Form SB-2 Amendment No. 7 for Decorize, Inc.

SB-2/A 1 formsb2a_121803.htm FORM SB-2/A Form SB-2 Amendment No. 7 for Decorize, Inc.



    As filed with the Securities and Exchange Commission on December 19, 2003

                                                     Registration No. 333-101677

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

                                 AMENDMENT NO. 7
                                       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            Proposed Maximum
    Title of Each Class of                 to be       Maximum Offering            Aggregate              Amount of
 Securities to be Registered             Registered    Price Per Share(1)       Offering Price        Registration Fee
------------------------------------- -------------- ---------------------- ----------------------- --------------------
------------------------------------- -------------- ---------------------- ----------------------- --------------------
Common Stock, $.001 par value           3,292,427            $1.01              $3,325,351.27             $266(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
     December 17, 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 December 19, 2003

PROSPECTUS

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 10 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 December 17, 2003, was $1.02 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 December ____, 2003.



                                TABLE OF CONTENTS

Prospectus Summary.............................................................1
         Our Company...........................................................1
         Terms of the Offering.................................................1
         Summary Financial Information.........................................2
Risk Factors...................................................................3
Cautionary Statement Concerning Forward-Looking Statements.....................8
Use of Proceeds................................................................8
Determination of Offering Price................................................9
Selling Stockholders..........................................................10
Plan of Distribution..........................................................12
Directors, Executive Officers, Promoters and Control Persons..................13
Security Ownership of Certain Beneficial Owners and Management................16
Description of Securities.....................................................18
Description of Business.......................................................20
Management's Discussion and Analysis of Financial Condition
  and Results of Operations...................................................27
Description of Property.......................................................34
Certain Relationships and Related Transactions................................34
Market for Common Equity and Related Stockholder Matters......................36
Executive Compensation........................................................37
Changes in and Disagreements with Accountants on
  Accounting and Financial Disclosure.........................................40
Legal Matters.................................................................41
Experts  .....................................................................41
Other Available Information...................................................41
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 20 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               13,819,549 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.

                                                                Three Months Ended                         Year Ended
                                                        -----------------------------------        --------------------------
                                                      September 30,2002    September 30, 2003    June 30, 2002    June 30, 2003
                                                      -----------------    ------------------    -------------    -------------               ----          ----
                                                         (unaudited)          (unaudited)
Statement of Operations Data:

Net sales                                              $   5,215,314        $    3,696,176       $ 14,081,833     $ 15,404,514

Gross profit                                               1,939,900               835,022          4,941,465        5,790,197

Operating expenses                                         1,637,495             1,493,512          6,561,754        6,279,689

Income (loss) from operations                                302,405             (658,490)        (1,620,289)        (489,492)

Other expense                                              (138,210)             (199,569)          (363,853)        (662,913)

Income (loss) before income taxes                            164,195             (858,059)        (1,984,142)      (1,152,405)

Net income (loss)                                            164,195             (858,059)        (2,016,842)      (1,152,405)

Basic income (loss) per share                                   0.02                (0.07)             (0.20)           (0.11)

Diluted income (loss) per share                                 0.02                (0.07)             (0.20)           (0.11)

Weighted average common shares outstanding - basic        10,432,774            11,270,693         10,306,274       10,913,004

Weighted average common and dilutive shares               10,698,628            11,270,693         10,306,274       10,913,004
outstanding



                                                                                                        As of September 30, 2003
                                                                                                        ------------------------
                                                                                                               (unaudited)
Balance Sheet Data:

Working capital                                                                                          $       1,027,720

Total assets                                                                                                     7,506,262

Capital lease obligations, less current maturities                                                                  76,202

Long-term debt, less current portion                                                                                64,690

Notes payable to stockholders                                                                                    1,803,010

Stockholders' equity                                                                                             3,077,679


                                       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 $1.2 million for the fiscal year ended June
30, 2003, and another net loss of $858,059 for the three months ended September
30, 2003. Although our level of revenues has increased significantly since the
beginning of fiscal 2002, our operating expenses have also increased, and a
recent increase in cost of sales has caused our operating margins to decrease
further. We cannot assure you that we can reduce or eliminate our operating
losses in the future, even if sales increase from their current levels. 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.

We failed to meet a financial covenant under our factoring agreement in fiscal
2003, and if we are unable to meet our covenants in the future, then we could
lose our factoring arrangement, which could cause our business to fail.

          For the fiscal year ended June 30, 2003, we incurred a net loss of
$1.2 million, which exceeded the net income financial covenant under our
factoring agreement with CIT Group/Commercial Services dated January 30, 2003.
CIT waived our noncompliance for fiscal 2003 and amended the factoring agreement
to require that we have a net loss of no more than $600,000 for fiscal 2004 and
net income of no less than $1 for each fiscal year thereafter. Our current
business plan contemplates significant non-cash expenses in connection with our
financing and investor relations activities during fiscal 2004, and we currently
project that we will not be in compliance with the amended covenants for fiscal
2004. If we fail to comply with our financial covenants, we expect to again
request a waiver from CIT. We have informed CIT of our projected noncompliance
with the net income covenant, and CIT has indicated it will consider a waiver at
the completion of fiscal 2004. If we fail to meet any financial or operating
covenants under the factoring agreement, and if CIT refuses to waive any such
non-compliance, then CIT could declare a default, terminate the factoring
agreement and foreclose on all accounts and related collateral that secure our
obligations under the factoring agreement. A foreclosure of those accounts would
be disruptive to our business and could harm our relationships with customers
who would be contacted during the collection of those accounts by CIT.
Furthermore, if CIT terminates the factoring agreement because of our default,
and we are unable to promptly obtain replacement financing, then our cash flow
may be severely restricted. The reduction in available cash flow combined with
the impact of any business disruption from a foreclosure by CIT could cause us
to become less


                                       3



profitable or incur higher losses, which in turn could cause the price of our
stock to decline and you to 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.

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 and other
short term 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 September 30, 2003, our total
number of employees increased from 7 to 60, including 8 employees in Asia. We
experienced high sales growth in fiscal year 2002, which at times exceeded the
capacity of our infrastructure and resulted in a backlog of customer orders. We
were able to resolve those capacity issues by hiring additional personnel and
upgrading our technology infrastructure, and 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.


                                       4



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 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 37.0% 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:


                                       5



          •     raw material shortages, work stoppages, strikes and political
                unrest;

          •     problems with ocean shipping, including work stoppages and
                shipping container shortages;

          •     increased inspections of import shipments or other factors
                causing delays in shipments; and

          •     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 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.


                                       6



                         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:

          •        warrants to purchase up to 2,563,143 shares of our stock, at
                   exercise prices ranging from $1.20 to $4.00, 1,713,142 of
                   which shares are being registered for resale by Decorize on
                   behalf of the selling stockholders;

          •        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

          •        options to purchase 1,216,956 shares of common stock under
                   our employee stock incentive plan.

In addition to the securities listed above, we may issue up to 1,783,044
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 note. These shares are described in the
"Selling Stockholders" section on page 10 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


                                       7



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

          •     the risks associated with growth;

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

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

          •     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


                                       8



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.


                                       9

SELLING STOCKHOLDERS

The table appearing below sets forth the beneficial ownership of our
common stock by the selling stockholders as of December 17, 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 266,403(10) 40,000 226,403 1.9%
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 73,333 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:

    •     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;

    •     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;


                                       11



    •     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

    •     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 $200,000 (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.


                                       12



          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
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 2003. 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 and the Compensation 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. 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 was a founder of
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


                                       13



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 September 1998 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. Dr. Bagalay holds a B.A. in Politics, Philosophy and Economics, and a
Ph.D. in Political Philosophy from Yale University, and a J.D. from the
University of Texas.

TIMOTHY M. DORGAN. Mr. Dorgan was elected as director of Decorize on June 29,
2001. Mr. Dorgan serves on the Audit Committee and the Compensation 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.
Mr. Garcia serves on the Compensation Committee and was a member of the Audit
Committee during the beginning of fiscal 2003, from July 1, 2002 until his
resignation in December 2002. 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.

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


                                       14



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 October 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.


                                       15



         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

          The following table sets forth certain information regarding
beneficial ownership of the common stock as of December 17, 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 36 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)                           9.7%
     1800 Bering Drive, Suite 755
     Houston, TX  77057
Quest Capital Alliance                           914,286(4)                           7.7%
     3140 East Division
     Springfield, MO
Jon T. Baker                                      2,330,741                          20.5%
     1938 E. Phelps
     Springfield, MO 65802
James K. Parsons                               3,602,970(5)                          29.8%
     1938 E. Phelps
     Springfield, MO 65802
Kevin Bohren                                     431,908(6)                           3.8%
     P.O. Box 6632
     Avon, CO 81620
Timothy M. Dorgan                                 69,101(7)                           0.6%
     350 May Avenue
     Glen Ellyn, IL 60137
Fabian Garcia                                    266,403(8)                           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                                    81,128(9)                           0.7%
     1938 E. Phelps
     Springfield, MO 65802
John E. Bagalay, Jr., PhD.                       14,348(10)                           0.1%
     1938 E. Phelps
     Springfield, MO 65802
Alex Budzinsky                                  155,667(11)                           1.4%
     1938 E. Phelps
     Springfield, MO 65802
All Executive Officers and                        4,836,627                          38.5%
   Directors as a Group (9 persons)(12)
----------------------------

(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 the date of this
         prospectus, and with respect to the percentage calculated for each
         individual shareholder or group of shareholders, it is assumed that
         such shareholder or


                                       16



         group exercises all of the stock options owned by such individual or
         group that are exercisable currently or within sixty days of the date
         of this prospectus.
(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 500,000 shares issuable under warrants at an exercise price
         of $1.40 per share and 200,000 shares issuable under warrants at an
         exercise price of $1.20 per share.
(6)      Includes  40,000 shares  issuable upon the exercise of stock options
         granted under  Decorize's 1999 Stock Option Plan, at an exercise price
         ranging from $1.22 per share to $2.60 per share, and another 70,000
         shares issuable under warrants at an exercise price of $2.00 per share.
(7)      Includes 33,333 shares issuable upon the exercise of stock options
         granted under Decorize's 1999 Stock Option Plan, at an exercise price
         ranging from $1.22 per share to $2.60 per share.
(8)      Includes 53,333 shares issuable upon the exercise of stock options
         granted under Decorize's 1999 Stock Option Plan, at an exercise price
         ranging from $1.22 per share to $3.95 per share and another 20,000
         shares issuable upon exercise of warrants at an exercise price of $3.00
         per share.
(9)      Includes 61,608 shares issuable upon the exercise of stock options
         granted under Decorize's 1999 Stock Option Plan, at an exercise price
         ranging from $1.13 per share to $2.65 per share.
(10)     Includes  10,000  shares  issuable upon exercise of stock  options
         granted  under  Decorize's  1999 Stock Option Plan, at an exercise
         price equal to $1.22 per share.
(11)     Includes 141,667 shares issuable upon exercise of stock options granted
         under Decorize's 1999 Stock Option Plan, at an exercise price ranging
         from $1.22 per share to $2.70 per share.
(12)     Includes all executive officers and directors of Decorize, as a group.


                                       17



                            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:

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

    •     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

    •     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


                                       18



to 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.


                                       19



                             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


                                       20



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 GuildMaster
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 37 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


                                       21



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 Faith Walk 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 37 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, and as of January 31, 2003, all of its product sourcing has been moved to
the Far East.

          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 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.


                                       22



          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. During the current fiscal
year, we installed 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.


                                       23



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.


                                       24



          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.


                                       25



          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.


                                       26



         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.


                                       27



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.


                                                 For the three months ended September 30,
                                           2003                        2002                     Change
                                           ----                        ----                     ------
                                      $           %               $           %            $              %
                                      -           -               -           -            -              -

      Sales, net                  3,696,176     100.0         5,215,314     100.0      (1,519,138)
      Cost of sales               2,861,154     77.4          3,275,414      62.8        (414,260)       14.6
      Gross profit                  835,022     22.6          1,939,900      37.2      (1,104,878)     (14.6)
      Selling, general and
        operating expenses        1,493,512     40.4          1,637,495      31.4        (143,983)        9.0
      Operating income (loss)     (658,490)   (17.8)            302,405       5.8        (960,895)     (23.6)
      Total other expense           199,569      5.4            138,210       2.7           61,358        2.7
      Net (loss)                  (858,059)   (23.2)            164,195       3.1      (1,022,254)     (26.3)

          Our revenues are derived primarily from the sale of home furnishing
and home decor products to large and small retailers. Sales for the three month
period ended September 30, 2003, decreased $1.5 million to $3.7 million,
compared to $5.2 million for the three month period ended September 30, 2002.
The three month period ended September 30, 2002, included large orders from one
customer. We continue to receive orders from that customer at a reduced volume,
but due to the lethargic economy, we were not able to replace those reduced
revenues during this current year quarter. We are aggressively pursuing revenue
growth and have secured orders from additional large customers scheduled to ship
in the subsequent quarters of this fiscal year. Furthermore, management is
planning to diversify its revenues by increasing sales volume from our smaller
retail customers. Although results of the current fiscal quarter do not compare
favorably with those of the same quarter in the previous fiscal year, we
anticipate that our annual revenues will be comparable to the previous two
fiscal years, with the rate of sales resuming growth toward the end of the
fiscal year.

Cost of Sales

          For the three months ended September 30, 2003, cost of sales increased
as a percentage of sales to 77.4% or $2.8 million, compared to 62.8% or $3.3
million for the three months ended September 30, 2002. The percentage increase
of costs, for the three months ended September 30, 2003, was due, in part,
because ocean freight rates increased substantially more than expected and we
were not able to recover all of the costs during the first quarter. Furthermore,
during the current period, we encountered a shift from higher margin orders, to
higher volume orders with lower margins. We also experienced some quality
related issues. Although these quality issues were mostly limited to one large
customer, returns and allowances, as a percentage of revenues, were greater than
in the prior year quarter.

Operating Expenses

          During the three month period ended September 30, 2003, our operating
expenses decreased $0.1 million to $1.5 million, compared to $1.6 million for
the same period last year. The decrease for the three-month period is due, in
part, to the cessation of operations in Houston, Texas, and the elimination of
expenses related to that operation, as well as to our ongoing effort to make our
operations more efficient.

Other Expense

          Other expense for the three-month period ended September 30, 2003,
consisted principally of $200,786 of interest expense compared to $164,703 of
interest expense for the three months ended September 30, 2002. This increase
during the three-month period ended September 30, 2003, was primarily due to the
$135,497 non-cash charge related to the amortization of discount on convertible
debt.


                                       28



Net Loss

          Our net loss was $858,059 for the three-month period ended September
30, 2003, compared to a net income of $164,195 for the same period last year.
The net loss for the three-month period was a result of decreased revenues,
increased cost of sales and increased interest expense related to the
amortization of discount on convertible debt.


Inflation

          We do not believe our business is materially affected by inflation. We
anticipate that any increase in costs caused by inflation will be passed on to
the customers.


                    Fiscal Years Ended June 30, 2003 and 2002

                                      2003                       2002                        Change
                                      ----                       ----                        ------

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 increase in revenues for fiscal
2003 over fiscal 2002 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 offerings and services 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.


                                       29



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, compared to
the prior year, was the result of a change in freight carriers and ongoing price
negotiations with vendors. 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, $84,373, compared to $750,000 during
the prior year period. Furthermore, for the year ended June 30, 2003, operating
expenses included $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 for
2003 versus $125,000 for 2002.

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 $0.11 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.


                                       30



   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.


                                       31



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, and working capital of $1.0 million at September
30, 2003, compared with $2.3 million at September 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.

          Cash and cash equivalents and short-term investments were $65,287 at
September 30, 2003, compared to $128,019 at September 30, 2002. Cash used in
operating activities during the three-month period ended September 30, 2003,
amounted to $1,198,957 compared to a $1,099,911 provision of cash for the same
period in the prior year. The increase was attributable to $135,000 of non-cash
amortization of debt discount, a $348,308 decrease in inventories, an increase
in receivables of $758,000, and a decrease in payables of $97,000.

          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. Investing
activities during the three-month period ended September 30, 2003, consumed
$26,000 in cash. This amount related to the acquisition of property and
equipment.

          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 $702,461 offset by principal payments of $259,614 on debt and payment of
$159,172 relating to the registration of the shares of Decorize common stock
offered by this prospectus. During the three months ended September 30, 2003,
our cash provided from financing activities amounted to $1,168,289 from
short-term financing in the amount of $300,000 and advances from our factor of
$969,000.

          We anticipate that our working capital need will increase as our
business grows. As of September 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 our
accounts receivable under global factoring arrangements. Throughout 2002,
Decorize and its subsidiaries operated under a factoring arrangement with First
Factors Corporation, under which we sold our 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


                                       32



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.

          For the fiscal year ended June 30, 2003, we failed to comply with the
net income financial covenant under the CIT factoring agreement, which required
that our net loss not exceed $150,000 for that fiscal year. Our net loss in
fiscal 2003 was $1.2 million. CIT signed an amendment and waiver letter in
September 2003, which waived our noncompliance with the net income covenant for
fiscal 2003 and amended the covenant to require us to have a net loss of no more
than $600,000 and net income of no less than $1 for each fiscal year thereafter
during the term of the agreement. We paid a $5,000 waiver fee in consideration
of the waiver and amendment, and we also reimbursed CIT for approximately
$700.00 in legal fees and other expenses associated with the waiver and
amendment. We believe that our projected level of operating losses, combined
with the impact of significant non-cash expenses that we expect to incur during
fiscal 2004 in connection with planned financing and investor relations
activities, make it likely that we will not be in compliance with our net income
covenant at the end of fiscal 2004. Therefore, we anticipate requiring another
waiver or amendment for the factoring agreement following the end of fiscal
2004.

          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 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.

          On October 3, 2003, we issued a line of credit note to James K.
Parsons, Decorize's President and CEO in the amount of $800,000 at an
interest rate of prime plus 1.25%, together with 500,000 warrants exercisable at
$1.40 per share. On December 10, 2003, the note was amended to increase the
principal amount available to $1,000,000, and Mr. Parsons was issued an
additional 200,000 warrants exerciseable at $1.20 per share. The note is due in
full on September 30, 2004. The initial set of warrants are exercisable until
September 30, 2006, and the second set of warrants terminate on December 31,
2006.

          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. We have
recently obtained short-term loans from an officer of the Company to meet
working capital requirements but there is no assurance that additional such
funds, if needed, will be available in the future.

          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.


                                       33

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 2,603,010 800,000 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 5,141,390 1,676,749 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 $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.
The lease for this space terminates on November 30, 2004. Our rent for this
facility is $800 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 36 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 36 of this prospectus. In October 2002, Mr. Sandel repaid
a note on behalf of 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.

          On October 3, 2003, we issued a line of credit note to James K.
Parsons, Decorize's President and CEO in the amount of $800,000 at an
interest rate of prime plus 1.25%, together with 500,000 warrants exercisable at
$1.40 per share. On December 10, 2003, the note was amended to increase the
principal amount available to $1,000,000, and Mr. Parsons was issued an
additional 200,000 warrants exerciseable at $1.20 per share. The note is due in
full on September 30, 2004. The initial set of warrants are exercisable until
September 30, 2006, and the second set of warrants terminate on December 31,
2006.

                                       35



            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
                                                        ----              ---

          Second Quarter 2004 (October 1, 2003         $1.52             $0.92
               through December 17, 2003)
          First Quarter 2004                            1.75              1.30
          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                  $4.10             $3.10
               March 7, 2002)
          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 September 30, 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.


                                       36



                             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-
  Former Chairman,        2002       $158,579 (1) $  20,000     $   -0-             -0-              -0-
  President, CEO and      2001       $133,879 (2) $    -0-      $ 22,570 (2)        -0-              -0-
  Director

James K. Parsons          2003       $123,700 (3) $    -0-      $   -0-             -0-              -0-
Chairman, President,      2002       $ 88,462 (3) $    -0-      $   -0-             -0-              -0-
CEO and Director since    2001       $ 75,000 (4) $    -0-      $   -0-             -0-              -0-
August, 2003

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     $             $   -0-          40,000 (14)         -0-
Executive Vice President  2002       $ 40,615        22,462     $  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 for the referenced fiscal
         year was $160,000. Mr. Baker's employment was terminated in August
         2003.

(2)      Includes  compensation  paid by  GuildMaster,  which was acquired on
         June 18,  2001,  from July 1, 1999 to March 5, 2001 and by Decorize
         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)      Mr. Sandel's annual salary is $113,423, although his employment
         agreement with Decorize provides for an annual salary of $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.


                                       37

(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 Options Exercise or
Number of Granted to Base Price in
Options 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:

Shares Number of Unexercised Options Value of Unexercised In-the-
Acquired Options at June 30, 2003 Money Options
on Value at June 30, 2003 (1)
Name Exercise Realized Exercisable Unexerciseable 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. The contract included a
two-year covenant-not-to-compete in the event Mr. Baker voluntarily terminated
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 (i) to pay Mr. Baker
severance in the amount of $36,000, which will be paid in equal installments on
Decorize's regularly scheduled paydays between September 1, 2003, and February
29, 2004; (ii) to issue 65,000 shares of common stock to Mr. Baker on March 1,
2004; and (iii) to reimburse 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 during the period from September
1, 2003, until December 31, 2004; however, any payments for his dependents will
remain his own responsibility. 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 July 31, 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 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.


                                       40



                                  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, and June 30, 2003, 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.

                           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.


                                       41




                          INDEX TO FINANCIAL STATEMENTS
                                 DECORIZE, INC.

                                                                                             Page(s)
                                                                                             -------

     Independent Accountants' Report                                                           F-2
     Consolidated Balance Sheet as of September 30, 2003                                       F-3
     Consolidated Statements of Operations for the three months ended                          F-5
            September 30, 2003 and September 30, 2002
     Consolidated Statement of Changes in Stockholders' Equity                                 F-6
           for the three months ended September 30, 2003
     Consolidated Statements of Cash Flows for the three months ended                          F-7
           September 30, 2003 and September 30, 2002
     Notes to the Consolidated Financial Statements for the three months ended                 F-8
           September 30, 2003
     Independent Accountants' Report                                                           F-11
     Consolidated Balance Sheets as of June 30, 2003 and 2002                                  F-12
     Consolidated Statements of Operations for the years ended                                 F-14
           June 30, 2003 and 2002
     Consolidated Statements of Changes in Stockholders' Equity                                F-15
           for the years ended June 30, 2003 and 2002
     Consolidated Statements of Cash Flows for the years ended                                 F-16
           June 30, 2003 and 2002
     Notes to Financial Statements for the years ended                                         F-17
           June 30, 2003 and 2002




                                      F-1



Independent Accountants' Report




Audit Committee and Board of Directors
Decorize, Inc.
Springfield, Missouri


We have reviewed the accompanying condensed consolidated balance sheet of
Decorize, Inc. as of September 30, 2003, and the related condensed consolidated
statements of operations, changes in stockholders' equity and cash flows for the
three-month period ended September 30, 2003. These financial statements are the
responsibility of the Company's management.

We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States of America, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with accounting principles generally accepted in the
United States of America.



                                   /s/BKD, LLP

November 4, 2003
Springfield, Missouri


                                      F-2




                            DECORIZE, INC. AND SUBSIDIARIES
                               CONSOLIDATED BALANCE SHEET
                             SEPTEMBER 30, 2003 (Unaudited)

                                         ASSETS


Current assets:



      Cash and cash equivalents                                             $     65,287

      Receivables:
            Trade accounts receivable, net of allowance of $291,167              225,995
            Due from factor, net of advances of $2,539,238                       391,846
            Other                                                                 12,389

      Inventory                                                                2,697,722

      Prepaid expenses and other                                                 119,162
                                                                      ------------------
            Total current assets                                               3,512,401
                                                                       ------------------
Property and equipment, net                                                      498,747

Goodwill                                                                       3,258,938

Other assets                                                                     236,176
                                                                       ------------------
                                                                               3,993,861
                                                                       ------------------

Total assets                                                               $   7,506,262
                                                                       ==================




         See accompanying notes to the consolidated financial statements.


                                      F-3





                            DECORIZE, INC. AND SUBSIDIARIES
                               CONSOLIDATED BALANCE SHEET
                             SEPTEMBER 30, 2003 (Unaudited)


                      LIABILITIES AND STOCKHOLDERS' EQUITY

        Current liabilities:

               Accounts payable                                               $ 1,335,527

               Accrued salaries and commissions                                   112,144

               Other accrued expenses                                             305,667

               Note payable, bank                                                 150,000

               Due to stockholder                                                 150,000

               Current portion of long-term debt                                  375,143

               Current portion of capital lease obligations                        56,200
                                                                            --------------

                        Total current liabilities                               2,484,681
                                                                            --------------

        Capital lease obligations, less current portion                            76,202

        Long-term debt, less current portion                                       64,690

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

                        Total liabilities                                       4,428,583
                                                                            --------------

        Stockholders' equity:

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

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

               Additional paid-in capital                                       7,272,369

               Accumulated deficit                                            (4,205,961)
                                                                            --------------

                        Total stockholders' equity                              3,077,679
                                                                            --------------

        Total liabilities and stockholders' equity                            $ 7,506,262
                                                                            ==============

        See accompanying notes to the consolidated financial statements.

                                      F-4



                         DECORIZE, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS


                                                                                      Three Months Ended
                                                                         September 30, 2003         September 30, 2002
                                                                         ------------------         ------------------
                                                                             (Unaudited)               (Unaudited)

Sales                                                                               $ 3,696,176               $ 5,215,314

Cost of sales                                                                         2,861,154                 3,275,414
                                                                      --------------------------    ----------------------

Gross profit                                                                            835,022                 1,939,900
                                                                      --------------------------    ----------------------

Operating expenses:
     Selling, general and administrative                                              1,432,743                 1,573,221
     Stock compensation                                                                       -                    15,000
     Depreciation and amortization                                                       60,769                    49,274
                                                                      --------------------------    ----------------------
          Total operating expenses                                                    1,493,512                 1,637,495
                                                                      --------------------------    ----------------------

Operating income (loss)                                                               (658,490)                   302,405

Other income (expense):
     Interest income                                                                        380                       466
     Interest expense                                                                 (200,786)                 (164,703)
     Other                                                                                  837                    26,027
                                                                      --------------------------    ----------------------
          Total other income (expense)                                                (199,569)                 (138,210)
                                                                      --------------------------    ----------------------

Net income (loss)                                                                    $(858,059)                 $ 164,195
                                                                      ==========================    ======================

Income (loss) per share:
     Basic:                                                                           $  (0.07)                  $   0.02
                                                                      ==========================    ======================
     Diluted:                                                                         $  (0.07)                  $   0.02
                                                                      ==========================    ======================

Weighted-average common shares outstanding:
     Basic:                                                                          11,270,693                10,432,774
                                                                      ==========================    ======================
     Diluted:                                                                        11,270,693                10,698,628
                                                                      ==========================    ======================


        See accompanying notes to the consolidated financial statements.

                                      F-5



                         DECORIZE, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY



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

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

Net loss
                                            -              -                 -           (858,059)          (858,059)
                                   ----------    -----------     -------------        ------------     --------------
Balance, September  30, 2003
(Unaudited)                        11,270,693    $    11,271     $   7,272,369     $   (4,205,961)     $    3,077,679
                                   ==========    ===========     =============     ===============     ==============


        See accompanying notes to the consolidated financial statements.



                                      F-6



                         DECORIZE, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                                           Three Months Ended
                                                                           September 30, 2003            September 30, 2002
                                                                         ------------------------    ---------------------------

                                                                               (Unaudited)                  (Unaudited)

Operating Activities:
Net income (loss)                                                                $  (858,059)                    $   164,195
Items not requiring (providing) cash
     Depreciation and amortization                                                     60,769                         49,275
     Compensatory issuance of common stock and stock options                                -                         15,000
     Amortization of debt discount included in interest expense                       135,497                         93,750
Changes in
     Trade accounts receivable                                                        158,761                      (373,488)
     Due from factor                                                                (917,002)                    (1,664,693)

     Inventories                                                                      348,308                        226,395

     Prepaid expenses and other current assets                                         21,559                       (10,494)

     Accounts payable                                                                (96,860)                        370,222

     Accrued expenses and other                                                      (51,930)                         29,927
                                                                            ------------------          ---------------------
        Net cash used in operating activities                                     (1,198,957)                     (1,099,911)
                                                                            ------------------          ---------------------

Investing Activities:

     Purchases of property and equipment                                             (25,761)                       (15,068)
                                                                            ------------------          ---------------------
        Net cash used in investing activities                                        (25,761)                       (15,068)
                                                                            ------------------          ---------------------

Financing Activities:

     Principal payments on long-term debt                                            (54,513)                       (47,721)

     Proceeds from issuance of stockholders' notes payable                            150,000                              -

     Principal payments on capital lease obligations                                 (13,605)                        (6,492)

     Proceeds from issuance of short-term debt                                        150,000                              -
     Payment of costs of ongoing stock registration                                  (32,278)                              -
     Advances from factor, net                                                        968,685                      1,149,139
                                                                            ------------------          ---------------------
        Net cash provided by financing activities                                   1,168,289                      1,094,926
                                                                            ------------------          ---------------------

Increase (Decrease) in Cash and Cash Equivalents                                     (56,429)                       (20,053)

Cash and Cash Equivalents, Beginning of Year                                          121,716                        148,072
                                                                            ------------------          ---------------------

Cash and Cash Equivalents, End of Year                                              $  65,287                    $   128,019
                                                                            ==================          =====================



        See accompanying notes to the consolidated financial statements.

                                      F-7



                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)


1.  General

The accompanying unaudited interim consolidated financial statements of
Decorize, Inc. (the "Company") have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission (the "Commission") for
reporting on Form 10-QSB. Accordingly, certain information and footnotes
required by generally accepted accounting principles for complete financial
statements have been omitted. These interim statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Form 10-KSB for the fiscal year ended June 30, 2003.

The information contained herein reflects all normal and recurring adjustments,
which, in the opinion of management, are necessary for a fair presentation of
the results of operations and financial position. The results of operations for
the interim periods are not necessarily indicative of the results to be expected
for the full year.

At September 30, 2003, the Company has a stock-based employee compensation plan.
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.

                                                                                    Three Months Ended
                                                                                       September 30,
                                                                                2003                  2002
                                                                                ----                  ----

Net income (loss), as reported                                                   $ (858,059)              $ 164,195
Add: Stock-based employee compensation expense included
in reported net income, net of tax effects                                                 -                 15,000

Less: Total stock-based employee compensation expense
 determined under the fair value based method, net of income taxes                 (113,683)              (396,054)
                                                                                 -----------            -----------

Pro forma net income (loss)                                                      $ (971,742)             $(216,859)
                                                                                 ===========             ==========

Earnings (loss) per share:
     Basic - as reported                                                           $  (0.07)               $   0.02
     Basic - pro forma                                                             $  (0.08)             $   (0.02)
     Diluted - as reported                                                         $  (0.07)               $   0.02
     Diluted - pro forma                                                           $  (0.08)              $  (0.02)

2.  Earnings Per Share

Basic earnings per share are computed by dividing net loss by the weighted
average number of common shares outstanding during the period. Diluted earnings
per share are computed similar to basic earnings per share except the
denominator is increased to include the number of additional common shares that
would have been outstanding if dilutive potential common shares had been issued.

Since all stock options and warrants would be antidilutive, basic and diluted
loss per share amounts are based on the weighted average number of common shares
outstanding.


                                      F-8


                                                                                 Quarter Ended
                                                               -----------------------     ---------------------------
                                                                    September 30,              September 30,
                                                                        2003                        2002
                                                               ------------------------    -----------------------
Numerator
Net income (loss) for basic and diluted
     earnings per share                                                    $ (858,059)                  $ 164,195

Denominator
Denominator for basic earnings (loss) per share -
     weighted average shares                                                11,270,693                 10,432,774
Effect of employee stock options and warrants                                       --
                                                                                                  265,854
                                                               ------------------------    -----------------------
Denominator for diluted earnings (loss) per share -
     adjusted weighted average shares and
     assumed conversions                                                    11,270,693                 10,698,628
                                                               ========================    =======================

Basic earnings (loss) per share                                             $   (0.07)                   $   0.02
                                                               ========================    =======================

Diluted earnings (loss) per share                                           $   (0.07)                   $   0.02
                                                               ========================    =======================

3.  Inventories

Inventories as of September 30, 2003 consist of the following:

         Finished Products                           $  2,457,414
         Raw Materials                                    229,680
         Work in Process                                   10,628
                                                    --------------
                                                      $ 2,697,722
                                                    ==============
4.  Debt

On July 1, 2003, the Company secured a $150,000 line of credit, bearing interest
at 7% annually, and maturing October 1, 2003, with Liberty Bank for use as
operating capital. The line of credit was secured by a $150,000 Certificate of
Deposit from James K. Parsons, an Executive Vice President and director of the
Company.

On July 17, 2003, the Company secured a promissory note with James K. Parsons,
an Executive Vice President and director of the Company, in the amount of
$150,000 with an interest rate of the prime rate (4%) plus 1%, maturing in 90
days.

5.  Contingencies

In December 2002, the Company received a written claim from two former employees
demanding payment for allegedly unpaid commissions, certain un-reimbursed
expenses and certain unexercised stock options. The Company has rejected all of
the demands made by the claimants. Management believes the claims of its former
employees are without merit, and the Company intends to vigorously defend itself
against these claims. No further actions have occurred regarding these claims.
No provision has been made in the consolidated financial statements for any loss
that might ultimately result from this matter. However, events could occur in
the near term that would change the amount of estimated loss materially.

We are also subject to certain other legal proceedings and claims that arise in
the ordinary course of business. In the opinion of management, based on
discussions with and advice of legal counsel, the amount of ultimate liability
with respect to these actions will not materially affect the consolidated
results of operations or our financial condition.

                                      F-9


6.  Subsequent Events

In October 2003, the Company obtained a 12 month line of credit in the amount of
$800,000 from James K. Parsons, the President and Chief Executive Officer of the
Company, with amounts outstanding bearing interest at a per annum rate equal to
the prime rate plus 1.25%. As additional compensation for establishing the loan,
the Company issued warrants, expiring September 30, 2006, allowing Mr. Parsons
to purchase 500,000 shares at $1.45 per share. The warrants will be recorded at
fair value, with the resulting discount reducing the carrying value of the debt.
The discount will be amortized to interest expense over the term of the line of
credit.

7.  Recently Adopted Accounting Standards

In January 2003, the Financial Accounting Standards Board (FASB) issued
interpretation 46, Consolidation of Variable Interest Entities (FIN 46). In May
2003, the FASB issued Statement of Financial Accounting Standards No. 150,
Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity. The Company adopted both of these new standards
effective July 1, 2003, which had no impact on its consolidated results of
operations or financial position.





                                      F-10


                         Independent Accountants' Report



Board of Directors
Decorize, Inc.
Springfield, Missouri


We have audited the accompanying consolidated balance sheets of Decorize, Inc.
as of June 30, 2003 and 2002, and the related consolidated statements of
operations, stockholders' equity and cash flows for the years 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, 2003 and 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, except for Note 12 as to which the date is September 24, 2003



                                      F-11


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

Assets

                                                                                    2003                  2002
                                                                            --------------------  --------------------
    Current Assets
        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-12


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

Liabilities and Stockholders' Equity

                                                                                   2003                  2002
                                                                            --------------------  --------------------
    Current Liabilities
        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
                                                                               ===============       ===============

See Notes to Consolidated Financial Statements



                                      F-13


                                 Decorize, Inc.
                      Consolidated Statements of Operations
                       Years Ended June 30, 2003 and 2002

                                                                                   2003                  2002
                                                                            --------------------  --------------------

    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-14


                                 Decorize, Inc.
                 Consolidated Statements of Stockholders' Equity
                       Years Ended June 30, 2003 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
                                  11,270,693     $   11,271      $   7,272,369     $   (3,347,902)     $    3,935,738
                                  ==========     ==========      =============     ===============     ==============


See Notes to Consolidated Financial Statements



                                      F-15



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

                                                                               2003          2002
                                                                          ------------   ------------
    Operating Activities
        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


             See Notes to Consolidated Financial Statements



                                      F-16



                                 Decorize, Inc.
                          Notes to Financial Statements
                             June 30, 2003 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 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
     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. The Company's factoring agreement includes
     certain financial targets, including a minimum consolidated tangible net
     worth measured



                                      F-17


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


     at the end of each month and certain net income or loss thresholds for each
     fiscal year. The Company's net loss exceeded the target net loss thresholds
     for the year ended June 30, 2003, and on September 12, 2003, the Company
     received a written waiver of that requirement for fiscal 2003 from the
     factor. At that time the factor also amended the factoring agreement to
     increase the allowable net loss for the fiscal year ended June 30, 2004.

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

           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 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.



                                      F-18



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


    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 9. 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
                                                   ------------------------------ ---------------------------------
            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

            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)
                                                          ==================             ==================



                                      F-19


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


     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
           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.



                                      F-20


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


Note 3:  Inventories

                                               2003                  2002
                                       --------------------  --------------------

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

           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.

          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


                                      F-21


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



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

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

                                                                              $      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.



                                      F-22


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

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

     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.


                                      F-23


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



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

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

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


                                      F-24


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


                                                                                   2003                  2002
                                                                            --------------------  --------------------


                  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

     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                                  2002
                                                                      Weighted                            Weighted
                                                                      Average                             Average
     Price                                            Shares           Price               Shares          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:



                                      F-25


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

                                                                                   2003                  2002
                                                                            --------------------  --------------------

           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                                                                      $1.82                   $1.58

     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

     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.


                                      F-26


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

     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. On September 24, 2003, the Company received a commitment for an
     unsecured line of credit with maximum borrowings of $800,000, bearing
     interest at prime plus 1.25% and maturing September 30, 2004, from an
     officer of the Company and his wife.

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 25, 2003. The Company has agreed to pay a total of approximately
     $39,000 plus 65,000 shares of common stock in severance benefits to the
     officer between September 1, 2003, and March 1, 2004.


                                      F-27


                                     PART II
                    INDEMNIFICATION OF DIRECTORS AND OFFICERS

          Section 145 of the Delaware General Corporation Law provides generally
and in pertinent part that a Delaware corporation may indemnify a director or
officer against expenses (including attorneys' fees), judgments, fines and
settlement payments actually and reasonably incurred in connection with an
action, suit or proceeding (other than an action by or in the right of the
corporation) to which he is made a party by virtue of his service to the
corporation, provided that he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation and,
with respect to any criminal action or proceeding, he had no reasonable cause to
believe his conduct was unlawful. Section 145 further provides that in
connection with the defense or settlement of any action by or in the right of
the corporation, a Delaware corporation may indemnify its directors and officers
against expenses actually and reasonably incurred by them if, in connection with
the matters in issue, they acted in good faith, in a manner they reasonably
believed to be in, or not opposed to, the best interests of the corporation,
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper. Section 145 permits a Delaware corporation to grant its
directors and officers additional rights of indemnification through bylaw
provisions and otherwise and to purchase indemnity insurance on behalf of its
directors and officers.

          Article 6.F of the registrant's Certificate of Incorporation
eliminates the liability of directors of the registrant for monetary damages for
breach of fiduciary duty as a director, except in the case of (i) any breach of
the director's duty of loyalty to the registrant, (ii) acts or omissions of the
director not in good faith or that involve intentional misconduct or a knowing
violation of law, (iii) any unlawful payment of a dividend or any unlawful stock
purchase or redemption, and (iv) any transaction from which the director
received an improper personal benefit. Such provisions further provide that if
any amendments to the Delaware General Corporation Law eliminate or further
limit the liability of directors, then the liability of the registrant's
directors shall be limited to the fullest extent permitted by Delaware law in
addition to, and not in replacement of, the limitation on liability provided by
Article 6.F. Paragraph 4 of Section 6.F of the Certificate of Incorporation also
requires the registrant to maintain Bylaw provisions that require mandatory
indemnification of directors to the maximum extent permitted by the Delaware
General Corporation Law. Section 48 of the registrant's Bylaws provides,
generally, that directors and officers shall be indemnified by the registrant
against any liability for acting in such capacity to the fullest extent
permitted under Delaware law. The registrant also maintains a directors' and
officers' liability insurance policy insuring directors and officers of the
registrant for covered losses as defined in the policy.


                   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                                           $ 114,000
Accounting Fees and Expenses                                      $  62,000
Transfer Agent Fees and Expenses                                  $   5,000
Expenses of Selling Stockholders                                  $  25,000
                                                                  ---------

Total                                                              $211,538
                                                                  =========

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


                                     PII-1


                     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 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
were exercisable at an exercise price equal to $2.00 per share until they
expired 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


                                     PII-2

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 warrants held by Mr. Bohren and Mr. Dorgan expired by their
terms on June 30, 2003, without being exercised. 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 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


                                     PII-3


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 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
to 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 and 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 issued
him 30,000 shares of our common stock. 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


          On October 3, 2003, we issued a line of credit note to James K.
Parsons, Decorize's President and CEO in the amount of $800,000 at an
interest rate of prime plus 1.25%, together with 500,000 warrants exercisable at
$1.40 per share. On December 10, 2003, the note was amended to increase the
principal amount available to $1,000,000, and Mr. Parsons was issued an
additional 200,000 warrants exerciseable at $1.20 per share. The note is due in
full on September 30, 2004. The initial set of warrants are exercisable until
September 30, 2006, and the second set of warrants terminate on December 31,
2006. Mr. Parsons represented that he was an "accredited investor" for purposes
of the Securities Act and indicated that he 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.

          In December 2003, we entered into an Investment Banking/Advisory
Agreement with First Securities USA, Inc., acting through its SBI USA division
(member NASD/SiPC), which provides for First Securities to act as the Company's
exclusive financial advisor for a twelve month period ending November 10, 2004.
The Investment Banking/Advisory Agreement requires the Company to issue 100,000
shares of common stock to First Securities upon execution of the agreement and
to issue warrants to purchase another 1,500,000 shares of common stock at an
initial exercise price equal to $2.00 per share within 90 days from the
execution of the agreement unless the agreement is terminated before that time.
The warrants will expire nine months after they are issued. In their capacity as
financial advisors to Decorize, First Securities 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. First Securities also represented to us that
it is 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-5



                                    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. (13)
10.1 Promissory Note dated June 15, 2001 between Decorate, Inc. and Jon T. Baker
     (1)
10.2 Promissory Note dated June 15, 2001 between Decorate, Inc. and James K.
     Parsons (1)
10.3 Employment Agreement between Decorate, Inc. and Jon T. Baker dated June 15,
     2001 (1)
10.4 Employment Agreement between Decorate, Inc. and James K. Parsons dated June
     15, 2001 (1)
10.5 Promissory Note dated July 31, 2001 between Decorize, Inc. and John Michael
     Sandel and Kitty Sandel (3)
10.6 Employment Agreement between Decorize, Inc. and John Michael Sandel dated
     July 31, 2001. (3)
10.7 Decorize, Inc. 1999 Stock Option Plan (6)
10.8 Form of Employee Incentive Stock Option Notice and Agreement (6)
10.9 Lease Agreement between C. R. Wehr, Jr. and GuildMaster, Inc. dated
     December 1, 1996 for land and commercial structure at 2655 North Airport
     Commerce Avenue, Springfield, Missouri (1)
10.10 Lease dated June 23, 1997 between Phoenix Home Life Mutual Insurance
      Company and GuildMaster, Inc. for furniture showroom space in High Point,
      North Carolina (1)
10.11 Sublease agreement dated June 9, 1998 between Southern Accessories Today,
      Inc. and GuildMaster, Inc. for showroom space in the Atlanta Merchandise
      Mart, Atlanta, Georgia (1)
10.12 Note and security agreements by and among GuildMaster, Inc., Sac River
      Valley Bank and the U.S. Small Business Administration dated August 13,
      1996 (1)
10.13 Lease Agreement between Faith Walk Designs, Inc. and Republic Leasing
      Company dated May 18, 1998 (1)
10.14 Equipment Lease between Faith Walk Designs, Inc. and Monex Leasing dated
      January 29, 1998 (1)
10.15 Form of Guaranty between GuildMaster, Inc. and The CIT Group/Commercial
      Services, Inc., dated January 30, 2003 (10)


                                     PII-6

10.16 Form of Guaranty between Faith Walk Designs, Inc. and The CIT
      Group/Commercial Services, Inc., dated January 30, 2003 (10)
10.17 Factoring Agreement between Decorize, Inc. and The CIT Group/Commercial
      Services, Inc., dated January 30, 2003 (10)
10.18 Separation Agreement between Decorize, Inc. and Jon T. Baker, dated August
      25, 2003 (11)
10.19 First Amendment to Factoring Agreement and Waiver Letter between Decorize,
      Inc. and the CIT Group/Commercial Services, Inc., dated September 2003.
      (12)
10.20 Investment Banking/Advisory Agreement between Decorize, Inc. and First
      Securities USA, Inc., dated December 3, 2003 (13)
10.21 Amended and Restated Line of Credit Promissory Note, dated December 10,
      2003, payable by Decorize, Inc. to the order of James K. Parsons, in the
      original principal amount of $1,000,000 (13)
10.22 Warrant for the purchase of 500,000 shares of common stock issued in the
      name of James K. Parsons, dated October 3, 2003
10.23 Warrant for the purchase of 200,000 shares of common stock issued in the
      name of James K. Parsons, dated December 10, 2003
21      List of Subsidiaries of Decorize, Inc. (10)
23.1    Consent of BKD, LLP (13)
23.2    Consent of Hallett & Perrin, P.C. (included in Exhibit 5)
24      Power of Attorney (11)
----------------------
(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 Registration Statement on Form SB-2
     filed by Guidelocator.com on September 29, 1999 (file no. 000-88083).
(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 6, 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 previously as an exhibit to Amendment No. 4 to the Registration
     Statement on Form SB-2 filed by Decorize, Inc. on October 10, 2003.
(12) Filed previously as an exhibit to Amendment No. 5 to the Registration
     Statement on Form SB-2 filed by Decorize, Inc. on November 13, 2003.
(13) 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.


                                     PII-7


         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.





                                     PII-8


                                   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 December 18, 2003 .

                          DECORIZE, INC.

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


                                POWER OF ATTORNEY

         Each of the undersigned hereby appoints James K. Parsons as the
attorney and agent for the undersigned, with full power of substitution, for and
in the name, place and stead of the undersigned, to sign and file with the
Securities and Exchange Commission under the Securities Act of 1933 any and all
amendments and exhibits to this registration statement and any and all
applications, instruments and other documents to be filed with the Securities
and Exchange Commission pertaining to the registration of the securities covered
hereby, with full power and authority to do and perform any and all acts and
things whatsoever requisite or desirable.

         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 Office
Date:  December 18, 2003                  (principal executive officer)

 /s/ Alex Budzinsky
-----------------------------------
Alex Budzinsky                            Executive Vice President and
Date:  December 18, 2003                  Chief Financial Officer (principal
                                          financial officer)

  /s/ Brent Olson
-----------------------------------
Brent Olson                               Vice President of Finance
Date:  December 18, 2003                  and Treasurer (principal accounting
                                          officer)

  /s/ Kevin Bohren
-----------------------------------
Kevin Bohren                              Director
Date:  December 18, 2003

  /s/ John E. Bagalay, Jr.
-----------------------------------
John E. Bagalay, Jr.                      Director
Date:  December 18, 2003


/s/ Fabian Garcia
-----------------------------------
Fabian Garcia                             Director
Date:  December 18, 2003



                                     PII-9





-----------------------------------
Timothy M. Dorgan                         Director
Date:


/s/ J. Michael Sandel
-----------------------------------
J. Michael Sandel                         Director and Vice President
Date:  December 18, 2003



*By:
      -----------------------------------------------
         James K. Parsons
         Attorney-In-Fact
Date:  December 18, 2003


                                     PII-10