SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                               ------------------


                                   FORM 10-QSB

[X]  Quarterly  Report  under  Section  13 or  Section  15(d) of the  Securities
     Exchange Act of 1934 for the quarterly period ended March 31, 2000.

[ ]  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.)

                            805 Third Ave, 8th Floor
                               New York, NY 10022
           ----------------------------------------------------------
          (Address of principal executive offices, including zip code)



                                 (212) 750-7766
               --------------------------------------------------
              (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 May 10, 2000 there were outstanding  32,328,020 shares of the Registrant's
Common Stock (no par value per share).


Transitional Small Business Disclosure Format

                        Yes   [ ]                No     [X]




                                        1

<PAGE>




                            U.S. WIRELESS DATA, INC.
                                TABLE OF CONTENTS


PART I    FINANCIAL INFORMATION                                             Page
                                                                            ----

Item 1.   Financial Statements (Unaudited)

          Balance Sheets -
             March 31, 2000, and June 30, 1999 ...........................  3

          Statements of Operations -
             Three Months and Nine Months Ended March 31, 2000 and 1999 ..  4

          Statements of Cash Flows -
             Nine Months Ended March 31, 2000 and 1999 ...................  5

          Notes to Financial Statements ..................................  6-15

Item 2.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations .......................................... 15-22

PART II   OTHER INFORMATION

Item 1.   Legal Proceedings .............................................. 22

Item 2.   Changes in Securities .......................................... 23

Item 3.   Defaults on Senior Securities .................................. 24

Item 5.   Other Information .............................................. 24

Item 6.   Exhibits and Reports on Form 8-K ..............................  25





                                        2
<PAGE>

<TABLE>
<CAPTION>
                            U.S. WIRELESS DATA, INC.
                                  BALANCE SHEET


                                                                                  March 31, 2000   June 30, 1999
                                                                                  --------------   -------------
<S>                                                                               <C>             <C>
ASSETS
Current Assets:
  Cash and cash equivalents ...................................................   $ 38,514,000    $    425,000
  Accounts receivable, net of allowance for doubtful accounts of
     $51,000 at March 31, 2000; $43,000 at June 30, 1999 ......................        157,000         178,000
  Inventory, net ..............................................................        147,000         215,000
  Other current assets ........................................................        195,000          14,000
  Escrow held for payment of professional fees ................................           --           112,000
                                                                                   -----------     -----------
     Total current assets .....................................................     39,013,000         944,000
Processing units - deployed ...................................................         45,000         408,000
Fixed assets, net .............................................................        670,000         405,000
Other assets ..................................................................         53,000          14,000
                                                                                   -----------     -----------

Total assets ..................................................................   $ 39,781,000    $  1,771,000
                                                                                   ===========     ===========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
  Accounts payable ............................................................   $  1,547,000    $  1,198,000
  Accrued liabilities .........................................................        388,000         413,000
  Borrowings, current portion .................................................         55,000       2,272,000
  Other current liabilities ...................................................           --           450,000
                                                                                   -----------     -----------
    Total current liabilities .................................................      1,990,000       4,333,000
Borrowings, long-term portion .................................................           --            25,000
                                                                                   -----------     -----------
Total liabilities .............................................................      1,990,000       4,358,000
                                                                                   -----------     -----------

Redeemable preferred stock:
  Series B 6%  cumulative  convertible  redeemable  preferred  stock,
    no par value, $1.00 stated value, 1,954,705 and 5,000,000 shares
    authorized, 227,352 and 1,954,705 shares issued and outstanding
    at March 31, 2000 and June 30, 1999, respectively.  Redeemable
    at approximately $350,000 at March 31, 2000 ...............................        350,000       1,587,000
                                                                                   -----------     -----------

Commitments and contingencies

Stockholders' equity (deficit):
  Preferred stock, no par value, 15,000,000 shares authorized:
    Series A, at $1.00 stated value, 0 and 4,000,000
       shares authorized, and 0 and 752,000 issued and outstanding
       at March 31, 2000 and June 30, 1999, respectively .....................           --           752,000
    Series C convertible, stated value $0.01 per share, liquidation
       value $10.00 per share aggregating $50,616,000, 8,450,000 shares
       authorized, 5,061,600 issued and outstanding at March 31, 2000 ........          51,000
  Common stock, at $1.00 stated value, 40,000,000 shares authorized;
       32,328,020 and 17,816,075 shares issued and outstanding at
       March 31, 2000 and June 30, 1999, respectively .........................     32,328,000      17,816,000
  Common stock to be distributed ..............................................           --           243,000
  Additional paid-in capital ..................................................     89,535,000     12,082,000
  Accumulated deficit .........................................................    (84,473,000)    (35,067,000)
                                                                                   -----------     -----------
    Total stockholders' equity (deficit) ......................................     37,441,000      (4,174,000)
                                                                                   -----------     -----------

    Total liabilities and stockholders' equity ................................   $ 39,781,000    $  1,771,000
                                                                                   ===========     ===========
</TABLE>

       Accompanying notes are an integral part of the financial statements


                                        3
<PAGE>

<TABLE>
<CAPTION>
                            U.S. WIRELESS DATA, INC.
                            STATEMENTS OF OPERATIONS

                                                                   For the three months ended             For the nine months ended
                                                                            March 31,                            March 31,
                                                                    -----------------------                -----------------------
                                                                    2000               1999                2000               1999
                                                                    ----               ----                ----               ----
                                                                                   As Restated                           As Restated
                                                                                   -----------                           -----------
<S>                                                           <C>                <C>                <C>                <C>
Net revenues:
     Product sales .....................................      $    111,000       $    124,000       $    271,000       $    633,000
     Services ..........................................            88,000            137,000            196,000            509,000
                                                              ------------       ------------       ------------       ------------
                                                                   199,000            261,000            467,000          1,142,000
                                                              ------------       ------------       ------------       ------------
Cost of revenues:
     Product sales .....................................           214,000             89,000            349,000            499,000
     Services ..........................................            52,000            151,000            196,000            482,000
     Settlement with supplier ..........................              --                 --                 --             (240,000)
                                                              ------------       ------------       ------------       ------------
                                                                   266,000            240,000            545,000            741,000
                                                              ------------       ------------       ------------       ------------

Gross (loss) profit ....................................           (67,000)            21,000            (78,000)           401,000
                                                              ------------       ------------       ------------       ------------

Operating expenses:
    Selling, general and administrative ................         1,953,000            431,000          4,016,000          3,857,000
    Research and development ...........................           391,000            105,000            859,000            363,000
                                                              ------------       ------------       ------------       ------------
       Total operating expenses ........................         2,344,000            536,000          4,875,000          4,220,000
                                                              ------------       ------------       ------------       ------------

Loss from operations ...................................        (2,411,000)          (515,000)        (4,953,000)        (3,819,000)

Interest expense .......................................          (462,000)        (1,118,000)        (1,394,000)        (1,757,000)
Interest credit ........................................           597,000               --              597,000               --
Interest income ........................................            65,000               --               65,000               --
Other income ...........................................              --                 --              128,000              8,000
                                                              ------------       ------------       ------------       ------------

Net loss ...............................................        (2,211,000)        (1,633,000)        (5,557,000)        (5,568,000)
                                                              ------------       ------------       ------------       ------------

Preferred stock dividends ..............................       (42,864,000)           (25,000)       (43,849,000)          (571,000)
                                                              ------------       ------------       ------------       ------------

Net loss available to common stockholders ..............      $(45,075,000)      $ (1,658,000)      $(49,406,000)      $ (6,139,000)
                                                              ============       ============       ============       ============

Basic and diluted net loss per share, (after
provision for preferred stock dividends) ...............      $      (1.89)      $      (0.12)      $      (2.34)      $      (0.46)
                                                              ============       ============       ============       ============

Weighted average common shares
outstanding - basic/diluted ............................        23,900,000         13,669,000         21,197,000         13,247,000
                                                              ============       ============       ============       ============
</TABLE>

       Accompanying notes are an integral part of the financial statements


                                        4
<PAGE>

<TABLE>
<CAPTION>

                            U.S. WIRELESS DATA, INC.
                            STATEMENTS OF CASH FLOWS


                                                                                For the nine months ended March 31,
                                                                                ----------------------------------
                                                                                       2000              1999
                                                                                       ----              ----
                                                                                                     As Restated
                                                                                                     -----------
<S>                                                                             <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss .............................................................      $ (5,557,000)           $ (5,568,000)
    Adjustments to reconcile net loss to net cash used in
     operating activities:
        Depreciation and amortization ....................................           127,000                 175,000
        Bad debt expense .................................................            25,000                    --
        Write down of inventory ..........................................           112,000
        Gain on sale of merchant portfolio ...............................          (124,000)
        Non-cash consulting services and other ...........................           511,000               1,499,000
        Non-cash compensation expense-variable stock option ..............              --                (1,302,000)
        Non-cash interest expense ........................................           451,000                 966,000
        Non-cash reduction of payment due supplier .......................              --                  (240,000)
        Loss on sale of fixed assets .....................................            16,000                    --
        Changes in current assets and liabilities:
           Accounts receivable ...........................................            (4,000)                (60,000)
           Inventory .....................................................           (44,000)                457,000
           Escrow for professional fees ..................................           112,000                    --
           Other current assets ..........................................          (181,000)                (29,000)
           Accounts payable ..............................................           349,000                (261,000)
           Accrued liabilities ...........................................            74,000               1,019,000
                                                                                ------------            ------------
           Net cash used in operating activities .........................        (4,133,000)             (3,344,000)
                                                                                ------------            ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
        Purchase of fixed assets .........................................          (395,000)                (46,000)
        Proceeds from sale of merchant portfolio .........................           450,000                    --
        Proceeds from sale of fixed assets ...............................            24,000                    --
        Processing units - deployed ......................................              --                   (81,000)
        (Increase) decrease in other assets ..............................           (39,000)                  9,000
                                                                                ------------            ------------
           Net cash provided by (used in) investing activities ...........            40,000                (118,000)
                                                                                ------------            ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
        Proceeds from issuance of common stock ...........................           939,000                  27,000
        Principal payment on borrowings ..................................        (1,827,000)               (366,000)
        Net proceeds from issuance of debt ...............................         1,585,000               2,310,000
        Net proceeds from issuance of convertible debenture ..............              --                 2,490,000
        Proceeds from issuance of Series C preferred stock ...............        50,616,000                    --
        Payments of offering costs for Series C preferred stock ..........        (6,102,000)                   --
        Proceeds from exercises of options and warrants ..................           169,000                    --
        Redemption of Series A preferred stock ...........................              --                (1,000,000)
        Redemption of Series B preferred stock ...........................        (2,198,000)                   --
        Redemption of convertible debenture ..............................        (1,000,000)                   --
                                                                                ------------            ------------
           Net cash provided by financing activities .....................        42,182,000               3,461,000
                                                                                ------------            ------------


Net increase (decrease) in cash and cash equivalents .....................        38,089,000                  (1,000)

Cash and cash equivalents, beginning of period ...........................           425,000                   4,000
                                                                                ------------            ------------

Cash and cash equivalents, end of period .................................      $ 38,514,000            $      3,000
                                                                                ============            ============
</TABLE>

       Accompanying notes are an integral part of the financial statements


                                        5
<PAGE>

                            U.S. WIRELESS DATA, INC.
                          NOTES TO FINANCIAL STATEMENTS



Note 1 - BASIS OF PRESENTATION

            The  accompanying  financial  statements  included  herein have been
       prepared by U.S.  Wireless Data, Inc. (the "Company" or "USWD"),  without
       audit,  pursuant  to the  rules and  regulations  of the  Securities  and
       Exchange  Commission.  The  financial  statements  for the three and nine
       month period ended March 31, 1999 have been restated from the  originally
       reported Form 10-QSB. A Form 8-K was filed on July 2, 1999, incorporating
       this  restatement.   The  financial  statements  have  been  prepared  in
       accordance  with  generally  accepted  accounting  principles for interim
       financial  information and with the  instructions to Form 10-QSB and Rule
       310 of  Regulation  S-B.  Accordingly,  they  do not  include  all of the
       information  and  footnotes  required by  generally  accepted  accounting
       principles  for  complete  financial   statements.   In  the  opinion  of
       management,  all adjustments  (consisting of normal  recurring  accruals)
       considered necessary for a fair presentation have been included.

           The results of operations of any interim  period are not  necessarily
       indicative  of the results of  operations  to be expected  for the fiscal
       year.  For further  information,  refer to the financial  statements  and
       accompanying footnotes included in the Company's Form 10-KSB for the year
       ended June 30, 1999.

            The year  ended  June 30,  1999  condensed  balance  sheet  data was
       derived  from  audited  financial  statements  but does not  include  all
       disclosures required by Generally Accepted Accounting Principles.


Note 2 - THE COMPANY

          The  Company  was  incorporated  in the State of  Colorado on July 30,
       1991.  The  Company   relocated  its  principal   executive  office  from
       California  to New York City in  February  2000.  The  Company  is in the
       business of providing products and services to enable the use of wireless
       technology for electronic payment and other  transactions.  The Company's
       Wireless  Express  Payment  ServiceSM  ("WEPS")  gateway serves as a link
       joining  all  parties  involved  in  a  wireless   point-of-sale  ("POS")
       transaction.  This enables  businesses  requiring  mobility and/or faster
       transaction  speed  to  accept  non-cash  payments   utilizing   wireless
       technology.  By providing a seamless  interface  between a merchant's POS
       terminal(s),  wireless carriers and front-end  processors,  credit, debit
       and other card transactions can be processed as fast as cash, without the
       cost  and  inconvenience  of  being  tethered  to a  telephone  line.  In
       addition,  WEPS'  Internet-based  tools offer on-line terminal activation
       and  online/real-time   transaction  monitoring,   reporting  and  remote
       terminal diagnostics.


Note 3 - BRIDGE FINANCING AND PRIVATE PLACEMENT

       Bridge Financing

           On December 23,  1999,  the Company  entered  into an agreement  with
       Commonwealth  Associates,  L.P.  ("Commonwealth")  in connection with the
       private  placement (the "Private  Placement")  of the Company's  Series C
       Convertible  Preferred  Stock  (the  "Series  C  Preferred  Stock").  The
       securities  issued in the Private  Placement and in the bridge  financing
       described  below have not been  registered  under the  Securities  Act of
       1933, as amended (the  "Securities  Act"), and may not be offered or sold
       in the United States absent registration or an applicable  exemption from
       registration requirements.

           In  connection  with the  engagement  of  Commonwealth,  the  Company
       entered  into  an  agreement  with  ComVest   Capital   Management,   LLC
       ("ComVest"),  an affiliate  of  Commonwealth,  pursuant to which  ComVest
       initially lent the Company $1,000,000 and Dean M. Leavitt,  the Company's
       Chairman  and Chief  Executive  Officer  lent the Company  $100,000  (the
       "Bridge  Financing").  ComVest  and Mr.  Leavitt  subsequently  lent  the
       Company an additional $250,000 and $25,000,  respectively. The loans were
       collateralized  by substantially  all of the Company's assets pursuant to
       general security  agreements and bore interest at a rate of 8% per annum.



                                        6
<PAGE>

       The notes were due on the earlier of (x) the date a change of control (as
       defined in the note) occurs, (y) the date the Company concludes a debt or
       equity  financing in which the Company  receives at least  $5,000,000  of
       gross  proceeds,  or (z) December 30, 2000.  The notes  included  certain
       negative  covenants,  including  prohibitions  on the  payment of certain
       dividends,  redemptions and asset sales and limitations on the incurrence
       of  indebtedness,  liens and the  issuance,  prior to March 31, 2000,  of
       securities  not  specifically  exempted.  The  lenders  had the option to
       convert the  outstanding  principal  amount of the notes into  securities
       issued in connection with any private  placement  transaction on the same
       terms as investors in such placement.  In addition, the Company agreed to
       appoint a designee of the bank affiliate  lender to the Board and to have
       an  observer  present at all  meetings  of the Board.  In addition to the
       Bridge  Financing,  the Company also  borrowed  $125,000 from ComVest and
       $75,000 from Mr. Leavitt (the "Additional  Notes").  The Additional Notes
       were due on demand interest free. The Company repaid the full outstanding
       amount of the Bridge  Financing and  Additional  Notes on March 18, 2000,
       from the Private  Placement  described below. The rights under the Bridge
       Financing expired on March 18, 2000, when the loans were repaid.

           In  connection  with the Bridge  Financing,  the Company  also issued
       ComVest  and Mr.  Leavitt  warrants  to  purchase  13,636,363  shares and
       1,363,637 shares,  respectively,  of Common Stock at an exercise price of
       $.01 per share. These warrants are fully exercisable at any time, subject
       to certain conditions,  including the availability of a sufficient number
       of shares of Common Stock for issuance  upon exercise  thereof.  On March
       10, 2000,  Commonwealth  and Mr.  Leavitt  exercised  their warrants with
       respect  to  7,920,000  shares  and  792,000  shares,  respectively.  The
       remaining  warrants expire on December 30, 2006.  ComVest and Mr. Leavitt
       have certain demand and "piggyback"  registration  rights,  commencing in
       June 2000, as to the shares of Common Stock underlying the warrants.

            Currently,  the Company does not have enough authorized Common Stock
       for the  remaining  warrants  to be fully  exercised.  As a  result,  the
       Company  entered into Economic  Participation  Agreements with the bridge
       lenders  which are  intended  to  provide  the  bridge  lenders  with the
       economic equivalent of ownership of the shares of Common Stock underlying
       the  warrants  in the  event  that the  Company  is  unable  to amend its
       Articles of Incorporation to increase the number of authorized  shares of
       Common Stock.  The Economic  Participation  Agreements  terminate at such
       time as a sufficient  number of shares of Common Stock are authorized and
       reserved  for  issuance  upon the  exercise of the  warrants,  unless the
       Company failed to amend its Articles of  Incorporation by April 28, 2000,
       in which case the bridge lenders are entitled to liquidated damages which
       are   calculated  in  accordance   with  the   agreement.   The  Economic
       Participation  Agreements were subsequently  amended to extend the period
       in which the Company must amend its Articles of Incorporation to July 11,
       2000. If the agreements are not automatically  terminated as contemplated
       by the agreements within 195 days of the date of the agreements, then the
       Company shall pay to the bridge lenders on such 195th day a nonconversion
       fee of $550,000 and, in addition,  until such time as the  agreements are
       terminated  as provided  for, the bridge  lenders may elect to receive in
       cash in consideration of canceling the agreements the greater of (A) $2.5
       million or (B) the  product of (1) the number of shares as  adjusted  per
       the agreement  and (2) the  remainder of (x) the closing  asking price of
       the common  stock on the last  trading  date prior to the exercise by the
       bridge lenders of their liquidation right and (y) $0.01.

           The Company  established  the value of the Bridge Warrants based upon
       an  assessment  of the market rate of interest for debt  securities  with
       similar  attributes but without the stock purchase warrants  feature.  In
       December  1999,  the  Company  recorded a discount  on the notes from the
       Bridge  Financing  via a charge of $34,000  against the face value of the
       notes  for a  proportionate  amount  of the  warrant  valuation.  For the
       quarter ended March 31, 2000, the Company  recorded an additional  charge
       of  $417,000  against  the face value of the notes for the balance of the
       warrant  valuation.  The Company accreted the carrying value of the notes
       to their full face value by the time of repayment on March 17, 2000.

       Private Placement

           Commonwealth  acted  as  placement  agent  in the  Private  Placement
       pursuant to which,  as of March 31, 2000,  506.16 Units have been sold at
       $100,000  per Unit for  aggregate  proceeds  of  $50,616,000.  Each  Unit
       consists  of 10,000  shares of the  Company's  Series C  Preferred  Stock

                                        7
<PAGE>


       (which is initially  convertible  into 66,667 shares of Common Stock) and
       warrants  to purchase  Common  Stock equal to 25% of the number of shares
       into which the Series C Preferred Stock is  convertible.  Under the terms
       of the  Private  Placement, an  additional  143.84  Units  for  aggregate
       proceeds of $14,384,000 may be sold.

           The Series C Preferred Stock has a liquidation  preference of $10 per
       share,  plus  accrued  and  unpaid  dividends.  The  holders  of Series C
       Preferred  Stock are  entitled to vote their shares of Series C Preferred
       Stock on an as  converted  basis with the  holders  of Common  Stock as a
       single  class on all  matters  submitted  to a vote of the  shareholders,
       except as  otherwise  required  by  applicable  law and  except  that the
       holders of Series C Preferred Stock voting separately as a class have the
       right to elect two directors to the Board of Directors.

           Each share of Series C Preferred  Stock is  convertible  at any time,
       subject  to the  approval  by the  shareholders  of an  amendment  to the
       Company's  Articles of Incorporation to increase the number of authorized
       shares of Common  Stock,  at the option of the  holder,  into a number of
       shares of Common Stock  determined by dividing the  liquidation  value by
       the  conversion  price,  initially  $1.50 per share,  which is subject to
       adjustment for stock splits,  recapitalizations and other similar events.
       If the Company  issues  shares of Common  Stock at a price per share less
       than  the  then  current  conversion  price,  then,  subject  to  certain
       exceptions,  the conversion price will be  automatically  reduced to such
       lower  price and the number of shares  issuable  upon  conversion  of the
       Series C Preferred Stock shall be increased proportionately. The Series C
       Preferred Stock  automatically  converts into Common Stock (a) if, at any
       time commencing three months after June 17, 2000, the average closing bid
       price of the Company's  Common Stock exceeds 300% of the conversion price
       for 20  consecutive  trading  days or (b) upon a public  offering  of the
       Company's securities that raises gross proceeds in excess of $30,000,000,
       provided the shareholders have approved an increase in authorized capital
       to allow for the conversion of the Series C Preferred Stock.

           The warrants  issued in connection  with the Private  Placement  (the
       "Unit  Warrants")  are  exercisable  for a period  of seven  years for an
       aggregate  number of shares of Common Stock equal to 25% of the number of
       shares into which the Series C  Preferred  Stock are  convertible,  at an
       exercise price equal to the then applicable conversion price. The initial
       exercise price is $1.50 per share,  subject to adjustment  under the same
       circumstances  as the conversion  price of the Series C Preferred  Stock.
       The Unit  Warrants  are  callable  for a nominal  price at the  Company's
       option on 30 days' notice to the holders of the Unit  Warrants if (a) the
       average  closing  bid  price  of  the  Company's   Common  Stock  for  20
       consecutive trading days exceeds 300% of the exercise price, as adjusted,
       (b) the  Company's  Common  Stock is  trading  on a  national  securities
       exchange  or  Nasdaq  SmallCap  or  National  Market  Systems,  and (c) a
       registration  statement covering the shares issuable upon exercise of the
       Unit  Warrants has been declared  effective and the shares  issuable upon
       exercise of the Unit  Warrants are not  otherwise  subject to any lock-up
       restrictions.

           The terms of the Series C Preferred  Stock and the Unit  Warrants may
       be  amended,  modified  or waived  by an  agreement  among  the  Company,
       Commonwealth  and a committee  to be  designated  by  Commonwealth  whose
       members hold in the aggregate not less than 20% of the outstanding Series
       C Preferred Stock and not less than 20% of the outstanding Unit Warrants.

           The Company has agreed to file a registration  statement with respect
       to the shares of Common Stock  issuable  upon  conversion of the Series C
       Preferred  Stock and exercise of the Unit Warrants  under the  Securities
       Act within  nine  months of the  closing of the  Private  Placement.  The
       investors also have certain "piggyback"  registration rights with respect
       to the shares of Common Stock  issuable  upon  conversion of the Series C
       Preferred Stock and the exercise of the Unit Warrants.

           Each investor who purchased Units in the Private Placement agreed not
       to sell,  transfer or otherwise  dispose of any of the securities sold in
       the Private  Placement for a period of one year  following the closing of
       the transaction.  Thereafter, investors may not sell, transfer or dispose
       of more than 25% of such  securities  during each of the  following  four
       90-day periods. The lock-up period may be extended by Commonwealth for up
       to an additional six months from the closing of any public  offering that
       is consummated  prior to the end of the initial lock-up period,  in which



                                        8
<PAGE>

       event there shall be no further  lock-up at the end of such  period.  The
       Company's  officers,  directors and certain other  existing  shareholders
       agreed to substantially the same lock-up provisions as to shares owned or
       acquired by them.

           Several of the Company's  officers and directors  purchased  Units in
       the Private  Placement.  Dean M. Leavitt,  the Company's  Chief Executive
       Officer and Chairman purchased 2.5 Units, Charles I. Leone, the Company's
       Chief Financial Officer,  Chief Operating Officer and Secretary purchased
       1 Unit and Robert E. Robichaud,  the Company's former Chief Financial and
       Accounting  Officer,  Treasurer  and  Secretary  purchased .75 of a Unit.
       Edwin  Cooperman,  a member of the  Board,  purchased  1 Unit and each of
       Michael  S.  Falk  and Amy  Newmark,  both  also  members  of the  Board,
       purchased 2.5 Units. Barry Kaplan, also a member of the Board,  purchased
       25 Units.  Mr.  Kaplan also  received  from  Commonwealth  at no charge a
       warrant to purchase 1.5 Units  exercisable at $100,000 per Unit (from the
       warrants Commonwealth received as compensation in the Private Placement).

           As  part  of its  compensation,  Commonwealth  received  warrants  to
       purchase  126.5  Units,  exercisable  at $100,000  per Unit, a commission
       equal to  $3,543,000,  which is 7% of the  gross  proceeds  raised in the
       Private Placement, and a structuring fee equal to $1,518,000, which is 3%
       of the gross  proceeds  raised in the  Private  Placement.  Pursuant to a
       prior agreement with Peter J. Solomon Securities Company Limited ("PJSC")
       relating to  financing  transactions  entered  into by the  Company,  the
       Company  issued to PJSC a warrant to purchase  25.3 Units at $100,000 per
       Unit and a fee equal to $400,000. The warrants are exercisable commencing
       on the date of  issuance  and for seven  years  thereafter.  The  Company
       valued the unit warrants at $5.57 million.

            Commonwealth  has the right under an Agency  Agreement  to designate
       two directors to the Board and the following  individuals gave proxies to
       Commonwealth to vote for the election of such designees:  Messrs. Leavitt
       and Leone, John H. Perveiler, the Company's Vice President/National Sales
       Manager,  Marc R.  Shultz,  the  Company's  Vice  President  of  Business
       Development,  and Barry  Kaplan,  Alvin  Rice and  Chester  Winter,  each
       members of the Board.  On March 29, 2000,  four new directors  joined the
       Board,  including Michael S. Falk, the Chairman of Commonwealth,  and Amy
       L. Newmark, both of whom were designated by Commonwealth.

            As a  condition  to the  completion  of the Private  Placement,  the
       Company  agreed  that the  exercise  price of a warrant  owned by Dean M.
       Leavitt,  the Company's Chairman and Chief Executive Officer, to purchase
       2,687,500  shares of Common  Stock should be reduced from $3.00 per share
       to the market price of the Common Stock on January 4, 2000. No amount has
       been  charged to  operations  for  compensation  in  connection  with the
       repricing because the exercise price equaled the market price on the date
       of  repricing.  In March  2000,  the FASB  issued  Interpretation  No. 44
       "Accounting for Certain Transactions  Involving Stock Compensation".  The
       interpretation   is  not   effective   until  July  1,   2000.   Had  the
       interpretation  been in effect on the date of the repricing,  the warrant
       would have been  considered a variable  warrant.  On March 31, 2000,  the
       variable  warrant would have  resulted in $9.75  million in  compensation
       expense,  which would have  increased the current  quarter's net loss and
       net loss per share to $54.9 million and $2.30 per share, respectively. On
       July 1, 2000, in accordance with  Interpretation No. 44, the warrant will
       be recorded as a variable warrant.

            As  a  result  of  the  Bridge  Financing  and  Private   Placement,
       Commonwealth may be deemed to control the Company.


Note 4 - FINANCIAL CONDITION AND LIQUIDITY

           The Company has incurred  recurring losses from operations and has an
       accumulated   deficit   of   approximately   $42   million.   During  the
       implementation  of  its  new  business  plan  as  described  in  Item 2 -
       Management  Discussion  and  Analysis,  the Company  expects  expenses to
       continue to exceed  revenues  during the initial  phases of the  business
       plan.

                                        9
<PAGE>


           The Company's cash position of $38.5 million provides the Company, in
       management's  opinion,  with  the  financial  resources  to  pursue  it's
       business  plan and fund  monthly  deficits.  As of May 10, the Company is
       debt free and has no current financing needs.


Note 5 - NET LOSS PER SHARE

          Earnings  (loss) per common share (EPS) is computed using Statement of
       Financial Accounting Standards (SFAS) No. 128, "Earnings per Share." SFAS
       No. 128  establishes  standards for the  computation,  presentation,  and
       disclosure of earnings per share. Basic per share amounts are computed by
       dividing the net loss  available to common  stockholders  by the weighted
       average number of common shares  outstanding during the year. Diluted per
       share  amounts  incorporate  the  incremental  shares  issuable  upon the
       assumed  exercise of the Company's stock options and warrants and assumed
       conversion of  convertible  securities.  During fiscal 1999 and 2000 such
       incremental  amounts have been excluded from the calculation  since their
       effect  would  be  anti-dilutive.   Such  stock  options,   warrants  and
       conversions could potentially dilute earnings per share in the future.


Note 6 - FINANCINGS, BORROWINGS AND STOCKHOLDERS' EQUITY

            For the nine  months  ended  March  31,  2000,  the  Company  raised
       $930,000 in a private  offering of common stock and common stock purchase
       warrants.  The Company issued  approximately  1,500,000  shares of common
       stock and  warrants to purchase  approximately  301,000  shares of common
       stock.  The warrants are  exercisable  at $1.50 per share through July 6,
       2004.  An  additional  727,273  shares of common stock were issued on the
       conversion of $450,000  notes  payable.  In addition,  as a result of the
       private offering, Bridge Financing and Private Placement described above,
       anti-dilution  provisions of certain outstanding  warrants were triggered
       and the Company is required to adjust the exercise  prices and the number
       of shares of common stock issuable upon the exercise of such warrants.

            During the none months ended March 31, 2000,  approximately  752,000
       shares of Series A Preferred Stock and accrued dividends of approximately
       $23,000 were  converted  into  approximately  1,177,000  shares of common
       stock at various price levels.

            In the fourth quarter of fiscal 1999, USWD entered into an agreement
       with the purchasers of the Series B Preferred Stock and holders of the 6%
       Debentures  to file a  registration  statement  with the SEC covering the
       common  stock  underlying  the Series B Preferred  Stock,  a common stock
       purchase warrant issued at the same time as the Series B Preferred Stock,
       the 6% Debentures,  and the common stock purchase  warrants issued to the
       6% Debenture holders in July, 1998, within 30 days of May 11, 1999, to be
       effective  within  90  days  of  May  11,  1999.   Failure  to  file  the
       registration statement by June 10, 1999 and/or obtain effectiveness of it
       by August 9, 1999,  resulted  in the  accrual of  penalties  against  the
       Company.  The Company did not file the  required  registration  statement
       until  June 30,  1999,  and the  registration  statement  has never  been
       declared  effective.  The  Series B  Preferred  Stock  and 6%  Debentures
       ultimately  became subject to redemption at the option of the holders for
       failure  to  obtain  effectiveness  of the  registration  statement.  The
       Company  became  subject to a late filing  penalty of $74,000 and accrued
       "late  effectiveness"  penalties  of  $188,000,  $225,000  and $0 for the
       quarters ended September 30, 1999,  December 31, 1999 and March 31, 2000,
       respectively. Upon redemption of these securities, approximately $372,000
       of the  penalties  were waived by the holders and recorded as an interest
       credit in the current fiscal quarter.  Offering  costs,  and valuation of
       related warrants and incentive shares were recorded against the aggregate
       preference  value of the  preferred  stock and will be accreted up to the
       full redemption value by the date of mandatory redemption.  Accretion and
       accrued  dividends  for the first,  second and third fiscal  quarters was
       $807,000, $126,000 and $49,000,  respectively. As described below in this
       Footnote and in Footnote 14 (Subsequent  Events), the Company redeemed or
       converted  all  outstanding  shares  of Series B  Preferred  Stock and 6%
       Debentures on or before May 3, 2000.  The  previously  accrued  dividends
       include  $87,000  which  was  waived  in  conjunction  with the  Series B
       Preferred Stock  redemptions.  This waived amount reduced preferred stock
       dividends and accumulated deficit in the current fiscal quarter.

           In  the  first  quarter  of  fiscal  year  2000,  holders  of  the 6%
       Debentures  converted  $200,000  of the debt into  approximately  313,000
       shares of common stock per the specified conversion formula.



                                       10
<PAGE>


           In the first quarter of fiscal year 2000, a Colorado based management
       recruiting  firm  successfully  completed  a  search  for a  key  product
       development  engineer.  The Company agreed to pay half the $17,000 fee in
       the form of 13,600 shares of common  stock,  which was issued on February
       23, 2000.

           On January 20, 2000,  the Company  issued a 22,500 share common stock
       purchase  warrant to RBB Bank as an inducement to redeem shares of Series
       B Preferred  Stock and 6%  Debentures  held by RBB Bank,  exercisable  at
       $1.50 per share.  The  warrant  vests  immediately,  was  issued  with an
       exercise price equal to the market price of the  underlying  stock on the
       date of grant,  and  expires  on July 6,  2004.  The  Company  valued the
       warrant at $32,000, which was charged as a deemed dividend to accumulated
       deficit.

            On  February  11,  2000,  holders  of  the 6%  Debentures  converted
       $800,000 of the debt into  approximately  405,000  shares of common stock
       per  the  specified  conversion  formula.   Upon  conversion  of  the  6%
       Debentures,  approximately  $225,000 of interest  previously  accrued was
       waived by the holders and  recorded as an interest  credit in the current
       fiscal quarter.

           On  March  15,  2000,  the  Company  retained  Lippert/Heilshorn  and
       Associates,  Inc. to provide investor relations services.  In addition to
       monthly fees and expenses, the Company agreed to issue  Lippert/Heilshorn
       a 15,000  share common  stock  purchase  warrant each year for the next 3
       years. The warrants vest one year after date of grant, are issued with an
       exercise price equal to the market price of the  underlying  stock on the
       date of grant,  and expire 5 years from the vesting date.  The first year
       grant was  issued on March 28,  2000,  exercisable  at $5.344  per share,
       which the Company valued at $52,000. The Company charged the valuation as
       investor relations expense.

           On March 17, 2000,  the Company  redeemed  227,353 shares of Series B
       Preferred Stock and $1,000,000 of 6% Debentures from RBB Bank for a price
       equal  to  125%  of  the  liquidation   value  or  principal  amount,  as
       applicable,  of the Series B Preferred Stock and 6% Debentures and repaid
       a loan in the amount of $250,000. In connection with the redemption,  RBB
       Bank also waived certain accrued penalties and dividends.

           On March 28,  2000,  the Company  issued a 50,000  share common stock
       purchase warrant to Cornell Consulting International,  Inc. for executive
       search  services,  exercisable  at $5.344 per share.  The  warrant  vests
       immediately,  was issued with an exercise price equal to the market price
       of the underlying stock on the date of grant, and expires March 27, 2005.
       The Company  valued the warrant at $95,000  (based on the market value of
       the  services  received  less cash paid),  which was charged as executive
       search expenses.

           On March 31,  2000,  the  Company  redeemed  1,500,000  shares of the
       Company's  Series B Preferred  Stock from Bold  Street,  LLC, for a price
       equal to 125% of the liquidation  value of the Series B Preferred  Stock,
       plus accrued dividends. As an inducement for the redemptions, the Company
       also issued a common stock purchase warrant,  expiring April 30, 2004, to
       purchase 150,000 shares of Common Stock,  exercisable at $2.28 per share.
       In connection  with such  redemption,  Bold Street waived certain accrued
       penalties.  Bold Street received certain "piggyback"  registration rights
       as to the shares of Common  Stock  underlying  the  warrant.  The Company
       valued the warrant at $536,000, which was charged as a deemed dividend to
       accumulated deficit.

           For the third fiscal quarter ended March 31, 2000: (i) 109,600 common
       stock  shares were issued on exercise of employee  options for  aggregate
       proceeds of $81,452,  (ii)  8,712,000  common stock shares were issued on
       exercise of the Bridge  Warrants for aggregate  proceeds of $87,120,  and
       (iii)  218,235  common stock shares were issued on cashless  exercises of
       warrants aggregating 394,632 shares.


                                       11
<PAGE>


Note 7 - SALE OF CREDIT CARD PORTFOLIO

            On July 7, 1999,  USWD sold a portion of its  merchant  credit  card
       portfolio  to PMT  Services  Inc.,  a  wholly  owned  subsidiary  of Nova
       Corporation.  The  transaction  resulted  in a cash  payment  to  USWD of
       $450,000.  The sale included approximately 450 installed USWD owned TRANZ
       Enabler  point-of-sale  devices deployed with a portion of the respective
       merchants. A gain of $124,000 was recorded on the sale as other income.


Note 8 - RELATED PARTY TRANSACTIONS

           On  July 1,  1999,  USWD  entered  into an  agreement  with  Liviakis
       Financial Communications,  Inc. (LFC), to provide the Company with public
       relations and investor  relations  services  through March 15, 2000.  The
       Company issued 690,000  restricted  shares of common stock to LFC for its
       services  under this  agreement.  LFC is  entitled to receive a 2.5% cash
       finder's fee for financing  located by LFC and a 2% finder's fee based on
       the "total  consideration  provided"  through any acquisition  located by
       LFC. The Company recorded a charge to consulting  expense of $352,000 for
       the valuation of the shares. LFC agreed not to sell any USWD common stock
       during the term of the consulting services agreement.

           In December 1999, the Company  issued  443,077  restricted  shares of
       common  stock to John M.  Liviakis,  the  principal  owner of LFC,  and a
       significant  Company  shareholder,  to replace  shares  transferred  to a
       finder  in  conjunction  with  the May  1999  Series  B  Preferred  Stock
       financing.

           In order to induce  Commonwealth to consummate the Private Placement,
       Mr. Liviakis and LFC agreed that for a period beginning on March 15, 2000
       and ending on the first  anniversary  of the final closing of the Private
       Placement  (the  "Lock-up  Period"),  they  will not  sell,  transfer  or
       otherwise  dispose of any  securities  of the Company  that were owned by
       either  of them as of March  14,  2000 or  acquired  during  the  Lock-up
       Period,  except  for  an  aggregate  of  1,139,000  shares  which  may be
       transferred or sold under certain conditions.

           On March 29, 2000, the Company issued each of the four new members of
       the Board a nonqualified stock option for 250,000 shares of the Company's
       common stock.  The options are  exercisable at $1.50 per share,  vest one
       third per yearly  anniversary date following grant date and expire on the
       earlier of ten years from the grant date or one year after  cessation  of
       the Optionee's  relationship  with the Company.  Since the exercise price
       for the  options  was less  than the  market  price of the  common  stock
       ($6.00) on the date of issue, the Company valued the options under APB 25
       at  an  aggregate  of  $4.5  million.   The  value  will  be  charged  to
       compensation  expense  over the vesting  period of the  options.  For the
       quarter ended March 31, 2000, the Company charged $12,000 to compensation
       expense.

           See additional  disclosures of related party transactions in Note 3 -
       Bridge  Financing  and  Private  Placement  and in Note  14 -  Subsequent
       Events.


Note 9 - BENEFICIAL CONVERSION FEATURE - SERIES C PREFERRED STOCK

            The value of the "in the money" conversion  feature for the Series C
       Preferred Stock from the closings of the Private  Placement  approximated
       $42.4 million.  The value was charged to increase  accumulated deficit as
       deemed dividends during the quarter ended March 31, 2000.


                                       12
<PAGE>


Note 10 - SUPPLEMENTAL CASH FLOW INFORMATION

     Supplemental disclosure of non-cash financing and investing activities:

     1.   Conversion  of $450,000  notes  payable to 727,273  shares of common
          stock.
     2.   Conversion  of  $1,000,000  6%  convertible  debenture  into 718,018
          shares of common stock.
     3.   Accretion  on  mandatory  redeemable  preferred  stock of  $982,000,
          including accrued dividends of $84,000.
     4.   Conversion of 751,610  shares of Series A preferred  stock and accrued
          dividends to 1,134,113 shares of common stock.
     5.   Issuance  of 690,000 and  443,077  shares of common  stock to Liviakis
          Financial Communications.
     6.   Recording of "in the money  conversion  feature" on Series C preferred
          stock for $42.4 million.
     7.   Issuance  of  243,000  shares of  common  stock  classified  as "to be
          distributed" on June 30, 1999.


Note 11 - INVENTORY

                                                 March 31, 2000   June 30, 1999
                                                 --------------   -------------
          Inventory consists of:
            Raw material                           $ 139,000        $ 144,000
            Work-in-process                          133,000             --
          Finished goods                             230,000          331,000
          Lower of cost or market reserve           (355,000)        (260,000)
                                                   ---------        ---------
                                                   $ 147,000        $ 215,000
                                                   =========        =========

          The Company has  established  a reserve to reflect the  estimated  net
       realizable value of the inventory as of March 31, 2000 and June 30, 1999.


Note 12 - COMMITMENTS AND CONTINGENCIES

           The  Company  leases  office  facilities  in  Colorado  and New  York
       expiring  January 16, 2003 and September 29, 2001,  respectively.  Future
       minimum annual lease  commitments  for the years  subsequent to March 31,
       2000 are $300,000, $190,000 and 64,000.

           The  Company  has  employment  agreements  with two of its  executive
       officers.  The  agreements  are for  initial  terms  of two  years,  with
       automatic  one-year  extensions after the initial term.  Effective May 4,
       2000,  the  employment  agreements  commit the  Company to annual  salary
       compensation of $425,000 and annual discretionary bonuses.

           See  additional  disclosure  regarding  the  Economic   Participation
       Agreements in Note 3 - Bridge Financing and Private  Placement and Leases
       in Note 14 - Subsequent Events.


Note 13 - LITIGATION

           In April 1998,  USWD entered into an  agreement  with certain  former
       noteholders of its Demand Notes under which USWD issued 525,800 shares of
       common stock in settlement of the dispute  regarding  conversion terms of
       their notes. Terms of the settlement  entitled the noteholders to certain
       guarantee  and/or  "put"  provisions  related  to the  shares  issued  in
       conversion of the notes. The shares  originally issued upon conversion of
       the notes and the additional  shares  resulting from the settlement  were
       reflected as redeemable  common stock on the balance sheet. The guarantee
       expired as to all shares on June 19,  1999.  The "put"  expired as to all
       shares  on June 24,  1999.  As of June 30,  1999,  the  "put"  provisions
       related to the shares had expired or been  relinquished in return for the
       Company's   agreement to   issue  up to 200,000 shares of common stock to


                                       13
<PAGE>


       certain  holders  who had  exercised  their "put"  rights.  In the fourth
       fiscal  quarter of 1999,  $49,000 was accrued to reflect the  settlement.
       The agreement  has been executed and 200,000  shares of common stock were
       issued on February 22, 2000.


Note 14 - SUBSEQUENT EVENTS

            The  Board of  Directors  approved  an  amendment  to the  Company's
       Articles of Incorporation to increase  authorized capital from 55,000,000
       shares to 225,000,000 shares. Of that number, 200,000,000 shares would be
       designated  as no par value Common Stock and  25,000,000  shares would be
       designated  as  preferred  stock,  with  the  rights,   designations  and
       preferences  of any series of preferred  stock to be fixed and determined
       by the Board of Directors at the time of issuance, without further action
       by shareholders.  The amendment to the Articles of Incorporation is to be
       submitted to the Company's shareholders as soon as practicable.

            The Board of Directors  approved a new stock option plan, subject to
       approval by the Company's  shareholders at the next shareholder  meeting.
       Once  approved by  shareholders  (and  assuming an increase in authorized
       common  stock is also  approved  by  shareholders)  the option plan would
       reserve  15,000,000  shares of  Common  Stock for  issuance  pursuant  to
       options that may be granted  under the plan. To date,  Dean Leavitt,  the
       Company's Chief Executive  Officer,  has been granted 2,500,000  options,
       and other employees have been granted 678,000 options,  to be issued with
       the exercise  price to be set as of the date of  shareholder  approval of
       the plan.  The plan is to be submitted to the Company's  shareholders  as
       soon as practicable.

            On April 28, 2000,  the Company  repaid  $55,000 of  principal  plus
       accrued  interest  to  date on all  outstanding  notes  classified  under
       current liabilities in the Balance Sheet at March 31, 2000.

           On May 3, 2000,  pursuant to  purchase  agreements  reached  with the
       holders, the Company redeemed the remaining 227,352 outstanding shares of
       Series B Preferred  Stock for an aggregate  price of $350,000  and, as an
       inducement  for  the  redemptions,  common  stock  purchase  warrants  to
       purchase an aggregate of 25,000 shares of the  Company's  Common Stock at
       an  exercise  price of $1.50 per  share.  The  warrants  are  exercisable
       through April 30, 2004, and the Company valued the warrants at $60,000 on
       the  date of  grant,  which  will be  charged  as a  deemed  dividend  to
       accumulated deficit.

           The Company intends to enter into a new lease for office space in New
       York City for a term of ten years.  Assuming  the  Company  signs the new
       lease in mid May 2000,  minimum  annual  lease  commitments  for the five
       years  subsequent  to March 31, 2000 are  $456,300,  $608,400,  $608,400,
       $608,400, $608,400 and thereafter in the aggregate are $3,334,500. At the
       same time, the Company is also  negotiating with its current landlord and
       a prospective  tenant for the  termination  of its existing New York City
       lease.  Assuming the Company is released from it's existing New York City
       lease  effective July 1, 2000 with no loss or penalty,  the Company would
       be relieved of future minimum lease  commitments of $164,000 and $110,000
       for the years ending March 31, 2001 and 2002, respectively.



                                       14
<PAGE>


            On May 4, 2000,  the Board  approved an  increase  in Mr.  Leavitt's
       annual salary to $250,000. The Board also approved a bonus of $200,000 to
       Mr. Leavitt for the year ending May 3, 2000, the first anniversary of Mr.
       Leavitt's position as Chairman and Chief Executive Officer.  Compensation
       expense  in the  third  fiscal  quarter  was  charged  $182,000  for  the
       proration of the bonus.

           May 4, 2000,  the Company issued a 25,000 share common stock purchase
       warrant to Cornell  Consulting  International,  Inc. for executive search
       services,   exercisable   at  $3.1875  per  share.   The  warrant   vests
       immediately,  is  exercisable at a price equal to the market price of the
       underlying  stock on the date of grant, and expires 5 years from the date
       of grant.  The Company valued the warrant at $25,000 (based on the market
       value of the services received less cash paid),  which will be charged to
       operations as executive search expenses in the fourth fiscal quarter.


ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS


       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 forward-looking  statements include,  but are not
       limited to: the Company's requirement for additional capital;  failure of
       the Company to raise  additional  capital  critical  to continue  ongoing
       operations;  the failure to execute definitive  agreements with potential
       strategic  alliance  partners;   technological  change;  system  capacity
       constraints or system failures; the ability of the Company to develop new
       distribution channels; or the intensification of competition.  Additional
       factors may be described in other  reports filed by the Company under the
       Securities  Exchange  Act of 1934.  A  detailed  statement  of risks  and
       uncertainties relating to forward-looking  statements is set forth in the
       Company's Annual Report on Form 10-KSB for the fiscal year ended June 30,
       1999 filed on October 14, 1999,  under the caption "Risk Factors" in Item
       6 of that Report, and is hereby incorporated by reference.


       OVERVIEW

           The  Company was  incorporated  in the State of Colorado in July 1991
       for the purposes of designing,  manufacturing and marketing  wireless and
       portable  credit card and check  authorization  terminals  for use in the
       transaction  processing business. The Company completed an initial public
       offering in December 1993. The Company relocated its principal  executive
       office to New York City from  California in February  2000. In late March
       2000, the Company raised $50.6 million in gross proceeds from the Private
       Placement.



                                       15
<PAGE>


           The Company has now repositioned  itself as a facilitator of wireless
       transaction  and  data  services.  It  is  a  device-  neutral,  wireless
       carrier-neutral,   merchant  acquirer  and  front-end  processor  neutral
       enabler of wireless transaction  processing services through the creation
       of its  Wireless  Express  Payment  ServiceSM  or WEPSSM  ("WEPS").  WEPS
       provides  a  gateway  between  all  of  the  parties  within  a  wireless
       point-of-sale  ("POS")  transaction.  By  providing a seamless  interface
       between a merchant's POS  terminals,  wireless  carriers and  transaction
       processors,  credit,  debit and other card  transactions can be processed
       almost  as fast as cash,  without  the cost  and  inconvenience  of being
       tethered to a telephone  line. In addition,  WEPS'  Internet-based  tools
       offer online,  real-time  transaction  monitoring and  reporting,  remote
       diagnostics and automated terminal activation.

           USWD provides merchant  acquirers,  Independent  Sales  Organizations
       ("ISOs") and payment  processors with a wireless  transaction  management
       service that can be utilized at both  conventional and emerging  merchant
       segments,  permits  the  retrieval  of  on-line/real-time   transactional
       reports and  diagnostics  via the  Internet and  simplifies  the customer
       service and application development effort.

       Revision of Business Plan

           In  fiscal  year  1998,  USWD  entered  into  agreements  with  large
       telecommunications  carriers for direct  distribution  of USWD's products
       and services to  merchants.  USWD signed joint  marketing  and  operating
       agreements with Bell Atlantic Mobile,  Ameritech  Mobile  Communications,
       Inc.,  and GTE Wireless.  Commencing in the second quarter of fiscal 1998
       and  continuing  into  the  first  quarter  of  fiscal  1999,  USWD  made
       significant  investments  to  support a  nationwide  deployment  of TRANZ
       Enablers  (a device  developed  by USWD that  provides  the ability for a
       traditional  dial-up  terminal to  communicate  wirelessly)  to merchants
       through  GTE's  and other  telecommunications  carriers'  national  sales
       forces.   Under  these   deployment   programs,   the   carrier's   sales
       representative  introduced  USWD's  credit card  processing  solution and
       TRANZ Enabler to the end user  merchant.  Upon execution of a credit card
       processing  agreement,  a  TRANZ  Enabler  unit(s)  was  provided  to the
       merchant by USWD at USWD's  cost.  Under this  program,  USWD  retained a
       portion of the monthly  credit  card fees based on the dollar  volume and
       number of transactions processed through the TRANZ Enabler.

           Placements of TRANZ Enabler units pursuant to USWD's  agreements with
       telecommunications carriers did not develop as rapidly as anticipated and
       did  not  reach  anticipated  (and  necessary)  levels  to  pay  for  the
       infrastructure to support the programs. Costs to USWD of implementing the
       joint  marketing and  distribution  agreements  with GTE  Wireless,  Bell
       Atlantic Mobile and Ameritech  exceeded revenue generated by the programs
       throughout the entire program. USWD has phased-out this program.

           USWD's continued focus on direct sales to the merchant  community had
       inadvertently  positioned it in direct  competition  with the  industry's
       largest  acquirers,  a competitive  stance that resulted in disappointing
       sales.  As the Company entered fiscal 1999, it was clear that the Company
       did not have the requisite  expertise as a merchant  acquirer and that it
       should not be in direct  competition with firms that were its prospective
       customers.  USWD  hired  Roger  Pierce,  former  President  of First Data
       Corporation and Chief Operating Officer of Visa  International,  as Chief
       Executive  Officer in August  1998.  It was during  this  period that the
       Company began the development of WEPS. Mr. Pierce retired in March 1999.



                                       16
<PAGE>


           In May 1999,  Dean M. Leavitt,  former  President and Chief Executive
       Officer of U.S. Data Capture,  a credit card processing company serving a
       broad spectrum of conventional card acceptors and emerging  markets,  was
       hired as Chairman and Chief  Executive  Officer of USWD.  Mr. Leavitt has
       refined  the  Company's  mission  to  become a device  neutral,  wireless
       carrier-neutral  and  merchant   acquirer-neutral  provider  of  wireless
       processing services.  The Company also developed a complimentary suite of
       Internet browser-based tools to simplify the activation,  troubleshooting
       and  deployment  of  wireless  terminal  devices.  As part of USWD's  new
       strategy,  the  Company  has  focused  its  resources  on  the  continued
       development of the WEPS platform and its suite of services and has phased
       out the sale of products  and  services  directly to  merchants,  thereby
       positioning itself as a neutral enabler to the acquirer marketplace.  The
       Company now has significant  efforts  underway to broaden the use of WEPS
       through the expansion of its sales  channels via contracts  with merchant
       acquirers,  ISO's and  payment  processors.  The  Company  is also in the
       process  of  expanding  its  WEPS  offerings  by  certifying   additional
       WEPS-enabled  POS devices and  implementing  connectivity  to  additional
       processors.

       WEPS

           The Company's  business plan is now focused on  establishing  WEPS as
       the  global  standard  for  wireless  POS  transaction  processing.  WEPS
       provides for a seamless  interface  between  wireless POS  terminals  and
       front-end  processors  (companies  with  established  connections  to the
       credit and debit card  issuers).  The speed and mobility  offered by WEPS
       has the potential to open up vast new markets that have  historically not
       accepted card payments. Central to the Company's strategy is its position
       as a "neutral" provider of wireless transaction services to the industry,
       specifically  neutral  with respect to terminal  manufacturers,  wireless
       carriers and card processors.

           The transaction processing industry in the United States is large and
       growing.  In 1998,  Americans used their credit and debit cards nearly 14
       billion times,  generating over $1 trillion in purchases.  However, there
       are two weaknesses in the electronic  transaction  processing  industry -
       slow transaction  speed and lack of mobility.  Until the mid-1980's,  all
       credit card  processing was essentially  paper-based.  As improvements in
       electronic terminal technologies evolved landline transmission became the
       prevailing  means for  processing  credit card  transactions.  Electronic
       Draft Capture  ("EDC"),  the electronic  authorization  and settlement of
       credit card transactions has since become the standard for processing POS
       transactions.  Merchant acquirers, transaction processors and credit card
       issuers all require merchants to utilize EDC to conduct secure credit and
       debit card  transactions.  However,  this tethered  methodology  excludes
       significant under-served markets that require mobility and/or speed, such
       as quick service  restaurants,  transportation  services,  delivery-based
       businesses, stadium concessions and others.

           As  the  electronic  transaction  processing  industry  has  evolved,
       providers have devoted  substantial  resources to developing  proprietary
       solutions to gain  competitive  advantages,  including the development of
       wireless POS systems.  However,  with the increasing  variety of terminal
       manufacturers,  wireless  carriers and  front-end  processors  needing to
       communicate,  and with each having proprietary  systems and communication
       protocols,  the cost and complexity of connectivity  has become a barrier
       to deployment of wireless POS systems.

           WEPS is designed to provide a solution to this connectivity  problem.
       WEPS  provides a scalable,  client-server  architecture  that serves as a
       neutral gateway between all parties in a wireless POS  transaction.  This
       architecture enables any WEPS-compliant POS terminals to communicate over
       most major U.S. wireless carriers to any transaction processors that have
       established WEPS connectivity.



                                       17
<PAGE>


           Typically,  terminal  manufacturers  program a specific  terminal  to
       communicate with a specific processor.  With WEPS, terminal manufacturers
       can now develop a single  application  to  communicate  to WEPS. The WEPS
       server  then  performs  the  formatting   necessary  to  communicate  the
       transaction  to any front-end  processor  which has agreed to accept WEPS
       facilitated  transactions  and  with  which  WEPS  connectivity  has been
       established.  This process saves the terminal  manufacturers  significant
       development expenses,  reduces the time to bring new terminals to market,
       and  enables   the   development   of   "thin-client"   terminals   whose
       characteristics  are  largely  determined  by  the  server.   Transaction
       processors  benefit  from  WEPS by not  having  to  negotiate  with  each
       wireless carrier to build and support connections to each. Instead,  they
       simply  connect to the WEPS server as a single  point of contact.  As new
       terminals  and  transaction  types  become  available,  each  transaction
       processor  will be able to use their  existing  WEPS  connection  to gain
       wireless access with minimal  development expense or effort on their end.
       As WEPS  enables  new  markets  to accept  wireless  payment  processing,
       wireless  carriers  benefit  from an increase  in traffic and  simplified
       connectivity to the  processors.  By providing a single point of contact,
       WEPS  significantly  minimizes the time and development cost for terminal
       manufacturers and transaction processors.

           USWD is targeting large merchant acquirers,  front-end processors and
       ISO's  for the WEPS  service.  The  initial  response  for WEPS  from the
       targeted  prospects has been positive.  The Company has entered into more
       than fifty WEPS agreements  with various  targeted  prospects,  including
       Card  Service  International  (CSI),  Paymentech  Network  Services,  and
       Certified  Merchant  Services (CMS),  and anticipates  adding  additional
       agreements in the near future.  The WEPS  agreement  allows the client to
       offer WEPS as a wireless  transaction  processing solution to a merchant.
       The WEPS  agreement  defines the services and billing  terms  between the
       Company and client if and when the  merchant  acquirer  utilizes  WEPS. A
       WEPS  agreement  is not a firm  commitment  by the client to purchase any
       goods or service from USWD.

           The benefits of WEPS to a merchant include:

          o    Mobility - with today's wireless  terminals and the WEPS service,
               a terminal no longer needs to be stationary. Eliminating the need
               for a phone line opens up an array of new markets.
          o    Speed - transaction  speed of  approximately  3-5 seconds in most
               cases vs. 15-20 seconds for a traditional landline transaction.
          o    Installation speed and reduced costs - elimination of phone lines
               enhance the installation  process and reduce the costs associated
               with phone lines.
          o    On-line, real-time Internet reporting - WEPS online merchant site
               offers  merchants a look at their  transactions  as they occur as
               well as detailed statistics and reports.

           WEPS enables a business that  requires  mobility  and/or  transaction
       speed to accept POS transactions. WEPS target markets include:

          o    Fast-food restaurants.
          o    Delivery services.
          o    Transportation services such as taxicabs, limos and buses.
          o    Stadiums,  arenas and amusement  parks.
          o    Public parking lots such as at airports.
          o    Movie theatres.
          o    Golf tournaments and racetracks.



                                       18
<PAGE>

           WEPS Internet-based tools provide the merchant, merchant acquirer and
       front-end processor with a new level of control and management over their
       wireless POS systems:

          o    Internet-based  on-line  activation,  deactivation,  and terminal
               diagnostic  tools - WEPS  automates the terminal  activation  and
               deactivation process,  significantly  decreasing the installation
               time  for new  terminals.  USWD  can  perform  real-time,  remote
               diagnostic services for immediate problem solving.
          o    Internet-based  on-line access to real-time transaction reports -
               WEPS provides real-time transaction  reporting,  which allows for
               previously unavailable levels of tracking and accountability.

           USWD  continues  to  establish   connectivity  between  the  wireless
       networks,  WEPS  server  and  various  front-end  processors.  Commercial
       transactions  running  through  the WEPS  platform  began  in the  second
       quarter of fiscal  2000.  The Company is also  working  with  several POS
       terminal  manufacturers  and front-end  processors as part of the ongoing
       process of adding additional devices to the WEPS menu of offerings.

           The  Company is  exploring  opportunities  for the WEPS  platform  to
       transport data to provide solutions for various non-payment  applications
       or applications  with a combination of payment and non-payment data. Over
       the long term, the Company intends to further its service offerings by:

          o    Expanding into selected international markets.
          o    Enabling wireless processing of ATM transactions.
          o    Transporting  non-payment oriented  transactions such as health
               care related transactions, vending machine inventory reports, EBT
               transactions and telemetric data.
          o    Becoming a vehicle for the  transport  of  frequency  and loyalty
               program information.
          o    Recognizing  and  storing  signatures  in the WEPS  network,  and
               accommodating nonconventional payment and debit transactions.

       Year 2000 Issues

           While the Company  believes the greatest  risks  associated  with the
       Year 2000 issue have passed, the Company cannot be certain that Year 2000
       issues with respect to the electronic payments infrastructure utilized by
       credit  card  processors,  banks and  financial  institutions  within the
       United  States  and on which USWD is  reliant  will not  emerge  over the
       coming  months.  USWD  could  be  adversely,  materially  affected,  both
       operationally  and financially,  to the extent third parties with whom it
       interfaces,  either directly or indirectly,  have not properly  addressed
       their  Year  2000  issues.   The  Company  does  not  have  an  available
       contingency  plan that would  alleviate  a  disruption  of service in the
       electronic transaction sector.


       RESULTS OF OPERATION - FISCAL 2000 COMPARED TO FISCAL 1999

       Revenue

            Revenue  from  services of $88,000  for the third  quarter of fiscal
       2000  decreased 36% from revenue of $137,000  generated  during the third
       quarter of fiscal 1999 as the Company continued the implementation of its
       new business model. As noted in the overview  section above,  the Company
       is  now  marketing  WEPS  to  merchant  acquirers,  ISO's  and  front-end
       processors.  The  Company  currently  has  over  50  "Clients"  (merchant
       acquirers, payment processors or independent service organizations) under
       contract for WEPS. Billing for the new WEPS service accounted for $72,000
       of the services  revenue  during the third  quarter of fiscal 2000.  This


                                       19
<PAGE>


       represents an increase of 57% from the second quarter of fiscal 2000, and
       should  continue  increasing as the number of active  terminals  increase
       from the growth in Clients and merchants.  The Company is also working to
       increase   the   number  of  WEPS   certified   devices   and   obtaining
       communications   connectivity  and  integration  to  additional front-end
       processors.  In  addition,  the  Company  sold  one of its  two  existing
       merchant  credit card portfolios at the beginning of July 1999 (see Other
       Income,  below).  The lost revenue from this  portfolio  accounted  for a
       decrease  of  approximately  $108,000  in  services  revenue  between the
       current  quarter and the same  quarter of the prior year.  Revenues  from
       product sales  decreased to $111,000 in the current quarter from $124,000
       in the prior period as the Company completes the transition from one-time
       product sales to a recurring revenue model based on WEPS service. For the
       nine months ended March 31, 2000,  total  revenues  decreased to $467,000
       from  $1,142,000 in the prior year,  again due to transition from the old
       to the new business model.

       Gross Profit

            The  Company  recorded a gross  loss of $67,000 in the third  fiscal
       quarter  of 2000  compared  to a gross  profit  of  $21,000  in the third
       quarter of fiscal 1999. The third quarter  negative product margin versus
       28% for the same  quarter of the  previous  year  reflects  markdowns  on
       product sales and a $112,000  write down in the value of  inventory.  The
       prior year  nine-month  product cost  included a $240,000  one- time gain
       resulting from the successful restructuring of a note payable to a former
       terminal equipment supplier. The services costs include the initial setup
       and ongoing  communications costs associated with the terminals connected
       through  WEPS  or  terminals   deployed  via  the  previous   credit-card
       portfolios.  The  services  margin was $36,000  for the  current  quarter
       versus a loss of  $14,000  for the same  quarter of the prior  year.  The
       spread  in  services  revenue  and cost  structure  are  impacted  by the
       initialization  of new  terminals,  the  quantity  of  active  terminals,
       transaction volume and the associated rates the Company bills its Clients
       for such services versus its charges from the various  carrier  networks.
       Prior period  service costs were distorted by excess  wireless  addresses
       associated with the previous credit-card portfolios or other inventorying
       of addresses.

       Operating Expenses

            Selling,  general and  administrative  expense was $1,953,000 in the
       current quarter, versus $431,000 in the third quarter of fiscal 1999. For
       the  current  nine-month  period,  selling,  general  and  administrative
       expense was $4,016,000 versus $3,857,000 in the prior year.

            Selling,  general and administrative expense for the same quarter of
       the prior year was reduced due to a $658,000 non-cash credit to reflect a
       change in the carrying value of a variable stock option due to the change
       in the Company's  stock during the quarter.  Increases in other  expenses
       for the current  quarter  versus the same quarter of the previous  fiscal
       year include increased activity for marketing,  including  promotions and
       travel,  recruiting,  and other general and administrative expenses. Also
       adding to the increase were non-cash charges for warrant grants valued at
       $52,000 for investor relations and $95,000 for executive recruiting.  The
       Company also accrued $182,000 in the current quarter for the proration of
       Mr. Leavitt's bonus.



                                       20
<PAGE>


            Selling,  general and administrative  expenses increased $159,000 to
       $4,016,000  for the nine  months  ended March 31,  2000,  versus the same
       period of the prior year.  The  underlying  makeup of the  expenses   are
       changing as the Company transitions to its new business plan.

            Research and development expenses increased to $391,000 in the third
       fiscal  quarter of 2000 from  $105,000  in the same  quarter of the prior
       year.  This  increase  was due  primarily to an increase in the number of
       employees  and full time  consultants  focused on the  implementation  of
       WEPS. For the nine-month period ending this fiscal year versus the prior,
       research  and  development  increased  $496,000  to  $859,000,  also  due
       primarily to increased staffing.

       Interest, Other Income and Preferred Stock Dividends

            Interest  income  amounted to $65,000 for the current fiscal quarter
       versus  negligible  amounts for prior  periods.  Prior to March 2000, the
       Company had substantial liquidity problems.  The Company's receipt of the
       net cash from the  Private  Placement  in late  March 2000  provided  the
       Company with a large cash balance from which it earned interest income in
       March, and from which it will earn interest or other investment income in
       future periods.

            Interest  expense of $462,000 in the quarter  ended March 31,  2000,
       includes  $451,000 of  non-cash  interest  expense  related to the Bridge
       Warrants.  Interest  expense of  $1,118,000  for the same  quarter of the
       previous  year  includes  $950,000  of  interest  and  late  registration
       penalties  on the 6%  Debentures.  Interest  expense  for the first  nine
       months of this fiscal year  decreased to $1,394,000  from  $1,757,000 for
       the same period of the previous fiscal year.

            The Interest credit of $597,000 in the quarter ended March 31, 2000,
       related  primarily to the reversal of accrued  interest and  penalties on
       the 6%  Debentures  and  Series  B  Preferred  Stock.  The  interest  and
       penalties were waived as part of the redemption  agreements  reached with
       the holders.

            Other income of $128,000 for the  nine-month  period ended March 31,
       2000  included  a  $124,000  gain on the July 1999  sale of a portion  of
       USWD's  merchant  credit card  portfolio to PMT  Services  Inc., a wholly
       owned subsidiary of Nova Corporation.  The transaction resulted in a cash
       payment  to  USWD  of  $450,000.  The  sale  included  approximately  450
       installed USWD owned TRANZ Enabler  point-of-sale devices deployed with a
       portion of the respective merchants.

            The  $42,864,000  preferred  stock  dividend  for the  third  fiscal
       quarter of 2000 includes $42,364,000 charged for the value of the "in the
       money"  conversion  feature  for the  Series C  Preferred  Stock from the
       closings of the Private  Placement  and $592,000 for warrants  issued and
       cash paid to induce  the  redemption  of the  Series B  Preferred  Stock.
       Preferred  stock dividends of $43,849,000 for the nine month period ended
       March 31, 2000,  include,  in addition to the amounts above,  $874,000 to
       accrete  the value of the Series B preferred  stock up to its  redemption
       value by the date at  which  mandatory  redemption  is  available  to the
       holders.  The  preferred  stock  dividend of $571,000 for the nine months
       ended March 31, 1999,  includes $465,000 of warrants and cash paid in the
       inducement of the redemption of the Series A Preferred Stock and $106,000
       of dividends accrued for the Series A Preferred Stock.

                                       21
<PAGE>


       FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY

           In late March 2000,  the Company  closed on $50.616  million in gross
       proceeds from the Private Placement. Net proceeds to the Company amounted
       to $44.6 million,  after payment of commissions,  fees and expenses of $6
       million.

            As of May 10, 2000, the Company has redeemed all outstanding  Series
       A Preferred Stock, Series B Preferred Stock, 6% Debentures and repaid the
       notes  from the  Bridge  Financing  and other  notes,  and has no current
       financing needs.

           The  Company's  success in raising  funds from the Private  Placement
       frees  management from the daily struggles of operating with little to no
       liquidity  and  long-term   solution  to  its  cash  needs.   During  the
       implementation  of its new  business  plan that the  Company  expects  to
       aggressively  pursue,  the Company expects expenses to continue to exceed
       revenues during the initial phases of the plan.  Interest income provided
       from the available cash balance will help to reduce monthly deficits. The
       Company's cash position of $38.5 million as of March 31, 2000,  provides,
       in management's  opinion, the financial resources to pursue it's business
       plan and fund monthly  deficits.  In addition,  the  Company's  currently
       anticipated   capital   equipment   expenditures   for   its   technology
       infrastructure are not extensive.

            Prior to March 2000,  USWD faced  significant  challenges due to its
       then current financial  condition and lack of liquidity.  The Company has
       incurred recurring losses from operations and has an accumulated  deficit
       of approximately $84.6 million at March 31, 2000.


PART II   OTHER INFORMATION

ITEM 1 - LITIGATION


       Settlement of Claims of Certain Noteholders

           In April 1998,  USWD entered into an  agreement  with certain  former
       noteholders of its Demand Notes under which USWD issued 525,800 shares of
       common stock in settlement of the dispute  regarding  conversion terms of
       their notes. Terms of the settlement  entitled the noteholders to certain
       guarantee  and/or  "put"  provisions  related  to the  shares  issued  in
       conversion of the notes. The shares  originally issued upon conversion of
       the notes and the additional  shares  resulting from the settlement  were
       reflected as redeemable  common stock on the balance sheet. The guarantee
       expired as to all shares on June 19,  1999.  The "put"  expired as to all
       shares  on June 24,  1999.  As of June 30,  1999,  the  "put"  provisions
       related to the shares had expired or been  relinquished in return for the
       Company's  agreement  to issue up to  200,000  shares of common  stock to
       certain  holders  who had  exercised  their "put"  rights.  In the fourth
       fiscal  quarter of 1999,  $49,000 was accrued to reflect the  settlement.
       The agreement  has been executed and 200,000  shares of common stock were
       issued on February 22, 2000.






                                       22
<PAGE>


ITEM 2 - CHANGES IN SECURITIES

       Recent Sales of Unregistered Securities

           During the fiscal  quarter ended March 31, 2000,  the Company sold or
       issued the following equity securities without registering the securities
       under the Securities Act of 1933, as amended (the "Act").

            On January 20, 2000,  the Company issued a 22,500 share common stock
       purchase warrant to RBB Bank.

           On February 11, 2000, holders of the 6% Debentures converted $800,000
       of the debt  into  404,599  shares  of  common  stock  per the  specified
       conversion formula.

           On  March  15,  2000,  the  Company  retained  Lippert/Heilshorn  and
       Associates,  Inc. to provide investor relations services.  In addition to
       monthly fees and expenses, the Company agreed to issue  Lippert/Heilshorn
       a 15,000  share common  stock  purchase  warrant each year for the next 3
       years. The warrants vest one year after date of grant, are issued with an
       exercise price equal to the market price of the  underlying  stock on the
       date of grant,  and expire 5 years from the vesting date.  The first year
       grant was issued on March 28, 2000,  with an exercise price of $5.344 per
       share.

           On March 28,  2000,  the Company  issued a 50,000  share common stock
       purchase warrant to Cornell Consulting International,  Inc. for executive
       search  services.  The warrant vests  immediately  and is  exercisable at
       $5.344 per share.

           On March 31,  2000,  the  Company  redeemed  1,500,000  shares of the
       Company's Series B Convertible Preferred Stock from Bold Street, LLC. The
       Company also issued a common stock purchase  warrant,  expiring April 30,
       2004, to purchase 150,000 shares of Common Stock exercisable at $2.28 per
       share. Bold Street received certain "piggyback" registration rights as to
       the shares of Common Stock underlying the warrant.

           For the third fiscal quarter ended March 31, 2000: (i) 109,600 common
       stock shares were issued on exercise of employee options,  (ii) 8,712,000
       common stock shares were issued on exercise of the Bridge  Warrants,  and
       (iii)  218,235  common stock shares were issued on cashless  exercises of
       warrants aggregating 394,632 shares.

           As to each of the foregoing transactions, the Company relied upon the
       registration  exemption  contained  in  Section  4(2)  of  the  Act.  The
       transactions did not involve a public offering of securities; the Company
       received  investment  representations  from each  purchaser to the effect
       that such purchaser was taking for investment only and not with a view to
       distribution  of the  securities;  the Company had reason to believe that
       each purchaser had such knowledge and experience, either alone or through
       a purchaser  representative  not affiliated  with the Company,  that such
       purchaser was capable of evaluating the merits and risks of an investment
       in the  Company;  each  purchaser,  either in his or her  capacity  as an
       investor or an  employee  or  consultant  to the  Company,  had access to
       adequate  information  concerning  the  Company  and  its  business;  all
       certificates  representing  the  securities were  appropriately imprinted




                                       23
<PAGE>


       with customary  "restricted  securities"  legends,  and instructions were
       lodged with the  Company's  transfer  agent with respect to all shares of
       common stock issued in the transactions as "restricted securities."


ITEM 3 - DEFAULT ON SENIOR SECURITIES

           In the fourth quarter of fiscal 1999,  USWD entered into an agreement
       with the purchasers of its Series B Preferred Stock and holders of its 6%
       Debentures  to file a  registration  statement  with the SEC covering the
       common  stock  underlying  the Series B Preferred  Stock,  a common stock
       purchase warrant issued at the same time as the Series B Preferred Stock,
       the 6% Debentures,  and the common stock purchase  warrants issued to the
       6% Debenture  holders in July 1998,  within 30 days of May 6, 1999, to be
       effective  within  90 days of May 6,  1999.  This  date was  subsequently
       extended to May 11, 1999. USWD filed the required registration  statement
       on June 30, 1999.  The Company  thereby  became  subject to a late filing
       penalty of $74,000  (following waiver of the "late filing" penalty by the
       holder of 1,500,000 shares of Series B Preferred Stock). The registration
       statement  did not become  effective  by August  10,  1999.  The  Company
       therefore become subject to an initial "late effectiveness" penalty of 3%
       of the total  original  purchase price of $1,800,000 of 6% Debentures and
       1,954,705 shares of Series B Preferred  Stock,  which were outstanding as
       of August  10,  1999.  Additional  late  effectiveness  penalties  accrue
       monthly (or for any portion of any month) that the registration statement
       is not effective,  in amounts equal to 2% of the original  purchase price
       of the outstanding  Series B Preferred Stock and 3% of the face amount of
       the  outstanding  6%  Debentures.  As of December 31,  1999,  $413,000 of
       penalties was accrued as a charge to interest  expense.  The registration
       statement has not become effective as of the date of filing this report.

           As of October 10, 1999, the Series B  Registration  Statement had not
       been declared effective.  The holders of the Series B Preferred Stock had
       the right to  require  USWD to redeem  the  shares of Series B  Preferred
       Stock  for  $1.25  per  share  plus  accrued   penalties   and  dividends
       (approximately $2,700,000 as of December 31, 1999), and holders of the 6%
       Debentures to redeem the $1,800,000 face amount at 120% of the face value
       (increased  to 125% based on pending  redemption  proposal)  plus accrued
       penalties and interest (approximately 2,520,000 as of December 31, 1999).

            As of March 31, 2000, the Company had redeemed  1,727,353  shares of
       Series B Preferred Stock at prices equal to 125% of the liquidation value
       of the Series B Preferred Stock and warrants to purchase and aggregate of
       150,000  shares  of  Common  Stock at $1.50 per  share,  and  repurchased
       $200,000 of the 6%  Debentures.  The remaining  $800,000 of 6% Debentures
       and accrued  interest were  converted into 404,745 shares of Common Stock
       at $2.05 per share. The Company redeemed the remaining  227,353 shares of
       Series B Preferred Stock on May 3, 2000, for an aggregate of $350,000 and
       warrants to purchase an aggregate of 25,000  shares of Common Stock at an
       exercise price of $1.50 per share. In connection with these  redemptions,
       the holders of the securities waived any rights they may have had arising
       out of any of the above described defaults.


ITEM 5 - OTHER INFORMATION

           On January 4, 2000,  the Board of Directors  approved an amendment to
       the Company's  Articles of Incorporation to increase  authorized  capital
       from 55,000,000 shares to 225,000,000 shares. Of that number, 200,000,000
       shares would be  designated  as no par value Common Stock and  25,000,000
       shares  would  be  designated  as  preferred  stock,   with  the  rights,
       designations and preferences of any series of preferred stock to be fixed
       and determined by the Board of Directors at the time of issuance, without
       further  action  by  shareholders.  The  amendment  to  the  Articles  of
       Incorporation is to be submitted to the Company's shareholders as soon as
       practicable.


                                       24
<PAGE>


           On  January  4,  2000,  the Board of  Directors  approved a new stock
       option plan,  subject to approval by the  Company's  shareholders  at the
       next shareholder meeting.  Once approved by shareholders (and assuming an
       increase in authorized common stock is also approved by shareholders) the
       option plan would reserve  15,000,000 shares of Common Stock for issuance
       pursuant to options  that may be granted  under the plan.  To date,  Dean
       Leavitt,  the Company's Chief Executive  Officer,  was granted  2,500,000
       options,  and other employees were granted 678,000 options,  to be issued
       with the exercise price to be set as of the date of shareholder  approval
       of the plan. The plan is to be submitted to the Company's shareholders as
       soon as practicable.

           On May 3, 2000,  pursuant to  Purchase  Agreements  reached  with the
       holders, the Company redeemed the remaining 227,352 outstanding shares of
       Series B Preferred Stock.

           The Company intends to enter into a new lease for office space in New
       York City for a term of ten years.  At the same time, the Company is also
       negotiating  with its current  landlord and a prospective  tenant for the
       termination of its existing New York City lease.


ITEM 6 -  EXHIBITS AND REPORTS ON FORM 8-K

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

     4.1  Form of  Nonqualified  Stock  Option  Certificate  issued  to Edwin M.
          Cooperman dated March 29, 2000 *

     4.2  Form of  Nonqualified  Stock Option  Certificate  issued to Michael S.
          Falk dated March 29, 2000 *

     4.3  Form of  Nonqualified  Stock  Option  Certificate  issued  to Barry A.
          Kaplan dated March 29, 2000 *

     4.4  Form of Nonqualified Stock Option Certificate issued to Amy L. Newmark
          dated March 29, 2000 *

     4.5  Nonqualified Stock Option Certificate issued to Charles I. Leone dated
          February 15, 2000 *

     4.6  Form of Common Stock Purchase  Warrant  (originally  issued to Dean M.
          Leavitt as of May 3, 1999),  as  re-executed  as of January 4, 2000 to
          reflect repricing authorized as of such date *

     4.7  Form of Common Stock Purchase  Warrant for 22,500 shares issued to RBB
          Bank dated January 20, 2000.

     4.8  Form of Common  Stock  Purchase  Warrant for 15,000  shares  issued to
          Lippert/Heilshorn & Associates, Inc. dated March 28, 2000

     4.9  Form of Common  Stock  Purchase  Warrant for 50,000  shares  issued to
          Cornell Consulting International, Inc. dated March 28, 2000

     4.10 Form of Common  Stock  Purchase  Warrant for 25,000  shares  issued to
          Cornell Consulting International, Inc. dated May 4, 2000

     4.11 Lock-up  Agreement  between  the  Company  and  John M.  Liviakis  and
          Liviakis Financial Communications, Inc. dated March 15, 2000**



                                       25
<PAGE>


     10.1 Form of Redemption  Agreement between the Company and Bold Street, LLC
          dated January 31, 2000**

     10.2 Form  of  Repurchase  Agreement  between  the  Company  and  RBB  Bank
          Aktiengesellschaft dated January 18, 2000**

     10.3 Form of Purchase  Agreement between the Company and The Cuttyhunk Fund
          dated May 3, 2000

     10.4 Form of Purchase  Agreement  between the Company and Tonga Partners LP
          dated May 3, 2000

     10.5 Form of Employment  Agreement  between USWD and Charles I. Leone dated
          February 11, 2000 *

     27   Financial Data Schedule

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

     * Management compensatory agreement.
    ** To be filed by amendment.

     b) Reports on Form 8-K

           On January 12, 2000, the Company filed a report on Form 8-K reporting
       an event of December 23, 1999.  The report  contained  disclosures  under
       Item 5 - Other  Events,  relating to various  agreements  entered into in
       connection  with  a  proposed  equity  private  placement  and  a  bridge
       financing.

           On March 24, 2000,  the Company  filed a report on Form 8-K reporting
       an event of March 17, 2000. The report contained disclosures under Item 5
       - Other Events,  relating to the issuance of a press release on March 20,
       2000 announcing a closing of a private placement raising $37.8 million of
       gross proceeds. The Report also disclosed the relocation of the Company's
       principal executive offices from California to New York.

           On March 30, 2000,  the Company  filed a report on Form 8-K reporting
       an event of March 28, 2000. The report contained disclosures under Item 5
       - Other Events,  relating to the issuance of a press release on March 29,
       2000  announcing a closing of a private  placement  raising an additional
       $12.8 million of gross  proceeds.  The press  release also  announced the
       appointment of four new Directors to the Board of Directors,  raising the
       number of Board Members to seven.

           On April 12, 2000,  the Company  filed a report on Form 8-K reporting
       an event of March 28, 2000. The report contained disclosures under Item 1
       - Change of Control  and Item 5 - Other  Events,  relating to a series of
       transactions   entered  into  in  connection   with  the  equity  private
       placement.

           On April 18, 2000, the Company filed a report on Form 8-K/A, amending
       the Form 8-K filing of April 12, 2000, to include various Exhibits.

           On April  24,  2000,  the  Company  filed a report  on Form  8-K/A-2,
       further  amending  the Form 8-K filing of April 12,  2000,  to include an
       additional Exhibit.

                                       26
<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:   May 15, 2000                             By: \s\ Dean M. Leavitt
                                                     ---------------------------
                                                     Chief Executive Officer



        May 15, 2000                             By: \s\ Charles I. Leone
                                                     ---------------------------
                                                     Chief Financial Officer
                                                     and Chief Operating Officer


























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