SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C.  20549

                                   FORM 10-K

(Mark One)


/ X /    ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
         EXCHANGE ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended DECEMBER 31, 1996

/  /     TRANSITION  REPORT  PURSUANT  TO SECTION 13 OR 15(d) OF THE  SECURITIES
         EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from          to

                        Commission file number 0-22922

                           THE WESTERN SYSTEMS CORP.
                (FORMERLY THE WESTERN TRANSMEDIA COMPANY, INC.)
------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

          Delaware                                  06-0995978
-----------------------------------         -----------------------------
(State or other jurisdiction                (IRS Employer Identification
 of incorporation or organi-                 Number)
 zation)

c/o Janney Montgomery Scott Inc., 26 Broadway, New York, NY 10004
------------------------------------------------------------------------------
(Address of Principal Executive Offices)               (Zip Code)


Registrant's telephone number, including area code: (212) 510-0688

Securities registered pursuant to Section 12(b) of the Act:

                                      None

Securities registered pursuant to Section 12(g) of the Act:

      Common Stock, $.60 par value
      Common Stock Purchase Warrants  entitling holders to purchase one share of
      Common Stock per Warrant prior to December 31, 1997

         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 /  /

                                                         (CONTINUED NEXT PAGE)
<PAGE>
         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of the  Registrant's  knowledge,  in definitive proxy or information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. /X/

         The  aggregate  market value of voting stock  (Common  Stock,  $.60 par
value)  held by  non-affiliates  of the  Registrant  as of  March  14,  1997 was
approximately  $12,419,923  (based on the mean between the closing bid and asked
prices of the Common Stock on such date), which value, solely for the purpose of
this calculation,  excludes shares held by the Registrant's  executive  officers
and  directors.  Such  exclusion  should  not be deemed a  determination  by the
Registrant that all such individuals are, in fact, affiliates of the Registrant.

         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock, as of the latest  practicable  date: At March 14, 1997,
there were outstanding  7,903,421 shares of the Registrant's  Common Stock, $.60
par value.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Certain portions of the  Registrant's  definitive proxy statement to be
filed not later than April 30, 1997 pursuant to Regulation 14A are  incorporated
by  reference  in Items 10 through 13 of Part III of this Annual  Report on Form
10-K.


<PAGE>

                                     PART I

ITEM 1.     BUSINESS

RECENT DEVELOPMENTS

         On January 3, 1997 the Company sold its  Transmedia  Network  franchise
(the  "Franchise")  covering the States of  California,  Oregon,  Washington and
parts of Nevada and  substantially  all of its operating  assets other than cash
and cash  equivalents (the "Asset Sale") to its franchisor,  Transmedia  Network
Inc.  ("Network").  Upon  consummation  of the Asset Sale, the Company's  assets
consisted  principally of cash and cash  equivalents  aggregating  approximately
$9,574,000.  These  assets  (less  approximately  $800,000  of taxes on the gain
resulting  from the Asset  Sale) will be  utilized  by the  Company to  acquire,
merge,  consolidate,  invest  in  transactions  or  otherwise  combine  with  an
operating business (any such transaction, a "Business Combination"). The Company
intends to enter into Business  Combinations  that will use substantially all of
the Company's  available  cash in one or two  transactions  and  structure  such
Business Combinations so that the current management of the target business will
remain in place.  There can be no assurance,  however,  that the Company will be
able to effectuate a Business Combination, or that any such Business Combination
will be profitable.  In anticipation of the Asset Sale, in the fourth quarter of
1996, the Company initiated  activities to seek a Business  Combination.  At the
present time, there are no Business  Combinations  under  consideration that the
Board of Directors  considers  probable of consummation.  The Board of Directors
will have broad discretion in its search for and negotiations  with respect to a
Business Combination.

         Pending a Business  Combination,  the Company's assets will be invested
as management of the Company deems prudent,  which investments may include,  but
not be limited to, certificates of deposit, mutual funds, money-market accounts,
stocks,  bonds or United States  Government or municipal  securities,  provided,
however,  that the  Company  will  attempt to invest its assets in a manner that
will not result in the Company  being  required  to  register  as an  investment
company under the Investment Company Act of 1940.

         During  the  year  ending  December  31,  1997  and  until  a  Business
Combination  is effected,  the Company  expects to generate  interest  income in
excess of its minimal  operating  expenses,  exclusive of any due  diligence and
professional   fees  incurred  in  connection   with  the   identification   and
consummation of one or more Business Combination.

         The Company has used and intends to continue to use various  sources in
its search for potential Business Combinations


<PAGE>
including its officers and directors,  consultants, special advisors, securities
broker-dealers,  venture  capitalists,  members of the  financial  community and
others who may present management with unsolicited proposals. The Company may be
required  to  pay a fee  in  connection  with  the  consummation  of a  Business
Combination.

         The Company does not intend to restrict its search to any specific kind
of industry or business.  The Company may investigate  and ultimately  acquire a
venture  that  is in  its  preliminary  or  development  stage,  is  already  in
operation, or in various stages of its corporate existence and development.  The
Board of  Directors  cannot  predict  at this  time the  status or nature of any
venture in which the Company may  participate.  A potential  venture  might need
additional  capital or merely  desire to have its shares  publicly  traded.  The
Board of Directors  believes that the Company  could provide a potential  public
vehicle for a private entity  interested in becoming a publicly held corporation
without  the  time and  expense  typically  associated  with an  initial  public
offering.

         Once the  Company has  identified  a  particular  entity as a potential
acquisition or merger  candidate,  the Board of Directors will seek to determine
whether  acquisition or merger is warranted or whether further  investigation is
necessary.  Such  determination will generally be based on the Board's knowledge
and  experience,  or with the  assistance  of outside  advisors and  consultants
evaluating the preliminary information available to them. The Board of Directors
may elect to engage  outside  independent  consultants  to  perform  preliminary
analysis of potential business opportunities.

         In evaluating such potential  Business  Combinations,  the Company will
consider,  to the extent relevant to the specific  opportunity,  several factors
including  potential  benefits  to the  Company  and its  stockholders;  working
capital,  financial  requirements  and  availability  of  additional  financing;
history of  operation,  if any;  nature of  present  and  expected  competition;
quality and experience of management; need for further research,  development or
exploration;  potential for growth and  expansion;  potential  for profits;  and
other factors deemed relevant to the specific opportunity.

         Presently,  the  Company  cannot  predict  the manner in which it might
participate  in a prospective  Business  Combination.  Each  separate  potential
opportunity  will be reviewed  and,  upon the basis of that  review,  a suitable
legal structure or method of participation will be chosen. The particular manner
in which the Company participates in a specific business opportunity will depend
upon the nature of that  opportunity,  the  respective  needs and desires of the
Company and management of the opportunity, and the relative negotiating strength
of the parties involved. Actual participation in a Business Combination may take
the form of an asset purchase, lease, joint venture, license, partnership, stock
purchase, reorganization, merger or consolidation. The Company may

                                       -2-

<PAGE>
act directly or indirectly through an interest in a partnership, corporation, or
other form of  organization.  The Company  could  participate  in  opportunities
through the purchase of minority stock positions.

         In the  Asset  Sale,  the  Company  received  a total of  approximately
$7,500,000 in cash,  which,  in addition to payment for the Franchise,  included
payment for the Company's Rights to Receive (as hereinafter  defined).  The cash
and  cash  equivalents   retained  by  the  Company  amounted  to  approximately
$2,074,000 at December 31, 1996.

GENERAL

         The  following  information  describes  the business  carried on by the
Company prior to the Asset Sale.

         In December 1991, the Company  entered into a franchise  agreement (the
"Franchise  Agreement")  with Network that granted to the Company the  exclusive
right  to  operate  the  Franchise,  the  primary  business  of  which  was  the
acquisition  of "Rights to Receive"  from client  restaurants  and other  dining
establishments  located in California that accept a charge card, "The Transmedia
Card," and the sale of such Rights to Receive to holders of The Transmedia  Card
("Cardholders").  The Transmedia Card, a private charge card marketed and issued
by Network, which utilizes a diner's MasterCard(R), Visa(R), American Express(R)
or  Discover(R)  charge  account to bill  Transmedia  Card  charges,  is used by
Cardholders  to pay for food and beverages  when dining at  restaurants or other
dining establishments (the "Participating  Restaurants") that participate in the
network of such  establishments that accept The Transmedia Card (the "Transmedia
Network(R)").   The  Transmedia  Network  is  a  unified  system  that  entitles
Cardholders recruited by Network, the Company or any other Network franchisee to
a savings of up to 25% on the regular menu prices of food and beverages  charged
on The Transmedia Card.  Rights to Receive were the Company's rights to food and
beverage credits of Participating Restaurants that were purchased by the Company
in exchange for cash in an amount equal to approximately 50% of the retail value
of such food and beverage credits.

         The Company derived  substantially  all of its revenues from the excess
of the proceeds of Cardholders'  charges on their  Transmedia  Cards incurred at
Participating Restaurants in the territory included within the Franchise (net of
the up to 25%  Cardholder  savings  and of fees and  other  charges  payable  to
Network)  over  the  Company's  cost  of  purchasing   Rights  to  Receive  from
Participating  Restaurants.  Revenues from Cardholders' membership fees were not
significant as the Company only received 40% of initial  membership fees (and no
portion of renewal fees) and, under arrangements with Network, such initial fees
were generally waived by the Company.

                                       -3-

<PAGE>

         The Company commenced its franchise operations in the San Francisco Bay
Area in August 1992,  in the Los Angeles  metropolitan  area in October 1993, in
Orange  County in January  1995,  and in the Lake Tahoe,  Nevada area in October
1995.  At  December  31,  1996,  there  was an  aggregate  of 557  Participating
Restaurants,  consisting of 221 in the San Francisco  Bay Area  (including  Lake
Tahoe),  269 in the Los Angeles  Metropolitan  Area and 67 in Orange County.  At
December 31, 1996, there was an average Rights to Receive balance (net of Rights
to Receive  payable by the Company)  per  Participating  Restaurant  for the San
Francisco  Bay Area,  Los Angeles  Metropolitan  Area and Orange  County Area of
approximately $6,300, $5,600, and $2,600, respectively. During 1996, the Company
added 64,000 new Cardholders residing in California. At December 31, 1996, there
were  approximately  146,000  Cardholders  after giving  effect to non- renewals
during the year.

         In addition to acquiring the California franchise, the Company acquired
options to operate  Transmedia  Network franchises in Oregon and Washington upon
payment of certain  prescribed fees. In December 1993, the Company exercised its
option to operate the Transmedia Network franchise in Washington and also agreed
with Network to purchase a franchise in Reno,  Nevada and the Nevada  portion of
the Lake Tahoe resort area.  In June 1995,  the Company  exercised its option to
obtain a Transmedia  Network  franchise for the State of Oregon. As used herein,
the term  "Franchise  Territory"  means the  States of  California,  Oregon  and
Washington, and Reno and Lake Tahoe, Nevada.

         In 1995,  Network began to offer to holders of The Transmedia  Card use
of the card at certain hotels,  resorts,  golf courses,  ski lifts and access to
discount  long  distance  telephone  services.  The  Company's  rights under the
Franchise  Agreement related only to Participating  Restaurants in the Franchise
Territory.  The Company did not have any rights to  participate in or derive any
income from these other services.

         In connection  with the Asset Sale,  the Company and Network  exchanged
general releases of all liabilities, obligations under the Franchise Agreement.

RIGHTS TO RECEIVE

         The Company's primary business was the acquisition of Rights to Receive
from Participating  Restaurants that it recruited to join the Transmedia Network
of dining  establishments and the sale of such Rights to Receive to Cardholders.
The Company derived  substantially all of its revenues from purchasing Rights to
Receive from Participating  Restaurants  operating in the Franchise Territory in
exchange for cash in an amount equal to approximately 50% of the retail value of
the food and  beverage  credits  underlying  such Rights to Receive and applying
such Rights to Receive against

                                       -4-

<PAGE>
Cardholder charges made at Participating  Restaurants operating in its Franchise
Territory.

         The Company entered into a contract (a "Restaurant Contract") with each
Participating  Restaurant  in its  Franchise  Territory in  connection  with its
purchase from it of Rights to Receive.  The typical Restaurant Contract provided
for the  purchase  by the  Company  of between  $5,000 and  $10,000 in Rights to
Receive.  Generally,  such  Rights to  Receive  were paid for by the  Company in
installments during the initial two-to-three month period thereof.  Beginning in
1995, the Company also entered into nine to 12 month commitment  agreements with
certain  Participating  Restaurants.  The  commitment  agreements  established a
minimum period of  participation  by the  Participating  Restaurant in the event
that the  initial  credits  purchased  by the  Company  from  the  Participating
Restaurant were exhausted prior to the expiration of the commitment  period. The
Company believes that these  commitment  agreements had a positive effect during
1996 upon restaurant retention and cash flow.

TRANSMEDIA CARD

         The Transmedia Card is a private charge card that entitles  Cardholders
to a  savings  of up to 25% on the  regular  menu  price of food  and  beverages
purchased  at  any  Participating  Restaurant  within  the  Transmedia  Network.
Participating  Restaurants  solicited  by the  Company  were  located in the San
Francisco Bay Area,  metropolitan Los Angeles and Orange County.  The Transmedia
Card was developed and is issued and marketed by Network.

         Cardholders  may use The Transmedia Card as they would any major credit
card. When paying the check at a Participating Restaurant, a Cardholder presents
The Transmedia Card in payment for the amount of goods and services received, as
well as for taxes and tips,  and signs a Network  credit  card  receipt for such
amount.  Network,  upon receiving the credit card receipt from the Participating
Restaurant,  gives the Participating  Restaurant a credit against the balance of
Rights to Receive that are held by the Company in respect of such  Participating
Restaurant. Network then arranges for the processing of the receipt for the full
amount of the charges  through the major credit card account (Visa,  Mastercard,
American  Express  or  Discover)  designated  by  the  Cardholder  in his or her
application (the "Major Credit Card Account") and simultaneously issues a credit
to the  Cardholder's  Major  Credit Card Account in an amount equal to the up to
25% savings on the appropriate food and beverage charges. Taxes and tips are not
eligible for the up to 25% savings.  Upon receipt by Network of payment from the
Major Credit Card Account,  it pays the  Participating  Restaurant the taxes and
tips  incurred by the  Cardholder,  deducts the fees and expenses  payable to it
under the

                                       -5-

<PAGE>

Franchise Agreement and remits the balance to the Company on a weekly basis.

CARDHOLDER MARKETING

         In  January  1996,  Network  initiated  a policy to offer  both new and
existing  Cardholders  an alternative  to the  traditional  arrangement of a 25%
savings  with an  annual  membership  fee of  $50.  The new  program  (the  "20%
Program")  provides a 20% savings to  Cardholders  with no annual fee so long as
Cardholder  usage is at least $200 during each  membership  year.  Commencing in
1996,  substantially all programs initiated by Network to obtain new cardholders
utilized  the 20%  Program  and  Network  took a  leading  role to  promote  the
Transmedia Card on a national basis utilizing  arrangements  with large national
organizations  and  businesses.  Since  January  1, 1996  substantially  all new
cardholders were enrolled in the 20% Program.

         The Company commenced active franchise  operations in the San Francisco
Bay Area in August 1992.  During 1993, the Company focused its principal efforts
on recruiting  restaurants and other dining establishments doing business in the
San  Francisco  Bay Area to join the  Transmedia  Network and on  marketing  The
Transmedia  Card  to  prospective  Cardholders.   Initial  franchise  activities
concentrated primarily on establishing a base of restaurants in San Francisco as
a  foundation  for  commencing   programs  to  market  The  Transmedia  Card  to
prospective  Cardholders.   Active  marketing  efforts  to  solicit  Cardholders
commenced in late 1992 and were directed primarily to professionals,  investment
banking  and real  estate  firms and  various  small and  mid-sized  businesses.
Marketing  to larger  businesses,  banks,  radio  station  listeners'  clubs and
various non-profit organizations commenced in April 1993.

         Active  marketing  efforts to solicit  Cardholders  in the Los  Angeles
metropolitan  area  commenced in January  1994 and  followed the same  marketing
strategy  implemented  by the  Company  in the San  Francisco  Bay Area.  Active
marketing efforts to solicit Cardholders in Orange County commenced in mid-1995.

FRANCHISE AGREEMENT

         The  Company  entered  into the  Franchise  Agreement  with  Network on
December 9, 1991.  Under the  original  terms of the  Franchise  Agreement,  the
Company was required to pay Network the following fees and charges: (i) $250,000
as an initial  franchise fee (which had been paid);  (ii) $250,000 as an initial
contribution to Network's  advertising  and development  fund, of which $125,000
was paid  and the  remaining  $125,000  was  payable,  without  interest,  in 12
consecutive  equal  monthly  payments  commencing  July 1993;  and (iii) 150,000
shares of the Common  Stock of the Company  valued at  $21,000,  which have been
issued. In September 1993, the Company and Network agreed that the Company would
pay for substantially all

                                       -6-

<PAGE>

of its  advertising  in  California  and entered  into an  agreement  providing,
effective  as of  September  30,  1993,  for (i) a refund to the  Company of the
remaining  unused balance  (approximately  $55,000) of the Company's  previously
advanced $145,000 initial contribution to Network's  advertising and development
fund  (which  refund has been made) and (ii) the  termination  of the  Company's
obligation  to  pay  the  remaining  monthly  installments  of  such  obligation
(approximately $105,000).

         In addition,  the Company was  obligated  to pay to Network  continuing
service  charges as follows:  (i) a general service charge equal to 7.5%, and an
advertising  fee of 2.5%,  of the total dollar  amount of Rights to Receive meal
credits used by Cardholders at  Participating  Restaurants  within the Franchise
Territory;  (ii) a monthly  restaurant service charge of $1.00 per Participating
Restaurant  located in the preceding month within the Franchise  Territory;  and
(iii)  a  processing  charge  equal  to $.20  per  Cardholder  transaction  slip
forwarded to Network by Participating Restaurants in the Franchise Territory.

         Under the Franchise Agreement,  the Company purchased options to obtain
Transmedia  Network  franchises  for the States of Oregon and/or  Washington for
initial  total  franchise  and  advertising   fees  of  $200,000  and  $300,000,
respectively.  In December 1993, the Company  exercised its option for the State
of Washington and in June 1995,  the Company  exercised its option for the State
of Oregon.  In  connection  with the  exercise of such option and the  Company's
assumption of certain advertising costs described above, the Company also agreed
with Network to provide for (i) a reduction in the Company's  exercise price for
the Transmedia  Network  franchises in the States of Oregon and/or Washington to
$100,000 and $150,000, respectively, to reflect the Company's assumption of such
advertising obligations;  (ii) the exercise of the Washington option by issuance
to Network of 50,000  shares of Common Stock (in lieu of the  $150,000  exercise
price) and the  exercise  of the Oregon  option by  issuance  to the  Network of
35,000  shares of Common Stock (in lieu of the  $100,000  exercise  price);  and
(iii) the acquisition of the right to operate the Transmedia  Network  franchise
in limited  areas of Nevada by  issuance  to Network of 10,000  shares of Common
Stock. The Company was required to commence franchise operations in the State of
Washington,  by  December  31,  1996 and in the State of  Oregon by April  1997.
Pending the completion of the Asset Sale, expansion activities were suspended.

EMPLOYEES

         As of December  31, 1996,  the Company  employed a total of 17 persons,
one of whom was the general  manager of the Los  Angeles  office and one of whom
was an executive  officer and director of the Company.  Effective with the Asset
Sale, 11 of such persons became  employees of Network.  During the first quarter
of 1997, the

                                       -7-

<PAGE>
Company will operate with a staff of two full time  administrative  employees in
order to fulfill its public reporting responsibilities.  After the first quarter
of 1997,  pending completion of one or more Business  Combinations,  the Company
will have no full time  employees or office  overhead and will  contract out all
required administrative and compliance functions.

COMPETITION

         The  charge  card  business,   including  the  restaurant  charge  card
business,  is highly  competitive and the Company  competed for both Cardholders
and restaurants.  Competitors included discount programs offered by major credit
card companies such as American Express(R), Visa, MasterCard and Diners Club(R),
other companies (including Dining a la Card(sm) and Entertainment(R)) that offer
different kinds of discount marketing programs and numerous smaller companies.

ITEM 2.     PROPERTIES

         The Company  presently  leases no business  premises  but  maintains an
office c/o Janney Montgomery Scott Inc., 26 Broadway, New York, New York 10004.

         During 1996, the Company's  principal  executive and sales offices were
located  at 475  Sansome  Street,  San  Francisco,  California.  These  premises
consisted  of  approximately  3,000 square feet of space leased until August 31,
1999. The annual base rental during 1996 was approximately  $55,200. The Company
leased an additional  executive office located at 233 Wilshire Boulevard,  Santa
Monica, California.  These premises consisted of approximately 2,000 square feet
of space  leased  until  February  1998 at an annual base rent of  approximately
$50,400.  The  Company  leased  approximately  100  square  feet of  space at an
executive suite in Costa Mesa in Orange County at a cost of $640 per month.

         Effective  with the Asset  Sale,  the San  Francisco  and Santa  Monica
leases were assigned to, and assumed by,  Network.  The Company's  Orange County
lease expired January 31, 1997 and was not renewed.

ITEM 3.     LEGAL PROCEEDINGS

         There are no pending legal proceedings to which the Company is a party.

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

         A Special  Meeting  of  stockholders  was held on  December  27,  1996.
Proxies were  solicited  with respect to approval of the Asset Sale and approval
of certain amendments to the Company's 1992

                                       -8-

<PAGE>

Stock   Option  Plan.   The   stockholders   approved  the  Asset  Sale.   The
votes cast for, against or abstaining were as follows:

                  For                                 4,611,055
                  Against                                40,919
                  Abstaining                              9,508

         The stockholders  also approved the amendments to the 1992 Stock Option
Plan.  The  number of votes  cast for,  against or  abstaining  with  respect to
approval were as follows:

                  For                            4,310,864
                  Against                          233,659
                  Abstaining                       116,959





                                       -9-

<PAGE>

                                     PART II

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

         The  Company's  Common Stock has been traded on NASDAQ under the symbol
("WTSM") since December 23, 1993. The Company's Units are traded on NASDAQ under
the symbol  ("WTSMU").  The  Company's  Warrants  are traded on NASDAQ under the
symbol ("WTSMW").

         The Company's Common Stock was traded in the over-the-counter market in
what is commonly referred to as the "pink sheets" or on the "OTC Bulletin Board"
of the National Association of Securities Dealers,  Inc. under the symbol "WTSM"
from July 16, 1992 to December 22, 1993.

         The  following  table sets forth the high and low bid prices on the OTC
Bulletin Board and the high and low closing bid prices as reported on NASDAQ for
the Company's  Common Stock during the quarters  indicated.  The prices reported
reflect inter-dealer quotations and may not represent actual transactions and do
not include retail mark-ups, mark-downs or commissions.


QUARTER ENDED                                       HIGH          LOW
-------------                                       ----          ---

March 31, 1995.................................     3.875         3.25

June 30, 1995..................................     3.75          2.75

September 30, 1995.............................     2.75          1.375

December 31, 1995..............................     2.50          1.00



March 31, 1996.................................     2.50          1.00

June 30, 1996..................................     2.625         1.50

September 30, 1996.............................     2.185         1.125

December 31, 1996..............................     1.375          .750


         At March 14, 1997,  there were  approximately  394 holders of record of
the Company's Common Stock. This number does not include an indeterminate number
of  stockholders  whose shares are held by brokers in "street name." The Company
has not paid any cash  dividends  on the Common  Stock since it became  publicly
traded.

                                      -10-

<PAGE>
ITEM 6.     SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>

                                             For the Years Ended December 31,
                              -----------------------------------------------------


                                   1996           1995         1994        1993       1992
                                   ----           ----         ----        ----       ----

SELECTED INCOME STATEMENT DATA:

<S>                              <C>          <C>           <C>          <C>         <C>    
Net Sales...................     $9,301,155   $11,368,903   $8,698,738   $926,852    $14,023

Interest Income.............        132,951       146,342      38,941      44,709     16,924

Net Income (Loss)...........        545,024        10,942    (280,994)   (924,733)  (741,882)

Net Income (Loss) Per Common
   Share*...................           $.07          $0.0      $(.04)      $(.16)     $ (.24)
</TABLE>

<TABLE>
<CAPTION>

                                             For the Years Ended December 31,
                              -----------------------------------------------------

                                   1996           1995         1994        1993       1992
                                   ----           ----         ----        ----       ----

SELECTED BALANCE SHEET DATA:

<S>                              <C>           <C>          <C>         <C>         <C>       
Total Assets................     $7,119,072    $6,203,976   $6,615,697  $4,017,551  $1,493,718

Long Term Obligations.......         12,026        15,602        4,108       1,702     64,862
</TABLE>


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

   *Based on a weighted  average  number of shares of Common Stock (as restated,
and see Note  8(a) of Notes to  Financial  Statements)  outstanding:  7,955,752,
8,030,685, 7,072,754, 5,804,297 and 3,123,659, shares, respectively, at December
31, 1996, 1995, 1994, 1993 and 1992.


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

         See ITEM 1.  "Business-Recent  Developments" for information in respect
of the  sale  of  substantially  all  of the  Company's  operating  assets.  The
information  presented  under "Results of Operations" in this Item 7. relates to
the operations of the business the operating assets of which were sold.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1996 COMPARED TO THE YEAR
ENDED DECEMBER 31, 1995

         Net sales for the year ended  December 31, 1996 were  $9,301,155.  This
was a decrease of $2,067,748 as compared to  $11,368,903 in net sales during the
year ended  December  31,  1995.  Sales for the year  ended  December  31,  1996
continued  to be  negatively  impacted by a decrease  in the average  restaurant
spending per  Cardholder  and by  continued  competition  from other  restaurant
promotion  programs  in the  California  market.  Since  the  beginning  of 1996
substantially   all  new  cardholders   were  developed,   primarily   utilizing
telemarketing,  under national 20% Programs by Network.  Although these programs
resulted in a  significant  increase in  Cardholders,  the  percentage  of these
Cardholders  who are  active  card  users is not as great as the  percentage  of
active

                                      -11-

<PAGE>

card users  enrolled in the 25% Program.  The Company  attributes  the continued
decrease in average  restaurant  spending per Cardholder to this fact as well as
to continued competition.

         The Company's net sales contributed  $3,185,652 and $3,792,589 in gross
profit for the years ended December 31, 1996 and 1995, respectively. The Company
operated with an approximate 34% gross profit margin from net sales of Rights to
Receive to Cardholders during the year ended December 31, 1996,  compared to 33%
during the year ended  December 31, 1995.  The  approximate 1% increase in gross
profit margin is  attributable  to restaurant  charges by  Cardholders  who have
enrolled in the 20% program.  Operating  expenses as a  percentage  of net sales
increased to 25.2% for the year ended  December  31, 1996  compared to 20.6% for
the year ended December 31, 1995.  The 4.6% increase in operating  expenses as a
percentage  of net  sales is  attributable  to the fact  that  while  net  sales
decreased,  the Company's operating expenses (overhead) are primarily of a fixed
nature.

         The Company has incurred  franchise costs of  approximately  14% of net
sales.  Franchise  costs were  $1,285,214 and $1,586,781  during the years ended
December 31, 1996 and 1995, respectively.

         Operating  expenses  (selling,  general  and  administrative  expenses)
aggregated  $2,341,675  and $2,339,648 for the years ended December 31, 1996 and
1995,   respectively.   Operating   expenses  remained   virtually  constant  as
approximately  $86,000 in payroll and  related  cost  savings  were offset by an
increase  in  professional  fees  of  $67,000  related  to the  Asset  Sale  and
acquisition due diligence relating to possible Business Combinations.

         For the year ended  December  31,  1996,  combined  operating  expenses
consisted  primarily of salaries and associated  payroll expenses  ($1,131,000),
professional   and  consulting  fees   ($230,000),   rent  and  office  expenses
($265,000), the Company's reserve for unrealizable Rights to Receive ($206,000),
promotion and marketing  expenses in connection  with attracting and maintaining
participating  California  restaurants  ($231,000),  advertising and promotional
expenses in connection with attracting and  maintaining  California  Cardholders
($69,000,  net of Network reimbursement) and electronic processing equipment set
up and amortization expenses ($52,000).

         For the year ended  December  31,  1995,  combined  operating  expenses
consisted  primarily of salaries and associated  payroll expenses  ($1,239,000),
professional   and  consulting  fees   ($196,000),   rent  and  office  expenses
($262,000), the Company's reserve for unrealizable Rights to Receive ($194,000),
marketing  expenses in connection with attracting and maintaining  participating
California  restaurants  ($231,000) and advertising and promotional  expenses in
connection with attracting and maintaining California Cardholders

                                      -12-

<PAGE>
($51,000    net   of    Network    reimbursement).    Electronic    processing
equipment set up and amortization expenses were not significant.

         Interest  income was $132,951 and $146,342 for the years ended December
31, 1996 and 1995, respectively.

         For the year ended  December  31,  1996,  the  Company  incurred a loss
before  provision  for income taxes of $311,976 or $.04 per share.  For the year
ended December 31, 1995,  however,  the Company earned a profit before provision
for  income  taxes of $10,942 or $0.00 per  share.  The  approximately  $323,000
decrease in earnings before  provision for income taxes was primarily due to the
decreased gross profit for the period net of franchise costs.

         For the year ended December 31, 1996,  the Company  recorded a $857,000
credit  for  income  taxes   related  to  the  tax  benefits   associated   with
approximately  $1,950,000  in  unused  operating  loss  carryforwards  and other
deductible temporary  differences.  The Company recorded this tax credit because
it generated  substantial  taxable  income in connection  with the Asset Sale in
January 1997, subsequent to the balance sheet date (see "Recent  Developments").
For the years ended  December 31, 1995 and  earlier,  the Company did not record
such a tax credit  because at that time there was no assurance  that the Company
would generate future taxable income.

         For the year ended  December 31, 1996, the Company earned net income of
$545,024 or $.07 per share.  The net income was  attributable  to the credit for
income taxes of $857,000 recorded by the Company less the $311,976 loss incurred
before  provision for income taxes.  For the year ended  December 31, 1995,  the
Company earned a profit before income taxes and a net profit of $10,942 or $0.00
per share. The Company incurred no provision for income taxes for the year ended
December  31, 1995  because the income  taxes on the  Company's  $10,942  pretax
profit were eliminated by the Company's net operating loss carryforwards.


YEAR ENDED DECEMBER 31, 1995 COMPARED TO
YEAR ENDED DECEMBER 31, 1994

         Net sales for the year ended December 31, 1995 were  $11,368,903.  This
was an increase of  $2,670,165 as compared to $8,698,738 in net sales during the
year ended December 31, 1994. The sales increase was primarily  attributable  to
the increasing  number of Cardholders and restaurants  available to Cardholders.
However,  offsetting this trend, sales for the year ended December 31, 1995 were
negatively  impacted  by a  decrease  in the  average  restaurant  spending  per
Cardholder.  The Company attributes the decrease in average restaurant  spending
per  Cardholder  to  increasing  competition  from  other  restaurant  promotion
programs  that were  introduced  into the  California  market and to softness in
California's economy in general.

                                      -13-

<PAGE>

         The Company  operated with an approximate  gross profit margin from net
sales of Rights to Receive to  Cardholders of  approximately  33%. The Company's
net sales  resulted in $3,792,589  and  $2,891,229 in gross profit for the years
ended December 31, 1995 and 1994, respectively.

         Operating  expenses  (selling,  general  and  administrative  expenses)
aggregated  $2,339,648  and $1,996,347 for the years ended December 31, 1995 and
1994, respectively.  The increase of $343,301 was primarily due to the fact that
the Company incurred additional salaries and associated payroll expenses related
to the  operation of its business in San  Francisco  and Los Angeles  during the
year ended December 31, 1995 and initiated active operations in Orange County in
January 1995. The Company incurred approximately $219,000 in additional salaries
and associated payroll expenses,  excluding Orange County, during the year ended
December 31, 1995 compared to the year ended  December 31, 1994.  These expenses
related to the  operation of its business in San  Francisco  and Los Angeles and
were primarily  attributable  to increased  officers' and employee  compensation
including certain bonus and commission  arrangements.  The Company also incurred
additional operating expenses of approximately $131,000 related to the operation
of its  business in Orange  County for the year ended  December  31,  1995.  The
Company did not actively operate in Orange County in 1994 and therefore incurred
no such expenses for the year ended December 31, 1994.

         For the year ended  December  31,  1994,  combined  operating  expenses
consisted  primarily of salaries and  associated  payroll  expenses  ($934,000),
professional   and  consulting  fees   ($191,000),   rent  and  office  expenses
($224,000), the Company's reserve for unrealizable Rights to Receive ($159,000),
marketing  expenses in connection with attracting and maintaining  participating
California  restaurants  ($169,000) and advertising and promotional  expenses in
connection with attracting and maintaining  California cardholders ($153,000 net
of Network reimbursement).

         Interest  income was $146,342 and $38,941 for the years ended  December
31, 1995 and 1994,  respectively.  Interest  income  increased in 1995 primarily
because of the interest earned on the approximately $2,138,000 net proceeds from
the Company's December 1994 Offer of Units.

         For the year ended  December 31, 1995,  the Company earned a net profit
of $10,942 or $0.00 per share.  For the year ended December 31, 1994 the Company
incurred a net loss of $280,994 or $.04 per share.  The  approximately  $292,000
increase in net earnings was primarily due to the increased gross profit for the
period net of franchise costs and increased interest income, partially offset by
increased  operating expenses  (including Orange County expenses),  as described
above.

                                      -14-

<PAGE>

         Orange  County  operations  resulted  in net  losses  of  approximately
$108,000  for the year ended  December 31, 1995.  Without  giving  effect to the
Orange  County  losses,  the  Company  would  have  generated  a net  profit  of
approximately $119,000, or $.01 per share, for the year ended December 31, 1995.

LIQUIDITY AND CAPITAL RESOURCES

         The  Company's  working  capital  at  December  31,  1996  and 1995 was
approximately $4,873,000 and $5,165,000,  respectively. At February 28, 1997, as
a result of the Asset Sale, its working  capital was  approximately  $8,700,000.
The Company has outstanding  2,052,987 warrants  exercisable at $4.00 per share.
The warrants expire December 31, 1997. The Company presently has no other unused
internal  sources of liquidity  other than cash (or  equivalents) on hand and no
external  sources  of  liquidity  such  as a line  of  credit  from a  financial
institution.

         During  the  year  ending  December  31,  1997  and  until  a  Business
Combination  is effected,  the Company  expects to generate  interest  income in
excess of its minimal  operating  expenses,  exclusive of any due  diligence and
professional   fees  incurred  in  connection   with  the   identification   and
consummation of one or more Business Combination.

         The Company intends to enter into Business  Combinations  that will use
substantially all of the Company's available cash in one or two transactions and
structure  such  Business  Combinations  so that the current  management  of the
target business will remain in place. There can be no assurance,  however,  that
the Company will be able to effectuate a Business Combination,  or that any such
Business  Combination  will be  profitable.  At the present  time,  there are no
Business  Combinations under consideration that the Board of Directors considers
probable of  consummation.  The Board of Directors will have broad discretion in
its search for and negotiations with respect to a Business Combination.

         Pending a Business  Combination,  the Company's assets will be invested
as management of the Company deems prudent,  which investments may include,  but
not be limited to, certificates of deposit, mutual funds, money-market accounts,
stocks,  bonds or United States  Government or municipal  securities,  provided,
however,  that the  Company  will  attempt to invest its assets in a manner that
will not result in the Company  being  required  to  register  as an  investment
company under the Investment Company Act of 1940.

         The Company has used and intends to continue to use various  sources in
its search for  potential  Business  Combinations  including  its  officers  and
directors,  consultants,  special advisors,  securities broker-dealers,  venture
capitalists,  members of the  financial  community  and  others who may  present
management

                                      -15-

<PAGE>
with   unsolicited   proposals.   The   Company  may  be  required  to  pay  a
fee in connection with the consummation of a Business Combination.

         The Company does not intend to restrict its search to any specific kind
of industry or business.  The Company may investigate  and ultimately  acquire a
venture  that  is in  its  preliminary  or  development  stage,  is  already  in
operation, or in various stages of its corporate existence and development.  The
Board of  Directors  cannot  predict  at this  time the  status or nature of any
venture in which the Company may  participate.  A potential  venture  might need
additional  capital or merely  desire to have its shares  publicly  traded.  The
Board of Directors  believes that the Company  could provide a potential  public
vehicle for a private entity  interested in becoming a publicly held corporation
without  the  time and  expense  typically  associated  with an  initial  public
offering.

         Presently,  the  Company  cannot  predict  the manner in which it might
participate  in a prospective  Business  Combination.  Each  separate  potential
opportunity  will be reviewed  and,  upon the basis of that  review,  a suitable
legal structure or method of participation will be chosen. The particular manner
in which the Company participates in a specific business opportunity will depend
upon the nature of that  opportunity,  the  respective  needs and desires of the
Company and management of the opportunity, and the relative negotiating strength
of the parties involved. Actual participation in a Business Combination may take
the form of an asset purchase, lease, joint venture, license, partnership, stock
purchase, reorganization,  merger or consolidation. The Company may act directly
or indirectly through an interest in a partnership,  corporation,  or other form
of  organization.  The Company could  participate in  opportunities  through the
purchase of minority stock positions.

         The  Company may be  required  to seek  additional  capital in order to
effecuate a Business  Combination.  There can be no  assurance  that  additional
financing  will be  available  to the Company or, if  available,  that it can be
obtained on acceptable  terms.  Failure to obtain such financing could result in
the delay or abandonment of one or more potential Business Combinations.

INFLATION AND SEASONALITY

         Inflation did not  significantly  impact the Company's  business during
1996, nor did the Company believe its business to be seasonal.

FORWARD-LOOKING STATEMENTS

         This report contains forward-looking statements and information that is
based on management's beliefs and assumptions,  as well as information currently
available to  management.  Although the Company  believes that the  expectations
reflected in such

                                      -16-

<PAGE>
forward-looking  statements are  reasonable,  it can give no assurance that such
expectations  will prove to be correct.  Such  statements are subject to certain
risks,  uncertainties  and  assumptions.  Should  one or more of these  risks or
uncertainties materialize, or should the underlying assumptions prove incorrect,
actual  results  may  vary  materially  from  those  anticipated,  estimated  or
expected.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         See index to financial statements included as part of Item 14 below.

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

         Not applicable.

                                      -17-

<PAGE>
                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

         See  PART  I,  ITEM  4.  "Executive  Officers  of the  Company."  Other
information  required  by this  item  is  incorporated  by  reference  from  the
Company's  definitive  proxy statement to be filed not later than April 30, 1997
pursuant  to  Regulation  14A of the  General  Rules and  Regulations  under the
Securities Exchange Act of 1934 ("Regulation 14A").

ITEM 11. EXECUTIVE COMPENSATION.

         The information required by this item is incorporated by reference from
the Company's  definitive  proxy  statement to be filed not later than April 30,
1997 pursuant to Regulation 14A.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN
         BENEFICIAL OWNERS AND MANAGEMENT.

         The information required by this item is incorporated by reference from
the Company's  definitive  proxy  statement to be filed not later than April 30,
1997 pursuant to Regulation 14A.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The information required by this item is incorporated by reference from
the Company's  definitive  proxy  statement to be filed not later than April 30,
1997 pursuant to Regulation 14A.

                                      -18-

<PAGE>

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
         FORM 8-K

   (a)   Financial Statements:                                   Page
                                                                 ----

         Report of Independent Auditors                           F-2

         Consolidated Balance Sheets as of
         December 31, 1996 and 1995                               F-3

         Consolidated Statements of Operations for
           the Three Years in the Period ended
           December 31, 1996                                      F-4

         Consolidated Statement of Stockholders'
           Equity for the Three Years in the Period
           ended December 31, 1996                                F-5

         Consolidated Statements of Cash Flows for
           the Three Years in the Period ended
           December 31, 1996                                      F-6

         Notes to Financial Statements                            F-8

   (b)   Reports on Form 8-K

         No reports on Form 8-K were filed during the last quarter of the period
covered by this report.

   (c)   Exhibits

         2.1   Purchase  Agreement  dated as of November 15, 1996 by and between
               the Company and Network,  incorporated  by reference as Exhibit A
               to the Company's  Definitive  Proxy Statement for Special Meeting
               of Stockholders held on December 27, 1996.

         3.1   Amended Certificate of Incorporation of the Company, incorporated
               by reference  to Exhibit 3.1 to the  Company's  Annual  Report on
               Form 10-K for the fiscal year ended  December 31, 1991 (the "1991
               10-K").

         3.2   Certificate of Amendment to Amended Certificate of Incorporation,
               incorporated  by  reference  to  Exhibit  3(d)  to the  Company's
               Registration Statement on Form S-1 (File No. 33-44845) (the "1992
               Form S-1").

                                      -19-

<PAGE>

        *3.3   Certificate of Amendment to Amended Certificate of Incorporation,
               filed with the  Secretary  of State of the State of  Delaware  on
               January 3, 1997.

         3.4   Amended and  Restated  By-Laws of the  Company,  incorporated  by
               reference to Exhibit 3(b) to the Company's Registration Statement
               on Form S-1 (File No. 33-84234) (the "1994 Form S-1").

         4.1   Form of Common Stock  Certificate,  incorporated  by reference to
               Exhibit 4(b) to the 1992 Form S-1.

         4.2   Form of Warrant Certificate, incorporated by reference to Exhibit
               4(b) to the 1994 Form S-1.

         4.3   Warrant  Agreement  dated  as  of  June  25,  1993,  between  the
               Registrant  and  American  Stock  Transfer  & Trust  Company,  as
               Warrant Agent,  incorporated  by reference to Exhibit 4(c) to the
               1994 Form S-1.

         4.4   Form of Amendment of Warrant Agreement, incorporated by reference
               to Exhibit 4(d) to the 1994 Form S-1.

       *10.1   The Company's  1992 Stock Option Plan,  as amended  through March
               26, 1997.

        10.2   Form of  Indemnification  Agreement  between  the Company and its
               officers  and  directors,  incorporated  by  reference to Exhibit
               10(d) to the 1992 Form S-1.

        10.3   Form of  Registration  Rights  Agreement  between the Company and
               certain of the Company's stockholders,  incorporated by reference
               to Exhibit 10(l) to the 1992 Form S-1.

       *10.14  Franchise  Termination  Agreement dated as of January 2, 1997, by
               and between the Company and Network.

        11.    Computation  of earnings per share of Common Stock,  incorporated
               by reference to Exhibit 11 to the Company's Annual Report on Form
               10-K for the fiscal year ended December 31, 1995.

        22.    Subsidiaries  of the  Registrant,  incorporated  by  reference to
               Exhibit 22 to the 1991 10-K.

-------------------------
*Filed herewith.

         (d) Financial Statement Schedules: none

                                      -20-

<PAGE>

                                   SIGNATURES

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


                                    THE WESTERN SYSTEMS CORP.


Date:  March 26, 1997               /s/ William J. Barrett
                                    -------------------------------
                                    William J. Barrett
                                    Chief Executive Officer and Director
                                    (Principal Executive Officer)

                                POWER OF ATTORNEY

         KNOW  ALL MEN BY THESE  PRESENTS,  that  each  person  whose  signature
appears below constitutes and appoints William J. Barrett and Herbert M. Gardner
his true and lawful  attorney-in-fact,  each  acting  alone,  with full power of
substitution and resubstitution for him and in his name, place and stead, in any
and all  capacities to sign any and all  amendments to this report,  and to file
the  same,  with  all  exhibits  thereto,  and  other  documents  in  connection
therewith,  with the Securities and Exchange  Commission,  hereby  ratifying and
confirming all that said  attorneys-in-fact  or their  substitutes,  each acting
alone, may lawfully do or cause to be done by virtue thereof.

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


Date:  March 26, 1997               /s/William J. Barrett
                                    ------------------------------------
                                    William J. Barrett
                                    Chief Executive Officer and Director
                                    (Principal Executive Officer)



Date:  March 26, 1997               /s/Stuart M. Pellman
                                    ------------------------------------
                                    Stuart M. Pellman
                                    Chief Financial Officer and Director
                                    (Principal Financial Officer and
                                    Principal Accounting Officer)




                                      -21-

<PAGE>


Date:  March   , 1997               
                                    --------------------------------------
                                    C. Scott Bartlett, Jr.
                                    Director


Date:  March 26, 1997               /s/ Herbert M. Gardner
                                    --------------------------------------
                                    Herbert M. Gardner
                                    Director



Date:  March 26, 1997               /s/ Howard Grafman
                                    --------------------------------------
                                    Howard Grafman
                                    Director


Date:  March 26, 1997               /s/ Paulette Grafman
                                    --------------------------------------
                                    Paulette Grafman
                                    Director


Date:  March __, 1997               
                                    --------------------------------------
                                    Richard O. Starbird
                                    Director

                                      -22-

<PAGE>

                                  EXHIBIT INDEX
                                  -------------

      EXHIBIT

11.   Computation of earnings per share of Common Stock

27.   Financial Data Schedule

                                      -23-

<PAGE>
                              INDEX TO FINANCIAL STATEMENTS



                                                                         Page(s)
                                                                         -------

Independent Auditors' Report                                              F - 2


Financial Statements:

   Consolidated Balance Sheets as of December 31, 1996 and 1995          F - 3

   Consolidated Statements of Operations for the Three Years
     in the Period Ended December 31, 1996                               F - 4

   Consolidated Statement of Shareholders' Equity for the
      Three Years in the Period Ended December 31, 1996                  F - 5

   Consolidated Statements of Cash Flows for the Three Years
      in the Period Ended December 31, 1996                              F - 6


Notes to Consolidated Financial Statements                               F - 8


                                      F - 1
<PAGE>
                          INDEPENDENT AUDITORS' REPORT


To The Board of Directors
The Western Systems Corp.
(formerly The Western Transmedia Company, Inc.)
San Francisco, California


We have  audited the  accompanying  consolidated  balance  sheets of The Western
Systems Corp. (formerly The Western Transmedia Company, Inc.), and subsidiary as
of December 31, 1996 and 1995 and the  consolidated  statements  of  operations,
changes in  shareholders'  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 audits 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 consolidated  financial statements referred to above present
fairly, in all material respects,  the financial position of The Western Systems
Corp.  (formerly  The Western  Transmedia  Company,  Inc.) and  subsidiary as of
December 31, 1996 and 1995 and the results of its  operations and its cash flows
for the three years in the period  ended  December 31, 1996 in  conformity  with
generally accepted accounting principles.




                                              /s/ LAZAR, LEVINE & COMPANY LLP
                                              -------------------------------
                                              LAZAR, LEVINE & COMPANY LLP

New York, New York
March 12, 1997


                                      F - 2
<PAGE>

                    THE WESTERN SYSTEMS CORP. AND SUBSIDIARY
                 (FORMERLY THE WESTERN TRANSMEDIA COMPANY, INC.)
                           CONSOLIDATED BALANCE SHEETS

                                   - ASSETS -
<TABLE>
<CAPTION>

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

CURRENT ASSETS:
<S>                                                                             <C>              <C>
  Cash (including interest bearing deposits) (Note 2c)                          $  2,073,697     $  3,040,620
  Accounts receivable (Note 2e)                                                      107,717          134,544
  Rights to receive - net of reserve for unrealizable rights to receive
     (Notes 2c and 2f)                                                             3,335,763        2,321,626
  Deferred income taxes (Note 10)                                                    857,000              -
  Prepaid expenses and other current assets                                          194,800          133,590
                                                                                ------------     ------------

TOTAL CURRENT ASSETS                                                               6,568,977        5,630,380

PROPERTY AND EQUIPMENT - NET  (NOTES 2g, 3 AND 6)                                     81,871          109,376

OTHER ASSETS  (NOTES 2h, 4 AND 5)                                                    468,224          464,220
                                                                                ------------     ------------

TOTAL ASSETS                                                                    $  7,119,072     $  6,203,976
                                                                                ============     ============

                    - LIABILITIES AND SHAREHOLDERS' EQUITY -

CURRENT LIABILITIES:
  Accounts payable - rights to receive (Note 2f)                                $    633,436     $    365,941
  Accrued liabilities                                                                202,112           96,681
  Capitalized lease obligations - current portion (Note 6)                             3,576            2,854
                                                                                ------------     ------------

TOTAL CURRENT LIABILITIES                                                            839,124          465,476
                                                                                ------------     ------------

LONG-TERM DEBT  (NOTE 6)                                                              12,026           15,602
                                                                                ------------     ------------

COMMITMENTS AND CONTINGENCIES  (NOTES 5, 9, 12 AND 13)

SHAREHOLDERS' EQUITY  (NOTES 7 AND 8):
  Preferred stock, $.10 par value, 2,000,000 shares authorized;
     none issued or outstanding                                                          -                -
  Common stock, $.60 par value,  25,000,000 shares authorized;  7,903,421
     issued and outstanding for December 31, 1996 and 1995, respectively              4,742,053     4,742,053
  Additional paid-in capital                                                          5,542,062     5,542,062
  Retained earnings (deficit)                                                        (4,016,193)   (4,561,217)
                                                                                ---------------  ------------

TOTAL SHAREHOLDERS' EQUITY                                                            6,267,922     5,722,898
                                                                                ---------------  ------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                      $     7,119,072  $  6,203,976
                                                                                ===============  ============
</TABLE>

   The accompanying notes are an integral part of these consolidated financial
statements.

                                      F - 3
<PAGE>
                    THE WESTERN SYSTEMS CORP. AND SUBSIDIARY
                 (FORMERLY THE WESTERN TRANSMEDIA COMPANY, INC.)
                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

                                                         For The Year Ended December 31,
                                                     ----------------------------------------
                                                       1996             1995          1994
                                                     ----------------------------------------
<S>                                                  <C>           <C>             <C>
NET SALES  (NOTE 2i)                                 $9,301,155    $11,368,903     $8,698,738

COST OF SALES  (NOTE 2i)                              6,115,503      7,576,314      5,807,509
                                                     ----------    -----------     ----------

GROSS PROFIT                                          3,185,652      3,792,589      2,891,229
                                                     ----------    -----------     ----------

EXPENSES AND OTHER (INCOME):
  Franchise costs                                     1,285,214      1,586,781      1,212,262
  Operating expenses                                  2,341,675      2,339,648      1,996,347
  Interest expense                                        3,690          1,560          2,555
  Interest income                                      (132,951)      (146,342)       (38,941)
                                                     ----------    -----------     -----------
                                                      3,497,628      3,781,647      3,172,223
                                                     ----------    -----------     -----------

INCOME (LOSS) BEFORE PROVISION FOR
  INCOME TAXES                                         (311,976)        10,942       (280,994)

PROVISION (CREDIT) FOR INCOME TAXES
    (NOTES 2j AND 10)                                  (857,000)           -              -
                                                     ----------    -----------     -----------

NET INCOME (LOSS)                                    $  545,024    $    10,942     $ (280,994)
                                                     ==========    ===========     ===========

INCOME (LOSS) PER COMMON SHARE  (NOTE 11)                  $.07         $ -             $(.04)
                                                           ====         ======          ======

WEIGHTED AVERAGE NUMBER OF COMMON
  SHARES OUTSTANDING  (NOTES 7 AND 11)                7,955,752      8,030,685      7,072,754
                                                      =========    ===========     ==========
</TABLE>


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                      F - 4
<PAGE>
                    THE WESTERN SYSTEMS CORP. AND SUBSIDIARY
                 (FORMERLY THE WESTERN TRANSMEDIA COMPANY, INC.)
            CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>

                                                Shares                  Additional    Retained    Common        Total
                                              (As Restated       Common  Paid-In      Earnings    Stock      Shareholders'
                                             Notes 7a and 7b)    Stock   Capital      (Deficit) Subscribed      Equity
                                             ----------------    -----   -------      --------- ----------      ------

<S>                                                <C>       <C>        <C>          <C>            <C>         <C>
Balance at December 31, 1993                       6,960,169 $4,176,101 $3,612,109   $(4,291,165)   $226,875    $3,723,920

Shares issued in connection with exercise of
 franchise option (Note 7c)                           60,000     36,000    144,000        -         (180,000)      -

Shares issued re: employment agreement (Note 7c)      25,000     15,000     31,875        -          (46,875)      -

Exercise of stock options                             17,500     10,500      2,875        -              -          13,375

Shares issued upon exercise of warrants in unit 
 offering (Note 7d)                                  800,000    480,000  1,658,393        -              -       2,138,393

Exercise of warrants (Note 7d)                         5,754      3,452     13,810        -              -          17,262

Adjustment for fractional shares resulting from
 reverse stock split                                      (2)       -          -          -              -         -

Net loss for the year ended December 31, 1994            -          -          -        (280,994)        -        (280,994)
                                                  ----------  ---------  ---------    -----------   -------     -----------

Balance at December 31, 1994                       7,868,421  4,721,053  5,463,062    (4,572,159)        -       5,611,956

Shares issued in connection with exercise of
 franchise option (Note 7e)                           35,000     21,000     79,000        -              -         100,000

Net income for the year ended December 31, 1995          -          -          -          10,942         -          10,942
                                                  ---------- ----------  ---------    -----------   -------     ----------

Balance at December 31, 1995                       7,903,421  4,742,053  5,542,062    (4,561,217)        -       5,722,898

Net income for the year ended December 31, 1996         -         -          -           545,024         -         545,024
                                                  ---------- ---------- ----------    -----------   -------     ----------

BALANCE AT DECEMBER 31, 1996                       7,903,421 $4,742,053 $5,542,062   $(4,016,193)   $    -      $6,267,922
                                                  ========== ========== ==========   ============   =========   ==========
</TABLE>

     The accompanying notes are an integral part of these consolidated financial
statements.

                                      F - 5
<PAGE>

                    THE WESTERN SYSTEMS CORP. AND SUBSIDIARY
                 (FORMERLY THE WESTERN TRANSMEDIA COMPANY, INC.)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS      Page 1 of 2
                      -------------------------------------
<TABLE>
<CAPTION>
                                                                             For the Year Ended December 31,
                                                                             -------------------------------
                                                                          1996              1995               1994
                                                                      ----------          ---------           --------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                   <C>                 <C>              <C>         
   Cash received from franchisor for cardholder restaurant spending   $  9,322,378        $11,390,947      $  8,533,074
   Cash paid for franchise fees                                         (1,288,992)        (1,591,277)       (1,188,947)
   Cash paid for rights to receive                                      (7,035,292)        (7,237,918)       (7,698,146)
   Cash paid to suppliers and employees                                 (2,051,261)        (2,314,820)       (1,754,795)
   Interest received                                                       132,951            146,342            38,941
   Interest paid                                                            (3,690)            (1,560)           (2,555)
      NET CASH PROVIDED (UTILIZED) BY OPERATING ACTIVITIES                (923,906)           391,714        (2,072,428)
                                                                      -------------       -----------      -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment                                      (39,500)           (22,024)          (59,053)
   Security deposits                                                          (663)              (805)           (4,064)
                                                                      -------------       ------------     -------------
      NET CASH (UTILIZED) BY INVESTING ACTIVITIES                          (40,163)           (22,829)          (63,117)
                                                                      -------------       ------------     -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from exercise of stock options                                    -                  -               13,375
   Proceeds from exercise of warrants                                         -                  -               17,262
   Proceeds from sale of units                                                -                  -            2,400,000
   Expenses associated with offering of stock and units                       -                  -             (261,607)
   Payments on capital lease obligations                                    (2,854)            (2,674)           (5,121)
                                                                      ------------        ------------     -------------
      NET CASH (UTILIZED) PROVIDED BY FINANCING ACTIVITIES                  (2,854)            (2,674)        2,163,909
                                                                      ------------        ------------     ------------

NET INCREASE (DECREASE) IN CASH AND CASH
   EQUIVALENTS                                                            (966,923)           366,211            28,364

   Cash and cash equivalents, at beginning of year                       3,040,620          2,674,409         2,646,045
                                                                      ------------        -----------      ------------

CASH AND CASH EQUIVALENTS, AT END OF YEAR                             $  2,073,697        $ 3,040,620      $  2,674,409
                                                                      ============        ===========      ============
</TABLE>


The  accompanying  notes are an integral part of these  consolidated  financial
statements.

                                      F - 6
<PAGE>
                    THE WESTERN SYSTEMS CORP. AND SUBSIDIARY
                 (FORMERLY THE WESTERN TRANSMEDIA COMPANY, INC.)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS      Page 2 of 2
                      -------------------------------------
<TABLE>
<CAPTION>
                                                                                For The Year Ended December 31,
                                                                         --------------------------------------------
                                                                             1996          1995             1994
                                                                         --------------------------------------------

RECONCILIATION OF NET INCOME (LOSS) TO NET CASH
    PROVIDED (UTILIZED) BY OPERATING ACTIVITIES:
<S>                                                                      <C>            <C>            <C>         
   Net income (loss)                                                     $  545,024     $  10,942      $  (280,994)
   Adjustments to reconcile net income (loss) to net cash provided
      (utilized) by operating activities:
         Depreciation and amortization                                       63,664        53,348           43,731
         Reserve for unrealizable rights to receive                         206,301       194,112          158,570
         Other                                                                 -              897             -
         Deferred tax asset                                                (857,000)         -                -
   Changes in assets and liabilities:
      Decrease (increase) in accounts receivable                             26,826        14,696         (143,021)
      Decrease (increase) in rights to receive                           (1,220,438)      753,181       (2,564,153)
      (Increase) decrease in prepaid expenses and other current assets      (61,209)     (100,283)           4,471
      (Decrease) increase in accounts payable - rights to receive           267,496      (412,624)         672,148
      (Decrease) increase in accrued expenses                               105,430      (122,555)          36,820
                                                                         ----------     ---------      -----------
         NET CASH PROVIDED (UTILIZED) BY OPERATING ACTIVITIES$           $ (923,906)    $ 391,714      $(2,072,428)
                                                                         ==========     =========      ===========
</TABLE>


SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

   a) During  the year  ended  December  31,  1994,  the  Company  acquired  the
      franchise  rights for the states of Washington  and Nevada in exchange for
      an aggregate of 60,000 shares of common stock.  These shares are valued by
      the Company at $180,000.

   b) During  the year  ended  December  31,  1995,  the  Company  acquired  the
      franchise  rights for the state of Oregon in exchange for 35,000 shares of
      its common stock. These shares are valued by the Company at $100,000.

   c) During the years ended December 31, 1995 and 1994 the Company entered into
      capitalized   lease   obligations    aggregating   $15,190   and   $6,263,
      respectively, for new office equipment.


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
                                      F - 7
<PAGE>
                    THE WESTERN SYSTEMS CORP. AND SUBSIDIARY
                 (FORMERLY THE WESTERN TRANSMEDIA COMPANY, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 1996

NOTE   1  - DESCRIPTION OF COMPANY:

           On January 3, 1997,  the Company  completed a sale of its  Transmedia
           Network  Inc.  (Network)  franchise  and  substantially  all  of  its
           operating assets,  other than cash and cash equivalents,  to Network.
           This sale is described in Footnote 13. The following  information and
           the information in Footnotes 2 - 12 describes the business carried on
           by the Company prior to the asset sale.

           The Western Systems Corp.  (formerly The Western Transmedia  Company,
           Inc.),  the "Company",  was  incorporated in the State of Delaware on
           May 30, 1978, under the name of Vigilance Systems Corp..

           In accordance with Statement of Financial Accounting Standards No. 7,
           the Company was treated as a  development  stage company from January
           1, 1991, the date the Company began devoting substantially all of its
           efforts towards  establishing a new business,  through  September 30,
           1993.  During this period,  the Company incurred a cumulative loss of
           $1,009,443.

           In December 1991, the Company, through an exchange of stock, acquired
           100% of the shares of a newly formed  affiliate,  TM West Corp.  ("TM
           West").  This transaction was accounted for as the  reorganization of
           entities  under common  control  which is accounted for utilizing the
           pooling  of  interests  method.  TM  West  had  raised  approximately
           $150,000 in a private  offering of its common stock in October  1991.
           In December  1991,  TM West entered into a franchise  agreement  with
           Network . See also Note 5.

           The franchise agreement (which was assigned by TM West to the Company
           in May 1992)  allowed the Company to acquire  rights to receive goods
           and  services  from  restaurants  ("Rights to Receive" - see Note 2f)
           which are then sold to the  franchisors'  cardholders  for cash.  The
           Rights to Receive  are  primarily  purchased  for cash or obtained in
           exchange for media  advertising  and other services  purchased by the
           Company on behalf of the restaurants.


NOTE   2  - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

           The Company's  financial  statements are prepared in accordance  with
           generally accepted  accounting  principles  (GAAP).  Those principles
           considered particularly significant are detailed below.

      (a)  USE OF ESTIMATES:

           In  preparing  financial  statements  in  accordance  with  generally
           accepted  accounting  principles,  management makes certain estimates
           and assumptions,  where applicable,  that affect the reported amounts
           of assets and liabilities  and  disclosures of contingent  assets and
           liabilities at the date of the financial  statements,  as well as the
           reported  amounts of  revenues  and  expenses  during  the  reporting
           period.  While  actual  results  could  differ from those  estimates,
           management does not expect such variances, if any, to have a material
           effect on the financial statements.


                                      F - 8
<PAGE>
                    THE WESTERN SYSTEMS CORP. AND SUBSIDIARY
                 (FORMERLY THE WESTERN TRANSMEDIA COMPANY, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 1996

NOTE   2  - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (CONTINUED):

      (b)  PRINCIPLES OF CONSOLIDATION:

           The  consolidated  financial  statements  include the accounts of The
           Western Systems Corp. and its  wholly-owned  subsidiary,  TM West, an
           inactive company. All material intercompany balances and transactions
           have been eliminated.

      (c)  CONCENTRATION OF CREDIT RISK/ FAIR VALUE:

           Financial   instruments  that  potentially  subject  the  Company  to
           concentrations of credit risk consist principally of cash investments
           and rights to receive.

           The Company maintains significant cash investments,  which exceed the
           Federal  depository  insurance  coverage  limit,  primarily  with one
           financial  institution.  The Company performs periodic reviews of the
           relative credit rating of this  institution as part of its investment
           strategy.

           Concentration  with  regards to rights to receive (see Note 2f below)
           are limited due to the Company's  large  customer base.  However,  at
           December  31,  1996 all of these  rights to receive do pertain to the
           restaurant industry.

           The carrying amounts of cash and cash equivalents, trade receivables,
           other  current  assets,   accounts   payable  and  debt   obligations
           approximate fair value.

      (d)  STATEMENTS OF CASH FLOWS:

           For purposes of the statements of cash flows,  the Company  considers
           all highly  liquid  investments  with an  original  maturity of three
           months or less to be cash equivalents.

      (e)  ALLOWANCE FOR DOUBTFUL ACCOUNTS:

           An allowance  for doubtful  accounts has not been  established  as of
           December 31, 1996 and 1995, since accounts receivable as reflected on
           the  balance  sheet  consists  entirely of cash  collected  by and in
           transit from the franchisor (see Note 5).

      (f)  RIGHTS TO RECEIVE:

           Rights to Receive  (see Note 5) are  composed  primarily  of food and
           beverage credits due from  restaurants.  Rights to Receive are stated
           at cost  which  approximates  50% of the  retail  value of  Rights to
           Receive  obtained.  Cost is  determined  by the  first-in,  first-out
           method.  Accounts payable - Rights to Receive represents the unfunded
           portion of the total commitment.

           The Company reviews the  realizability  of the Rights to Receive on a
           periodic  basis  and  writes-off   those  amounts   receivable   from
           restaurants  that have  ceased  operations  or whose  credits are not
           utilized by the franchisors'  cardholders.  The analysis of rights to
           receive is as follows:

                                      F - 9
<PAGE>
                    THE WESTERN SYSTEMS CORP. AND SUBSIDIARY
                 (FORMERLY THE WESTERN TRANSMEDIA COMPANY, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 1996

NOTE   2  - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (CONTINUED):

      (f)  RIGHTS TO RECEIVE (CONTINUED):
<TABLE>
<CAPTION>

                                                                   December 31, 1996
                                                           ---------------------------------
                                                           Total        Funded       Unfunded

<S>                                                     <C>           <C>           <C>     
           Cost                                         $3,722,523    $3,089,087    $633,436
           Reserve for unrealizable rights to receive     (386,760)     (386,760)         -
                                                        ----------    ----------    --------
           Net                                          $3,335,763    $2,702,327    $633,436
                                                        ==========    ==========    ========
</TABLE>

<TABLE>
<CAPTION>

                                                              December 31, 1995
                                                       -----------------------------------
                                                         Total         Funded     Unfunded

<S>                                                    <C>           <C>           <C>     
           Cost                                        $2,616,041    $2,250,100    $365,941
           Reserve for unrealizable rights to receive    (294,415)     (294,415)       -
                                                       -----------   -----------   ---------
           Net                                         $2,321,626    $1,955,685    $365,941
                                                       ===========   ===========   =========
</TABLE>

      (g)  PROPERTY AND EQUIPMENT:

           Property and equipment are stated at cost.  Depreciation  on property
           and equipment is provided on a straight-line basis over the estimated
           useful  lives of the assets of 5 to 7 years.  Leasehold  improvements
           are amortized over the term of the lease. Maintenance and repairs are
           charged to operating  expenses as incurred;  renewals and betterments
           are capitalized.

           Depreciation  expense for the years ended December 31, 1996, 1995 and
           1994 aggregated $28,629, $25,498 and $16,631, respectively.

      (h)  AMORTIZATION:

           The  cost of the  franchise  rights  acquired  (see  Note 5) is being
           amortized on a  straight-line  basis through the end of the franchise
           term.  Amortization expense charged to operations for the years ended
           December  31, 1996,  1995 and 1994  aggregated  $31,600,  $27,850 and
           $27,100, respectively.

      (i)  NET SALES/COST OF SALES:

           Net sales  represent  the retail value of the Rights to Receive sold,
           less up to the 25% savings offered to the franchisors' cardholders. A
           sale is  recognized  when the  franchisor  (see  Note 5)  receives  a
           restaurant  charge card receipt from a  restaurant  in the  Company's
           franchise area,  indicating that a cardholder has charged a meal. The
           cost of a sale  consists of the actual cost of rights to receive from
           a restaurant (see Note 2f above).

                                     F - 10
<PAGE>
                    THE WESTERN SYSTEMS CORP. AND SUBSIDIARY
                 (FORMERLY THE WESTERN TRANSMEDIA COMPANY, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 1996

NOTE   2  -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (CONTINUED):

      (i)  NET SALES/COST OF SALES (CONTINUED):

           Revenues from card  membership  fees generated prior to 1996 were not
           been material since the Company waived  substantially  all first year
           membership fees. The Company received no portion of renewal fees.

           Additionally,  in January 1996,  Network  initiated a policy to offer
           both new and existing  cardholders an alternative to the  traditional
           arrangement of a 25% savings with an annual membership fee of $50.00.
           The new program  provides a 20% savings to cardholders with no annual
           fee so  long  as  cardholder  usage  is at  least  $200  during  each
           membership  year.  Since  January  31,  1996  substantially  all  new
           cardholders were enrolled in the 20% Program (see Note 5).

      (j)  INCOME TAXES:

           In February 1992,  the Financial  Accounting  Standards  Board issued
           Statement No. 109,  "Accounting for Income Taxes" ("SFAS 109").  SFAS
           109 requires the use of the asset and liability approach of providing
           for income taxes and required implementation no later than for fiscal
           years  beginning after December 15, 1992.  Effective  January 1, 1993
           the Company adopted the provisions of SFAS 109. (See also, Note 10).

      (k)  RECLASSIFICATIONS:

           Certain  reclassifications  were made to the 1995 and 1994  financial
           statements to conform to the current year's reporting format.


NOTE   3  -                          PROPERTY AND EQUIPMENT:

           Property and equipment consists of the following:

<TABLE>
<CAPTION>
                                                                   December 31,
                                                                   ------------
                                                                 1996      1995
                                                                 ----      ----

<S>                                                           <C>        <C>
           Furniture and fixtures                             $  70,964  $  69,990
           Office equipment                                      89,744     89,594
           Leasehold improvements                                 1,285      1,285
                                                             ---------- ----------
                                                                161,993    160,869
           Less:  accumulated depreciation and amortization      80,122     51,493
                                                             ----------   --------
                                                              $  81,871   $109,376
                                                              =========   ========
</TABLE>

                                     F - 11
<PAGE>
                    THE WESTERN SYSTEMS CORP. AND SUBSIDIARY
                 (FORMERLY THE WESTERN TRANSMEDIA COMPANY, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 1996



NOTE 4 - OTHER ASSETS:
<TABLE>
<CAPTION>
                                                                                    December 31,
                                                                                    ------------
                                                                                  1996      1995
                                                                                  ----      ----
         Other assets consists of the following:

<S>                                                                              <C>       <C>
         Franchise agreement - net of accumulated amortization of $127,200
           and $95,600 for 1996 and 1995, respectively (Notes 2g and 5)          $423,800  $455,400
         Security deposits                                                          9,483     8,820
         Point of sale equipment - net of accumulated amortization of
           $3,435 for 1996                                                         34,941         -
                                                                                 --------  --------
                                                                                 $468,224  $464,220
                                                                                 ========  ========
</TABLE>

NOTE   5  -  FRANCHISE AGREEMENT:

           TM West, a  wholly-owned  subsidiary of the Company (see Note 1), was
           formed for the purpose of  negotiating  and entering into a franchise
           agreement  with  Network.  This  franchise  agreement was executed in
           December,  1991,  and assigned by TM West to the Company in May 1992.
           The term of the  franchise  agreement was for 10 years with an option
           exercisable  by the Company  for two  additional  successive  10 year
           periods, provided certain conditions are met. In connection with this
           operation,  the Company  changed  its name to The Western  Transmedia
           Company, Inc. (see Note 1).

           Under the  initial  franchise  agreement,  the Company  acquired  the
           exclusive  right to operate a franchise  in the state of  California,
           the  primary  business  of which is the  acquisition  of  "Rights  to
           Receive"  from  restaurants  located in  California  that  accept the
           Transmedia  Card (a  private  charge  card  marketed  and  issued  by
           Network)  and the sale of such  Rights to  Receive  to holders of the
           card who are then entitled to either a 25% or 20% savings from listed
           menu prices when dining at participating restaurants.

           Restaurants that join the Transmedia program are provided with two of
           their essential needs:  advance financing and additional  diners. The
           Company   purchases  for  cash,  and  in  some   instances,   prepaid
           advertising, from full service restaurants, food and beverage credits
           (Rights  to  Receive)  which  are  then  used  by card  members  when
           patronizing such  restaurants.  Rights to Receive are purchased in an
           amount equal to  approximately  50% of the listed menu prices of such
           food and beverage credits.

                                     F - 12
<PAGE>

                    THE WESTERN SYSTEMS CORP. AND SUBSIDIARY
                 (FORMERLY THE WESTERN TRANSMEDIA COMPANY, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 1996

NOTE   5  -  FRANCHISE AGREEMENT (CONTINUED):

           The Company  derives its  revenues  from the  difference  between the
           amount it pays to restaurants  for the food and beverage  credits and
           the  cardmember's  charges at such  restaurants  net of the up to 25%
           savings  (exclusive of tip and  applicable  taxes) and franchise fees
           payable to Network.  The Company also receives 40% of the  Restaurant
           Card membership fee for the initial year of membership of cardholders
           solicited by the Company and no portion of any renewal fees. However,
           the  Company and Network  have  waived  substantially  all first year
           membership   fees  in  connection   with  its   marketing   programs.
           Additionally,  in January 1996,  Network  initiated a policy to offer
           both new and existing  cardholders an alternative to the  traditional
           arrangement of a 25% savings with an annual membership fee of $50.00.
           The new program  provides a 20% savings to cardholders with no annual
           fee so long as cardholder  usage is least $200 during each membership
           year.  Since January 1, 1996  substantially  all new cardholders were
           enrolled in the 20% Program (see Note 2(i)).

           The  franchise  agreement to operate in  California,  provided for an
           initial  franchise  fee of $250,000  (which was paid in July 1992) as
           well as 150,000  shares of common stock of the Company (see Note 7b),
           which shares were issued in January  1992.  The  franchise  agreement
           also  provided for payments to Network's  advertising  and  promotion
           fund in the amount of  $250,000;  one-half of which was paid with the
           initial  franchise  fee  and  the  balance  to be  paid  in 12  equal
           consecutive  monthly  installments,  without interest,  commencing in
           July 1993. The funds for advertising and promotion were to be used by
           Network for the exclusive  benefit of the Company during the two year
           period  following  the  effective  date of the  franchise  agreement.
           Effective  September  30, 1993 the Company  entered into an agreement
           with Network whereby  substantially  all local  advertising  expenses
           would  be paid  directly  by the  Company,  instead  of  through  the
           advertising   and   promotional   fund  to  which  the   Company  had
           contributed.  As a result of this agreement,  the Company's remaining
           obligation  under  this note was  terminated.  In  addition,  Network
           reimbursed the Company  approximately  $55,000 for the unused portion
           of the fund contributed by the Company.

           In December  1993,  the Company  exercised it's option to acquire the
           franchise to operate in the state of Washington  through the issuance
           of 50,000 shares of common stock to Network  valued by the Company at
           $150,000.  The Company also  acquired the franchise to operate in the
           City of Reno,  Nevada and the Nevada portion of the Lake Tahoe resort
           area by issuing  10,000  shares of common stock to Network at a value
           of $30,000.  The Company also  exercised  an option in June,  1995 to
           operate in the state of Oregon for an  initial  payment of  $100,000.
           The Company  issued  35,000 shares of its common stock to effect this
           payment.


                                     F - 13
<PAGE>
                    THE WESTERN SYSTEMS CORP. AND SUBSIDIARY
                 (FORMERLY THE WESTERN TRANSMEDIA COMPANY, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 1996

NOTE   5  -  FRANCHISE AGREEMENT (CONTINUED):

           For each of the  franchises,  the  Company  was also  required to pay
           Network a 7 1/2% general service charge and a 2 1/2%  advertising fee
           based on the gross dollar amount of food and beverage credits used by
           cardmembers  within each territory.  The Company was also required to
           pay a  miscellaneous  administrative  fee  based  upon the  number of
           participating  restaurants  and charge card  transactions  during any
           given month.  Additionally,  the Company was subject to a non-compete
           agreement.

           SEE  NOTE  13 RE:  SUBSEQUENT  EVENT  -  SALE  OF  SUBSTANTIALLY  ALL
           OPERATING ASSETS.


NOTE   6  -  LONG-TERM DEBT:

           The Company is the lessee of office and  computer  equipment  through
           leases which expire in years through 2000. The assets (and liability)
           under these leases are recorded at the lower of the present  value of
           the minimum lease payments or the fair market value of the asset. The
           assets  are  depreciated  over  their  estimated   productive  lives.
           Depreciation  of  assets  under  capitalized   leases,   included  in
           depreciation  expense for the years ended December 31, 1996, 1995 and
           1994, aggregated $5,250, $3,381 and $2,914, respectively.

           Minimum future lease payments under capitalized leases as of December
           31,  1996 and for  each of the  next  four  fiscal  years  and in the
           aggregate are as follows:

                1997                            $ 6,544
                1998                              5,583
                1999                              4,349
                2000                              6,324
                                               --------
           Total minimum lease payments          22,800
           Less: amount representing interest     7,198
                                              ---------
                                                $15,602
                                              =========

           The interest rate has been  calculated at  approximately  10% and was
           based upon the lower of the Company's  incremental  borrowing rate at
           the inception of the lease or the lessor's implicit rate of return.

           In connection  with the sale of the Company's  assets,  subsequent to
           the balance  sheet date,  the leases and the  liabilities  thereunder
           were assigned to Network (see Note 13).

NOTE   7  -     COMMON STOCK:

      (a)  In December 1991,  the Company  effected a reverse stock split of its
           issued and  outstanding  common  stock on a one (1) for  thirty  (30)
           basis. The number of authorized shares (25,000,000) was not changed.

                                     F - 14
<PAGE>
                    THE WESTERN SYSTEMS CORP. AND SUBSIDIARY
                 (FORMERLY THE WESTERN TRANSMEDIA COMPANY, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 1996

NOTE   7  -     COMMON STOCK (CONTINUED):

           In May 1992,  the Company  effected a second reverse stock split on a
           one (1) for two (2) basis  resulting  in 1,500,000  shares,  $.60 par
           value,  issued and outstanding.  The number of authorized  shares was
           not changed.

           All  references  to the number of common shares and per share amounts
           in the  accompanying  financial  statements,  have been  restated  to
           reflect the reverse stock splits.

      (b)  In January 1992, the Company issued 150,000 shares,  as restated,  of
           its  common  stock to  Network  (see Note 5) in  connection  with the
           franchise agreement. These shares were issued at a post reverse stock
           split price of $.14 per share.

           In July 1992, the Company  completed a private placement of 3,397,317
           shares of its common  stock at a price of $.60 per share (par  value)
           which  yielded net  proceeds of  approximately  $1,966,000.  With the
           completion  of this  private  placement,  the Company  had  4,897,265
           shares of its common stock outstanding.  In addition, during 1991 and
           1992  the  Company  also  expended  approximately  $369,000  in costs
           associated with a terminated public offering.

      (c)  In July 1993, the Company  completed a private placement of 1,764,624
           units  (each  unit  consisting  of one share of common  stock and one
           common  stock  purchase  warrant)  at a price of $1.70 per unit which
           yielded net proceeds of approximately  $2,625,000.  In November 1993,
           the Company also completed a private placement of 294,117 units (each
           unit  consisting  of one share of common  stock and one common  stock
           purchase  warrant)  at a price of $1.70 per unit for net  proceeds of
           approximately  $463,000.  The warrants are  exercisable at a price of
           $3.00  per  share  through  December  1994  and at  $4.00  per  share
           thereafter   and  through   December  1997.  The  warrants  are  also
           redeemable  at a price of $1.00  per  warrant,  at the  option of the
           Company, based upon certain circumstances.

           In July 1993, the Company also issued 2,500 shares of common stock in
           lieu of consulting fees aggregating $6,250.

           Pursuant to the terms of a  employment  agreement  with an officer of
           the  Company  (see  Note  12a)  the  Company   reflected  $46,875  as
           additional compensation for the year ended December 31, 1993. Payment
           was made by issuing  25,000 shares of common stock.  The value of the
           shares is  included in common  stock  subscribed  as of December  31,
           1993.

           As payment for the  exercise of  franchise  options for the states of
           Washington and the City of Reno, Nevada and the Nevada portion of the
           Lake Tahoe  resort area (see Note 5), the Company has agreed to issue
           60,000 shares of common stock to Network.  These shares are valued by
           the Company at $180,000. This amount is also included in common stock
           subscribed as of December 31, 1993.

                                     F - 15
<PAGE>
                    THE WESTERN SYSTEMS CORP. AND SUBSIDIARY
                 (FORMERLY THE WESTERN TRANSMEDIA COMPANY, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 1996

NOTE   7  -     COMMON STOCK (CONTINUED):

      (d)  In December 1994, through a unit offering, warrant holders of 800,000
           warrants  exchanged  their  warrants and paid $3.00 per warrant for a
           unit  consisting  of a share of common stock and a new warrant.  This
           offering resulted in net proceeds to the Company of $2,138,393. These
           new warrants are  exercisable  at a price of $4.00 per share  through
           December 31, 1997. In addition,  in December  1994,  holders of 5,754
           existing warrants exercised their right to purchase common stock at a
           price of $3.00 per share.

      (e)  In June 1995,  as payment for the exercise of a franchise  option for
           the state of Oregon,  the Company  issued 35,000 shares of its common
           stock to Network. These shares are valued by the Company at $100,000.

NOTE   8  -     STOCK OPTION PLAN:

           The Company has  established  a Stock  Option Plan (the  "Plan"),  as
           amended,  under which  options to purchase up to a maximum of 750,000
           shares  of common  stock may be  granted  to  officers  and other key
           employees. Stock options granted under this Plan, which may be either
           incentive  stock  options or  nonqualified  stock options for federal
           income tax  purposes,  expire up to ten years after date of grant and
           become exercisable over a three year period.  Employees who have left
           the Company have 90 days to exercise their options. In December 1996,
           the stockholders  agreed to an amendment to the Plan,  whereby in the
           event  of a sale of the  assets  of the  Company  (see  Note  13) all
           options  outstanding  would become  immediately  exercisable  without
           regard to any vesting provisions.

           The Company has elected to follow Accounting Principles Board Opinion
           No.  25,  "Accounting  for Stock  Issued to  Employees"  (APB 25) and
           related  interpretations in accounting for its employee stock options
           because,  as discussed  below,  the alternative fair value accounting
           provided  for  under  FASB   Statement  No.  123,   "Accounting   for
           Stock-Based  Compensation"  requires use of option  valuation  models
           that were not developed for use in valuing  employee  stock  options.
           Under APB 25,  because the exercise  price of the Company's  employee
           stock options equals the market price of the underlying  stock on the
           date of grant, no compensation expense is recognized.

           Pro forma information  regarding net income and earnings per share is
           required by Statement 123, and has been  determined as if the Company
           had  accounted  for its employee  stock  options under the fair value
           method  of that  Statement.  The fair  value for  these  options  was
           estimated at the date of grant using a  Black-Scholes  option pricing
           model with the following  weighted  average  assumptions for 1996 and
           1995,  respectively:  risk-free  interest  rates  of 6.8 % and  8.4%;
           volatility  factors of the  expected  market  price of the  Company's
           common stock of .41 and .38; and a weighted  average expected life of
           the options of 7 1/2 years.

           The  Black-Scholes  option  valuation  model was developed for use in
           estimating  the fair  value of traded  options  which have no vesting
           restrictions  and  are  fully  transferable.   In  addition,   option
           valuation models require the input of highly  subjective  assumptions
           including the expected stock price volatility.  Because the Company's
           employee stock options have characteristics  significantly  different
           from those of traded  options,  and because changes in the subjective
           input assumptions can materially  affect the fair value estimate,  in
           management's  opinion, the existing models do not necessarily provide
           a reliable  single  measure of the fair value of its  employee  stock
           options.

                                     F - 16
<PAGE>

                    THE WESTERN SYSTEMS CORP. AND SUBSIDIARY
                 (FORMERLY THE WESTERN TRANSMEDIA COMPANY, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 1996

NOTE   8  -     STOCK OPTION PLAN (CONTINUED):

           For purposes of pro forma  disclosures,  the estimated  fair value of
           the options is amortized to expense over the options  vesting period.
           The Company's pro forma information follows:

                                                         1996       1995
                                                         ----       ----
           Net income
             As reported                                $545,024   $  10,942
             Pro forma                                   475,054     (85,248)

           Primary earnings per share
             As reported                                    $.07    $    -
             Pro forma                                       .06        (.01)

           A summary of stock  activity,  and related  information for the years
ended December 31 follows:

                                                             Weighted Average
                                               Options       Exercise Price
                                               -------       --------------

           Outstanding, December 31, 1993         349,000           $1.72
             Granted                               32,500            3.25
             Exercised                            (17,500)            .76
             Cancelled                            (12,500)           2.39
                                              -----------          ------

           Outstanding, December 31, 1994         351,500            1.88
             Granted                              320,000            2.85
             Exercised                            -                 -
             Cancelled                             (2,500)           1.75
                                             ------------          ------

           Outstanding, December 31, 1995         669,000            2.35

           Weighted average fair value of options
             granted during the year                                  .94

             Granted                               50,000            1.94
             Exercised                               -                -
             Cancelled                           (245,000)           2.46
                                               ----------          ------
           OUTSTANDING, DECEMBER 31, 1996         474,000           $2.24
                                              ===========           =====

           Weighted average fair value of options
             granted during the year                               $  .18

           Options exercisable as of:
             December 31, 1994                    106,833           $1.43
             December 31, 1995                    179,833            1.61
             December 31, 1996                    278,167            2.02

           Exercise  prices for  options  outstanding  as of  December  31, 1996
           ranged from $.60 to $3.75. The weighted average remaining contractual
           life of these options is 8 years.

                                     F - 17
<PAGE>
                    THE WESTERN SYSTEMS CORP. AND SUBSIDIARY
                 (FORMERLY THE WESTERN TRANSMEDIA COMPANY, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 1996

NOTE   9  -  BUSINESS CONCENTRATIONS:

           Most of the Company's  participating  restaurants  are located in the
           San Francisco/Los  Angeles areas. No single participating  restaurant
           accounted for more than 5% of the Company's  sales in any fiscal year
           presented.

           No single  participating  restaurant's  Rights to receive balance was
           greater  than 5% of the total  Rights to receive  balance at December
           31, 1996 and 1995.


NOTE 10  -   INCOME TAXES:

           The provision for income taxes consists of the following:

                                                     For the Year Ended
                                                       December 31,
                                                   ----------------------------
                                                     1996        1995      1994
                                                     ----        ----      ----
           Current taxes:
             Federal                               $    -       $  -      $  -
             State                                      -          -         -
                                                   ----------   ------    ------
                Total                                   -          -         -
                                                   ----------   ------    ------

           Deferred taxes:
             Federal                                (104,000)      -         -
             State                                   (33,000)      -         -
                                                   ----------   ------    ------
                Total                               (137,000)      -         -
                                                   ----------   ------    ------

           Benefit of operating loss carryforwards  (720,000)      -         -
                                                   ----------   ------    ------

           Provision (credit) for income taxes     $(857,000)   $  -      $  -
                                                   =========    ======    ======

           Deferred  income  taxes  reflect  the net tax  effects  of  temporary
           differences  between the carrying  amounts for assets and liabilities
           for financial  reporting  purposes as well as the effect of operating
           loss  carryforwards.  Significant  components  of the  Company's  net
           deferred tax asset are as follows:

                                                          1996        1995
                                                          ----        ----
                Tax effects of:
                   Operating loss carryforwards         $720,000  $  680,000
                   Allowance for rights to receive       140,000     115,000
                   Property and equipment                 (3,000)     (2,500)
                                                        --------  -----------
                Gross deferred tax asset                 857,000     792,500
                Valuation allowance                         -       (792,500)
                                                        --------  ----------
                Net deferred tax asset                  $857,000  $     -
                                                        ========= ===========

                                     F - 18
<PAGE>
                    THE WESTERN SYSTEMS CORP. AND SUBSIDIARY
                 (FORMERLY THE WESTERN TRANSMEDIA COMPANY, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 1996

NOTE 10  - INCOME TAXES (CONTINUED):

           The  Company has  available  at  December  31, 1996 and 1995,  unused
           operating  loss   carryforwards  of   approximately   $1,950,000  and
           $1,744,000  respectively  which expire in various years through 2011.
           As of December  31,  1996,  the Company has recorded the tax benefits
           associated  with  future  deductible  temporary  differences  and NOL
           carryforwards  since it generated taxable income in connection with a
           sale of its  operating  assets in  January  1997,  subsequent  to the
           balance sheet date (see Note 13).


NOTE 11  - EARNINGS (LOSS) PER SHARE:

           Earnings  (loss)  per  share  has been  computed  on the basis of the
           weighted average number of common shares and common equivalent shares
           outstanding  during  each  period  presented.  The effect on earnings
           (loss) per share resulting from the exercise of common stock warrants
           and options is antidilutive and therefore not shown for 1994.

NOTE 12  - COMMITMENTS AND CONTINGENCIES:

      (a)  EMPLOYMENT/CONSULTING AGREEMENTS:

           The  Company  entered  into an  employment  agreement  with its Chief
           Executive  Officer,  which  agreement  commenced  January 1, 1995 and
           expired on December  31,  1996.  The  agreement  provided  for a base
           annual  salary of $175,000  for the first year and $200,000 for 1996.
           This  employee  is also  entitled  to a  bonus,  based  upon  pre-tax
           earnings, of 5% on the first $2,000,000 and 6 1/2% on all earnings in
           excess of  $2,000,000.  The  employee  was also  granted  options  to
           acquire  150,000  shares of common stock at prices ranging from $2.82
           to $3.75 per share. The employment agreement also contains provisions
           for a covenant not to compete in the event of termination and various
           buy-out provisions in the event of termination,  disability, death or
           a sale of a controlling  interest or substantially  all the assets of
           the Company.

           The Company also entered  into an  agreement  with an Executive  Vice
           President.  This  agreement  was  effective as of January 1, 1995 and
           would have expired on December 31, 1996.  The terms of this agreement
           provided for an annual base salary of $115,000 for the first year and
           $140,000 for the second year.  This employee was also granted options
           to acquire  105,000  shares of common  stock at prices  ranging  from
           $2.82 to $3.75 per share. The Executive Vice President  resigned from
           the Company in January 1996.

           The Company  had also  entered  into a  consulting  agreement  with a
           company in which a director  and its  executive  vice  president  are
           shareholders.  The agreement  provided for monthly consulting fees of
           $2,500  for the  first 12  months,  increasing  to  $2,917  per month
           thereafter  through  December  1996.  This  agreement was  terminated
           effective December 31, 1995.

                                     F - 19
<PAGE>
                    THE WESTERN SYSTEMS CORP. AND SUBSIDIARY
                 (FORMERLY THE WESTERN TRANSMEDIA COMPANY, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 1996

NOTE  12  -       COMMITMENTS AND CONTINGENCIES (CONTINUED):

      (B)  OPERATING LEASE:

           The Company has entered into operating  leases for office space which
           expire in various years through 1999 with renewal options. The leases
           provide for payment of taxes and the Company's proportionate share of
           basic operating costs.

           Minimum future base rental  payments under these leases,  for each of
           the next three years and in the aggregate are as follows:

                 Year ending December 31, 1997   $  60,078
                 Year ending December 31, 1998      58,874
                 Year ending December 31, 1999      40,399
                                                 ---------
                                                  $159,351

           Rent expense for the years ended  December  31,  1996,  1995 and 1994
           aggregated $115,991, $113,859 and $91,931, respectively.

           Effective with the asset sale (see Note 13) the aforementioned leases
           were assigned to and assumed by Network.

           The Company also leases office space in Orange County, California, on
           a  month-to-month  basis,  at a cost of $640 per month.  The  Company
           terminated this lease on January 31, 1997.

      (C)  SUBSEQUENT EVENT:

           See Note 13 regarding sale of substantially all operating assets.


NOTE  13  -      SUBSEQUENT EVENT - SALE OF ASSETS:

           On January 3, 1997, the Company sold its Transmedia Network franchise
           for the states of California,  Oregon, Washington and parts of Nevada
           and substantially  all of its operating  assets,  other than cash and
           cash  equivalents,  to  its  franchisor,   Transmedia  Network,  Inc.
           ("Network").  Upon  consummation  of the asset  sale,  the  Company's
           assets consisted principally of cash and cash equivalents aggregating
           approximately  $9,574,000 and liabilities consisting of approximately
           $800,000  of taxes on the gain  resulting  from the asset  sale.  The
           Company also transferred its obligations  under capital and operating
           leases  entered into, to Network.  In connection  with the asset sale
           the Company and Network  exchange general releases of all liabilities
           and obligations under the franchise  agreement (see Note 5). However,
           pursuant to the terms of the  contract,  should the Rights to Receive
           of a certain restaurant group become  uncollectible  within 12 months
           of the closing  date,  the Company is obligated to  repurchase  those
           Rights to  Receive  from  Network at the then  outstanding  full cash
           amount.  The Company would then have the  opportunity  to recover the
           amount paid to Network from the restaurant group and guarantors.
           Such Rights to Receive totaled approximately $100,000.

                                     F - 20