SECURITIES AND EXCHANGE COMMISSION
                        Washington, D.C. 20549


                              FORM 10-K

           Annual report pursuant to Section 13 or 15(d) of
                 the Securities Exchange Act of 1934


For the fiscal year ended December 31, 1996  Commission File No.0-8358

                      MICRO GENERAL CORPORATION
        (Exact name of registrant as specified in its charter)

            DELAWARE                         95-2621545
     (State or other jurisdiction        (I.R.S. Employer
     of incorporation or organization)     Identification No.)

                        14711 Bentley Circle
                      Tustin, California 92780
         (Address of principal executive offices)(Zip Code)

Registrant's Telephone Number, Including Area Code: (714) 731-0557

  Securities registered pursuant to Section 12(b) of the Act: None

    Securities registered pursuant to Section 12(g) of the Act:
                    Common Stock, $.05 par value

     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.   YES   X     NO

     As of December 31, 1996, the aggregate market value of the
voting stock held by non-affiliates of the registrant was
$1,555,498.

     As of December 31, 1996, the registrant had 1,949,166 shares
of common stock, $.05 par value outstanding.

     The information required by Part III (items 10,11,12 and 13)
is incorporated by reference to portions of the registrant's
definitive proxy statement for the 1997 annual meeting of
shareholders which will be filed with the Securities and Exchange
Commission within 120 days after the close of the 1996 fiscal year.

<PAGE>
                                PART I
Item 1.   BUSINESS

Introduction

     Micro General Corporation (the "Company") designs, markets and
sells parcel shipping systems and electronic postal scales for use
in shipping departments and office mailrooms.  The Company earns
revenues both from the initial sale of shipping systems and scales
and from subsequent rate updates resulting from rate changes by the
United States Postal Service ("USPS"), United Parcel Service
("UPS") and other parcel carriers (see the following "Rate Change
Modifications" discussion).  The Company's products reduce labor
costs in shipping parcels and letters and, by consistent use of
accurate weight and corresponding shipping or postage rates, can
significantly reduce shipping and postage rate errors.
     The Company's products are programmed with the current
shipping rates of USPS or UPS.  The high-end models of the
Company's parcel shipping systems and each of the Company's postal
scale models also permit the customer to choose additional
carriers' rates from the Company's rate library.  The Company's
ability to customize a shipping system or postal scale to include
additional carriers' rates in accordance with each customer's
shipping or mailing preferences permits the customer to choose the
optimum carrier and class of service for a particular parcel or
letter by quickly "rate shopping" between the standard shipping or
postal rate of different carriers.

Development of the Company's Business

     In March 1981, the Company acquired all of the outstanding
stock of Coda Enterprises, Inc., a California corporation ("CODA").
Since its 1978 inception, CODA had designed and manufactured an
electronic postal scale and a piece-count scale  and had sold those
products under a private label contract with a distributor of
mailroom equipment.  In December 1981, CODA merged with the Company
and the Company changed its name to Micro General Corporation.  The
Company has since redirected its resources to the development of
its microprocessor-based parcel shipping systems and postal scales.
In 1988, the Company reincorporated in Delaware.

Industry Overview

     Prior to 1956, the USPS provided the sole means of letter or
parcel delivery throughout the United States.  Currently many other
companies such as UPS, FedEx and others, provide nationwide
coverage in the package delivery business.  There are currently
more than 30 letter and parcel delivery companies which compete
directly with the USPS.  Additionally, deregulation of the airline
and trucking industries has lessened certain prior barriers to
reducing the cost of delivering letters and parcels by these
particular modes of transportation.
     In order to provide reliable delivery information regarding
the location of en-route parcels, parcels must be uniquely tagged
so that package origin, destination, class of service and other
data can be quickly read and input into the carrier's information
system.  The ability to produce this tag has created a significant
potential opportunity for the Company within the mailing and
shipping industry.  Although carriers are currently investing in
plant and equipment to automate the handling of parcels and
letters, many of their customers still use hand ledgers, manual
zip-to-zone charts, spring scales and other conventional mechanical
equipment which lack the accurate weight/cost precision of the
Company's family of microprocessor-based and computer-based
products.  These products also make data entry less difficult.
     The Company believes that the number of UPS and other parcel
carrier users who might have a need for the Company's products
represents a significant market.

Products and Markets

     The Company's family of microprocessor-based, computer-based
parcel shipping systems and postal scales are as follows:

     Parcel Shipping Systems  The Company believes its parcel
shipping systems offer cost and productivity advantages over manual
methods of parcel shipping recording for businesses which
consistently use UPS, the USPS or other parcel carriers.  First,
the Company's parcel shipping systems automate transaction
recording and label identification on a package-by-package basis.
For example, a system's "manifest" printout, by itself, adequately
documents parcel shipments for pickup, delivery and accurate
billing by a carrier.    Additionally, these systems allow the user
to determine the most economically acceptable method of shipment,
to determine and apply the correct shipping charge,  and to record
data relevant to the transaction for use both by the shipper and
the parcel carrier.
     The user places the parcel on the system's electronic scale
platform (which has a maximum rating of 150 pounds), then enters
the desired carrier and class of service and the parcel's
destination zip code.  Each entry is accomplished by pushing a
single, clearly identified button.  The user can instantly display
the rates for alternative carriers and classes of service by
depressing a single key for each such inquiry.  When a carrier and
class of service have been selected, the user enters a package
identification number and, with a single keystroke, prints the
shipping label.  Simultaneously, the transaction is automatically
entered into a computerized memory which both the carrier and the
shipper's accounting department can access.
      The suggested retail prices for the Company's parcel shipping
systems range from $795 to $3,000, excluding options.

     Computer-based Shipping Systems  The Company currently offers
computer software and "turn-key" systems for shipping and warehouse
automation.  The software programs include many of the standard
features already found in the Company's parcel shipping systems.
The software programs have the ability to take advantage of all of
the carriers now offered with the Company's other products.  The
suggested retail prices for the Company's software programs, which
can be sold with or without equipment, range from $1,195 to $5,000,
excluding options.

     Mailing Scales  The Company currently offers both digital
electronic scales as well as mechanical spring scales.  The
Company's digital display electronic postal scales are primarily
designed for office mailroom use.  Relying upon Company-designed
microprocessor-based circuitry, parcel or letter weight is
instantly displayed in digital format.  When a class of service is
selected on the membrane switch keyboard, the precise postage is
computed and displayed.  Sophisticated features, such as the
ability to connect directly to a printer to provide instantaneous
accounting for transactions or to an electronic postage meter for
automatic setting and dispensing of postage, are possible because
of the microprocessor-based design.  Use of the Company's scales
enables businesses to decrease postage costs by eliminating the
inefficiencies and errors which commonly occur when mechanical
scales and manual rate tables are used.  The Company's postal
scales are available in maximum weight capacity ratings of 1 to 150
pounds.  The suggested retail prices for the Company's postal
scales range from approximately $10 to $1,295, excluding options.

     Tape Dispensing Systems  The Company currently offers a manual
gummed tape dispensing system.  This system is used for securing
boxes for shipment.  The suggested retail price for the Company's
tape dispensing system is $279, excluding options.

     Rate Change Modifications  Currently, the Company maintains a
rate library containing rate information for most national and
regional parcel carriers.  The Company updates this library
whenever a carrier's rate change occurs.
     Modifying the Company's units in the field to reflect rate
changes by the USPS, UPS or other carriers in the Company's rate
library is done by inserting programmable read-only memory chips
("PROMS") into designated slots in the Company's parcel shipping
systems and postal scales or via floppy disk updates for computer-
based systems.  The Company generally charges a fee for each new
PROM or disk it provides.  Alternatively, the Company will, for a
one-time fee, provide updated rate PROMS as required for a
specified period of time.  As the Company's installed unit base
grows, potential revenues associated with rate changes represent a
significant source of revenue and profit for the Company.  PROMS
related to rate changes are sold both to dealers and directly by
the Company for its installed customer base.  For each rate PROM
sold to an end-user customer, a percentage of the purchase price is
generally credited to the dealer that originally sold the system to
the customer, provided that the dealer is still an authorized
Company dealer.  No such allowances are paid where sales of the
underlying equipment were not through dealers.

Marketing, Sales, Warranties and Customers

     Marketing and Sales  The Company's strategy is to select
market niches in which its technology provides price and/or
performance advantages over products offered by the market leaders.
The Company's position is primarily in software, but the unique
appearance, functionality and built in "ease of use" of its
products are also considered to be significant competitive
advantages.   With the increase of UPS owned equipment and free
software available to the customers, the Company seeks new products
to replace the customers lost to UPS equipment.
     The Company sells its dealer products through a network of
more than 140 dealers located throughout the United States and
Canada, although approximately 30 dealers account for the majority
of the Company's sales. The Company believes the loss of any
particular dealer would not have a material adverse effect on the
Company's operating results.  All dealer orders accepted by the
Company are shipped and invoiced to dealers at discounts from the
Company's suggested retail list price.  The Company's normal sales
terms to its qualified dealers are net 30 days from invoice date.
Company sales are generally final and are supported by a Company-
issued order entry acknowledgment which specifies all terms and
conditions of the contracted sales transaction.  However, in
addition to any product returns resulting from product defects, the
Company is obligated under some of its dealer agreements to accept
the return of unopened inventory from terminated dealers (subject
to a restocking fee).  The Company, at its discretion, periodically
permits dealers to return products for credit or exchange (subject
to a restocking fee in most cases) due to dealers' lost sales or
dealers' errors in ordering or evaluating end-user customer needs.
Returns as a percentage of product sales for 1996, 1995, and 1994,
were 19%, 16%, and 12%, respectively.  The Company believes that
the allowance for sales returns at December 31, 1996 and December
31, 1995, is adequate in light of historical experience.
     The Company typically experiences significantly higher
revenues in the first quarter of each year, which is attributable
to the sales of carrier rate changes.  When a USPS or UPS rate
change occurs many product users update their machines with new
rates which provides significant rate change revenues to the
Company.
     A comparison of first quarter sales in the last 3 years in
relation to annual sales is as follows:

                 1st Quarter         Annual Sales   %
     1996        $1,470,389          $2,155,378     68%
     1995        $2,173,689          $4,041,921     54%
     1994        $1,844,557          $4,768,548     39%

  Even though history has shown that the carrier rate changes
traditionally have occurred in the first quarter, the Company
believes this should not be included as a seasonal impact.  There
can be no assurance as to the timing of future rate changes.
  In 1990, the Company established a network of manufacturer's
representatives to sell the retail products to stationary stores,
direct mail houses, wholesalers and office product resellers.  This
portion of the business in 1996, 1995  and 1994 represents 20%, 29%
and 24% of the Company's total product sales, respectively.

  Warranties  Individual dealers have responsibility for
installation and service of the Company's products.  The Company's
distributed products are sold with a 90-day warranty on material
and labor.  The Company bears the costs incurred in providing such
in-warranty repairs.  The Company invoices the dealers on a time
and materials basis for out-of-warranty repairs performed by the
Company.  In 1996,  1995, and 1994 the Company's costs to perform
both in-warranty and out-of-warranty repairs, in the aggregates
were 8%, 13%, and 11%, respectively, of total product sales.

  Customers  As of December 31, 1996, the Company estimates it
had an aggregate installed base of approximately 20,000 parcel
shipping systems, postal scales and piece count scales.  Moreover,
no individual dealer accounted for more than 10% of the Company's
1996 total net revenues.

  Backlog  The Company typically enters facsimile orders from
its dealers, considers these orders part of backlog, and schedules
delivery for a date within 10 days from receipt of the order.
Subsequent confirmation through a written purchase order is
normally obtained.  On a monthly basis, the Company generates a
listing of scheduled and confirmed backlog. Backlog cancellations
have historically been nominal.  The backlog at December 31, 1996,
is not material.

Competition
    The Company competes in an industry characterized by intense
and increasing competition.  To the Company's knowledge, there are
approximately 20 competitors engaged in either the sale or lease of
electronic shipping systems or postal scales.  Among these, Pitney
Bowes, Inc. has a dominant position in the postage meter market,
and UPS has a dominant position in the parcel  shipping systems
market.
  The Company sells principally to shippers having moderate
volumes of daily shipments.  Various firms have recently begun
selling parcel shipping software that customers use with their
existing in-house computer systems.  Also, various air express and
other shipping firms are now providing free computerized parcel
shipping systems and offering volume discounts to end-user
customers that maintain specified minimum shipping volumes.
  The Company believes that the price/performance features of
its products continue to compare favorably with their various
competitors.  Nevertheless, many of the Company's competitors have
far greater financial and personnel resources than those of the
Company, including direct sales branches and substantial marketing
and product development programs.  Consequently, there can be no
assurance that future competition from such competitors will not
have a material adverse effect on the Company's business.

Distribution
  In recent years, the Company has increased the purchasing of
completed units manufactured outside the United States.  The
foreign manufacturers take advantage of the tooling put in place by
the Company, in order to provide the Company with parts for its
specialized needs.    In the fourth quarter of 1995, the Company
resumed manufacturing in its California facility to improve quality
and reduce costs on its larger model scales.
  Finished product quality inspection and final testing is
performed prior to shipment by Company personnel at the Company's
Tustin, California facility.

Engineering and Development
  For the years ended December 31, 1996, 1995, and 1994, the
Company's expenditures for engineering, research and development
approximated $556,000, $638,000, and $415,000, respectively.  In
May 1995, the engineering department was moved to the Company's
facility in Oxford, Connecticut.  The Company's 1996 engineering,
research and development activities included the UPS rate changes
in the first quarter of 1996.  A new multi-carrier computer-based
product, The Eagle Best Rate Shipper, was designed in 1995 and was
released in May 1996.  The postage meter development project,
started in 1995,  is continuing and is designed to comply with
changing U.S. Postal regulations is scheduled for submission to the
United States Postal service for approval during the second fiscal
quarter of 1997.  Product release of the Company's postage meter is
targeted for the end of 1997. It has been reported, in various
publications, that the U.S. Postal Service has announced the
decertification of all mechanical postage meters in the U.S. with
the phase-out period to be completed by March 1999.  It is
estimated that 774,000 meters are affected by this anticipated
ruling.   This ruling provides the Company with an opportunity to
enter a major new market.  Submission for approval to the U.S.
Postal Service of the Company's first postage meter is expected by
mid-1997.



Patents and Licenses
  The Company has federally registered the trademarks "CODA",
"MAILMATE ", "PC SHIPMATE ", "SMART METER ", "SMART LABEL , "SHIP
SAVER ", "SHIPMATE ", "SHIP MASTER ", "SHIP-EASY", "SHIP
COMMANDER ", and "Eagle Best Rate Shipper".    During 1996 the Company
has applied for several patents which pertain to the postage meter
project.


Employees
  As of December 31, 1996, the Company employed 28 people.  The
Company's employees are not represented by a labor union and it has
experienced no work stoppages.  The Company believes that its
employee relations are good.  The Company augments its work force
with temporary staff during periods of rate change shipments.

Item 2.  PROPERTIES

  During 1996, the Company's executive office, distribution and
service facility consisted of a 18,550 square feet in a building
located in Santa Ana, California.  The Company has leased this
facility until the year 1999.  In January 1997, the Company sub-
leased its Santa Ana facility and relocated to a new site in
Tustin, California.  The Tustin facility consists of 7,711 square
feet. This facility has been leased until the year 2000.  In April
1995, the Company  entered into a three-year lease for a 5,000
square foot research and development office in Oxford, Connecticut,
which currently houses engineering, research and development,
technical service and customer service.

Item 3.  LEGAL PROCEEDINGS

  The Company is involved in various claims and legal actions
arising in the ordinary course of business.  In the opinion of
management, the ultimate disposition of these matters will not have
a material adverse effect on the Company's consolidated financial
position, results of operations or liquidity.

 Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  None.



<PAGE>
Executive Officers of the Registrant

  The following sets forth the name, age and offices presently
held by the Company's executive officers:

Thomas E. Pistilli . . . .  54       President, Chief Executive Officer,
                                     Chief Financial Officer and Director

John J. Horbal . . . . . . .59       Vice President - Engineering

Linda I. Morton. . . . . . .44       Corporate Secretary and Controller

Robert F. Baker. . . . . . .49       Vice President - Sales

THOMAS E. PISTILLI
  Mr. Pistilli has served as the President, Chief Executive
Officer, Chief Financial Officer, and Director since November 1994.
Prior to joining the Company, Mr. Pistilli served as a management
consultant to the Company for approximately two years.  Mr.
Pistilli is the former President and  Chief Executive Officer of
International Mailing Systems, Inc.(ASCOM/HASLER), Shelton,
Connecticut, where he served in that capacity for 11 years and
overall with that Company for 18 years.   Mr. Pistilli, a Certified
Public Accountant, was previously employed by KPMG Peat Marwick
LLP, for a period of seven years.   Mr. Pistilli is a member of the
Board of Directors, serving since November 1994.

JOHN J. HORBAL
  Mr. Horbal joined the Company as Vice President-Research and
Development in January 1995.  Prior to joining the Company, Mr.
Horbal was with ASCOM/HASLER and Better Packages, Shelton,
Connecticut, for 25 years serving as Director of Engineering,
Director of Research and Development, and Chief Engineer.  He was
named Vice President of Engineering in June 1995.

LINDA I. MORTON
  Ms. Morton joined the Company in September 1983 serving in
various management accounting positions.  She was appointed
Controller in August 1988 and  Corporate Secretary in June 1991.

ROBERT F. BAKER
  Mr. Baker joined the Company as Vice President - Sales in
January 1997.  Prior to joining the Company, Mr. Baker was a Vice-
President with Better Homes and Gardens Real Estate since 1989.
Mr. Baker also served in various senior sales management positions
with ASCOM/HASLER, Scriptomatic and Pitney Bowes.

<PAGE>
                                PART II

Item 5.             MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
                    STOCKHOLDER MATTERS

Principal Market and Prices

  During 1996, the Company's common stock was traded on the
over-the-counter market on NASDAQ under the symbol MGEN.  On
January 10, 1997, the Company elected to have its common stock
delisted form the Nasdaq SmallCap Market .  The stock is now
listed on the OTC Bulletin Board .  The following table sets forth
the range of high and low closing bid quotations per share of the
Company's common stock for the fiscal quarters indicated as
reported by the NASD on its monthly statistical reports.  Such
prices represent interdealer quotations without adjustment for
retail markup, markdown, or commission and do not necessarily
represent actual transactions.

Fiscal Quarters                                  Bid Price
                                             High           Low
  Year Ended December 31, 1996
    First Quarter  . . . . . .            $  3.50            1.50
    Second Quarter . . . . . .               3.25            2.00
    Third Quarter. . . . . . .               3.38            2.00
    Fourth Quarter . . . . . .               2.63            1.63

  Year Ended December 31, 1995
    First Quarter  . . . . . .            $  2.50            2.00
    Second Quarter . . . . . .               2.63            2.25
    Third Quarter. . . . . . .               2.38            1.75
    Fourth Quarter . . . . . .               1.75            1.50


Number of Common Shareholders

  The number of shareholders of record of the Company's common
stock at December 31, 1996 was 602.

Dividends

  The Company intends to continue its policy of retaining all
earnings for reinvestment in the business operations of the
Company.  Under Delaware law, the Company's Board of Directors may
declare and pay dividends on its outstanding shares in cash or
property only out of the unreserved and unrestricted earned
surplus.  The Company has an accumulated deficit of $3,882,314, as
of December 31, 1996 and accordingly, Delaware law prohibits the
Company from paying cash dividends except to the extent that the
Company has net profits in any fiscal year or the preceding fiscal
year.  There were no accumulated dividends as of December 31, 1996.
<PAGE>

Item 6.  SELECTED FINANCIAL DATA

  The following table summarizes selected financial data.  This
data is derived from and qualified in its entirety by the more
detailed financial statements included elsewhere herein.


                             Year Ended
                   (in thousands, except per share
                                data)
                   12/31/96  12/31/95  12/31/94  12/31/93  12/31/92
Net Product Sales  $    834  $  1,743  $  2,710  $  3,104  $  2,525
Service and
Rate Change Revenue   1,321     2,299     2,059     1,950     1,944
                   --------  --------  --------   -------   -------
Total Revenues        2,155     4,042     4,769     5,054     4,469

Cost of Sales         1,399     1,937     2,863     2,864     2,579
                   --------  --------  --------   -------   -------
Gross Profit            756     2,105     1,906     2,190     1,890
                   --------  --------  --------   -------   -------
Net Earnings (Loss)$ (1,182) $   (230) $   (297)  $   375   $    .5
                   --------  --------  --------   -------   -------

Net Earnings (Loss)
Per Share          $  (0.61) $  (0.12) $  (0.16)  $  0.20   $  0.00
                   --------  --------  --------   -------   -------
Weighted Average Number
of Shares Used in
Computation*      1,948,541 1,940,666 1,883,876 1,882,240 1,882,240
  ___________________________
 *Per share computations are based on the weighted average number
of shares outstanding.  The shares issuable upon exercise of stock
 options and other common stock equivalents have not been included
 in the computations of net earnings (loss) per share during any of
 the periods  because the effect would have been antidilutive. All
 share and per share data for 1992 has been restated for the 1 for
5 reverse stock split which became effective December 31, 1992.

                             Year Ended
                           (in thousands)
                  12/31/96  12/31/95  12/31/94  12/31/93  12/31/92
Working Capital    $ 1,363   $ 1,340   $ 1,512   $ 1,778   $ 1,338
Total Assets         2,190     2,084     2,420     2,575     2,052
Shareholders' Equity   391     1,572     1,736     2,027     1,652

<PAGE>

Item 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS

Results of Operations

A. Comparison of Fiscal 1996 and Fiscal 1995
     Total revenue for the Company in 1996 decreased $1,886,543 or
47% compared to the same period in 1995.  The overall decrease is a
combination of a decrease in product sales of $561,572 or 46% in
the dealer channel and $346,762 or 68% in the retail channel, a
decrease in service revenue of $75,025 or 45%, and a decrease in
rate change revenue of $903,184 or 42%.  The decline of sales in
the retail channel is a result of a consolidation of various
superstores and catalogue houses who have exclusive arrangements
with one large-scale supplier.  The decrease in the dealer channel
is primarily the result of continued pressure on the manifest
industry by United Parcel Service and other carriers who provide
free software and equipment to customers.  The decrease in the rate
change revenue is a result of only a single UPS rate change in
February 1996 versus both a UPS and USPS rate change in both
January and August 1995.  The Company is continuing to develop new
products for the dealer channel.  The introduction in May 1996 of a
low priced computer-based software program "The Eagle-Best Rate
Shipper" along with the retail version, "The Eagle Parcel Center
2000" in early 1997 is expected to increase sales volume as the
dealers become more acclimated and better trained to market this
product.

     Cost of sales for product sales decreased 341,099 or 25%.  The
service and rate change revenue costs decreased $197,769 or 34% as
compared to the same period in 1995.  The decrease is due to lower
sales and a reduction in other product costs.

     Gross margin overall decreased 64% for the year ended December
31,1996 as compared to the prior year.  The primary reason was
attributable to lower product sales with a 43% decrease in gross
margin compared to 1995.

     Operating expenses for the Company in 1996 decreased $458,195
or 20% as compared to the prior year.  The decrease is a result of
a number of factors including the reduction in the sales, marketing
and general and administrative expense of $215,097 or 13% and a
decrease in engineering and development expense of $81,336 and the
capitalization of $146,198 of research and development expense
relating to the postage meter project.  The provision for doubtful
receivables decreased $15,564 as compared to 1995.

     Interest expense for the Company in 1996 increased $54,538 as
compared to the prior year.  This increase is due to the interest
associated with convertible notes signed August 1, 1996(see note
7).

     The net loss of $1,182,166 is $952,514 or 415% higher than the
prior year.  The loss is primarily attributable to lower rate
change revenue for 1996 due to only one rate change versus two in
1995.  The decline in profit, due to lower sales revenue, was
partially offset by lower operating expenses and capitalized
research and development.  The profit associated with one rate
change is approximately $700,000.

B. Comparison of Fiscal 1995 and Fiscal 1994.
     Total revenue for the Company in 1995 decreased $726,627 or
15% compared to the same period in 1994.  The overall decrease is a
combination of a decrease in product sales of $825,210 or 40% in
the dealer channel and $141,236 or 22% in the retail channel,  a
decrease in service revenue of $155,802 or 48%, and an increase in
rate change revenue of $395,621 or 23%.  The increase in the rate
change revenue is a result of both a UPS rate change in February
1995 and USPS rate change's in both January and August 1995. A
portion of the January 1995 USPS rate change revenue, totaling
$384,262, was recognized in December 1994. The combination of
decreased unit sales and lower average sale prices, primarily due
to a shift in product mix, resulted in lower overall revenue.  The
Company reduced expenses by  reducing advertising expense and
improved profit margins through price adjustments in the retail
channel, which resulted in lower volume in this channel. The
Company is continuing to develop new products for the dealer
channel.
     Cost of sales for product sales decreased $927,027 or 41%.
The decrease is due to a decrease in sales and the improved profit
margins in the retail channel and a reduction in other product
costs.   The service and rate change revenue costs increased $1,714
or 0.3% as compared to the same period in 1994.
     Gross margin increased 12% for the year ended December 31,
1995 compared to the prior year.  The primary reason was
attributable to product sales with a 7% increase in gross margin
compared to 1994.  This is a result of cost reductions in the
retail channel and the increase in product mix towards lower
priced, higher margin products in the dealer channel.  The increase
in service and rate change revenue gross margin of 5% is a result
of two rate changes in the first quarter of 1995.
     Operating expenses for the Company in 1995 increased $134,134
or 6% as compared to the prior year.  This was a result of a
combination of increased expenses in engineering and research and
development and a decrease in the sales, marketing, general and
administrative expenses as compared to the prior year.  The
decrease in sales, marketing and general and administrative expense
is due to a decrease in promotion and advertising expense for the
period in an effort to control costs.  The increase in  engineering
and development expenses of $222,867 or 54% over the prior year is
due to the final development of the computer-based system
introduced in March 1996 and the continuing development of the
Company's postage meter products.
     The net loss of $229,652 is $67,132 or 23% lower than the
prior year.  The loss is attributable to lower product sales and an
increase in engineering and development expenses.

C. Financial Condition, Liquidity and Capital Resources

     The Company's ability to generate cash depends on rate change
revenue, long term debt, the sale of inventory and collection of
accounts receivable.  The Company's 1996 cash balance increased
$378,311 or 1074% from December 31, 1995.  The increase compared to
December 31, 1995 is primarily attributable to cash generated from
amounts borrowed from the convertible notes signed August 1, 1996.
At December 31, 1996, the Company had borrowed $1,500,000 from the
convertible notes (see note 7).  The Company's 1996 net accounts
receivable balance decreased $246,517 or 70% from December 31, 1995
levels.  This decrease is due to improved accounts receivable
collections and reduced sales.

     Working capital has ranged from $1,340,255 in 1995 to
$1,362,595 in 1996.  The Company's current ratio at December 31,
1996 was 5.6 compared to 3.6 at December 31, 1995.

     The Company's total inventories decreased 284,137 or 22% at
December 31, 1996 as compared to the prior year end.  The decrease
in inventory is related to the sale of products and reduced
purchasing throughout the year.

     The Company has available liquidity through the two financing
agreements entered into on August 1, 1996, to provide additional
funding primarily for the retirement of bank debt, operations, and
to fund the Company's ongoing development of a series of high-level
security postage meters designed to comply with the new United
States Postal Service proposed regulations(see note 7).  At
December 31, 1996, the Company was in compliance with all financial
covenants associated with the convertible notes.

     The Company is currently operating without a revolving line of
credit agreement to fund working capital requirements.  Current
liquidity is being funded through the aforementioned product sales,
service and rate change revenues and a portion (15% pursuant to the
governing loan agreement) of periodic drawdowns on its note
payable.

     Based upon the Company's current cash projections which
demonstrate a cash shortfall using these sources of liquidity, its
lack of a revolving credit agreement and the uncertainty regarding
its ability to access other sources of liquidity, substantial doubt
exists regarding its ability to continue as a going concern.

     Management's plans with respect to these matters includes the
on-going negotiations with its current lenders to modify the terms
of its loan agreements.  The proposed modifications would include
the waiver of the current requirement which restricts the Company's
use of any loan proceeds to 15% for working capital purposes and
85% of such drawdown for the Company's "Meter Project."  If
management is successful in obtaining such waivers up to $1,500,000
in additional cash would be come available for working capital
purposes (presuming advances under the note were approved by the
noteholders).  If such waivers or similar renegotiations are
ultimately negotiated to the Company's satisfaction, the Company
believes it will have adequate liquidity available through the
remainder of 1997.

     If the noteholders were to approve such a waiver, the Company
would require additional funding to complete its ongoing "Meter
Project."  It is anticipated that the "Meter Project" will require
additional funding of approximately $1,000,000 in 1997.  Such
funding will be utilized for license agreements.

     The Company's investment in capital expenditures for 1996 has
increased slightly over 1995.  There were no material commitments
for capital expenditures as of December 31, 1996.  The Company does
not anticipate any significant domestic capital expenditures in the
near future.

      The Company does not engage in any material off balance sheet
      financing.

Inflation
     The effect of inflation on operating results has, historically,
     been insignificant.



Item 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
     The information required by this Item is incorporated herein
by reference to the financial statements and supplementary data
listed in Item 14 of Part IV of this Report.

Item 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
          ACCOUNTING AND FINANCIAL DISCLOSURE

     None.
<PAGE>
                               PART III

Item 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Incorporated herein by reference is the information required
by this Item in the Company's definitive proxy statement for the
1997 annual meeting of shareholders which will be filed with the
Securities and Exchange Commission no later than 120 days after the
close of the Company's fiscal year ended December 31, 1996.

Item 11.  EXECUTIVE COMPENSATION

     Incorporated herein by reference is the information required
by this Item in the Company's definitive proxy statement for the
1997 annual meeting of shareholders which will be filed with the
Securities and Exchange Commission no later than 120 days after the
close of the Company's fiscal year ended December 31, 1996.

Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS ANDMANAGEMENT

     Incorporated herein by reference is the information required
by this Item in the Company's definitive proxy statement for the
1997 annual meeting of shareholders which will be filed with the
Securities and Exchange Commission no later than 120 days after the
close of the Company's fiscal year ended December 31, 1996.

Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Incorporated herein by reference is the information required
by this Item in the Company's definitive proxy statement for the
1997 annual meeting of shareholders which will be filed with the
Securities and Exchange Commission no later than 120 days after the
close of the Company's fiscal year ended December 31, 1996.

Item 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON
          FORM 8-K

Documents filed with Report

     Financial Statements
          The financial statements listed on the accompanying Index
to Financial Statements and Schedule are filed as part of this
report.

     Financial Statement Schedule
          The financial statement schedule listed on the
accompanying Index to Financial Statements and Schedule are filed
as part of this report.



     Exhibits
          The exhibits listed on the accompanying Index to Exhibits
are filed as part of this report.

     Reports on Form 8-K

     No reports on Form 8-K were filed by the Company during the
last quarter of the fiscal year ended December 31, 1996.

<PAGE>

  MICRO GENERAL CORPORATION
  Annual Report - Form 10-K
  Items 8, 14(a)(1) and 14(a)(2)
  Financial Statements and Schedule
  December 31, 1996, 1995 and 1994
  (With Independent Auditors' Report Thereon)

<PAGE>

  MICRO GENERAL CORPORATION
  SEC FORM 10-K
  Items 8, 14(a)(1) and 14(a)(2)
  Index to Financial Statements and Schedules

  Financial Statements

  Balance Sheets - December 31, 1996 and 1995
  Statements of Operations - Years ended December 31, 1996, 1995 and 1994
  Statements of Shareholders' Equity - Years ended December 31,
                                       1996, 1995 and 1994
  Statements of Cash Flows - Years ended December 31, 1996, 1995 and 1994
  Notes to Financial Statements

  Schedule

  Valuation and Qualifying Accounts - Schedule II

  All other schedules are omitted as the required information is
  inapplicable or the information is presented in the financial
  statements or notes thereto.

<PAGE>

Independent Auditors' Report

The Board of Directors and Shareholders
Micro General Corporation:

	We have audited the financial statements of Micro General
  Corporation as listed in the accompanying index.  In connection
  with our audits of the financial statements, we also have audited
  the financial statement schedule as listed in the accompanying
  index.  These financial statements and financial statement
  schedule are the responsibility of the Company's management.  Our
  responsibility is to express an opinion on these financial
  statements and financial statement schedule based on our audits.
  We conducted our audits in accordance with generally accepted
  auditing standards.  Those standards require that we plan and
  perform the audit to obtain reasonable assurance about whether the
  financial statements are free of material misstatement.  An audit
  includes examining, on a test basis, evidence supporting the
  amounts and disclosures in the financial statements.  An audit
  also includes assessing the accounting principles used and
  significant estimates made by management, as well as evaluating
  the overall financial statement presentation.  We believe that our
  audits provide a reasonable basis for our opinion.
  In our opinion, the financial statements referred to above present
  fairly, in all material respects, the financial position of Micro
  General Corporation as of December 31, 1996 and 1995 and the
  results of its operations and its cash flows for each of the years
  in the three-year period ended December 31, 1996 in conformity
  with generally accepted accounting principles.  Also, in our
  opinion, the related financial statement schedule, when considered
  in relation to the basic financial statements taken as a whole,
  presents fairly, in all material respects, the information set
  forth therein.
  The accompanying financial statements have been prepared assuming
  that the Company will continue as a going concern.  As discussed
  in note 2 to the financial statements, the Company has suffered
  recurring losses from operations and has limited working capital
  resources that raise substantial doubt about its ability to
  continue as a going concern.  Management's plans in regard to
  these matters are also described in note 2.  The financial
  statements do not include any adjustments that might result from
  the outcome of this uncertainty.

  Orange County, California
  March 6, 1997

<PAGE>

                   Micro General Corporation
                           Balance Sheets
                     December 31, 1996 and 1995

                      Assets (Note 7)       1996           1995
  Current assets:
    Cash                             $    413,533         35,222
  Accounts and notes receivable,
     less allowance for doubtful
      receivables and sales returns
      of $35,333 in 1996 and
      $46,594 in 1995                     103,474        349,991
  Inventories (note 3)                  1,039,972      1,324,109
  Prepaid expenses                        104,993        143,433
                                       ----------      ---------
  Total current assets                  1,661,972      1,852,755

  Equipment and improvements,
       net (note 4)                       207,659        193,691

  Other assets, net (note 5)              320,598         37,822
                                       ----------      ---------
                                     $  2,190,229      2,084,268
                                       ==========      =========
  Liabilities and Shareholders' Equity

  Current liabilities:
  Note payable to bank (note 7)      $          -        275,000
  Accounts payable                         65,480         51,278
  Accrued expenses                        173,040        164,545
  Deferred revenue                         60,857         21,677
                                       ----------      ---------
  Total current liabilities               299,377        512,500

  Long-term debt (note 7)               1,500,000              -
                                       ----------      ---------
  Shareholders' equity (note 8):
     Preferred stock, $.05 par value.
       Authorized 1,000,000 shares;
       none issued and outstanding              -              -
     Common stock, $.05 par value.
       Authorized 10,000,000 shares;
       issued and outstanding 1,949,166
       and 1,948,166 shares in 1996
       and 1995, respectively              97,458         97,408
  Additional paid-in capital            4,175,708      4,174,508
  Accumulated deficit                  (3,882,314)    (2,700,148)
                                       ----------      ---------
  Total shareholders' equity              390,852      1,571,768

  Commitments and contingencies (note 10)
  Subsequent event (note 11)
                                       ----------      ---------
                                     $  2,190,229      2,084,268
                                       ==========      =========
   See accompanying notes to financial statements.

<PAGE>

                   Micro General Corporation
                    Statements of Operations
           Years ended December 31, 1996, 1995 and 1994

                                             1996        1995        1994

  Revenues:
    Product sales, net of returns of
     $158,435 in 1996, $278,839 in 1995
     and $329,235 in 1994             $   834,609   1,742,943   2,709,389

    Service and rate change revenues
     (note 10)                          1,320,769   2,298,978   2,059,159
                                       ----------   ---------   ---------
         Total revenues                 2,155,378   4,041,921   4,768,548

    Cost of sales:
     Products                           1,008,918   1,350,017   2,277,044
     Service and rate changes             389,598     587,367     585,653
                                       ----------   ---------   ---------
         Total cost of sales            1,398,516   1,937,384   2,862,697
                                       ----------   ---------   ---------
         Gross profit                     756,862   2,104,537   1,905,851

    Operating expenses:
      Selling, general and
        administrative                  1,459,225   1,674,322   1,713,511
      Engineering and development         410,362     637,896     415,029
      Provision for doubtful receivables   16,285      31,849      81,393
                                       ----------   ---------   ---------
         Operating loss                (1,129,010)   (239,530)   (304,082)

    Interest and other income
      (expense), net                      (52,356)     10,678       8,098
                                       ----------   ---------   ---------
         Loss before income
             tax expense               (1,181,366)   (228,852)   (295,984)

    Income tax expense (note 6)               800         800         800
                                       ----------   ---------   ---------
         Net loss                     $(1,182,166)   (229,652)   (296,784)
                                       ==========   =========   =========
         Net loss per common share    $      (.61)       (.12)       (.16)
                                       ==========   =========   =========
         Weighted average number of
          common shares outstanding     1,948,541   1,940,666   1,883,876
                                       ==========   =========   =========
    See accompanying notes to financial statements.

 <PAGE>

                           MICRO GENERAL CORPORATION
                    Statements of Shareholders' Equity
               Years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
                    Preferred          Common        Additional                 Total
                      Stock             Stock         paid-in    Accumulated shareholder's
                 Shares  Amount    Shares    Amount   capital     deficit     equity
<S>              <C>     <C>      <C>        <C>      <C>        <C>         <C>
Balance at
December 31, 1993   -    $    -   1,882,240  $94,112   4,107,492 (2,173,712)    2,027,892
Repurchase of
common stock        -         -      (4,075)    (204)     (8,965)          -       (9,169)
Stock options
exercised           -         -       10,001     500      13,356           -       13,856
Net loss            -         -            -       -           -    (296,784)    (296,784)
               ------    ------    ---------  ------   ---------  ----------    ---------
Balance at
December 31, 1994   -         -    1,888,166  94,408   4,111,883  (2,470,496)   1,735,795
Stock options
exercised           -         -       60,000   3,000      62,625           -       65,625
Net loss            -         -            -       -           -    (229,652)    (229,652)
               ------    ------    ---------  ------   ---------  ----------    ---------
Balance at
December 31, 1995   -         -    1,948,166  97,408   4,174,508  (2,700,148)   1,571,768
Stock options
exercised           -         -        1,000      50       1,200           -        1,250
Net loss            -         -            -       -           -  (1,182,166)  (1,182,166)
               ------    ------    ---------  ------   ---------  ----------    ---------
Balance at
December 31, 1996   -    $    -    1,949,166 $97,458   4,175,708  (3,882,314)     390,852
               ======    ======    ========= =======   =========  ==========   ===========

See accompanying notes to financial statements.
</TABLE>



<PAGE>
                           Micro General Corporation
                           Statements of Cash Flows
                 Years ended December 31, 1996, 1995 and 1994

                                               1996        1995        1994

  Cash flows from operating activities:
    Net loss                            $(1,182,166)   (229,652)   (296,784)
    Adjustments to reconcile net loss
      to net cash provided by (used in)
      operating activities:
        Depreciation and amortization       111,223     108,281     103,825
        Provision for doubtful
         receivables                         16,285      31,849      81,393
        Provision for sales returns         158,435      62,739      53,336
        Decrease (increase) in assets:
         Accounts and notes receivable       71,797     173,855      85,496
         Income tax receivable                    -       7,000      (2,000)
         Inventories                        284,137    (183,926)    (48,633)
         Prepaid expenses                    34,440     133,999      27,434
         Other assets                      (308,558)    (15,000)          -
        Increase (decrease) in liabilities:
         Accounts payable                    14,202    (244,793)    120,846
         Accrued expenses                     8,495     (63,527)      8,311
         Deferred revenue                    39,180    (138,176)    107,488
                                         ----------   ----------  ---------
             Net cash provided by (used
              in) operating activities     (752,530)   (357,351)    240,712

    Cash flows used in investing
      activities - capital expenditures     (95,409)   (100,900)    (78,063)
                                         ----------   ----------  ---------

    Cash flows from financing
      activities:
       Proceeds from note payable         1,500,000           -           -
       Net proceeds (repayment) of notes
        payable to bank                    (275,000)    275,000    (100,000)
       Repurchase of common stock                 -           -      (9,169)
       Issuance of common stock               1,250      65,625      13,856
                                         ----------   ----------  ---------
             Net cash provided by (used
              in) financing activities    1,226,250     340,625     (95,313)
                                         ----------   ----------  ---------
             Net increase (decrease)
              in cash                       378,311    (117,626)     67,336

    Cash at beginning of year                35,222     152,848      85,512
                                         ----------   ----------  ---------
    Cash at end of year                 $   413,533      35,222     152,848
                                         ==========   ==========  =========
    Supplemental disclosures of cash
      flow information:
       Cash paid during the year for:
         Interest                       $    54,539       2,000       1,230
         Income taxes                           800         800       2,800
                                        ===========   ==========  =========
    See accompanying notes to financial statements.

<PAGE>
                        MICRO GENERAL CORPORATION
                      Notes To Financial Statements
                     December 31, 1996, 1995 and 1994

(1)  Summary of Significant Accounting Policies

     General

          The operations of Micro General Corporation (the Company)
          consist of the design, purchase, distribution and
          manufacturing of computerized parcel shipping systems, postal
          scales and piece-count scales.  Product sales are achieved
          through the use of authorized company dealers and through
          dealers in the office products and superstore channels
          throughout the United States.

     Cash and Cash Equivalents

          Cash and cash equivalents include cash on hand, demand
          deposits and investments with original maturities of three
          months or less.

     Inventories

          Inventories are stated at the lower of cost (first-in,
          first-out) or market (net realizable value).

     Equipment and Improvements

          Equipment and improvements are stated at cost.  Depreciation
          and amortization are provided using the straight-line method
          over the estimated useful lives of the respective equipment
          and improvements.

     Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of

          The Company adopted the provisions of Statement of Financial
          Accounting Standard No. 121 (Statement No. 121), "Accounting
          for the Impairment of Long-Lived Assets and for Long-Lived
          Assets to Be Disposed Of,  on January 1, 1996.  This Statement
          requires that long-lived assets and certain identifiable
          intangibles be reviewed for impairment whenever events or
          changes in circumstances indicate that the carrying amount of
          an asset may not be recoverable.  Recoverability of assets to
          be held and used is measured by a comparison of the carrying
          amount of an asset to future net cash flows expected to be
          generated by the asset.  If such assets are considered to be
          impaired, the impairment to be recognized is measured by the
          amount by which the carrying amount of the assets exceed the
          fair value of the assets.  Assets to be disposed of are
          reported at the lower of the carrying amount or fair value
          less costs to sell.  Adoption of this Statement did not have
          a material impact on the Company's financial position, results
          of operations or liquidity.

     Net Loss per Common Share

          Net loss per common share is computed based on the weighted
          average number of common shares outstanding.  The potential
          exercise of stock options or warrants are not included in the
          computation of net loss per common share since the effect
          would be antidilutive for all years presented.

     Income Taxes

          Income taxes are accounted for under the asset and liability
          method.  Deferred tax assets and liabilities are recognized
          for the future tax consequences attributable to differences
          between the financial statement carrying amounts of existing
          assets and liabilities and their respective tax bases and tax
          credit carryforwards.  Deferred tax assets and liabilities are
          measured using enacted tax rates expected to apply to taxable
          income in the years in which those temporary differences are
          expected to be recovered or settled.  The effect on deferred
          tax assets and liabilities of a change in tax rates is
          recognized in income in the period that includes the enactment
          date.

     Warranties

          The Company's products are sold with a 90-day warranty on
          materials and workmanship.  Estimated warranty costs based on
          historical experience are accrued as an expense at the time
          products are sold.

     Intangible Assets

          Intangible assets are classified under other assets and are
          amortized on a straight-line basis over periods ranging from
          10 to 15 years.

     Capitalized Research and Development Costs

          Research and development costs incurred after the
          establishment of technological feasibility are capitalized and
          amortized using the straight-line method over the estimated
          economic life of the product.

     Revenue Recognition

          Product sales are recorded by the Company when products are
          shipped to dealers and customers.  Rate change revenues are
          recorded by the Company at the time memory chips are
          reprogrammed with new tariffs and shipped to the customer.
          The Company collects fees from some customers in anticipation
          of future rate changes.  Customers prepaying future rate
          changes receive memory chips with the new tariffs, upon notice
          of a rate change, without paying an additional charge.  These
          prepaid rate change fees are recorded as revenue on a pro rata
          basis over the prepaid period.

     Sales Returns

          The majority of the Company's product sales are to its
          authorized dealers who resell the Company's products.  The
          Company's policy is that all sales are final, but dealers may,
          at the Company's sole discretion and subject to a restocking
          fee, return certain out-of-warranty products in exchange for
          products of comparable sales value.  Additionally, dealers
          may, at the Company's sole discretion, be permitted to return
          their unopened inventory in the event they or the Company
          terminate their dealership agreement, again subject to a
          restocking fee.  Upon acceptance of returned goods, the
          Company reconditions the goods, at a nominal cost, and
          restocks them in inventory to be sold at a later date.  The
          Company provides an allowance for such returns equal to the
          estimated gross profit on the portion of sales estimated to
          be returned.  This specific allowance is a component of the
          Company's allowance for doubtful receivables and sales
          returns.

     Financial Instruments

          The carrying amount of cash, accounts and notes receivable,
          prepaid expenses, other assets, accounts payable, accrued
          expenses, notes payable to bank, long-term debt and deferred
          revenue are measured at cost which approximates their fair
          value due to the short maturity of these instruments.

     Use of Estimates

          The preparation of financial statements in conformity with
          generally accepted accounting principles 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

     Stock Option Plan

          Prior to January 1, 1996, the Company accounted for its stock
          option plan in accordance with the provisions of Accounting
          Principles Board (APB) Opinion No. 25, "Accounting for Stock
          Issued to Employees" and related interpretations.  As such,
          compensation expense would be recorded on the date of grant
          only if the current market price of the underlying stock
          exceeded the exercise price.  On January 1, 1996, the Company
          adopted Statement of Financial Accounting Standard No. 123
          (SFAS No. 123), "Accounting for Stock-Based Compensation"
          which permits entities to recognize as expense over the
          vesting period the fair value of all stock-based awards on the
          date of grant.  Alternatively, SFAS No. 123 also allows
          entities to continue to apply the provisions of APB Opinion
          No. 25 and provide pro forma net income (loss) and pro forma
          earnings (loss) per share disclosures for employee stock
          option grants made in 1995 and future years as if the
          fair-value-based method defined in SFAS No. 123 had been
          applied.  The Company has elected to continue to apply the
          provisions of APB Opinion No. 25 and provide the pro forma
          disclosure provisions of SFAS No. 123 (note 8).

(2)   Liquidity and Going Concern

          The Company has suffered losses from operations for each of
          the years in the three years ended December 31, 1996.  In
          addition, the Company is currently operating without a
          revolving line of credit agreement to fund working capital
          requirements.  Current liquidity is being funded through
          product sales, service and rate change revenues and a portion
          (15% pursuant to the governing loan agreement) of periodic
          drawdowns on its note payable arrangement (see note 7).
          Based upon the recurring losses from operations, the Company's
          current cash projections which demonstrate a cash shortfall
          using the above-mentioned sources of liquidity, its lack of
          a revolving credit agreement and the uncertainty regarding its
          ability to access other sources of liquidity, substantial
          doubt exists regarding its ability to continue as a going
          concern.

          Management's plan with respect to these matters includes the
          ongoing negotiations with its current lenders to modify the
          terms of its loan agreements.  The proposed modifications
          would include the waiver of the current requirement which
          restricts the Company's use of any loan proceeds to 15% for
          working capital purposes and 85% of such drawdown for the
          Company's "Meter Project.   If management is successful in
          obtaining such waivers, up to $1,500,000 in additional cash
          would become available for working capital purposes (presuming
          advances under the note were approved by the noteholders).
          If such waivers or similar renegotiations are ultimately
          negotiated to the Company's satisfaction, the Company believes
          it will have adequate liquidity available through the
          remainder of 1997.

(3)   Inventories

          Inventories are comprised of the following at December 31,
          1996 and 1995:

                                           1996        1995

              Parts and supplies       $  683,936     919,459
              Purchased finished goods    333,376     372,763
              Consigned inventory          22,660      31,887
                                        ---------   ---------
                                       $1,039,972   1,324,109
                                       ==========   =========

(4)  Equipment and Improvements

     Equipment and improvements consist of the following at
     December 31, 1996 and 1995:

                           Useful life     1996       1995

     Production equipment,
      including tooling      5 years  $  446,232    432,902

     Office furniture and
      equipment              5 years     617,480    563,557
     Leasehold improvements  5 years      39,347     30,606
                                       ---------  ---------
                                       1,103,059  1,027,065
     Less accumulated
      depreciation  and amortization     895,400    833,374
                                       ---------  ---------
                                      $  207,659    193,691
                                       =========  =========

(5)  Other Assets

     Other assets consist of the following at December 31, 1996 and 1995:

                          Estimated
                             useful
                               life             1996       1995
    Capitalized research
      and development costs  3 to 5 years   $  262,558          -
    Excess cost of assets
      purchased over fair
      market value             15 years        232,531    232,531
    Deferred loan fees          5 years         50,000          -
    License rights             10 years         41,382     41,382
    Other intangible assets    15 years         23,388     23,388
                                            ----------  ---------
                                               609,859    297,301
    Less accumulated amortization              289,261    259,479
                                            ----------  ---------
                                           $   320,598     37,822
                                            ==========  =========
    During July 1996, the Company reached the technological
    feasibility stage of development of a research and development
    project (the Meter Project), which in accordance with
    Statement of Financial Accounting Standard No. 86, "Accounting
    for the Costs of Computer Software to be Sold, Leased, or
    Otherwise Marketed" is the point at which qualified research
    and development costs may be capitalized.  The amount
    capitalized at December 31, 1996 is mainly comprised of salary
    expense, departmental overhead and an allocation of other
    indirect costs.  All such capitalized costs were incurred
    subsequent to the achievement of technological feasibility.

(6)  Income Taxes
          Income tax expense for the three years ended December 31, 1996
          represents the state minimum tax.
          The expected income tax benefit computed by multiplying loss
          before income tax expense by the statutory Federal income tax
          rate of 34% differs from the actual income tax expense as
          follows:
                                            1996        1995         1994

    Expected tax benefit                 $(402,000)    (78,000)    (101,000)
    Effect of net operating loss
      carryforward not recognized for
      financial statement purposes until
      utilization is more likely than not  395,000      71,000       94,000

    Nondeductible amortization of the excess
      cost of assets purchased over fair
      market value                           7,000       7,000        7,000
    State income tax expense                   800         800          800
                                         ---------    --------     --------
                                        $      800         800          800
                                         =========    ========     ========

   Deferred income taxes reflect the net tax effects of temporary differences
   between the carrying amounts of assets and liabilities for financial
   reporting purposes and the amounts used for income tax purposes.
   Significant components of the Company's deferred tax assets
   and liabilities as of December 31, 1996 and 1995 are as follows:

                                             1996         1995
     Deferred tax assets:
     Net operating loss carryforwards     $1,118,000      652,000
     Reserves and accruals not recognized
       for income tax purposes                56,000       89,000
     Tax credit carryforwards                 80,000       85,000
     Accelerated depreciation for financial
       statement purposes in excess of
       income tax depreciation                 8,000            -
                                           ---------    ---------
          Total deferred tax assets        1,262,000      826,000
     Less valuation allowance             (1,262,000)    (822,000)
                                           ---------    ---------
         Net deferred tax assets                   -        4,000
    Deferred tax liabilities - accelerated
      depreciation for income tax purposes
      in excess of financial statement
       depreciation                                -       (4,000)
                                           ---------    ---------
         Deferred taxes recognized on the
            accompanying balance sheets   $        -            -
                                           =========    =========

    Deferred income tax assets include the tax impact of net
    operating loss carryforwards. Realization of these assets is
    contingent on future taxable income.  The net change in the
    total valuation allowance during 1996 was an increase of
    $440,000.  At December 31, 1996, the Company had net operating
    loss carryforwards of approximately $3,031,000 and $974,000 for
    Federal and state income tax purposes, respectively.  If not used
    to offset future taxable income, the net operating loss
    carryforwards will expire at various years through 2011.  The
    Company also has investment tax credit and research and
    experimentation credit carryforwards aggregating approximately
    $80,000 which expire during the period 1997 to 2002.


(7)  Notes Payable/Long-Term Debt

     On August 1, 1996, the Company entered into a $3 million
     financing agreement to provide additional funding primarily
     for the retirement of bank debt, operations, and to fund the
     Company's ongoing development of a series of high-level
     security postage meters designed to comply with the new
     United States Postal Service proposed regulations.  Two
     9.5%, five-year convertible notes were made available,
     one in the amount of $1 million and one in the amount
     of $2 million, and are held by Fidelity National Financial,
     Inc., a Delaware corporation and 38% holder of Micro General
     common stock and Dito Caree L.P. Holding, a Nevada
     cooperation which owns 5% of the common stock of Micro
     General, respectively.  As stipulated in the note agreements,
     a maximum of 85% of these borrowings must be used to fund the
     Meter Project and the remaining 15% may be used for operations.
     Amendment to the 85%/15% split is at the sole discretion of
     the note holders.  At December 31, 1996, there was $1,500,000
     outstanding on these notes.

     The Company can draw against the notes in aggregate amounts up
     to $750,000 per quarter over the twelve months commencing
     August 1, 1996, if in compliance with certain restrictive
     covenants.  The debt, secured by the assets of the Company,
     can be converted into 1,344,438 shares of the Company's
     common stock at prices ranging from $2.00 to $2.50 per share.
     Repayment of the notes is on an interest-only basis for the
     first two years, with principal and interest payments for
     the remaining three years of the term.  Principal maturities of
     the notes payable are as follow:

                         1997     $        -
                         1998              -
                         1999        500,000
                         2000        500,000
                         2001        500,000
                                  ----------
                         Total    $1,500,000
                                  ==========

     At December 31, 1996, the Company was in compliance with all
     restrictive debt covenants. In conjunction with the $3 million
     financing agreement, the Company paid a 1% commitment fee
     to the noteholders.  This fee amounted to $20,000 and $10,000
     to Dito Caree L.P. Holdings and Fidelity National Financial, Inc.,
     respectively.  The Company had a line of credit which was secured
     by substantially all of the Company's assets and could not exceed
     70% of qualifying accounts receivable plus 40% of qualifying
     inventory up to a maximum credit line of $600,000.  The interest
     rate on the line of credit was at the bank's prime rate plus 2.0%.
     On August 1, 1996, the Company repaid the outstanding amount due
     on the line of credit in full.

(8)  Stock Option Plans

     Under terms of the Company's Incentive Stock Option Plan (the Plan),
     the exercise price of options granted is to be equal to the stock's
     fair market value at the date of grant.  Common stock initially
     available for option under the Plan was 220,000 shares.  Options
     are exercisable no later than 5 years from the date of grant.
     Options which are not exercised or canceled revert back to the Plan
     and are subject to subsequent reissuance.  This Plan expired on
     October 7, 1991 and was renewed at the 1993 annual shareholders'
     meeting.  There are 3,999 remaining shares available for grant under
     this Plan as of December 31, 1996.  In 1995, the Company's Board of
     Directors approved a new stock option plan (the 1995 Plan).  Company
     common stock available for option under the 1995 Plan is 200,000
     shares and all shares were available for grant as of December 31, 1996.
     The per share weighted-average fair value of stock options granted
     during 1996 and 1995 was $1.02 and $1.05 on the date of grant using the
     Black-Scholes option pricing model with the following
     weighted-average assumptions:  1996 - expected dividend yield 0%, risk-
     free interest rate ranging from 5.91% to 6.48%, volatility factor of
     46.49%, and an expected life of  four years:  1995 - expected dividend
     yield 0%, risk-free interest rate ranging from 5.96% to 7.47%, volatility
     factor of 46.49%, and an expected life of four years.
     The Company applies APB Opinion No. 25 in accounting for its Plan and,
     accordingly, no compensation cost has been recognized for its stock
     options in the financial statements. Had the Company determined
     compensation cost based on the fair value at the grant date for
     its stock options under SFAS No. 123, the Company's net income
     would have been reduced to the pro forma amounts indicated below:

                                   1996            1995
    Net loss:
     As reported               $(1,182,166)       (229,652)
     Pro forma                  (1,281,513)       (306,000)
                               ===========       =========
    Net loss per share:
     As reported               $      (.61)           (.12)
     Pro forma                        (.66)           (.16)
                                ==========       =========

    Pro forma net loss reflects only options granted in 1996 and 1995.
    Therefore, the full impact of calculating compensation cost for
    stock options under SFAS No. 123 is not reflected in the pro forma
    net loss amounts presented above because compensation cost is reflected
    over the options' vesting period of three years and compensation cost
    for options granted prior to January 1, 1995 is not considered.


    A summary of all stock option transactions for the three-year period
    ended December 31, 1996 follows:

                                                    Weighted average
                                        Shares      exercise price
    Options granted and outstanding:
      At December 31, 1993             212,000      $  2.14
       Granted                          42,000         2.13
       Exercised                       (10,001)        1.39
       Canceled                        (54,499)        1.82
                                      ---------      ------
      At December 31, 1994             189,500         1.46
       Granted                         110,000         2.31
       Exercised                       (60,000)        1.09
       Canceled                       (100,000)        1.52
                                      --------       ------
      At December 31, 1995             139,500         2.25
       Granted                          26,500         2.26
       Exercised                        (1,000)        1.25
       Canceled                        (20,000)        2.22
                                      --------       ------
      At December 31, 1996             145,000      $  2.26
                                      ========       ======

      The aggregate value of options granted and outstanding at
      December 31, 1996 and 1995 was $327,398 and $313,188,
      respectively.  At December 31, 1996, options for 53,334 shares
      of common stock were vested and exercisable at prices ranging
      from $1.375 to $2.50 per share.

(9)  401(k) Plan

     The Company maintains a 401(k) plan whereby all employees who have
     completed three months of service may elect to make pretax
     contributions of 1% to 20% of their annual pay not to exceed
     contributions of $9,500 per year.  The Company has a 25% employer
     matching program contingent upon Company earnings of at least
     $100,000.  As the Company did not meet the minimum earnings
     requirement for employer matching in 1996, 1995 and 1994,
     no Company contributions were made to the plan for those years.


(10) Commitments and Contingencies

     Noncancelable operating lease commitments consist principally of the
     lease for the Company's distribution and administrative facility.
     In February 1994, the Company extended this facility lease through
     1999.  In December 1996, the Company entered into a four-year lease
     agreement for a new distribution and administration facility and in
     turn entered into an agreement to sublease the old distribution
     and administration facility for the same lease term and same lease
     payments.  Sublease income is shown below as a reduction to total
     future lease payments. At December 31, 1996, the Company was
     committed to the following noncancelable operating lease payments:

        Year ending December:
             1997                  $ 194,000
             1998                    183,000
             1999                     89,000
             2000                     60,000
                                    --------
                                     526,000
        Less sublease income         250,000
                                    --------
        Net minimum lease payments $ 276,000
                                    ========

     Rental expense was approximately $150,000 in 1996, $130,400 in 1995
     and $118,000 in 1994.  The Company has a license agreement with
     Pitney Bowes which enables the Company to manufacture and sell
     certain products.  The license agreement expires in 2004.  Annual
     expenses for the license agreement are minor.

     From time to time, the United States Postal Service (USPS) or
     United Parcel Service (UPS) change their rates. For a fee, the Company
     provides its customers with programmable memory chips with the new
     tariffs which can be inserted into the Company's products.  In some
     instances, customers prepay a fee to the Company which assures they
     will receive new programmable memory chips for all rate changes which
     occur within a predetermined period.  In other instances, customers
     incur a fee for each time they decide to procure a new programmable
     memory chip.  The Company has experienced UPS rate changes in 1996,
     1995 and 1994 and a USPS rate change in 1995.  During 1996, 1995 and
     1994, the Company recorded revenues from rate changes totaling
     approximately $1,229,000, $2,132,000 and $1,736,000, respectively.
     Gross profits related to rate changes in 1996, 1995 and 1994 totaled
     approximately $1,068,000, $1,805,000 and $1,396,000, respectively.
     A UPS rate change also occurred in February 1997.  However, there can
     be no assurance that future rate changes by UPS or USPS will occur.

     The Company is involved in various claims and legal actions arising in
     the ordinary course of business.  In the opinion of management, the
     ultimate disposition of these matters will not have a material adverse
     effect on the Company's financial position, results of operations or
     liquidity.

(11) Subsequent Event

     On January 10, 1997, the Company elected to delist its common stock
     from the Nasdaq SmallCap Market as the Nasdaq's capital and surplus
     requirements would be onerous for the Company during 1997.  The Company
     may apply for re-listing at a future date.

<PAGE>
                                Schedule II
                         MICRO GENERAL CORPORATION
                    Valuation and Qualifying Accounts
                Years ended December 31, 1996, 1995 and 1994

                                    Additions
                      Balance at    charged to
                      beginning of  costs and                Balance at
Description             period       expenses    Deductions  end of Period

Allowance for doubtful receivables:
 Year ended
  December 31, 1996   $  39,594       16,285        27,546      28,333
                       ========     ========      ========    ========
 Year ended
  December 31, 1995   $  74,749       31,849        67,004      39,594
                       ========     ========      ========    ========
 Year ended
  December 31, 1994   $  66,085       81,393        72,729      74,749
                       ========     ========      ========    ========

Allowance for sales returns:
 Year ended
  December 31, 1996   $   7,000      158,435       158,435*      7,000
                       ========     ========      ========    ========
 Year ended
  December 31, 1995   $   7,000       62,739        62,739*      7,000
                       ========     ========      ========    ========
 Year ended
  December 31, 1994   $   7,000       53,336        53,336*      7,000
                       ========     ========      ========    ========

*    Represents gross profit on sales returns of $278,839 and $329,235
     for the years ended December 31, 1995 and 1994, respectively.
     For the year ended December 31, 1996, balance represents the full
     amount of sales returns given the negative gross profit position.




<PAGE>                              SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                   MICRO GENERAL CORPORATION
Dated: March 31, 1997           By:      /s/ Thomas E. Pistilli
                                      Thomas E. Pistilli
                                      President
                                      Chief Executive Officer
                                      Chief Financial Officer

                                By:    /s/ Linda I. Morton
                                      Linda I. Morton
                                      Controller
                                      Corporate Secretary

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

/s/ Thomas E. Pistilli     President and Director   March 31, 1997
Thomas E. Pistilli

/s/ John J. Cahill         Director                 March 31, 1997
John J. Cahill

/s/ William P. Foley ,II   Director                 March 31, 1997
William P. Foley, II

/s/ George E. Olenik       Director                 March 31, 1997
George E. Olenik

/s/ Richard H. Pickup      Director                 March 31, 1997
Richard H. Pickup

/s/ Carl A. Strunk         Director                 March 31, 1997
Carl A. Strunk
<PAGE>



    Exhibit                                                   Sequentially
    Number  Description of Exhibit                            Numbered Page

    3.1     Restated Articles of Incorporation of the Company
          		(incorporated by reference to Exhibit 3 to the
	          	Company's Annual Report on Form 10-K for the year
	          	ended December 25, 1988 (the "1988 Form 10-K
		          Amendment 1"))

    3.11 	 Restated Articles of Incorporation of the Company
          	(filed herewith)

    3.2	   Bylaws of the Company (incoporated by reference to
	         	Exhibit 3.2 to the "1988 Form 10-K Amendment 1"

    10.1	  Incentive Stock Option Plan and form of Incentive Stock Option
		      Agreement in use prior to 1987 (incorporated by reference to
         	      Exhibit 10.1 to the 1984 Form 10-K) Option Plan and form
         		of Incentive Stock Option Agreement in use commencing in
		      1987 (incorporated by reference to Exhibit 10. to the
		      Company's Annual Report for the year ended December 28,
         		1986 (the "1986 Form 10-K"))

    10.2	  Nonqualified Stock Option Plan and form of Nonqualified
		         Stock Option Agreement (incorporated by reference to
		         Exhibit 10.2 to the 1984 Form 10-K)

    10.3	  Lease of 1740 E. Wilshire Ave., Santa Ana, California,
		         92705, facilities between Shaw Investment and the Company
		         (incorporated by reference to the Company's Annual
		         Report on Form 10-K for the year ended December 25, 1988
 		        (the "1988 Form 10-K Amendment 1"))

    10.4	  Lease of 115 Hurley Road., Oxford, Connecticut,
         		06478, facilities between Hurley Farms Business Park
		         and the Company dated March 20, 1995. (Filed herewith)

    10.5	  Sub-lease of 1740 E. Wilshire Ave., Santa Ana,
		         California, 92705 facilities between Micro General
		         Corporation and Secure Communications dated
		         October 29, 1996. (Filed herewith)

    10.6	  Leases of 14711 Bentley Circle, Tustin, California, 92780
          	facilities between Andrew S. Friedman and the Company
          	dated November 6, 1996. (Filed herewith)

   10.16.1 Loan Agreement between the Company and Silicon Valley Bank
           dated September 12, 1991. (Incorporated by reference to the
          	Company's Annual Report on Form 10-K for the year ended
          	December 31, 1991)

   10.16.2 Amendment to Loan Agreement between the Company and
          	Silicon Valley Bank dated December 2, 1992. (Incorporated
          	by reference to the Company's Annual Report on
          	Form 10-K for the year ended December 31, 1992)

   10.16.3 Amendment to Loan Agreement betweenthe Company and
          	Silicon Valley Bank dated December 10, 1993. (Incorporated
          	by reference to the Company's Annual Report on
          	Form 10-K for the year ended December 31, 1993)

   10.16.4 Amendment to Loan Agreement between the Company and
          	Silicon Valley Bank dated January 27, 1994. (Incorporated
          	by reference to the Company's Annual Report on
          	Form 10-K for the year ended December 31, 1994)

   10.17 	Loan Agreement between the Company and First Bank
         	and Trust dated November 15, 1995. (Incorporated by
         	Reference to the Company's Annual Report on Form 10-K
         	for the year ended December 31, 1995)

   10.18 	Convertible Note Purchase Agreement between Micro General
         	Corporation and Cal West Service Corporation dated
         	August 1, 1996. (Filed herewith)

   10.19 	Convertible Note Purchase Agreement between Micro General
         	Corporation and Dito Caree L.P. dated August 1, 1996.
         	(Filed herewith)

   23.1   Consent of KPMG Peat Marwick LLP (filed herewith)