 2002. Cash and cash equivalents and short-term
investments were $122,000 at June 30, 2003, compared to $148,000 at June 30,
2002. Cash used in operating activities decreased from $1,894,684 in fiscal year
2002 to $1,050,919 in fiscal year 2003. The principal operating uses of cash
during fiscal 2003 were attributable to the $1.2 million net loss, increased
inventories and an increase in accounts receivable, which was minimized by an
increase in accounts payable. The increase in inventory was due to inventory not
shipped immediately upon production but held for later shipment to customers. In
addition, inventory levels at June 30, 2002 were significantly higher than
normal due to the postponement of a delivery at the request of a major customer.

         Investing activities during the year ended June 30, 2003, consumed
$158,904 in cash. This amount related to the acquisition of computer equipment
and improvements in Decorize's technological infrastructure.

         During the year ended June 30, 2003, our cash provided from financing
activities amounted to $1,183,467. This is principally attributable to
investment capital raised of $899,792 and net advances received from our factor
of $702,000 offset by principal payments of $259,614 on debt and payment of
costs relating to this registration of $159,000.

         We anticipate that our working capital need will increase as our
business grows. As of June 30, 2003, our working capital was $1.9 million. In
particular, we require cash to fund the purchase and manufacturing of products
for shipment to customers. We expect that these working capital requirements can
be met through our ongoing relationships with asset-based lenders that have
provided similar funding to us in the form of factored accounts receivable and
borrowing against qualified inventories.

         In order to provide improved working capital liquidity and credit risk
exposure, Decorize and its subsidiaries regularly sell the majority of their
accounts receivable under global factoring arrangements they enter into from
time to time. Throughout 2002, Decorize and its subsidiaries operated under a
factoring arrangement with First Factors Corporation, under which they sold
their accounts receivable on a pre-approved, non-recourse basis. Accounts
receivable sold are subject to pre-approval by the factor. Decorize does not
retain any interest in, or control of, the accounts receivable sold. Decorize
does not bear any credit risk relating to the sold receivables other than with
regard to customer disputes that may require Decorize to reacquire such disputed
receivables from the factor. A portion of the sale proceeds is withheld by the
factor for a period of time pursuant to the factoring agreement, which is
reflected as due from factor on the balance sheet. Advances of amounts due from
factor bear interest at prime, and may be offset against amounts due to Decorize
at the factor's option. For the year ended June 30, 2003, Decorize and its
subsidiaries factored $8,887,982 in accounts receivable and received $8,932,128
in cash from First Factors. The factoring service fees were $111,487 and the
interest paid on cash advances from the factor, amounted to $65,048 for the year
ended June 30, 2003.

         On February 4, 2003, Decorize and its subsidiaries entered into a
factoring arrangement with CIT Commercial Services, a unit of CIT Group, Inc.
This factoring arrangement replaced the previously existing arrangement that had
been in place with First Factors and has substantially similar characteristics.
For the year ended June 30, 2003, Decorize and its subsidiaries factored
$5,434,412 in accounts receivable and received $5,555,043 in cash from CIT. The
factoring service fees were $29,974 and the interest paid on cash advances from
the factor, amounted to $13,030 for the year ended June 30, 2003. In addition to
factoring accounts receivable, this arrangement provides for borrowing against
qualified inventories of up to $1,000,000. Decorize was in compliance with its
obligations under the First Factors arrangement at the time of it entering into
the new agreement with CIT.


         In December 2002, Decorize completed a private placement of 785,714
shares of common stock, and warrants to acquire an additional 785,714 shares of
common stock at an initial exercise price of $2.80 per share. Each purchaser
received a warrant to purchase one share of common stock for each share of
common stock purchased in the private placement. The private placement was
completed in two separate closings on November 19, 2002 and December 2, 2002.
The aggregate purchase price for the common stock and the warrants was
$1,100,000, based on a price per share of common stock equal to $1.40. As a cost
of this private offering, Decorize paid $75,000 and issued 17,857 shares of
common stock, together with warrants for an aggregate of 171,428 shares of
common stock, as placement fees to parties acting on Decorize's behalf in such
placement. In addition, Decorize agreed to


                                       30

pay a $2,500 monthly management fee to one of the purchasers for the two year
period following closing. The warrants are exercisable at $1.40 per share for
42,857 shares, at $2.80 per share for 42,857 shares, at $1.68 per share for
42,857 shares and at $3.36 per share for 42,857 shares. All of the warrants have
an exercise period of three years, except for the warrants exercisable for
42,857 shares at a price of $2.80 per share, which have an exercise period of
five years.

         On January 1, 2003, the $750,000 convertible term note issued to
NestUSA on February 20, 2002, was amended by the issuance of an amended and
restated convertible term note. Terms of the amended note created new payment
terms for the convertible term note, and Decorize issued additional three-year
warrants for 216,000 shares of Decorize's common stock at an exercise price of
$2.80 per share. The conversion price of the original three-year warrants,
exercisable for 300,000 shares, was reduced to $1.50 per share on December 31,
2002, since Decorize failed to complete the requisite financing described in
those warrants. Interest on the note accrues at an initial rate of 6.00% per
annum, accrued and compounded annually. Principal and interest are payable
monthly in the amount of $17,500 commencing on January 31, 2003, continuing
until January 31, 2004, when the monthly payments increase to $53,351 through
December 31, 2004, at which time the note will be fully paid. Decorize was not
in violation of any covenants or obligations relating to the convertible note at
the time of the amendment.


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


         Total Contractual Cash and Other Obligations


         The following table summarizes our long-term debt, capital lease
obligations, and operating lease obligations as of June 30, 2003.

                                                                  Less than                                    After 5
                                                    Total           1 Year         1-3 Years     4 - 5 Years     Years
                                                    -----           ------         ---------     -----------     -----
Aggregate amount of principal to be paid
   on the outstanding long-term debt                   832,395         444,798          387,597             -           -
Principal payments due on notes payable to
stockholders                                         1,803,010               -        1,803,010             -           -
Future minimum lease payments under
   capital leases                                      187,424          71,298          110,215         5,911           -
Future minimum lease payments under
   noncancelable operating leases                    1,518,561         360,653          901,440       256,468           -
                                                     ---------         -------          -------       -------           -
Totals                                               4,341,390         876,749        3,202,262       262,379           -
                                                     =========         =======        =========       =======           =



                             DESCRIPTION OF PROPERTY

         We operate each of our businesses in leased facilities. Our corporate
headquarters and the operations of decorize.com are housed together in
approximately 9,600 square feet in one building in Springfield, Missouri. Our
rent for this space is $3,500 per month. The facilities are in good condition.
The initial term of the lease for our corporate headquarters terminated on April
15, 2003, and we exercised our option to renew the lease for another one-year
term ending April 15, 2004. We have a second option to renew the lease for
another one-year period at the end of the current renewal term. We anticipate
that if additional space is required within the next 12 months for our
headquarters and decorize.com operations, then such space will be available in
the Springfield area on a reasonable commercial basis.


         Decorize leases 13,876 square feet of showroom in High Point, North
Carolina. The High Point showroom lease terminates on October 31, 2009. The rent
for the period beginning June 1, 2003 and ending April 30, 2004 is

                                       31



$15,738 per month, from May 1, 2004 to October 31, 2005 is $18,354 per month,
from November 1, 2005 to October 31, 2008 is $18,703 per month, and from
November 1, 2008 to October 31, 2009, is $19,264 per month. We have an option to
renew the lease for one five-year period.

         Decorize manufactures and warehouses GuildMaster items in a 41,250
square feet facility in Springfield, Missouri. The lease agreement currently
provides for a monthly rent payment of $9,860. The lease on the building
terminates on November 30, 2006, and there are options to renew the lease for
two additional five-year periods. The Springfield facility is in good condition,
and we believe the space is adequate for GuildMaster's operations for the
foreseeable future.

         Decorize also leases approximately 2,275 square feet in a furniture
market in Atlanta, Georgia. The Atlanta showroom is leased on a month-to-month
basis for $3,225 per month with a 30-day cancellation notice period. We believe
adequate space is available in the Atlanta area on a reasonable commercial basis
should the current lease not be renewed.

         Faith Walk rents approximately 1,500 square feet in Houston, Texas on a
month-to-month basis. Our rent for this facility is $600 per month. The facility
is in good condition. We believe the space is adequate for Faith Walk's
operations for the current period. We are in the process of transitioning Faith
Walk's operations to Springfield, Missouri and to Asia, so we do not plan to
maintain a large facility in Houston.

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


                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         On July 14, 1999, Guidelocator.com, Inc., our predecessor company,
issued a $10,000 promissory note to Ruth E. Shepley, the sole officer and
director of Guidelocator at the time. The note carried an interest rate of 10%,
was due on August 30, 2001, and required repayment upon a change of control of
Guidelocator. This note was subsequently repaid.

         In July 1999, we issued 1,500,000 shares of our common stock to Ms.
Shepley for services rendered which were valued at $1,500 in the aggregate. Ms.
Shepley returned 1,150,000 of these shares to us pursuant to the merger of
Guidelocator and Decorate, Inc. on June 29, 2001. Prior to the merger, our
office was located in a building owned by Ms. Shepley. We did not pay rent for
the office and did not enter into a lease for the office space.


         When we acquired GuildMaster in June 2001, all of the stock of
GuildMaster was owned by James Parsons, our President and Chief Executive
Officer, and Ellen Parsons, the wife of James Parsons, and by Jon Baker, a
director of the Company. The purchase price for GuildMaster was $2.5 million,
which we paid by issuing a $375,000 promissory note to Mr. Baker and by issuing
common stock worth approximately $2,125,000 to Mr. Baker, Mr. Parsons and Mrs.
Parsons. We also assumed a $925,000 debt owed by GuildMaster to Mr. Parsons, by
issuing a $925,000 promissory note. The notes are due in full on July 31, 2004
(pursuant to modifications made subsequent to the end of fiscal year 2002);
however, the interest payable on Mr. Baker's note will be paid on December 31,
2004, pursuant to the separation agreement signed in connection with his
resignation on August 25, 2003. We believe that the transaction was exempt from
registration Section 4(2) of the Securities Act of 1933. As part of the
transaction, we entered into employment agreements with Mr. Baker and Mr.
Parsons. You can find information about these employment agreements and Mr.
Baker's separation agreement in "Executive Compensation" on page 35 of this
prospectus.

         We acquired Faith Walk in July 2001. Prior to the acquisition, Faith
Walk was owned by J. Michael Sandel and his spouse. The purchase price for Faith
Walk was $1.0 million. We paid $284,000 of the purchase price in cash. The
remainder of the purchase price was paid by issuing a $216,000 promissory note
and common stock worth approximately $510,000 to Mr. Sandel and his spouse. The
note is due in full on July 31, 2004 (pursuant to modifications made subsequent
to the end of fiscal year 2002). We believe the transaction was exempt from
registration under Section 4(2) of the Securities Act of 1933. As part of the
transaction, we entered into an employment agreement with Mr. Sandel. You can
find information about Mr. Sandel's employment agreement in "Executive
Compensation" on page 35 of this prospectus. In October 2002, Mr. Sandel repaid
a note on behalf of


                                       32

Faith Walk to Sterling Bank in the amount of $288,000. Decorize subsequently
issued a note in the same amount to Mr. Sandel.

         On August 4, 2001, our Board of Directors authorized the issuance of
two-year common stock purchase warrants that were exercisable for up to 500,000
shares of Decorize common stock, with the issuance to be effective as of June
30, 2001. Decorize ultimately issued warrants for an aggregate 470,000 shares to
11 former holders of Class B equity units in decorize.com, L.L.C., the
predecessor to Decorize, effective as of that June 30 date. The warrants were
issued in exchange for the payment of $.10 per warrant share and the waiver by
such holders of any claims they may have against Decorize in connection with the
conversion of decorize.com, L.L.C. into a Delaware corporation. The warrants are
exercisable at an exercise price equal to $2.00 per share until they expire by
their terms on June 30, 2003. Decorize received an aggregate $44,000 in exchange
for the issuance of the warrants, and we waived the $3,000 payment for the
30,000 warrants issued to Fabian Garcia in consideration of his promise to
exercise the warrants and purchase the underlying shares within a shorter time
period than was provided under the warrants. Mr. Garcia exercised his warrants
in October 2001, and upon such exercise and the payment of the $60,000 exercise
price, he received 30,000 shares of Decorize common stock. The current warrant
holders include Kevin Bohren and Timothy Dorgan, both of whom serve as directors
of Decorize. Mr. Bohren paid $7,000 in cash for warrants to purchase 70,000
shares of our common stock, and Mr. Dorgan paid $1,000 in cash for warrants to
purchase 10,000 shares of common stock. The amount of the original investments
made by Mr. Bohren, Mr. Dorgan and Mr. Garcia for the Class B equity units that
were exchanged by each of them was approximately $225,000, $36,000 and $100,000,
respectively.


         On May 6, 2002, Decorize issued and sold to Mr. Garcia an additional
20,000 shares of common stock at a purchase price equal to $2.50 per share, in a
private sale transaction. Mr. Garcia also received common stock purchase
warrants exercisable for an additional 20,000 shares of common stock at an
initial exercise price of $3.00 per share. The exercise period under the
warrants terminates five years after issuance, in May 2007.



                                       33



            MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS


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

                                                              High              Low
                                                              ----              ---

                  First Quarter 2004 (July 1, 2003            $1.75             $1.30
                       through September 11, 2003)
                  Fourth Quarter 2003                           1.77              1.39
                  Third Quarter 2003                            1.90              1.01
                  Second Quarter 2003                           2.39              0.72
                  First Quarter 2003                            3.20              1.75
                  Fourth Quarter 2002                           4.38              3.10
                  Third Quarter 2002 (March 8                   4.49              3.50
                       through March 31)


Previously, our common stock was traded on the over-the-counter bulletin board
under the symbol "DCZ". The following table summarizes the high and low
historical bid quotes reported by the OTCBB Historical Data Service for the
periods indicated. OTCBB quotations reflect inter-dealer prices, without retail
mark-up, mark down or commissions, so those quotes may not represent actual
transactions.

                                                High                 Low
                                                ----                 ---

Third Quarter 2002 (through March 7, 2002)     $4.10                 $3.10

Second Quarter 2002                             4.45                  1.80
First Quarter 2002                              3.90                  1.50
Fourth Quarter 2001                              .03                   .03
Third Quarter 2001                             .0413                 .0413
Second Quarter 2001                               **                    **
First Quarter 2001                             .0075                 .0030

**       No trades reported by the OTCBB


         We had approximately 540 beneficial owners of our common stock,
including 97 of which were holders of record, as of August 29, 2003.

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



                                       34


                             EXECUTIVE COMPENSATION

Summary Compensation


         The following table, and the accompanying explanatory footnotes,
includes annual and long-term compensation information on (i) our Chief
Executive Officer, and (ii) three other executive officers and one employee who
were the most highly compensated officers or employees of Decorize for services
rendered in all capacities during the twelve month periods ended June 30, 2003,
2002 and 2001.



Name and                                                                                 Long Term
Principal Position                         Annual Compensation                          Compensation
------------------                         -------------------                          ------------

                            Twelve                                                  Securities
                             Month                              Other Annual        Underlying         All Other
                            Period      Salary       Bonus      Compensation         Options         Compensation
                            ------      ------       -----      ------------        ----------       ------------


Jon T. Baker              2003       $159,765 (1) $  10,000     $          -0-         -0-                 -0-
Chairman, President       2002       $158,579 (1) $  20,000     $          -0-         -0-                 -0-
CEO and Director          2001       $133,879 (2) $        -0-  $   22,570 (2)         -0-                 -0-

James K. Parsons          2003       $123,700 (3) $        -0-  $          -0-          -0-                -0-
Executive Vice President  2002       $  88,462(3) $        -0-  $          -0-          -0-                -0-
And Director              2001       $  75,000(4) $        -0-  $          -0-          -0-                -0-


J. Michael Sandel         2003       $113,423 (5) $        -0-  $          -0-         -0-                 -0-
Vice President and        2002       $107,800 (5) $        -0-  $          -0-         -0-                 -0-
Director                  2001       $122,304 (6) $        -0-  $          -0-         -0-                 -0-

Shane Mathews (7)         2003       $  70,000    $        -0-   $105,373 (8)        15,000 (10)           -0-
Key Account Manager       2002       $  70,000    $        -0-  $  94,425 (9)        10,000 (11)           -0-
                          2001       $  46,231    $        -0-  $        -0-         39,941 (12)    $  5,000(13)

Alex Budzinsky            2003       $107,077     $  22,462     $        -0-          40,000(14)           -0-
Executive Vice President  2002       $ 40,615     $        -0-  $   2,478            100,000(15)           -0-
and CFO                   2001       $       -0-  $        -0-  $        -0-           -0-                 -0-



(1)  Includes $21,421 in deferred compensation earned by Mr. Baker in fiscal
     year 2002, to be paid in fiscal year 2003. Pursuant to his employment
     agreement with us, Mr. Baker's annual salary is $160,000.

(2)  Includes compensation paid by GuildMaster, which was acquired on June 18,
     2001, from July 1, 1999 to March 5, 2001 and by Decorize, Inc. thereafter.

(3)  Pursuant to his employment agreement with us, Mr. Parson's annual salary is
     $140,000. Mr. Parsons has opted to forgo the remaining salary owed to him
     under his employment agreement for fiscal year 2002 and 2003.

(4)  Represents compensation paid by GuildMaster, which was acquired on June 18,
     2001.

(5)  Pursuant to his employment agreement with us, Mr. Sandel's annual salary is
     $110,000. Mr. Sandel was employed by Decorize 11 months in fiscal year
     2002.

(6)  Represents compensation paid by Faith Walk Designs, Inc. and Odd & Ends,
     L.P., which were acquired on July 31, 2001.



                                       35

(7) Mr. Matthews is not an executive officer of Decorize; however, he is
included in the table as a highly compensated employee pursuant to SEC
rules.

(8) Represents sales commissions paid in fiscal year 2003.

(9) Represents sales commissions paid in fiscal year 2002.

(10) The 15,000 shares are issuable under stock options granted under the 1999
Stock Option Plan on July 26, 2002, for an exercise price equal to $2.40
per share.

(11) The 10,000 shares are issuable under stock options granted under the 1999
Stock Option Plan on October 8, 2001, for an exercise price equal to $2.65
per share.

(12) The 39,941 shares are issuable under stock options granted under the 1999
Stock Option Plan on June 29, 2001, for an exercise price equal to $1.13
per share.

(13) Represents the fair market value of the 14,520 shares of restricted common
stock issued in exchange for the decorize.com equity units previously owned
by Mr. Matthews, as of the exchange date.

(14) The 40,000 shares are issuable under stock options granted under the 1999
Stock Option Plan on July 26, 2002, for an exercise price equal to $2.40
per share.

(15) The 100,000 shares are issuable under stock options granted under the 1999
Stock Option Plan on January 16, 2002, for an exercise price equal to
$2.70.

401(k) Plan

Effective July 1, 2002, we adopted a 401(k) Profit Sharing Plan that is
qualified under Section 401(k) of the Internal Revenue Code of 1986, as amended.
The 401(k) plan is available to each employee who meets certain eligibility
requirements. Employees may begin participation in the 401(k) plan on the first
day of every month any time after one month of employment. Participating
employees may contribute a portion of their compensation not exceeding a limit
set annually by the Internal Revenue Service. Decorize has made no contributions
to the 401(k) plan and, at this time, does not intend to begin matching employee
contributions to the 401(k) Plan.

Option Grants Table

The following table sets forth certain information with respect to the
options granted during the fiscal year ended June 30, 2003, to each employee
listed in the Summary Compensation Table set forth above.

Option Grants in Fiscal Year 2003

Percent of Total Exercise or
Number of Options Granted Base Price in
Options to Employees in Dollars per Expiration
Name Granted (1) Fiscal Year(2) Share (3) Date
---- ----------- ----------------- --------- ------------
Jon T. Baker (4) -0- N/A N/A N/A
James K. Parsons (4) -0- N/A N/A N/A
J. Michael Sandel (4) -0- N/A N/A N/A
Alex Budzinsky 40,000 11.6% $2.40 07/25/11
Shane Matthews 15,000 4.3% $2.40 07/25/11

(1) Options vest over a two-year period from date of grant, with one-third
vesting immediately and the remainder vesting at the rate of 50% per year.

(2) The aggregate number of options granted in fiscal year 2002 was 454,700.

(3) Closing price of our common stock on AMEX at date of grant.

(4) Decorize has never granted any stock options to Jon T. Baker, James K.
Parsons or J. Michael Sandel.

Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values

The following table sets forth certain information with respect to the
options owned by the employees named above during the year ended June 30, 2003:

Number of Unexercised Options Value of Unexercised In-the-
Shares at June 30, 2003 Money Options
Name Acquired Value at June 30, 2003 (1)
----- on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
--------- -------- ----------- ------------- ----------- -------------

Jon T. Baker (2) -0- N/A N/A N/A N/A N/A
James K. Parsons (2) -0- N/A N/A N/A N/A N/A
J. Michael Sandel (2) -0- N/A N/A N/A N/A N/A
Shane Matthews -0- N/A 51,608 13,333 $61,509 $0
Alex Budzinsky -0- N/A 113,334 26,666 N/A N/A

(1) Based upon the spread between the closing price of our common stock on AMEX
on June 30, 2003, which was $1.54 per share, and the exercise price of the
options (between $1.13 and $2.65 per share).

(2) Decorize has never granted any stock options to Jon T. Baker, James K.
Parsons or J. Michael Sandel.

Employment Agreements

We have employment contracts with two of our executive officers: James
K. Parsons and J. Michael Sandel. Mr. Baker's employment contract was superceded
by the Separation Agreement entered into by Decorize and Mr. Baker following his
resignation as President, Chief Executive Officer and Chairman of the Board in
August 2003, following the end of our fiscal year 2003.

Mr. Baker's employment contract, dated June 15, 2001, had a term of
three years and a base annual salary of $160,000. Bonuses, if any, are to be
paid at the sole discretion of our board of directors. The agreement contained
an equity compensation provision under which Mr. Baker had the opportunity to
earn an equity compensation bonus at the second anniversary of the agreement
based on the profitability of GuildMaster, Inc., but no equity compensation was
earned within the time limits provided in the agreement. The contract also
included a two-year covenant-not-to-compete in the event Mr. Baker voluntarily
terminates his employment with us. On August 25, 2003, Mr. Baker tendered his
resignation as Chairman of the Board, President and Chief Executive Officer.
Subsequently, Decorize and Mr. Baker entered into a Separation Agreement and
Release to clarify their respective obligations following the termination of Mr.
Baker's employment. The Separation Agreement provides for Decorize to pay Mr.
Baker (i) severance in the amount of $147,692, which will be paid in equal
installments on Decorize's regularly scheduled paydays between September 1,
2003, and December 31, 2004; (ii) reimbursement of Mr. Baker's costs incurred
under the Consolidated Omnibus Budget Reconciliation Act ("COBRA") to continue
his health insurance coverage under Decorize's health insurance plan; however,
any payments for his dependents will remain his own responsibility during the
period from September 1, 2003, until December 31, 2004; and (iii) a bonus of
$20,000 that he earned in February 2002, but had agreed to defer, which will be
paid in equal installment payments on Decorize's regularly scheduled paydays
between September 1, 2003, and December 31, 2004. Decorize will also pay any
interest due (calculated at 4% per year) on the Promissory Note entered into
between Baker and Decorize on June 15, 2001, as modified by the Note
Modification Agreement dated April 30, 2002, on December 31, 2004. The
separation agreement also contains standard confidentiality, non-hire and
release language for the benefit of Decorize.



         Mr. Parson's employment contract, dated June 15, 2001, has a term of
three years and a base annual salary of $140,000. Bonuses, if any, are to paid
at the sole discretion of our board of directors. The agreement contains an
equity compensation provision under which Mr. Parsons had the opportunity to
earn an equity compensation bonus at the second anniversary of the agreement
based on the profitability of GuildMaster, Inc., but no equity compensation was
earned prior to expiration of that provision of the agreement. The contract also
includes a two-year covenant-not-to-compete in the event Mr. Parsons voluntarily
terminates his employment with us.

         Mr. Sandel's employment contract, dated July 31, 2001, has a term of
four years and a base annual salary of $110,000. Bonuses, if any, are to be paid
at the sole discretion of our Board of Directors. The agreement contains an
equity compensation provision under which Mr. Sandel had the opportunity to earn
an equity compensation bonus on the second anniversary of the agreement based on
the profitability of Faith Walk Designs, Inc., but no equity compensation was
earned prior to expiration of that provision of the agreement. The contract also
includes a two-year covenant-not-to-compete in the event Mr. Sandel voluntarily
terminates his employment with us.



                  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                     ON ACCOUNTING AND FINANCIAL DISCLOSURE

         On April 12, 2002, Decorize dismissed its independent public
accountants, Kirkpatrick, Phillips & Miller, CPA's, P.C. The decision to change
accountants was recommended and approved by our board of directors on that same
date. From July 31, 2001, the date of our former accountant's engagement, until
April 12, 2002, there were no disagreements with Kirkpatrick, Phillips & Miller,
CPA's, P.C. on any matter of accounting principle or practice, financial
statement disclosure or auditing scope of procedure, which disagreements, if not
resolved to their satisfaction would have caused them to make reference in
connection with their opinion to the subject matter of the disagreement. None of
the former accountant's reports on the company's financial statements for the
period of their engagement with Decorize contained an adverse opinion or
disclaimer of opinion or qualification or modification as to uncertainty, audit
scope or accounting principles.

         The letter from the former accountants to the office of the Chief
Accountant of the SEC stating that they are in agreement with the above
statements is attached to Decorize's Form 8-K/A filed with the SEC on May 28,
2002.

         Effective April 12, 2002, Decorize engaged Ernst & Young LLP, as its
independent public accountants. During the two most recent fiscal years and the
period of January 1, 2002 through April 12, 2002, neither Decorize, nor anyone
on behalf of Decorize, consulted Ernst & Young LLP regarding the application of
accounting principles to a specified transaction, either completed or proposed;
or the type of audit opinion that might be rendered on Decorize's financial
statements, or any matter that was the subject of a disagreement or a reportable
event; and such matters were not an important factor in reaching a decision to
engage Ernst & Young LLP as Decorize's independent public accountants.

         On January 3, 2003, Decorize dismissed its independent public
accountants, Ernst & Young LLP. The decision to change accountants was
recommended and approved by our board of directors on that same date, following
the recommendation of Decorize's audit committee. From April 12, 2002, the date
of our former accountant's engagement, until January 3, 2003, there were no
disagreements with Ernst & Young LLP on any matter of accounting principle or
practice, financial statement disclosure or auditing scope of procedure, which
disagreements, if not resolved to their satisfaction would have caused them to
make reference in connection with their opinion to the subject matter of the
disagreement. None of the former accountant's reports on the company's financial
statements for the period of their engagement with Decorize contained an adverse
opinion or disclaimer of opinion or qualification or modification as to
uncertainty, audit scope or accounting principles.

         The letter from the former accountants to the office of the Chief
Accountant of the SEC stating that they are in agreement with the above
statements is attached to Decorize's Form 8-K filed with the SEC on January 6,
2003.


         Effective January 6, 2003, Decorize engaged BKD, LLP, as its
independent public accountants. During the two most recent twelve month periods
ending June 30, 2002 and June 30, 2001 and the period of July 1, 2002 through
January 3, 2003, neither Decorize, nor anyone on behalf of Decorize, consulted
BKD regarding the application of accounting principles to a specified
transaction, either completed or proposed, or the type of audit


                                       38



opinion that might be rendered on our financial statements, or any matter that
was the subject of a disagreement or a reportable event; and such matters were
not an important factor in reaching a decision to engage BKD as our independent
public accountants. Decorize instructed BKD to audit its financial statements for
the year ended June 30, 2002, in addition to completing its normal year end
audit of its fiscal 2003 financials.


                              LEGAL MATTERS

         The validity of the common stock offered hereby is being passed upon by
Hallett & Perrin, P.C., Dallas, Texas.

                                 EXPERTS


         The consolidated financial statements of Decorize, Inc. as of and for
the year ended June 30, 2002, appearing in this Prospectus and Registration
Statement has been audited by BKD, LLP, independent accountants, as set forth in
its report thereon appearing elsewhere herein, and are included in reliance upon
such report given on the authority of such firm as experts in accounting and
auditing.

         The consolidated financial statements of Decorize, Inc. for the period
from January 1, 2001 to June 30, 2001 and the period from March 6, 2000 to
December 31, 2000, appearing in this Prospectus and Registration Statement have
been audited by Kirkpatrick, Phillips & Miller, CPAs, P.C., independent
accountants, as set forth in their report thereon appearing elsewhere herein,
and are included in reliance upon such report given on the authority of such
firm as experts in accounting and auditing.


                       OTHER AVAILABLE INFORMATION


         We are subject to the reporting requirements of the SEC. Accordingly,
we are required to file current reports with the SEC including annual reports,
quarterly reports, proxy or information statements, and current reports as
required by SEC rules. All reports that we file electronically with the SEC are
available for viewing free of charge over the Internet via the SEC's EDGAR
system at http://www.sec.gov. We will provide without charge to each person who
receives a copy of this prospectus, upon written or oral request, a copy of any
information that is incorporated by reference in this prospectus. Requests
should be directed to James K. Parsons, our President and Chief Executive
Officer.


         We are filing a registration statement with the SEC on Form SB-2 under
the Securities Act of 1933 in connection with the securities offered in this
prospectus. This prospectus does not contain all of the information that is in
the registration statement, and you may inspect without charge, and copy all
materials that we file with the SEC, at the public reference room maintained by
the SEC at 450 Fifth Street, N.W. Washington, D.C. 20549. Copies of these
materials may also be obtained at prescribed rates by calling the SEC public
reference room at 1-800-SEC-0330.



                                       39


                          INDEX TO FINANCIAL STATEMENTS
                                 DECORIZE, INC.




                                                                                             Page(s)
                                                                                             -------
     Independent Accountants Report of BKD, LLP                                               F-2
     Consolidated Balance Sheet at June 30, 2003 (unaudited) and 2002                         F-3
     Consolidated Statements of Operations for the Years ended                                F-5
              June 30, 2003 (unaudited) and 2002
     Consolidated Statement of Changes in Stockholders' Equity for the Years ended            F-6
              June 30, 2003 (unaudited) and 2002
     Consolidated Statements of Cash Flows for the Years ended                                F-7
              June 30, 2003 (unaudited) and 2002
     Notes to the June 30, 2003 (unaudited) and 2002 Consolidated Financial
     Statements                                                                               F-8

     Independent Auditors Report of Kirkpatrick, Phillips & Miller, CPA's, P.C.           F-20
     Consolidated Statements of Operations                                                    F-21
              for the period from January 1, 2001 to June 30, 2001
              and the period March 6, 2000 to December 31, 2000
     Consolidated Statements of Changes in Stockholders' Equity                               F-22
              for the period from January 1, 2001 to June
              30, 2001 and the period March 6, 2000 to December 31, 2000
     Consolidated Statements of Cash Flows for                                                F-23
              for the period from January 1, 2001 to June 30, 2001 and the period
              March 6, 2000 to December 31, 2000
     Notes to Audited Consolidated Financial Statements                                       F-24


                                      F-1


                         Independent Accountants' Report




Board of Directors
Decorize, Inc.
Springfield, Missouri


We have audited the accompanying consolidated balance sheet of Decorize, Inc. as
of June 30, 2002, and the related consolidated statements of operations,
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with auditing standards generally accepted
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 audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Decorize, Inc. as of
June 30, 2002, and the results of its operations and its cash flows for the year
then ended in conformity with accounting principles generally accepted in the
United States of America.

As discussed in Note 1, the Company changed its method of accounting for
goodwill by adopting the provisions of Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets, in 2002.




                                   /s/BKD, LLP


Springfield, MO
September 3, 2003

                                      F-2





                                 Decorize, Inc.
                           Consolidated Balance Sheets
                       June 30, 2003 (Unaudited) and 2002


Assets

                                                                                   2003                2002
                                                                            ----------------------------------------
    Current Assets                                                              (Unaudited)

        Cash and cash equivalents                                             $        121,716   $        148,072

        Receivable:
             Trade accounts receivable, net of allowance 2003 -
          $287,530, 2002 - $215,158                                                    371,240             94,300
             Due from factor, net of advances 2003 - $1,570,553, 2002 -
          $1,182,788                                                                   443,529            951,118
             Other                                                                      25,906             54,304

        Inventories                                                                  3,046,031          2,252,372

        Prepaid expenses and other                                                     140,719             77,630
                                                                               ---------------    ---------------

               Total current assets                                                  4,149,141          3,577,796
                                                                               ---------------    ---------------

        Property and equipment, net                                                    520,919            403,921

        Goodwill                                                                     3,258,938          3,258,938

        Other                                                                          215,343             90,343
                                                                               ---------------    ---------------

                                                                                     3,995,200          3,753,202
                                                                               ---------------    ---------------

                                                                              $      8,144,341   $      7,330,998
                                                                               ===============    ===============


See Notes to Consolidated Financial Statements

                                      F-3




                                 Decorize, Inc.
                           Consolidated Balance Sheets
                       June 30, 2003 (Unaudited) and 2002


Liabilities and Stockholders' Equity

                                                                                   2003                2002
                                                                            ----------------------------------------
    Current Liabilities                                                         (Unaudited)
        Accounts payable                                                      $      1,432,387   $        818,366

        Accrued salaries and commissions                                               151,984            245,974

        Other accrued expenses                                                         316,368            183,155

        Current portion of long-term debt                                              285,900            462,970

        Current portion of capital lease obligations                                    49,200             27,447
                                                                               ---------------    ---------------

               Total current liabilities                                             2,235,839          1,737,912
                                                                               ---------------    ---------------

    Capital lease obligation, less current portion                                      97,134             34,712

    Long-term debt, less current portion                                                72,620            121,193

    Notes payable to stockholders                                                    1,803,010          1,645,703
                                                                               ---------------    ---------------

               Total liabilities                                                     4,208,603          3,539,520
                                                                               ---------------    ---------------

    Stockholders' Equity

        Preferred stock, $.001 par value; authorized 10,000,000 shares;
          none issued                                                                        -                  -

        Common stock, $.001 par value; 50,000,000 authorized, issued
          11,270,693 shares                                                             11,271             10,433

        Additional paid-in capital                                                   7,272,369          5,976,542

        Accumulated deficit                                                         (3,347,902)        (2,195,497)
                                                                               ----------------   ----------------

               Total stockholders' equity                                            3,935,738          3,791,478
                                                                               ---------------    ---------------

                                                                              $      8,144,341   $      7,330,998
                                                                               ===============    ===============

                                      F-4




                                 Decorize, Inc.
                        Consolidated Statements of Income
                 Years Ended June 30, 2003 (Unaudited) and 2002

                                                                                   2003                2002
                                                                            ----------------------------------------
                                                                                (Unaudited)
    Net Sales                                                                 $     15,404,514   $     14,081,833

    Cost of Goods Sold                                                               9,614,317          9,140,368
                                                                               ---------------    ---------------
    Gross Profit                                                                     5,790,197          4,941,465
                                                                               ---------------    ---------------
    Operating Expenses
        Selling, general and administrative                                          6,027,234          5,682,428
        Stock compensation expense                                                      37,500            753,893
        Depreciation and amortization                                                  214,955            125,433
                                                                               ---------------    ---------------
                                                                                     6,279,689          6,561,754
                                                                               ---------------    ---------------
    Operating Loss                                                                    (489,492)        (1,620,289)
                                                                               ----------------   ----------------

    Other Income (Expense)
        Interest income                                                                  3,826              4,573
        Interest expense                                                              (250,749)          (204,778)
        Amortization of debt discount                                                 (463,625)          (125,000)
        Other                                                                           47,635            (38,648)
                                                                               ---------------    ----------------
                                                                                      (662,913)          (363,853)
                                                                               ----------------   ----------------

    Loss Before Income Taxes                                                        (1,152,405)        (1,984,142)
                                                                               ----------------   ----------------

    Provision for Income Taxes                                                               -             32,700
                                                                               ---------------    ---------------

    Net Loss                                                                  $     (1,152,405)  $     (2,016,842)
                                                                               ----------------   ----------------

    Basic and Diluted Loss Per Share                                              $      (0.11)       $      (0.20)
                                                                                  =============       =============

    Basic and Diluted Weighted-Average Shares Outstanding                           10,913,004         10,306,274
                                                                            ================== ==================


See Notes to Consolidated Financial Statements


                                      F-5




                                 Decorize, Inc.
                 Consolidated Statements of Stockholders' Equity
                 Years Ended June 30, 2003 (Unaudited) and 2002




                                      Common Stock              Additional         Accumulated
                                  Shares        Par Value     Paid-in Capital        Deficit               Total
                                  ------        ---------     ---------------        -------               -----

Balance, June 30, 2001            10,000,000        $10,000         $3,214,761          $(178,655)         $3,046,106

Issuance of common stock in
   connection with the
   acquisition of Faith
   Walk Designs, Inc.                161,443            162            509,838                   -            510,000
Issuance of stock warrants                 -              -            124,000                   -            124,000
Allocation of proceeds from
   issuance of convertible
   note payable to warrants
   and beneficial conversion               -              -            750,000                   -            750,000
Compensation related to
   issuance of stock
   options to a non-employee               -              -             45,000                   -             45,000
Net proceeds from sale of
   common stock, net of
   offering costs $10,679            270,000            270            624,051                   -            624,321
Issuance of common stock
   for services                        1,331              1              2,999                   -              3,000
Stock compensation expense
   related to stock options
   issued under Equity
   Incentive Plan                          -              -            705,893                   -            705,893
Net loss
                                           -              -                  -         (2,016,842)        (2,016,842)
                                  ----------      ---------         ----------        ------------        -----------

Balance, June 30, 2002            10,432,774        $10,433         $5,976,542        $(2,195,497)         $3,791,478

Stock compensation expense
   related to stock options
   issued under Equity
   Incentive Plan                          -              -             32,500                   -             32,500
Compensatory issuance of
   common stock                       34,348             35             51,838                   -             51,873
Net proceeds from issuance
   of common stock                   803,571            803            898,989                   -            899,792
Discount recorded on
   amended convertible term
   note                                    -              -            312,500                   -            312,500
Net loss
                                           -              -                 -          (1,152,405)        (1,152,405)
                                  ----------        -------         ----------        ------------        -----------

Balances, June 30, 2003,
(Unaudited)                       11,270,693        $11,271         $7,272,369        $(3,347,902)         $3,935,738
                                  ==========        =======         ==========        ============         ==========


See Notes to Consolidated Financial Statements





                                      F-6




                                 Decorize, Inc.
                      Consolidated Statements of Cash Flows
                 Years Ended June 30, 2003 (Unaudited) and 2002




                                                                                     2003                2002
                                                                            ----------------------------------------
    Operating Activities                                                        (Unaudited)
        Net income (loss)                                                     $     (1,152,405)  $     (2,016,842)
        Items not requiring (providing) cash
           Deferred income taxes                                                            --             32,700
           Depreciation and amortization                                               214,955            125,433
           Compensatory issuance of common stock and stock options                      84,373            753,893
           Amortization of debt discount included in interest expense                  463,625            125,000
           Loss (gain) on disposal of property and equipment                               991             (1,266)
        Changes in
           Trade accounts receivable                                                  (248,542)         1,091,465
           Due from factor                                                            (194,872)        (1,730,802)
           Inventories                                                                (793,659)          (305,303)
           Prepaid expenses and other current assets                                   (78,629)            30,615
           Accounts payable                                                            614,021            174,617
           Accrued expenses and other                                                   39,223           (174,194)
                                                                               ---------------    ---------------
               Net cash used in operating activities                                (1,050,919)        (1,894,684)
                                                                               ---------------    ---------------

    Investing Activities
        Purchase of property and equipment                                            (166,209)          (129,534)
        Proceeds from disposal of property and equipment                                 7,305             14,197
        Acquisition of Faith Walk Designs, Inc., net of cash acquired                       --           (295,812)
                                                                               ---------------    ---------------
               Net cash used in investing activities                                  (158,904)          (411,149)
                                                                               ---------------    ---------------

    Financing Activities
        Principal payments on long-term debt                                           (87,997)          (338,507)
        Proceeds from issuance of long-term debt                                            --            933,391
        Principal payments of stockholders' notes payable                             (131,463)           (51,505)
        Proceeds from issuance of stockholders' notes payable                               --            162,167
        Principal payments on capital lease obligations                                (40,154)           (17,514)
        Issuance of common stock, net of related expenses                              899,792            624,321
        Proceeds from issuance of common stock warrants                                     --             44,000
        Payment of costs of ongoing stock registration                                (159,172)                --
        Advances from factor, net                                                      702,461          1,008,372
                                                                               ---------------    ---------------
               Net cash provided by financing activities                             1,183,467          2,364,725
                                                                               ---------------    ---------------

    Increase (Decrease) in Cash and Cash Equivalents                                   (26,356)            58,892

    Cash and Cash Equivalents, Beginning of Year                                       148,072             89,180
                                                                               ---------------    ---------------
    Cash and Cash Equivalents, End of Year                                    $        121,716   $        148,072
                                                                               ===============    ===============

    Supplemental Cash Flows Information
        Interest paid                                                                 $210,019           $178,402
        Common stock warrants issued in connection with note payable                  $113,126           $276,515
        Beneficial conversion option associated with note payable                     $199,374           $473,485
        Promissory note issued to stockholder in exchange for repayment
          of note payable                                                             $288,607                 --
        Capital lease obligations incurred for property and equipment                 $124,328            $60,173

                                      F-7



                                 Decorize, Inc.
                          Notes to Financial Statements
                       June 30, 2003 (Unaudited) and 2002


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


    Nature of Operations

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


    Principles of Consolidation

          The consolidated financial statements include the accounts of
          Decorize, Inc. and its wholly owned subsidiaries, GuildMaster, Inc.
          and Faith Walk Designs, Inc. ("Faith Walk"). The results of operations
          of Faith Walk Designs, Inc. have been included in the consolidated
          financial statements from the effective date of the acquisition
          transaction (see Note 2). All significant intercompany accounts and
          transactions have been eliminated in consolidation.


    Use of Estimates

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


    Cash Equivalents

          The Company considers all liquid investments with original maturities
          of three months or less to be cash equivalents. At June 30, 2003 and
          2002, cash equivalents consisted primarily of certificates of deposit.


    Accounts Receivable

          Accounts receivable are stated at the amount billed to customers. The
          Company provides an allowance for doubtful accounts, which is based
          upon a review of outstanding receivables, historical collection
          information and existing economic conditions. Accounts receivable are
          ordinarily due 30 to 60 days after the issuance of the invoice.
          Delinquent receivables are written off based on individual credit
          evaluation and specific circumstances of the customer. Provision
          (credit) for bad debts was ($79,355) and $178,402 for the years ended
          June 30, 2003 and 2002, respectively.

          The Company has established relationships with several major
          customers. Sales to one customer accounted for 29.5% and 19.9% of
          total sales for the years ended June 30, 2003 and 2002, respectively.
          Sales for 2003 to another customer accounted for an additional 14.7%
          of total sales. The Company grants credit to customers who meet the
          Company's pre-established credit requirements and generally does not
          require collateral to secure payment of accounts receivable.


    Due From Factor

          Decorize and its subsidiaries regularly sell the majority of their
          accounts on a pre-approved, non-recourse basis under global factoring
          agreements. Accounts receivable sold are subject to pre-approval by
          the factor. The Company does not retain any interest in, or control
          of, the accounts receivable sold. The Company does not bear any credit
          risk relating to the sold receivables other than with regard to
          customer disputes that may require the Company to reacquire the
          disputed receivables from the factor. A portion of the sale proceeds
          is withheld by the factor for a period of time pursuant to the
          factoring agreement, which is reflected as due from



                                      F-8



                                 Decorize, Inc.
                          Notes to Financial Statements
                       June 30, 2003 (Unaudited) and 2002


          factor on the consolidated balance sheet. Advances of amounts due from
          factor bear interest at prime, and may be offset against amounts due
          to the Company at the factor's option. At June 30, 2003, the Company
          was not in compliance with certain financial restrictions of its
          factoring agreements. The factor has waived compliance with those
          restrictions at June 30, 2003.


    Inventory Pricing

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


    Property and Equipment

          Property and equipment are stated at cost less accumulated
          depreciation and are depreciated over the estimated useful life of
          each asset. Leasehold improvements are amortized over the shorter of
          the lease term or the estimated useful lives of the improvements. As
          required by Statement of Position 98-1, Accounting for Costs of
          Computer Software Developed or Obtained for Internal Use, the Company
          capitalized $167,088 related to computer software developed or
          obtained for internal use in 2002. Depreciation has been computed by
          applying the straight-line method to each asset category over their
          estimated lives, as follows:

                                                                                  Balance at          Balance at
                         Category                         Estimated Life           June 30, 2003       June 30, 2002
----------------------------------------------------------------------------------------------------------------------
                                                                                    (Unaudited)
           Automobiles                                          5 years        $         36,198    $         14,718
           Warehouse and production equipment                  5-7 years                 63,682              62,939
           Computer software                                    3 years                 167,088             167,088
           Office and computer equipment                       3-7 years                481,335             241,323
           Leasehold improvements                             Lease term                 77,521              71,606
                                                                                ---------------     ---------------
           Total                                                                        825,824             557,674
           Less accumulated depreciation                                                304,905             153,753
                                                                                ---------------     ---------------
           Property and equipment, net                                         $        520,919    $        403,921
                                                                                ===============     ===============

   Impairment of Long-lived Assets

          Long-lived assets are reviewed for impairment whenever events or
          changes in circumstances indicate the carrying amount of an asset may
          not be recoverable. When events or changes in circumstances indicate
          an asset may not be recoverable, the Company estimates the future cash
          flows expected to result from the use of the asset. If the sum of the
          expected undiscounted future cash flows is less than the carrying
          value of the asset, an impairment loss is recognized. The impairment
          loss is recognized by measuring the difference between the carrying
          value of the assets and the estimated fair value of the assets. The
          Company's estimates of fair values are based on the best information
          available and require the use of estimates, judgments and projections
          as considered necessary. The actual results may vary significantly. No
          impairment losses have been recorded in 2003 and 2002.


    Goodwill

          Effective July 1, 2001, the Company adopted the provisions of
          Statement of Financial Accounting Standards No. 142, Goodwill and
          Other Intangible Assets (SFAS No. 142), which was issued by the
          Financial Accounting Standards Board (FASB) in July 2001. SFAS No. 142
          requires that an intangible asset that is acquired shall be initially
          recognized and measured based on its fair value. SFAS No. 142 also
          provides that goodwill should not be amortized, but shall be tested
          for impairment annually, or more frequently if circumstances indicate
          potential impairment, through a comparison of fair value to its
          carrying amount. The


                                      F-9



                                 Decorize, Inc.
                          Notes to Financial Statements
                       June 30, 2003 (Unaudited) and 2002



          Company has not recorded a charge as a result of the required
          impairment tests in 2003 and 2002, nor was amortization of goodwill
          required in any prior period.


    Income Taxes

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


    Revenue Recognition

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


    Advertising Costs

          The Company expenses advertising costs as they are incurred.
          Advertising expense for the years ended June 30, 2003 and 2002, was
          $38,161 and $349,086, respectively.

    Loss Per Share

          Basic and diluted loss per share are computed by dividing the net loss
          by the weighted-average number of common shares outstanding during the
          period and excludes the otherwise dilutive effects of outstanding
          stock options and warrants as their effects would be anti-dilutive.


    Stock-based Compensation

          At June 30, 2003 and 2002, the Company had a stock-based employee
          compensation plan, as more fully described in Note 11. The Company
          accounts for this plan under the recognition and measurement
          principles of APB Opinion No. 25, Accounting for Stock Issued to
          Employees, and related Interpretations. Stock-based employee
          compensation cost is reflected in net income, as some options granted
          under those plans had an exercise price below the market value of the
          underlying common stock on the grant date. The following table
          illustrates the effect on net income and earnings per share if the
          company had applied the fair value provisions of FASB Statement No.
          123, Accounting for Stock-Based Compensation, to stock-based employee
          compensation.

                                                                      Year Ended June 30
                                                               2003                         2002
                                                   ----------------------------------------------------------
                                                              (Unaudited)
            Net loss, as reported                        $        (1,152,405)         $        (2,016,842)
            Add stock-based employee
              compensation expense included in
              reported net income, net of  tax
              effects                                                 37,500                      734,390
            Less total stock-based employee
              compensation expense determined
              under the fair value based method                     (454,730)                  (1,254,590)
                                                          ------------------           ------------------
            Pro forma net loss                           $        (1,569,635)         $        (2,537,042)
                                                          ==================           ==================

            Loss per share

                                      F-10



                                 Decorize, Inc.
                          Notes to Financial Statements
                       June 30, 2003 (Unaudited) and 2002


            Basic - as reported                          $             (0.11)         $             (0.20)
                                                          ==================           ==================

            Basic - pro forma                            $             (0.14)         $             (0.25)
                                                          ==================           ==================

            Diluted - as reported                        $             (0.11)         $             (0.20)
                                                          ==================           ==================

            Diluted - pro forma                          $             (0.14)         $             (0.25)
                                                          ==================           ==================


          The Company adopted Financial Accounting Standards Board
          Interpretation No. 44 (FIN 44), Accounting for Certain Transactions
          Involving Stock Compensation, an Interpretation of APB No. 25,
          effective July 1, 2000. In accordance with FIN 44, when an award is
          modified to accelerate vesting, a new measurement date results (see
          Note 9).


    Financial Instruments

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


    Recent Accounting Standards

          In August 2001, the FASB issued SFAS No. 144, Accounting for the
          Impairment or Disposal of Long-lived Assets and for Long-lived Assets
          to Be Disposed Of, which resolves significant implementation issues
          that had evolved since the issuance of SFAS No. 121. SFAS No. 144 also
          establishes a single accounting model for long-lived assets to be
          disposed of by sale. The Company adopted SFAS No. 144 in the first
          quarter of fiscal 2003. Adoption of SFAS No. 144 had no impact on the
          Company's consolidated results of operations or financial position.

          The Company also adopted SFAS No. 148, Accounting for Stock-Based
          Compensation-Transition and Disclosure, in 2002. This standard amends
          the disclosure requirements of SFAS No. 123, requiring additional
          disclosures about stock-based compensation in the Company's financial
          statements. The adoption of SFAS No. 148 had no significant impact on
          the Company's results of operations or financial position.

Note 2:  Acquisition of Faith Walk Designs, Inc.

          On July 31, 2001, Faith Walk Designs, Inc. was merged with and into
          Step of Faith, Inc., a wholly owned subsidiary of Decorize, Inc. Step
          of Faith, Inc. then changed its name to Faith Walk Designs, Inc. Faith
          Walk has historically sourced its products in unpainted form from
          United States suppliers and added design finishing to them in Faith
          Walk's Houston, Texas manufacturing facility. However, under the
          Company's "direct ship" strategy, Faith Walk is creating designs and
          then sourcing finished products from the Company's suppliers in the
          far east and phasing out its domestic manufacturing operations.

          The purchase price was comprised of a 6.75% promissory note due July
          31, 2003 in the principal amount of $215,744, cash of $295,812 and
          161,443 shares in Decorize, Inc. common stock (valued at $510,000.)
          The acquisition was accounted for as a purchase, and the results of
          operations of Faith Walk Designs, Inc. have been included in the
          consolidated results of the Company since the acquisition date. The
          total cost of this acquisition, which was based on fair values of the
          net assets acquired is as follows:

           Accounts receivable                                $        327,467
           Inventories                                                 514,679
           Prepaid expenses and other                                   13,156
           Property and equipment                                       70,945
           Goodwill                                                  1,132,989


                                      F-11


                                 Decorize, Inc.
                          Notes to Financial Statements
                       June 30, 2003 (Unaudited) and 2002

           Accounts payable                                           (463,303)
           Accrued expenses                                             (5,709)
           Other liabilities                                           (81,492)
           Debt                                                       (487,177)
                                                               ---------------

           Total cost of net assets acquired                  $      1,021,555
                                                               ===============


        Pro forma results for the year ended June 30, 2002, would not be
        materially different from the actual results of operations due to the
        date of the Faith Walk acquisition, and are therefore not presented.

Note 3:  Inventories

                                                                   2003                2002
                                                            ---------------------------------------
                                                               (Unaudited)
           Raw materials                                     $        346,869   $        556,858
           Work-in-process                                             33,273              4,289
           Finished units                                           2,665,889          1,691,225
                                                              ---------------    ---------------

                                                             $      3,046,031   $      2,252,372
                                                              ===============    ===============


Note 4:  Debt

                                                                  2003                2002
                                                            ---------------------------------------
                                                               (Unaudited)
           Note payable, bank (A)                            $        103,557   $        132,499
           Convertible note payable, net of discount (B)              254,963            125,000
           Note payable, bank (C)                                          --            176,648
           Note payable, bank (D)                                          --            150,016
                                                              ---------------    ---------------
                                                                      358,520            584,163
           Less current maturities                                    285,900            462,970
                                                              ---------------    ---------------

                                                             $         72,620   $        121,193
                                                              ===============    ===============

(A)  Note payable to bank in monthly installments of $3,201, including interest
     at the bank's prime rate plus 1% (5.00% at June 30, 2003), through June
     2007, secured by inventories and accounts receivable.

(B)  The Company entered into a securities purchase agreement on February 26,
     2002 with NestUSA. Under this agreement the Company issued a convertible
     term note in the amount of $750,000 and warrants to purchase an aggregate
     of 300,000 shares of common stock. The note accrues interest at 6% and
     requires equal monthly installments of principal and interest of $68,423 to
     be paid on the last day of each calendar month beginning on March 31, 2003,
     through February 2004. Within one year the holder of this note may convert
     all or any portion of the outstanding balance of this note, including
     accrued but unpaid interest, into shares of common stock. The price at
     which the note is convertible is $2.50 per share. The warrants have an
     exercise price of $3.00 per share. If the Company does not obtain certain
     financing by December 31, 2002, the warrant exercise price will be reduced
     to $1.50 per share. The warrants are exercisable until February 26, 2005.

     The estimated fair value of the warrants and beneficial conversion terms
     related to this convertible note payable issued on February 26, 2002,
     amounted to $276,515 and $473,485, respectively and were recorded as a
     discount on the note. The discount is being amortized to interest expense
     over the two-year term of the convertible note payable using the interest
     method.


                                      F-12



     On January 1, 2003, the $750,000 convertible term note was changed by the
     issuance of an amended and restated convertible term note. The amended and
     restated note created new payment terms, extended the conversion option
     through December 31, 2003, and required issuance of three year warrants for
     an additional 216,000 shares of the Company's common stock at an exercise
     price of $2.80 per share that expire February 26, 2005. Interest accrues at
     the initial rate of 6.00% per annum, accrued and compounded annually.
     Principal and interest are payable monthly in the amount of $17,500
     commencing on January 31, 2003, continuing until January 31, 2004, when the
     monthly payments increase to $53,351 through December 31, 2004, at which
     time the note is to be fully paid. In April 2003, the note holder agreed to
     defer $5,000 of the monthly payments of principal for April, May and June,
     which shall be paid as additional $5,000 principal payments in July, August
     and September of 2003.

     As of January 1, 2003, the estimated fair values of the warrants and
     beneficial conversion terms related to this convertible note were
     recognized as additional discounts to the carrying value of the note of
     $113,126 and $199,374, respectively, with an offsetting credit to paid-in
     capital. The aggregate discount on the convertible note as of January 1,
     2003, was equal to its $750,000 face value. This discount is being
     amortized to interest expense over the revised note term using the interest
     method. During the years ended June 30, 2003 and 2002, $463,625 and
     $125,000 was charged to interest expense relating to the amortization of
     discounts on this convertible note.

(C)  Note payable to bank in monthly installments of $1,111 plus interest, at
     the bank's prime rate plus 1.25%, through September 2002, secured by
     substantially all assets. This note was repaid in full by a stockholder on
     behalf of the Company during 2003.

(D)  Note payable to bank in monthly installments of $10,000, plus interest at
     the bank's prime rate plus 1%, through September 2002, secured by
     substantially all assets. This note was repaid in full by a stockholder on
     behalf of the Company during 2003

       The aggregate annual maturities of long-term debt at June 30, 2003, are
as follows:

                                                                            Aggregate Principal
                            Year Ended June 30 (Unaudited)                      Maturities
           --------------------------------------------------------------------------------------

                 2004                                                         $        444,798
                 2005                                                                  387,597
                                                                               ---------------

                 Total aggregate principal payments                                    832,395

                 Less current portion                                                  285,900
                 Less unamortized portion of debt discount                             473,875
                                                                               ---------------

                 Long-term debt                                               $         72,620
                                                                               ===============


        Notes payable to stockholders at June 30, 2003, consists of the
following unsecured notes:

                                                                2003                2002
                                                       --------------------------------------
                                                         (Unaudited)
           Note payable (E)                            $        925,000   $        925,000
           Note payable (E)                                     375,000            375,000
           Note payable (F)                                     214,240            214,240
           Note payable (G)                                     288,770                 --
           Note payable (H)                                          --            131,463
                                                        ---------------    ---------------


                                      F-13



                                 Decorize, Inc.
                          Notes to Financial Statements
                       June 30, 2003 (Unaudited) and 2002




                                                       $      1,803,010   $      1,645,703
                                                        ===============    ===============


(E)            Stockholder notes payable, interest at prime plus 1%, due at
               maturity, July 31, 2004.

(F)            Stockholder note payable, interest at 6.75% due at maturity, July
               31, 2004.

(G)            Stockholder note payable bearing interest at 5.75%, due October
               25, 2005. This note was issued in exchange for the stockholder's
               payment of two notes payable to bank (see (C) and (D) above.

(H)            Stockholder note payable, interest at prime, due at maturity,
               July 31, 2004. This note was repaid in full during 2003.

     The prime rate of interest at June 30, 2003 was 4.00%.

     A bank loan agreement requires the Company to maintain certain covenants,
     the more important of which restricts the purchase of its stock and payment
     of dividends.

Note 5:  Leases

     The Company leases various plant, office and showroom facilities and
     certain other equipment under agreements accounted for as operating leases.
     These leases expire through April 2008 and certain leases contain renewal
     options.

     The Company also leases equipment under agreements accounted for as capital
     leases. The assets under capital leases are amortized on a straight-line
     basis over the term of the lease, and lease amortization is included in
     depreciation expense. Property and equipment included $214,998 and $87,970
     of assets under capital lease less $4,675 and $19,008 of accumulated
     depreciation at June 30, 2003 and 2002, respectively.

     Future minimum payments for noncancelable capital and operating leases with
     initial or remaining terms of one year or more at June 30, 2003, are as
     follows:

                                                                                 Operating           Capital
                                                                                  Leases              Leases
                                                                            ----------------------------------------

           2004                                                               $        360,653   $         71,298
           2005                                                                        340,424             57,980
           2006                                                                        309,505             38,117
           2007                                                                        251,511             14,118
           2008 and beyond                                                             256,468              5,911
                                                                               ---------------    ---------------

                                                                              $      1,518,561            187,424
                                                                               ===============

           Less amount representing interest                                                               41,090
                                                                                                  ---------------

           Present value of future minimum lease payments                                                 146,334

           Less current portion                                                                            49,200
                                                                                                  ---------------

                                                                                                 $         97,134
                                                                                                 ================


        Total rent expense incurred under operating leases amounted to $474,450
        and $365,227 for the year ended June 30, 2003 and 2002, respectively.

Note 6:  Stockholders' Equity


                                      F-14



                                 Decorize, Inc.
                          Notes to Financial Statements
                       June 30, 2003 (Unaudited) and 2002


        On August 4, 2001, the Decorize, Inc. board of directors authorized the
        issuance of up to 500,000 common stock purchase warrants to 11 former
        holders of Class B Units in Decorize.com, L.L.C. The warrants were
        exercisable for $2.00 per share. During 2002, 30,000 warrants were
        exercised for consideration of $60,000. The remaining 470,000 warrants
        expired June 30, 2003.

        In February 2002, the Company completed a private placement financing of
        $525,000 of restricted securities consisting of common stock and common
        stock warrants to accredited investors, which was exempt from
        registration pursuant to Rule 506 of Regulation D of the Securities Act.
        The Company sold the shares and warrants as Units at prices between
        $2.25 and $2.50 per Unit, with each Unit consisting of one share of our
        common stock and one five-year warrant to purchase one share of our
        common stock for $4.00 per share. The minimum purchase was 20,000 Units
        for $50,000. On February 28, 2002 the Company closed the private
        placement subscriptions for 220,000 Units at a total selling price of
        $525,000.

        Also during fiscal 2002, the Company issued 20,000 shares of common
        stock for aggregate proceeds of $50,000.

        The Company agreed to prepare a registration statement covering the
        common stock issued pursuant to sale of the Units and the associated
        warrants. The Company further pledged to use its best efforts to cause
        the registration statement for the common stock to be made effective by
        the SEC and to maintain the effectiveness of the registration statement
        until all such common stock has been resold by the initial owners.
        During 2003, the Company has deferred $159,172 of costs related to this
        registration, which are included in other assets on the consolidated
        balance sheet. These costs will offset additional paid-in capital when
        the registration becomes effective, or will be charged to expense in the
        event that the registration is abandoned.

        In December 2002, the Company completed a private placement of 785,714
        shares of common stock, and warrants to acquire an additional 785,714
        shares of common stock at an initial exercise price of $2.80 per share.
        Each purchaser received a warrant to purchase one share of common stock
        for each share of common stock purchased in the private placement. The
        private placement was completed in two separate closings on November 19,
        2002 and December 2, 2002. The aggregate purchase price for the common
        stock and the warrants was $1,100,000, based on a price per share of
        common stock equal to $1.40. As a cost of this private offering, the
        Company paid $60,000 and issued 17,857 shares of common stock, together
        with warrants for an aggregate of 171,428 shares of common stock, as
        brokerage fees, to parties acting on the Company's behalf in such
        placement. The warrants are exercisable at $1.40 per share for 42,857
        shares, at $2.80 per share for 42,857 shares, at $1.68 per share for
        42,857 shares and at $3.36 per share for 42,857 shares. All of the
        warrants have an exercise period of three years, except for the warrants
        exercisable for 42,857 shares at a price of $2.80 per share, which have
        an exercise period of five years.

Note 7:  Income Taxes

        The provision for income taxes includes these components:

                                                                                   2003                2002
                                                                            ----------------------------------------
                                                                                (Unaudited)
           Taxes currently payable                                            $             --   $             --
           Deferred income taxes                                                            --             32,700
                                                                               ---------------    ---------------

                  Income tax expense                                          $              0   $         32,700
                                                                               ===============    ===============


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

                                                                                   2003                2002
                                                                            ----------------------------------------
                                                                                (Unaudited)
           Computed at the statutory rate (34%)                               $       (391,206)  $       (674,608)
           Increase (decrease) resulting from



                                      F-15



                                 Decorize, Inc.
                          Notes to Financial Statements
                       June 30, 2003 (Unaudited) and 2002

               Nondeductible expenses                                                   23,646            258,648
               State income taxes                                                      (42,810)           (48,447)
               Changes in the deferred tax asset valuation allowance                   416,912            520,700
               Other                                                                    (6,542)           (23,593)
                                                                               ---------------    ---------------

                  Actual tax expense                                          $              0   $         32,700
                                                                               ===============    ===============


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

                                                                                   2003                2002
                                                                            ----------------------------------------
           Deferred tax assets                                                  (Unaudited)
               Allowance for doubtful accounts                                $        109,261   $         81,760
               Accrued compensated absences                                             20,154             20,154
               Inventories                                                              48,703             49,102
               Capital lease obligations                                                13,305             22,121
               Net operating loss carryforwards                                        822,880            403,615
               Charitable contribution carryforwards and other                           7,671              1,095
                                                                               ---------------    ---------------
                                                                                     1,021,974            577,847
                                                                               ---------------    ---------------
           Deferred tax liabilities
               Property and equipment                                                  (54,261)           (39,562)
               Prepaid expenses                                                        (30,101)           (17,585)
                                                                               ----------------   ---------------
                                                                                       (84,362)           (57,147)
                                                                               ---------------    ---------------

                  Net deferred tax asset before valuation allowance                    937,612            520,700
                                                                               ---------------    ---------------

           Valuation allowance
               Beginning balance                                                      (520,700)                --
               (Increase) decrease during the period                                  (416,912)          (520,700)
                                                                               ---------------    ---------------

               Ending balance                                                         (937,612)          (520,700)
                                                                               ---------------    ---------------

                  Net deferred tax asset                                      $              0   $              0
                                                                               ===============    ===============


        For the years ended June 30, 2003 and 2002, the Company recorded a
        valuation allowance for the full amount of the net deferred tax asset
        otherwise recorded due to the losses causing uncertainty as to the
        realizability of the deferred tax assets in future years. As of June 30,
        2003 and 2002, the Company had approximately $2,160,000 and $1,060,000,
        respectively, of net operating loss carryforwards available to offset
        future federal income taxes. The carryforwards expire in varying amounts
        from 2021 to 2023, if unused. Utilization of the net operating loss
        carryforwards may be subject to certain limitations as a result of
        changes in ownership of the Company.

     Note 8: Profit-sharing Plan


    Profit-sharing Plan

        The Company has a 401(k) profit-sharing plan covering substantially all
        employees. The Company's contributions to the plan are determined
        annually by the Board of Directors. There were no Company contributions
        to the plan for 2003 or 2002.

     Note 9: Employee Stock Plans


    Stock Option Plan



                                      F-16


                                 Decorize, Inc.
                          Notes to Financial Statements
                       June 30, 2003 (Unaudited) and 2002


        The Company has elected to follow APB Opinion No. 25, Accounting for
        Stock Issued to Employees, and related interpretations in accounting for
        its employee stock options rather than the alternative fair value
        accounting provided under SFAS No. 123.

        The Company has a stock options plan (1999 Equity Incentive Plan)
        providing for incentive and nonqualified stock options up to which
        3,000,000 shares of common stock are available to issuance to employees,
        officers, directors, and consultants. Options granted under this plan
        may expire as much as 10 years from the date of the grant at prices
        determined by the Board of Directors.

        A summary of the Company's stock option activity and related information
        for the years ended June 30, 2003 and 2002 is presented below:

                                                             2003
                                                          (Unaudited)                               2002
                                                                 Weighted Average                       Weighted Average
                                                   Shares         Exercise Price         Shares          Exercise Price
                                            -------------------------------------------------------------------------------

       Outstanding, beginning of year                  784,998         $ 1.97                 344,823      $  .99
           Granted                                     441,300           2.31                 454,700        2.73
           Exercised                                        --           --                        --        --
           Forfeited                                  (347,692)          2.01                 (14,525)       2.26
                                               ---------------                        ---------------

       Outstanding, end of year                        878,606           2.13                 784,998        1.97
                                               ===============                        ===============

       Options exercisable, end of year                476,637           1.86                 547,675        1.68


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

                                                                                   2003                2002
                                                                            ----------------------------------------
                                                                                (Unaudited)
           Dividend per share                                                 $            --    $            --
           Risk-free interest rate                                                      4.3%               4.4% to 6%
           Weighted average expected life of options                              4 to 5 years            5 to 7 years
           Expected volatility of the Company's common stock market
              price                                                                    1.0084           0.516 to 0.463

           Weighted average fair value of options granted during the year               $1.58                    $1.82


        The following table summarizes information about stock options under the
plan outstanding at June 30, 2003:

                                                     Options Outstanding                    Options Exercisable
                                             Weighted-Average
   Range of Exercise       Number         Remaining Contractual    Weighted Average      Number     Weighted Average
        Prices          Outstanding                Life             Exercise Price    Exercisable    Exercise Price
-----------------------------------------------------------------------------------------------------------------------

    $0.80 to $1.80           245,356            3.1 years               $0.93          223,354            $0.90
    $2.60 to $2.70           608,250            5.2 years               $2.53          228,283            $2.56
    $3.95 to $4.20            25,000            2.6 years               $4.00          25,000             $4.00



                                      F-17



                                 Decorize, Inc.
                          Notes to Financial Statements
                       June 30, 2003 (Unaudited) and 2002

        The Company granted stock options to certain executives, employees and
        directors on various dates during 2003 and 2002. The exercise price of
        these options granted is equal to the market price on the date of the
        grant. There is no recorded expense related to grants of these options.

        On January 16, 2002, the Company granted options to an executive with an
        exercise price below the market price on the date of the grant. The
        Company has recorded $87,500 of stock compensation expense related to
        these options in fiscal 2002.

        On October 3, 2001, the Board of Directors approved the acceleration of
        vesting of 339,498 options granted June 29, 2001, held by certain
        current employees, including officers of the Company. These options have
        a 7-year life and originally vested on certain performance requirements
        being met. With the Board approval these options became fully vested as
        of June 29, 2002. Other than the changes in the vesting period, there
        was no other change in the terms of the original options as granted.

        FIN 44 requires, among other things, that stock options, which have been
        modified after December 15, 1998, to accelerate vesting, be accounted
        for with a new measurement date. Compensation is measured based on the
        award's intrinsic value at the date of modification and expenses over
        the new expected vesting period. As a result of the application of FIN
        44, the Company recorded a non-cash stock compensation expense of
        $618,394 in fiscal 2002. For 2003 and future periods, the Company will
        not have to record any additional stock compensation related to these
        options as they became fully vested on June 29, 2002.

        In 2002, the Company issued a warrant to purchase 150,000 shares of its
        common stock to an outside consultant for services rendered. The warrant
        has an exercise price of $3.00 per share and expires in November 2004.

Note 10: Significant Estimates and Concentrations

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


    General Litigation

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


    Major Supplier

        The Company purchases approximately 37% of its principal products from
        one supplier. There are a limited number of suppliers for these
        products.

Note 11: Employment Agreements

        As part of the GuildMaster, Inc. merger, employment agreements were
        entered into with two officers of the Company. The agreements are
        effective through June 2004 and prohibit the officers from competing
        against the corporation for two years after voluntarily terminating
        employment. One of the officers voluntarily ended his employment
        subsequent to June 30, 2003 (see Note 13.)

        In connection with the acquisition of Faith Walk (see Note 2) the
        Company entered into an employment agreement with a former officer of
        Faith Walk, dated July 31, 2001, with a term of four years which
        includes a two-year covenant-not-to-compete clause in the event that the
        officer voluntarily terminates employment. Bonuses, if any, are to be
        paid at the sole discretion of the Board of Directors.

Note 12: Future Liquidity Needs




                                      F-18



                                 Decorize, Inc.
                          Notes to Financial Statements
                       June 30, 2003 (Unaudited) and 2002

        The Company has incurred losses and recurring negative cash flows since
        formation. Management is considering several alternatives for mitigating
        these conditions during the next year. These include establishing and
        expanding relationships with key customers, selective reductions of
        operating overhead and seeking additional sources of equity and debt
        financing.

Note 13: Subsequent Events

        On July 9, 2003, the Company established a $150,000 90-day bank line of
        credit personally guaranteed by an officer of the Company.

        On July 17, 2003, a promissory note for $150,000 bearing interest at
        prime, due October 11, 2003 was issued to an officer of the Company in
        exchange for a loan of $150,000 cash from the officer.

        An officer voluntarily ended his employment with the Company effective
        August 15, 2003. The Company has agreed to pay a total of approximately
        $170,000 in severance benefits to the officer between September 1, 2003,
        and December 31, 2004.


                                      F-19





                          INDEPENDENT AUDITORS' REPORT
            - - - - - - - - - - - - - - - - - - - - - - - - - - - - -


To the Board of Directors and Stockholders
Decorize, Inc. (Successor to Guidelocator.com, Inc.) and Subsidiary
Springfield, Missouri


We have audited the accompanying consolidated statements of operations, changes
in stockholders' equity, and cash flows of Decorize, Inc. and Subsidiary for the
six months ended June 30, 2001 and the period March 6, 2000 to December 31,
2000. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

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

In our opinion, the consolidated statements of operations, changes in
stockholders' equity and cash flows referred to above present fairly, in all
material respects, the results of operations and cash flows of Decorize, Inc.
and Subsidiary for the six months ended June 30, 2001 and the period March 6,
2000 to December 31, 2000, in conformity with accounting principles generally
accepted in the United States of America.

As discussed in note 2, the company restated its consolidated financial
statements to reclassify Decorize.com, L.L.C.'s accumulated deficit to paid-in
capital as of the date Decorize.com, L.L.C. was merged into Decorate, Inc. and
to correct the presentation of Guidelocator.com, Inc.'s (Guidelocator)
outstanding common stock prior to the merger with Decorate, Inc.


                              /s/  Kirkpatrick, Phillips & Miller, CPA's, P.C.


September 7, 2001, except for note 2 as to which the date is August 4, 2003
Springfield, Missouri



                                      F-20



       DECORIZE, INC. (SUCCESSOR TO GUIDELOCATOR.COM, INC.) AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS


                                                                         Period
                                                   Six Months Ended   March 6, 2000
                                                    June 30, 2001    December 31, 2000
                                                     (Restated)         (Restated)

          Sales                                      $   842,274    $   284,307

          Cost of sales                                  585,135        220,829
                                                     -----------    -----------

          Gross profit                                   257,139         63,478
                                                     -----------    -----------

          Operating expenses:
               Selling, general and administrative       994,566        654,866
               Depreciation and amortization              27,545         17,190
                                                     -----------    -----------
               Total operating expenses                1,022,111        672,056
                                                     -----------    -----------

          Net loss from operations                      (764,972)      (608,578)

          Other income (expense):
          Interest income                                  7,822         15,475
               Interest expense                           (4,699)          (485)
               Other                                     (80,000)       (72,293)
                                                     -----------    -----------
               Total other income (expense)              (76,877)       (57,303)
                                                     -----------    -----------

          Net loss before income taxes                  (841,849)      (665,881)

          Income tax benefit                             (32,700)          --
                                                     -----------   -----------

          Net loss                                   $  (809,149)   $  (665,881)
                                                     ===========    ===========

          Basic and diluted loss
                   per share                         $     (0.17)   $     (0.15)
                                                     ===========    ===========

          Basic and diluted weighted-average
                   shares outstanding                  4,701,206      4,396,672
                                                     ===========    ===========



                                      F-21



       DECORIZE, INC. (SUCCESSOR TO GUIDELOCATOR.COM, INC.) AND SUBSIDIARY
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
  PERIOD MARCH 6, 2000 TO DECEMBER 31, 2000 AND SIX MONTHS ENDED JUNE 30, 2001

                                   (RESTATED)

                                                                                          Receivables
                                                                                                 from
                                       Common Stock                                          Stockholders
                                                   Par       Paid-in      Accumulated            for
                                     Shares       Value      Capital         Deficit        Stock Issuance       Total
                                     ------       -----      -------         -------        --------------       ---------
Net proceeds from issuance of
    common stock                      4,396,672    $4,397    $1,770,603            $  --         $ (330,000)   $1,445,000

Net loss                                      -         -             -        (665,881)                   -    (665,881)
                                      ---------    ------    ----------       ----------         -----------    ---------
Balances, December 31, 2000           4,396,672     4,397     1,770,603        (665,881)           (330,000)      779,119

Net loss                                      -         -             -        (809,149)                   -    (809,149)

Exercise of stock options               109,864       110        41,555                -                   -       41,665

Collection of receivables for
    stock issuance                            -         -             -                -             330,000      330,000

Merger of Decorize.com,
    L.L.C., into Decorate, Inc.
                                              -         -   (1,296,375)        1,296,375                   -            -
Issuance of common stock for
    acquisition of
    Guildmaster, Inc.                 3,193,464     3,193     2,049,284                -                   -    2,052,477

Net proceeds from issuance of
    common stock                        876,000       876       651,118                -                   -      651,994

Issuance of common stock from
    merger with Guidelocator
                                      1,424,000     1,424       (1,424)                -                   -            -
                                      ---------     -----   -----------        ---------                ----    ---------


Balances, June 30, 2001              10,000,000  $ 10,000    $3,214,761      $ (178,655)                $  _   $3,046,106
                                     ==========  ========    ==========      ===========                ====   ==========


The accompanying notes are an integral part of the consolidated financial
statements.



                                      F-22



       DECORIZE, INC. (SUCCESSOR TO GUIDELOCATOR.COM, INC.) AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                          Period
                                                                    Six Months Ended  March 6, 2000 to
                                                                      June 30, 2001   December 31, 2000
                                                                      -------------   ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
          Net loss                                                     $  (809,149)   $  (665,881)
          Adjustments to reconcile net loss to cash provided
          by operating activities:
                   Depreciation                                             27,756         17,190
                   Common stock issued for services                           --           50,000
                   Loss on abandonment of property
                   and equipment                                              --           72,293
                   Exercise of stock options                                41,665           --
          Changes in certain assets and liabilities:
                   Receivables                                            (140,799)       (22,970)
                   Inventories                                            (146,793)       (61,055)
                   Prepaid expenses and other                              (12,825)      (125,445)
                   Deferred tax benefits                                   (32,700)          --
                   Accounts payable                                         52,627         86,679
                   Accrued expenses                                        170,292         35,710
                                                                       -----------    -----------
                       Net cash used in operating activities              (849,926)      (613,479)
                                                                       -----------    -----------

          CASH FLOWS FROM INVESTING ACTIVITIES:
                   Acquisition of property and equipment                   (29,824)      (222,448)
                   Other receivables                                       (69,537)          --
                                                                                      -----------
                   Acquisition of Guildmaster, Inc., net of cash               300
                                                                       -----------

                            Net cash used in investing activities          (99,061)      (222,448)
                                                                       -----------    -----------

          CASH FLOWS FROM FINANCING ACTIVITIES:
          Principal payments under capital lease obligation                 (1,568)        (2,108)
                   Proceeds from receivables  for issuance of
                     common stock                                          330,000           --
                   Issuance of common stock, net of related expenses       152,770      1,395,000
                                                                       -----------    -----------
                            Net cash from financing activities             481,202      1,392,892
                                                                       -----------    -----------
                            Net increase (decrease) in cash
                            and cash equivalents                          (467,785)       556,965

          CASH AND CASH EQUIVALENTS, beginning of period                   556,965           --
                                                                       -----------    -----------
          CASH AND CASH EQUIVALENTS, end of period                     $    89,180    $   556,965
                                                                       ===========    ===========

          SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

          CASH PAID FOR INTEREST                                       $     4,699    $       485
                                                                       ===========    ===========

          NON-CASH INVESTING AND FINANCING ACTIVITIES:

During the period March 6, 2000 to December 31, 2000, the Company entered into a
capital lease for a phone system. The Company recorded the phone system and
corresponding lease obligation at its market value of $10,204. The Company
issued common stock in exchange for $50,000 of services during the same period.
The Company acquired Guildmaster, Inc. on June 18, 2001. See Note 3 for details
of that transaction. On June 29, 2001 the Company issued 876,000 shares of
common stock for $230,000 and a receivable of $470,000 (See Note 11).

The accompanying notes are an integral part of the consolidated
financial statements.


                                      F-23



       DECORIZE, INC. (SUCCESSOR TO GUIDELOCATOR.COM, INC.) AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

       Nature of business - The Company is a manufacturer and wholesaler of
           imported home furnishings and home accent items. The consolidated
           financial statements include the accounts of the Company's
           wholly-owned subsidiary, Decorate, Inc. and Decorate, Inc.'s
           wholly-owned subsidiary, Guildmaster, Inc.

       Principles of consolidation - The Company is a holding company whose
           assets consist of its investment in its subsidiary. The business of
           the consolidated group is conducted through Decorate, Inc. and
           Guildmaster, Inc. The results of companies acquired are included in
           the consolidated financial statements from the effective date of
           acquisition (see Note 3). All significant intercompany balances and
           transactions have been eliminated in consolidation.

       Inventories - Inventories have been valued at the lower of cost or
           market, as determined by the first-in first-out (FIFO) method.

       Depreciation - Depreciation has been computed by applying the
           straight-line method over the following estimated lives:

          Category                           Estimated Life
          ---------------------------       -----------------
          Automobiles                                 5 years
          Warehouse and production equipment          7 years
          Developed technology                        3 years
          Office and computer equipment             3-7 years
          Leasehold improvements                  10-20 years

           Depreciation charged to expense amounted to $27,756 and $17,190 for
           the six months ended June 30, 2001 and the period March 6, 2000 to
           December 31, 2000, respectively.

       Goodwill - Goodwill has been recorded by the Company in connection with
           the acquisition of the net assets of Guildmaster, Inc., which is
           discussed further in Note (3). Goodwill, which represents the excess
           of the purchase price over the estimated market value of net assets
           acquired, is being amortized on a straight-line basis over fifteen
           years. Amortization expense was not charged to operations for the
           period from the merger date to June 30, 2001, because the amount was
           not material to the consolidated financial statements.

       Income taxes - Deferred tax liabilities and assets are recognized for the
              expected future tax consequences of events that have been included
              in the consolidated financial statements or tax returns. Deferred
              tax liabilities and assets are determined based on the differences
              between the consolidated financial statements and the tax basis of
              assets and liabilities, using tax rates in effect for the years in
              which the differences are expected to reverse. A valuation
              allowance is provided to offset any net deferred tax assets if,
              based upon the available evidence, it is more likely than not that
              some or all of the deferred tax assets will not be realized.

              As discussed in Note 3, Decorate, Inc. merged with Decorize.com,
              L.L.C. on June 18, 2001. Because Decorize.com, L.L.C. operated as
              a limited liability company, any net losses incurred between March
              6, 2000 and June 18, 2001 will be passed through to each member of
              the limited liability company with no income tax benefit resulting
              to the Company.



                                      F-24


       DECORIZE, INC. (SUCCESSOR TO GUIDELOCATOR.COM, INC.) AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

       Accounting estimates - Management uses estimates and assumptions in
              preparing these financial statements in accordance with generally
              accepted accounting principles. Those estimates and assumptions
              affect the disclosure of contingent assets and liabilities, and
              the reported revenues and expenses. Actual results could vary from
              the estimates that were used.

       Consolidated statements of cash flows - For purposes of the Consolidated
              Statements of Cash Flows, cash equivalents include money market
              funds and all highly liquid debt instruments with maturities of
              three months or less at the date of their acquisition.

       Advertising costs - The Company expenses non-direct response advertising
              costs as they are incurred.

       Revenue Recognition - Revenue from the sale of the Company's products is
              recognized as products are delivered to customers.

       Loss per share - Basic loss per share excludes dilution and is computed
              by dividing net loss available to stockholders by the
              weighted-average number of shares outstanding during the period.
              Diluted loss per share reflects the potential dilution that could
              occur if securities or other contracts to issue shares were
              exercised or resulted in the issuance of shares that would share
              in the losses of the Company. Dilutive potential shares are added
              to weighted-average shares used to compute basic loss per share.

       New accounting standards - In July 2001, the Financial Accounting
              Standards Board issued SFAS No. 141, "Business Combinations" and
              SFAS No. 142, "Goodwill and other Intangible Assets." SFAS No. 141
              requires the use of the purchase method of accounting for all
              business combinations initiated after June 30, 2001, thereby
              eliminating the pooling-of-interests method. SFAS No. 141 also
              provides new criteria that determine whether an acquired
              intangible asset should be recognized separately from goodwill.
              SFAS No. 142 provides guidance on how to account for goodwill and
              intangible assets after a business combination has been completed.
              Under SFAS No. 142 goodwill and certain other intangible assets
              will no longer be amortized and will be tested for impairment at
              least annually. Intangible assets with a definite life will
              continue to be amortized. The nonamortization and impairment rules
              will apply to existing goodwill and intangible assets beginning
              with the fiscal years starting after December 15, 2001. Early
              adoption is permitted for entities with fiscal years beginning
              after March 15, 2001. The Company believes that the adoption of
              SFAS No. 141 and 142 will have an impact on the results of
              operations and the financial condition of the Company. The
              significance of the impact has not been determined.

(2)    RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS

              In connection with our filing of Form SB-2 with the Securities and
              Exchange Commission (SEC), the SEC has requested the Company
              restate the 2001 and 2000 financial statements. The restatement
              reflects adjustments which are corrections of errors made in the
              application of U.S. generally accepted accounting principles
              (GAAP) and includes (i) the reclassification of Decorize.com,
              L.L.C.'s accumulated deficit to paid-in capital as of the date
              Decorize.com, L.L.C. was merged into Decorate, Inc. and (ii) the
              presentation of Guidelocator's outstanding common stock prior to
              the merger with Decorate, Inc.


                                      F-25



       DECORIZE, INC. (SUCCESSOR TO GUIDELOCATOR.COM, INC.) AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(2)    RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

       (i)  Reclassification of Decorize.com, L.L.C.'s accumulated deficit

              Decorate, Inc. was incorporated on March 28, 2001 for the sole
              purpose of merging with Decorize.com, L.L.C. to change the
              formation of Decorize.com from a L.L.C. to a corporation. On June
              18, 2001 Decorize.com, L.L.C. merged into Decorate, Inc. The same
              individuals owned the two entities, therefore the merger was
              accounted for as a recapitalization of Decorize.com, L.L.C. The
              ending accumulated deficit of Decorize.com, L.L.C. was originally
              reported as the beginning accumulated deficit of Decorate, Inc.
              The restatement closed the accumulated deficit of Decorize.com,
              L.L.C. on June 18, 2001 into paid-in capital. The accumulated
              deficit amounted to $1,296,375. This change is reflected in the
              consolidated statements of changes in stockholders' equity. After
              this change, paid-in capital is $3,214,761 instead of $4,511,136
              and accumulated deficit is $(178,655) instead of $(1,475,030) at
              June 30, 2001. This change had no effect on total assets, total
              liabilities, total stockholders' equity, net loss or loss per
              share.

       (ii)  Presentation of Guidelocator.com, Inc.'s outstanding common stock

              Decorate, Inc. was acquired on June 29, 2001, by Guidelocator, a
              public shell company with no assets or operations. Because
              Guidelocator was a public shell company, the transaction was
              accounted for as a recapitalization, rather than as a business
              combination. Immediately before the transaction on June 29, 2001
              Guidelocator had 1,424,000 shares of common stock outstanding.
              These shares continued to be outstanding after the transaction
              with Decorate, Inc. Since Guidelocator had no operations, assets
              or liabilities, Guidelocator's outstanding common stock was
              treated as if it had been outstanding since Decorate, Inc. and its
              predecessors were organized. The restatement changes this
              presentation to show Guidelocator's outstanding common stock as if
              it were issued on June 29, 2001. Outstanding common stock reported
              as of December 31, 2000 has been reduced by 1,424,000 shares. This
              change had the following effects on the consolidated financial
              statements:

                                                            As Originally         As
                                                               Reported        Restated
                                                               --------        --------
          Shares of common stock outstanding at
               December 31, 2000                               5,820,672      4,396,672
          Common stock par value at December 31, 2000        $     5,821    $     4,397
          Paid-in Capital at December 31, 2000               $ 1,769,179    $ 1,770,603
          Loss per share - six months ended June 30, 2001    $     (0.13)   $     (0.17)
          Weighted-average shares outstanding - six months
            ended June 30, 2001                                6,117,338      4,701,206
          Loss per share - period March 6, 2000 to
            December 31, 2000                                $     (0.11)   $     (0.15)
          Weighted-average shares outstanding - period
            March 6, 2000 to December 31, 2000                 5,820,672      4,396,672

              This change had no effect on total assets, total liabilities,
              total stockholders' equity or net loss.


                                      F-26




       DECORIZE, INC. (SUCCESSOR TO GUIDELOCATOR.COM, INC.) AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(3)    MERGERS AND ACQUISITIONS

          Far East Direct, L.L.C., a Missouri limited liability company was
          formed on February 7, 2000. This company began operating on March 6,
          2000. On March 29, 2000, Far East Direct, L.L.C. changed its name to
          Decorize.com, L.L.C. On March 28, 2001, Decorate, Inc. was
          incorporated as a Missouri corporation for the purpose of changing the
          legal form of Decorize.com, L.L.C. Decorize.com, L.L.C. was merged
          into Decorate, Inc. on June 18, 2001. Since the two entities were
          owned by the same individuals, no adjustments to the carrying value of
          assets or liabilities were recorded.

          Decorate, Inc. was acquired on June 29, 2001, by Guidelocator, a Texas
          corporation. Guidelocator was a public shell company with no assets or
          operations. Guidelocator issued 7,700,000 shares (77% of the total
          outstanding shares after the acquisition) of its common stock in
          exchange for all of the outstanding shares of Decorate, Inc. common
          stock. After the acquisition, the shareholders of Decorate, Inc. held
          the majority of the outstanding common stock of Guidelocator. Because
          Guidelocator was a public shell company, the transaction was accounted
          for as a recapitalization, rather than as a business combination. On
          July 6, 2001, Guidelocator merged into Decorize, Inc., a Delaware
          corporation and wholly-owned subsidiary of Guidelocator formed solely
          for that purpose. Because this merger occurred after June 30, 2001,
          stockholders' equity reflected in the consolidated statements of
          changes in stockholders' equity is that of Guidelocator.

          At the same time Decorate, Inc. was incorporated, JB Express, Inc., a
          wholly-owned subsidiary of Decorate, Inc. was formed as a Missouri
          corporation. JB Express, Inc. merged with Guildmaster, Inc. on June
          18, 2001, and then changed its name to Guildmaster, Inc. The
          acquisition of Guildmaster, Inc. was accounted for as a purchase, and
          the results of operations of Guildmaster, Inc. have been included in
          the consolidated results of the Company since the acquisition date.
          Guildmaster, Inc. incurred a net loss of $3,941 for the period June
          18, 2001, to June 30, 2001.

          The purchase price was comprised of 223,210 shares of common stock
          (subsequently exchanged for 3,193,464 shares of the Company's common
          stock) valued at $2,052,477, a $375,000 promissory note to selling
          stockholders, and acquisition costs. Prior to the acquisition, two
          individuals who together controlled 47.26% of Decorate, Inc.'s
          outstanding common stock and represented a minority of the Decorate,
          Inc. board owned all of Guildmaster's outstanding common stock. The
          $2,500,000 cost of the acquisition was allocated based on the
          following fair market values of the net assets acquired:

                 Cash                                              $    300
                 Accounts receivables                               437,984
                 Other receivables                                   43,299
                 Inventories                                      1,225,262
                 Prepaid expenses and
                   Other                                             60,737
                 Property and equipment                             122,821
                 Goodwill                                         2,125,949
                 Accounts payable                                   (41,140)
                 Accrued expenses                                  (122,680)
                 Other liabilities                                 (268,160)
                 Debt                                              (159,372)
                 Notes payable to
                   Stockholders                                    (925,000)
                                                          -------------------
                   Total cost of net
                     assets acquired                            $ 2,500,000
                                                          ===================




                                      F-27


       DECORIZE, INC. (SUCCESSOR TO GUIDELOCATOR.COM, INC.) AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

   (3)   MERGERS AND ACQUISITION (CONTINUED)

       The following unaudited pro forma information summarizes the results of
       operations for the periods indicated as if the acquisition had been
       completed as of the beginning of the periods presented. The pro forma
       data gives effect to actual operating results prior to the acquisition.
       Adjustments to interest expense, goodwill amortization and income taxes
       are reflected in the pro forma data. No effect has been given to cost
       reductions or operating synergies in this presentation. These pro forma
       amounts do not purport to be indicative of the results that would have
       actually been obtained if the acquisition had occurred as of the
       beginning of the periods presented or that may be obtained in the future.

                                                       Six Months          Period
                                                          Ended          March 6, 2000
                                                       June 30, 2001  to December 31, 2000
                                                     ---------------- --------------------
                                                        (Restated)        (Restated)

                         Sales                       $    2,984,671     $  4,806,617
                         Cost of sales                    1,932,197        3,010,577
                                                          ---------        ---------
                         Gross profit                      1,052,474       1,796,040
                         Operating expenses                1,930,879       2,013,357
                                                      --------------       ---------
                         Net loss from operations           (878,405)      (217,317)
                         Other income (expense)             (148,728)      (188,721)
                         Net loss before income taxes     (1,027,133)      (406,038)
                         Income tax benefit                 (184,884)       (73,087)
                                                      --------------     -----------
                         Net loss                     $     (842,249)    $ (332,951)
                                                      ===============    ===========

                         Basic and diluted
                           loss per share             $        (0.11)    $    (0.04)
                                                      ===============    ===========


     (4)  LEASES

          Decorate, Inc. leases two offices in Springfield, Missouri. The leases
          on the office space are accounted for as operating leases in
          accordance with SFAS No. 13. One lease has a term of 3 years expiring
          on April 30, 2003 and a monthly rental of $860. The other lease has a
          term of 2.5 years expiring on April 30, 2003 and a monthly rental of
          $1,100.

          Guildmaster, Inc., leases a plant and office facility in Springfield,
          Missouri, a showroom in High Point, North Carolina, and a showroom in
          Atlanta, Georgia. The leases are accounted for as operating leases in
          accordance with SFAS No. 13. The plant and office facility lease has a
          term of 5 years expiring November 30, 2001, with three five-year
          renewal options and monthly rental of $8,766. The High Point, North
          Carolina lease has a term of five years expiring April 30, 2002, and
          monthly rental of $8,235. The Atlanta, Georgia showroom is leased on a
          month-to-month basis with monthly rental of $773.

          The Company leases equipment, which meets the criteria of capital
          leases as defined by SFAS No. 13. Accordingly, minimum rentals have
          been capitalized, and the related asset and obligation have been
          recorded at their fair market value at the inception of the lease. The
          asset is amortized on a straight-line basis over the term of the
          lease, and interest is accrued on the basis of the outstanding lease
          obligation.




                                      F-28




       DECORIZE, INC. (SUCCESSOR TO GUIDELOCATOR.COM, INC.) AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(4)    LEASES (CONTINUED)

       Future minimum payments for noncancelable leases with initial or
       remaining terms of one year or more at June 30, 2001, are as follows:


                                                                        Capital            Operating
                Year Ended                                              Leases               Leases
                -----------                                          ------------         -------------
                June 30, 2002                                        $      3,941         $     149,700
              June 30, 2003                                                 3,613                19,600
                                                                     ------------         -------------
              Total minimum lease payments                                  7,554         $     169,300
                                                                                          =============
              Less amount representing interest                             1,026
                                                                     ------------
              Present value of net obligation                               6,528
              Less current maturities                                       3,400
                                                                     ------------
              Non-current obligations
                under capital leases                                 $      3,128
                                                                     ============

       Total rent expense incurred under operating leases amounted to $22,470
       and $13,128 for the six months ended June 30, 2001 and the period March
       6, 2000 to December 31, 2000, respectively.

(5)    ADVERTISING COSTS

       The Company incurred $74,601 and $145,246 in non-direct response
       advertising costs for the six months ended June 30, 2001 and the period
       March 6, 2000 to December 31, 2000, respectively. The company incurred no
       direct response advertising costs during the periods.

(6)    CONCENTRATIONS OF CREDIT RISK

       The Company has established a relationship with one major customer who
       accounted for 20.5% of the Company's sales in the six months ended June 30,
       2001. This customer accounted for 93.4% of the Company's sales for the
       period March 6, 2000 to December 31, 2000.

       The Company extends unsecured credit to several exclusive private label
       customers under approved credit terms and arrangements.

(7)    RETIREMENT PLAN

       Effective January 1994, Guildmaster, Inc. adopted a 401(K) plan covering
       all full-time employees. Contributions to the plan for any fiscal year, as
       determined by the Board of Directors, are discretionary but, in no event,
       will exceed 15 percent of the annual aggregate salaries of those
       employees eligible for participation in the plan plus carryovers from prior
       years. No employer amounts were contributed to the plan for any period
       presented in these consolidated financial statements.



                                      F-29





       DECORIZE, INC. (SUCCESSOR TO GUIDELOCATOR.COM, INC.) AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 (8)   INCOME TAXES

          The provision for income tax expense is as follows:

                                                            Six months ended
                                                              June 30, 2001
              Current                                         -------------
              Deferred                                        $     (32,700)
                                                              ---------------
                   Total                                      $     (32,700)
                                                              ===============

          The provision for income taxes differs from that computed at the
          statutory corporate rate of 34% as follows:
                                                            Six months ended
                                                              June 30, 2001
                                                              -------------
              Tax at statutory rate                       $   (286,229)
              Increase (decrease) in taxes resulting from:
              Losses passed through
                to Decorize.com, L.L.C.
                members                                            262,868
              Non-deductible expenses                                  265
              Other                                                 (9,604)
                                                               ------------
                Provision for income taxes                    $    (32,700)
                                                               ============

          As of June 30, 2001, the Company had approximately $66,000 of a net
          operating loss carryforward. The loss carryforward will expire in the
          year ending June 30, 2021


(9)    LOSS PER SHARE - RESTATED

          The following information shows the amounts used in computing loss per
          share and the effect on income and the weighted-average number of
          shares of dilutive potential common stock. The amounts in the income
          columns represent the numerator and the amounts in the shares columns
          represent the denominator.




                                      F-30



       DECORIZE, INC. (SUCCESSOR TO GUIDELOCATOR.COM, INC.) AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(9)   LOSS PER SHARE - RESTATED (CONTINUED)


                                                                       Period
                               Six Months Ended                       March 6, 2000 to
                               ----------------
                                 June 30, 2001                       December 31, 2000
                     -----------------------------------------------------------------------------
Basic loss                                   Per Share                          Per Share
  per share:         Loss             Shares       Amt.         Loss       Shares      Amt.
                     ----             ------       ----         ----       ------      ----
Loss available
to Common
Stockholders          $ (809,149)    4,701,206     (.17)      $(665,881)  4,396,672  $ (.15)
                     ---------------------------------------------------------------------------

Effect of
  dilutive securities
                     -             -                       -             -
                     ---------------------------           --------------------------

Diluted loss per
  share:
Loss available to
  Stockholders plus
  stock options       $ (809,149)   4,701,206      (.17)       $(665,881)  4,396,672  $ (.15)
                     ===========================================================================

       The computation of diluted loss per share excludes the effect of the
       assumed exercise of 344,823 stock options that were outstanding as of
       June 30, 2001 because the effect would be anti-dilutive.

(10)   STOCK OPTION PLAN

       The Company has elected to follow APB Opinion No. 25, accounting for
       stock issued to employees, and related interpretations in accounting for
       its employee stock options because, as described below, the alternative
       fair value accounting provided under SFAS No. 123 requires use of option
       valuation models that were not developed for use in valuing employee
       stock options.

       The Company granted stock options to employees on June 29, 2001 under the
       Company's 1999 equity incentive plan. The grants were done with the
       knowledge that Guidelocator would merge with Decorize, Inc. on July 6,
       2001. The merger created additional authorized but unissued common stock.
       The 1999 equity incentive plan authorizes the grant of options to key
       employees and consultants of the Company of up to 3,000,000 shares of the
       Company's common stock. No options were granted during the period from
       March 6, 2000 to December 31, 2000.


                                      F-31



       DECORIZE, INC. (SUCCESSOR TO GUIDELOCATOR.COM, INC.) AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 (10)  STOCK OPTION PLAN (CONTINUED)

       A summary of the Company's stock option activity for the six months ended
June 30, 2001 follows:

                                                                                 Weighted-
                                                                                     average
                                                       Options                   Exercise price
                                                    ---------------           ---------------------

                  Outstanding - beginning

                    of period                                   -               $          -

                  Granted                                 454,687                      .74934

                  Exercised                               109,864                      .00376

                  Forfeited                                     -                           -
                                                    ---------------
                  Outstanding - end

                    of period                             344,823                      .98690
                                                    ===============

                  Exercisable at end
                    of period                                  -                            -

                  Weighted-average fair
                    value  of options
                    granted during the
                    Period                                   0.23
                                                    ===============

          The exercise prices of the options granted on June 29, 2001 range from
          $.80 to $1.88. The options have a 7-year life and vest based on
          certain performance requirements being met. The vesting periods are
          estimated to range from 6 months to 36 months.

          Pro forma information regarding net loss and loss per share is
          required by SFAS No. 123 using the fair value method of that
          statement. The fair value of each option was estimated on the date of
          grant using the Black-Scholes option-pricing model. The following
          weighted-average assumptions were used for the six months ended June
          30, 2001:

                     Expected stock price volatility                                    46.3%
                     Risk free interest rate                                             6.0%
                     Expected annual dividend yield per share                            ----
                     Expected life of options                                       7.0 years

          The Black-Scholes option valuation model was developed for use in
          estimating the fair value of traded options, which have no vesting
          restrictions and are fully transferable. In addition, option valuation
          models require the input of highly subjective assumptions, including
          the expected stock price volatility. Because the Company's employee
          stock options have characteristics significantly different from those
          of traded options and because changes in the subjective input
          assumptions can materially affect the fair value estimate, in
          management's opinion, the existing models do not necessarily provide a
          reliable single measure of the fair value of its employee stock
          options.

          For purposes of pro forma disclosures the pro forma results for the
          period from January 1, 2001 to June 30, 2001 would not have been
          materially different than actual results.


                                      F-32




       DECORIZE, INC. (SUCCESSOR TO GUIDELOCATOR.COM, INC.) AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(10)   STOCK OPTION PLAN (CONTINUED)

       In February 2001, Decorize.com, L.L.C. issued a total of 41,257 unit
       options to ten employees. These options were all exercised in February
       2001 at a price of $.01 per unit. The units were ultimately converted
       into 109,864 shares of the Company's stock.

(11)   RELATED PARTY TRANSACTIONS

       Notes payable to stockholders consists of:

                                                                    June 30, 2001

                  Prime + 1%; unsecured; interest
                    due at maturity;  matures
                    June 15, 2002                                 $        925,000

                  Prime + 1%; unsecured; interest
                    due at maturity;  matures
                    June 15, 2002                                          375,000
                                                                 -------------------

                                                                  $      1,300,000
                                                                 ===================



          Through a private offering of stock, 876,000 shares of the Company's
          common stock were sold for $700,000 on June 29, 2001. As of June 30,
          2001, $230,000 of the proceeds had been received. The remaining
          $470,000 was received in July 2001.

          A stockholder of the company owed the company $39,537 as of June 30,
          2001, for expenses paid by the Company.

(12)   RESTRICTIONS IN LOAN AGREEMENTS

          A bank loan agreement requires Guildmaster, Inc. to maintain certain
          covenants, the more important of which restricts the purchase of its
          stock and the payment of dividends.

          Guildmaster, Inc. has obtained waivers from the bank on all known
          events of default. Therefore, the Company is considered to be in
          compliance with all terms of the loan agreement at June 30, 2001.

(13)   DEFERRED COMPENSATION

          In January 2001 the Company entered into a deferred compensation
          agreement with one of its officers. The Company is deferring $40,000
          of the officer's salary for the period January 1, 2001 to December 31,
          2001. The agreement calls for the payment of this amount in January
          2002. The Company has recorded a $20,000 liability for this agreement
          as of June 30, 2001.

(14)   EMPLOYMENT AGREEMENTS

          As part of the Guildmaster, Inc. acquisition, employment agreements
          were entered into with two officers of the Company. The agreements are
          effective for a three-year period and contain a
          covenant-not-to-compete clause that prohibits the officers from
          competing against the corporation for two years after the officers
          voluntarily


                                      F-33



     terminate their employment. The agreements also state that if the officers
     are employed by the Company as of the second anniversary date
     (determination date) of the agreements the officers shall be issued shares
     of common stock of the Company based upon pre-tax profits of Guildmaster.
     The following table shows the market value of the shares to be issued:

                      Cumulative Pre-tax Profits             Market Value of
                      of Guildmaster, Inc. as of           Bonus Shares to be
                          Determination Date               Issued to Employee
                  ------------------------------------  --------------------------

                  Less than $700,000                           $              -
                  $700,000 - $899,999                                     100,000
                  $900,000 - $1,099,999                                   150,000
                  $1,100,000 or more                                      250,000


(15)   SUBSEQUENT EVENTS

     On July 27, 2001, Decorate, Inc. was merged into Decorize, Inc. Upon the
     completion of this merger, the assets and liabilities of the former
     Decorize.com, L.L.C. were held directly by Decorize, Inc. and Decorize,
     Inc. had one wholly-owned subsidiary, Guildmaster, Inc.

     On July 31, 2001, Faith Walk Designs, Inc., a Texas corporation, was merged
     with and into Step of Faith, Inc., a Missouri corporation and a
     wholly-owned subsidiary of Decorize, Inc. Step of Faith, Inc. then changed
     its name to Faith Walk Designs, Inc. The consideration given for Faith Walk
     Designs, Inc. was a 6.75% promissory note due March 31, 2002 in the
     principal amount of $215,744, cash of $284,256 and $510,000 in Decorize,
     Inc. common stock for a total value of $1,010,000. The number of shares of
     Decorize, Inc. stock was determined by dividing the average last sale price
     of such stock during the 30-day period following the closing date. Faith
     Walk Designs, Inc. is a manufacturer of premium, hand painted furniture and
     home accents.

     In connection with the acquisition of Faith Walk Designs, Inc., Decorize,
     Inc. entered into a four-year employment agreement with an officer of Faith
     Walk Designs, Inc. Pursuant to the agreement, the officer will serve as a
     vice president of Decorize, Inc. and be responsible for its product
     development. In addition, the officer was appointed a director of Decorize,
     Inc. to serve until the next annual meeting of stockholders.

     On August 4, 2001, the Decorize, Inc. board of directors authorized the
     issuance of up to 500,000 common stock purchase warrants to 11 former
     holders of Class B Units in Decorize.com, L.L.C. in exchange for up to
     $50,000 and the waiver by such holders of any claims they might have
     against Decorize, Inc. The warrants will be exercisable for $2.00 per share
     until June 30, 2003.

     In August 2001, the Company began offering up to $5,000,000 of restricted
     securities to accredited investors through a private placement offering.
     The offering is exempt from registration pursuant to Rule 506 of Regulation
     D of the Securities Act. The Company is offering to sell up to an aggregate
     of 2,000,000 Units for $2.50 per Unit. Each Unit consists of one share of
     the Company's common stock and one five-year warrant to purchase one share
     of the Company's common stock for $4.00 per share. The minimum purchase is
     20,000 Units at $50,000. The Company has agreed to prepare a registration
     statement within 180 days of the initial sale of the Units covering the
     common stock issued pursuant to sale of the Units and the associated
     warrants.


                                      F-34



                                     PART II
                    INDEMNIFICATION OF DIRECTORS AND OFFICERS

     Our Certificate of Incorporation contains no specific previsions concerning
     indemnification of officers and directors. Our Bylaws provide that Decorize
     shall have the power to indemnify any person who is a party to any
     threatened, pending or completed action by reason of the fact he is (or
     was) an officer or director of Decorize, for his or her expenses (including
     attorney's fees) actually and reasonably incurred by him in connection with
     such action. Delaware law permits such indemnification and requires that
     Decorize indemnify any director who is successful on the merits of any such
     action for the reasonable expenses incurred by him in connection with such
     action.


                   OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

     It is estimated that the expenses incurred in connection with this offering
     will be as follows:

Fees and Expenses:                                  Amount Payable by the Registrant:

SEC Registration Fee                                                 $     538
Printing and Engraving                                               $   5,000
Legal Fees and Expenses                                              $ 102,307
Accounting Fees and Expenses                                         $  56,865
Transfer Agent Fees and Expenses                                     $   5,000
Expenses of Selling Stockholders                                     $  25,000
                                                                     ---------

 Total                                                                $194,710
                                                                      ========

All expenses other than the SEC registration fee are estimated. All expenses
will be paid by the registrant.


                     RECENT SALES OF UNREGISTERED SECURITIES

The following sets forth particular information for all securities sold by the
registrant within the last three years in a transaction that was not registered
under the Securities Act of 1933, as amended. Unless specifically noted
otherwise, there were no underwriters in any of these transactions, nor were any
sales commissions paid thereon.


In connection with the acquisition of GuildMaster in June 2001, Decorate, Inc.,
issued a promissory note and an aggregate 223,210 shares of its common stock,
which were subsequently exchanged for 3,193,464 of the registrant's shares, to
Jon T. Baker, our President and Chief Executive Officer, James K. Parsons, our
Executive Vice President, and Ellen Parsons. The original principal amount of
the note, which Decorate issued to Mr. Baker, was $375,000, and the aggregate
value of the shares of common stock issued to all three of GuildMaster's
shareholders was $2,052,477, which resulted in a purchase price of approximately
$2.5 million. In addition, Decorate agreed to assume certain debt owed by
GuildMaster to Mr. Parsons, which it did by issuing another note in the
principal amount of $925,000 to Mr. Parsons at the closing of the acquisition.
Decorate was merged into the registrant on June 29, 2001, and in connection with
the merger, we issued 3,193,464 shares of common stock in exchange for the
Decorate shares previously issued for GuildMaster and assumed the $375,000 and
$925,000 notes owed by Decorate to Mr. Parsons. The notes are due in full on
July 31, 2004, as a result of amendments that were made following the end of
fiscal year 2002. Based on representations made by each of them, Mr. Baker, Mr.
Parson and Mrs. Parsons were "accredited investors," as defined in the
Securities Act, at the time of the GuildMaster and subsequent Guidelocator
transactions. Messrs. Baker and Parson were also serving as directors of
Decorate at the time of the transactions. There was no public advertising or
solicitation in connection with the GuildMaster transaction. In light of those
factors, we believe that the transaction was exempt from registration under
Section 4(2) of the Securities Act.

We acquired Faith Walk in July 2001 by merging our subsidiary, Step of Faith,
with Faith Walk. Prior to this transaction, Faith Walk was owned by J. Michael
and Kitty Sandel. The total purchase price for Faith Walk was $1,021,555, which
we paid with approximately $296,000 in cash, a 6.75% promissory note in the
original principal




                                     PII-1



amount of $215,743, and 161,443 shares of common stock valued at approximately
$510,000. The note is due in full on July 31, 2004, as a result of amendments
that were made following the end of fiscal year 2002. Based on representations
made by the Sandels, we believe they were "accredited investors" for purposes of
the Securities Act. We made no public advertising or solicitation in connection
with this issuance of common stock. In light of those factors, we believe the
transaction was exempt from registration under Section 4(2) of the Securities
Act.

On June 29, 2001, we closed a private placement of our common stock in which we
sold 876,000 shares of common stock to twelve accredited investors for an
aggregate purchase price of $700,000. The common stock had a purchase price of
$0.80 per share. The investors were "accredited investors," and we made
available information regarding our company and the securities offered to allow
them to make an informed investment decision with regard to the private
placement. There was no public advertising or solicitation made in connection
with this private offering, and each of the investors was previously a
shareholder of Guidelocator or Decorate. This offering was made in compliance
with the "safe harbor" requirements of Rule 506 under Regulation D of the
Securities Act, which we relied upon in taking the position that the transaction
was exempt from registration under Section 4(2) of the Securities Act.


On August 4, 2001, our Board of Directors authorized the issuance of
two-year common stock purchase warrants that were exercisable for up to 500,000
shares of Decorize common stock, with the issuance to be effective as of June
30, 2001. Decorize ultimately issued warrants for an aggregate 470,000 shares to
11 former holders of Class B equity units in decorize.com, L.L.C., the
predecessor to Decorize, effective as of that June 30 date. The warrants were
issued in exchange for the payment of $.10 per warrant share and the waiver by
such holders of any claims they may have against Decorize in connection with the
conversion of decorize.com, L.L.C. into a Delaware corporation. The warrants are
exercisable at an exercise price equal to $2.00 per share until they expire by
their terms on June 30, 2003. Decorize received an aggregate $44,000 in exchange
for the issuance of the warrants, and we waived the $3,000 payment for the
30,000 warrants issued to Fabian Garcia in consideration of his promise to
exercise the warrants and purchase the underlying shares within a shorter time
period than was provided under the warrants. Mr. Garcia exercised his warrants
in October 2001, and upon such exercise and the payment of the $60,000 exercise
price, he received 30,000 shares of Decorize common stock. The current warrant
holders include Kevin Bohren and Timothy Dorgan, both of whom serve as directors
of Decorize. Mr. Bohren paid $7,000 in cash for warrants to purchase 70,000
shares of our common stock, and Mr. Dorgan paid $1,000 in cash for warrants to
purchase 10,000 shares of common stock. The amount of the original investments
made by Mr. Bohren, Mr. Dorgan and Mr. Garcia for the Class B equity units that
were exchanged by each of them was approximately $225,000, $36,000 and $100,000,
respectively. The investors were given access to appropriate information
regarding our company and the securities offered to allow them to make an
informed investment decision with regard to accepting the warrants. There was no
public advertising or solicitation made in connection with this private
offering, and each of the investors was a shareholder of the registrant. In
light of the foregoing factors, we believe that the issuance of the warrants and
the subsequent exercise of warrants for shares of our Common Stock by Mr. Garcia
were, in each case, exempt from registration under Section 4(2) of the
Securities Act.


In October 2001, Mr. Garcia exercised warrants for 30,000 shares of our common
stock at an exercise price of $2.00 per share, for a total purchase price of
$60,000, as described above. Mr. Garcia was a stockholder and serving as a
director of the registrant at the time of his exercise of the warrants, and as a
result he had access to the same financial and operating data regarding the
registrant that would be made available to investors in a registered public
offering. Based on representations provided by Mr. Garcia, he was an "accredited
investor" for purposes of the Securities Act at the time of the offering. The
offer and sale was made solely between Mr. Garcia and the registrant, and there
was no public advertising or solicitation made. Mr. Garcia also represented that
he was acquiring the shares for investment and not with a view to distribution.
Accordingly, we believe that the exercise of the warrant for the underlying
shares of common stock was exempt from registration pursuant to Section 4(2) of
the Securities Act.

In November 2001, we issued a warrant to purchase 150,000 shares of common stock
at a price of $3.00 per share to National Financial Commitment Corporation, a
business consultant that provided advice regarding financing alternatives
available to Decorize, in exchange for those services. The warrants are
exercisable until November 2004. The business consultant was an accredited
investor, which was familiar with our operations and had access to our public
financial and operating information, such as would normally be included in a
registration statement with respect to the offered securities. The issuance was
a private transaction with no advertising or public



                                     PII-2


solicitation. In light of the foregoing, we believe that the transaction was
exempt from registration under Section 4(2) of the Securities Act.

In February 2002, we completed a private placement financing of $525,000 of
restricted securities consisting of common stock and common stock warrants to
four accredited investors, which was exempt from registration pursuant to Rule
506 of Regulation D of the Securities Act of 1933. We sold the shares and
warrants as units at a price between $2.25 and $2.50 per unit, with each unit
consisting of one share of our common stock and one five-year warrant to
purchase one share of our common stock for $4.00 per share. The minimum purchase
was 20,000 units for $50,000. The purchasers included NestUSA and Quest Capital
Alliance. We provided a discount of $25,000 to Quest Capital Alliance, which
purchased 100,000 units. On February 28, 2002, we closed the private placement
subscriptions for 220,000 units at a total selling price of $525,000. Each of
the investors was provided offering materials that contained business and
financial information regarding the registrant that was similar to what would be
made available in a registered offering. Each of the investors signed a
subscription agreement acknowledging the restrictions on resale of the acquired
shares and stating that such investor was an "accredited investor". There was no
public advertising or solicitation made in connection with this offering.
Accordingly, we believe this offering was exempt from registration under Section
4(2) of the Securities Act.

On February 26, 2002, we completed a private placement financing with NestUSA of
a $750,000 Convertible Term Note, convertible into 535,714 (as adjusted from an
initial 300,000 shares in accordance with the antidilution provisions of such
instrument due to the private placement completed in November and December of
2002) shares of common stock, with 300,000 warrants exercisable at $2.50 per
share. As amended, the note is convertible into shares of common stock of the
Registrant until December 31, 2003. NestUSA has not indicated whether it will
convert the note, in whole or in part, into shares of common stock. The number
of shares that may be issued upon conversion of the note depends upon if, and
how much of the note, NestUSA decides to convert to common stock. Effective as
of January 31, 2003, the convertible term note was amended to restructure the
payments of principal and interest due from Decorize. Beginning January 31,
2003, we will make monthly payments of interest and principal on the note in the
amount of $17,500 until December 31, 2003, at which time the note will be
reamortized and the monthly installments beginning on January 31, 2004, will be
adjusted. The note is due in full on December 31, 2004. In connection with the
restructuring of the Convertible Term Note, on January 31, 2003, we issued
warrants to NestUSA exercisable for 216,000 shares of common stock at an
exercise price of $2.80 per share. The warrants are exercisable until December
31, 2005. NestUSA represented that it was an "accredited investor" for purposes
of the Securities Act and indicated that it was acquiring the shares for
investment and not with a view to distribution. Furthermore, there was no public
advertising or solicitation made in connection with the placement of the
convertible note. Accordingly, we believe this offering was made in compliance
with the "safe harbor" requirements of Rule 506 under Regulation D of the
Securities Act, which we have relied upon in taking the position that the
transaction was exempt from registration under the Securities Act.

On May 6, 2002, we closed a private placement with Fabian Garcia, one of our
directors, in which he purchased 20,000 shares of common stock at a price of
$2.50 per share and warrants to acquire an additional 20,000 shares of common
stock at an initial exercise price of $3.00 per share. The warrants are
exercisable until May 6, 2007. The purchase price for the common stock and
warrants was $50,000. Mr. Garcia was a stockholder and serving as a director of
the registrant at the time of his purchase of the common stock and common stock
warrants, and as a result he had access to the same financial and operating data
regarding the registrant that would be made available to investors in a
registered public offering. Based on representations provided by Mr. Garcia, he
was an "accredited investor" for purposes of the Securities Act at the time of
the offering. The offer and sale was made solely between Mr. Garcia and the
registrant, and there was no public advertising or solicitation made. Mr. Garcia
also represented that he was acquiring the shares and warrants for investment
and not with a view to distribution. Accordingly, we believe that the sale of
the common stock and warrants was exempt from registration pursuant to Section
4(2) of the Securities Act.

In December 2002, we completed a private placement of 785,714 shares of common
stock to five accredited investors at a price of $1.40 per share and three-year
warrants to acquire an additional 785,714 shares of common stock at an initial
exercise price of $2.80 per share, which had two separate closings on November
19, 2002 and December 2, 2002. The aggregate purchase price of the common stock
and warrants was $1.1 million. As an expense of this private offering, we issued
an additional set of warrants for an aggregate 85,714 shares to employees of
Stonegate Securities, Inc., which acted as the placement agent on our behalf in
such placements, with 42,857 shares exercisable



                                     PII-3



at $1.40 per share and 42,857 shares exercisable at $2.80 per share. Decorize
also issued warrants to Mr. Smith and Mr. Iler, who acted as financial advisors
with respect the placement, which were exercisable for 42,857 shares at $1.68
per share and 42,857 shares at $3.36 per share. In addition to those warrants,
Decorize issued an additional 17,857 shares of common stock to Stonegate as a
portion of its placement fee. The private placement shares (including shares
that may be issued upon any exercise of warrants) are being registered for
resale by the purchasers our financial advisors under this registration
statement. The purchasers include Quest Capital Alliance, Pequot Scout Fund,
L.P., Pequot Navigator Offshore Fund, L.P., Gryphon Master Fund, and Gary Stein
Roth IRA. Each of the investors represented that it was an "accredited investor"
for purposes of the Securities Act, and indicated that it was acquiring the
shares for investment and not with a view to distribution. We provided each
investor with appropriate financial and operating information. In fact, one of
the investors was an existing stockholder of the registrant. Accordingly, we
believe this offering was made in compliance with the "safe harbor" requirements
of Rule 506 under Regulation D of the Securities Act, which we have relied upon
in taking the position that the transaction was exempt from registration under
the Securities Act.


In December 2002, we issued 4,348 shares to Dr. John Bagalay Jr. as partial
compensation upon his appointment as director of the Company.

In March 2003, we entered into a Consultant Agreement with Evan Kaye, an
individual who was engaged to provide Decorize with investor relations advice
and input regarding our strategy for raising working capital to meet our growth
needs. As consideration for the services to be provided by Mr. Kaye, we agreed
to issue him an aggregate 30,000 shares of our common stock, payable 10,000
shares upon execution of the agreement, 6,667 shares on each of the first days
of April and May, and the final payment of 6,666 shares on June 1, 2003. As a
financial consultant to Decorize, Mr. Kaye was made familiar with our operations
and was provided access to our public financial and operating information, such
as would normally be included in a registration statement with respect to the
offered securities. Mr. Kaye represented to us that he was an accredited
investor for purposes of the Securities Act. Also, the issuance was a private
transaction with no advertising or public solicitation. In light of the
foregoing, we believe that the transaction was exempt from registration under
Section 4(2) of the Securities Act.



                                     PII-4



                                    EXHIBITS
Exhibit
Number            Description
------            -----------

2.1               Agreement and Plan of Merger between  Decorate,  Inc. and  decorize.com,  L.L.C.,  dated June 18,
                  2001 (1)
2.2               Agreement  and Plan of  Merger  by and  among  JB  Express,  Inc.,  GuildMaster,  Inc.,  James K.
                  Parsons, Ellen L. Parsons and Jon T. Baker, dated June 18, 2001 (1)
2.3               Securities  Exchange Agreement between  Guidelocator.com,  Inc. and the shareholders of Decorate,
                  Inc., dated June 29, 2001 (2)
2.4               Certificate  of Merger  issued by the State of Delaware for the merger of  Guidelocator.com  with
                  and into Decorize, Inc., dated July 5, 2001 (2)
2.5               Articles  of Merger  issued by the State of Texas  for the  merger of  Guidelocator.com  with and
                  into Decorize, Inc., dated July 6, 2001 (2)
2.6               Agreement  and Plan of Merger by and among  Decorize,  Inc.,  Step of  Faith,  Inc.,  Faith  Walk
                  Designs, Inc., John Michael Sandel and Kitty Sandel, dated July 31, 2001 (3)
2.7               Letter  Agreement  between John Michael Sandel,  Kitty Sandel and Decorize,  Inc., dated July 31,
                  2001 (3)
2.8               Letter  Agreement #2 between John Michael  Sandel,  Kitty Sandel and Decorize,  Inc.,  dated July
                  31, 2001 (3)
2.9               Certificate  of Ownership  and Merger issued by the State of Delaware for the merger of Decorate,
                  Inc. with and into Decorize, Inc., dated July 27, 2001 (1)
2.10              Articles of Merger  issued by the State of Missouri  for the merger of  Decorate,  Inc.  with and
                  into Decorize, Inc., dated August 6, 2001 (1)
3.1               Certificate of Incorporation of Decorize, Inc., State of Delaware, dated June 27, 2001 (1)
3.2               Bylaws of Decorize, Inc. (1)
4.1               Form of Securities  Purchase  Agreement  between  Decorize,  Inc. and the Purchasers set forth on
                  the signature pages thereto, together with all exhibits and schedules (4)
4.2               Securities Purchase Agreement,  dated as of February 26, 2002, by and between Decorize,  Inc. and
                  NestUSA, Inc., together with all exhibits and schedules (5)
4.3               Subscription Agreement dated November 11, 2001, between Decorize, Inc. and Fabian Garcia (9)
4.4               Form of Decorize, Inc. Stock Certificate (1)
4.5               Form of Securities  Purchase  Agreement  between Decorize,  Inc. and the Purchaser  acquiring its
                  shares on November 19, 2002, together with exhibits (8)
4.6               Form of Securities Purchase Agreement between Decorize,  Inc. and the Purchasers  acquiring their
                  shares on December 2, 2002, together with exhibits (8)
5                 Opinion of Hallett & Perrin, P.C. (11)
10.1              Form of Guaranty between  GuildMaster,  Inc. and The CIT Group/Commercial  Services,  Inc., dated
                  January 30, 2003 (10)
10.2              Form of Guaranty between Faith Walk Designs,  Inc. and The CIT Group/Commercial  Services,  Inc.,
                  dated January 30, 2003 (10)
10.3              Factoring Agreement between Decorize,  Inc. and The CIT  Group/Commercial  Services,  Inc., dated
                  January 30, 2003 (10)
10.4              Separation Agreement and Release between Decorize, Inc. and Jon T. Baker, dated August __, 2003.
21                List of Subsidiaries of Decorize, Inc. (10)
23.1              Consent of BKD, LLP (11)
23.2              Consent of Kirkpatrick, Phillips & Miller, CPA's, P.C. (11)
23.3              Consent of Hallett & Perrin, P.C. (included in Exhibit 5)
24                Power of Attorney (included on p. II-4)
----------------------
(1)      Filed  previously as an exhibit to the Annual  Report on Form 10-KSB filed by Decorize,  Inc. on September
         28, 2001.
(2)      Filed  previously  as an exhibit to the  Current  Report on Form 8-K filed by  Decorize,  Inc. on July 16,
         2001.
(3)      Filed  previously  as an exhibit to the Current  Report on Form 8-K filed by Decorize,  Inc. on August 15,
         2001.

(4) Filed previously as an exhibit to the Current Report on Form 8-K filed by Decorize, Inc. on March 15,
2002.
(5) Filed previously as an exhibit to the Current Report on Form 8-K filed by Decorize, Inc. on March 19,
2002.
(6) Filed previously as an exhibit to the Current Report on Form 8-K filed by Decorize, Inc. on August 1,
2001.
(7) Filed previously as an exhibit to the Current Report on Form 8-K filed by Decorize, Inc. on April 12,
2002.
(8) Filed previously as an exhibit to the Current Report on Form 8-K filed by Decorize, Inc. on December 5,
2002.
(9) Filed previously as an exhibit to the Annual Report on Form 10-KSB filed by Decorize, Inc. on October 2,
2002.
(10) Filed previously as an exhibit to Amendment No. 1 to the Registration Statement on Form SB-2 filed by
Decorize, Inc. on March 24, 2003.
(11) Filed herewith.

UNDERTAKINGS

Decorize hereby undertakes that it will file, during any period in
which it offers or sells securities, a post-effective amendment to this
registration statement to:

(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

(ii) Reflect in the prospectus any factors or events which,
individually or together, represent a fundamental change in the
information set forth in the registration statement. Notwithstanding
the foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the SEC pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of the Registration Fee" table in the effective
registration statement; and

(iii) Include any additional or changed material information
on the plan of distribution.

For the purpose of determining liability under the Securities Act of
1933, Decorize hereby undertakes to treat each post-effective amendment of this
registration statement as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.

Decorize hereby undertakes to file a post-effective amendment to remove
from registration any of the securities that remain unsold at the end of the
offering.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
Decorize pursuant to the foregoing provisions or otherwise, Decorize has been
advised that in the opinion of the SEC, such indemnification is against public
policy as expressed in the Securities Act of 1933 and is therefore
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by Decorize of expenses incurred or paid by
a director, officer or controlling person of Decorize 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, Decorize
will, unless in the opinion of its counsel, the matter has been settled by
controlling precedent, subject to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933, and will be governed by the final
adjudication of such issue.




                                   SIGNATURES


         In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of
Springfield, State of Missouri on September 15, 2003.

                                            DECORIZE, INC.


                                            By:      /s/ James K. Parsons
                                                  ----------------------------------------
                                            Printed Name:     James K. Parsons
                                                          --------------------------------
                                            Titles:  President and Chief Executive Officer



         In accordance with the requirements of the Securities Act of 1933 this
registration statement was signed by the following persons in the capacities and
on the dates stated:


  /s/ James K. Parsons
-------------------------------------
James K. Parsons                                           President and Chief Executive Officer
Date:  September 15, 2003                                  (principal executive officer)


  /s/ Alex Budzinsky
-------------------------------------
Alex Budzinsky                                             Executive Vice President and
Date:  September 15, 2003                                  Chief Financial Officer
                                                           (principal financial officer)

  /s/ Brent Olson
-------------------------------------
Brent Olson                                                Vice President of Finance
Date:  September 15, 2003                                  and Treasurer
                                                           (principal accounting officer)
  /s/ John A. Bagalay, Jr.
-------------------------------------
John A. Bagalay, Jr.                                       Director
Date:  September 15, 2003

  /s/ Jon T. Baker
-------------------------------------
Jon T. Baker                                               Director
Date:  September 15, 2003

  /s/ Timothy M. Dorgan
-------------------------------------
Timothy M. Dorgan                                          Director
Date:  September 16, 2003



-------------------------------------
Fabian Garcia                                              Director
Date:  September __, 2003

 /s/ Kevin Bohren
-------------------------------------
Kevin Bohren                                               Director
Date:  September 15, 2003



-------------------------------------
J. Michael Sandel                                        Director and Vice President
Date: September 15, 2003