SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549


                                  FORM 10-QSB/A

|X|      Quarterly Report under Section 13 or Section 15(d) of the Securities 
         Exchange Act of 1934 for the quarterly period ended March 31, 1998

|_|      Transition Report under Section 13 or 15(d) of the Securities Exchange
         Act of 1934 for the transition period from ______ to ______.


         Commission File No.:  0-22848


                            U.S. Wireless Data, Inc.
             (Exact name of registrant as specified in its charter)


                  Colorado                              84-1178691
           ----------------------             -------------------------------
          (State of incorporation)           (IRS Employer Identification No.)


   
                          2200 Powell Street, Suite 800
                          Emeryville, California 94608
                  ---------------------------------------------
          (Address of principal executive offices, including zip code)
    



                                 (510) 596-2025
                      ------------------------------------
              (Registrant's Telephone Number, including area code)


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past ninety days.

                                Yes _X_   No ___


As of March 31, 1998 there were outstanding 9,324,601 shares of the Registrant's
Common Stock (no par value per share).


Transitional Small Business Disclosure Format

                                Yes ___   No _X_

<PAGE>
                            U.S. WIRELESS DATA, INC.
                                TABLE OF CONTENTS




PART I     FINANCIAL INFORMATION                                            Page
                                                                            ----
                                                                          
Item 1.    Financial Statements (Unaudited and Restated)
    

           Balance Sheets --
               March 31, 1998, and June 30, 1997...............................3

           Statements of Operations --
               Three Months and Nine Months Ended March 31, 1998 and 1997......4

           Statements of Cash Flows --
               Nine Months Ended March 31, 1998 and 1997.......................5

   
           Notes to Financial Statements (Restated).........................6-12



Item 2.    Management's Discussion and Analysis (Restated).................13-16
    

PART II    OTHER INFORMATION

Item 1.    Legal Proceedings .................................................19

Item 2.    Changes in Securities..............................................21

Item 3.    Defaults Upon Senior Securities....................................22

Item 4.    Submission of Matters to a Vote of Security Holders................23

Item 5.    Other Information..................................................23

Item 6.    Exhibits and Reports on Form 8-K...................................24

   
RESTATEMENT OF FINANCIAL STATEMENTS AND CHANGES TO CERTAIN INFORMATION

This  amended  filing  contains  restated  financial   information  and  related
disclosures  for the three and nine  months  ended March 31, 1998 (See Note 1 to
Financial  Statements).  Quarterly financial  statement  information and related
disclosures included in this amended filing reflect, where appropriate,  changes
as a result of the restatement. This information is consistent with the contents
of the Company's Annual Report on Form 10-KSB for the fiscal year ended June 30,
1998 which, was filed with the SEC on December 17, 1998 (See "Note 15. Unaudited
Restated Quarterly Financial Information," in the 10-KSB).
    
                                       2
<PAGE>
<TABLE>
<CAPTION>
   
                            U.S. WIRELESS DATA, INC.
                                  BALANCE SHEET
                            (Unaudited and Restated)


                                                                     March 31, 1998   June 30, 1997
                                                                     --------------   -------------
                                                                      (As Restated)
                                                                      -------------
<S>                                                                   <C>             <C>         
                                  ASSETS

Current Assets:
        Cash ......................................................   $     65,000    $      6,000
        Accounts receivable, net of allowance for .................         80,000         131,000
            doubtful accounts of $48,000 at March 31, 1998;
            $16,000 at  June 30, 1997
        Inventory, net ............................................        880,000         209,000
        Other current assets ......................................        571,000         103,000
                                                                      ------------    ------------
                 Total current assets .............................      1,596,000         449,000

Processing units - deployed .......................................        383,000            --
Property and equipment, net .......................................        287,000          41,000
Other assets ......................................................         68,000          11,000
                                                                      ------------    ------------


Total assets ......................................................   $  2,334,000    $    501,000
                                                                      ============    ============


                  LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities:
        Accounts payable ..........................................   $  1,275,000    $    354,000
        Accrued liabilities .......................................      4,181,000         126,000
        Borrowings, current portion ...............................        828,000         738,000
                                                                      ------------    ------------
                Total current liabilities .........................      6,284,000       1,218,000
                                                                      ------------    ------------

Borrowings, long-term portion .....................................         45,000          45,000
                                                                      ------------    ------------

Total Liabilities .................................................      6,329,000       1,263,000
                                                                      ------------    ------------

Redeemable common stock and warrants ..............................        560,000            --
                                                                      ------------    ------------


Stockholders' Deficit:
        Preferred Stock, 12,000,000 authorized,  3,060,000 Series A      3,060,000            --
                 Issued and outstanding
        Common stock, no par value, 40,000,000 ....................      9,325,000       5,614,000
                shares authorized; 9,324,601 and 5,613,952 shares
                 issued and outstanding at March 31, 1998
                 June 30, 1997, respectively
        Additional paid-in capital ................................      8,872,000      10,613,000
        Accumulated deficit .......................................    (25,812,000)    (16,961,000)
        Notes Receivable from Shareholder .........................           --           (28,000)
                                                                      ------------    ------------
                Total stockholders' deficit .......................     (4,555,000)       (762,000)
                                                                      ------------    ------------


Total liabilities and stockholders' deficit .......................   $  2,334,000    $    501,000
                                                                      ============    ============
    
</TABLE>
       Accompanying Notes are an integral part of the Financial Statements

                                        3
<PAGE>
<TABLE>
<CAPTION>
   
                            U.S. WIRELESS DATA, INC.
                            STATEMENTS OF OPERATIONS
                            (Unaudited and Restated)



                                                    Three Months Ended            Nine Months Ended
                                                  3/31/98         3/31/97       3/31/98        3/31/97
                                                  -------         -------       -------        -------
                                               (As Restated)                 (As Restated)
                                               -------------                 -------------
<S>                                            <C>            <C>            <C>            <C>        
Revenue ....................................   $   252,000    $   244,000    $   638,000    $ 1,046,000
Cost of revenue ............................       115,000        115,000        352,000        602,000
                                               -----------    -----------    -----------    -----------

Gross profit ...............................       137,000        129,000        286,000        444,000
                                               -----------    -----------    -----------    -----------



Operating expenses:
    Selling, general and administrative ....     2,518,000        123,000      6,659,000        463,000
    Research and development ...............        78,000         88,000        251,000        301,000
    Litigation settlement ..................     1,353,000           --        1,353,000           --
                                               -----------    -----------    -----------    -----------
    Total operating expense ................     3,949,000        211,000      8,263,000        764,000
                                               -----------    -----------    -----------    -----------


Loss from operations .......................    (3,812,000)       (82,000)    (7,977,000)      (320,000)



Interest income
Interest expense ...........................      (439,000)        (8,000)      (707,000)       (24,000)
Other income ...............................      (165,000)         7,000       (166,000)        31,000
                                               -----------    -----------    -----------    -----------


Net loss ...................................   $(4,416,000)   $   (83,000)   $(8,850,000)   $  (313,000)
                                               ===========    ===========    ===========    ===========



Basic and diluted net loss per share: ......   $      (.48)   $      (.02)   $     (1.01)   $      (.07)
                                               ===========    ===========    ===========    ===========


Weighted average common shares outstanding -     9,281,000      4,984,000      8,753,000      4,815.000
basic and diluted                              ===========    ===========    ===========    ===========
    
</TABLE>

       Accompanying Notes are an integral part of the Financial Statements

                                       4
<PAGE>
<TABLE>
<CAPTION>
   
                            U.S. WIRELESS DATA, INC.
                            STATEMENTS OF CASH FLOWS
                            (Unaudited and Restated)


                                                                    Nine Months Ended
                                                              March 31,1998  March 31, 1997
                                                              -------------  --------------
                                                              (As Restated)
CASH FLOWS FROM OPERATING ACTIVITIES: 
<S>                                                           <C>            <C>         
     Net loss .............................................   $(8,850,000)   $  (313,000)
     Depreciation and amortization ........................        65,000         51,000
     Non-cash consulting services and warrant extension ...     2,124,000         15,000
     Non-cash compensation - stock option .................     1,707,000            --
     Non-cash interest expense - debentures ...............       637,000            --
     Non-cash litigation expense ..........................     1,353,000            --
   Changes in assets and liabilities:
          (Increase) decrease in:
               Accounts receivable ........................        46,000         18,000
               Inventory ..................................      (671,000)       168,000
               Processing units - deployed ................      (383,000)           --
               Other current assets .......................      (152,000)        35,000
          Increase (decrease) in:
               Accounts payable ...........................       911,000        102,000
               Accrued liabilities ........................        52,000        (90,000)
               Borrowings .................................           --         (23,000)
                                                              -----------    ----------- 
               Net cash used in operating activities ......    (3,161,000)       (37,000)
                                                              -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchase of Property, plant, and equipment ...........      (291,000)         1,000
     Increase in other assets .............................       (56,000)          --
                                                              -----------    -----------
               Net cash used in investing activities ......      (347,000)         1,000
                                                              -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from issuance of stock ......................       585,000         28,000
     Proceeds from sale of options to purchase common stock       192,000           --
     Note receivable ......................................        28,000        (28,000)
     Net Proceeds from issuance of debt ...................     2,762,000           --
                                                              -----------    -----------
              Net cash provided by financing activities ...     3,567,000           --
                                                              -----------    -----------


INCREASE (DECREASE) IN CASH ...............................        59,000        (36,000)


CASH, Beginning of period .................................         6,000         40,000
                                                              -----------    -----------


CASH, End of period .......................................   $    65,000    $     4,000
                                                              ===========    ===========
</TABLE>

Non-cash Financing and Investing:
1.       Conversion of $50,000 Notes Payable to 75,000 shares of Common Stock
2.       Conversion of $3,060,000 Convertible Debentures to 3,060,000 shares of
         Preferred Stock
    
       Accompanying Notes are an integral part of the Financial Statements

                                       5
<PAGE>
   
                            U.S. WIRELESS DATA, INC.
                          NOTES TO FINANCIAL STATEMENTS
                            (Unaudited and Restated)


Note 1 -- RESTATEMENT

      The  accompanying  restated  balance  sheet as of March  31,  1998 and the
      accompanying  restated  statement of  operations  for the three months and
      nine-months  ended March 31, 1998 have been restated to reflect the proper
      treatment of the Liviakis  Financial  Communications,  Inc.  financing and
      consulting transactions (see Note 6 to Financial Statements), the granting
      of a  variable  option  (see  Note  7 to  Financial  Statements)  and  the
      settlement with certain noteholders regarding the tradability of shares to
      be  issued  upon  conversion  of  their  notes  (see  Note 9 to  Financial
      Statements).  The effect of these  restatements  is to  increase  selling,
      general  and  administrative   expenses  and  increase  reported  loss  by
      $1,114,000 and $2,985,000 for the three months and nine months ended March
      31,  1998  ($0.12  and  $0.34  for  fully  diluted   earnings  per  share)
      respectively, reduce total assets by $8,000, increase total liabilities by
      $4,003,000,  increase redeemable common stock and warrants by $560,000 and
      increase  stockholders'  deficit by $4,571,000.  These restatements do not
      affect previously reported net cash flows.


Note 2 -- ACCOUNTING PRINCIPLES
    
      The  balance  sheet as of March 31,  1998,  as well as the  statements  of
      operations  for the three and nine  months  ended March 31, 1998 and March
      31, 1997,  and statement of cash flows for the nine months ended March 31,
      1998 and March 31,  1997 have been  prepared  by the  Company  without  an
      audit. In the opinion of management,  all adjustments,  consisting only of
      normal  recurring  adjustments  necessary to present  fairly the financial
      position,  results of operations, and cash flows at March 31, 1998 and for
      all periods presented, have been made.

      Certain  information  and footnote  disclosures  normally  included in the
      financial  statements  prepared  in  accordance  with  generally  accepted
      accounting principles have been condensed or omitted. It is suggested that
      these  financial  statements  be read in  conjunction  with the  financial
      statements  and notes thereto  included in the  Company's  Form 10-KSB for
      fiscal year ended June 30,  1997.  The results of  operations  for interim
      periods presented are not necessarily  indicative of the operating results
      for the full year.


   
Note 3 -- FINANCIAL CONDITION AND LIQUIDITY (Restated)

      The Company has incurred an  accumulated  deficit of  approximately  $25.8
      million since inception, including a loss of $8.9 million during the first
      nine  months of fiscal  year 1998.  In order to attempt to  continue  as a
      going concern,  the Company has transitioned to a recurring revenue focus,
      is working on programs to increase revenue levels and product margins, and
      is negotiating new distribution agreements.  In December 1997, the Company
      closed  a  private   placement   offering  of  $3,060,000  of  Convertible
      Subordinated  Debentures.  After  associated  fees and repayment of bridge
      loans  incurred  during the quarter ended  December 31, 1997,  the Company
      retained  approximately  $2,200,000 to apply to immediate  working capital
      needs and the  national  launch of its  proprietary  wireless  transaction
      processing  solution.  The current  sales volume is inadequate to fund the
      infrastructure  growth and business  transition.  As a result, the Company
      anticipates  the continued  roll out of the GTE Wireless and Bell Atlantic
      joint  marketing  and  operating  agreements  and  potential  distribution
      programs  with other  cellular  carriers will require  additional  debt or
      equity financing in the immediate future.

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

                                       6
<PAGE>
Note 4 -- NET LOSS PER SHARE
    
     Earnings  (loss) per common  share (EPS) is  computed  using  Statement  of
     Financial  Accounting  Standard (SFAS) No. 128, "Earnings per Share".  SFAS
     No. 128,  establishes  standards  for the  computation,  presentation,  and
     disclosure  of  earnings  per share.  Basic and diluted net loss per common
     share are computed by dividing the net loss by the weighted  average number
     of common shares outstanding at the end of the period. Diluted EPS excludes
     exercisable  stock  options and warrants from the  calculation  since their
     effect  would be  anti-dilutive.  Such stock  options  and  warrants  could
     potentially  dilute earnings or losses per share in the future. EPS for the
     three and nine month  periods  ended March 31,  1997 have been  restated to
     conform with SFAS No.128.

   
Note 5 -- FINANCINGS

     As the Company  entered the first quarter of fiscal 1998, it faced the need
     for  increased  liquidity to meet its  obligations  and fund a  significant
     rollout of the CDPD  TRANZ  Enabler  product.  In August  1997,  through an
     introduction by the entrenet Group, LLC. ("entrenet"), the Company sold 3.5
     million  unregistered  shares of common  stock and 1.6 million  warrants to
     purchase  common  stock at an  exercise  price of  $0.01  per  share to two
     officers of Liviakis Financial Communications, Inc. ("LFC") for $500,000 in
     cash. The warrants are exercisable  from January 15, 1998 through August 4,
     2002.  The  securities  sold  to  the  two  officers  of LFC  carry  future
     registration rights, including a one-time demand registration, with fees to
     be paid by the Company (see also Note 6,  below).  In  accordance  with its
     agreement with entrenet,  the Company granted entrenet the right to receive
     280,000 unregistered shares of the Company's Common Stock as an 8% finder's
     fee for the  direct  source  financing.  The stock was  issued to  entrenet
     following  shareholder approval for an increase in authorized Common Stock,
     which  occurred on February 6, 1998. The agreement  provides  entrenet with
     "piggyback registration rights."
    
     On December  10, 1997 the Company  closed a private  placement  offering of
     $3,060,000 principal amount of 8% Adjustable Rate Convertible  Subordinated
     Debentures.  After  associated  fees and repayment of bridge loans incurred
     during the quarter, the Company retained approximately  $2,200,000 to apply
     to  immediate  working  capital  needs  and  the  national  launch  of  its
     proprietary  wireless  transaction  processing  solution.  The  convertible
     features of the debenture include an "in-the-money" convertible option that
     allows the holder to obtain  shares of common  stock at a discount  of fair
     market value. The value of the in-the-money provision has been allocated to
     stockholder's  equity (deficit).  The difference between the realized value
     and face value of the debt was  recognized  as  non-cash  interest  expense
     between  the date of issue and date of  conversion  into  preferred  stock,
     which was  effected as of February 9, 1998.  Non-cash  interest  expense of
     approximately  $225,000  and  $397,000 was recorded in the second and third
     fiscal   quarters,   respectively.   As  the  result  of  the  approval  by
     shareholders on February 6, 1998, the Company  authorized  4,000,000 shares
     of no par value  Series "A"  Cumulative  Convertible  Redeemable  Preferred
     Stock (the "Preferred  Stock"),  with a stated value of $1.00 per share. On
     that date, the debentures  automatically converted into 3,060,000 shares of
     Preferred  Stock. The Preferred Stock gives the holder the right to convert
     principal into shares of Common Stock in the future at 80% of market price,
     but not lower than $4 per share for the first 270 days,  and no higher than
     $6 per share. The security carries an 8% dividend rate, which drops to a 4%
     dividend  rate once the  underlying  shares of Common Stock are  registered
     with the  Securities  and Exchange  Commission.  The Company is required to
     register the shares of Common Stock  underlying the securities  sold in the
     offering,  plus the shares of Common  Stock  issuable  as  interest  on the
     Debentures and dividends on the Preferred Stock.

     In  order  to  satisfy  a  portion  of its  immediate  short  term  capital
     requirements  the Company entered into an agreement on March 12, 1998, with
     a stockholder to allow the Company to assign to third  parties,  options it
     has held since 1995, on 367,684 shares of the Company's  Common Stock owned
     by that  stockholder,  which the  Company has the right to purchase at $.25
     per share.  The  Company  anticipates  that it will sell and  assign  these
     options to  accredited  investors  in blocks of no less than 50,000  shares
     between the present time and October 5, 1998,  the date on which its option
     expires.  The amount of cash that may be provided  to the  Company  through
     this source is not readily  determinable,  as it will vary depending on the
     market price of the  Company's  Common Stock at the time the Company  sells
     each option.  Through March 31, 1998, the Company  assigned its Call Option
     on 50,000 shares owned by stockholder's assignee, Tillicombe International,
     LDC, to RBB Bank Aktiengesellschaft,  the agent which owns 1,600,000 shares
     of the Company's  Series A Preferred Stock.  During April 1998,  additional
     options  for 150,000  shares were  assigned.  RBB Bank  purchased  the Call
     Options in four increments of 50,000 share options each, and has

                                       7
<PAGE>
     paid the  Company  85% of the  average  last sale  price of the  underlying
     shares over the five days prior to the date of acquiring  each Call Option,
     less the Call Option exercise price of $.25 per share. In each transaction,
     RBB Bank must pay the acquisition price for the Call Option to the Company,
     as well as the exercise price to Tillicombe prior to taking delivery of the
     shares.

   
     Note 6 -- -RELATED PARTIES (Restated)

     Transactions  with  Liviakis  Financial  Communications,  Inc.  ("LFC") and
     Affiliates of LFC

     In July of 1997,  the Company  entered  into a  Consulting  Agreement  with
     Liviakis  Financial  Communications,  Inc.  ("LFC")  pursuant  to which LFC
     provides the Company with financial and business  consulting and public and
     investor  relations  services.   The  Company  was  obligated  to  pay  LFC
     consulting  fees of $10,000 in cash and 300,000  shares of its Common Stock
     over  the  one-year  term  of the  Consulting  Agreement.  Pursuant  to the
     Consulting  Agreement,  the Company must also pay LFC cash equal to 2.5% of
     the gross proceeds received in any direct financing located for the Company
     by LFC.  In  connection  with the closing of the sale of  $3,060,000  of 8%
     Convertible Debentures, the Company paid LFC $76,500 in December 1997.

     The  Company  also sold a total of  3,500,000  shares  of Common  Stock and
     warrants to purchase up to an additional  1,600,000  shares of Common Stock
     exercisable  at $.01 per share to two LFC  affiliates  in  August  1997 for
     $500,000 in cash.  Pursuant  to this  transaction,  LFC and its  affiliates
     became  significant  shareholders  of the Company.  The Common Stock issued
     (and issuable pursuant to the Consulting Agreement and upon exercise of the
     warrants) to LFC and its affiliates  carries certain  registration  rights.
     The  warrants  provide  that if for any reason the  Company  does not issue
     shares upon  exercise,  the Company is required to repurchase  the warrants
     for the  difference  between the $.01 exercise  price and the  then-current
     market  price of the Common  Stock.  Pursuant  to the  agreements,  the LFC
     affiliates were granted the right to appoint certain officers and directors
     of the Company.

     Since  the  LFC  related  financing  transaction  and  the  LFC  Consulting
     Agreement were entered into by the Company at approximately  the same time,
     the  Company  has  treated  these   transactions  as  one  transaction  for
     accounting purposes.  Based on the fair market value of the Common Stock as
     determined by an independent  valuation,  the initial  3,500,000  shares of
     Common Stock and warrants  for  1,600,000  shares of Common Stock issued in
     the  transactions,   net  of  cash  proceeds   received,   were  valued  at
     approximately  $1,285,000 and recorded as prepaid consulting services.  The
     consulting services are amortized on a straight-line basis over the term of
     the Consulting  Agreement  commencing with the July 25, 1997 effective date
     of the agreement. The warrants are classified as redeemable securities as a
     result of the repurchase  provisions  described  above.  The 300,000 shares
     which are  issuable  over the term of the contract are being valued as such
     shares  vest,  and  resulted  in an  additional  $164,000  and  $847,000 in
     consulting expenses during the three-months and nine-months ended March 31,
     1998, respectively.


     Between  October 14 and  November 30, 1997,  the Company  received  several
     bridge  loans from LFC in the total  amount of  $475,000.  The  Company was
     obligated to pay LFC interest on the amount  borrowed at the rate of 9% per
     annum. The Company paid LFC the amount due on these loans, with interest at
     the  stated  rate,  from the  proceeds  of the  sale of the 8%  Convertible
     Debentures sold on December 10, 1997.

     Transactions with entrenet Group, LLC

     In June 1997, the Company entered into a consulting agreement with entrenet
     Group, LLC ("entrenet"), for purposes of assisting the Company in strategic
     planning,  the creation of a detailed  business and  marketing  plan and in
     locating financing sources. For its services, the Company issued a $150,000
     convertible  promissory note to entrenet,  with interest payable at 10% per
     annum, due in full on or before June 2, 1998. In addition,  the Company was
     obligated to pay entrenet a finder's fee of 8% for any direct  financing it
     located for the Company,  payable in Company securities  identical to those
     issued in the subject  financing.  .  entrenet  located  the  $500,000  LFC
     financing.   The  Company  and  entrenet  were  in  discussions   over  the
     interpretation of the provisions  specifying the  consideration  payable to
     entrenet as its finder's  fee for locating  LFC. The matter was resolved in
     November  1997,  whereby  the Company  agreed to issue  entrenet a total of
     300,000  shares of its Common  Stock for the  promissory  note and  280,000
     shares of Common  Stock as payment of 

                                       8
<PAGE>
     the  finder's  fee.  Those shares were issued in April 1998 and included in
     the Registration Statement, which became effective August 7, 1998.

     As of March 12, 1998,  the Company  entered into an agreement with entrenet
     to provide business and financial consulting services to the Company and to
     assist  the  Company  in  locating  additional  financing.  The term of the
     agreement  is for six months from March 12, 1998 and renews for  additional
     six-month  terms unless at least 60 days notice is given to  terminate  the
     agreement  prior to the end of a term. For its advisory  services under the
     agreement, entrenet earned a fee of $60,000. In addition, entrenet received
     a Common  Stock  Purchase  Warrant to purchase  10,435  shares at $5.75 per
     share,  exercisable  until March 11, 2003. The shares issuable  pursuant to
     the  warrant  carry  certain  piggyback   registration   rights.  Upon  the
     consummation  of any  financing  transaction  entered  into by the  Company
     during the term of the agreement  (with the  exception of  financings  from
     certain  identified,  excluded  sources) or for two years after termination
     with respect to any  financing  obtained  from a source  introduced  to the
     Company by entrenet,  entrenet is entitled to receive cash  compensation as
     follows:  for debt  financings,  2% of the total  amount of the  financing,
     payable  in cash or in the form of a 10% note due in one year;  for  equity
     financings,  7% of the total gross  financing  proceeds  (payable in cash),
     unless  there  is  a  licensed   investment   banker  entitled  to  receive
     compensation  as a result  of the  transaction,  in which  case the  amount
     payable to entrenet is reduced to 2 1/2% of the gross proceeds  (payable in
     cash),  plus a five year  Common  Stock  purchase  warrant  which  entitles
     entrenet to purchase  that number of shares of Common  Stock equal in value
     (as  determined  by a defined  fair  market  price)  to the full  amount of
     compensation  payable to entrenet in cash,  at a per share  exercise  price
     equal to the then current  market  value of the Common Stock (as  defined);
     for  mergers  and  acquisitions,  5% of the  total  consideration  paid  or
     received in the transaction  (payable in cash),  unless there is a licensed
     investment  banker  entitled  to  receive  compensation  as a result of the
     transaction,  in which case the amount payable to entrenet is reduced to 3%
     (payable  in cash) of such  consideration,  plus a five year  Common  Stock
     purchase warrant which entitles  entrenet to purchase that number of shares
     of Common  Stock  equal in value (as  determined  by a defined  fair market
     price) to the full amount of compensation payable to entrenet in cash, at a
     per share  exercise  price equal to the then  current  market  value of the
     Common Stock (as defined).  If entrenet  assists the Company in locating an
     executive-level candidate who is hired by the Company, entrenet is entitled
     to receive a fee equal to 30%  (payable in cash) of the  candidate's  total
     first year compensation.


Note 7 - VARIABLE OPTION

     In August 1997, the Company granted an option to purchase 600,000 shares of
     common stock to its Chief Executive  Officer , and in November 1997, agreed
     to pay the officer any additional  income taxes which the officer may incur
     as a result of the option being a non-qualified stock option as compared to
     an incentive stock option. Due to this agreement,  the stock options, which
     the Company had previously  accounted for based on the fair value as of the
     grant date,  are being  accounted for as variable  options  resulting in an
     additional $519,000 and $1,707,000 of non-cash  compensation expense in the
     three-months  and  nine-months  ended  March 31,  1998,  respectively.  The
     Company's previously reported balance sheet and statement of operations are
     being restated to reflect this additional expense.


Note 8 - ACCOUNTING FOR PROCESSING UNITS DEPLOYED
    
     Merchants that subscribe to the Company's  credit card  processing  service
     usually   receive  a  TRANZ   Enabler  unit  that   provides  the  wireless
     communications and processing functionality. As these units are deployed at
     a customer  location,  the asset value is  transferred  from  inventory  to
     "Processing units - deployed" and depreciated via a charge to Cost of Sales
     over a 48 month life. The Company  retains title to the TRANZ Enabler units
     and earns usage income on the units while they are deployed at the customer
     location.

                                       9
<PAGE>
   
Note 9 -- LITIGATION

     Securities Class Actions Settlements

     In September  1996, the Company agreed to terms in settlement of securities
     fraud litigation,  pending since 1994, which was brought in connection with
     the  Company's  initial  public  offering in December  1993.  The  parties'
     agreement  (the  "Settlement  Agreement")  was filed in the  United  States
     District  Court for the  District of Colorado on January 15,  1997.  By its
     order  approving  the   settlement,   the  court  certified  a  plaintiffs'
     settlement  class and provided  the  mechanism  for payment of claims.  The
     Company contributed $10,000 to the total settlement fund of $2,150,000. The
     remaining portion of the settlement was contributed by certain underwriters
     of the Company's initial public offering and its former securities counsel.
     No objections to the  Settlement  Agreement  were made. No potential  class
     member opted-out of the settlement and all are bound by the release granted
     the Company.  All claims  against the Company in those  consolidated  cases
     were dismissed by final federal court order on September 4, 1997. No appeal
     was filed.  Similar state court claims were dismissed by Colorado  district
     court order dated  October 9, 1997,  and no appeals have been filed in that
     case.

     To resolve cross-claims asserted by the underwriters in the litigation, the
     Company agreed to issue a total of 600,000 shares of Common Stock valued at
     approximately  $94,000 upon the effective date of the Settlement Agreement,
     which was April 26, 1997.  The shares issued under this  settlement  become
     saleable  under SEC Rule 144  commencing on April 26, 1998. The Company has
     agreed to register  such shares upon demand of holders of not less than 25%
     of the shares.  Further, on September 17, 1997, the Company agreed to entry
     of a consent  judgment  against it and in favor the sole  shareholder of an
     underwriter, in the amount of $60,000 payable over a three year period.

     Settlement with Consultant

     In July 1997,  the Company  executed a two-year  agreement  effective as of
     April 1,  1997  for  consulting  services.  In  addition  to  monthly  cash
     compensation,  the consultant received a $50,000 two-year  convertible note
     with 10% interest per annum.  The note was convertible into Common Stock at
     $.40 per share,  for a total of 125,000 shares  issuable upon conversion of
     the principal  amount of the note. A dispute  arose between the  consultant
     and the Company and the consulting  agreement was terminated by the Company
     as of the end of August  1997.  The Company  settled the dispute in January
     1998,  which resulted in a $60,000 payment  (including  amounts  previously
     paid to the consultant prior to termination) for all services rendered.  As
     part of the  settlement,  an  adjustment  to the  conversion  terms  of the
     promissory note was made reflecting that all principal and accrued interest
     on the note could be converted to 75,000 shares of the Company's  Common on
     or before April 1, 1998.  The note was converted and the shares were issued
     as  "restricted  securities" as defined under Rule 144 under the Securities
     Act of 1933, as of January 26, 1998. The shares became  saleable under Rule
     144 commencing on April 1, 1998.

     Settlement of Claims of Certain Noteholders

     From April  through  June 1997,  the Company  issued a total of $185,000 of
     Demand  Notes  payable  in full on or before  April 11,  1998 (the  "Demand
     Notes").  The  principal  and accrued  interest on the Demand  Notes became
     convertible  into shares of the  Company's  Common  Stock as of November 1,
     1997 at prices of $.35 per share (as to $75,000  of the  Demand  Notes) and
     $.50 per share (as to $110,000 of the Demand Notes). Commencing on November
     3,  1997,  the  Company  began  receiving   conversion   demands  from  the
     Noteholders and as of November 14, 1997,  holders of $135,000 of the Demand
     Notes had demanded  conversion  of their  Demand Notes into "free  trading"
     Common  Stock.  The  Noteholders  claimed that their right to  free-trading
     stock  arose  out of  certain  oral  representations  made  at the  time of
     issuance  of the Demand  Notes,  the fact that no  "restricted  securities"
     legends were imprinted on the documents  evidencing the Demand Notes and no
     other written advice as to the "restricted" nature of the shares underlying
     the Demand Notes was given to them at the time. The complaining Noteholders
     were  asserting  damages based on a market price for the  Company's  Common
     Stock in the $8.00 per share range as of the  November 1, 1997 time period.
     The holder of the remaining  $50,000 Demand Note (which was  convertible at
     $.50 per share) did not assert any claims against the Company in connection
     with his purchase of the Demand Note.

     Rather than incur the expense and risks of litigation,  the Company settled
     the  complaining  Noteholders'  claims by  issuing  1.4 times the number of
     shares  originally  issuable as principal  and interest on the Demand Notes
     purchased by the complaining  Noteholders (plus an additional 11,000 shares
     to one Noteholder who

                                       11
<PAGE>
     purchased $50,000 of the Demand Notes),  and providing the Noteholders with
     certain  guarantees as to the amount for which the shares can be resold and
     a "put" which allows the  Noteholders  to require the Company to repurchase
     any restricted  shares  remaining  unsold at the end of the one year period
     after the shares become saleable under SEC Rule 144, as described in detail
     below.   The  shares  issued  upon  conversion  of  the  Demand  Notes  are
     "restricted  securities"  as defined  under SEC Rule 144,  but will  become
     saleable  pursuant to Rule 144 one year from the date the converted  Demand
     Note was purchased by the  Noteholder.  A total of 525,800 shares have been
     issued to the complaining Noteholders upon conversion of their Demand Notes
     which will be subject to the  guarantee and put  agreements.  The holder of
     the other $50,000 Demand Note has been given the enhanced  conversion  rate
     (of 1.4  times  the  number of shares  originally  issuable)  and  received
     154,000  shares  upon  conversion  of his Demand  Note;  the shares are not
     entitled to the guarantee or put.

     The  guarantee  provision  of the  settlement  agreement  allows the former
     Noteholders to recover the difference between the guarantee price (which is
     $3.00 per share as to  360,800  of the shares and $4.29 per share as to the
     remaining  165,000 shares issuable upon conversion of the Demand Notes) and
     the gross amount the  Noteholder  receives  upon a sale of the shares.  The
     guarantee is operative at any time during the one year period commencing on
     the date the shares  become  saleable  under SEC Rule 144.  The  Company is
     obligated  to pay the amount due within  thirty days of receiving a demand,
     accompanied by documentation confirming the sale. Under the "put" provision
     of the settlement  agreement,  the former  Noteholders will have a five day
     period  commencing  on the date one year  from the date the  shares  become
     saleable  under SEC Rule 144 (or the first  business day thereafter if such
     day is a day on which the stock markets are closed) during which the former
     Noteholders may "put" any restricted shares remaining unsold by them at the
     time back to the Company. Upon exercise of the put, the Company must either
     (1)  purchase  the shares  for the put price  (which is $3.00 per share for
     360,800 of the shares and $4.29 per share for 165,000 of the shares) or (2)
     require  the  shareholder  to sell the  shares  into the  market,  with the
     Company making up the difference between the put price and the gross amount
     received by the shareholder upon such sale, within 15 days after receipt of
     written notice and documentation confirming the sale.

     As a result of the above  settlement,  the Company  recorded  approximately
     $1,353,000 as litigation  settlement expense in the third quarter of fiscal
     1998. The shares  originally  issuable upon conversion of the notes and the
     additional  shares  resulting  from  the  settlement  are  subject  to  the
     guarantee  and "put"  provisions  and are  reflected as  Redeemable  Common
     Stock.  The originally  issuable  shares are reflected at their  conversion
     value  adjusted  for the  value  attributable  to the  guarantee  and "put"
     provisions. In the event redemption of such shares becomes probable and the
     actual redemption  amount is in excess of the carrying amount,  such excess
     amount will be recorded as litigation  settlement  expense.  The additional
     shares are reflected at their redemption value.

     On July 2, 1997, the Company also issued a promissory note in the amount of
     $17,000 to one of the investors  who purchased the Demand Notes.  This note
     was due and  payable  in full as of July 30,  1997 and bore  interest  at a
     default  rate of 18% per  annum if not paid when  due.  In  return  for the
     investor's  agreement  not to require  the  Company to pay the note when it
     came due, the investor claims that a representative of the Company promised
     that the Company  would treat the note the same as the other  Demand  Notes
     and convert it to Common Stock on the same terms.  In conjunction  with the
     Demand Note  settlement  with this investor,  the Company agreed to convert
     all  amounts  owing as  principal  and  interest by it under this note to a
     total of 18,507 shares of Common Stock.  The shares issued upon  conversion
     of this note are not entitled to the guarantee or put described above.

     Dispute with Supplier

     In April of 1995, the Company  entered into an agreement with a supplier to
     supply modems for CDPD products.  In October 1996, the supplier  asserted a
     claim for  payment of product  sold under that  agreement  in the amount of
     approximately   $60,000.   The  Company  asserted  the  supplier  delivered
     defective  product,  which  caused  damages to the Company in excess of the
     amount being  claimed.  The Company  agreed to settle the dispute by paying
     $50,000 over the sixty-day period commencing June 30, 1998. 

                                       11
<PAGE>
Note 10 -- RECENT ACCOUNTING PRONOUNCEMENTS
    
     In June  1997,  the FASB  issued  SFAS No.  130,  "Reporting  Comprehensive
     Income".  SFAS No. 130, which is effective for fiscal years beginning after
     December 15, 1997,  establishes  standards  for  reporting  and  displaying
     comprehensive  income and its components  with the same prominence as other
     financial statements.  All prior periods must be restated to conform to the
     provisions  of SFAS No. 130. The Company will adopt SFAS No. 130 during the
     first  quarter  of fiscal  1999,  but does not  expect  the new  accounting
     standard  to have a material  impact on the  Company's  reported  financial
     results.

     In June 1997, the FASB issued SFAS No. 131,  "Disclosures about Segments of
     an Enterprise  and Related  Information."  SFAS No. 131, which is effective
     for fiscal  years  beginning  after  December  15,  1997,  establishes  new
     disclosure   requirements  for  operating  segments,   including  products,
     services,  geographic  areas, and major  customers.  The Company will adopt
     SFAS No. 131 for the 1999 fiscal year.  The Company does not expect the new
     accounting  standard to have a material  impact on the  Company's  reported
     financial results.

                                       12
<PAGE>
   
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Restated)


FORWARD-LOOKING STATEMENTS
--------------------------

     The  Company  may,  in  discussions  of its future  plans,  objectives  and
     expected  performance  in periodic  reports  filed by the Company  with the
     Securities and Exchange Commission (or documents  incorporated by reference
     therein) and in written and oral presentations made by the Company, include
     projections  or other  forward-looking  statements  within  the  meaning of
     Section 27A of the  Securities Act of 1933 or Section 21E of the Securities
     Exchange Act of 1934,  as amended.  Such  projections  and  forward-looking
     statements  are  based  on  assumptions  which  the  Company  believes  are
     reasonable,  but are by their nature  inherently  uncertain.  In all cases,
     results could differ materially from those projected. Some of the important
     factors that could cause actual results to differ from any such projections
     or  other  forward-looking  statements  are  detailed  below,  and in other
     reports  filed by the Company  under the  Securities  Exchange Act of 1934,
     including  the  Company's  Annual Report on Form 10-KSB for the fiscal year
     ended  June 30,  1997 and the  current  Report on Form 8-K filed on May 20,
     1998,  Reporting an Event of May 14, 1998.  The Form 8-K  incorporates  the
     Company's Registration Statement on Form SB-2 (SEC File No. 333-52625).

     Amounts in this  discussion and analysis have been restated as disclosed in
     Notes 1, 3, 6, 7 and 9 of the Notes to the Financial Statements.
    
     History of Losses and Potential Fluctuations in Operating Results:  Through
     the end of the third  quarter of fiscal  year  ending  June 30,  1998,  the
     Company had experienced significant operating losses. In addition,  because
     the  Company  generally  ships its  products  on the  basis of credit  card
     processing applications or purchase orders, increments to recurring revenue
     and other  component  sales in any quarter are highly  dependent  on orders
     shipped in that quarter and,  accordingly,  may fluctuate  materially  from
     quarter to quarter. The Company's operating expense levels are based on the
     Company's  internal  forecasts  for future  demand and not on firm customer
     orders.  Failure by the Company to achieve these internal  forecasts  could
     result in expense levels that are inconsistent  with actual  revenues.  The
     Company's  results  may also be  affected  by  fluctuating  demand  for the
     Company's  products and by increases  in the costs of  components  acquired
     from the Company's vendors.

     Requirement  for Additional  Capital:  At present,  the  development of the
     Company's   infrastructure   and  expansion  of  the  sales  and  marketing
     organization  requires  additional  financing.  Proceeds  from the recently
     completed  private  placement  offering  have provided the Company with the
     ability  to  launch  the GTE  joint  marketing  and  distribution  program,
     however,  execution of the  Company's  business plan is dependent on a more
     significant debt or equity  financing event. The Company  continues to work
     both  directly and through its  consultants  to secure  additional  debt or
     equity  financing which is required to fund operations  while a significant
     recurring  revenue  stream is built.  While  management is confident it can
     accomplish  this  objective,  there is no  guarantee  that this  additional
     funding will occur in the required  time frame.  The failure of the Company
     to obtain additional  financing could have a material adverse impact on the
     Company, including its ability to continue as a going concern.

     Distribution Program: The rollout of the GTE and Bell Atlantic distribution
     programs  is  expected to have a material  impact on the  Company's  future
     revenue stream.  While the Company anticipates it will execute distribution
     agreements  with other  significant  partners,  the loss of,  diminution of
     purchases from the Company through,  or failure to place sufficient numbers
     of  merchant  accounts  through,  any of these  distributors  could  have a
     material adverse effect on the Company.

     Need for Third-Party Inventory Financing:  The Company has recently entered
     into an agreement with GTE Leasing  Corporation to pay for the  manufacture
     of TRANZ  Enabler  units to be deployed  under the GTE  Wireless  marketing
     agreement.  The  agreement  grants GTE  Leasing a security  interest in the
     units as well as certain  rights to cash flow from the  processing  revenue
     payable to the Company under its  agreement  with NOVA. It is expected that
     repayment  of the  financing  will  be  made  from  the  recurring  revenue
     generated  by units  placed  under the GTE  Wireless  marketing  agreement.
     Several technical and legal requirements  remain to be finalized before the
     Company  will be able to draw upon this  financing  source.  Although  this
     financing provides the Company with needed support for units placed through
     the GTE Wireless marketing agreement,

                                       13
<PAGE>
     third party  financing  of all TRANZ  Enabler  units  placed by the Company
     through any source is a required  element of the Company's  business model.
     The Company must therefore seek similar  financing  arrangements  for units
     distributed through other marketing  channels,  including the Bell Atlantic
     Mobile  marketing  agreement.  The inability to fund  inventory  needs from
     outside  sources could have a material  adverse impact on the Company,  its
     liquidity and results of operations.

     The  Company's  Dependence  on a Single Type of Product  and  Technological
     Change:  All of the  Company's  revenue is derived from sales of its credit
     card  transaction  services and CDPD  enabling  products.  Demand for these
     products  could be  affected  by numerous  factors  outside  the  Company's
     control,   including,   among  others,  market  acceptance  by  prospective
     customers,  or the introduction of new or superior competing  technologies.
     The Company's success will depend in part on its ability to respond quickly
     to  technological  changes  through the  development and improvement of its
     products.

     Competition  by Existing  Competitors  and  Potential New Entrants Into the
     Market: The Company has identified several potential competitors attempting
     to develop CDPD based terminals and solutions. In addition,  companies with
     substantially greater financial,  technical,  marketing,  manufacturing and
     human  resources,  as well as name  recognition,  than the Company may also
     enter the market.

     CDPD Resale Agreements Containing Minimum Purchase Obligations: The Company
     has to date entered into three CDPD service resale agreements, two of which
     contain minimum  obligations  which can be  characterized  as "take or pay"
     provisions.  The agreements  with GTE Wireless and AT&T Wireless Data, Inc.
     contain  such  provisions.  The Company is obligated to pay for the minimum
     amount of service stated in the agreements even if it fails to place enough
     service with merchants to meet the minimums.  The failure of the Company to
     meet these service minimums could have an adverse financial impact upon the
     Company.

     Status of Federal  Corporate  Tax  Filings:  The Company has not  completed
     federal  income tax  filings  for fiscal  years 1996 and 1997.  While it is
     unlikely  that the Company will owe any taxes due to the  sustained  losses
     during  the  periods,  the  Company  may be subject  to  penalties  for the
     delinquency. The Company intends to take the steps required to complete the
     tax filings as soon as practicable.


     RESULTS OF OPERATIONS
     ---------------------

     U.S.  Wireless  Data,  Inc.,  a Colorado  corporation,  (the  "Company"  or
     "USWD"),  was  organized  on July 30,  1991 for the  purpose of  designing,
     manufacturing and marketing a line of wireless and portable credit card and
     check authorization terminals. Over the past two and a half years, USWD has
     focused its product  development  effort on incorporating  Cellular Digital
     Packet Data (CDPD)  technology  into its product line.  Because of the high
     speed  nature of CDPD  technology,  and the  ability  to bypass  the public
     switched telephone network,  the Company's new line of CDPD-based terminals
     have  significant   performance  and  communication  cost  advantages  when
     compared with the traditional dial-up terminals currently being sold in the
     U.S.  market today. In mid fiscal year 1997, the Company made a fundamental
     decision  to  change  the  manner  in  which  it  generates   revenue.   If
     successfully implemented, this will transform the Company from being a "box
     maker" in which it earned one time  wholesale  margins from the sale of its
     products to earning recurring revenue by providing wireless credit card and
     debit card processing services to retail merchants.

     A key element of USWD's strategic direction is to establish close alliances
     with large communications  carriers through joint distribution programs. In
     August  1997,  USWD  and  GTE  Wireless  announced  a joint  marketing  and
     operating  agreement to distribute USWD's  proprietary TRANZ Enabler credit
     card  processing  system using GTE's CDPD network.  The agreement  contains
     certain operational and financial performance criteria which must be met by
     the  Company.  During  the second  fiscal  quarter,  USWD made  significant
     investments  to execute a  nationwide  deployment,  which will extend TRANZ
     Enabler sales to merchants  through GTE's national sales force. The Company
     added significant sales and support personnel and infrastructure to provide
     local support for the GTE sales representatives.  The initial placements of
     the TRANZ Enabler units did not develop as rapidly as anticipated; however,
     recent  actions by GTE are  expected to favorably  impact the program.  The
     Company  expects  that  the  transition  from a  "voice"  to  "data"  sales
     orientation  for the GTE  sales  personnel  will be  aided by  several  new
     operational  initiatives  implemented in February 1998 by GTE Wireless, and
     that this will have a positive  impact on product  placement and revenue to
     the  Company.  By  leveraging  the sales  organizations  of the major  CDPD
     providers, the Company has the potential to quickly reach a large number of
     merchants.  The Company has CDPD air time agreements 

                                       14
<PAGE>
     in place  with  AT&T and Bell  Atlantic  and has  selectively  added  sales
     personnel in these markets to begin  deployment of TRANZ Enabler units. See
     discussion of agreement with Bell Atlantic Mobile, below.
   
     In July 1997, the Company retained Liviakis Financial Communications,  Inc.
     (LFC) to advise  and assist the  Company  in  matters  concerning  investor
     relations,   corporate   finance   and   strategic   management   planning.
     Remuneration to LFC under the Consulting Agreement, which has a term of one
     year, includes $10,000 in cash over a one year period and 300,000 shares of
     unregistered  stock with 150,000  shares of the stock  issuable at November
     15, 1997 and 150,000  additional  shares  issuable  over a 10-month  period
     thereafter.  The  Company  completed  a  private  placement  of  restricted
     securities  pursuant to Regulation D of the Securities Act of 1933 with two
     officers of Liviakis.  The Company raised  $500,000 in cash for 3.5 million
     shares of common  stock and 1.6 million  warrants to purchase  common stock
     for $.01 per share,  exercisable  from January 15, 1998  through  August 4,
     2002.  In May 1998,  1.2  million of the  warrants  were  exercised  by one
     warrant holder. The securities carry future registration rights,  including
     a one-time demand  registration,  with fees to be paid by the Company.  See
     "Note  6 -  Related  Parties"  in  Notes  to  Financial  Statements  for  a
     description of the accounting treatment for these transactions.
    

     Between  October and December 1997, the Company  received bridge loans from
     Liviakis Financial Communications,  Inc. for $475,000 pending completion of
     the private placement offering. Following the funding in mid-December,  the
     notes were  immediately  repaid by the Company  along with interest of nine
     percent per annum.
   
     On December  10, 1997 the Company  closed a private  placement  offering of
     $3,060,000 principal amount of 8% Adjustable Rate Convertible  Subordinated
     Debentures.  After  associated  fees and repayment of bridge loans incurred
     during the quarter, the Company retained approximately  $2,200,000 to apply
     to  immediate  working  capital  needs  and  the  national  launch  of  its
     proprietary  wireless  transaction   processing  solution.  See  Note  5  -
     Financing in Notes to Financial Statements.
    
     During the second  quarter,  the Company  completed  the  relocation of its
     customer   support,   administrative   and  accounting   functions  to  the
     Emeryville,  California headquarters. The lease on the Wheatridge, Colorado
     office has terminated.  Engineering  functions will remain at the Company's
     Palmer Lake, Colorado facility.

     Through the second  quarter of fiscal 1998,  the Company  conducted its own
     equipment  deployment and servicing  functions.  In late January 1998, USWD
     entered into an agreement  with TASQ  Technology,  Inc. of Rocklin,  CA, to
     provide  these  services.  TASQ will  deploy,  track and maintain all TRANZ
     Enablers placed with merchants acquired by the Company.  In addition,  TASQ
     will provide these same  functions  for  peripheral  equipment  sold by the
     Company. The Company believes that this relationship will ultimately result
     in savings to the Company over what it would cost to provide these services
     internally.

     In March 1998 the Company signed a joint sales and marketing agreement with
     Bell Atlantic Mobile.  Bell Atlantic Mobile is the largest wireless service
     provider on the East Coast and the second largest in the United States. The
     agreement is similar in structure to the GTE Wireless  agreement  described
     above, and the Company  anticipates adding additional  personnel to support
     that  agreement.  By leveraging the sales  organizations  of the major CDPD
     providers, the Company has the potential to quickly reach a large number of
     merchants.  It is expected  that the costs to the  Company of  implementing
     both this and the GTE  joint  marketing  and  distribution  agreement  will
     exceed short-term revenue generated by the programs.

     The Company also signed a merchant  acquiring  agreement with National Bank
     of Commerce  "NBC",  in March 1998.  NBC is the lead  banking  affiliate of
     National Commerce Bancorporation. USWD expects the agreement to broaden its
     ability to provide  credit card  processing  services for  merchants in the
     retail, restaurant, and hotel/lodging industries.
   
     During the  second  quarter,  the  Company  granted  an option to  purchase
     600,000  shares  of  common  stock  and  subsequently  agreed to pay to the
     employee  any  additional  income  taxes which the  employee may incur as a
     result of the option being a  non-qualified  stock option as compared to an
     incentive  stock option.  Due to this  agreement,  the company  incurred an
     additional $519,000 and $1,706,000 of non-cash  compensation expense in the
     three-months and nine-months ended March 31, 1998, respectively.  See "Note
     7 - Variable Option" in Notes to Financial  Statements for a description of
     the accounting treatment for these transactions.
    
                                       15
<PAGE>
     As of March 12, 1998,  the Company  entered into an agreement with entrenet
     Group,  LLC  ("entrenet")  to provide  business  and  financial  consulting
     services to the  Company  and to assist the Company in locating  additional
     financing.  The term of the agreement is for six months from March 12, 1998
     and renews for additional six month terms unless at least 60 days notice is
     given  to  terminate  the  agreement  prior  to the end of a term.  For its
     advisory  services  under the  agreement,  entrenet  will  receive a fee of
     $60,000, payable in the form of a promissory note bearing 10% interest, due
     on or before the earlier of March 11,  1999,  or the receipt by the Company
     of aggregate  gross proceeds from  financings of  $2,000,000.  In addition,
     entrenet received a Common Stock Purchase Warrant to purchase 10,435 shares
     at $5.75 per share, exercisable until March 11, 2003. Upon the consummation
     of any financing transaction entered into by the Company during the term of
     the agreement  (with the exception of financings  from certain  identified,
     excluded  sources) or for two years after  termination  with respect to any
     financing obtained from a source introduced to the Company by entrenet,  or
     if entrenet  assists the Company in locating an  executive-level  candidate
     who is hired by the Company, entrenet is entitled to compensation under the
     agreement.

     The Company has not completed a  comprehensive  review of the impact of the
     Year  2000  issue  on the  Company's  business.  This  issue  concerns  the
     potential problems and liabilities faced by all users and persons dependent
     on  computers  that  might  result  from  software  or  system  failure  or
     malfunctions  if the  systems  fail to properly  recognize  the date change
     between  1999 and  2000.  The  engineering  staff  has  made a  preliminary
     assessment of USWD products and is not aware of any material complications.
     In the first  quarter of fiscal  1999,  the Company  expects to confirm the
     impact,  if any, on products it distributes,  and complete an assessment of
     external factors  including key vendors and licensed  software for internal
     business applications.

     Net Sales

   
     Revenue of  $252,000  for the third  quarter of fiscal 1998 was up slightly
     from  revenue of  $244,000  generated  during the third  fiscal  quarter of
     fiscal  1997 as the  Company  continued  the shift  from a  per-unit  sales
     approach to a recurring  revenue model. The Company was also able to resume
     shipment  of POS-50  units  following  a  product  shortage  in the  second
     quarter. For the nine-month period,  revenue of $638,000 decreased 39% from
     the prior period amount of $1,046,000 due to the strategy  shift  described
     above. Product placements of the TRANZ Enabler to merchants through the new
     distribution   program  have  not  developed  as  rapidly  as  anticipated,
     consequently revenue has been minimal,  while at the same time; significant
     expenses have been incurred.  The Company hopes that the transition  from a
     "voice" to "data" sales  orientation  for the GTE sales  personnel  will be
     aided by several new operational  initiatives  implemented in February 1998
     by GTE  Wireless.  The Company  also  expects a positive  impact on product
     placement and revenue from the recently  signed Bell  Atlantic  joint sales
     and marketing agreement. However, for both programs, expenses are likely to
     exceed revenues, at least over the near term.


     Gross Margin

     Gross margins in the third fiscal quarter of 1998 were $137,000 compared to
     $129,000 for the same period in fiscal 1997. As a percent of revenue, gross
     margins increased to 54% for the three-months ended March 31, 1998 over 53%
     for the same period in 1997.  For the  nine-month  periods,  gross  margins
     decreased from $444,000 in fiscal 1997 to $286,000 in the current period on
     the corresponding revenue decline. For the current nine-month period, gross
     margin as a percent of revenue was up 2.3% from the prior period due to the
     mix of product sales in the first half of the current year.



     Operating Expenses

     Selling,  general and administrative expense increased from $123,000 in the
     third fiscal  quarter of 1997 to $2,518,000 in the third fiscal  quarter of
     1998.  For the  nine-month  periods,  selling,  general and  administrative
     expense  increased  from  $463,000 in the prior year to  $6,659,000  in the
     current year. The current quarter  contains  several  significant  non-cash
     charges.  These  include a  $514,000  charge  related to the  revalued  LFC
     consulting agreement, and compensation expense related to the granting of a
     variable  option  of  $519,000  (see Note 7 to the  financial  statements).
     Non-cash  consulting fees related to business  development of approximately
     $1,968,000 are reflected in the fiscal 1998 nine month results, and include
     the termination of the original entrenet and Woolley consulting  agreements
     entered into during fiscal year 1997, and

                                       16
<PAGE>
     amortization of the Liviakis Financial  Communications  consulting services
     (see Note 6 to the financial  statements).  Non-cash  compensation  expense
     related to the  granting  of a variable  option in the second  quarter  was
     approximately  $1,707,000  for the  nine-month  period  (see  Note 7 to the
     financial  statements).  The  nine-month  period was also  impacted  by the
     $156,000 charge related to the warrant extension.

     The balance of the selling, general and administrative expense increased by
     approximately  $1,362,000 and $2,522,000 for the three month and nine month
     periods,  respectively.  A significant  portion of the increase in both the
     three and nine month periods resulted from the aggressive addition of sales
     and support  personnel and  infrastructure to provide local support for the
     GTE nationwide deployment. Headcount increased from approximately 18 at the
     end of September  1997,  to  approximately  50 employees as of December 31,
     1997 and  approximately 60 at the end of March 1998.  Expenditures  include
     increased   compensation   expense  for  new  sales  and  sales  management
     personnel, selective additions to the management team, increased travel and
     communication  expense  related to the new marketing  program,  and expense
     related to the resolution of several  outstanding legal issues. The Company
     continues to hire sales and support  personnel to support the new marketing
     programs.  At least in the near term,  operating  expense will  continue to
     increase ahead of revenue.

     Research  and  development  expenses  decreased  from  $88,000 in the third
     fiscal quarter of 1997 to $78,000 in the first third quarter of 1998.  This
     decrease was due to lower engineering  material  purchases.  The nine-month
     period expense decreased from $301,000 in fiscal 1997 to $251,000 in fiscal
     1998 due to one  vacancy  in the  department  during a portion of the first
     half of fiscal 1998 and due to lower occupancy costs.

     The third quarter results include a $1,353,000  charge for the valuation of
     common shares issued to a group of certain noteholders,  in settlement of a
     dispute regarding rights related to the conversion of the notes into shares
     of Common Stock.  Refer to Settlement of Claims of Certain  Noteholders  in
     Note  7 to the  financial  statements  for a  complete  description  of the
     settlement.

     Interest and Other Expense

     Interest  expense  includes  a $397,000  and  $622,000  non-cash  charge to
     interest  expense  in the  three and nine  month  periods  of fiscal  1998,
     respectively, related to the private placement. The convertible features of
     the debenture include an "in-the-money"  convertible option that allows the
     holder to obtain  shares of common  stock at a discount  off of fair market
     value.  The  value of the  in-the-money  provision  has been  allocated  to
     stockholder  equity.  The  difference  between the realized  value and face
     value of the debt was recognized as non-cash  interest  expense between the
     date of  issue  and date of  conversion  into  preferred  stock  which  was
     effected on February 9, 1998. Other expense of $165,000 includes a $156,000
     charge in the three and  nine-month  periods  related to the extension of a
     common stock warrant exercise period which was expiring.


FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY
----------------------------------------------------

     The Company  continues to have  significant  problems due to its  financial
     condition and lack of liquidity.  While  management is optimistic  with its
     medium  and long term  opportunities,  the  Company is  constrained  by its
     immediate financial condition and requirement for increased liquidity.  The
     Company has  accumulated  a deficit of  approximately  $25.8  million since
     inception to December 31, 1997. The Company's CDPD based products,  the GTE
     and Bell Atlantic  joint  marketing and  distribution  agreements,  pending
     distribution  agreements  (if realized)  and the  transition to a recurring
     revenue  focus  present an  opportunity  for  significant  revenue  growth,
     eventual  profitability,  and the  generation  of  positive  cash flow from
     operations.   At   present,   however,   development   of   the   Company's
     infrastructure  and  expansion  of the  sales  and  marketing  organization
     requires  immediate,   additional  financing.  Proceeds  from  the  private
     placement  offering  which was completed in December  1997,  have been used
     primarily  to complete the launch of the joint  marketing  program with GTE
     Wireless,  build the related  corporate  infrastructure  and make selective
     inventory purchases.
    
     Based on current staffing levels, the Company's expenditures are running at
     a monthly rate of approximately  $450,000. In order to meet its obligations
     under its  agreement  with Bell Atlantic  Mobile,  the Company will require
     additional sales personnel for significant  product to be placed under that
     agreement.  This will further  increase  the  Company's  expenditures  over
     present levels.  As a result,  execution of the Company's  business plan is
     dependent on a  significant  debt or equity  financing  event.  The Company
     continues  to work both  directly  and  through its  consultants  to secure
     additional  debt or equity  financing  which is required to fund 

                                       17
<PAGE>
     operations  while a significant  recurring  revenue stream is built.  While
     management  is  confident it can  accomplish  this  objective,  there is no
     guarantee that this additional funding will be accomplished or that it will
     occur in the required  time frame.  The  inability of the Company to secure
     additional  financing in the near term could adversely impact the Company's
     financial position, including its ability to continue as a going concern.

     In an  attempt  to finance a portion  of its  inventory  requirements,  the
     Company engaged in discussions  with GTE Leasing  Corporation for some time
     regarding a program to fund the  manufacture  of TRANZ  Enabler units which
     are  deployed  and to be deployed  through the joint USWD and GTE  Wireless
     marketing   agreement.   As  described  below  in  this  discussion   under
     "Subsequent  Events,"  the Company  entered into this  inventory  financing
     agreement with GTE Leasing Corporation as of April 2, 1998 and is presently
     completing  certain  technical  and  legal  requirements  to  finalize  the
     agreement and begin to draw funding  thereunder.  Third-party  financing of
     TRANZ Enabler units is a required  element of the Company's  business model
     and it is  likely  that the  Company  will have to seek  similar  financing
     arrangements for units distributed  through other marketing  channels.  The
     inability  to fund  inventory  needs  from  outside  sources  could  have a
     material adverse impact on the Company.

     In  order  to  satisfy  a  portion  of its  immediate  short  term  capital
     requirements  the Company has entered into an agreement  with a shareholder
     to allow the Company to assign to third parties,  options it has held since
     1995,  on  367,684  shares  of the  Company's  Common  Stock  owned by that
     shareholder, which the Company has the right to purchase at $.25 per share.
     The  Company  anticipates  that it will sell and  assign  these  options to
     accredited  investors in blocks of no less than 50,000  shares  between the
     present time and October 5, 1998, the date on which its option expires. The
     amount of cash that may be provided to the Company  through  this source is
     not readily determinable,  as it will vary depending on the market price of
     the Company's Common Stock at the time the Company sells each option.
   
     Inventory increased from $209,000 as June 30, 1997 to $880,000 at March 31,
     1998.  Approximately  $359,000  of  this  increase  was for  TRANZ  Enabler
     inventory,  with the  remaining  portion  being  for  components  needed to
     initiate new builds of POS-50(R)  and POS-500  units.  This  inventory  was
     purchased  directly by the Company.  The Company's  business plan calls for
     all TRANZ Enablers to be financed  through third party  financing  sources.
     While  the  Company  has  entered  into  the  agreement  with  GTE  Leasing
     (described   below)  to  fund  product  placed  through  the  GTE  Wireless
     agreement,  it must obtain  inventory  financing from external  sources for
     other  placements,  and at present the Company  has not yet  obtained  such
     financing.  As described in Note 6 to the financial  statements,  merchants
     that  subscribe to the Company's  credit card  processing  service  usually
     receive a TRANZ Enabler unit which provides the wireless communications and
     processing  functionality.  As  these  units  are  deployed  at a  customer
     location,  the asset value is  transferred  from  inventory to  "Processing
     units - deployed" and  depreciated  via a charge to Cost of Sales over a 48
     month life.  The net value of this  equipment  was $383,100 as of March 31,
     1998.
    
     As the result of the  approval by  shareholders  on  February 6, 1998,  the
     Company  authorized  4,000,000 shares of no par value Series "A" Cumulative
     Convertible  Redeemable  Preferred  Stock (the "Preferred  Stock"),  with a
     stated  value  of  $1.00  per  share.  On  that  date,  the  $3,060,000  of
     Convertible  Debentures  issued in December 1997,  automatically  converted
     into 3,060,000  shares of Preferred  Stock.  The Preferred  Stock gives the
     holder the right to convert  principal  into shares of Common  Stock in the
     future at 80% of  market  price,  but not  lower  than $4 per share for the
     first 270 days, and no higher than $6 per share. The security carries an 8%
     dividend rate, which drops to a 4% dividend rate once the underlying shares
     of Common Stock are registered with the Securities and Exchange Commission.
     The Company is required to register the shares of Common  Stock  underlying
     the  securities  sold in the  offering,  plus the  shares of  Common  Stock
     issuable as interest  on the  Debentures  and  dividends  on the  Preferred
     Stock.

     Subsequent Events

     Agreement with GTE Leasing Corporation

     On April 2, 1998 the Company  entered  into a Loan and  Security  Agreement
     with GTE Leasing Corporation to fund the manufacture of TRANZ Enabler units
     by Wellex  which are or will be  deployed  through the GTE  Wireless  joint
     marketing  agreement.  The  agreement  with GTE Leasing is in the form of a
     revolving credit facility in the maximum amount of $1,200,000.  GTE Leasing
     will  pay  the  Company  a  fixed  amount  for  each  TRANZ   Enabler  unit
     manufactured by Wellex for placement under the GTE Wireless joint marketing
     agreement.  At approximately  $400 per unit, the Company has the ability to
     finance up to 3,000 TRANZ

                                       18
<PAGE>
     Enabler  units at any one time under this  agreement.  The Company  expects
     that repayment of the amounts  financed  under the credit  facility will be
     made from the recurring revenue generated by the units placed under the GTE
     Wireless  joint  marketing  agreement.  However,  the Company is  primarily
     obligated   to  repay  all  amounts   owing  under  the  credit   facility,
     irrespective  of whether  processing  revenues are  sufficient  to pay such
     amounts.  To secure payment under the agreement the Company has granted GTE
     Leasing a security  interest in the units and the processing  revenues from
     those units. The Company also entered into a Notice,  Consent and Agreement
     between itself,  NOVA Information  Systems,  Inc.  ("NOVA") and GTE Leasing
     which  acknowledges the obligation of NOVA to pay GTE Leasing directly from
     amounts owed to the Company by NOVA for amounts owing by the Company to GTE
     Leasing  under the  credit  facility.  The  agreement  with GTE  Leasing is
     terminable on certain  defined events of default,  including the failure to
     pay any installment within ten days of its due date and for other events of
     default which remain  unremedied  for ten days after notice is given to the
     Company  by GTE  Leasing.  The  Company  is  presently  finalizing  several
     technical and legal requirements that must be completed before it can begin
     to draw funds under this agreement.


Part II

     ITEM 1 -- LEGAL PROCEEDINGS

     Securities Class Actions Settlements

     In  September  of 1996,  the Company  agreed to terms to settle  securities
     fraud litigation,  pending since 1994, which was brought in connection with
     the  Company's  initial  public  offering in December  1993.  The  parties'
     agreement  (the  "Settlement  Agreement")  was filed in the  United  States
     District  Court  for the  District  of  Colorado  on  January  15,  1997 in
     consolidated Case No. 94-Z-2258,  Appel, et al. v. Caldwell,  et al. By its
     order  approving  the   settlement,   the  court  certified  a  plaintiffs'
     settlement  class and provided  the  mechanism  for payment of claims.  The
     Company contributed $10,000 to the total settlement fund of $2,150,000. The
     remaining portion of the settlement was contributed by certain underwriters
     of the Company's initial public offering and its former securities counsel.
     No objections to the  Settlement  Agreement  were made. No potential  class
     member opted-out of the settlement and all are bound by the release granted
     the Company.  All claims  against the Company in those  consolidated  cases
     were dismissed by final federal court order on September 4, 1997. No appeal
     was filed.  Similar state court claims were dismissed by Colorado  district
     court order dated  October 9, 1997,  and no appeals have been filed in that
     case.

     To resolve cross-claims asserted by the underwriters in the litigation, the
     Company agreed to issue to RAS Securities  Corporation,  H.J.  Meyers & Co,
     Inc., Sands & Co. Ltd. and R.J. Steichen & Co. a total of 600,000 shares of
     Common Stock upon the effective date of the Settlement Agreement, which was
     April 25, 1997.  The shares issued under this  settlement  become  saleable
     under SEC Rule 144  commencing on April 26, 1998. The Company has agreed to
     register  such  shares  upon  demand of holders of not less than 25% of the
     shares, not sooner than April 26, 1998.  Further, on September 17, 1997 the
     Company  agreed to entry of a consent  judgment  against it and in favor of
     Don Walford, the sole shareholder of underwriter Walford Securities,  Inc.,
     in the amount of  $60,000,  payable  over a  three-year  period.  The total
     charge recognized during fiscal 1997 consists of the following: $93,600 for
     the value of the common  shares  issued based upon the fair market value of
     the  Company's  Common Stock on the date the  commitment of such shares was
     made;  $10,000 for actual  cash to be paid by the  Company  pursuant to the
     settlement  with  stockholders;  and $60,000 for the note payable  executed
     with Don Walford as discussed above.


                                       19
<PAGE>
     Settlement with Consultant

     In July of 1997, the Company executed a two-year agreement  effective as of
     April  1,  1997  for  consulting  services  previously  provided  and to be
     provided by Mr. Gary Woolley. In addition to monthly cash compensation, Mr.
     Woolley received a $50,000 two-year  convertible note with 10% interest per
     annum.  The note was convertible into Common Stock at $.40 per share, for a
     total of 125,000 shares issuable upon conversion of the principal amount of
     the note.  A dispute  arose  between  Mr.  Woolley  and the Company and the
     consulting  agreement was terminated by the Company as of the end of August
     1997.  Mr.  Woolley and the Company  settled their dispute in January 1998,
     which  resulted  in a payment by the  Company to Mr.  Woolley of a total of
     $60,000  (including  amounts previously paid to Mr. Woolley as a consulting
     fee prior to termination)  for all services  rendered by Mr. Woolley to the
     Company.  As part of the settlement,  an adjustment to the conversion terms
     of the promissory  note was made  reflecting that all principal and accrued
     interest on the note could be converted to 75,000  shares of the  Company's
     Common  Stock by election of Mr.  Woolley  made on or before April 1, 1998.
     The shares are to be issued as  "restricted  securities"  as defined  under
     Rule 144 under the Securities  Act of 1933. Mr. Woolley  elected to convert
     the note to shares of Common  Stock as of  January  26,  1998.  The  shares
     became saleable under Rule 144 commencing on April 1, 1998.

     Settlement of Claims of Certain Noteholders

     From April  through  June 1997 the  Company  issued a total of  $185,000 of
     Demand  Notes  payable  in full on or before  April 11,  1998 (the  "Demand
     Notes").  The  principal  and accrued  interest on the Demand  Notes became
     convertible  into shares of the  Company's  Common  Stock as of November 1,
     1997 at prices of $.35 per share (as to $75,000  of the  Demand  Notes) and
     $.50 per share (as to $110,000 of the Demand Notes). Commencing on November
     3,  1997,  the  Company  began  receiving   conversion   demands  from  the
     Noteholders and as of November 14, 1997,  holders of $135,000 of the Demand
     Notes had demanded  conversion  of their Demand Notes into Common Stock and
     were  insisting that the Company issue  "free-trading"  shares to them. The
     Noteholders  claimed  that their right to  free-trading  stock arose out of
     certain  oral  representations  made at the time of  issuance of the Demand
     Notes, the fact that no "restricted  securities"  legends were imprinted on
     the documents evidencing the Demand Notes and no other written advice as to
     the "restricted" nature of the shares underlying the Demand Notes was given
     to them at the time. The  complaining  Noteholders  were asserting  damages
     based on a market  price for the  Company's  Common  Stock in the $8.00 per
     share  range as of the  November  1, 1997 time  period.  The  holder of the
     remaining  $50,000 Demand Note (which is convertible at $.50 per share) has
     not asserted any claims against the Company in connection with his purchase
     of the Demand Note.
   
     During March 1998, the Company  reached a settlement  with the  complaining
     Noteholders' by agreeing to issue 1.4 times the number of shares originally
     issuable as principal  and  interest on the Demand  Notes  purchased by the
     complaining Noteholders (plus an additional 11,000 shares to one Noteholder
     who purchased  $50,000 of the Demand Notes). As a result of the settlement,
     the  issuance of "premium"  shares was  recorded in Operating  Expense as a
     litigation  settlement  of  approximately  $1,353,000  in March  1998.  The
     agreement also provides the Noteholders  with certain  guarantees as to the
     amount  for which the shares  can be resold  and a "put"  which  allows the
     Noteholders  to require the Company to  repurchase  any  restricted  shares
     remaining  unsold at the end of the one year period after the shares become
     saleable  under SEC Rule 144. The shares  issuable  upon  conversion of the
     Demand Notes will be "restricted securities" as defined under SEC Rule 144,
     but will  become  saleable  pursuant to Rule 144 one year from the date the
     converted  Demand Note was purchased by the Noteholder.  A total of 525,800
     shares  have  been or will be issued to the  complaining  Noteholders  upon
     conversion  of their notes which will be subject to the  guarantee  and put
     agreements.  The holder of the other $50,000  Demand Note will be given the
     enhanced  conversion  rate (of 1.4  times the  number of shares  originally
     issuable)  and will receive  154,000  shares upon  conversion of his Demand
     Note but will not be given the guarantee or put.
    
     The  guarantee  provision  of the  settlement  agreement  allows the former
     Noteholders to recover the difference between the guarantee price (which is
     $3.00 per share as to  360,800  of the shares and $4.29 per share as to the
     remaining  165,000 shares issuable upon conversion of the Demand Notes) and
     the gross amount the  Noteholder  receives  upon a sale of the shares.  The
     guarantee is operative at any time during the one year period commencing on
     the date the shares become saleable under SEC

                                       20
<PAGE>
     Rule 144. The Company is obligated to pay the amount due within thirty days
     of receiving a demand,  accompanied by  documentation  confirming the sale.
     Under  the  "put"  provision  of  the  settlement  agreement,   the  former
     Noteholders  will have a five day  period  commencing  on the date one year
     from the date the shares become  saleable  under SEC Rule 144 (or the first
     business day thereafter if such day is a day on which the stock markets are
     closed) during which the former Noteholders may "put" any restricted shares
     remaining unsold by them at the time back to the Company.  Upon exercise of
     the put, the Company  which must either (1) purchase the shares for the put
     price  (which is $3.00 per share for  360,800  of the  shares and $4.29 per
     share for 165,000 of the shares) or (2) require the shareholder to sell the
     shares into the market,  with the Company making up the difference  between
     the put price and the gross amount  received by the  shareholder  upon such
     sale,  within 15 days after  receipt of  written  notice and  documentation
     confirming the sale.

     On July 2, 1997, the Company also issued a promissory note in the amount of
     $16,825 to one of the investors  who purchased the Demand Notes.  This note
     was due and  payable  in full as of July 30,  1997 and bore  interest  at a
     default  rate of 18% per  annum if not paid when  due.  In  return  for the
     investor's  agreement  not to require  the  Company to pay the note when it
     came due, the investor claims that a representative of the Company promised
     that the Company  would treat the note the same as the other  Demand  Notes
     and convert it to Common Stock on the same terms.  In conjunction  with the
     Demand Note  settlement  with this investor,  the Company agreed to convert
     all  amounts  owing as  principal  and  interest by it under this note to a
     total of 18,507 shares of Common Stock. The shares issuable upon conversion
     of this note are not entitled to the guarantee or put described above which
     applies to the shares issuable upon conversion of the Demand Note purchased
     by this investor.

     Dispute with Supplier

     In April of 1995,  the  Company  entered  into an  agreement  with  Novatel
     Communications Ltd. (now called Novatel, Inc.) to supply it with modems for
     its CDPD products.  Novatel.  Inc. has asserted a claim against the Company
     for payment for  product it tendered to the Company  under that  agreement.
     The claim was asserted in October  1996 for  $59,632.  Although the Company
     has  accrued a  liability  in the amount of this  claim,  it  asserts  that
     Novatel  delivered  defective  product,  which has  caused  damages  to the
     Company in excess of the amount  being  claimed by Novatel.  The Company is
     therefore  disputing  the claim.  The Company  and  Novatel  have agreed to
     arbitrate the dispute under an arbitration provision of the agreement which
     requires  arbitration  before  a  private  arbitration  agency  located  in
     Vancouver,  British  Columbia.  The Company  believes it has a  substantial
     basis for its refusal to pay the claim,  but no assurance can be given that
     it will prevail in arbitration.



ITEM 2 - CHANGES IN SECURITIES

     Recent Issuances of Unregistered Securities:

     January  26,  1998:  conversion  of a  $50,000  promissory  note  issued to
     consultant  was  converted  to 75,000  shares of common  stock  pursuant to
     agreement  between the Company and a former  consultant (see Item 1 - Legal
     Proceedings Settlement with Consultant, above);

     February 9, 1998:  conversion  of $3,060,000  face value of 8%  Convertible
     Debentures into 3,060,000 shares of Series A Preferred Stock;

     March 12, 1998:  issuance of a $60,000 10%  unsecured  promissory  note and
     10,435 shares Common Stock  Purchase  Warrant  exercisable  until March 11,
     2003 at 5.75 per share to a  consultant  of the Company for  services to be
     rendered over the six month period commencing March 12, 1998;

     March 24 - March 30, 1998: sale of call options  acquired by the Company in
     October 1995, to purchase a total of 50,000 shares of Common Stock owned by
     an unaffiliated  third party, sold by the Company to an unaffiliated  third
     party  for  total  consideration  of  $216,700  in  cash,  less a one  time
     inducement fee to the original stockholder of $25,000.


                                       21
<PAGE>
     The Company  relied upon the  registration  exemption  contained in Section
     4(2) of the  Securities  Act of 1933 for  these  transactions.  None of the
     transactions involved a public offering. Representations were received from
     the  purchasers of the  securities to the effect that the  purchasers  were
     taking for  investment  purposes only and not with a view to  distribution;
     "restricted  securities"  legends  were or will be  imprinted  on all stock
     certificates; and stop-transfer instructions were lodged with the Company's
     transfer agent as to all shares of common stock issued in the transactions.


     Changes in Securities:

     Prior to going  public,  the Company  issued two 50,000  share  warrants to
     purchase a total of 100,000  shares of Common  Stock to a former  Director.
     The Directors' Warrants were originally  exercisable through April 12, 1998
     at $4.00  per  share;  however,  the  Company  has  agreed  to  extend  the
     expiration date of the Directors'  Warrants until the earlier of six months
     from the effective  date of a registration  statement  including the shares
     underlying the 50,000 share warrant which has registration rights, or April
     12, 1999.



ITEM 3 -- DEFAULTS UPON SENIOR SECURITIES

       The  Company  is  indebted  to  Omron  Systems,   Inc.  under  a  Secured
       Installment  Note  dated  March 27,  1995,  for the  principal  amount of
       $387,866  and  interest  thereon.  The  terms of such note  required  the
       Company to make  payments of principal and interest each month from April
       1995 through  December  1995,  at which time the note became due in full.
       The Company made one principal  payment,  and monthly  interest  payments
       through  October 1996, in accordance  with the terms of the note, but has
       made no other payments under this note and for that reason is in default.
       The  Company  continues  to  discuss  options  with Omron  regarding  the
       possible restructuring or mutually agreeable settlement of this note.

                                       22
<PAGE>



ITEM 4 --  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
<TABLE>
<CAPTION>
          Annual Shareholder Meeting, February 6, 1998:

       Proposals                                                     For        Against    Abstain     Not Voted     Total Voted
       ---------                                                     ---        -------    -------     ---------     -----------
<S>                                                               <C>                       <C>                       <C>      
       1. Elect five directors to the Company's Board of
       Directors
              Evon A. Kelly                                       8,177,029        --       11,467         --         8,188,496
              Rod L. Stambaugh                                    8,177,029        --       11,467         --         8,188,496
              Richard S. Barton                                   8,177,029        --       11,467         --         8,188,496
              Caesar Berger                                       8,177,029        --       11,467         --         8,188,496
              Chester N. Winter                                   8,177,029        --       11,467         --         8,188,496

       2. Amendments to Company's  Articles of  Incorporation     8,081,829      90,504     16,163         --         8,188,496
       to  increase  the  number  of  shares  of no par value
       Common Stock to 40,000,000

       3. Amendments to Company's  Articles of  Incorporation     5,216,071      91,287     20,554     2,860,584      5,327,912
       to authorize up to 15,000,000  shares of preferred stock, 
       up to 4,000,000 designated as Series A Cumulative 
       Convertible Redeemable Preferred Stock

       4.  Amendments to Company's  Amended 1992 Stock Option     5,178,657     126,187     22,168     2,861,484      5,327,012
       Plan to increase  the number of shares  available  for
       issuance upon exercise to 2,680,000 shares

       5.  Ratify   selection  of  Price  Waterhouse  LLP  as     8,170,676       8,470      9,350          --        8,188,496
       Company's Independent Accountants
</TABLE>

ITEM 5 -- OTHER INFORMATION


         On May 14, 1998,  The Company  filed a  Registration  Statement on Form
         SB-2 with the United States  Securities  and Exchange  Commission  (SEC
         File No.  333-52625) to register a total of 7,324,106  shares of Common
         Stock ( the  "Shares").  The  Shares are being  registered  and will be
         offered for sale by certain  holders of the Company's  securities  (the
         "Selling Security  Holders").  None of the Shares are being sold by the
         Company and the Company will not receive any proceeds from sales of the
         Shares.  All expenses of this registration  (excluding selling expenses
         incurred  by the  Selling  Security  Holders)  are  being  paid  by the
         Company.


ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K

         a) Exhibits required by Item 601 of Regulation S-B


                        27        Financial Data Schedule

         b) Reports on Form 8-K

                      No reports on Form 8-K were  filed by the  Company  during
the quarter ended March 31, 1998.

                                       23
<PAGE>

                                   SIGNATURES


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



   
                                       U.S. WIRELESS DATA, INC.
                                       Registrant



Date:    February 25, 1999             By: \s\ Roger L. Peirce     
         -----------------                 --------------------------
                                           Chief Executive Officer


         February 25, 1999             By: \s\ Robert E. Robichaud 
         -----------------                 --------------------------
                                           Chief Financial Officer