<PAGE>

                                     FORM 10-Q 
                                          
                         SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, D.C.  20549
                                          

(Mark one)


[ X ]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED MARCH 31, 1998

                                         or

[   ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER:  0-7513







                          ARTISTIC GREETINGS INCORPORATED
               ------------------------------------------------------
               (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                                   <C>
                          DELAWARE                                                  16-0909929
                          --------                                                  ----------
(State or other jurisdiction of incorporation or organization)         (I.R.S. Employer Identification No.)

                                  ONE KOMER CENTER
                              ELMIRA, NEW YORK  14902
                                   (607) 733-5541
                                   --------------
(Address of principal executive offices, including Registrant's telephone number)

</TABLE>






Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.  

[ X ] Yes  [   ] No


As of May 8, 1998 the Registrant had 5,844,946 shares of its common stock issued
and outstanding.


<PAGE>

                          ARTISTIC GREETINGS INCORPORATED
                                          
                                  FORM 10-Q INDEX
                                          
                     FOR QUARTERLY PERIOD ENDED MARCH 31, 1998



                                                                        Page No.
                                                                        --------

PART I.   FINANCIAL INFORMATION

          Item 1.   Financial Statements

                      Balance Sheets . . . . . . . . . . . . . . . . .     3

                      Statements of Operations . . . . . . . . . . . .     4

                      Statements of Cash Flows . . . . . . . . . . . .     5

                      Notes to Financial Statements  . . . . . . . . .     6

          Item 2.   Management's Discussion and Analysis of
                      Financial Condition and Results of Operations  .     9

PART II.  OTHER INFORMATION

          Item 3.   Other Information  . . . . . . . . . . . . . . . .    13

          Item 4.   Exhibits and Reports on Form 8-K . . . . . . . . .    13

                    Signatures . . . . . . . . . . . . . . . . . . . .    14

                    Exhibit Index  . . . . . . . . . . . . . . . . . .    15


                                          2

<PAGE>

                            PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                          ARTISTIC GREETINGS INCORPORATED
                                   BALANCE SHEETS

<TABLE>
<CAPTION>
 

                                                                                            March 31,      December 31,
                                                                                              1998             1997
                                                                                              ----             ----
In Thousands of Dollars, Except per Share Data                                             (Unaudited)
----------------------------------------------

                            ASSETS
<S>                                                                                         <C>            <C>
CURRENT ASSETS:
  Cash and cash equivalents  . . . . . . . . . . . . . . . . . . . . . . . . . . . .         $    17        $   160
  Marketable securities:
    Trading, at market (cost $1,237 in 1998 and $1,230 in 1997)  . . . . . . . . . .           1,557          1,403
    Available for sale, at market (cost $409 in 1998 and $409 in 1997) . . . . . . .             494            458
  Trade receivables - net  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           2,163          2,343
  Income taxes receivable  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             420            420
  Inventories  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           2,459          2,518
  Prepaid advertising  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           2,320          3,492
  Prepaid expenses and other current assets  . . . . . . . . . . . . . . . . . . . .             323            384
                                                                                             -------        -------
       TOTAL CURRENT ASSETS  . . . . . . . . . . . . . . . . . . . . . . . . . . . .           9,753         11,178

Deferred advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           4,400          3,683
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . .          16,250         16,301
Cash surrender value of life insurance . . . . . . . . . . . . . . . . . . . . . . .             642            629
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              37             67
                                                                                             -------        -------
       TOTAL ASSETS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         $31,082        $31,858
                                                                                             =======        =======

         LIABILITIES AND STOCKHOLDERS' EQUITY


CURRENT LIABILITIES:
  Current portion of long-term debt  . . . . . . . . . . . . . . . . . . . . . . . .         $ 4,043        $ 4,494
  Accounts payable, trade (includes checks in transit of $2,205 in 1998 and 
   $2,485 in 1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          11,609         12,804
  Accrued liabilities  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           1,475          1,521
  Customer advances  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             980            571
  Income taxes and other payables  . . . . . . . . . . . . . . . . . . . . . . . . .             347             --
                                                                                             -------        -------
       TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . .          18,454         19,390

Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             900            936

Other liabilities  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             258            283
                                                                                             -------        -------
       TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          19,612         20,609

STOCKHOLDERS' EQUITY:

  Common stock, par value $.10:
    Authorized:  10,000,000 shares;
    Issued: 6,538,520 shares in 1998 and in 1997 . . . . . . . . . . . . . . . . . .             654            654
  Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . .          11,055         11,055
  Unrealized (losses) gains on marketable securities held as available for sale, 
   net of tax effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              36             --
  Retained earnings  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             647            462
                                                                                             -------        -------
                                                                                              12,392         12,171
  Less: Treasury stock, at cost (695,356 shares in 1998 and in 1997) . . . . . . . .            (922)          (922)
                                                                                             -------        -------
       TOTAL STOCKHOLDERS' EQUITY  . . . . . . . . . . . . . . . . . . . . . . . . .          11,470         11,249

       TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  . . . . . . . . . . . . . . . . .         $31,082        $31,858
                                                                                             =======        =======

THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

</TABLE>
 

                                          3

<PAGE>

                          ARTISTIC GREETINGS INCORPORATED
                         UNAUDITED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
 

                                                                                                  Quarter Ended
                                                                                                  -------------
                                                                                            March 31,      March 31,
                                                                                              1998            1997
                                                                                              ----            ----
In Thousands of Dollars, Except per Share Data                                             (Unaudited)
----------------------------------------------

<S>                                                                                         <C>            <C>

Net sales  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      $   26,025     $   24,218
Cost of sales  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          11,342          9,512
                                                                                          ----------     ----------
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          14,683         14,706

Selling, advertising, general and administrative expenses  . . . . . . . . . . . . .          14,503         13,550
                                                                                          ----------     ----------
INCOME FROM OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             180          1,156

Other income (expense)
   Interest and dividend income  . . . . . . . . . . . . . . . . . . . . . . . . . .              11             33
   Net unrealized gains (losses) on trading securities . . . . . . . . . . . . . . .             145            (78)
   Net realized gains (losses) on marketable securities  . . . . . . . . . . . . . .               8              6
   Interest expense  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             (76)           (60)
   Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              21             22
                                                                                          ----------     ----------
INCOME BEFORE TAXES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             289          1,079

Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             104            388
                                                                                          ----------     ----------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      $      185     $      691
                                                                                          ==========     ==========
Net income per common and common equivalent share (basic and diluted)  . . . . . . .             .03            .11
                                                                                          ==========     ==========

Weighted average number of common shares outstanding . . . . . . . . . . . . . . . .       5,886,723      6,353,531


THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

</TABLE>
 

                                          4

<PAGE>

                          ARTISTIC GREETINGS INCORPORATED
                         UNAUDITED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
 

                                                                                                  Quarter Ended
                                                                                                  -------------
                                                                                            March 31,      March 31,
                                                                                              1998            1997
                                                                                              ----            ----
In Thousands of Dollars, Except per Share Data                                             (Unaudited)
----------------------------------------------

<S>                                                                                         <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         $   185        $   691
Adjustments to reconcile net income (loss) to net cash provided by 
  (used in) operating activities:
  Depreciation and amortization  . . . . . . . . . . . . . . . . . . . . . . . . . .             599            424
  Allowance for doubtful accounts. . . . . . . . . . . . . . . . . . . . . . . . . .             100            (75)
  Net unrealized losses (gains) on trading securities  . . . . . . . . . . . . . . .            (145)            78
  Net realized losses (gains) on marketable securities (equity)  . . . . . . . . . .              (8)            (6)
  Purchase of trading securities . . . . . . . . . . . . . . . . . . . . . . . . . .            (195)          (384)
  Proceeds from sale of trading securities . . . . . . . . . . . . . . . . . . . . .             172            362
  Accretion of common stock subject to a put option  . . . . . . . . . . . . . . . .              --             78
  Decrease (increase) in cash   surrender value of life insurance  . . . . . . . . .              --            (14)
  Decrease (increase) in assets:
    Trade receivables  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              80            173
    Inventories  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              60           (304)
    Prepaid advertising, prepaid expenses and other  . . . . . . . . . . . . . . . .           1,263          1,265
    Deferred advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            (717)          (867)
  Increase (decrease) in liabilities:
    Checks-in-transit  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            (279)           173
    Accounts payable, trade  . . . . . . . . . . . . . . . . . . . . . . . . . . . .            (915)          (489)
    Accrued liabilities  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             (47)          (598)
    Customer advances  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             409            449
    Income taxes and other payables  . . . . . . . . . . . . . . . . . . . . . . . .             347            244
                                                                                             -------        -------
       NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES . . . . . . . . . . . . .             909          1,200
CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property, plant and equipment. . . . . . . . . . . . . . . . . . . . . .            (568)        (1,223)

Proceeds from sale of marketable securities  . . . . . . . . . . . . . . . . . . . .              42             --
Purchases of marketable securities . . . . . . . . . . . . . . . . . . . . . . . . .             (37)            --
                                                                                             -------        -------
       NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES . . . . . . . . . . . . .            (563)        (1,223)
CASH FLOWS FROM FINANCING ACTIVITIES:

Repayment of borrowings from the lines of credit . . . . . . . . . . . . . . . . . .          (9,262)        (1,732)

Proceeds from the lines of credit  . . . . . . . . . . . . . . . . . . . . . . . . .           8,811          1,732
Proceeds from issuance of common stock, treasury stock
  and options exercised. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              --             23
Payments to New York State Urban Development Corporation . . . . . . . . . . . . . .             (25)           (25)
Repayment of long-term debt  . . . . . . . . . . . . . . . . . . . . . . . . . . . .             (13)           (36)
                                                                                             -------        -------
       NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES . . . . . . . . . . . . .            (489)           (38)

Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . .            (143)           (61)
Cash and cash equivalents at beginning of quarter  . . . . . . . . . . . . . . . . .             160             99
                                                                                             -------        -------
Cash and cash equivalents at end of quarter  . . . . . . . . . . . . . . . . . . . .         $    17        $    38
                                                                                             =======        =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: 

Cash paid (received) during the quarter for:

  Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         $    75        $    (2)
  Income taxes, net of refunds received. . . . . . . . . . . . . . . . . . . . . . .         $    --        $   145


THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

</TABLE>


                                          5

<PAGE>


                          ARTISTIC GREETINGS INCORPORATED
                      NOTES TO CONDENSED FINANCIAL STATEMENTS
                                    (UNAUDITED)

(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)

NOTE 1.   STATEMENT OF MANAGEMENT

     The condensed financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission.  Certain information and footnote
disclosures normally included in financial statements, prepared in accordance
with generally accepted accounting principles, have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading.

     In the opinion of management, the information contained herein reflects all
adjustments that are of a normal recurring nature and necessary to a fair
statement of the results of operations for the periods presented in the
statements of operations included herein.

NOTE 2.   FORM 10-K

     Reference is made to the following footnotes included in the Company's 1997
report on Form 10-K as amended by Forms 10-K/A, 10-K/A2 and 10-K/A3.

     1.   Summary of Significant Accounting Policies
     2.   Marketable Securities
     3.   Inventories
     4.   Property, Plant and Equipment
     5.   Accrued Liabilities
     6.   Income Taxes
     7.   Leases
     8.   Debt
     9.   Defined Contribution Savings Plan
     10.  Stock Options
     11.  Stockholders' Equity
     12.  Related Party Transactions
     13.  Commitments and Contingencies
     14.  Supplemental Disclosure of Noncash Investing and Financing Activity
     15.  New Accounting Standards


                                          6

<PAGE>

                          ARTISTIC GREETINGS INCORPORATED
                                    (Unaudited)

(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)


NOTE 3.   NET INCOME PER SHARE

     Net income or loss per common and common equivalent share is computed on
the basis of the weighted average of common and common equivalent shares
outstanding during the period.  The weighted average number of shares
outstanding was 5,886,723 for the quarter ended March 31, 1998 and 6,353,531 for
the quarter ended March 31, 1997.

     The Company has adopted Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS No. 128) and
restated previously reported earnings per share.  Basic earnings per common
share was computed by dividing net income by the weighted average number of
shares of common stock outstanding during the three month periods ending March
31, 1998 and 1997.  Diluted earnings per share were computed by the weighted
number of common shares outstanding and common stock equivalents using the
treasury stock method for the three month periods ending March 31, 1998 and
1997.

     All references to net income per share should be assumed to have been
calculated under SFAS No. 128.

     The following table sets forth the computation for basic and diluted
earnings per share for the three month periods ended March 31, 1998 and 1997.

<TABLE>
<CAPTION>

                                          3 MONTHS ENDED      3 MONTHS ENDED
                                          MARCH 31, 1998      MARCH 31, 1997
                                          --------------      --------------
<S>                                        <C>                 <C>
          Net Income - basic                $      185          $      691
          Net Income - diluted                     185                 691

          Shares used to compute
          net income per share               5,886,723           6,353,531

</TABLE>

NOTE 4.   COMPREHENSIVE INCOME

     The Company adopted SFAS No. 130 in the first quarter of 1998.  This
standard requires disclosure of total non-owner changes in stockholders' equity,
which is defined as net income plus direct adjustments to stockholders' equity
such as equity and cash investment adjustments and pension liability
adjustments.  On this basis, these non-owner changes in stockholders' equity,
including net income, for the first quarter of 1998 and 1997, totaled $278 and
$694, respectively.

<TABLE>
<CAPTION>

                                                    3/31/98          3/31/97
                                                    -------          -------
<S>                                                 <C>              <C>
     Comprehensive Income:
          Net Income                                 $185             $690
          Realized gains on available for sale
          securities (net of tax $52 and
          $2 in 1998 and 1997 respectively)            93                4
                                                     ----             ----
     Total Comprehensive Income                      $278             $694
                                                     ====             ====

</TABLE>


                                          7

<PAGE>

                          ARTISTIC GREETINGS INCORPORATED
                                    (Unaudited)

(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)


NOTE 5.   PROPOSED MERGER

     On December 21, 1997, the Company entered into an agreement and plan of
Merger ("Merger Agreement") with MDC Communications Corporation an Ontario,
Canada corporation, and AGI Acquisition Co., a Delaware corporation and a
wholly-owned subsidiary of MDC ("Newco") whereby Newco will merge with and into
the Company (the "Merger") pursuant to which the Company will become a
wholly-owned subsidiary of MDC and each outstanding share of common stock, par
value $0.10 per share, of the Company (other than stock of the Company owned by
the Company, MDC or any of their respective subsidiaries) will be converted into
the right to receive $5.70 in cash without interest.  It is a condition to the
consummation of the Merger Agreement that the Company have completed an asset
distribution as set forth in an agreement ("Asset Purchase Agreement") between
the Company and Artistic Direct Incorporated ("ADI"), a New York corporation,
for the sale to ADI of certain assets relating to the personalized product and
catalog businesses of the Company (the "P&C" Businesses) for $9 million in cash
and the assumption of certain liabilities related to the P&C Businesses.

NOTE 6.   GOING CONCERN MATTERS

     As shown in the financial statements for the year ended December 31, 1997,
the Company incurred a net loss of $1,064 for the year and has classified its
revolver as current for the period ended March 31, 1998.  These factors among
others raise substantial doubt about the Company's ability to continue as a
going concern.

     The financial statements do not include any adjustments relating to the
recoverability and classification of liabilities that may be necessary should
the Company be unable to continue as a going concern.

     The Company was not in compliance with certain of the financial covenants
under its Revolver as of March 31, 1998.  The Company's continuation as a going
concern is dependent upon its ability to generate sufficient cash flows to meet
its obligations on a timely basis, to comply with the terms of its Revolver
agreement, to obtain additional financing or refinancing as may be required, and
ultimately to attain profitability.

     In light of the Company's projected earnings and cash flows, management
believes the Company has sufficient financial resources to maintain its current
level of operations.  However, the Company has violated the minimum tangible net
worth and cash flow covenants for the first quarter of 1998.  There can be no
assurance that the lender will provide a waiver for any future covenant
violations nor that the company will be able to obtain other financing. 
Accordingly, the Company has classified the Revolver as current liability.

     As described in Note 5, the Company has entered into an agreement and plan
of merger with MDC pursuant to which the Company will become a wholly-owned
subsidiary of MDC and the Revolver referred to above will be assumed by MDC.  It
is a condition of the merger that the Company have completed the sales of
certain assets and the assumption of certain liabilities relating to the P&C
Businesses of the Company to ADI.  ADI has obtained a commitment from a
financial institution to finance the acquisition of the P&C Businesses.

     Further, should the plan of merger and asset purchase not occur, the
Company believes that it would be able to obtain other financing to replace the
Revolver.  However, there can be no assurances that the Company will be
successful in obtaining such financing.


                                          8

<PAGE>

                          ARTISTIC GREETINGS INCORPORATED
                                    (Unaudited)

(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS.

CERTAIN OF THE INFORMATION CONTAINED IN THIS FORM 10-Q CONTAIN FORWARD-LOOKING
STATEMENTS.  FOR A DISCUSSION OF IMPORTANT FACTORS THAT COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM SUCH FORWARD-LOOKING STATEMENTS, PLEASE
CAREFULLY REVIEW THE DISCUSSION OF RISK FACTORS CONTAINED IN THIS ITEM 2, AS
WELL AS THE OTHER INFORMATION CONTAINED IN THE REPORT AND IN THE COMPANY'S
PERIODIC REPORTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC" OR
"COMMISSION").

RESULTS OF OPERATIONS:

NET SALES
In the first three months of 1998, the Company's net sales increased 7.5%, to
$26,025 from $24,218 in the year earlier period.  All three of the Company's
principal business lines (personalized products, catalog and checks) exhibited
gains due to better response rates from more effective advertising initiatives. 
Personalized products marked a 5.9% advance, to $9,585 from $9,051, on the
strength of more sharply focused advertising in mass media.  Catalog was up
26.7%, to $3,178 from $2,508, in response to wider circulation.  Checks advanced
by 9.2%, to $12,386 from $11,338, mostly from increased prices.

COST OF SALES
The major components of cost of goods sold are materials, which consist
primarily of paper and gift items; direct labor; and manufacturing overhead.

Materials cost increased to $6,899, or 26.5% of sales through the first three
months, from $6,021, or 24.9% of sales for the year earlier period, this largely
the result of a higher proportion of catalog sales in the overall revenue mix.

Direct labor charges were flat on a dollar basis, at $1,297 for the first
quarter of 1998 versus $1,295 for the first quarter of 1997.  This represented,
on the period's higher volume, a decrease as a percentage of sales to 5.0% from
5.3%.  Higher order entry and production costs driven by increased volume
through the quarter were more than offset by lower call center costs.  The call
center function, which had been outsourced by the Company in the Fall of 1997 to
more efficiently handle seasonal volume, was not fully back in-house until mid
February, 1998.

Manufacturing overhead increased to $3,145, or 12.1% of sales for the first
quarter of 1998 from $2,195, or 9.1% a year earlier.  Contributing to this
increase was the call center outsourcing arrangement, which shifted expense to
this category from direct labor; severance paid early in the quarter with work
force reductions; and higher depreciation expense.


                                          9

<PAGE>

                          ARTISTIC GREETINGS INCORPORATED
                                    (Unaudited)

(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)

SELLING, GENERAL AND ADMINISTRATIVE (SG&A)
The three largest components of SG&A are advertising, postage and labor.

Advertising expense increased to $10,011, or 38.5% of sales for the first three
months of 1998, from $8,636, or 35.7% of sales in the comparable year earlier
period.  Advertising expense for personalized products increased by 10.1%, to
$4,842 from $4,398, on wider circulation through mass media.  Catalog
advertising expense grew by 32.5%, to $1,456 from $1,099, as more catalogues
were printed and circulated, consistent with the Company's plan to expand its
catalog revenues.  Check advertising expense was up by 24.0%, to $2,847 from
$2,296, as the Company successfully pursued higher response rate vehicles and
broader mass media circulation.

Postage and shipping expense for the first quarter of 1998 increased to $2,390
from $2,239 for the first quarter of 1997.  As a component of sales, however,
these costs remained flat at 9.2%.  Higher relative mailing costs related to the
outsourced check-printing operation was balanced by more efficient matching of
multi-item orders of personalized and catalog products. 

Administrative expenses were lower through the first three months of 1998, at
$2,101, or 8.1% of sales, from $2,330, or 9.6% of sales a year earlier.  Reduced
personnel costs stemming from the restructuring of certain managerial
responsibilities contributed to the decline, as did lower depreciation expense.

OTHER EXPENSE (INCOME)
The Company recorded net other income of $109, or 0.4% of sales, through the
first three months of 1998, compared to a net other expense of $422 or (1.7)% of
sales for the year earlier peirod.  Most of this swing results from the absence
in the first quarter of 1998 of accruals for employee incentive compensation or
for contributions to the Company profit sharing plan.  In the first quarter of
1997, these accruals related to the earnings posted for the 1996 fiscal year; in
fiscal 1997 the Company posted a net loss.  Additionally, the Company recorded a
$152 gain (realized and unrealized) on its portfolio of marketable securities in
the most recent quarter, this compared to a loss of $72 for the year earlier
period.

TAX PROVISION
A tax provision of $104 was recorded for the first three months of 1998,
compared to $389 for the first three months of 1997.  Both provisions reflect an
effective tax rate of 36%.

NET INCOME
The Company posted net income for the first quarter of 1998 of $185, or $0.03
per share.  This compares to $691, or $0.11 per share, for the year earlier
period.


                                          10

<PAGE>

                          ARTISTIC GREETINGS INCORPORATED
                                    (Unaudited)

(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)

LIQUIDITY & CAPITAL RESOURCES
In March 1996, the Company refinanced a demand discretionary line of credit with
Marine Midland Bank ("Marine") under which it can borrow up to $6,500, with a
revolving line of credit that is committed to the Company until January 1, 1999,
(the "Revolver").  The Company may borrow and repay at its option, and issue
letters of credit, up to an aggregate of $6,500 under the Revolver at either
Marine's quoted Prime Rate or the Money Market Rate as quoted by Marine at the
time of borrowing.  Additionally, Marine has provided letters of credit to
secure workers' compensation obligations of the Company in the amount of
approximately $107, which expire on March 31, 1999.  The amount of borrowings
available to the Company under the Revolver is dependent upon the amount of
accounts receivable and inventory, and the value of certain intangibles of the
Company (collectively, the "Collateral"), determined at the time as such
borrowing base is calculated quarterly.  The Revolver is secured by the
Collateral.  The Revolver contains a restriction on the payment of dividends as
well as financial and operating covenants requiring, among other things, the
maintenance of certain financial ratios, including minimum net worth, leverage
and working capital requirements.  Various modifications, including working
capital covenants, maturity date and valuation of collateral were made effective
May 30, 1996; November 30, 1996; December 31, 1996; March 31, 1997 and June 30,
1997.  The Revolver can be prepaid by the Company at any time without penalty. 
As of March 31, 1998, the Company was not in compliance with its minimum
tangible net worth and cash flow ratio covenants.  As of May 14, 1998, the
Company had requested and received from Marine a waiver of these covenants as of
March 31, 1998.

Cash and marketable securities totaled $2,021 at December 31, 1997 and $2,068 at
March 31, 1998.  Total liabilities decreased by $997, to $19,612 at March 31,
1998 from $20,609 at December 31, 1997. Long term debt decreased by $36, to $900
at March 31, 1998 from $936 at December 31, 1997.  Accounts payable were reduced
by $915, to $9,404 at March 31, 1998 from $10,319 at December 31, 1997, while
checks in transit dropped by $279, to $2,205 at March 31, 1998 from $2,485 at
December 31, 1997.

Working capital remained negative at March 31, 1998, the working capital deficit
growing to $8,701 from $8,212 as the increase in deferred advertising was only
partially funded by the period's earnings.  Accounts receivable dropped by $181
over the first quarter on improved collections. Inventory of $2,459 at March 31,
1998, was slightly lower than at the recent year end, which in combination with
the quarter's higher volume served to reduce inventory turns to 17 days from 20.
Prepaid advertising dropped by $1,171 over the three month period, the combined
result of the distribution during the quarter of several catalogues and other
advertising media and the reduction of expenditures in this area in anticipation
of seasonal slowing during the second quarter.  Deferred advertising,
accordingly, increased by $717, reflecting the higher quantity of active media
in circulation.

The Company had total availability under the Revolver of $6,500 at March 31,
1998, which is subject to a borrowing base formula and certain other conditions.
As of May 6, 1998, the Company had $4,699 outstanding under the Revolver and,
based upon the borrowing base formula, had the entire remaining balance, or
$1,801, available to it thereunder.  For additional information concerning the
terms of the Revolver, see the first paragraph above.

Management believes that the operating activities of the Company, together with
the availability under the Revolver, will substantially support its cash
requirements for the next twelve months and that sufficient capital resources
are available to the Company to provide adequate liquidity overall.  As of May
14, 1998, the Company had requested and received from Marine a waiver of the
covenants pertaining to the minimum tangible net worth and cash flow ratios of
the Company for the period ending 


                                          11

<PAGE>

                          ARTISTIC GREETINGS INCORPORATED
                                    (Unaudited)

(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)

March 31, 1998.  If the waiver were withdrawn or did not become effective, the
Company could be in default of its obligation under the Revolver.  Management is
of the opinion that inflation will not have a material effect on the operations
of the Company.


                                          12

<PAGE>

                          ARTISTIC GREETINGS INCORPORATED
                                    (Unaudited)


PART II - OTHER INFORMATION

ITEM 3.   OTHER INFORMATION.

     NONE


ITEM 4.   EXHIBITS AND REPORTS ON FORM 8-K.

     a)   Exhibits.  See Exhibit Index.

     b)   Reports on Form 8-K.  None. 


                                          13

<PAGE>

                                     SIGNATURES
                                          
                                          
     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                   ARTISTIC GREETINGS INCORPORATED



Dated:    May 14, 1998         By:
                                   ---------------------------------------------
                                   David A. Preucil
                                   Vice President Finance and
                                   Chief Financial Officer
                                   (Principal Financial and Accounting Officer)


                                          14

<PAGE>

                                    EXHIBIT INDEX


EXHIBIT NUMBER                DESCRIPTION                   PAGES

      11        Statement re: computation of per   See Note 3 to the Financial
                share earnings                     Statements contained in this
                                                   report

      27        Financial Data Schedule            Filed only with EDGAR filing,
                                                   per Regulation S-K, 
                                                   Rule 601(c)(1)(v)

      99        Risk Factors                       Filed Herewith


                                          15