EXCERPTS FROM ARTISTIC GREETINGS INCORPORATED
1996 ANNUAL REPORT TO STOCKHOLDERS

Selected Financial Data:

(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
FOR THE YEAR                                    1994         1995           1996
<S>                                        <C>          <C>             <C>
Net sales                                    $91,121        $97,042        $98,911
Net income (loss)                               (426)        (9,952)         2,675
Per common share:
   Net income (loss)                           (0.07)         (1.57)          0.42
Cash flows from operations                    (1,902)        (4,275)        11,535
AT YEAR END
Total assets                                  37,909         38,654         28,998
Current liabilities                           16,852         16.998         12,950
Long-term debt                                 1,559          9,593          1,034
Stockholders' equity                          19,308          9,548         12,288
</TABLE>

<PAGE>

Management's  Discussion  and  Analysis  of  Financial Condition and Results of
Operations
(Dollars in thousands, except per share data)

The following discussion contains forward-looking  statements. For a discussion
of important factors that could cause actual results  to differ materially from
such forward-looking statements, please carefully review  the discussion of the
Risk Factors contained in Item 1 of the Company's report on  Form  10-K for its
year  ended  December  31,  1996  as  filed  with  the  Securities and Exchange
Commission  ("SEC"):  see  "Recent Losses; Potential Fluctuation  in  Operating
Results"; "Dependence on Effective  Information Systems"; "Potential Volatility
of Stock Price"; and "Control by Present  Stockholders"  as  well  as the other
information  contained  in  this  Report  and in the Company's periodic reports
filed with the SEC.

Results of Operations
1996 vs. 1995
Net Sales
In 1996, the Company's net sales increased  1.9% to $98,911 compared to $97,042
in 1995, as it continued its efforts to develop  its  check-printing activities
and increase volume in its catalog operation.  Sales volume  decreased  in  the
personalized  name  and  address  product  category,  which consists of labels,
MiniPrinters<reg-trade-mark>,  self-inking  stamps and certain  other  products
generally  sold through mass media channels ("personalized  products"),  by  an
aggregate of 17.3%, from $44,196 in 1995 to $36,539 in 1996.  As in 1995, these
reductions resulted  from  discontinuing  marginally  profitable  products  and
advertising  initiatives.   Check sales increased by 14.0% from $37,806 in 1995
to $43,100 in 1996.  This growth  was  primarily  the  result  of the full-year
effect   in  1996  of  the  acquisition  of  the  assets  of  Valcheck  Company
("Valcheck"),  a  direct-mail check printing company in the second quarter (the
"Valcheck Acquisition")  of  1995,  combined  with  the growth of higher-margin
check reorders.

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

The cost of materials in 1996 decreased 3.6% to $21, 973 compared to $22,802 in
1995.  Lower sales volume in personalized  products  partially  offset  volume-
related  increases  in  material  costs  for  checks  and  catalogs.   Costs of
materials for personalized products, checks and catalogs decreased as a  result
of  savings  from additional management focus on manufacturing efficiencies  in
these areas.  Material costs decreased 1.3% as a component of net sales between
years due to the  subcontracting  of  a  portion  of  check personalization and
fulfillment  ("check  production")  for the first three quarters  of  1996,  in
addition to the implementation in the  fourth  quarter of an agreement with the
John Harland Company ("Harland") to manufacture  100%  of  the  Company's check
orders (the "Harland Agreement").

Direct labor was down 19.4% from $8,595 in 1995 to $6,928 in 1996,  a  decrease
of  1.9%  as  a  component  of  net sales.  Overall sales volume was higher, as
discussed above.  More than offsetting  this  factor  in  the production areas,
however,  was  the  effect  of  continued  management  attention  to  improving
manufacturing  efficiencies,  combined with increased subcontracting  of  check
production to Harland, as discussed  above.   Labor  to receive incoming orders
was  higher  resulting  from  the increased mix of check reorders  and  catalog
volume, causing higher call volume.

Manufacturing overhead increased 6.0% to $11,764 in 1996 compared to $11,101 in
1995, however, such increase only  represented a .5% increase as a component of
net sales during that period.  Manufacturing  overhead  represented by indirect
labor increased as the manufacturing support and management infrastructure were
strengthened.   Employee  benefits  expense increased in 1996  primarily  as  a
result of the prior conversion of long-term  temporary  personnel  to full-time
status in the third quarter of 1995.

Selling, Advertising, General and Administrative
(SG&A)
The  three  largest  components  of SG&A expenses are advertising, postage  and
labor.Advertising expense decreased  22.8%  to  $37,809  in  1996  compared  to
$48,978  in  1995,  which  represents a decrease of 12.3% as a component of net
sales.  Personalized products advertising was down $9,010 from 1995 as marginal
programs were reduced or eliminated.   Catalog  advertising was up $2,476 in an
effort  to  pursue higher-margin growth through increased  circulation.   Check
advertising was  down  $4,705  due  to  a  lower  level of free standing insert
("FSI")  circulation,  mostly  in  the third and fourth  quarters  of  1996  as
compared  to 1995, in an effort to achieve  targeted  advertising  with  higher
margin potential.   An  additional  factor in check advertising which partially
offset the lower FSI circulation was  the  increased  amortization expense, for
all of 1996 as compared to the second half of 1995, for annual payments related
to  an  advertising  agreement  (the  "Advertising  Agreement")  with  Valassis
Communications, Inc. ("Valassis").

Postage  and  shipping  expense in 1996 decreased 4.6% to  $8,876  compared  to
$9,300 in 1995, which represents a decrease of .6% as a component of net sales.
This  decrease  in  postage   and  shipping  expense  occurred  despite  higher
production volumes and was attributable primarily to a significant reduction in
exchanges resulting from improved product and process quality.

Other administrative expense was  reduced by 2.7% to $7,797 in 1996 compared to
$8,010 in 1995, representing a reduction  of  .4%  as a component of net sales.
This  reduction  is  substantially  the result of decreases  in  utilities  and
depreciation partially offset by increases  in  expenses  for consulting, legal
and other outside advisors to the Company.

Other
The Company incurred expense of $1,406 in 1996 compared to  expense  of $919 in
1995.   Interest  expense  decreased  to  $536 in 1996 from $881 in 1995, which
represents a decrease of .4% as a component  of  net  sales.   The  decrease in
interest  expense  was due to reductions in both long- and short-term borrowing
as the Company applied  its strong cash flow from operations to debt reduction.
Accruals for employee incentive  compensation  and contributions to the Company
profit-sharing plan were $992 in 1996, as compared to zero in 1995.

Tax Provision
The Company's effective tax benefit rate for 1995  was  21.4%.   In  1995,  the
Company  was  not able to recognize, in its tax provision, the full benefit for
its 1995 loss and  credits  generated.  The Company's tax benefits were reduced
through the application of FAS  109.   FAS 109 requires that the Company assess
the value of the deferred tax assets on  its  balance  sheet.   The Company was
required to establish a valuation allowance in 1995 for the deferred tax assets
to reduce the value of these assets to a level that was more likely than not to
be  realized.   The  effect of recording a valuation allowance related  to  the
Company's 1995 deferred  tax assets was to reduce the 1995 tax benefit from the
statutory rate.  The $317  tax  benefit  recorded  in 1996 is substantially the
result  of the recognition of tax assets for which a  valuation  allowance  was
previously recorded.  As the Company demonstrated profitability through 1996, a
portion of   the net operating loss carryforward was utilized.  The tax benefit
of this carryforward  was  not  fully  recorded  in  1995  due to the valuation
allowance described above.  Additionally, based upon the 1996 profitability and
the profitability expected in the future, the Company has recorded benefits for
the remaining net operating loss and credit carryforwards.

Net Income
For the reasons discussed above, the Company's 1996 net income  was  $2,675  or
$0.42 per share, compared to 1995's net loss of $9,952 or $1.57  per share.


Results of Operations
1995 vs. 1994

Net Sales
In  1995  the Company's net sales increased 6.5% to $97,042 compared to $91,121
in  1994, as  it  continued  its  efforts  to  improve  profitability  of  core
businesses  while  further  developing  its  check-printing  activities.  Sales
decreased  in  the  personalized products category, as well as in  catalog  and
international categories  by  an  aggregate  of  20.5%, from $70,249 in 1994 to
$55,860  in  1995.   These  reductions  resulted from discontinuing  marginally
profitable products and advertising initiatives.  Check sales more than doubled
from $17,718 in 1994 to $37,806 in 1995.   This growth was primarily the result
of the Valcheck Acquisition in the second quarter  and significant increases in
check advertising from the establishment of the Advertising Agreement.

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

The cost of materials in 1995 increased 26.8% to $22,802 compared to $17,987 in
1994,  primarily  as a result of the increase  in  check  sales  volume,  which
resulted in an increase in the volume of check material purchased.  Lower sales
volume in other product  lines  partially  offset  volume-related  increases in
material  costs  for checks.  Costs of materials for personalized products  and
catalogs decreased  as  a result of savings from additional management focus on
manufacturing efficiencies  in  these areas.  Finally, material costs increased
2.6% as a component of net sales  between  years due to the subcontracting of a
portion of check personalization and fulfillment.

Direct labor was up 39.0% from $6,182 in 1994 to $8,595 in 1995, an increase of
2.1% as a component of net sales during that  period  for  two primary reasons.
First,  as  discussed  above,  check-printing  volume  increased  substantially
requiring  an  increase in direct labor.  Temporary quality problems  resulting
from the volume  growth  also  caused  a  substantial  increase in direct-labor
hours.  The second factor for the increase in direct labor  was the integration
of  the Valcheck Acquisition and the relocation of production  and  warehousing
activities  to  a  new  facility  ("Artistic Plaza").  Employment levels nearly
doubled, with corresponding higher  expense.   These  increases in direct labor
peaked  in  the  third  quarter  and  subsequently decreased  as  a  result  of
reductions in the labor force as requirements were reevaluated.

Manufacturing overhead increased 13.7% to $11,101 in 1995 compared to $9,763 in
1994, however, such increase only represented  a .7% increase as a component of
net sales during that period.  Manufacturing overhead  represented  by indirect
labor  partially offset the increase as a result of cost reductions as  overall
production  methods became more efficient.  Employee benefits expense increased
substantially  as  a  result  of  both overall higher employment levels and the
conversion of long-term temporary personnel  to full-time status.  Other check-
related expenses were higher in 1995 due to inefficiencies  resulting  from the
volume  growth.  Finally, depreciation expense increased by 27.0% from $650  in
1994 to $828  in  1995  as  a  result  of the purchase of Artistic Plaza in the
second quarter, the refurbishment of that  facility  and the purchase of check-
printing equipment to support volume increases.

Selling, Advertising, General and Administrative
(SG&A)
The  three  largest  components of SG&A expenses are advertising,  postage  and
labor.

Advertising expense increased  15.4%  to $48,978 in 1995 compared to $42,441 in
1994,  which  represents an increase of 3.9%  as  a  component  of  net  sales.
Although advertising  for  personalized  products,  catalog  and  international
categories  decreased  by 16.2% from 1994 due to downsizing efforts to  improve
profitability, such decrease  was  offset  by  a  more  than  200%  increase in
advertising  for checks, as the Company took advantage of increased circulation
availability resulting from the Advertising Agreement.

Postage and shipping  expense  in  1995  increased  32.0% to $9,300 compared to
$7,046 in 1994, which represents an increase of 1.9%  as  a  component  of  net
sales.   Such  increase  was  attributable  primarily to check volume increases
(which packages are generally heavier and cost  more to ship than other product
lines) and temporary quality problems with an attendant  increase in the number
of exchanges of product at no additional charge to customers.

Other administrative expense was reduced by 2.7% to $8,010  in 1995 compared to
$8,236 in 1994, representing a reduction of 1.6% as a component  of  net sales.
This  reduction  was  substantially the result of the decrease in salaries  and
wages, with associated  reductions  in  employee benefits costs.  Several other
factors offset one another, including increases  in  expenses  for  consulting,
legal  and  other  outside  advisors  to the Company to facilitate the business
restructuring, as well as charges for donations of obsolete inventory, which in
turn were offset by reductions in travel,  office supplies, equipment purchases
and the elimination of international marketing expense.

Other
The Company incurred expense of $919 in 1995  compared  to  expense  of $109 in
1994.   Interest  expense  increased  to  $881 in 1995 from $339 in 1994, which
represents an increase of .5% as a component  of  net  sales.   The increase in
interest  expense  was  due  to  higher  borrowing to support the expansion  of
facilities  and  working  capital  for  the  growth   of  the  check  business.
Additionally, in June 1995 the Company began to accrete  a  monthly  expense to
account  for the $78 increase in 1995 of the value of the common stock  subject
to a put option granted to Valcheck in the Valcheck Acquisition.  Finally, non-
recurring  charges  were  recorded  in  1995, reflecting primarily the costs of
consolidation of several warehouse facilities in the Elmira area.

Tax Provision
The Company's effective tax benefit rate  for  1995  was  21.4%  compared to an
effective  1994  tax benefit rate of 70.2%.  In 1994, the Company recognized  a
tax benefit related  to  its  loss,  as well as tax benefits for New York State
investment tax credits on manufacturing  equipment,  and federal rehabilitation
and job credits.  In 1995, the Company was not able to  recognize,  in  its tax
provision, the full benefit for its 1995 loss and 1995 credits generated.   The
Company's  tax  benefits  were reduced through the application of FAS 109.  FAS
109 requires that the Company  assess  the  value of the deferred tax assets on
its balance sheet.  The Company was required to establish a valuation allowance
for the deferred tax assets to reduce the value of the deferred tax assets to a
level that is more likely than not to be realized.   The  effect of recording a
valuation allowance related to the Company's 1995 deferred  tax  assets  was to
reduce  the  1995  tax benefit.  Therefore, the Company's effective tax benefit
rate was reduced from 1994 to 1995.

Net Income
For the reasons discussed  above,  the  Company's  1995  net loss was $9,952 or
$1.57 per share, compared to 1994's net loss of $426 or $0.07 per share.

Liquidity and Capital Resources

The Company has historically met its cash requirements primarily from operating
activities.   Although  the  Company's  liquidity  was  reduced  in  1995,  the
operating  activities  of  the  Company  in 1996 provided for  a  reduction  in
accounts payable to historical levels and  a repayment in full of borrowings on
the Company's revolving line of credit and certain  of  the Company's long-term
debt.  In addition, proceeds from check-manufacturing equipment sold to Harland
as part of the Harland Agreement were used to pay off two equipment term loans.

Marketable securities, cash and cash equivalents were $2,999  at  year end 1996
and $3,108 at year end 1995; accounts payable have been reduced from $13,993 at
year  end  1995  to  $9,847  at year end 1996; long-term debt was reduced  from
$9,593 at year end 1995 to $1,034  at  year  end  1996;  and  the  Company  has
modified  its  revolving  line  of credit as further described in Note 8 to the
Financial Statements.

While working capital decreased to  negative  $2,865  at  December  31, 1996 as
compared to $805 at December 31, 1995, this is attributable to several  factors
and  reflects  successful  efforts  to  manage  the  operations of the Company.
Current  assets  decreased  from year to year by $7,718,  primarily  due  to  a
reduction of $430 in cash and  cash  equivalents  to  pay  off  long-term debt,
reduction  of  inventory  by  $3,579  due to improved materials management  and
outsourcing  100%  of  check  production and  a  $3,052  reduction  of  prepaid
advertising.  Current liabilities  decreased  by  $4,048  due to a reduction of
$4,146  in  accounts payable and $1,624 in current portion of  long-term  debt,
partially offset  by an increase of $1,395 in other accrued liabilities, mostly
related to employee  incentive programs.  As a result of the Harland Agreement,
the Company has no inventory  for  its  check  business  but  records  accounts
payable for the costs of Harland's check production.

The  Company  has  available $6,500 as of year end under its revolving line  of
credit with its bank  (the  "Revolver"),  which  is subject to a borrowing base
formula and certain other conditions.  As of March 20, 1997, the Company had no
outstanding  balance  under  the  Revolver and, based  on  the  borrowing  base
formula, had $5,602 available to it  thereunder.   For  additional  information
concerning the terms of the Revolver, see Note 8 to the Notes to the  Financial
Statements contained herein.

Management believes that the operating activities of the Company, together with
the line of credit available under its Revolver, will substantially support its
cash  requirements  for  the  next  twelve  months  and that sufficient capital
resources are available to the Company to provide adequate liquidity overall.

Management is of the opinion that inflation will not  have a material effect on
the operations of the Company.

Significant Agreements

During 1996 and 1995, the Company entered into several  significant  agreements
relating  to  its  manufacturing operations, management information system  and
advertising.

In 1996, the Company  entered  into  the  Harland Agreement under which Harland
will  manufacture  and ship all check orders  received  by  the  Company  at  a
contractually-determined  price  per  box  together  with  related shipping and
handling fees.  The Harland Agreement is for an initial term of seven years and
provides  the  Company  with  access  to  virtually  unlimited check-production
capacity without the capital expenditure requirements  or  inventory costs that
the Company would otherwise have to incur in connection with  the growth of its
check- product line.  The Harland Agreement provides that, in the  event either
party  wishes to terminate, such party must provide one year's notice  of  such
intention  to terminate prior to its effectiveness.  The Harland Agreement also
provided for  Harland's purchase of the Company's check-production equipment at
net book value resulting in no gain or loss being recognized.

Also in 1996, the  Company  reviewed,  selected and began the installation of a
new management information system, at a projected cost of $4.5 million of which
$3.2  million  was incurred in 1996.  The  Company  has  entered  into  various
agreements to purchase  computer  hardware and software, implementation support
services and training.  The installation of and conversion to the entire system
is expected to be completed by mid-1997.   The  Company  believes that upon its
completion,  this new system will improve the Company's access  to  information
for enhanced decision making and control.

In 1995, the Company  entered  into  the Advertising Agreement, under which, in
return for the payment of an annual fee  to  Valassis,  the Company obtained an
exclusive right of first refusal to place its weekly newspaper  FSI advertising
at competitive rates in all circulation in which Valassis has contracts for the
placement of such advertising.  The Company has committed to pay $10 million in
annual  fees over the term of the Agreement which expires in May 2000.   As  of
December  31,  1996,  the  remaining  commitment under the contract was $5,000,
payable  in  annual installments of $2,000  through  May  1998  and  the  final
installment of $1,000 due in May 1999.
<PAGE>

FINANCIAL STATEMENTS

Balance Sheets
(Dollars in thousands, except share data and per share amounts)
Assets

<TABLE>
<CAPTION>
                                                            December 31, 1996             December 31, 1995
<S>                                                             <C>                        <C>
Current Assets:

Cash and cash equivalents                                           $     99                      $  529
Marketable securites:
Trading, at market
        (cost $2,699 in 1996 and $1,704 in 1995)                       2,881                       1,926
Available for sale, at market
        (cost $11 in 1996 and $651 in 1995)                               19                         653
Trade receivables (net of allowance for doubtful accounts of
        $112 and $113 in 1996 and 1995, respectively)                  1,252                       1,803
Income tax receivable                                                     -                          900
Inventories                                                            2,270                       5,849
Prepaid advertising                                                    3,064                       6,116
Prepaid expenses and other current assets                                500                          27
    Total current assets                                              10,085                      17,803
Deferred advertising                                                   2,113                       3,537
Property, plant and equipment, net                                    16,237                      16,869
Cash surrender value of life insurance
        (net of policy loans of $127 in 1996 and 1995)                   433                         308
Other assets                                                             130                         137
Total assets                                                         $28,998                     $38,654

Liabilities and Stockholders' Equity

Current Liabilities:

Current portion of long-term debt                                   $    153                     $ 1,777
Accounts payable, trade (includes checks-in-transit
    of $243 in 1996 and $1,438 in 1995)                                9,847                      13,993
Accrued liabilities                                                    2,386                         991
Customer advances                                                        451                         237
Income taxes payable                                                     113                           -
        Total current liabilities                                     12,950                      16,998

Long-term debt                                                         1,034                       9,593
Other liabilities                                                        383                         483
Total liabilities                                                     14,367                      27,074
Commitments and contingencies:

Common stock, subject to put option - 500,000 shares                   2,343                       2,032

Stockholders' Equity:
Common stock, par value $0.10;
Authorized:  10,000,000 shares;
Issued:  6,037,720 shares in 1996 and 1995                         $      604                   $   604
Additional paid-in capital                                             11,042                    11,028
Unrealized gains on marketable securities
    held as available for sale, net of tax effect                          1                          1
Retained earnings                                                       1,526                    (1,149)
                                                                       13,173                    10,484
Less:  Treasury stock, at cost (200,356 and 216,427
    shares in 1996 and 1995, respectively)                               (885)                     (936)
Total stockholders' equity                                             12,288                     9,548
Total liabilities and stockholders' equity                            $28,998                   $38,654

</TABLE>
The accompanying  notes  to  financial statements are an integral part of these
balance sheets.

<PAGE>

Statement of Operations
Years Ended December 31,
(Dollars in thousands, except share data and per share amounts)

<TABLE>
<CAPTION>
                                               1996           1995           1994
<S>                                        <C>          <C>             <C>
Net sales                                    $98,911        $97,042        $91,121
Cost of sales                                 40,665         42,498         33,932
Gross profit                                  58,246         54,544         57,189
Selling, advertising, general
        and administrative expenses           54,482         66,287         58,510
Income (loss) from operations                  3,764        (11,743)        (1,321)
Other income (expense):
Interest and dividend income                     158            278            498
Net unrealized gains (losses)
        on trading securities                    (34)           230             (8)
Net realized gains (losses)
        on marketable securities                 328           (161)          (186)
Interest expense                                (536)          (881)          (339)
Bonus and profit sharing expense                (992)             -              -
Other                                           (330)          (385)           (74)
Income (loss) before income taxes              2,358        (12,662)        (1,430)

Provision for (benefit from) income taxes       (317)        (2,710)        (1,004)
Net income (loss)                            $  2,675       $(9,952)       $  (426)
Net income (loss) per common
        and common equivalent share          $  0.42        $ (1.57)       $ (0.07)
Weighted average number of common and
common equivalent shares outstanding         6,349,318      6,331,688      5,912,136

</TABLE>
The accompanying notes to financial  statements  are  an integral part of these
statements.

<PAGE>

Statement of Changes in Stockholders' Equity
(Dollars in thousands, except share data and per share amounts)

<TABLE>
<CAPTION>                                                                  
                                                                  Additional
                                            Common Stock          Paid-In        Retained       Treasury
                                        Shares         Amount     Capital        Earnings       Stock          Other    Total
<S>                                  <C>             <C>        <C>           <C>             <C>            <C>       <C>
Balance December 31, 1993               6,034,520      $603       $11,002        $ 9,665        $(975)         $ -      $20,295

Exercise of stock options 
by employees                                2,300         1             8                                                     9

Stock grants to directors/employees                                    21                          50                        71

Purchase of treasury stock                                                                        (20)                      (20)

Dividends paid ($.075 per share)                                                   (436)                                   (436)

Unrealized losses on marketable 
securities held as available for sale,
net of tax effect                                                                                               (185)      (185)

Net loss                                                                           (426)                                   (426)

Balance December 31, 1994                6,036,820      $604      $11,031       $ 8,803        $ (945)         $(185)    $19,308

Exercise of stock options 
by employees                                   900                      2                                                      2

Stock grant to a director                                              (5)                        $ 9                          4

Unrealized gains on marketable 
securities held as available for sale, 
net of tax effect                                                                                                186         186

Net loss                                                                        $(9,952)                                 $(9,952)

Balance December 31, 1995                6,037,720      $604       $11,028      $(1,149)       $ (936)            $1     $ 9,548

Stock grants to directors/employees                                     14                         51                         65

Net income                                                                       $2,675                                    2,675

Balance December 31, 1996                6,037,720      $604       $11,042       $1,526        $  (85)            $ 1    $12,288

</TABLE>
The  accompanying  notes  to financial statements are an integral part of these
statements.

<PAGE>

Statement of Cash Flows
Years Ended December 31,
(Dollars in thousands, except share data and per share amounts)

<TABLE>
<CAPTION>
                                                       1996           1995           1994
<S>                                             <C>             <C>             <C>
Cash Flows from Operating Activities:

Net income (loss)                                    $ 2,675        $ (9,952)      $  (426)
Adjustments to reconcile net income (loss)
        to net cash provided by (used in)
        operating activities:
Depreciation and amortization                          2,379          2,544          1,745
Allowance for doubtful accounts                           (1)           113              -
Net unrealized losses (gains) 
        on trading securities                             40           (230)             8
Net realized losses (gains) 
        on marketable securities                        (328)           161            186
Purchase of trading securities                        (4,891)        (1,922)        (1,680)
Proceeds from sale of trading securities               4,858          1,268            672
Accretion of common stock subject to a put option        311            157              -
Decrease (increase) in cash surrender value
        of life insurance                               (125)           (66)           (55)
Decrease (increase) in assets:
    Trade receivables                                    552           (360)          (605)
    Income taxes receivable                              900             14           (914)
    Inventories                                        3,579            341           (816)
    Prepaid advertising, prepaid expenses and other    3,058         (2,772)        (1,280)
    Deferred advertising                               1,424          3,180         (1,332)
    Deferred income taxes                               (472)             -              -
Increase (decrease) in liabilities:
    Checks-in-transit                                 (1,195)           507            931
    Accounts payable, trade                           (2,951)         4,895          2,010
    Accrued liabilities                                1,395           (241)           167
    Customer advances                                    214             54           (275)
    Deferred income taxes                                  -         (1,966)          (125)
    Income taxes payable                                 113              -           (113)
        Net cash provided by (used in)
               operating activities                   11,535         (4,275)        (1,902)

Cash Flows from Investing Activities:
    Purchase of property, plant and equipment         (5,388)        (6,101)        (3,403)
    Proceeds from sale of equipment                    3,641              -              -
    Purchase of marketable securities                      -         (1,595)        (2,998)
    Proceeds from sale of marketable securities            -          7,215          3,711
        Net cash provided by (used in)
               investing activities                   (1,747)          (481)        (2,690)

Cash Flows from Financing Activities:
    Repayment of borrowings from the line of credit  (25,311)       (40,663)       (28,812)
    Proceeds from the line of credit                  20,349         40,757         33,680
    Purchase of treasury stock                             -              -            (20)
    Proceeds from long-term borrowings                     -          4,553              -
    Proceeds from issuance of common stock,
        treasury stock and options exercised              65              6             79
    Proceeds from (payments to) New York State Urban
      Development Corporation                           (100)           483              -
    Payment of dividends                                   -              -           (436)
    Repayment of long-term debt                       (5,221)             -           (299)
        Net cash provided by (used in)
               financing activities                  (10,218)         5,136          4,192
        Net increase (decrease) in cash
               and cash equivalents                     (430)           380           (400)
Cash and cash equivalents at beginning of year           529            149            549
Cash and cash equivalents at end of year                 $99           $529           $149

Supplemental Disclosures of Cash Flow Information:
Cash paid (received) during the year for:
    Interest                                            $527           $735           $319
    Income taxes, net of refunds received              $(858)         $(771)           $36

</TABLE>
The accompanying notes to financial  statements  are  an integral part of these
statements.

<PAGE>
Notes to Financial Statements
(Dollars in thousands, except share data)

Note 1
Summary of Significant Accounting Policies

Description of Business
The  Company  is  engaged primarily in the direct-mail marketing  and  sale  of
personalized checks,  personalized  name  and  address products, stationery and
gift items, and performing services such as package  insertion and mailing list
rental.   Artistic  sells  its  products through Sunday newspaper  supplements,
magazines, co-operative mailings, direct mailings, its catalogs and through its
retail store.  Sales are predominately  to  individuals  throughout  the United
States.   Corporate  headquarters  and manufacturing facilities are located  in
Elmira, New York.  Artistic processes its orders in several locations in Elmira
and the surrounding area.

Principles of Consolidation
Prior to 1995, the financial statements  include  the  accounts of Artistic and
its wholly-owed subsidiary.  During 1992, the Company established  a subsidiary
in  the  United  Kingdom,   Artistic  Greetings  Limited, to expand on business
opportunities.  As of December 31, 1994, the operations  of the subsidiary were
terminated.   All  material  intercompany balances and transactions  have  been
eliminated.

Cash and Cash Equivalents
The Company considers liquid investments  with  a  maturity  of three months or
less  to  be  cash  equivalents  which are reflected at their approximate  fair
value.

Inventories
Inventories are stated at the lower  of  first-in,  first-out  ("FIFO") cost or
market, based on the lower of replacement cost or estimated realizable value.

Property, Plant and Equipment
Property, plant and equipment is stated at cost.  Depreciation and amortization
is  provided  principally  by  the  straight-line  method  over  the  following
estimated useful lives of the assets:

    Transportation equipment          5 years
    Furniture and fixtures            5 - 7 years
    Machinery and equipment           5 - 12 years
    Buildings                         18 - 31 years

Betterments,  renewals  and  extraordinary repairs that extend the life of  the
assets are capitalized.  Other  repairs  and  maintenance  are  expensed.  When
sold,  the cost and accumulated depreciation applicable to assets  retired  are
removed from the accounts, and the gain or loss on disposition is recognized in
income.

During 1996,  the  Company  adopted Statement of Financial Accounting Standards
No. 121 ("SFAS 121"), "Accounting  for  the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of."   The  Statement  requires that long-
lived assets and certain identifiable intangibles to be held  and  used  by  an
entity  be  reviewed for impairment whenever events or changes in circumstances
indicate that  the carrying amount of an asset may not be recoverable.  If such
events or changes  in  circumstances  are  present, a loss is recognized to the
extent  the  carrying  value  of the asset is in  excess  of  the  sum  of  the
undiscounted cash flows expected  to  result  from the use of the asset and its
eventual disposition.


Prepaid Advertising and Deferred Advertising
The Company capitalizes costs for direct response advertising and amortizes the
costs over the period of expected future benefit.   All other advertising costs
are  expensed  the first time the advertisement takes place.   Direct  response
advertising consists  of  prepaid  advertising  costs  and deferred advertising
costs.

Prepaid  advertising  costs  consist  principally  of the materials  and  labor
incurred  in developing the advertising materials, including  sales  literature
and catalogs.   These  costs  are  accumulated  until the materials are used or
distributed  to  a  customer  at which time they are  transferred  to  deferred
advertising costs.

Deferred advertising includes the  costs  previously  described  and  the costs
associated with distributing advertisements to customers, such as insertion and
mailing  costs.  Advertising is amortized over a period not to exceed one  year
following  the  date  the  literature  or  catalog is mailed or inserted into a
newspaper  or  co-op  mailing.   The amortization  period  corresponds  to  the
expected sales cycle of the advertising  material,  based on actual advertising
responses.  In 1994, advertising costs related to the  check-printing operation
were amortized over a period not to exceed 80 weeks, as  the  duration  of  the
probable  future  benefits was greater than one year or one operating cycle due
to customer reorders.   During  1995,  the  sales  cycle for the check-printing
operation for the original sales order and one reorder  occurred  within twelve
months  and the related amortization period was reduced to correspond  to  that
cycle.  These amortization periods are in compliance with American Institute of
Certified   Public  Accountants  Statement  of  Position  93-7,  "Reporting  on
Advertising Costs."

At December 31,  1996  and  1995,  $5,177  and  $9,653  of  advertising  costs,
respectively, were reported as assets.  Advertising expense for the years ended
December   31,   1996,   1995  and  1994  was  $37,809,  $48,978  and  $42,441,
respectively.  The expense  in  1995  includes  a charge of $2,229 to writedown
deferred advertising to its net realizable value.   The  expense  for  1996 and
1995  includes  approximately  $12,500 and $8,500, respectively, in advertising
placements related to the Advertising  Agreement  described  in  Note 13 to the
Financial Statements.

Cash Surrender Value of Life Insurance
The  Company has chosen to take out loans against the cash surrender  value  of
certain  life  insurance policies in place, due to the favorable rates offered.
Face value of the  policies  is  approximately  $1,800, with $600 being key man
life insurance.

Income Taxes
The Company uses the liability method of accounting  for deferred income taxes.
The liability method accounts for deferred income taxes  by  applying statutory
rates to the difference between the financial reporting and the  tax  bases  of
assets  and  liabilities.   Deferred federal and state income taxes result from
temporary differences in the  recognition of revenue and expense for income tax
and financial statement purposes.   Such  differences  arise  principally  from
depreciation,  tax credit carryforwards and promotional costs.  Tax credits are
applied as a reduction  to  the  provision  for  federal and state income taxes
using the flow-through method.

Revenue Recognition
The Company recognizes revenue when products are shipped.

Net Income Per Share
Net income per common and common equivalent share  is  based  on  the  weighted
average number of common and common equivalent shares (stock options determined
under the treasury stock method) outstanding during the period.  The effect  of
considering common stock equivalents for fully diluted net income per share was
not significant.  The weighted average number of shares outstanding is computed
as follows:

                                        1996         1995           1994

Common shares                         6,328,207      6,331,688      5,871,759
Common equivalent shares                 21,111             -          40,377
Total                                 6,349,318      6,331,688      5,912,136


Fair Value of Financial Instruments
Cash  and  cash  equivalents,  trade  receivables,  accounts  payable,  accrued
liabilities  and  other  current  liabilities  other  than  long-term  debt are
reflected  in  the financial statements at fair value because of the short-term
maturity of those instruments.

The estimated fair value of the Company's financial instruments is as follows:
<TABLE>
<CAPTION>

December 31,                          1996                          1995

                              Carrying       Fair           Carrying       Fair
                              Amount         Value          Amount         Value
<S>                         <C>         <C>             <C>             <C>
Marketable securities         $2,900         $2,900         $ 2,579        $ 2,579

Long-term debt,including
 current portion              $1,187         $  812         $11,370        $10,901
</TABLE>

The fair values  of  the  Company's  financial  instruments  were determined as
follows:

Marketable  securities:   The fair value is based on quoted market  prices  for
these or similar instruments.   Accordingly,  the carrying amount of marketable
securities approximates fair value.

Long-term debt including current portion:  The fair value of the long-term debt
is estimated based upon interest rates available to the Company for issuance of
similar debt with similar terms and remaining maturities.

Management's 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.

Note 2
Marketable Securities

The  Company accounts for its  investments  in  accordance  with  Statement  of
Financial  Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities."

The Company  has  classified  its securities into two categories, available for
sale and trading securities.  The value of the investment accounts is stated at
market value based on quoted market  prices.   The  cost of investments sold is
determined on a specific identification basis.  Gains  and  (losses) from these
securities are as follows:

<PAGE>
December 31,                          1996           1995
Securities available for sale
    Realized gain                     $ -            $ 32
    Realized loss                     $ -            $249
    Unrealized gain                     8               2
Trading securities
    Realized gain                     358             120
    Realized loss                      30              64
    Net unrealized gain               182             222


Unrealized gains and losses related to the securities available  for  sale  are
excluded  from  earnings  and reported as a separate component of stockholders'
equity, net of related deferred taxes of $1 in both 1996 and 1995.


Note 3
Inventories

Inventories include cost of  materials, labor and overhead and are comprised of
the following:

December 31,                          1996           1995

Finished goods                        $  652         $  798
Work-in-process                       $  561         $  492
Raw materials and supplies            $1,057         $4,559
Total                                 $2,270         $5,849

Note 4
Property, Plant and Equipment

Property, plant and equipment consist of the following:



December 31,                  1996           1995

Land                          $   385        $   365
Buildings                       9,160          8,335
Machinery and equipment        15,203         15,457
Furniture and fixtures          1,667          1,618
Transportation equipment          194            160
Subtotal                       26,609         25,935
Less:
Accumulated depreciation
        and amortization       10,372          9,066
Net                           $16,237        $16,869


Depreciation and amortization expense charged to operations amounted to $2,379,
$2,434  and $1,745 for the years  ended  December  31,  1996,  1995  and  1994,
respectively.


Note 5
Accrued Liabilities

Accrued liabilities consist of the following:

December 31,                          1996           1995
Accrued executive bonuses             $  691         $   -
Accrued employee profit sharing          301             -
Accrued and deferred compensation        406           511
Accrued vacation                         396           400
Miscellaneous accrued liabilities        592            80
Total                                 $2,386         $ 991


Note 6
Income Taxes

The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes."  The provision for
(benefit from) income taxes is comprised of the following:



December 31,                          1996           1995            1994
Currently payable:
Federal                               $  134         $  (757)       $  (987)
State                                     21              13             13
Total current                            155            (744)          (974)
Deferred:
Net loss carryforward                    786            (917)             -
Receivable reserve                       (41)              -             41
Depreciation                            (108)            293             84
Promotional costs                       (752)         (1,361)           523
Deferred compensation                      -              35            (35)
Vacation expense                           2              (3)           (37)
Insurance liability                     (122)              -              -
Investment losses and
 carryforwards                           (14)            157            (71)
Contribution carryforward               (281)            172           (470)
Inventory reserve                        219            (348)            29
Investment credits                         -             270            (33)
Other                                   (161)           (261)           (61)
Total deferred                          (472)         (1,966)           (30)
Total                                  $(317)        $(2,710)       $(1,004)

The following  is  a  reconciliation  of  the expected federal tax at statutory
rates to the effective rates:
<TABLE>
<CAPTION>
December 31,                                 1996           1995           1994
<S>                                     <C>             <C>             <C>
Expected tax                                 $  802         $(4,305)       $ (486)
State tax effect                                 19             (30)           27
Interest and dividend exclusion                  (5)            (49)         (126)
Investment credit                                 -               -           (67)
Nondeductible interest                          106               -             -
Adjustment of prior years' accruals              53               -           (86)
Contributions                                  (125)              -          (205)
Federal valuation allowance                  (1,144)          1,381             -
Other                                            33             205            17
Federal tax                                    (261)         (2,798)         (926)
State tax                                       (56)             88           (78)
Total                                        $ (317)        $(2,710)       $(1,004)
</TABLE>
The contribution amount is the tax benefit related to certain inventory donated
to various charities which qualify for a tax  deduction in excess of cost under
the Internal Revenue Code.

Deferred tax liabilities (assets) are comprised of the following:
<TABLE>
<CAPTION>

December 31,                                 1996           1995
<S>                                     <C>             <C>
Depreciation                                 $  773         $  881
Promotional costs                               781          1,308
Marketable securities                            68             82
Gross deferred tax liabilities                1,622          2,271
Promotional costs                              (410)          (185)
Vacation expense                               (146)          (148)
Contribution carryforward                      (579)          (298)
Net loss carryforward                          (674)        (2,476)
Alternate minimum tax credits                  (307)          (143)
Inventory reserve                               (52)          (401)
Receivable reserve                              (41)             -
Insurance liability                            (122)             -
Credit carryforwards                         (1,002)        (1,002)
Gross deferred tax assets                    (3,333)        (4,653)
Deferred tax assets valuation allowance       1,239          2,382
Total net deferred taxes                     $ (472)        $    -
</TABLE>


The  valuation allowance for deferred tax assets  in  1996  of  $1,239  relates
primarily  to  the  realizability  of  the  contribution  carryforward  and the
uncertainty  of  realizing  the  tax benefit of certain state tax credits.  The
valuation allowance for deferred tax assets in 1995 of $2,382 related primarily
to the realizability of net operating loss carryforwards and the uncertainty of
realizing the tax benefit of certain state tax credits.

The Company has New York State Investment  Tax Credits and Economic Development
Zone Credits that will provide tax benefit in  future  years.   The Company has
available investment tax credits of approximately $100 with varying  expiration
dates  through 2002.  The Company also has available Economic Development  Zone
Credits of approximately $900 which may be carried forward indefinitely.


Note 7
Leases

During 1995, the Company leased a portion of its manufacturing and office space
from an  officer who is a substantial stockholder of the Company.  All of these
leases expired  at December 31, 1995 and one was renewed.  Rental expense under
these arrangements  amounted  to  $42,  $91  and  $97  in  1996, 1995 and 1994,
respectively.   Other rental expense amounted to $90, $255 and  $332  in  1996,
1995 and 1994, respectively.

Future minimum lease  payments  under  operating  leases through the end of the
lease terms are expected to be $22 in 1997.


Note 8
Debt

Marine Revolving Line of Credit
In  March 1996, the Company refinanced a demand discretionary  line  of  credit
with Marine Midland Bank ("Marine") under which it can borrow up to $6,500 (the
"Demand  Line"),  with  a  revolving  line  of  credit that is committed to the
Company until January 2, 1998, (the "Marine Revolver").  The Company may borrow
and repay at its option, and issue letters of credit,  up  to  an  aggregate of
$6,500  under the Marine Revolver at either Marine's quoted Prime Rate  or  the
Money Market  Rate as quoted by Marine at the time of borrowing.  Additionally,
Marine  has  provided   letters  of  credit  to  secure  workers'  compensation
obligations of the Company in the amount of approximately $252, which expire on
September 30, 1997.  The  amount  of  borrowings available to the Company under
the Marine Revolver is dependent upon the  amount  of  accounts  receivable and
inventory, and the PAGE 17
value  of  certain intangibles of the Company (collectively, the "Collateral"),
determined at  the  time  as such borrowing base is calculated each month.  The
Marine Revolver is secured  by  the Collateral.  The Marine Revolver contains a
restriction on the payment of dividends  as  well  as  financial  and operating
covenants  requiring, among other things, the maintenance of certain  financial
ratios, including minimum net worth, leverage and working capital requirements.
Various modifications,  including  working capital covenants, maturity date and
valuation of collateral were made effective  May  30, 1996; September 30, 1996;
and December 31, 1996.  The Company is in compliance  with all of the financial
and operating covenants contained in the Marine Revolver.   The Marine Revolver
can be prepaid by the Company at any time without penalty.

Marine Equipment Term Loan
In  March  1995,  the  Company  executed  a  commercial installment  term  loan
agreement with Marine, under which it borrowed  $1,500  (the  "Marine Equipment
Loan"),  the  proceeds  of  which  were  used  to  finance  previous  equipment
purchases.   The  Marine  Equipment  Loan  was  secured  by  specific  items of
equipment (the "Marine Equipment"), incurred interest at Marine's quoted  Prime
Rate  and  was  to expire in April 2000.  The Marine Equipment Loan was paid in
full in 1996.

Marine Computer Term Loan
In  August 1991, the  Company  executed  a  commercial  installment  term  loan
agreement  with  Marine  under  which  it borrowed $1,200 (the "Marine Computer
Loan"), the proceeds of which were used  to  finance  certain computer hardware
and software of the Company (the "Computer Equipment").   The  Marine  Computer
Loan  was  secured  by  the  Computer  Equipment, incurred interest at Marine's
quoted Prime Rate and expired in August  1996.   The final payment on this loan
was made in 1996.

Marine Mortgage
In  August  1991, the Company executed a mortgage loan  agreement  with  Marine
under which it  borrowed  $750  (the  "Marine Mortgage"), the proceeds of which
were  used  to  finance  two  of the Company's  manufacturing  facilities  (the
"Manufacturing Facilities").  The  Mortgage  was  secured  by the Manufacturing
Facilities, incurred interest at a rate which is one percent  above  the quoted
Prime Rate of Marine and required a repayment of the aggregate principal amount
thereunder  of  $467 as of October 1996.  The outstanding principal amount  was
paid in full in 1996.
Chase Equipment Term Loan
In March 1995, the  Company  executed  an  installment term loan agreement with
Chase Lincoln First Bank, N.A. ("Chase"), under  which  it borrowed $3,500 (the
"Chase Equipment Loan"), the proceeds of which were used  to  finance  previous
equipment purchases.  The Chase Equipment Loan was secured by specific items of
equipment  (the "Chase Equipment").  The Chase Equipment Term Loan was paid  in
full in 1996.

New York State Urban Development Corporation Loan
In October 1995,  the  Company  executed  a  mortgage  loan agreement (the "UDC
Mortgage")  with the New York State Urban Development Corporation  (the  "UDC")
under which it  borrowed  $400,  the  proceeds  of  which  were used to finance
expenses  incurred  in  the purchase and buildout of Artistic Plaza.   The  UDC
Mortgage is secured by Artistic  Plaza,  does  not  incur interest and requires
amortization  for four years with the principal amount  thereunder  due  to  be
repaid in November 1999.  The UDC Mortgage can be prepaid by the Company at any
time without penalty.

Southern Tier Economic Growth Loan
In August 1995,  the Company executed an equipment term loan with Southern Tier
Economic Growth, Inc.  ("STEG") under which it borrowed $200 (the "STEG Loan"),
the proceeds of which were used to finance expenses incurred in the purchase of
certain items of equipment  (the  "STEG Equipment").  The STEG Loan was secured
by the STEG Equipment, incurred interest at a rate of 7% per annum and required
amortization over a five-year period  with  the principal amount thereunder due
to be repaid in September 2000.  The STEG Loan was paid in full in 1996.

City of Elmira Mortgage
In April 1991, the Company executed a Sales and  Development Agreement with the
City of Elmira (the "City of Elmira Mortgage").  As part of this agreement, the
Company  acquired two office buildings located in the  City  of  Elmira.   This
agreement provided financing for the purchase of these buildings evidenced by a
promissory  note  for  $920  at one percent per annum using the simple interest
method over 25 years.  Both the  principal  and interest payments were deferred
until May 1996.  Interest accrued on the principal  balance  during this period
at  one percent per annum using the simple interest method.  After  such  time,
both  the accrued interest and principal were reamortized over the remaining 20
years by  making  equal quarterly payments of principal and interest.  The note
also provides that the Company will have the right to prepay any part of,  
or  all of, the outstanding principal and accrued interest at any time 
without penalty.   This agreement is secured by a first mortgage on
these buildings.

Long-Term Debt
December 31,                  1996           1995

Marine Revolver               $ -            $4,962
Marine Equipment Loan           _             1,275
Marine Computer Loan            -               132
Marine Mortgage                 -               514
Chase Equipment Loan            -             2,975
UDC Mortgage                  300               400
STEG Loan                       -               192
City of Elmira Mortgage       887               920
Total long-term debt        1,187            11,370
Less:  Current portion        153             1,777
Total                      $1,034            $9,593


Minimum debt repayments under long-term obligations for the next five years and
thereafter are as follows:

    1997 .......................................$153
    1998 .......................................$153
    1999 .......................................$153
    2000 .......................................$ 53
    2001 .......................................$ 53
    Thereafter .................................$622

The weighted average interest rate  on short-term borrowings outstanding are as
follows:

                              1996    1995   1994
30-day notes                     -%     -%   6.14%
Money-market line             6.82%   7.36%  6.06%
Regular line                  8.25%   8.78%  7.12%



Note 9
Defined Contribution Savings Plan

The Company has a defined contribution  savings plan under which employees with
one year of service, who have worked 1,000  hours and attained 21 years of age,
are eligible for participation.  In 1996, the  Company matched 25% of the first
4% contributed by each participating employee annually.  The Company's matching
contributions were $39, $35 and $31 during 1996,  1995  and 1994, respectively.
Eligible employees enrolled and active at December 31 are eligible for employer
contributions  and  may  make  voluntary  contributions  subject   to   certain
limitations.   Company  profit  sharing  contributions  are discretionary.  The
profit-sharing contribution for 1996 was $301.  Due to the net loss in 1995 and
1994, no contributions were made to the plan for those years.


Note 10
Stock Options

The Company has an Employee Long-Term Incentive Plan (the  "Plan")  under which
Incentive  Stock  Options  ("ISOs")  to  purchase and/or Stock Incentive Rights
("SIRs") to receive a total of 1,800,000 shares  of  the Company's common stock
may be awarded.

In October 1995, the Financial Accounting Standards Board  issued  Statement of
Financial   Accounting   Standards   No.   123,   "Accounting  for  Stock-Based
Compensation" ("SFAS 123").  The Statement encourages,  but does not require, a
fair value based method of accounting for an employee stock  option  or similar
equity instrument.  The Company accounts for its stock options under Accounting
Principles  Board  Opinion  No. 25, "Accounting for Stock Issued to Employees".
Accordingly, no compensation  cost  has  been  recognized for the options.  Had
compensation cost for these options been determined  based on the fair value at
the  grant  dates of the awards, consistent with SFAS 123,  the  Company's  pro
forma amounts for net income and earnings per share would have been as follows:

                                   1996        1995
Net income (loss)      As reported $2,675    $(9,952)
                       Pro forma   $2,345    $(9,977)

Net income (loss)      As reported  0.42       (1.57)
per common and         Pro forma    0.37       (1.58)
common equivalent share


SFAS 123 has  only been applied to options granted after January 1, 1995.  As a
result, the pro forma compensation expense may not be representative of that to
be expected in future years.

The weighted-average assumptions used to estimate the fair value of each option
on the date of grant using the Black-Scholes option pricing model include:

                                      1996           1995
Risk-free interest rate               6.37%          6.02%
Expected life                         5 years        5 years
Expected volatility                   51.1%          51.1%
Expected dividends                      -               -
Weighted average fair value
        of options granted            $2.24          $1.68


ISOs are granted  at  not  less than fair value on the date of grant, expire no
later than ten years from the  date  of grant and are exercisable over variable
periods from three to five years.  The  following  table summarizes the changes
in ISOs outstanding and related price ranges for shares of the Company's common
stock under the Plan.
<PAGE>
                                      Number of
                                      Shares         Price Range
Outstanding at January 1, 1994        556,630        $ 2.62 to $11.75
Granted:                              101,500        $4.00 to $5.00
Exercised:                             (2,300)       $3.20 to $5.00
Canceled:                             (20,300)       $6.06 to $11.75
Outstanding at December 31, 1994:     635,530        $3.20 to $11.75
Exercisable at December 31, 1994:     398,648        $3.20 to $11.75
Outstanding at January 1, 1995:       635,530        $3.20 to $11.75
Granted:                               15,000        $3.12 to $3.50
Exercised:                                900        $2.62 to $2.62
Canceled:                            (149,730)       $4.00 to $9.50
Outstanding at December 31, 1995:     500,900        $3.12 to $10.31
Exercisable at December 31, 1995:     272,908        $3.12 to $10.31
Outstanding at January 1, 1996:       500,900        $3.12 to $10.31
Granted:                              147,000        $2.62 to $5.00
Exercised:                                  -        $-   to   $-
Canceled:                             (259,490)      $3.20 to $9.38
Outstanding at December 31, 1996:     388,410        $2.62 to $10.31
Exercisable at December 31, 1996:     139,700        $2.62 to $10.31



SIRs  are rights to receive shares of the Company's common  stock  without  any
cash payment  to the Company, conditioned only on continued employment with the
Company over a  specified  four-year  incentive  period.  During that incentive
period,  the  recipient  of  a  SIR  award would receive  "dividend-equivalent"
payments on the number of shares covered  by  his/her  SIR award, but would not
have any other rights, e.g., voting rights, etc., with respect  to  such shares
until  they  were issued to him/her under the terms of the award.  To date,  no
SIRs have been granted under the Plan.

The Company had  shares  available for awards amounting to 775,920, 663,430 and
529,700 at December 31, 1996, 1995 and 1994, respectively.  The Company is able
to realize an income tax benefit  from  the  exercise  and early disposition of
ISOs.  For financial reporting purposes, this benefit results  in a decrease in
current income taxes payable and an increase in additional paid-in capital.

Note 11
Stockholders' Equity

In 1996, the Company issued 1,071 shares of its treasury stock to a director at
a price per share of $3.50 for services rendered.  In 1996, the Company granted
10,000 and 5,000 shares of its treasury stock to two employees at  a  price per
share  of  $3.88 and $4.69, respectively, for services rendered.  In 1995,  the
Company issued  1,363 shares of its treasury stock to a director at a price per
share of $2.75 for  services  rendered.   In  1994,  the Company granted 11,860
shares of its treasury stock to directors at a price per  share  of  $5.00  for
services  rendered  and  2,000 shares of its treasury stock to an employee at a
price per share of $5.50 for services rendered.

In October 1993, the Board  of  Directors  authorized  the  purchase  of  up to
300,000 shares of the Company's common stock at the prevailing market price  as
the  shares  are made available to the Company.  The Company did not repurchase
shares in either  1996  or 1995.  The Company repurchased 3,500 shares in 1994.
These shares were repurchased at an average per share price of $5.60.


Note 12
Related Party Transactions

The son of an executive officer of the Company, who is a licensed stock broker,
processes the Company's marketable  securities transactions.  Total commissions
paid to this individual were approximately  $17,  $21 and $16 in 1996, 1995 and
1994, respectively.


Note 13
Commitments and Contingencies

Employment Contracts
In 1996, the Company entered into a three-year employment  agreement  with  the
Chief  Executive  Officer  and  President  of the Company, which provides for a
minimum  annual compensation of $200 and for  participation  in  the  Company's
executive  bonus  program.   Additionally,  the  Company  entered into two-year
employment  agreements,  providing for participation in the bonus  program  and
minimum annual compensation  of  $125  and  $122,  with each of its Senior Vice
President  of  Finance and Senior Vice President Administration,  respectively.
In 1993, the Company  entered  into  a  five-year employment agreement with the
Chairman of the Company which provides minimum  annual compensation of $225 and
an annual bonus based on net income before taxes.

Legal Matters
The Company is subject to litigation from time to  time  in the ordinary course
of  business.  Although the amount of any liability with respect  to  any  such
litigation  cannot be determined, in the opinion of management, such liability,
if any, will  not  have  a  material  adverse effect on the Company's financial
condition or results of operations.

Commitments
In May 1995, the Company negotiated a contract  with a supplier to obtain right
of  first  refusal  for  advertising  placement at competitive  rates.   As  of
December 31, 1996, the remaining commitment  under  the contract, which expires
May 2000, was $5,000, payable in annual installments of $2,000 through May 1998
and the final installment of $1,000 due in May 1999.

Note 14
Supplemental Disclosure of Noncash Investing and Financing Activity

During  1995,  the  Company  acquired  certain  assets of Valcheck  Company  in
exchange for 500,000 shares of the Company's common  stock.   The  common stock
was  issued  at  a  price  of $3.75 per share, or $1,875.  The common stock  is
puttable to the Company, at  Valcheck's  option, two years from the acquisition
date at $5 per share.

                                      1995
Fair value of assets acquired
    Inventory                         $  361
Property, plant and equipment         $1,481
Name list                             $   33
Total                                 $1,875
Less: common stock issued              1,875
Cash paid                             $    -



Note 15
New Accounting Standards

In March 1997, the Financial Accounting Standards  Board  issued  Statement  of
Financial Accounting Standards No. 128, "Earnings Per Share".  The statement is
effective  for  fiscal  years  ending  after  December 15, 1997.  When adopted,
restatement of prior years' earnings per share will be required.

The  statement  establishes  revised  standards for  computing  and  presenting
earnings per share.  Management does not  expect  the  application  to  have  a
material effect on the Company's financial statements.

<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

The Board of Directors and Stockholders of
Artistic Greetings Incorporated:

    We  have  audited  the  accompanying  balance  sheets of Artistic Greetings
Incorporated, (a Delaware corporation) as of December  31,  1996  and 1995, and
the related statements of operations, changes in stockholders' equity  and cash
flows for each of the three years in the period ended December 31, 1996.  These
financial  statements are the responsibility of the Company's management.   Our
responsibility  is to express an opinion on these financial statements based on
our 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 the Company as of December
31, 1996 and 1995, and the results of its operations  and  its  cash  flows for
each  of  the  three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.

/s/ Arthur Andersen LLP
Rochester, New York
February 7, 1997

<PAGE>
10-K Report
A copy of the Annual Report on Form 10-K, filed with the Securities and
Exchange Commission, is available at no charge upon request by writing or
calling Robert E. Johnson, Chief Financial Officer.

Market for Registrant's Common Stock and Related Stockholder Matters

The following represents the range of quarterly high and low sales prices for
the Company's common stock for 1996 and 1995 as provided by the NASD.

1996 Quarter 1  High 3        Low  2 3/8
1996 Quarter 2  High 4 1/16   Low  2 3/4
1996 Quarter 3  High 5 7/8    Low  3 3/8
1996 Quarter 4  High 5 15/16  Low  4 1/4

1995 Quarter 1  High 3 3/4  Low  2 1/8
1995 Quarter 2  High 4 3/8  Low  2 1/4
1995 Quarter 2  High 4 1/8  Low  3 1/8
1995 Quarter 2  High 3 7/8  Low  2 1/4

On March 20, 1997, the closing price of the Company's common stock was $4.75
per share, as quoted by NASDAQ - NMS and published in The Wall Street Journal.

The number of holders of record of the Company's common stock on March 20, 1997
was in excess of 626, as supplied by the Company's transfer agent.