**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**




**WASHINGTON,
      DC 20549**









**FORM
      10-QSB**







x
            **Quarterly
                Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                Act****of 1934 for the quarterly
                period ended March
                31, 2006**  o
            **Transition Report Pursuant
              to Section
              13 or 15(d) of the Securities Exchange Act of
              1934**


****


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)







84-1178691


(IRS
      Employer Identification No.)




2121
      Avenue of the Stars, Suite 1650


Los
      Angeles, CA 90067


(Address
      of principal executive offices, including zip code)




(310)
      601-2500


(Registrant's
      Telephone Number, including area code)




153
      East
      53 rd Street,
      48 th Floor


New
      York, NY 10022


(Former
      Address if changed since last report)







Check
      whether the Registrant (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 x  No o





Indicate
      by check mark whether the Registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes [X] No [ ]





As
      of May
      15, 2006, there were outstanding 9,499,730 shares of the Registrant’s Common
      Stock ($0.01 par value per share).





Transitional
      Small Business Disclosure Format. Yes o  No x







**U.S.
      WIRELESS DATA, INC.**


**(A
      Development Stage Company)**


**MARCH
      31, 2006 QUARTERLY REPORT ON FORM 10-QSB**


**TABLE
      OF CONTENTS**





**Page**Special
                Note Regarding Forward Looking Statements
            
            3PART
                I -- FINANCIAL INFORMATION
            
            4ITEM
                1. Financial Statements (Unaudited)
            
            4Condensed
                Consolidated Balance Sheet as of March 31, 2006
            
            4Condensed
                Consolidated Statements of Operations for the Three and Nine months
                ended
                March 31, 2006 and 2005
            
            5Condensed
                Consolidated Statements of Cash Flows for the Nine months ended March
                31,
                2006 and 2005
            
            6Notes
                to Condensed Consolidated Financial Statements
            
            7ITEM
                2. Management’s Discussion and Analysis and Plan of
                Operation
            
            16ITEM
                3. Controls and Procedures
            
            20PART
                II -- OTHER INFORMATIONITEM
                1. Legal Proceedings
            
            21ITEM
                2.Unregistered
                Sales of Equity Securities and Use of Proceeds21ITEM
                3. Defaults Upon Senior Securities
            
            21ITEM
                4. Submission of Matters to a Vote of Security Holders
            
            21ITEM
                5. Other Information
            
            21ITEM
                6. Exhibits
            
            21





2


**SPECIAL
      NOTE REGARDING FORWARD-LOOKING STATEMENTS**





In
      this
      section, “Special Note Regarding Forward-Looking Statements,” references to
“we,” “us,” “our,” refer to U.S. Wireless Data, Inc.





To
      the
      extent that the information presented in this Quarterly Report on Form 10-QSB
      discuss financial projections, information or expectations about our products
      or
      markets, or otherwise makes statements about future events, such statements
      are
      forward-looking. We are making these forward-looking statements in reliance
      on
      the safe harbor provisions of the Private Securities Litigation Reform Act
      of
      1995. Although we believe that the expectations reflected in these
      forward-looking statements are based on reasonable assumptions, there are a
      number of risks and uncertainties that could cause actual results to differ
      materially from such forward-looking statements. These risks and uncertainties
      are described, among other places in this Quarterly Report, in “Plan of
      Operation”.





In
      addition, we disclaim any obligations to update any forward-looking statements
      to reflect events or circumstances after the date of this Quarterly Report.
      When
      considering such forward-looking statements, you should keep in mind the risks
      referenced above the other cautionary statement in this Quarterly
      Report.




3


**Part
      I — FINANCIAL INFORMATION**




**ITEM
      1. Financial Statements**




**U.S.
      WIRELESS DATA, INC.**


**(A
      Development Stage Company)**


**CONDENSED
      CONSOLIDATED BALANCE SHEET**


**(Unaudited)**





**ASSETS**
            
            **March
                31, 2006**Current
                assets:Cash
            
            $
            5,217,000**Total
                assets**
            
            **$**
            **5,217,000****LIABILITIES
                AND STOCKHOLDERS' EQUITY**Current
                liabilities:Accrued
                liabilities
            
            $
            115,000**Total
                liabilities**
            
            
            **115,000**Commitments
                and contingenciesStockholders'
                equity:Preferred
                stock, 1,000,000 shares authorized at $.01 par value,no
                shares issued or outstanding at March 31, 2006
            
            
            -Common
                stock, 19,000,000 shares authorized at $.01 par value,9,499,730
                shares issued and outstanding
            
            
            95,000Additional
                paid-in capital
            
            
            5,826,000Deficit
                accumulated during development stage
            
            
            (819,000
            )**Total
                stockholders' equity**
            
            
            **5,102,000****Total
                liabilities and stockholders' equity**
            
            **$**
            **5,217,000**See
                notes to condensed consolidated financial
                statements.





4


**U.S.
      WIRELESS DATA, INC.**


**(A
      Development Stage Company)**


**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


**(Unaudited)**





**Successor****Company****Cumulative****Period****THREE
                MONTHS ENDED**
            
            **NINE
                MONTHS ENDED**
            
            **From
                Inception****MARCH
                31,**
            
            **MARCH
                31,**
            
            **(April
                1, 2005)****Successor**
            
            **Predecessor**
            
            **Successor**
            
            **Predecessor**
            
            **To****Company**
            
            **Company**
            
            **Company**
            
            **Company**
            
            **March
                31,****2006**
            
            **2005**
            
            **2006**
            
            **2005**
            
            **2006****Continuing
                operations**General
                and administrative expenses
            
            $
            (747,000
            )
            $
            (254,000
            )
            $
            (808,000
            )
            $
            (981,000
            )
            $
            (833,000
            )Interest
                income
            
            
            14,000
            
            
            -
            
            
            14,000
            
            
            -
            
            
            14,000Interest
                expense
            
            
            -
            
            
            (1,000
            )
            
            -
            
            
            4,000
            
            
            -Other
                expenses
            
            
            -
            
            
            49,000
            
            
            -
            
            
            40,000
            
            
            -Loss
                before reorganization itemsand
                discontinued operations
            
            
            (733,000
            )
            
            (206,000
            )
            
            (794,000
            )
            
            (937,000
            )
            
            (819,000
            )Reorganization
                itemsGain
                on sale of shell
            
            
            -
            
            
            400,000
            
            
            -
            
            
            400,000
            
            
            -Professional
                fees and U.S. Trustee fees
            
            
            -
            
            
            (22,000
            )
            
            -
            
            
            (91,000
            )
            
            -Interest
                income
            
            
            -
            
            
            9,000
            
            
            -
            
            
            33,000
            
            
            -Income
                (Loss) from continuing operations
            
            
            (733,000
            )
            
            181,000
            
            
            (794,000
            )
            
            (595,000
            )
            
            (819,000
            )**Discontinued
                operations**Loss
                on discontinued operations
            
            
            -
            
            
            (58,000
            )
            
            -
            
            
            (305,000
            )
            
            -Gain
                on sale of discontinued operations
            
            
            -
            
            
            5,000
            
            
            -
            
            
            5,000
            
            
            -Loss
                from discontinued operations
            
            
            -
            
            
            (53,000
            )
            
            -
            
            
            (300,000
            )
            
            -**Net
                income (loss)**
            
            **$**
            **(733,000**
            **)**
            **$**
            **128,000**
            
            **$**
            **(794,000**
            **)**
            **$**
            **(895,000**
            **)**
            **$**
            **(819,000**
            **)**Basic
                and dilutedNet
                Loss per share fromfrom
                continuing operations
            
            $
            (0.12
            )
            
            (a
            )
            $
            (0.17
            )
            
            (a
            )
            $
            (0.18
            )Net
                Loss per share from discontinued operations
            
            
            -
            
            
            (a
            )
            
            -
            
            
            (a
            )
            
            -Net
                loss per share
            
            $
            (0.12
            )
            
            (a
            )
            $
            (0.17
            )
            
            (a
            )
            $
            (0.18
            )Weighted
                average common sharesoutstanding,
                basic and diluted
            
            
            5,988,000
            
            
            4,000,000
            
            
            4,598,000
            
            
            4,000,000
            
            
            4,598,000See
                notes to condensed consolidated financial statements.(a)
                See Note 4.




5




**U.S.
      WIRELESS DATA, INC.**


**(A
      Development Stage Company)**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(Unaudited)**





**Successor****Company****Cumulative****Period****For
                the nine months ended March 31,**
            
            **From
                Inception****2006**
            
            **2005**
            
            **(April
                1, 2005)****Successor**
            
            **Predecessor**
            
            **To****Company**
            
            **Company**
            
            **March
                31, 2006****CASH
                FLOWS FROM OPERATING ACTIVITIES:**Net
                loss
            
            $
            (794,000
            )
            $
            (895,000
            )
            $
            (819,000
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Provision
                for doubtful accounts
            
            
            -
            
            
            53,000
            
            
            -Stock-based
                compensation
            
            
            381,000
            
            
            -
            
            
            381,000Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            -
            
            
            (39,000
            )
            
            -Due
                from factor
            
            
            -
            
            
            63,000
            
            
            -Due
                from plan sponsor
            
            
            -
            
            
            (400,000
            )
            
            -Due
                from winning auction sale bidder
            
            
            -
            
            
            107,000
            
            
            -Prepaid
                and other current assets
            
            
            -
            
            
            357,000
            
            
            -Accounts
                payable and accrued liabilities
            
            
            102,000
            
            
            174,000
            
            
            115,000Accrued
                liabilities
            
            
            -
            
            
            (486,000
            )
            
            -Prepetition
                liabilities subject to compromise
            
            
            -
            
            
            (909,000
            )
            
            -Net
                cash used in operating activities
            
            
            (311,000
            )
            
            (1,975,000
            )
            
            (323,000
            )**CASH
                FLOWS FROM INVESTING ACTIVITIES:**Decrease
                in restricted cash
            
            
            -
            
            
            456,000
            
            
            -Transfer
                to Chapter 11 escrow accounts
            
            
            -
            
            
            (668,000
            )
            
            -Transfer
                from Chapter 11 escrow accounts
            
            
            -
            
            
            1,831,000
            
            
            -Transfer
                to Liquidation Trust
            
            
            -
            
            
            (100,000
            )
            
            -Transfer
                to Plan Sponsor escrow account
            
            
            -
            
            
            (100,000
            )
            
            -Transfer
                from Plan Sponsor escrow account
            
            
            -
            
            
            49,000
            
            
            -Net
                cash provided by investing activities
            
            
            -
            
            
            1,468,000
            
            
            -**CASH
                FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                from common stock issuances
            
            
            5,500,000
            
            
            -
            
            
            5,500,000Proceeds
                from Plan Sponsor
            
            
            -
            
            
            100,000
            
            
            100,000Costs
                related to acquisition of shell
            
            
            -
            
            
            (49,000
            )
            
            (60,000
            )Payments
                for real estate lease termination
            
            
            -
            
            
            (456,000
            )
            
            -Net
                cash provided (used in) financing activities
            
            
            5,500,000
            
            
            (405,000
            )
            
            5,540,000Net
                increase (decrease) in cash and cash equivalents
            
            
            5,189,000
            
            
            (912,000
            )
            
            5,217,000Cash
                and cash equivalents, beginning of period
            
            
            28,000
            
            
            912,000
            
            
            -Cash
                and cash equivalents, end of period
            
            $
            5,217,000
            
            $
            -
            
            $
            5,217,000See
                notes to condensed consolidated financial
                statements.





6


**U.S.
      WIRELESS DATA, INC.**


**(A
      Development Stage Company)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**





**(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 currently
      a
“shell” company with no operations and controlled by Trinad Capital, L.P.
      (“Trinad”), our major shareholder. The Company intends to serve as a vehicle to
      effect an asset acquisition, merger, exchange of capital stock or other business
      combination with a domestic or foreign business.





**Trinad
      and Management’s Plan of Operation**





Trinad,
      a
      hedge fund dedicated to investing in micro-cap companies, is seeking to raise
      additional capital 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 are therefore subject to a number of risks,
      including: any acquisition consummated by us may turn out to be unsuccessful;
      our investors will not know what operating business, if any, will be acquired,
      including the particular industry in which the business operates, and whether
      financing that could have a dilutive effect on our present stockholders will
      be
      required in connection 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.





Trinad
      has agreed that it will not dispose of any of our common stock held by it 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 Securities and Exchange
      Commission (“SEC”).





**Reorganization
      and the Liquidation Trust**





On
      March
      18, 2005, in accordance with the Plan (as defined below under the section titled
      Chapter 11 Proceedings), Trinad, our Plan sponsor, became the holder of 93%
      of
      our newly issued common stock as further discussed in the paragraphs below
      (the
“Reorganization”).





Additionally,
      on March 18, 2005, Robert Ellin became a director and our Chief Executive
      Officer, Jay Wolf became a director and our Chief Operating Officer and Chief
      Financial Officer and Barry Regenstein became a director. Robert Ellin and
      Jay
      Wolf are the Managing Member and Managing Director of Trinad,
      respectively.





In
      accordance with the Plan, Trinad contributed $400,000 in cash to the Predecessor
      Company (as defined in Note 2) and as of the close of business on March 18,
      2005
      (immediately before the Reorganization), all of the assets and liabilities
      of
      the Predecessor Company, with the exception of the public entity shell company,
      along with all contingent assets and liabilities, were transferred to the USWD
      Liquidation Trust (the “Liquidation Trust”). In addition, Trinad contributed
      $100,000 in cash to the Successor Company (as defined in Note 2) in exchange
      for
      93% of the new common stock issued under the Plan, with the remaining 7% of
      the
      new common stock 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.
      Simultaneously, all of our originally outstanding Series C Preferred Stock
      and
      our Common Stock were cancelled. In accordance with the Plan, the cash in the
      Liquidation Trust will be used to pay administrative costs and creditors of
      the
      Chapter 11 Proceedings. If there is any remaining cash in the Liquidation Trust,
      it will be used to settle a small portion





7


**U.S.
      WIRELESS DATA, INC.**


**(A
      Development Stage Company)**


**NOTES
      CONDENSED CONSOLIDATED TO FINANCIAL STATEMENTS**





**(Unaudited)**





**NOTE
      1 — THE COMPANY (continued)**





of
      the
      aggregate $32,302,000 liquidation preference to which the holders of our Series
      C Preferred Stock as of February 7, 2005 are entitled.





**Chapter
      11 Proceedings**





On
      March
      26, 2004 (the “Petition Date”), 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. Prior to the
      chapter 11 proceeding, we were principally engaged in providing wireless
      transaction delivery and gateway services to the payment processing industry.
      Since our inception, we had incurred significant losses and negative cash flow
      from operations.




We
      operated 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”) until the
      Reorganization.





On
      December 27, 2004, the Court confirmed our Amended Plan of Reorganization (the
      “Plan”). 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.





On
      January 19, 2005 we paid approximately $889,000 as an initial payment to
      creditors for pre-petition liabilities representing approximately 50% of
“Allowed Claims”.





The
      following assets and liabilities from our Balance Sheet as of the close of
      business on March 18, 2005 immediately before the Reorganization, along with
      all
      contingent assets and liabilities, were transferred to the Liquidation Trust
      (as
      provided for under the terms of the Plan) and the Company effectuated the
      completion of the Reorganization, thereby emerging from the Chapter 11
      Proceedings:





ASSETSCurrent
                assets:Cash
                and cash equivalents
            
            $
            100,000Cash
                and cash equivalents in escrow
            
            
            2,225,000Due
                from Plan Sponsor
            
            
            400,000Due
                from winning auction sale bidder
            
            
            64,000Prepaid
                and other current assets
            
            
            13,000$
            2,802,000LIABILITIESCurrent
                liabilities:Accounts
                payable
            
            $
            212,000Accrued
                liabilities
            
            
            73,000Total
                liabilities not subject to compromise
            
            
            285,000Pre-petition
                liabilities subject to compromise
            
            
            1,572,000Total
                liabilities
            
            
            1,857,000





“Pre-petition
      liabilities subject to compromise” were as follows:





Accounts
                payable
            
            $
            1,154,000Accrued
                liabilities
            
            
            206,000Obligation
                for rejected real property lease
            
            
            212,000$
            1,572,000




8




**U.S.
      WIRELESS DATA, INC.**


**(A
      Development Stage Company)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**





**(Unaudited)**





**NOTE
      1 — THE COMPANY (continued)**





**Loan,
      Stock Sales and Liquidity**





On
      September 23, 2005, the Company executed a loan agreement with Trinad whereby
      Trinad has agreed to loan the Company up to a principal amount of $100,000
      (the
“Loan”) at any time and from time to time prior to the Company’s consummation of
      a Next Financing (as defined below). Trinad shall make advances to the Company
      in such amounts, as the Company shall request from time to time. The Loan bears
      interest at the prime rate plus 1 percent per annum. The entire outstanding
      principal amount of the Loan and any accrued interest thereon shall be due
      and
      payable by the Company upon, and not prior to, the consummation of a sale of
      securities (other than a sale of shares of the Company’s Common Stock to
      officers, directors or employees of, or consultants to, the Company in
      connection with their provision of services to the Company), to a third party
      or
      parties with proceeds to the Company of not less than $200,000 (a “Next
      Financing”). As of March 31, 2006, no amounts were outstanding under the loan
      agreement.





During
      the three months ended March 31, 2006, the Company sold 5,500,000 units,
      consisting of one share of common stock and one warrant, at a price of $1 per
      unit in three private placements. The warrants have an exercise price of $2
      per
      share and expire 1,000,000 in December 2007, 950,000 in January 2008 and
      3,550,000 in March 2008. As of March 31, 2006, the Company had approximately
      $5,217,000 of cash, which management believes is sufficient to satisfy our
      monetary needs for the next fiscal year. During the three months ended March
      31,
      2006, the Company’s stock price was trading from $1.30 to $2.30. The Company has
      determined that all of the proceeds from the sale of the units were allocated
      to
      the shares of common stock contained in the units at $1 per share. As a result,
      no value was allocated to the warrants granted in connection with the sale
      of
      these units.





We
      do not
      currently have an operating business and therefore have no ability to generate
      cash flow from operations in order to fund our ongoing financial needs past
      the
      next fiscal year.





**NOTE
      2 - BASIS OF PRESENTATION**





The
      Company may be referred to as the “Predecessor Company” for all periods through
      the Reorganization and as the “Successor Company” for all periods after the
      recognition of the Reorganization. The Reorganization was effectuated as of
      the
      close of business on March 18, 2005; however, there was virtually no activity
      between March 19, 2005 and March 31, 2005. Therefore, for accounting purposes,
      we used March 31, 2005 as the date the Reorganization was effectuated.





As
      a
      result of (i) the sale of virtually all of our operating assets, , and (ii)
      the
      Reorganization the historical financial statements are irrelevant to any
      assessment of the Company on an ongoing basis. Accordingly, readers are advised
      not to rely on any historical financial information in considering an investment
      in or disposition of our stock.





There
      were no revenues during the three and nine month periods ended March 31, 2006
      and 2005 from discontinued operations.





9


**U.S.
      WIRELESS DATA, INC.**


**(A
      Development Stage Company)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**





**(Unaudited)**





**NOTE
      2 - BASIS OF PRESENTATION (continued)**





**Basis
      of Presentation and Use of Estimates**





The
      accompanying interim condensed consolidated financial statements included herein
      have been prepared in accordance with accounting principles generally accepted
      in the United States of America and have been prepared by us, without an audit
      pursuant to the rules and regulations of the Security and Exchange Commission.
      In the opinion of management, all adjustments have been made, which include
      normal recurring adjustments necessary to present fairly the condensed
      consolidated financial statements. Operating results for the periods presented
      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 condensed 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, 2005
      on
      Form 10-KSB.





The
      accompanying condensed 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. All pre-petition
      claims were transferred to the Liquidation Trust on March 18, 2005 in accordance
      with the Reorganization. Revenues, expenses, realized gains and losses and
      provision for losses resulting from the reorganization are reported separately
      as “Reorganization items” in the accompanying condensed consolidated statements
      of operations.





The
      preparation of 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.





All
      of
      the common stock that was outstanding prior to the Petition Date was cancelled
      and new shares of common stock were issued in accordance with the Plan. The
      reorganization value of the assets of the emerging entity immediately before
      the
      date of confirmation exceeded the total of all post-petition liabilities and
      allowed claims, therefore, the Company did not qualify for fresh start
      accounting under SOP 90-7 and continued its basis of accounting.





The
      Company is subject to a number of risks similar to those of other development
      stage companies including dependence on key individuals, dependence on outside
      sources of capital, completion of an asset acquisition, merger, and exchange
      of
      capital stock or other business combination with a domestic or foreign business.
      There are no assurances, however, that the Company will be able to obtain
      additional financing or achieve the completion of an asset acquisition, merger
      or other business combination on favorable terms.





**Reclassifications**





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




10


**U.S.
      WIRELESS DATA, INC.**


**(A
      Development Stage Company)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**





**(Unaudited)**





**NOTE
      2 - BASIS OF PRESENTATION (continued)**


**Stock-based
      Compensation**




On
      January 1, 2006, the Company adopted Statement of Financial Accounting
      Standards No. 123 (revised 2004), “Share-Based Payment,” (“SFAS 123(R)”)
      which requires the measurement and recognition of compensation expense for
      all
      share-based payment awards made to employees and directors based on estimated
      fair values. SFAS 123(R) supersedes the Company’s previous accounting under
      Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to
      Employees” (“APB 25”) for periods beginning in fiscal 2006. In March 2005, the
      Securities and Exchange Commission issued Staff Accounting Bulletin No. 107
      (“SAB 107”) relating to SFAS 123(R). The Company has applied the provisions of
      SAB 107 in its adoption of SFAS 123(R).





The
      Company adopted SFAS 123(R) using the modified prospective transition method,
      which requires the application of the accounting standard as of January 1,
      2006, the first day of the Company’s third quarter in fiscal year 2006. The
      Company’s Condensed Consolidated Financial Statements as of and for the three
      months ended March 31, 2006 reflect the impact of SFAS 123(R). In
      accordance with the modified prospective transition method, the Company’s
      Condensed Consolidated Financial Statements for prior periods have not been
      restated to reflect, and do not include, the impact of SFAS 123(R). Stock-based
      compensation expense recognized under SFAS 123(R) for the three months ended
      March 31, 2006 was approximately $381,000 which consisted of warrant
      granted to Board Members and an Officer (See Note 8). There was no stock-based
      compensation expense related to employee equity awards during the three and
      nine
      months ended March 31, 2005 under APB 25.





SFAS
      123(R) requires companies to estimate the fair value of share-based payment
      awards on the date of grant using an option-pricing model. The value of the
      portion of the award that is ultimately expected to vest is recognized as
      expense over the requisite service period in the Company’s Condensed
      Consolidated Statement of Operations. Prior to the adoption of SFAS 123(R),
      the
      Company accounted for employee equity awards and employee stock purchases using
      the intrinsic value method in accordance with APB 25 as allowed under Statement
      of Financial Accounting Standards No. 123, “Accounting for Stock-Based
      Compensation”  (“SFAS 123”). Under the intrinsic value method, no
      stock-based compensation expense had been recognized in the Company’s Condensed
      Consolidated Statement of Operations, other than as related to acquisitions,
      because the exercise price of the Company’s stock options granted to employees
      and directors equaled the fair market value of the underlying stock at the
      date
      of grant.





Stock-based
      compensation expense recognized during the period is based on the value of
      the
      portion of share-based payment awards that is ultimately expected to vest during
      the period. SFAS 123(R) requires forfeitures to be estimated at the time of
      grant and revised, if necessary, in subsequent periods if actual forfeitures
      differ from those estimates.





The
      fair
      value of share-based payment awards is estimated at the grant date using the
      Black-Scholes option valuation model. The Company’s determination of fair value
      of share-based payment awards on the date of grant using an option-pricing
      model
      is affected by the Company’s stock price as well as assumptions regarding a
      number of highly complex and subjective variables. These variables include,
      but
      are not limited to, the Company’s expected stock price volatility over the term
      of the awards, and actual and projected employee stock option exercise
      behaviors.





On
      November 10, 2005, the Financial Accounting Standards Board (“FASB”) issued
      FASB Staff Position No. FAS 123(R)-3 “Transition Election Related to Accounting
      for Tax Effects of Share-Based Payment Awards.” The Company has elected to adopt
      the modified prospective transition method provided in the FASB Staff Position
      for calculating the tax effects of stock-based compensation pursuant to SFAS
      123(R). The alternative transition method includes simplified methods to
      establish the beginning balance of the additional paid-in capital pool (“APIC
      pool”) related to the tax effects of employee stock-based compensation, and to
      determine the subsequent impact on the APIC pool and Condensed Consolidated
      Statements of Cash Flows of the tax effects of employee stock-based compensation
      awards that are outstanding upon adoption of SFAS 123(R).




11





**U.S.
      WIRELESS DATA, INC.**


**(A
      Development Stage Company)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**





**(Unaudited)**





**NOTE
      3 - AUCTION SALES**





Loss
      from
      the discontinued operations relating to the Auction Sales are as follows:




**Three
                  months ended**March 31,
            
            **Nine
                  months ended**March 31,**2006**
            
            **2005**
            
            **2006**
            
            **2005**Revenues
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -Loss
                from operations
            
            
            -
            
            
            (93,000
            )
            
            -
            
            
            (247,000
            )





**NOTE
      4 — NET LOSS PER SHARE**





Net
      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 periods presented in the Statements of
      Operations, 5,750,000 warrants to purchase shares of common stock have been
      excluded from the calculation since their effect would be anti-dilutive.





As
      of the
      close of business on March 18, 2005, our assets, liabilities and contingencies
      were transferred to the Liquidation Trust (as provided for under the terms
      of
      the Plan) and the Company effectuated the completion of the Reorganization.
      In
      addition, all issued and outstanding shares of the Company’s capital stock were
      cancelled and new shares we re
      issued. The Company’s current operations are not representative or comparable to
      that of the Company prior to March 18, 2005 and, accordingly, net loss per
      share
      is not presented for periods prior to March 18, 2005.




12


**U.S.
      WIRELESS DATA, INC.**


**(A
      Development Stage Company)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**





**(Unaudited)**





**NOTE
      5 — SUPPLEMENTAL CASH FLOW INFORMATION**





Supplemental
      disclosure of non-cash financing and investing activities:


Nine
      months ended March 31, 2006 and 2005




1.
              Conversion
                  of 10,000 shares of Series C Convertible Preferred Stock into 16,667
                  shares of Common Stock during the nine months ended March 31,
                  2005.




**NOTE
      6 - EQUITY TRANSACTIONS**





During
      the three months ended March 31, 2006, the Company sold 5,500,000 units,
      consisting of one share of common stock and one warrant, at a price of $1 per
      unit in three private placements for net proceeds of $5,500,000. The warrants
      have an exercise price of $2 per share and expire 1,000,000 in December 2007,
      950,000 in January 2008 and 3,550,000 in March 2008. During the three months
      ended March 31, 2006, the Company’s stock price was trading from $1.30 to $2.30.
      The Company has determined that all of the proceeds from the sale of the units
      were allocated to the shares of common stock contained in the units at $1 per
      share. As a result, no value was allocated to the warrants granted in connection
      with the sale of these units.




**NOTE
      7 —RECENT ACCOUNTING PRONOUNCEMENTS**





In
      December 2004, the Financial Accounting Standards Board (“FASB”) issued Staff
      Position 109-1 (“FSP 109-1”), Application of FASB Statement No. 109 (FASB No.
      109”), “Accounting for Income Taxes”, to the Tax Deduction on Qualified
      Production Activities Provided by the American Jobs Creation Act of 2004. FSP
      109-1 clarifies guidance that applies to the new deduction for qualified
      domestic production activities. When fully phased-in, the deduction will be
      up
      to 9% of the lesser of “qualified production activities income” or taxable
      income. FSP 109-1 clarifies that the deduction should be accounted for as a
      special deduction under FASB No. 109 and will reduce tax expense in the period
      or periods that the amounts are deductible on the tax return. **** Any
      tax
      benefits resulting from the new deduction will be effective for the Company’s
      fiscal year ending March 31, 2006. This staff position is not expected to have
      a
      material impact on the Company’s condensed consolidated financial
      statements.





The
      FASB
      issued SFAS 153, Exchange of Nonmonetary Assets, which changes the guidance
      in
      Accounting Principles Board (APB) Opinion 29, Accounting for Nonmonetary
      Transactions. This statement amends Opinion 29 to eliminate the exception for
      nonmonetary exchanges of similar productive assets and replaces it with a
      commercial substance. 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 nonmonetary assets exchange
      occurring in the fiscal period beginning after June 15, 2005. The Company does
      not believe the adoption of SFAS No. 153 will have a material impact on the
      Company’s condensed consolidated financial statements.





In
      June
      2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections,
      a
      replacement of APB Opinion No. 20 and SFAS 3. The statement applies to all
      voluntary changes in accounting for and reporting of a change in accounting
      principle. SFAS is effective for accounting changes and error corrections made
      in the fiscal year beginning December 15, 2005. The Company does not believe
      the
      adoption of SFAS No. 154 will have a material impact on the Company’s condensed
      consolidated financial statements.





In
      February 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
      No. 155, “Accounting for Certain Hybrid Financial Instruments—an Amendment
      of FASB Statements No. 133 and 140” (“SFAS No. 155”). SFAS
      No. 155 allows financial instruments that contain an embedded derivative
      and that otherwise would require bifurcation to be accounted for as a whole
      on a
      fair value basis, at the holders’ election. SFAS No. 155 also clarifies and
      amends certain other provisions of SFAS No. 133 and SFAS No. 140. This
      statement is effective for all financial instruments acquired or issued in
      fiscal years beginning after September 15, 2006. We do not expect that the
      adoption of SFAS No. 155 will have a material impact on our condensed
      consolidated financial condition or results of operations.




In
      March
      2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial
      Assets—an Amendment of FASB Statement No. 140” (“SFAS No. 156”). SFAS
      No. 156 provides guidance on the accounting for servicing assets and
      liabilities when an entity undertakes an obligation to service a financial
      asset
      by entering into a servicing contract. This statement is effective for all
      transactions in fiscal years beginning after September 15, 2006. We do not
      expect that the adoption of SFAS No. 156 will have a material impact on our
      condensed consolid ated
      financial condition or results of operations.




13




**U.S.
      WIRELESS DATA, INC.**


**(A
      Development Stage Company)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**





**(Unaudited)**





**NOTE
      8 - EXECUTIVE COMPENSATION**





On
      January 18, 2006, upon the appointment of Mr. David Chazen as President and
      a
      member of the Board of Directors, the Company has agreed to compensate Mr.
      Chazen for his services as President at a rate of $10,000 per month. This
      compensation arrangement can be terminated by either the Company or Mr. Chazen
      upon written notice to the other party. In addition, for agreeing to serve
      as a
      member of the Company’s Board of Directors, Mr. Chazen was granted a warrant to
      purchase 150,000 shares of the Company’s common stock, having an exercise price
      of $1.00 and an expiration date of January 18, 2008. Furthermore, on January
      18,
      2006, Mr. Barry Regenstein, a member of the Company’s Board of Directors, was
      granted, for his services as a member, a warrant to purchase 50,000 shares
      of
      the Company’s common stock, having an exercise price of $1.00 and an expiration
      date of January 18, 2008. The warrants granted to Messrs. Chazen and Regenstein
      contain standard piggyback registration rights, provided, however, the shares
      of
      common stock issued upon exercise will be subject to restrictions on resale
      for
      a period of one year from the date of exercise. The Company recognized
      approximately $300,000 of stock-based compensation expense related to the
      issuance of the warrants.





The
      fair
      value of each option grant is estimated on the date of grant using the
      Black-Scholes option-pricing model with the following assumptions:


Expected
                Life (years)
            
            
            2Interest
                Rate
            
            
            4.35
            %Volatility
            
            
            446
            %Dividend
                Yield
            
            
            0





On
      February 13, 2006, upon the appointment of Mr. David Goddard as a member of
      the
      Board of Directors, he was granted a warrant to purchase 50,000 shares of the
      Company’s common stock, having an exercise price of $1.00 and an expiration date
      of February 13, 2008. The warrant contains standard piggyback registration
      rights, provided, however, the shares of common stock issued upon exercise
      will
      be subject to restrictions on resale for a period of one year from the date
      of
      exercise. The Company recognized approximately $81,000 of stock-based
      compensation expense related to the issuance of the warrants.





The
      fair
      value of each option grant is estimated on the date of grant using the
      Black-Scholes option-pricing model with the following assumptions:


Expected
                Life (years)
            
            
            2Interest
                Rate
            
            
            4.68
            %Volatility
            
            
            321
            %Dividend
                Yield
            
            
            0





**NOTE
      9 - RELATED PARTY TRANSACTION**





On
      March
      10, 2006, a Management Agreement with Trinad Management, LLC ("Trinad") and
      the
      Company, pursuant to which Trinad agrees to provide the Company with certain
      management services (the "Management Services"), including without limitation,
      the sourcing, structuring and negotiation of a potential business combination
      involving the Company became effective. As compensation for such Management
      Services the Company shall pay Trinad a monthly management fee of $30,000 for
      a
      period of five years. The Company may terminate the agreement by paying a
      termination fee of $1,000,000. Trinad and its affiliates collectively own
      approximately 55% of the Company's issued and outstanding Common
      Stock.




14


**U.S.
      WIRELESS DATA, INC.**


**(A
      Development Stage Company)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**





**(Unaudited)**


**NOTE
      10 - SUBSEQUENT EVENTS**





On
      April
      20, 2006, the Company, provided a bridge loan of $300,000 to StarVox
      Communications, Inc. (“StarVox”). The loan has a term of 120 days. The loan
      provides for an interest rate of 10% per annum and is secured by a lien on
      all
      of the assets of StarVox.





On
      April
      26, 2006, the Company announced that it has executed a letter of intent which
      sets forth the preliminary terms and conditions of a proposed merger transaction
      between the Company and StarVox. In connection with the merger, the shareholders
      of StarVox will exchange their shares of capital stock in StarVox for capital
      stock of the Company. The number of shares of the Company’s stock to be received
      by the shareholders of StarVox will be dependent upon certain events and
      conditions at the time of closing.





StarVox
      is a facilities-based next generation Infrastructure and Applications service
      provider, that offers wholesale and retail traditional voice services and
      enhanced VoIP services over its domestic VoIP network and its international
      wholesale network. StarVox’s domestic VoIP network provides over 300 Points of
      Presence (POPs) which allows access from about 80% of business sites. StarVox
      also provides local services to about 65% of business sites. A full suite of
      traditional and enhanced products is available to wholesale and retail
      customers. The international wholesale network offers reliable cost effective
      worldwide connectivity to both established and emerging carriers. StarVox owns
      both its application technologies and domestic and international VoIP networks,
      which gives it a competitive advantage. StarVox works with a variety of channels
      (such as, ISPs, CLECs, Telecom Agents, Carriers, Affinity Groups, Property
      Management Groups, etc.) that are interested in migrating customers from
      traditional separate voice and data communications connections to a converged
      voice/data connection. StarVox offers a complete “turnkey” package of services
      to its channels with individual branding. StarVox services target small, medium
      and larger sized businesses (both single site and multi-site) that are
      interested in lowering their communications monthly costs by 20% to 40% by
      migrating to a converged service.





The
      closing of the transaction is subject to certain conditions, including execution
      of a definitive merger agreement and the completion of due diligence. There
      can
      be no assurance that the merger will be consummated or, if consummated, that
      it
      will be consummated on the terms set forth in the letter of intent.





15





**ITEM
      2. MANAGEMENT’S DISCUSSION AND ANALYSIS AND 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 inability to obtain sufficient
      cash to fund ongoing obligations and continue as a going concern; (ii) our
      ability to carry out our operating strategy; and (iii) 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. (“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 currently
      a
“shell” company with no operations and controlled by Trinad Capital, L.P.
      (“Trinad”), our major stockholder. The Company intends to serve as a vehicle to
      effect on asset acquisition, merger and exchange of capital stock or other
      business combination with a domestic or foreign business.





The
      Company may be referred to as the “Predecessor Company” for all periods through
      the Reorganization (as defined below) and as the “Successor Company” for all
      periods after the recognition of the Reorganization. The Reorganization was
      effectuated as of the close of business on March 18, 2005; however, there was
      virtually no activity between March 19, 2005 and March 31, 2005. Therefore,
      for
      accounting purposes, we used March 31, 2005 as the date the Reorganization
      was
      effectuated.





As
      a
      result of (i) the sale of virtually all of our operating assets in the Auction
      Sales (as defined below), and (ii) the Reorganization, very little of what
      is
      included in this Report on Form 10-QSB is relevant to any assessment of the
      Company on an ongoing basis. Accordingly, readers are advised not to rely on
      any
      historical information in considering an investment in or disposition of our
      stock.





**Trinad
      and Management’s Plan of Operation**





Trinad,
      a
      hedge fund dedicated to investing in micro-cap companies, is seeking to raise
      additional capital 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 are therefore subject to a number of risks,
      including: any acquisition consummated by us may turn out to be unsuccessful;
      our investors will not know what operating business, if any, will be acquired,
      including the particular industry in which the business operates, and whether
      financing that could have a dilutive effect on our present stockholders will
      be
      required in connection 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.





Trinad
      has agreed that it will not dispose of any of our common stock held by it 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 Securities and Exchange
      Commission (“SEC”).




16





**Reorganization
      and the Liquidation Trust**





On
      March
      18, 2005, in accordance with the Plan (as defined below under the section titled
      Chapter 11 Proceedings), Trinad, our Plan sponsor, became the holder of 93%
      of
      our newly issued common stock as further discussed in the paragraphs below
      (the
“Reorganization”).





Additionally,
      on March 18, 2005, Robert Ellin became a director and our Chief Executive
      Officer, Jay Wolf became a director and our Chief Operating Officer and Chief
      Financial Officer and Barry Regenstein became a director. Robert Ellin and
      Jay
      Wolf are the Managing Member and Managing Director of Trinad, respectively,
      and
      Barry Regenstein is an outside consultant to Trinad.





In
      accordance with the Plan, Trinad contributed $400,000 in cash to the Predecessor
      Company and as of the close of business on March 18, 2005 (immediately before
      the Reorganization), all of the assets and liabilities of the Predecessor
      Company, with the exception of the public entity shell company, along with
      all
      contingent assets and liabilities, were transferred to the USWD Liquidation
      Trust (the “Liquidation Trust”). In addition, Trinad contributed $100,000 in
      cash to the Successor Company in exchange for 93% of the new common stock issued
      under the Plan, with the remaining 7% of the new common stock 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. Simultaneously, all of our
      originally outstanding Series C Preferred Stock and our Common Stock were
      cancelled. In accordance with the Plan, the cash in the Liquidation Trust will
      be used to pay administrative costs and creditors of the Chapter 11 Proceedings.
      If there is any remaining cash in the Liquidation Trust, 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 as of February 7, 2005 are
      entitled.





**Chapter
      11 Proceedings**





On
      March
      26, 2004 (the “Petition Date”), 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 (the “Chapter 11
      Proceeding”). Prior to the chapter 11 proceeding, we were principally engaged in
      providing wireless transaction delivery and gateway services to the payment
      processing industry. Since our inception, we had incurred significant losses
      and
      negative cash flow from operations.







We
      operated 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”) until the
      Reorganization.








On
      December 27, 2004, the Court confirmed our Amended Plan of Reorganization (the
      “Plan”). 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.





On
      January 19, 2005 we paid approximately $889,000 as an initial payment to
      creditors for pre-petition liabilities representing approximately 50% of
“Allowed Claims”.





The
      following assets and liabilities from our Balance Sheet as of the close of
      business on March 18, 2005 immediately before the Reorganization, along with
      all
      contingent assets and liabilities, were transferred to the Liquidation Trust
      (as
      provided for under the terms of the Plan) and the Company effectuated the
      completion of the Reorganization, thereby emerging from the Chapter 11
      Proceedings:





ASSETSCurrent
                assets:Cash
                and cash equivalents
            
            $
            100,000Cash
                and cash equivalents in escrow
            
            
            2,225,000Due
                from Plan Sponsor
            
            
            400,000Due
                from winning auction sale bidder
            
            
            64,000Prepaid
                and other current assets
            
            
            13,000$
            2,802,000




17




LIABILITIESCurrent
                liabilities:Accounts
                payable
            
            $
            212,000Accrued
                liabilities
            
            
            73,000Total
                liabilities not subject to compromise
            
            
            285,000Pre-petition
                liabilities subject to compromise
            
            
            1,572,000Total
                liabilities
            
            
            1,857,000





“Pre-petition
      liabilities subject to compromise” were as follows:





Accounts
                payable
            
            $
            1,154,000Accrued
                liabilities
            
            
            206,000Obligation
                for rejected real property lease
            
            
            212,000$
            1,572,000





**Loan,
      Stock Sales and Liquidity**





On
      September 23, 2005, the Company executed a loan agreement with Trinad whereby
      Trinad has agreed to loan the Company up to a principal amount of $100,000
      (the
“Loan”) at any time and from time to time prior to the Company’s consummation of
      a Next Financing (as defined below). Trinad shall make advances to the Company
      in such amounts, as the Company shall request from time to time. The Loan bears
      interest at the prime rate plus 1 percent per annum. The entire outstanding
      principal amount of the Loan and any accrued interest thereon shall be due
      and
      payable by the Company upon, and not prior to, the consummation of a sale of
      securities (other than a sale of shares of the Company’s Common Stock to
      officers, directors or employees of, or consultants to, the Company in
      connection with their provision of services to the Company), to a third party
      or
      parties with proceeds to the Company of not less than $200,000 (a “Next
      Financing”). As of March 31, 2006, no amounts were outstanding under the loan
      agreement.





During
      the nine months ended March 31, 2006, the Company sold 5.5 million units
      consisting of one share of common stock and one warrant at a price of $1 per
      unit in three private placements for net proceeds of $5,500,000. The warrants
      have an exercise price of $2 per share and expire in December 2007. As of March
      31, 2006, the Company had approximately $5,200,000 of cash, which management
      believes is sufficient to satisfy our monetary needs for the next fiscal
      year.





**Loan
      Receivable and Letter of Intent**





On
      April
      20, 2006, the Company, provided a bridge loan of $300,000 to StarVox
      Communications, Inc. (“StarVox”). The loan has a term of 120 days. The loan
      provides for an interest rate of 10% per annum and is secured by a lien on
      all
      of the assets of StarVox.





On
      April
      26, 2006, the Company announced that it has executed a letter of intent which
      sets forth the preliminary terms and conditions of a proposed merger transaction
      between the Company and StarVox. In connection with the merger, the shareholders
      of StarVox will exchange their shares of capital stock in StarVox for capital
      stock of the Company. The number of shares of the Company’s stock to be received
      by the shareholders of StarVox will be dependent upon certain events and
      conditions at the time of closing.





StarVox
      is a facilities-based next generation Infrastructure and Applications service
      provider, that offers wholesale and retail traditional voice services and
      enhanced VoIP services over its domestic VoIP network and its international
      wholesale network. Starvox’s domestic VoIP network provides over 300 Points of
      Presence (POPs) which allows access from about 80% of business sites. StarVox
      also provides local services to about 65% of business sites. A full suite of
      traditional and enhanced products is available to wholesale and retail
      customers. The international wholesale network offers reliable cost effective
      worldwide connectivity to both established and emerging carriers. StarVox owns
      both its application technologies and domestic and international VoIP networks,
      which gives it a competitive advantage. StarVox works with a variety of channels
      (such as, ISPs, CLECs, Telecom Agents, Carriers, Affinity Groups, Property
      Management Groups, etc.) that are interested in migrating customers from
      traditional separate voice and data communications connections to a converged
      voice/data connection. StarVox offers a complete “turnkey” package of services
      to its channels with individual branding. StarVox services target small, medium
      and larger sized businesses (both single site and multi-site) that are
      interested in lowering their communications monthly costs by 20% to 40% by
      migrating to a converged service.




18





The
      closing of the transaction is subject to certain conditions, including execution
      of a definitive merger agreement and the completion of due diligence. There
      can
      be no assurance that the merger will be consummated or, if consummated, that
      it
      will be consummated on the terms set forth in the letter of intent.





**MANAGEMENT
      CHANGES**





On
      January 18, 2006, upon the appointment of Mr. David Chazen as President and
      a
      member of the Board of Directors (as discussed below), the Company has agreed
      to
      compensate Mr. Chazen for his services as President at a rate of $10,000 per
      month. This compensation arrangement can be terminated by either the Company
      or
      Mr. Chazen upon written notice to the other party. In addition, for agreeing
      to
      serve as a member of the Company’s Board of Directors, Mr. Chazen was granted a
      warrant to purchase 150,000 shares of the Company’s common stock, having an
      exercise price of $1.00 and an expiration date of January 18, 2008. Furthermore,
      on January 18, 2006, Mr. Barry Regenstein, a member of the Company’s Board of
      Directors, was granted, for his services as a member, a warrant to purchase
      50,000 shares of the Company’s common stock, having an exercise price of $1.00
      and an expiration date of January 18, 2008. The warrants granted to Messrs.
      Chazen and Regenstein contain standard piggyback registration rights, provided,
      however, the shares of common stock issued upon exercise will be subject to
      restrictions on resale for a period of one year from the date of exercise.





On
      February 13, 2006, upon the appointment of Mr. David Goddard as a member of
      the
      Board of Directors, he was granted a warrant to purchase 50,000 shares of the
      Company’s common stock, having an exercise price of $1.00 and an expiration date
      of February 13, 2008. The warrant contains standard piggyback registration
      rights, provided, however, the shares of common stock issued upon exercise
      will
      be subject to restrictions on resale for a period of one year from the date
      of
      exercise.





The
      Company has valued the warrants issued at approximately $381,000 using the
      Black-Scholes Model, which was charged to compensation expense in the third
      quarter.





**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 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.





**Financial
      Reporting by Entities in Reorganization under the Bankruptcy
      Code**





The
      accompanying 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.





All
      of
      the common stock that was outstanding prior to the Petition Date was cancelled
      and new shares of common stock were issued in accordance with the Plan. The
      reorganization value of the assets of the emerging entity immediately before
      the
      date of confirmation exceeded the total of all post-petition liabilities and
      allowed claims, therefore, the Company did not qualify for fresh start
      accounting under SOP 90-7 and continued its basis of accounting.





**Stock-Based
      Compensation**




On
      January 1, 2006, the Company adopted Statement of Financial Accounting
      Standards No. 123 (revised 2004), “Share-Based Payment,” (“SFAS 123(R)”)
      which requires the measurement and recognition of compensation expense for
      all
      share-based payment awards made to employees and directors based on estimated
      fair values. SFAS 123(R) supersedes the Company’s previous accounting under
      Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to
      Employees” (“APB 25”) for periods beginning in fiscal 2006. In March 2005, the
      Securities and Exchange Commission issued Staff Accounting Bulletin No. 107
      (“SAB 107”) relating to SFAS 123(R). The Company has applied the provisions of
      SAB 107 in its adoption of SFAS 123(R).




19





The
      Company adopted SFAS 123(R) using the modified prospective transition method,
      which requires the application of the accounting standard as of January 1,
      2006, the first day of the Company’s third quarter in fiscal year 2006. The
      Company’s Condensed Consolidated Financial Statements as of and for the three
      and nine months ended March 31, 2006 reflect the impact of SFAS 123(R). In
      accordance with the modified prospective transition method, the Company’s
      Condensed Consolidated Financial Statements for prior periods have not been
      restated to reflect, and do not include, the impact of SFAS 123(R). Stock-based
      compensation expense recognized under SFAS 123(R) for each of the three and
      nine
      months ended March 31, 2006 was approximately $381,000 which consisted of
      warrant granted to Board Members and an Officer (See Note 8). There was no
      stock-based compensation expense related to employee equity awards during the
      three and nine months ended March 31, 2005 under APB 25.





SFAS
      123(R) requires companies to estimate the fair value of share-based payment
      awards on the date of grant using an option-pricing model. The value of the
      portion of the award that is ultimately expected to vest is recognized as
      expense over the requisite service period in the Company’s Condensed
      Consolidated Statement of Operations. Prior to the adoption of SFAS 123(R),
      the
      Company accounted for employee equity awards and employee stock purchases using
      the intrinsic value method in accordance with APB 25 as allowed under Statement
      of Financial Accounting Standards No. 123, “Accounting for Stock-Based
      Compensation”  (“SFAS 123”). Under the intrinsic value method, no
      stock-based compensation expense had been recognized in the Company’s Condensed
      Consolidated Statement of Operations, other than as related to acquisitions,
      because the exercise price of the Company’s stock options granted to employees
      and directors equaled the fair market value of the underlying stock at the
      date
      of grant.





**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, 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.




20


**PART
      II — OTHER INFORMATION**





**ITEM
      1. LEGAL PROCEEDINGS**





We
      are
      not currently subject to any 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.UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS





None.





**ITEM
      3. DEFAULTS UPON SENIOR SECURITIES**





None.





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





None.





**ITEM
      5. OTHER INFORMATION**





None





**ITEM
      6. EXHIBITS**




**Exhibit
                No.**
            
            **Description
              of
              Exhibit**31.1
            
            Certification
                of Principal Executive Officer Pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002, 18 U.S.C. Section
                1350





31.2
            
            Certification
                of Principal Financial Officer Pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002, 18 U.S.C. Section
                1350





32.1
            
            Certification
                of Principal Executive Officer and Principal Financial Officer Pursuant
                to
                Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section
                1350




21





**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:
                May 15 , 2006
            By:
            /s/ Robert
                EllinRobert
                EllinChief
                Executive Officer(Principal
                Executive Officer)Dated:
                May 15, 2006
            
            /s/
                Jay WolfJay
                WolfChief
                Operating Officer andChief
                Financial Officer(Principal
                Financial Officer)




22