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SECURITIES
AND EXCHANGE COMMISSIONWashington,
DC 20549

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# FORM 10-QSB

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|[X] |  | Quarterly
Report under Section 13 or Section15 (d) of the Securities Exchange Act of 1934for the
quarterly period ended September 30, 2004
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------

|[   ] |  | Transition
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|----- |  | ----------------------------------------------------------------------------------------

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Commission
File Number 0-22848

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

Delaware
(State of incorporation)

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84-1178691
(IRS Employer Identification No.)

420 Lexington Avenue,
Suite 2450New York, NY 10170
(Address of principal executive offices, including zip code)

(646)
452-6128
(Registrants Telephone Number, including area code)

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Check
whether the issuer (1) has 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  [   ]
  No  [X]

As of March 11,
2005, there were  outstanding 18,159,556 shares of the Registrants Common Stock
($0.01 par  value per share).

Transitional
Small Business Disclosure Format. Yes [   ]       No  [X]

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

|                                                                 | Page
|---------------------------------------------------------------- | ----
|PART I  FINANCIAL INFORMATION                                   |     
|ITEM 1.   Financial Statements                                   |     
|Consolidated Balance Sheet as of                                 |     
|September 30, 2004                                               |     
|Consolidated Statements of Operations for the three months       |     
|ended September 30, 2004 and 2003                                |     
|Consolidated Statements of Cash Flows for the three months ended |     
|September 30, 2004 and 2003                                      |     
|Consolidated Statements of Stockholders Equity for              |     
|the year ended June 30, 2004 and the three months                |     
|ended September 30, 2004                                         |     
|                                                                 |     
|Notes to Consolidated Financial Statements                       |     
|ITEM 2.   Managements Plan of Operation                         |     
|ITEM 3.   Controls and Procedures                                |     
|PART II  OTHER INFORMATION                                      |     
|ITEM 1.   Legal Proceedings                                      |     
|ITEM 2.  Changes in Securities and Small Business                |     
|Issuer Purchases of Equity Securities                            |     
|ITEM 3.  Defaults Upon Senior Securities                         |     
|ITEM 4.  Submission of Matters to a Vote of Security Holders     |     
|ITEM 5.  Other Information                                       |     
|ITEM 6.  Exhibits                                                |     
|SIGNATURES                                                       |     

2

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PART I
 FINANCIAL INFORMATION

ITEM 1.   
FINANCIAL STATEMENTS

U.S.
WIRELESS DATA, INC.(Debtor in Possession)CONSOLIDATED BALANCE SHEET(Unaudited)

|                                                               | September 30,2004
|-------------------------------------------------------------- | -----------------
|ASSETS                                                         |                  
|Current assets:                                                |                  
|Cash and cash equivalents                                      |                  
|Cash and cash equivalents in escrow                            |                  
|Accounts receivable                                            |                  
|Due from winning auction sale bidder                           |                  
|Prepaids and other current assets                              |                  
|                                                               |                  
|Total assets                                                   |                  
|                                                               |                  
|                                                               |                  
|LIABILITIES AND STOCKHOLDERS EQUITY                           |                  
|Current liabilities:                                           |                  
|Accounts payable                                               |                  
|Accrued liabilities                                            |                  
|                                                               |                  
|Total liabilities not subject to compromise                    |                  
|Prepetition liabilities subject to compromise                  |                  
|                                                               |                  
|Total liabilities                                              |                  
|                                                               |                  
|Commitments and contingencies                                  |                  
|Stockholders equity:                                          |                  
|Preferred stock, 25,000,000 shares authorized:                 |                  
|Series C convertible, at $.01 par value, liquidation value     |                  
|$10.00 per share, aggregating $32,302,000; 8,450,000           |                  
|shares authorized, 3,230,200 issued and outstanding            |                  
|Common stock, 200,000,000 shares authorized at $.01 par value; |                  
|18,159,556 shares issued and outstanding                       |                  
|Additional paid-in capital                                     |                  
|Accumulated deficit                                            |                  
|                                                               |                  
|Total stockholders equity                                     |                  
|                                                               |                  
|Total liabilities and stockholders equity                     |                  
|                                                               |                  
|                                                               |                  

Accompanying
notes are an integral part of the financial statements

3

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U.S.
WIRELESS DATA, INC.(Debtor in Possession)CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

|                                                              | For the three months endedSeptember 30, |                  
|------------------------------------------------------------- | --------------------------------------- | -----------------
|
|Continuing operations                                         |                                         |                  
|General and administrative expenses                           |                                         | $    (307,000    
|Interest income                                               |                                         | 15,000           
|Interest expense                                              |                                         | --               
|Other income (expense)                                        |                                         | (1,000           
|                                                              |                                         |                  
|Loss before reorganization items                              |                                         | (293,000         
|Reorganization items                                          |                                        
|Professional fees and U.S. Trustee fees                       |                                         | (57,000          
|                                                              |                                         |                  
|Loss before discontinued operations                           |                                         | (350,000         
|                                                              |                                         |                  
|Discontinued operations                                       |                                        
|Loss from discontinued operations                             |                                         | (154,000         
|                                                              |                                         |                  
|Loss on discontinued operations                               |                                         | (154,000         
|                                                              |                                         |                  
|Net loss                                                      |                                         | $    (504,000    
|                                                              |                                         |                  
|                                                              |                                         |                  
|Basic and diluted net loss per share:                         |                                        
|Loss before discontinued operations                           |                                         | $           (0.02
|Loss on discontinued operations                               |                                         | (0.01            
|                                                              |                                         |                  
|                                                              |                                         |                  
|Net loss per share                                            |                                         | $           (0.03
|                                                              |                                         |                  
|                                                              |                                         |                  
|Weighted average common shares outstanding, basic and diluted |                                         | 18,154,000       
|                                                              |                                         |                  
|                                                              |                                         |                  

Accompanying
notes are an integral part of the financial statements

4

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U.S.
WIRELESS DATA, INC.(Debtor in Possession)CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

|                                                           | For the three months endedSeptember 30, |          
|---------------------------------------------------------- | --------------------------------------- | ---------
|
|CASH FLOWS FROM OPERATING ACTIVITIES:                      |                                         |          
|Net loss                                                   |                                         | $(504,000
|Adjustments to reconcile net loss to net cash used in      |                                        
|operating activities:                                      |                                        
|Depreciation and amortization from discontinued operations |                                         | --       
|Accretion of bridge loan discount                          |                                         | --       
|Provision for doubtful accounts                            |                                         | 50,000   
|Deferred rent                                              |                                         | --       
|Changes in operating assets and liabilities:               |                                        
|Accounts receivable                                        |                                         | (91,000  
|Due from factor                                            |                                         | 63,000   
|Due from winning auction sale bidder                       |                                         | 107,000  
|Inventory                                                  |                                         | --       
|Deferred cost of revenue                                   |                                         | --       
|Prepaids and other current assets                          |                                         | 154,000  
|Accounts payable                                           |                                         | 57,000   
|Accrued liabilities                                        |                                         | (158,000 
|Accrued restructuring expense                              |                                         | --       
|Customer advances                                          |                                         | --       
|Deferred revenue                                           |                                         | --       
|Other liabilities                                          |                                         | --       
|Prepetition liabilities subject to compromise              |                                         | 185,000  
|                                                           |                                         |          
|Net cash (used in) operating activities                    |                                         | (137,000 
|                                                           |                                         |          
|CASH FLOWS FROM INVESTING ACTIVITIES:                      |                                        
|Purchase of property and equipment                         |                                         | --       
|Decrease in restricted cash                                |                                         | 456,000  
|Transfer to Chapter 11 escrow accounts                     |                                         | (13,000  
|                                                           |                                         |          
|Net cash provided by investing activities                  |                                         | 443,000  
|                                                           |                                         |          
|CASH FLOWS FROM FINANCING ACTIVITIES:                      |                                        
|Proceeds from bridge loan                                  |                                         | --       
|Proceeds from notes payable                                |                                         | --       
|Payment of notes payable                                   |                                         | --       
|Payments for real estate lease termination                 |                                         | (456,000 
|                                                           |                                         |          
|Net cash (used in) provided by financing activities        |                                         | (456,000 
|                                                           |                                         |          
|Net (decrease) in cash and cash equivalents                |                                         | (150,000 
|Cash and cash equivalents, beginning of period             |                                         | 912,000  
|                                                           |                                         |          
|Cash and cash equivalents, end of period                   |                                         | $ 762,000
|                                                           |                                         |          
|                                                           |                                         |          

Accompanying
notes are an integral part of the financial statements

5

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U.S.
WIRELESS DATA, INC.(Debtor in Possession)CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITYFor the year ended June 30, 2004, and the three months ended September 30, 2004
(Unaudited)

|                                     | Series C Convertible Preferred Stock | Common Stock | Additional Paid-in | Accumulated | Total Stockholders |            | 
|------------------------------------ | ------------------------------------ | ------------ | ------------------ | ----------- | ------------------- | ---------- | 
|
|BALANCE AT JUNE 30, 2003             |                                      | 3,548,700    |                    | $   36,000  |                     | 17,628,716 | 
|Conversion of Series C convertible   |                                     
|preferred stock                      |                                      | (308,500     | )                  | (4,000      | )                   | 514,173    | 
|Issuance of warrants for bridge loan |                                      | --           |                    | --          |                     | --         | 
|Termination of warrants for bridge   |                                     
|loan                                 |                                      | --           |                    | --          |                     | --         | 
|Net income                           |                                      | --           |                    | --          |                     | --         | 
|                                     |                                      |              |                    |             |                     |            | 
|BALANCE AT JUNE 30, 2004             |                                      | 3,240,200    |                    | $   32,000  |                     | 18,142,889 | 
|Conversion of Series C convertible   |                                     
|preferred stock                      |                                      | (10,000      | )                  | --          |                     | 16,667     | 
|Net loss                             |                                      | --           |                    | --          |                     | --         | 
|                                     |                                      |              |                    |             |                     |            | 
|BALANCE AT SEPTEMBER 30, 2004        |                                      | 3,230,200    |                    | $   32,000  |                     | 18,159,556 | 
|                                     |                                      |              |                    |             |                     |            | 
|                                     |                                      |              |                    |             |                     |            | 

Accompanying
notes are an integral part of the financial statements

6

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U.S.
WIRELESS DATA, INC.(Debtor in Possession)NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFor the three months ended September 30, 2004 and 2003(Unaudited)

NOTE 1
 THE COMPANY

U.S.
Wireless Data, Inc. (USWD, the Company, we,
us, our or similar terms) was incorporated in the state
of Colorado on July 30, 1991 and was reincorporated in the state of Delaware on
October 6, 2000. We are operating under the Chapter 11 Proceedings (as defined
below) and as of May 21, 2004, we sold all of our operations in the Auction
Sales (as defined below). Subsequent to the Auction Sales, we do not have any
assets or operations other than those related to the Chapter 11 Proceedings.
Prior to that time, we were principally engaged in providing wireless
transaction delivery and gateway services to the payment processing industry.

Going
Concern, Liquidity Uncertainties and Chapter 11 Proceedings

Since
the Companys inception, the Company has incurred significant losses and
negative cash flow from operations. As of September 30, 2004, we had an
accumulated deficit of approximately $142 million. Managements concerns
about capital led it to take additional steps to cut costs, dispose of
operations and, on March 26, 2004, we filed a voluntary petition for relief
under Chapter 11 of the United States Bankruptcy Code (the Bankruptcy
Code) in the United States Bankruptcy Court for the Southern District of
New York (the Court), in re U.S. Wireless Data, Inc., Case Number
04-12075.

We are
operating as a debtor-in-possession (DIP) under the jurisdiction of
the Court and in accordance with the applicable provisions of the Bankruptcy
Code and orders of the Court (the Chapter 11 Proceedings).

In
connection with our bankruptcy filing, we issued a press release announcing that
we had executed an agreement with NBS Synapse Corporation to sell our Synapse
point-of-sale gateway business to NBS for $2.85 million in cash plus up to $2.15
million credit for free payment processing services to be rendered to us for our
vending operations plus the assumption of certain liabilities. We simultaneously
announced that we had reached an agreement with SANI Operating Co., LLC
(SANI) to sell our vending operations, including the $2.15 million
credit for free payment processing services from NBS, for $1.6 million in cash
plus the assumption of certain liabilities. We had also arranged DIP financing
with SANI in order to fund our ongoing operations during the bankruptcy process
and through the closing of the sales of the operations. We drew $925,000 on the
DIP loan at March 31, 2004 and $675,000 on May 7, 2004. Interest accrued on the
DIP loan at a rate of 6% per annum. The DIP loan was repaid, with interest, on
May 11, 2004 from a deposit of the proceeds of the Auction Sales.

7

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U.S.
WIRELESS DATA, INC.(Debtor in Possession)NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFor the three months ended September 30, 2004 and 2003(Unaudited)

On May
11, 2004, we completed the bankruptcy auctions for the sale of (i) our Synapse
point-of-sale gateway business, and (ii) our vending operations (collectively,
the Auction Sales). Transaction Network Services (TNS)
was awarded by the Court as the winning bidder for each of the operations
offered for sale. TNS paid $6 million in cash for our wireless payment
processing business and $3.7 million in cash for our wireless vending business,
for an aggregate purchase price of $9.7 million in cash. The sales to TNS were
completed on May 21, 2004.

The
Court entered an order that established August 9, 2004 as the last date for each
person or entity to file a proof of claim or preferred equity interest against
us (the Bar Date). In addition, the Court established a separate
date of September 23, 2004 for governmental units only to file a proof of claim
(the Governmental Bar Date). We are analyzing the actual claims
filed by creditors against the pre-petition liabilities accrued by us. In some
individual instances and in total, claims filed by creditors are in excess of
the amounts recorded by us, allowed under the law, or provided for by agreement.
There is uncertainty as to the ultimate liability that will be allowed with
creditors in the case, and the final liability that will be allowed at a future
date may be significantly higher or lower than our current estimate. We intend
to contest claims to the extent that they exceed the amounts we believe are due.

In
September 2004, we filed a Plan of Reorganization and
Disclosure Statement with the Court. On November 21, 2004, the Court
approved an Amended Disclosure Statement and on December 21, 2004
held a hearing to consider confirmation of the Plan of Reorganization.

On
December 27, 2004, the Court confirmed our Amended Plan of Reorganization (the
Plan). The Plan contemplates that the primary source of cash for
distributions will be the proceeds from the aforementioned sale of our
businesses and the cash contribution of Trinad Capital, L.P.
(Trinad), the plan sponsor. Trinad will contribute $500,000 in cash
to us in exchange for 93% of the new common stock to be issued under the Plan,
with the remaining 7% of the new common stock being issued to the holders of
record of our Series C Preferred Stock and our common stock as of February 7,
2005, with 3.5% going to each class. Of such $500,000 from Trinad, $400,000 will
be added to the funds used to pay administrative costs, creditors and, possibly,
a small portion of the liquidation preference. The remaining $100,000 will be
retained by us to fund the expenses of remaining public. The Plan contemplates
that all cash (other than the $100,000 to be retained by the reorganized debtor)
will be placed in a liquidation trust (the Liquidation Trust) and,
after the payment of administrative costs, will be used to pay our liabilities.
If there is any remaining cash, it will be used to settle a small portion of the
aggregate $32,302,000 liquidation preference to which the holders of our Series
C Preferred Stock are entitled as of February 7, 2005.

The
Plan also contemplates that the Liquidation Trust will pay for the prosecution
of our pending litigation against AT&T Wireless. On February 20, 2004, we
commenced arbitration proceedings against AT&T Wireless whereby we were
seeking a $12 million judgment against AT&T Wireless relating to its
decommissioning of the cellular digital packet data (CDPD) network. Any
recoveries, net of the costs of prosecuting the arbitration and administering
the trust, will be distributed by the Liquidation Trust as described above. On
March 8, 2005 we submitted a Settlement and Release Agreement to the Court in
order to settle this matter. Additional information is included in Note 10
 Subsequent Events.

8

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U.S.
WIRELESS DATA, INC.(Debtor in Possession)NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFor the three months ended September 30, 2004 and 2003(Unaudited)

There
is no assurance that there will be sufficient assets to satisfy all of our
liabilities, or to pay any portion of the Series C Preferred liquidation
preference. Our disclosure statement projected that available cash would be
adequate to pay 70-80% of the unsecured claims made. However, we do plan to
challenge certain of the claims and, if successful, of which there is no
assurance, we may be able to pay 100% of such claims and retain a small surplus
for payment of a small portion of the Series C Liquidation preference. Only
holders of record of our Series C Preferred Stock as of February 7, 2005 will be
entitled to receive any payments towards the Series C liquidation preference, or
to receive any pro rata share of the new common stock allocated to Series C
Preferred Stock. Cash distributions shall be made as soon as practicable, as
determined by the trustee of the Liquidation Trust. Distributions of the new
stock shall be made as soon as practicable after we make certain filings with
the Securities and Exchange Commission (SEC) which were not made, in
light of the uncertainties associated with the bankruptcy, in order to conserve
cash. We anticipate that the remaining filings due are this report and our
Quarterly Report on Form 10-QSB for the quarter ended December 31, 2004. In
light of the sale of our operating assets to TNS in May 2004, the information to
be contained in such reports will be largely irrelevant to stockholders of the
reorganized USWD.

Additional
details concerning the Plan are in the Amended Disclosure Statement filed with
the Court in November 2004 in support of the Plan, the Amended Plan of
Reorganization and Order Confirming Amended Plan of Reorganization, each of
which is filed as an exhibit to Form 8-K filed with the SEC on January 18, 2005.

As
soon as practicable after we become current on our filings with the SEC, new
common stock will be issued to Trinad (93%), holders of record of our Series C
Preferred Stock as of February 7, 2005 (3.5%) and holders of record of our
common stock as of the same date (3.5%). On that date, Robert Ellin and Jay Wolf
shall become our sole Board members and shall also be our Chief Executive
Officer and Chief Operating Officer, respectively, and Barry Regenstein will be
our Chief Financial Officer. On that date, we will be capitalized with $100,000
of the $500,000 Trinad has paid, with the $400,000 having been transferred to
the Liquidation Trust.

Trinad
has advised us that it will seek to raise additional capital (which will dilute
the ownership interests of all stockholders) with a view to making us an
attractive vehicle with which to acquire a business. It will then seek a
suitable acquisition candidate. No such business has been identified and we will
be subject to a number of risks, including that any acquisition consummated by
us may turn out to be unsuccessful; investors in us will not know what operating
business, if any, will be acquired, including the particular industry in which
the business operates, and whether dilutive financing will be required
therewith; the historical operations of a specific business opportunity may not
necessarily be indicative of the potential for the future; we may acquire a
company in the early stage of development causing us to incur further risks; we
may be dependent upon the management of an acquired business which has not
proven its abilities or effectiveness; we will be controlled by a small number
of stockholders and such control could prevent the taking of certain actions
that may be beneficial to other stockholders; our common stock will likely be
thinly traded, and the public market may provide little or no liquidity for
holders of our common stock.

9

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U.S.
WIRELESS DATA, INC.(Debtor in Possession)NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFor the three months ended September 30, 2004 and 2003(Unaudited)

Trinad
has agreed that it will not dispose of any of its common stock until an
acquisition transaction has been consummated and a Current Report on Form 8-K
setting forth the terms of the acquisition and audited financial statements of
the acquisition target have been filed with the SEC.

As a
result of the sale of virtually all of our operating assets, the historical
financial statements are irrelevant to any assessment of our operations on an
ongoing basis. Accordingly, readers are advised not to rely on any historical
financial information in considering an investment in or the disposition of our
stock. After we emerge from bankruptcy, we will have no liabilities and
extremely limited cash under new management. The Liquidation Trust will be
entirely for the benefit of the holders of the Series C Preferred Stock as of
the record date, after payment of administrative costs and allowed claims in
accordance with the provisions of the Plan, and will not be an asset of the
corporation.

Bridge Loan

Prior
to the Petition Date, we partially financed our business through a factoring
arrangement with Platinum Funding Corp. (Platinum). Our obligations
to Platinum were secured by all of the Companys assets. By the date of the
Auction Sales, we had fully repaid this obligation and were released from the
liens on our assets.

Also,
prior to the bankruptcy filing, we financed our business through a $2.75 million
bridge loan (the Bridge Loan) made by Brascan Financial Corporation
(Brascan), a subsidiary of the Toronto, Canada-based Brascan
Corporation. The Bridge Loan was secured by a lien upon and security interest in
all of the Companys assets. As part of the transaction, Platinum
contractually subordinated its lien upon our assets (other than Accounts
Receivable) to Brascans liens to the extent of $3,500,000. In connection
with the Bridge Loan, Brascan received a warrant on September 16, 2003
exercisable for 10 million shares of our common stock at $.15 per share (the
Bridge Loan Warrant). The Bridge Loan Warrant was subsequently
amended and restated to 5 million shares as of the Petition Date. The Bridge
Loan Warrant became exercisable on December 31, 2003 and was to expire in
September 2008.

The
Bridge Loan was repaid, with interest, on May 21, 2004 from the proceeds of the
Auction Sales.

NOTE 2
 BASIS OF PRESENTATION

Basis of
Consolidation and Auction Sales

Our
consolidated financial statements include the accounts of our former
wholly-owned subsidiary, UNS Corporation, formerly known as NXT Corporation
(NXT). UNS Corporation was dormant during the period July 1, 2003
through its dissolution on December 11, 2003.

During
March 2004, our Board of Directors approved and authorized management to seek
the sale of our operations which were sold in the Auction Sales. We closed the
sales of our operations included in the Auction Sales on May 21, 2004. Such
operations have been classified as discontinued operations in the accompanying
consolidated financial statements.

10

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U.S.
WIRELESS DATA, INC.(Debtor in Possession)NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFor the three months ended September 30, 2004 and 2003(Unaudited)

Basis of
Presentation and Use of Estimates

The
accompanying financial statements have been prepared by us, without an audit. In
the opinion of management, all adjustments have been made, which include normal
recurring adjustments necessary to present fairly the consolidated financial
statements. Operating results for the three months ended September 30, 2004 and
2003 are not necessarily indicative of the operating results for the full year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted. We believe that
the disclosures provided are adequate to make the information presented not
misleading. These unaudited consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and related notes
included in our Annual Report for the year ended June 30, 2004 on Form 10-KSB.

The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the dates of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.

The
accompanying unaudited consolidated financial statements have been prepared in
accordance with Statement of Position 90-7 (SOP 90-7),
Financial Reporting by Entities in Reorganization under the Bankruptcy
Code. SOP 90-7 requires that the financial statements for periods
subsequent to the Chapter 11 filing petition distinguish transactions and events
that are directly associated with the reorganization from the ongoing operations
of the business. Accordingly, all pre-petition liabilities subject to compromise
are separately classified. Additional pre-petition claims (liabilities subject
to compromise) may arise due to the rejection of executory contracts or
unexpired leases, or as a result of the allowance of contingent or disputed
claims. Revenues, expenses, realized gains and losses and provision for losses
resulting from the reorganization are reported separately as
Reorganization items in the unaudited consolidated statements of
operations.

Except
for the reclassification of our Prepetition liabilities subject to
compromise as current liabilities at September 30, 2004, the accompanying
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of these
uncertainties nor do they reflect any adjustments that will result from SOP
90-7.

The
accompanying unaudited consolidated financial statements have been prepared on a
going concern basis, which assumes continuity of operations and realization of
assets and satisfaction of liabilities in the ordinary course of business and in
accordance with SOP 90-7.

11

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U.S.
WIRELESS DATA, INC.(Debtor in Possession)NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFor the three months ended September 30, 2004 and 2003(Unaudited)

Reclassifications

Certain
amounts in the prior period financial statements have been reclassified to
conform to the current presentation.

Stock-based
Compensation

We
account for employee stock-based compensation cost using the intrinsic value
method of accounting prescribed by the Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees (APB No.
25). The Company has adopted the disclosure-only provisions of Statement
of Financial Accounting Standards (SFAS) No. 123, Accounting
for Stock Based-Compensation and SFAS No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure for employee
stock arrangements. Restricted stock or stock awards are recorded as
compensation expense over the vesting period, if any, based on the market value
on the date of grant.

For options
issued to non-employees, we utilize the fair value method prescribed in SFAS No. 123.

At
September 30, 2004, we had four fixed stock-based compensation plans. The
exercise price of each option granted pursuant to these plans was equal to the
market price of the Companys common stock on the date of grant.
Accordingly, pursuant to APB No. 25, no compensation cost has been recognized
for such grants. Had compensation cost been determined based on the fair value
at the grant dates for such awards consistent with the method prescribed by SFAS
No. 123, the Companys net loss and loss per share for the periods
indicated would have been as follows:

|                                    | Three months endedSeptember 30, |                  
|----------------------------------- | ------------------------------- | -----------------
|
|Loss before discontinued operations |                                 | $    (350,000    
|Loss on discontinued operations     |                                 | (154,000         
|                                    |                                 |                  
|Net loss, as reported               |                                 | $    (504,000    
|Deduct: Total stock-based           |                                
|compensation expense determined     |                                
|under fair value based method       |                                 | (77,000          
|                                    |                                 |                  
|Pro forma net loss                  |                                 | $    (581,000    
|                                    |                                 |                  
|                                    |                                 |                  
|Per share, as reported              |                                
|Before discontinued operations      |                                 | $          (0.02)
|From discontinued operations        |                                 | (0.01)           
|                                    |                                 |                  
|Net loss                            |                                 | $          (0.03)
|                                    |                                 |                  
|                                    |                                 |                  
|Per share, pro forma                |                                
|Before discontinued operations      |                                 | $          (0.02)
|From discontinued operations        |                                 | (0.01)           
|                                    |                                 |                  
|Net loss                            |                                 | $          (0.03)
|                                    |                                 |                  
|                                    |                                 |                  

12

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U.S.
WIRELESS DATA, INC.(Debtor in Possession)NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFor the three months ended September 30, 2004 and 2003(Unaudited)

In
determining the fair value of each option, we used the Black-Scholes
option-pricing model as prescribed by SFAS No. 123 using the following
assumptions: dividend yield of zero, expected volatility of 123%, an average
expected option life of 3.5 years and an average risk-free interest rate of
2.31% for the year ended June 30, 2003. We did not grant options during the year
ended June 30, 2004 or during the three months ended September 30, 2004.

As of
the effective date of the Plan and as provided for under the provisions of the
Plan, all outstanding warrants and options expired worthless.

NOTE 3
 RECENT ACCOUNTING PRONOUNCEMENTS

In
December 2004, the Financial Accounting Standards Board (FASB)
issued SFAS No. 123 (Revised 2004) Share-Based Payment (SFAS
No. 123R) that addresses the accounting for share-based payment
transactions in which a company receives employee services in exchange for (a)
equity instruments of the company or (b) liabilities that are based on the fair
value of the companys equity instruments or that may be settled by the
issuance of such equity instruments. SFAS No. 123R addresses all forms of
share-based payment awards, including shares issued under employee stock
purchase plans, stock options, restricted stock and stock appreciation rights.
SFAS No. 123R eliminates the ability to account for share-based compensation
transactions using APB Opinion No. 25, Accounting for Stock Issued to
Employees, that was provided in Statement 123 as originally issued. Under
SFAS No. 123R companies are required to record compensation expense for all
share based payment award transactions measured at fair value. This statement is
effective for quarters ending after June 15, 2005. The adoption of SFAS No. 123R
did not have a material effect on our results of operation or financial
condition.

In
December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets
 An Amendment of APB Opinion No. 29, Accounting for Nonmonetary
Transactions (SFAS 153). SFAS 153 eliminates the exception from fair value
measurement for nonmonetary exchanges of similar productive assets in paragraph
21(b) of APB Opinion No. 29, Accounting for Nonmonetary Transactions, and
replaces it with an exception for exchanges that do not have commercial
substance. SFAS 153 specifies that a nonmonetary exchange has commercial
substance if the future cash flows of the entity are expected to change
significantly as a result of the exchange. SFAS 153 is effective for the fiscal
periods beginning after June 15, 2005. The adoption of SFAS No. 153 did not have
a material impact on our financial statements.

NOTE 4
 AUCTION SALES

Revenues
and income (loss) from the discontinued operations relating to the Auction Sales
are as follows:

|                     | Three months ended September 30, |              
|-------------------- | -------------------------------- | -------------
|
|Revenues             |                                  | $          --
|Loss from operations |                                  | (307,000     

13

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U.S.
WIRELESS DATA, INC.(Debtor in Possession)NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFor the three months ended September 30, 2004 and 2003(Unaudited)

NOTE 5
 PREPETITION LIABILITIES SUBJECT TO COMPROMISE

At
September 30, 2004, Prepetition liabilities subject to compromise
are as follows:

|Accounts payable                             |  | $   746,000 | 
|-------------------------------------------- |  | ----------- | 
|Accrued liabilities                          |  | 654,000     | 
|Obligation under capital lease               |  | 510,000     | 
|Obligation for rejected real property lease  |  | 212,000     | 
|Obligation for rejected executory agreements |  | 544,000     | 
|                                             |  |            
|Balance at September 30, 2004                |  | $2,666,000  | 
|                                             |  |            
|                                             |  |            

NOTE 6
 STOCKHOLDERS EQUITY

During
the three months ended September 30, 2004, 10,000 shares of Series C preferred
stock were converted into 16,667 shares of common stock, in accordance with the
Series C preferred stock documents.

As of
the effective date of the Plan and as provided for under the provisions of the
Plan, all outstanding warrants and options expired worthless.

NOTE 7
 NET LOSS PER SHARE

Loss
per common share is computed in accordance with the provisions of 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 the three months ended September
30, 2004 and 2003, 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 8
 SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental
disclosure of cash flow information:

$0 and
$50,000 was paid in cash for interest for the three months ended September 30,
2004 and 2003, respectively.

14

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U.S.
WIRELESS DATA, INC.(Debtor in Possession)NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFor the three months ended September 30, 2004 and 2003(Unaudited)

Supplemental
disclosure of non-cash financing and investing activities:

Three months
ended September 30, 2004

|1. |  | Conversion
of 10,000 shares of Series C Convertible Preferred Stock into 16,667  shares of Common
Stock.
|-- |  | --------------------------------------------------------------------------------------------------------

Three months
ended September 30, 2003

|1. |  | Conversion
of 1,000 shares of Series C Convertible Preferred Stock into 1,666 shares of Common Stock.
|-- |  | -----------------------------------------------------------------------------------------------------

|2. |  | Issuance
of warrant in connection with the Bridge Loan,  exercisable for 10,000,000 shares of
Common Stock  valued at $780,000. Amended and restated for 5,000,000 shares on March 26,
2004.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. |  | Accretion
of Bridge Loan discount of $22,000.
|-- |  | ---------------------------------------------

NOTE 9
 COMMITMENTS AND CONTINGENCIES

On May
31, 2004, we vacated our former leased office space in New York and rejected the
balance of the lease. We accrued an aggregate of $668,000 at March 31, 2004 as
an estimated obligation on the rejected lease plus the associated New York City
Commercial Rent Taxes, recognizing that this amount is subject to rejection and
reduction for a variety of reasons. Such amount was reduced by the elimination
of $206,000 of deferred rent expense. We had maintained a letter of credit in
the amount of $456,000 as a security deposit for this lease and had restricted
cash of the same amount on deposit in a money market fund as collateral for the
letter of credit maintained by the issuing bank. In September 2004, the issuing
bank claimed the collateral in settlement of the letter of credit, which was
presented and drawn by the landlord. The actual amount of the remaining claim
may be greater or less than the remaining estimated accrual.

We are
now subletting much smaller, more economical space on a month to month basis,
which will enable us to wind down the Chapter 11 Proceedings and terminate our
rental obligations once all matters have been concluded.

Rent
expense for the three months ended September 30, 2004 and 2003 was $7,000 and
$181,000, respectively.

Future
minimum lease payments on capital leases aggregated $510,000 and are included
under Prepetition liabilities as of September 30, 2004.

We had
employment agreements with our four executive officers. The agreements were for  initial
terms of one to three years, with automatic one-year extensions after  the initial term.
The employment agreements had committed the Company to annual  salary compensation of
$738,000. The agreements included provisions for  severance payments upon nonrenewal or
termination under certain conditions. The  agreements were rejected in conjunction with,
and are subject to, the Chapter 11  Proceedings. One agreement was assigned with the
Auction Sales. We accrued a  Provision for rejected executory agreements of
$544,000 at June 30,  2004, which amount was included in the Pre-petition
liabilities subject to  comprise at September 30, 2004.

15

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U.S.
WIRELESS DATA, INC.(Debtor in Possession)NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFor the three months ended September 30, 2004 and 2003(Unaudited)

We had
committed to reimburse a third party 50%, up to a maximum of $300,000, for
certain agreed upon development costs. The obligation is subject to the Chapter
11 Proceedings.

On
March 12, 2004, we were served with a complaint filed by U.S.A. Technologies,
Inc. in the District Court for the District of Delaware, alleging infringement
of one patent relating to certain aspects of the Companys technology to
enable vending machines to accept credit cards and seeking unspecified damages
and injunctive relief. The Company believes this suit is without merit and
intended to vigorously defend such action. The suit has been stayed by virtue of
the Companys bankruptcy filing. The suit is subject to the Chapter 11
Proceedings.

We are
not currently subject to any other material legal proceedings. However, we may
from time to time become a party to legal proceedings arising in the ordinary
course of our business.

See Note 1 -
The Company.

NOTE 10
 SUBSEQUENT EVENTS

First
Distribution for Allowed Claims

On
January 19, 2005 we paid approximately $889,000 as an initial payment to
creditors for prepetition liabilities representing approximately 50% of
Allowed Claims.

Settlement
and Release Agreement regarding the AT&T Action

On
February 23, 2005, we entered into a Settlement and Release Agreement (the
Agreement) with Cingular Wireless, LLC (successor in interest to
AT&T Wireless Services, Inc.) in order to settle the previously disclosed
arbitration relating to the AT&T Action between the parties.

The
Agreement shall become effective when all of the following events have occurred:
(a) the Agreement has been fully executed by the parties; (b) we have submitted
the Agreement to the United States Bankruptcy Court for the Southern District of
New York and that court has entered an order (Order) approving the
Agreement; and (c) the period for appealing the Order has expired and no appeal
has been filed or the Order has been affirmed on appeal.

The
Agreement has been executed by both parties and was submitted to the bankruptcy
court on March 8, 2005. The court has assigned March 31, 2005 as the date of the
hearing at which the court will review the Agreement.

Cingular
has agreed to pay us the sum of $900,000 within 15 days of the Agreement
becoming effective. In addition, within 15 days of the Agreement becoming
effective, the parties have agreed to execute and file a stipulation for
dismissal of the arbitration with prejudice, and without award of costs or
attorneys fees to either party. In addition, we must seek approval of the
Agreement and authorization to execute it from the Bankruptcy Court and shall be
responsible for all costs and attorneys fees incurred in seeking and
obtaining that approval.

The
parties shall bear their own costs and attorneys fees in connection with
the arbitration and the negotiation, drafting and execution of the agreement.
The parties each shall pay one-half of the hearing fees assessed or to be
assessed by the American Arbitration Association in connection with the
arbitration. The parties also agreed to mutually release one another from any
and all claims through the date of the Agreement.

16

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ITEM 2.
MANAGEMENTS PLAN OF OPERATION

Special Note
Regarding Forward-Looking Statements

We
may, in discussions of our future plans, objectives and expected performance in
periodic reports filed by us with the Securities and Exchange Commission
(SEC) (or documents incorporated by reference therein) and in
written and oral presentations made by us, include projections or other
forward-looking statements within the meaning of Section 27A of the Securities
Exchange Act of 1933 or Section 21E of the Securities Act of 1934, as amended.
Such projections and forward-looking statements are based on assumptions, which
we believe are reasonable but are, by their nature, inherently uncertain. You
are cautioned that any such forward looking statements are not guarantees of
future performance and involve risks and uncertainties, and that actual results
may differ materially from those projected in the forward looking statements as
a result of various factors. The factors that might cause such differences
include, among others, the following: (i) our ability to consummate our plan of
reorganization with respect to the Chapter 11 case; (ii) our inability to obtain
sufficient cash to fund ongoing obligations and continue as a going concern;
(iii) our ability to carry out our operating and restructuring strategy; and
(iv) other factors including those discussed below. We undertake no obligation
to publicly update or revise forward looking statements to reflect events or
circumstances after the date of this Quarterly Report on Form 10-QSB or to
reflect the occurrence of unanticipated events.

Overview

U.S.  Wireless
Data,  Inc.  was  incorporated  on July 30, 1991 in the State of Colorado.  On October 6,
2000,  we  reincorporated  in the state of Delaware.  Until May 21, 2004, we were
principally  engaged in providing  wireless  transaction delivery and gateway services to
the payment processing industry.

On
March 26, 2004, we filed a petition for relief under Chapter 11 of the United
States Bankruptcy Code. On May 11, 2004, the United States Bankruptcy Court (the
Court) conducted an auction of our assets and on May 21, 2004, the
sale of all of our assets and operations to Transactional Network Services, Inc.
(TNS) closed. TNS paid $6,000,000 for our wireless payment
processing business and $3,700,000 for our wireless vending business. Thus, from
May 21, 2004 through June 30, 2004, we did not have any assets or operations
other than those related to the bankruptcy. Currently, we have no operations.

On
November 4, 2004, we filed an Amended Plan of Reorganization (the
Plan) which contemplates that all cash after the payment of
administrative costs and claims will be used to pay our liabilities and any
remaining cash will be used to settle a portion of the aggregate $32,302,000
liquidation preference to which the holders of our Series C Preferred Stock are
entitled.

In
mid-December, we became aware of a tender offer of $0.12 per share for up to 2
million shares of our Series C Preferred Stock that had been launched on
December 2, 2004 by Regen Acquisition I, LLC (Offeror). The offer
expired on December 30, 2004. Although we do not know how many shares were
tendered in the offering, according to a Form 3 and 4 filed on January 5, 2005
by Riverside Contracting LLC (with an address at Offeror), such entity owns
1,204,583 shares of Series C Preferred Stock. We expressed concerns to Offeror
that the offer may not have been widely enough published for all holders to have
been advised of it and also, that as a result of their late notice to us, our
Board had not been able to weigh in with its opinion.

17

---

As
noted above, due to the fact that we learned of the tender offer so late into
the process, we were not in a position to report to our stockholders what our
opinion would have been. There are three separate sources of potential recovery
for a holder of Series C Preferred Stock and there is no assurance that such
sources will not exceed or be less than $0.12 per share. Those sources, as
described above in more detail, consist of (i) any cash remaining after payment
of our administrative costs and liabilities, (ii) any recovery from the AT&T
Wireless arbitration, net of the costs of prosecuting and administering such
claim, and (iii) the value of a Series C stockholders shares in the reorganized
U. S. Wireless Data.

As a
result of the foregoing, very little of what is included in this Report on Form
10-QSB is relevant to investors in the ongoing business. However, this report is
being filed to comply with the requirements of the Securities Exchange Act of
1934, as amended (the Exchange Act).

Discontinued
Operations

During
March 2004, our Board of Directors approved and authorized management to seek
the sale of our operations which were sold in the Auction Sales. In accordance
with accounting principles generally accepted in the United States of America,
we classified our former operations sold in the Auction Sales as discontinued
operations and have eliminated such operations from the discussion that follows
except where indicated.

Managements
Plan of Operation

As
described above, on May 11, 2004, the Court conducted an auction of our assets
and on May 21, 2004, the sale of all of our assets and operations to TNS closed.
TNS paid $6,000,000 for the wireless payment processing business and $3,700,000
for the wireless vending business. On November 4, 2004, we filed the Plan, which
contemplates that all cash after the payment of administrative costs will be
used to pay our liabilities and any remaining cash will be used to settle a
portion of the aggregate $32,302,000 liquidation preference to which the holders
of our Series C Preferred Stock are entitled.

On
December 27, 2004, the Court confirmed the Plan, which contemplates that the
primary source of cash for distributions will be the proceeds from the
aforementioned sale of our businesses and the cash contribution of Trinad, the
plan sponsor. Trinad will contribute $500,000 in cash to us in exchange for 93%
of the new common stock to be issued under the Plan, with the remaining 7% of
the new common stock being issued to the holders of record of our Series C
Preferred Stock and our common stock as of February 7, 2005, with 3.5% going to
each class. Of such $500,000 from Trinad, $400,000 will be added to the funds
used to pay administrative costs, creditors and, possibly, a small portion of
the liquidation preference. The remaining $100,000 will be retained by us to
fund the expenses of remaining public. The Plan contemplates that all cash
(other than the $100,000 to be retained by the reorganized debtor) will be
placed in the Liquidation Trust and, after the payment of administrative costs,
will be used to pay our liabilities. If there is any remaining cash, it will be
used to settle a small portion of the aggregate $32,302,000 liquidation
preference to which the holders of our Series C Preferred Stock are entitled.

18

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The
Plan also contemplates that the Liquidation Trust will pay for the prosecution
of our pending litigation against AT&T Wireless. On February 20, 2004, we
commenced arbitration proceedings against AT&T Wireless whereby we were
seeking a $12 million judgment against AT&T Wireless relating to its
decommissioning of the cellular digital packet data (CDPD) network. Any
recoveries, net of the costs of prosecuting the arbitration and administering
the trust, will be distributed by the Liquidation Trust as described above. On
March 8, 2005 we submitted a Settlement and Release Agreement to the Court in
order to settle this matter. Additional information is included in Part II, Item
5 later in this report.

There
is no assurance that there will be sufficient assets to satisfy all of our
liabilities, or to pay any portion of the Series C Preferred liquidation
preference. Our disclosure statement projected that available cash would be
adequate to pay 70-80% of the unsecured claims made. However, we do plan to
challenge certain of the claims and, if successful, of which there is no
assurance, we may be able to pay 100% of such claims and retain a small surplus
for payment of a small portion of the Series C Liquidation preference. Only
holders of record of our Series C Preferred Stock as of February 7, 2005 will be
entitled to receive any payments towards the Series C liquidation preference, or
to receive any pro rata share of the new common stock allocated to Series C
Preferred Stock. Cash distributions shall be made as soon as practicable, as
determined by the trustee of the Liquidation Trust. Distributions of the new
stock shall be made as soon as practicable after we make certain filings with
the SEC which were not made, in light of the uncertainties associated with the
bankruptcy, in order to conserve cash. Such filings include this Annual Report
on Form 10-KSB. In light of the sale of our operating assets to TNS in May, the
information to be contained in such reports will be largely irrelevant to
stockholders of the reorganized U.S. Wireless Data.

As
soon as practicable after we have filed our late SEC reports, new common stock
will be issued to Trinad (93%), holders of record of our Series C Preferred
Stock as of February 7, 2005 (3.5%) and holders of record of our common stock as
of the same date (3.5%). On that date, Robert Ellin and Jay Wolf shall become
our sole Board members and shall also be our Chief Executive Officer and Chief
Operating Officer, respectively, and Barry Regenstein will be our Chief
Financial Officer. On that date, we will be capitalized with $100,000 of the
$500,000 Trinad has paid, with the $400,000 having been transferred to the
Liquidation Trust.

Trinad
has advised us that it will seek to raise additional capital (which will dilute
the ownership interests of all stockholders) with a view to making us an
attractive vehicle with which to acquire a business. It will then seek a
suitable acquisition candidate. No such business has been identified and we will
be subject to a number of risks, including that any acquisition consummated by
us may turn out to be unsuccessful; investors in us will not know what operating
business, if any, will be acquired, including the particular industry in which
the business operates, and whether dilutive financing will be required
therewith; the historical operations of a specific business opportunity may not
necessarily be indicative of the potential for the future; we may acquire a
company in the early stage of development causing us to incur further risks; we
may be dependent upon the management of an acquired business which has not
proven its abilities or effectiveness; we will be controlled by a small number
of stockholders and such control could prevent the taking of certain actions
that may be beneficial to other stockholders; our common stock will likely be
thinly traded, and the public market may provide little or no liquidity for
holders of our common stock.

19

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Trinad
has agreed that it will not dispose of any of its common stock until an
acquisition transaction has been consummated and a Current Report on Form 8-K
setting forth the terms of the acquisition and audited financial statements of
the acquisition target have been filed with the SEC.

As a
result of the sale of virtually all of our operating assets, the historical
financial statements are irrelevant to any assessment of our operations on an
ongoing basis. Accordingly, readers are advised not to rely on any historical
financial information in considering an investment in or the disposition of our
stock. The Plan was confirmed by the Court and after we emerge from bankruptcy
we will have no liabilities and extremely limited cash under new management. The
Liquidation Trust will be entirely for the benefit of the holders of the Series
C Preferred Stock as of the record date, after payment of administrative costs
and allowed claims in accordance with the provisions of the Plan, and will not
be an asset of the corporation.

As
described more fully above, subsequent to the above-referenced transactions, our
plan of operation is to merge or effect a business combination with a domestic
or foreign private operating entity. We may seek to raise additional capital
first to make ourselves more attractive to acquisition candidates. We believe
that there are perceived benefits to being a reporting company with
a class of publicly-traded securities which may be attractive to private
entities. Other than activities relating to such financing attempting to locate
such a candidate, we do not currently anticipate conducting any operations.

We may
enter into a definitive agreement with a wide variety of private businesses
without limitation as to their industry or revenues. It is not possible at this
time to predict when, if ever, we will enter into a business combination with
any such private company or the industry or the operating history, revenues,
future prospects or other characteristics of any such company. Trinad intends to
raise capital to make us a more attractive acquisition vehicle and then seek a
suitable merger candidate. Trinad has not identified anyone for acquisition at
this juncture.

CRITICAL
ACCOUNTING POLICIES

The
accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America.

Estimates
and assumptions

The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the dates of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.

20

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Financial
Reporting by Entities in Reorganization under the Bankruptcy Code

The
accompanying consolidated financial statements have been prepared in accordance
with Statement of Position 90-7 (SOP 90-7), Financial
Reporting by Entities in Reorganization under the Bankruptcy Code. SOP
90-7 requires that the financial statements for periods subsequent to the
Chapter 11 filing petition distinguish transactions and events that are directly
associated with the reorganization from the ongoing operations of the business.
Accordingly, all pre-petition liabilities subject to compromise are separately
classified. Additional pre-petition claims (liabilities subject to compromise)
may arise due to the rejection of executory contracts or unexpired leases, or as
a result of the allowance of contingent or disputed claims. Revenues, expenses,
realized gains and losses and provision for losses resulting from the
reorganization are reported separately as Reorganization items in
the accompanying consolidated statements of operations.

Except
for the reclassification of our Prepetition liabilities subject to
compromise as current liabilities at September 30, 2004, the accompanying
consolidated financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that may result from the outcome
of these uncertainties nor do they reflect any adjustments that will result from
SOP 90-7.

Going Concern

The
accompanying consolidated financial statements have been prepared on a going
concern basis, which assumes continuity of operations and realization of assets
and satisfaction of liabilities in the ordinary course of business and in
accordance with SOP 90-7.

Revenue
Recognition from Discontinued Operations

We
adopted the provisions of Staff Accounting Bulletin No. 101, Revenue Recognition
in Financial Statements (SAB 101), which provides guidance on the
recognition, presentation and disclosure of revenue in financial statements
filed with the Securities and Exchange Commission. In addition, we follow the
guidance contained in Emerging Issues Task Force position No. 00-21 with respect
to sales arrangements with multiple deliverables.

We
adopted Emerging Issues Task Force (EITF) No. 00-21, Accounting for Revenue
Arrangements with Multiple Deliverables, which is being applied on a prospective
basis. The consensus addresses how to account for arrangements that may involve
the delivery or performance of multiple products, services and/or rights to use
assets. Revenue arrangements with multiple deliverables are required to be
divided into separate units of accounting if the deliverables in the arrangement
meet certain criteria. Arrangement consideration must be allocated among the
separate units of accounting based on their relative fair values. The consensus
also supersedes certain guidance set forth in SEC Staff Accounting Bulletin
Number 101, Revenue Recognition in Financial Statements (SAB 101). SAB 101 was
amended in December 2003 by Staff Accounting Bulletin Number 104 (SAB 104). The
adoption of this pronouncement did not have a material impact on our financial
statements.

21

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We
derived revenue from two primary sources from our discontinued operations:
service fees and product (equipment) sales.

Services.Service fees consist of: (a) one-time, non-refundable service activation
fees; (b) monthly minimum subscription fees for the availability of service; (c)
fees for transactions delivered on wireless or other methods through our hosts;
and (d) other fees, including administration and other fees for certain wireless
services, certain charges for telecommunications connections between us and a
party, and installation fees and expenses. Service fees are generated from our
Synapse Service. Service activation fees are recognized ratably over the
estimated average life of a customer contract. All other service revenues are
recognized as services are provided.

Product
sales.Product sales (i.e., sales of equipment) are primarily derived from
the sale of our proprietary Synapse Enabler and Synapse Adapter products.
Revenues from product sales are recognized upon shipment and acceptance,
although product sales of our Synapse Enabler for Vending are recognized ratably
over the life of the customer contract upon activation.

Loss
Contingencies, Impairment of an Asset or Incurrence of a Liability

We are
subject to the possibility of various loss contingencies arising in the ordinary
course of business. We consider the likelihood of loss or impairment of an asset
or the incurrence of a liability, as well as our ability to reasonably estimate
the amount of loss in determining loss contingencies. An estimated loss
contingency is accrued when it is probable that an asset has been impaired or a
liability has been incurred and the amount of loss can be reasonably estimated.
We regularly evaluate current information available to us to determine whether
such accruals should be adjusted.

RECENT
ACCOUNTING PRONOUNCEMENTS

In
December 2004, the Financial Accounting Standards Board (FASB)
issued SFAS No. 123 (Revised 2004) Share-Based Payment (SFAS
No. 123R) that addresses the accounting for share-based payment
transactions in which a company receives employee services in exchange for (a)
equity instruments of the company or (b) liabilities that are based on the fair
value of the companys equity instruments or that may be settled by the
issuance of such equity instruments. SFAS No. 123R addresses all forms of
share-based payment awards, including shares issued under employee stock
purchase plans, stock options, restricted stock and stock appreciation rights.
SFAS No. 123R eliminates the ability to account for share-based compensation
transactions using APB Opinion No. 25, Accounting for Stock Issued to
Employees, that was provided in Statement 123 as originally issued. Under
SFAS No. 123R companies are required to record compensation expense for all
share based payment award transactions measured at fair value. This statement is
effective for quarters ending after June 15, 2005. The adoption of SFAS No. 123R
did not have a material effect on our results of operation or financial
condition.

22

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In
December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets
 An Amendment of APB Opinion No. 29, Accounting for Nonmonetary
Transactions (SFAS 153). SFAS 153 eliminates the exception from fair value
measurement for nonmonetary exchanges of similar productive assets in paragraph
21(b) of APB Opinion No. 29, Accounting for Nonmonetary Transactions, and
replaces it with an exception for exchanges that do not have commercial
substance. SFAS 153 specifies that a nonmonetary exchange has commercial
substance if the future cash flows of the entity are expected to change
significantly as a result of the exchange. SFAS 153 is effective for the fiscal
periods beginning after June 15, 2005. The adoption of SFAS No. 153 did not have
a material impact on our financial statements.

QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We
currently have no floating rate indebtedness, hold no derivative instruments,
and do not earn foreign-sourced income. Accordingly, changes in interest rates
or currency exchange rates do not generally have a direct effect on our
financial position. Changes in interest rates may affect the amount of interest
we earn on available cash balances as well as the amount of interest we pay on
borrowings. To the extent that changes in interest rates and currency exchange
rates affect general economic conditions, we may also be affected by such
changes.

ITEM 3.
CONTROLS AND PROCEDURES

(a)
Evaluation of Disclosure Controls and Procedures. Our principal executive
officer and principal financial officer, after evaluating the effectiveness of
our disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly
Report on Form 10-QSB, have concluded that, based on such evaluation, our
disclosure controls and procedures were adequate and effective to ensure that
material information relating to us, including our consolidated subsidiaries,
was made known to them by others within those entities, particularly during the
period in which this Quarterly Report on Form 10-QSB was being prepared.

(b)
Changes in Internal Controls. There were no significant changes in our
internal control over financial reporting, identified in connection with the
evaluation of such internal control that occurred during our last fiscal
quarter, that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.

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PART II
 OTHER INFORMATION

ITEM 1. LEGAL
PROCEEDINGS

On
March 26, 2004, we filed a petition for relief under Chapter 11 of the
Bankruptcy Code with the Court. On May 21, 2004, the Court closed the sale of
all of our assets and operations to TNS. We are operating as a
debtor-in-possession (DIP) under the jurisdiction of the Court and
in accordance with the applicable provisions of the Bankruptcy Code and orders
of the Court (the Chapter 11 Proceedings).

On
November 4, 2004, we filed an Amended Plan of Reorganization (the
Plan) which contemplates that all cash after the payment of
administrative costs and claims will be used to pay our liabilities and any
remaining cash will be used to settle a portion of the aggregate $32,302,000
liquidation preference to which the holders of our Series C Preferred Stock are
entitled. On December 27, 2004, the Court confirmed the Plan.

On
March 12, 2004, we were served with a complaint filed by U.S.A. Technologies,
Inc. in the District Court for the District of Delaware, alleging infringement
of one patent relating to certain aspects of our technology to enable vending
machines to accept credit cards and seeking unspecified damages and injunctive
relief. We believe this suit is without merit and intended to vigorously defend
such action. The suit has been stayed by virtue of our bankruptcy filing and is
subject to the Chapter 11 Proceedings.

We are
not currently subject to any other material legal proceedings. However, we may
from time to time become a party to legal proceedings arising in the ordinary
course of our business.

ITEM 2.
CHANGES IN SECURITIES AND SMALL BUSINESS ISSUER  PURCHASES OF EQUITY SECURITIES

None.

ITEM 3.
DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

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ITEM 5. OTHER
INFORMATION

First
Distribution for Allowed Claims

On
January 19, 2005 we paid approximately $889,000 as an initial payment to
creditors for prepetition liabilities representing approximately 50% of
Allowed Claims.

Settlement
and Release Agreement regarding the AT&T Action

On
February 23, 2005, we entered into a Settlement and Release Agreement (the
Agreement) with Cingular Wireless, LLC (successor in interest to
AT&T Wireless Services, Inc.) in order to settle the previously disclosed
arbitration relating to the AT&T Action between the parties.

The
Agreement shall become effective when all of the following events have occurred:
(a) the Agreement has been fully executed by the parties; (b) we have submitted
the Agreement to the United States Bankruptcy Court for the Southern District of
New York and that court has entered an order (Order) approving the
Agreement; and (c) the period for appealing the Order has expired and no appeal
has been filed or the Order has been affirmed on appeal.

The
Agreement has been executed by both parties and was submitted to the bankruptcy
court on March 8, 2005. The court has assigned March 31, 2005 as the date of the
hearing at which the court will review the Agreement.

Cingular
has agreed to pay us the sum of $900,000 within 15 days of the Agreement
becoming effective. In addition, within 15 days of the Agreement becoming
effective, the parties have agreed to execute and file a stipulation for
dismissal of the arbitration with prejudice, and without award of costs or
attorneys fees to either party. In addition, we must seek approval of the
Agreement and authorization to execute it from the Bankruptcy Court and shall be
responsible for all costs and attorneys fees incurred in seeking and
obtaining that approval.

The
parties shall bear their own costs and attorneys fees in connection with
the arbitration and the negotiation, drafting and execution of the agreement.
The parties each shall pay one-half of the hearing fees assessed or to be
assessed by the American Arbitration Association in connection with the
arbitration. The parties also agreed to mutually release one another from any
and all claims through the date of the Agreement.

ITEM 6.
EXHIBITS

|Exhibit No. | Description of Exhibit
|----------- | ----------------------
|            |                       
|31          | .1                    
|31          | .2                    
|32          | .1                    
|32          | .2                    

25

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SIGNATURES

In
accordance with Section 13 or 15 of the Exchange Act, the Registrant caused this
Report to be signed on its behalf by the undersigned, thereunto duly authorized.

| | U.S.
WIRELESS DATA, INC.
| | ------------------------

|Dated:    March 14, 2005
|------------------------
|                        

|Dated:    March 14, 2005
|------------------------
|                        

26

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