UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C., 20549
                                   FORM 10-KSB

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1996

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934
For the transition period from         to
                               --------   -----------

Commission File Number: 33-17229-D

                                 ART CARDS, INC.
                          -----------------------------
                         (Name of Small Business Issuer
                                in its Charter)

        Colorado                                           84-0978589
 ------------------------------                         ---------------------
(State or Other Jurisdiction of                        (I.R.S. Employer
 Incorporation or Organization)                         Identification Number)

        933 Pearl Street
        Denver, Colorado                                        80203
 --------------------------------------                        --------
(Address of Principal Executive Offices)                      (Zip Code)

Issuer's Telephone:   (303) 831-9335

Securities registered under Section  12(b) or Section 12(g) of the Act:

                                      None

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the  Registrant  was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days. YES[ ] NO [X]

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the  best  of  the  Issuer's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [X]

The issuer had no revenues  for the fiscal year ended  December  31,  1996.  The
aggregate  market  value of the  voting  stock  held as of March  28,  1997,  by
nonaffiliates of the Registrant was $0 as there was no bid on that day.

As of March 28, 1997, Registrant had 876,602,000 shares of its $0.0001 par value
common stock outstanding.

     Transitional Small Business Disclosure Format (Check one):

                              Yes   [ ]    No {X}

                                        1

<PAGE>

                                   FORM 10-KSB
                                 ART CARDS, INC.


                                TABLE OF CONTENTS

Item
 No.                    Description                                         Page

                                     PART I

1.       Description of Business............................................   3
2.       Description of Property............................................   5
3.       Legal Proceedings..................................................   5
4.       Submission of Matters to a Vote of Security Holders................   5

                                     PART II

5.       Market for the Registrant's Common Equity and Related Stockholder
               Matters......................................................   7
6.       Management's Discussion and Analysis or Plan of Operations.........   7
7.       Financial Statements...............................................   8
8.       Changes in and Disagreements with Accountants on Accounting and
               Financial Disclosure.........................................   8

                                    PART III

9.       Directors, Executive Officers, Promoters and Control Persons;
               Compliance with Section 16(a) of the Exchange Act............   9
10.      Executive Compensation.............................................  10
11.      Security Ownership of Certain Beneficial Owners and Management.....  11
12.      Certain Relationships and Related Transactions.....................  12

                                     PART IV

13.      Exhibits and Reports on Form 8-K...................................  13
         Signatures.........................................................  14

                                        2

<PAGE>

                                   FORM 10-KSB
                                 ART CARDS, INC.

                                December 31, 1996

PART I

ITEM 1.   DESCRIPTION OF BUSINESS

     Art Cards, Inc.  ("Registrant" or the "Company") was incorporated under the
laws of the state of Colorado on January 30, 1984, as World Greetings,  Inc. And
changed its name to Art Cards,  Inc. on March 31,  1987.  The Company  designed,
manufactured, produced and marketed greeting cards.

     On November 7, 1993,  the Company sold its remaining  inventory of greeting
cards,  approximately  337,000,  for $22,000 and is no longer in the business of
designing,  manufacturing,  producing and marketing  greeting cards. The Company
has been  looking for a suitable  candidate  to merge with or be acquired by. To
date, the Company has not located a suitable candidate.

     (b) Financial Information About Industry Segments

     Since its inception,  the Company's revenues,  operating profit or loss and
identifiable  assets  were  attributable  to only one  industry  segment and the
Company has been engaged in only one line of business,  which was the designing,
manufacturing,  producing and  marketing of greeting  cards,  postcards,  poster
grams and similar products.

ITEM 2.   DESCRIPTION OF PROPERTY

     The Company's  executive  offices are located at 933 Pearl Street,  Denver,
Colorado, which is the home of the Company's President.

ITEM 3.   LEGAL PROCEEDINGS

     The Company is not a party to any legal proceedings.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     During the Company's  fourth quarter for the fiscal year ended December 31,
1996,  no matter was  submitted  to a vote of the  Company's  security  holders,
either by proxy solicitation or otherwise.


                                       3
<PAGE>

                                     PART II

ITEM 5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     There is no  established  public  trading  market for the Company's  common
stock.

     As of March 31, 1997, the Company had  approximately  993  shareholders  of
record of its common stock.

     The Company has not declared  cash  dividends on its common stock since its
inception  and the Company  does not  anticipate  paying a cash  dividend in the
foreseeable future.

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

Liquidity and Capital Resources

     During the fiscal year ended  December  31,  1996,  the  Company's  working
capital  deficit  changed  slightly  from  ($72,845)  at  December  31,  1995 to
($69,793) at December 31, 1994.  The decrease was the result of an  unsuccessful
merger  transaction  with Legacy  Brands,  Inc.  The Company is no longer in the
business of designing,  manufacturing,  producing and marketing  greeting  cards
although it still  accepts  special  orders for greeting  cards.  The  Company's
auditors  have  included a  qualification  in their  report as to the  Company's
ability to continue as a going concern due to the significant  operating  losses
and  working  capital  deficit.  The  Company  is  currently  seeking a business
combination. There are no assurances the Company will be successful in combining
with any other entity.

Results of Operations

     Year Ended December 31, 1996 Compared to Year Ended December 31, 1995

     The results of operations for the year ended December 31, 1996, reflect the
cessation of operations for the Company. Since the Company has ceased operations
the Company has minimal  operating  expenses,  primaily  representing  legal and
accounting  fees. The Company no longer actively  markets its greeting cards and
sold its entire inventory in 1993.

Inflation

     The  management of the Company does not believe that  inflation has had any
material effect on the Company during the fiscal year ended December 31, 1996.

ITEM 7.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The  financial  statements  are filed as part of this Annual Report on Form
10-KSB.

ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

     (a) On May 16, 1996, the Company  retained the firm of Janet Loss,  C.P.A.,
P.C. to serve as the Company's  principal  independent  accountants  in place of
Mitchell . Finley and Company,  P.C.,  which had served in that capacity for the
two fiscal years ended December 31, 1993. On June 7, 1996,  the Company  advised
Mitchell . Finley and Company,  P.C. that the Company was terminating Mitchell .
Finley and Company, P.C., as the Company's principal independent  accountants as
of May 16, 1996.

     (b) There was no disagreements  during the Company's two fiscal years ended
December 31, 1993, or any interim period subsequent  thereto between the Company
and Mitchell . Finley and Company,  P.C. on any matter of accounting  principles
or practices,  financial  statement  disclosure,  or auditing scope or procedure
which,  if not  resolved to the  satisfaction  of Mitchell . Finley and Company,
P.C., would have caused Mitchell . Finley and Company, P.C. to make reference in
its reports to the subject matter of such disagreement.

     (c) The  opinions of Mitchell . Finley and Company,  P.C. on the  Company's
financial  statements  or the fiscal  years  ended  December  31, 1993 and 1992,
contained no adverse  opinion or disclaimer  of opinion,  nor were such opinions
qualified as to uncertainty,  audit scope or accounting principles,  except that
such opinions raised  substantial  doubt about the Company's ability to continue
as a going concern.

     (d) The decision to change  accountants  was not approved by the  Company's
Board of Directors or any committee thereof.

                                        8

<PAGE>

                                    PART III

ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
          COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

     The present term of office of each  director will expire at the next annual
meeting of shareholders. The name, position with the Company and the age of each
director, and the period during which each director has served are as follows:

     Name and position, if any,
     in the Company                                         Age   Director Since
     --------------------------                             ---   --------------
     Richard H. Miller
     (President and Chairman of the Board) ............      51         1984

     Richard M. Gawlik
     (Secretary/Treasurer) ............................      59         1986

     Marilyn R. Goldberg ..............................      51         1984

     John W. Rapparlie ................................      53         1987

     There was no  arrangement  or  understanding  between any  director and any
other person pursuant to which any director was selected as a director.

     The executive officers of the Company are elected annually.  Each executive
officer shall hold office until his  successor  duly is elected and qualified or
until his resignation or until he shall be removed in the manner provided by the
Company's Bylaws. The Company's executive officers,  their ages,  positions with
the Company and periods during which they have served as such are as follows:

     Name of Executive Officer and
     Position in Company                                    Age    Officer Since
     -----------------------------                          ---    -------------
     Richard H. Miller
     (President and Chairman of the Board) .........         51         1984

     Richard M. Gawlik
     (Secretary/Treasurer) .........................         59         1986

     There was no arrangement or understanding between any executive officer and
any other  person  pursuant to which any  executive  officer  was  selected as a
executive officer.

     There are no family relationships between any officers and directors of the
Company.

                                        9

<PAGE>

     The following is a brief account of the business experience during the past
five years of each director and executive officer:

     Name of Director                   Principal Occupation During
     or Officer                         The Last Five Years
     ----------------                   ---------------------------

     Richard H. Miller                  Chairman of the Board and  President  of
                                        the Company.

     Richard M. Gawlik                  Secretary/Treasurer of the Company since
                                        August,  1986;   Independent  Consultant
                                        since  1992;   President  of  The  Kober
                                        Corporation   and  of  Kober   Financial
                                        Corporation  where he has  also  acted a
                                        broker/dealer,  from  January,  1986  to
                                        March,  1992;  sole  propri  etor of RMG
                                        Enterprises,    Inc.,   which   provided
                                        accounting   and  financial   consulting
                                        services  to  small  and  medium   sized
                                        corporations, from 1981 to 1987.

     Marilyn R.  Goldberg               President   of   Mari   Hube   (formerly
                                        Marigold Enterprises, Ltd.), a publisher
                                        and  distributor  of fine art  graphics,
                                        limited edition prints and posters.

     John W. Rapparlie                  Chief Executive  Officer since July 1986
                                        and  President  and Sales  Director  for
                                        Paper Cargo, Inc., a greeting card sales
                                        and marketing corporation, since August,
                                        1982.

     No  director  is a  director  of any  company  with a class  of  securities
registered  pursuant  to Section 12 of the  Securities  Exchange  Act of 1934 or
subject  to the  requirements  of  Section  15(d)  of  such  Act or any  company
registered as an investment company under the Investment Company Act of 1940.

     The Company does not have a class of equity securities  registered pursuant
to Section 12 of the Exchange Act.

ITEM 10.  EXECUTIVE COMPENSATION

     The following  table sets forth for the  Company's  last three fiscal years
ended December 31, 1996, 1995 and 1994, the compensation paid by the Company for
services rendered in all capacities to the Company to Richard H. Miller, who was
the chief  executive  officer of the Company  during the  Company's  fiscal year
ended  December  31, 1996.  No person who served as an executive  officer of the
Company during the Company's fiscal year ended December 31, 1996, received total
annual  salary  and bonus in excess of  $100,000  from the  Company  during  the
Company's fiscal year ended December 31, 1996:

                                       10

<PAGE>


<TABLE>
<CAPTION>
                           Summary Compensation Table
                                                                            Long Term
                                                                           Compensation
                                            Annual Compensation               Awards
                                    ------------------------------------   ----------
                     Year                                 Other            Securities  All
Name and             ended                                Annual           Underlying  Other
Principal Position   December 31,   Salary($)   Bonus($)  Compensation($)  Options(#)  Compensation($)
------------------   ------------   --------    -------   --------------   ----------  --------------

<S>                      <C>         <C>          <C>         <C>             <C>         <C>
Richard H. Miller....    1996         --           --          --              --          --
President                1995         --           --          --              --          --
                         1994         --           --          --              --          --

</TABLE>

Option Grants in Fiscal Year Ended December 31, 1996

     No options  were  granted by the  Company to Richard H.  Miller  during the
Company's fiscal year ended December 31, 1996.

Options Exercises and Fiscal Year-End Option Values

     No options  were owned by Richard H. Miller at December  31,  1996,  and no
options were  exercised by Richard H. Miller  during the  Company's  fiscal year
ended December 31, 1996.

Compensation of Directors

     There were no standard or other  arrangements  for the  compensation of the
Company's  directors in effect for the Company's  fiscal year ended December 31,
1996.

ITEM 11.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT

     (a) Security Ownership of Certain Beneficial Owners.

     The  following  person is the only person known to the Company who on March
28, 1997,  owned  beneficially  more than 5% of the Company's  $0.0001 par value
common stock, its only class of outstanding voting securities:

     Name and Address of                   Amount and Nature of         Percent
     Beneficial Owner                      Beneficial Ownership(1)      Of Class
     -------------------                   ----------------------       --------
     Richard H. Miller
     933 Pearl Street
     Denver, Colorado 80203 ..............       414,315,800             47.3%

     (1) Mr. Miller has the sole voting and investment power with respect to the
shares.

                                       11

<PAGE>

     (b) Security Ownership of Management.

     The following table shows as of March 28, 1997, the shares of the Company's
$0.0001  par value  common  stock  beneficially  owned by each  director  of the
Company and the shares  beneficially  owned by all the officers and directors of
the Company as a group:

<TABLE>
<CAPTION>
                                            Amount of Shares and Nature      Percent
Name of Beneficial Owner                    of Beneficial Ownership (1)      of Class
------------------------                    ---------------------------      --------

<S>                                              <C>                           <C>
Richard H. Miller .............................  414,315,800                   47.3%

Richard M. Gawlik .............................    1,350,000                   0.15%

Marilyn R. Goldberg ...........................   10,000,000                    1.1%

John W. Rapparlie .............................      100,000                   0.01%

All Officers and Directors as a ...............  425,765,800                   48.6%
Group (4 Persons)
</TABLE>

     (1) The beneficial owners listed have sole voting and investment power with
respect to the shares.

     (c) Changes in Control.

     There are no  arrangements  which may  result in a change in control of the
Company.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     There are no transactions that are required to be reported pursuant to this
Item 12.

                                     PART IV

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits.

3.1(a) Articles of Incorporation (incorporated by reference to Exhibit 3.1(a) to
       the Company's  Annual  Report on Form 10-KSB for the year ended  December
       31, 1994).

3.1(b) Articles of Amendment to the  Articles of  Incorporation  filed March 31,
       1987 (incorporated by reference to Exhibit 3.1(b) to the Company's Annual
       Report on Form 10-KSB for the year ended December 31, 1994).

3.1(c) Amendment  to  Articles  of   Incorporation   filed   November  13,  1987
       (incorporated  by reference  to Exhibit  3.1(c) to the  Company's  Annual
       Report on Form 10-KSB for the year ended December 31, 1994).

3.1(d) Amendment  to  Articles  of   Incorporation   filed  September  30,  1988
       (incorporated  by reference  to Exhibit  3.1(d) to the  Company's  Annual
       Report on Form 10-KSB for the year ended December 31, 1994).

3.1(e) Certificate  of Correction to Articles of  Incorporation  filed April 11,
       1989 (incorporated by reference to Exhibit 3.1(e) to the Company's Annual
       Report on Form 10-KSB for the year ended December 31, 1994).

3.2    Bylaws  (incorporated by reference to Exhibit 3.2 to the Company's Annual
       Report on Form 10-KSB for the year ended December 31, 1994).

16     Letter on change in certifying  accountant  (incorporated by reference to
       Exhibit  16 to the  Company's  Current  Report  on Form 8-K dated May 16,
       1996).

     (b)  Reports on Form 8-K.

     None.

                                       12

<PAGE>


                            Janet Loss, C.P.A., P.C.
                       9101 East Kenyon Avenue, Suite 2000
                             Denver, Colorado 80237
                                 (303) 220-0227


To the Board of Directors and Shareholders
Art Cards, Inc.
Denver, Colorado

I have audited the accompanying  balance sheets of Art Cards, Inc. (the Company)
as of December  31, 1996 and 1995,  and the related  statements  of  operations,
shareholders'  deficit and cash flows for the years ended  December 31, 1996 and
1995.  These  financial  statements  are the  responsi  bility of the  Company's
management.  My  responsibility  is to express  an  opinion  on these  financial
statements based on my audit.

I conducted my audit in accordance with generally  accepted auditing  standards.
These standards  require that I 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.
I believe that my audit provides a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of the Company as of December 31, 1996
and 1995,  and the  results of its  operations  and its cash flows for the years
ended  December  31,  1996  and  1995  in  conformity  with  generally  accepted
accounting principles.

The accompanying  financial  statements have been prepared  assuming the Company
will  continue as a going  concern.  As shown in the financial  statements,  the
Company has  incurred  net income  $3,052 and a net loss of $1,200 for the years
ended  December 31, 1996 and 1995,  respectively.  In addition,  the Company has
incurred losses to date in the amount of $1,107,826.  The Company's  significant
operating  losses  raise  substantial  doubt  about its ability to continue as a
going  concern.  The financial  statements do not include any  adjustments  that
might result from the outcome of this uncertainty.


/s/ Janet Loss, C.P.A., P.C.
Janet Loss, C.P.A., P.C.

March 26, 1997

                                       F-1

<PAGE>

<TABLE>
<CAPTION>

                                 ART CARDS, INC.

                                 BALANCE SHEETS

                                                                                December 31,     December 31,
                                                                                    1996             1995
                                                                                -----------      -----------

                                     ASSETS

<S>                                                                              <C>            <C>
CURRENT ASSETS:
         Cash ................................................................   $        62    $         0
                                                                                 -----------    -----------

         TOTAL CURRENT ASSETS ................................................            62              0
                                                                                 -----------    -----------
OTHER ASSETS:
         Organization Costs, ne  of
           accumulated amortization of
           $14,509 ..........................................................             0              0
                                                                                 -----------    -----------

         TOTAL OTHER ASSETS ..................................................            0              0
                                                                                -----------    -----------
TOTAL ASSETS .................................................................   $       62    $         0
                                                                                ===========    ===========

                      LIABILITIES AND SHAREHOLDERS' DEFICIT

CURRENT  LIABILITIES:
         Accounts Payable ....................................................   $        0    $     3,090
         Accrued liabilities, officer ........................................       69,855         69,755
                                                                                 ----------    -----------
         TOTAL CURRENT LIABILITIES ...........................................       69,855         72,845
                                                                                 ----------    -----------

                                             COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' DEFICIT:
         Common Stock, $.0001 par value,
         3,000,000,000 shares authorized,
         876,602,000 and 861,602,000 shares
         issued and outstanding as of
         December 31, 1996 and 1995,
         respectively ........................................................       87,660         87,660

         Additional paid-in capital ..........................................      950,373        950,373

         Accumulated deficit .................................................   (1,107,826)    (1,110,878)
                                                                                 ----------    -----------

         TOTAL SHAREHOLDERS' DEFICIT .........................................      (69,793)       (72,845)
                                                                                 -----------    -----------
TOTAL LIABILITIES AND
         SHAREHOLDERS' DEFICIT ...............................................   $       62    $         0
                                                                                 ==========    ===========
</TABLE>

See independent auditor's report and notes to financial statements.

                                       F-2

<PAGE>

<TABLE>
<CAPTION>

                                 ART CARDS, INC.

                            STATEMENTS OF OPERATIONS

                 For the Years Ended December 31, 1996 and 1995


                                                      1996              1995
                                                      ----              ----
<S>                                            <C>              <C>
Sales, net .................................   $        --      $        --
                                                 -----------      -----------
OPERATING EXPENSES:
         Bank charges ......................              48             --
         Legal and accounting fees .........          12,725             --
         Filing fees .......................             500             --
         Freight and handling ..............            --              1,200
         Travel expenses ...................             875             --
                                                 -----------      -----------
         TOTAL OPERATING EXPENSES ..........          14,148            1,200
                                                 -----------      -----------

NET INCOME (LOSS) BEFORE
OTHER INCOME AND EXPENSES ..................         (14,148)          (1,200)
                                                 -----------      -----------
OTHER INCOME AND (EXPENSES):
         Income from proposed
            acquisition payments ...........          17,200             --
                                                 -----------      -----------

NET INCOME (LOSS) ..........................   $       3,052    $      (1,200)
                                                 ===========      ===========
NET INCOME (LOSS)
PER SHARE OF COMMON STOCK ..................   $        *       $       *
                                                 ===========      ===========

AVERAGE NUMBER OF
  COMMON SHARES OUTSTANDING ................     878,602,000      875,352,000
                                                 ===========      ===========
</TABLE>

* less than $.01 per share





See independent auditor's report and notes to financial statements.

                                       F-3

<PAGE>

<TABLE>
<CAPTION>

                                 ART CARDS, INC.

                       STATEMENTS OF SHAREHOLDERS' DEFICIT

                 For the Years Ended December 31, 1996 and 1995


                                                                                                   Additional
                                                                                 Par                 Paid-In            Accumulated
                                                   Number of Shares             Value                Capital              Deficit
                                                   ----------------             -----              -----------          -----------
<S>                                                   <C>                   <C>                   <C>                   <C>
Balances,
January 1, 1995 ...........................           861,602,000           $    86,160           $   949,473           $(1,109,678)
Common stock issued for
services ..................................             7,500,000                   750                   450                  --
Common stock issued for
settlement of Accounts
Payable ...................................             7,500,000                   750                   450                  --
Net Loss for Year Ended
December 31, 1995 .........................                  --                    --                    --                  (1,200)
                                                      -----------           -----------           -----------           -----------
Balances,
December 31, 1995 .........................           876,602,000                87,660               950,373            (1,110,878)
Net Income for Year
Ended December 31, 1996 ...................                  --                    --                    --                   3,052
                                                      -----------           -----------           -----------           -----------
Balances,
December 31, 1996 .........................           876,602,000           $    87,660           $   950,373           $(1,107,826)
                                                      ===========           ===========           ===========           ===========

</TABLE>








See independent auditor's report and notes to financial statements.

                                       F-4

<PAGE>

<TABLE>
<CAPTION>


                                 ART CARDS, INC.

                            STATEMENTS OF CASH FLOWS

                 For the Years Ended December 31, 1996 and 1995


                                                                          1996          1995
                                                                          ----          ----
<S>                                                                    <C>            <C>
Operating Activities:

         Net Income (Loss) .....................................       $ 3,052        $(1,200)

         Adjustments to reconcile net loss
         to net cash used in operating
         activities:

           Common stock issued for services ....................             0          1,200

         Changes in operating assets and liabilities:

           Increase (decrease) in accounts
             payable and other current
             liabilities .......................................        (2,990)          (107)
                                                                       -------        -------

NET CASH USED IN OPERATING ACTIVITIES ..........................        (2,990)          (107)
                                                                       -------        -------

INCREASE (DECREASE) IN CASH
  AND CASH EQUIVALENTS .........................................        (2,990)          (107)

CASH, BEGINNING OF YEAR ........................................       $     0        $   107
                                                                       -------        -------

CASH, END OF YEAR ..............................................       $    62        $     0
                                                                       =======        =======
</TABLE>






See independent auditor's report and notes to financial statements.

                                       F-5

<PAGE>


                                 ART CARDS, INC.

                          NOTES TO FINANCIAL STATEMENTS


NOTE A - ORGANIZATION

Art Cards, Inc. (the Company),  formerly World Greetings, Inc., was incorporated
in Colorado on January 30, 1984, for the purpose of manufacturing  and marketing
greeting cards and similar  products.  The Company disposed of all its inventory
in 1993 and no longer markets  greeting cards and similar  products  although it
accepts special orders for greeting cards.

The  Company's  ability to continue  as a going  concern is  dependent  upon the
Company's  ability to obtain  financing.  The Company is currently looking for a
suitable candidate to merge with or be acquired by. The financial  statements do
not  include  any  adjustments  that  might  result  from  the  outcome  of this
uncertainty.


NOTE B - SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates
The  preparation  of the  Company's  financial  statements  in  conformity  with
generally accepted accounting principles  necessarily require management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  at the balance  sheet date and  reported  amounts of  revenues  and
expenses during the reporting periods.

The  Financial  Standards  Board has  recently  issued  Statement  of  Financial
Accounting  Standards  ("SFAS")  No.  121,  "Accounting  for the  Impairment  of
Long-Lived Assets" and SFAS No. 123, "Accounting for Stock-Based  Compensation."
SFAS  No.  121  requires  that  long-lived   assets  and  certain   identifiable
intangibles be reported at the lower of the carrying  amounts or their estimated
recoverable  amount and the  adoption  of this  statement  by the Company is not
expected to have an impact on the financial statements.  SFAS No. 123 encourages
the accounting for  stock-based  employee  compensation  programs to be reported
within the financial  statements on a fair-value based method. If the fair-value
based method is not adopted,  then the statement requires proforma disclosure of
net income and  earnings  per share as if the fair value  based  method has been
adopted. The Company has not yet determined how SFAS No. 123 will be adopted nor
its impact on the financial statements. Both statements are effective for fiscal
years beginning after December 15, 1995.

Cash and Cash Equivalents
The Company considers investments in Treasury Bills and certificates of deposits
with  maturities  of less than three months of the balance sheet date to be cash
equivalents.



                                       F-6

<PAGE>

                                 ART CARDS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE B - SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes
The  Company  adopted  the  provisions  of  Statement  of  Financial  Accounting
Standards No. 109,  "Accounting for Income Taxes" (SFAS 109),  which changed the
criteria for measuring the provisions for income taxes and recognizing  deferred
tax assets and liabilities in the accompanying  financial  statements.  SFAS 109
requires  recognition  of deferred tax assets and  liabilities  for the expected
future tax  consequences  of events  that have been  included  in the  financial
statements  or  tax  returns.  Under  this  method,   deferred  tax  assets  and
liabilities  are  determined,  based upon the  difference  between the financial
statements  and tax basis of assets and  liabilities  using enacted tax rates in
effect  for the year in which the  differences  are  expected  to  reverse.  The
adoption of SFAS 109 did not have a material impact on the financial statements.

Net Loss Per Common Share
The net loss per share of common stock is determined using the  weighted-average
number of shares issued and outstanding during the period, according to rules of
the Securities and Exchange  Commission.  The Company's common stock equivalents
were not included in the computation because their effect was antidilutive.


NOTE C - LICENSE AGREEMENTS

The Company has entered into several license agreements with various artists and
publishers to use designated graphic images in its manufacture, distribution and
sale of greeting cards, postcards and similar products.  Generally,  the license
agreements are exclusive and require royalties on net sales of licensed products
by the Company.  Certain  agreements  can be terminated  by the licensor,  after
specified periods of time, if minimum sales requirements are not met. Under some
license  agreements,   the  Company  has  made  non-refundable  advance  royalty
payments. The advance royalties are charged to expense as they are earned by the
licensor.  The Company no longer uses the license agreements.





                                       F-7

<PAGE>

                                 ART CARDS, INC.

                          NOTES TO FINANCIAL STATEMENTS


NOTE D - SHAREHOLDERS' DEFICIT

In  connection  with the  Company's  public  offering,  the  Company  issued ten
callable Class A common stock purchase  warrants.  Each Class A warrant consists
of one callable  Class B common  stock  purchase  warrant and also  entitles the
holder to purchase ten additional shares of common stock at an exercise price of
$.0075 per share  until  February  9, 1996.  Each Class B warrant  entitles  the
holder to purchase ten shares of common  stock at an exercise  price of $.01 per
share until February 9, 1996. All of the  above-referenced  warrants  expired on
February 9, 1996.


NOTE E - RELATED PARTY TRANSACTIONS

As of December 31, 1996, $69,855 was owed to the president for expenses.


NOTE F - INCOME TAXES

Effective January 1, 1993, the Company adopted SFAS 109,  "Accounting for Income
Taxes." As allowed by SFAS 109, prior years' financial  statements have not been
restated.

As of December 31, 1996,  the Company had net operating  loss carry forwards for
income tax purposes of approximately $1,000,000 to offset future taxable income.
The net  operating  loss  carry  forwards  expire  through  2008.  However,  the
Company's  ability to utilize  such losses to offset  future  taxable  income is
subject  to various  limitations  imposed  by the rules and  regulations  on the
Internal Revenue Service.

The tax effects of the temporary  differences  and operating loss carry forwards
that give rise to  significant  portions of the  deferred tax assets at December
31, 1996,  are  presented  below.  The entire  valuation  allowance was recorded
during 1996.

         Net operating loss
           carry forwards                            $ 185,100
         Compensation expense not
           allowed for income tax
           reporting purposes                            8,000
         Valuation allowance                          (193,100)
                                                      --------
         Balance, December 31, 1996                  $       0
                                                      ========

There is no provision  for income taxes in 1996 and 1995 because the Company had
net operating loss carryforwards of $185,100.

                                       F-8

<PAGE>

                                 ART CARDS, INC.

                          NOTES TO FINANCIAL STATEMENTS


NOTE G - LETTER OF INTENT

The Company signed a letter of intent with Legacy Brands, Inc. to enter into a
merger which may or may not be tax-free under Internal Revenue Code Section 368.
This acquisition transaction with Legacy Brands, Inc. was not successful.

                                       F-9

<PAGE>

                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) 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.

                                        ART CARDS, INC.


Dated:  March 31, 1997                  By:  /s/ Richard H. Miller
                                           -------------------------------------
                                           Richard H. Miller, President


Dated:  March 31, 1997                  By:  /s/ Richard M. Gawlik
                                           -------------------------------------
                                           Richard M. Gawlik,
                                           Treasurer and Chief Financial Officer

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.


Dated:  March 31, 1997                  By:  /s/ Richard H. Miller
                                           -------------------------------------
                                           Richard H. Miller, Director


Dated:  March 31, 1997                  By:  /s/ Richard M. Gawlik
                                           -------------------------------------
                                           Richard M. Gawlik, Director


Dated:  March 31, 1997                  By:  /s/ Marilyn R. Goldberg
                                           -------------------------------------
                                           Marilyn R. Goldberg, Director


Dated:  March 31, 1997                  By:  /s/ John W. Rapparlie
                                           -------------------------------------
                                           John W. Rapparlie, Director

     Supplement  Information  to be  Furnished  With Reports  Filed  Pursuant to
Section 15(d) of the Act by  Registrants  Which Have Not  Registered  Securities
Pursuant to Section 12 of the Act.

     No annual report to security holders covering the Registrant's  last fiscal
year or proxy material was sent to security holders.