SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-QSB

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

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


         Commission File No.:  0-22848


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


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


                          2200 Powell Street, Suite 450
                          Emeryville, California 94608
                          ----------------------------
          (Address of principal executive offices, including zip code)



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



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

                             Yes _X_          No ___

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


Transitional Small Business Disclosure Format

                             Yes ___          No _X_
<PAGE>

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


PART I    FINANCIAL INFORMATION                                                 Page
<S>       <C>                                                                   <C>
Item 1.   Financial Statements (Unaudited)

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

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

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

          Notes to Financial Statements...........................................6-10

Item 2.   Management's Discussion and Analysis....................................11-16



PART II   OTHER INFORMATION

Item 1.   Legal Proceedings.......................................................17

Item 2.   Changes in Securities...................................................19

Item 3.   Defaults Upon Senior Securities.........................................20

Item 4.   Submission of Matters to a Vote of Security Holders.....................20

Item 5.   Other Information.......................................................21

Item 6.   Exhibits and Reports on Form 8-K........................................21
<PAGE>
                            U.S. WIRELESS DATA, INC.
                                  BALANCE SHEET
                                   (Unaudited)


                                                                  March 31, 1998  June 30, 1997
                                                                  --------------  -------------
                                 ASSETS

Current Assets:
        Cash ....................................................   $     64,640    $      6,083
        Accounts receivable, net of allowance for ...............         73,997         120,531
            doubtful accounts of $48,215 at March 31, 1998;
            $15,903 at  June 30, 1997
        Sales-type lease receivables ............................          5,905          11,023
        Inventory, net ..........................................        879,952         208,867
        Other current assets
                                                                         579,587         102,836
                                                                    ------------    ------------
                 Total current assets ...........................      1,604,081         449,340

Processing units - deployed .....................................        383,100            --
Property and equipment, net .....................................        287,080          40,445
Other assets
                                                                          67,671          11,495
                                                                    ------------    ------------


Total assets ....................................................   $  2,341,932    $    501,280
                                                                    ============    ============


                  LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
        Accounts payable ........................................   $  1,275,428    $    354,213
        Accrued liabilities .....................................        177,849         125,587
        Notes payable ...........................................        827,863         737,866
                                                                    ------------    ------------
                Total current liabilities                              2,281,140       1,217,666
                                                                    ------------    ------------

Long Term Debt ..................................................         45,000          45,000
                                                                    ------------    ------------

Total Liabilities
                                                                       2,326,140       1,262,666
                                                                    ------------    ------------


Stockholders' Equity (Deficit):
        Preferred Stock, 12,000,000 authorized, 3,060,000 Series A     3,060,000            --
                 Issued and outstanding
        Common stock, no par value, 40,000,000 ..................      9,324,601       5,613,952
                shares authorized; 9,324,601 and 5,613,952 shares
                 issued and outstanding at March 31, 1998
                 June 30, 1997, respectively
        Additional paid-in capital ..............................     10,456,612      10,613,465
        Accumulated deficit .....................................    (22,825,421)    (16,960,853)
        Notes Receivable from Shareholder                                  --            (27,950)
                                                                    ------------    ------------
                Total stockholders' equity (deficit)
                                                                          15,792        (761,386)
                                                                    ------------    ------------


Total liabilities and stockholders' equity (deficit)                $  2,341,932    $    501,280
                                                                    ============    ============
</TABLE>
       Accompanying Notes are an integral part of the Financial Statements

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


                                                  Three Months Ended             Nine Months Ended
                                                 3/31/98        3/31/97           3/31/98      3/31/97
                                                 -------        -------           -------      -------
<S>                                          <C>            <C>            <C>              <C>        
Revenue ..................................   $   245,439    $   243,446    $      599,296   $ 1,046,359
Cost of goods sold .......................       115,339        114,780           351,746       602,078
                                             -----------    -----------    --------------   -----------

Gross margin .............................       130,100        128,666           247,550       444,281
                                             -----------    -----------    --------------   -----------

Operating Expenses:
    Selling, general and administrative ..     1,999,817        122,691       4,271,625         463,009
    Research and development .............        78,000         87,914         251,000         301,315
    Litigation settlement ................       921,132           --           921,132            --
                                             -----------    -----------     -----------     -----------
    Total operating expense ..............     2,998,949        210,605       5,443,757         764,324
                                          --------------    -----------     -----------     -----------   

Loss from operations .....................    (2,868,849)       (81,939)     (5,196,207)       (320,043)


Interest income                                    5,722             21           7,398              70
Interest expense .........................      (438,626)        (8,045)       (706,308)        (24,688)
Other income .............................                        6,912          30,548          31,394


Net loss .................................   $(3,301,753)   $   (83,051)     (5,864,569)    $  (313,267)
                                             ===========    ===========     ===========     ===========
                                                                                                            



Basic / Diluted Earnings (loss) per ......   $      (.36)   $      (.02)   $       (.67)    $      (.07)
                                             ===========    ============     ==========     ===========


Weighted average common shares outstanding     9,280,963      4,983,852       8,753,321       4,814,900
- Basic/Diluted                              ===========    ===========      ==========     ===========
</TABLE>

       Accompanying Notes are an integral part of the Financial Statements

                                       4
<PAGE>
<TABLE>
<CAPTION>
                            U.S. WIRELESS DATA, INC.

                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)

                                                                 Nine Months Ended
                                                            March 31,1998  March 31, 1997
                                                            -------------  --------------
<S>                                                           <C>            <C>         
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss .............................................   $(5,864,569)   $  (313,267)
     Depreciation and amortization ........................        65,463         50,586
     Non-cash consulting services and warrant extension ...     1,276,808         15,446
     Non-cash interest expense - debentures ...............       637,172
     Non-cash litigation expense ..........................       921,132

   Changes in assets and liabilities:
          (Increase) decrease in:
               Accounts receivable ........................        46,543         18,210
               Inventory ..................................      (671,085)       168,300
               Processing units - deployed ................      (383,100)             0
               Other current assets .......................      (152,411)        34,627
          Increase (decrease) in:
               Accounts payable ...........................       911,215        102,071
               Accrued liabilities ........................        52,262        (90,297)
               Notes Payable ..............................             0        (22,800)
                                                              -----------    -----------
               Net cash used in operating activities ......    (2,777,470)       (37,124)

CASH FLOWS FROM INVESTING ACTIVITIES:
     (Purchase) of Property, plant, and equipment .........      (291,445)           500
     (Increase) in other assets ...........................       (56,176)             0
                                                              -----------    -----------
               Net cash used in investing activities ......      (730,721)           500

CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from issuance of stock ......................       585,010         27,950
     Proceeds from sale of options to purchase common stock       191,700              0
     Note receivable ......................................        27,950        (27,950)
     Net Proceeds from issuance of debt ...................     2,762,088            --
                                                              -----------    -----------
              Net cash provided by financing activities ...     3,566,748              0


INCREASE (DECREASE) IN CASH ...............................        58,557        (36,624)


CASH, Beginning of period .................................         6,083         40,350
                                                              -----------    -----------
                                                                           

CASH, End of period .......................................   $    64,640    $     3,726
                                                              ===========    ===========
</TABLE>

Non-cash Financing and Investing:
      1. Conversion of  $50,000 Notes Payable to 75,000 shares of
         Common Stock
      2. Conversion of  $3,060,000 Convertible Debentures to
         3,060,000 shares of Preferred Stock


       Accompanying Notes are an integral part of the Financial Statements

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


Note 1 -- ACCOUNTING PRINCIPLES

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

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



Note 2 -- FINANCIAL CONDITION AND LIQUIDITY

      The Company has incurred an  accumulated  deficit of  approximately  $22.8
      million since inception, including a loss of $5.9 million during the first
      nine  months of fiscal  year 1998.  In order to attempt to  continue  as a
      going concern,  the Company has transitioned to a recurring revenue focus,
      is working on programs to increase revenue levels and product margins, and
      is negotiating new distribution agreements.  In December 1997, the Company
      closed  a  private   placement   offering  of  $3,060,000  of  Convertible
      Subordinated  Debentures.  After  associated  fees and repayment of bridge
      loans  incurred  during the quarter ended  December 31, 1997,  the Company
      retained  approximately  $2,200,000 to apply to immediate  working capital
      needs and the  national  launch of its  proprietary  wireless  transaction
      processing  solution.  The current  sales volume is inadequate to fund the
      infrastructure  growth and business  transition.  As a result, the Company
      anticipates  the continued  roll out of the GTE Wireless and Bell Atlantic
      joint  marketing  and  operating  agreements  and  potential  distribution
      programs  with other  cellular  carriers will require  additional  debt or
      equity financing in the immediate future.

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



Note 3 -- NET LOSS PER SHARE

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

       As the Company  entered the first  quarter of fiscal  1998,  it faced the
       need  for  increased  liquidity  to  meet  its  obligations  and  fund  a
       significant  rollout of the CDPD TRANZ Enabler  product.  In August 1997,
       through an  introduction by the entrenet Group,  LLC.  ("entrenet"),  the
       Company  sold 3.5  million  unregistered  shares of common  stock and 1.6
       million  warrants to purchase  common stock at an exercise price of $0.01
       per share to two  officers of  Liviakis  Financial  Communications,  Inc.
       ("LFC") for $500,000 in cash. The warrants are  exercisable  from January
       15, 1998 through August 4, 2002. The securities  sold to the two officers
       of LFC carry  future  registration  rights,  including a one-time  demand
       registration,  with  fees to be paid by the  Company  (see  also  Note 5,
       below).  In accordance  with its  agreement  with  entrenet,  the Company
       granted entrenet the right to receive 280,000  unregistered shares of the
       Company's  Common  Stock  as an 8%  finder's  fee for the  direct  source
       financing.  The  stock  was  issued  to  entrenet  following  shareholder
       approval for an increase in authorized  Common Stock,  which  occurred on
       February  6,  1998.  The  agreement  provides  entrenet  with  "piggyback
       registration rights."

       On December 10, 1997 the Company closed a private  placement  offering of
       $3,060,000   principal   amount  of  8%   Adjustable   Rate   Convertible
       Subordinated  Debentures.  After  associated fees and repayment of bridge
       loans incurred  during the quarter,  the Company  retained  approximately
       $2,200,000 to apply to immediate  working  capital needs and the national
       launch of its proprietary wireless transaction  processing solution.  The
       convertible   features  of  the  debenture   include  an   "in-the-money"
       convertible  option  that  allows the  holder to obtain  shares of common
       stock  at a  discount  off  of  fair  market  value.  The  value  of  the
       in-the-money   provision  has  been  allocated  to  stockholder's  equity
       (deficit).  The  difference  between the realized value and face value of
       the debt was recognized as non-cash  interest expense between the date of
       issue and date of conversion into preferred stock,  which was effected as
       of February 9, 1998. Non-cash interest expense of approximately  $225,000
       and  $397,000  was  recorded  in the  second and third  fiscal  quarters,
       respectively.  As the result of the approval by  shareholders on February
       6, 1998, the Company  authorized  4,000,000 shares of no par value Series
       "A" Cumulative  Convertible  Redeemable  Preferred  Stock (the "Preferred
       Stock"),  with a stated  value of $1.00  per  share.  On that  date,  the
       debentures  automatically  converted into  3,060,000  shares of Preferred
       Stock.  The  Preferred  Stock  gives  the  holder  the  right to  convert
       principal  into  shares  of Common  Stock in the  future at 80% of market
       price,  but not lower  than $4 per  share for the first 270 days,  and no
       higher than $6 per share. The security carries an 8% dividend rate, which
       drops to a 4% dividend  rate once the  underlying  shares of Common Stock
       are registered with the Securities and Exchange  Commission.  The Company
       is  required  to  register  the  shares of Common  Stock  underlying  the
       securities sold in the offering, plus the shares of Common Stock issuable
       as interest on the  Debentures  and  dividends  on the Preferred Stock.

       In order to  satisfy  a  portion  of its  immediate  short  term  capital
       requirements  the Company  entered  into an  agreement on March 12, 1998,
       with a  stockholder  to allow the  Company  to  assign to third  parties,
       options it has held since 1995, on 367,684 shares of the Company's Common
       Stock  owned by that  stockholder,  which  the  Company  has the right to
       purchase at $.25 per share. The Company anticipates that it will sell and
       assign these  options to  accredited  investors in blocks of no less than
       50,000 shares  between the present time and October 5, 1998,  the date on
       which its option expires.  The amount of cash that may be provided to the
       Company through this source is not readily determinable,  as it will vary
       depending on the market price of the  Company's  Common Stock at the time
       the  Company  sells each  option.  Through  March 31,  1998,  the Company
       assigned  its  Call  Option  on  50,000  shares  owned  by  stockholder's
       assignee, Tillicombe International,  LDC, to RBB Bank Aktiengesellschaft,
       the agent which owns 1,600,000 shares of the Company's Series A Preferred
       Stock.  During  April 1998,  additional  options for 150,000  shares were
       assigned.  RBB Bank  purchased  the Call  Options in four  increments  of
       50,000 share  options  each,  and has paid the Company 85% of the average
       last sale price of the underlying  shares over the five days prior to the
       date of acquiring each Call Option,  less the Call Option  exercise price
       of $.25 per share. In each transaction, RBB Bank must pay the acquisition
       price for the Call Option to the Company,  as well as the exercise  price
       to Tillicombe prior to taking delivery of the shares.

                                        7
<PAGE>
Note 5 -- LIVIAKIS FINANCIAL COMMUNICATIONS INC. ("LFC") - CONSULTING

       In July 1997,  the Company  retained LFC to advise and assist the Company
       in matters  concerning  investor relations and corporate finance covering
       the period from July 25, 1997 through July 31, 1998. As compensation  for
       these  services,  the Company will issue a total of 300,000  unregistered
       restricted  shares of its Common Stock and $10,000 in cash as  consulting
       fees.  The  issuance of the shares of Common  Stock will occur at various
       times during the  Consulting  Agreement.  As of March 31,  1998,  225,000
       shares were issuable to LFC per the Consulting Agreement. The shares also
       have registration  rights as described in Note 4, above.  Pursuant to the
       Consulting  Agreement,  the Company will also pay LFC a cash fee equal to
       2.5% of the gross  proceeds  received  as a  finder's  fee for any direct
       financing  located for the Company.  LFC received  $76,500 for a finder's
       fee in December 1997, related to the private placement offering.

       Since the LFC related financing  transaction  described in Note 4 and the
       LFC   Consulting   Agreement   were   entered  into  by  the  Company  at
       approximately  the same time, the Company has treated these  transactions
       as one transaction for accounting  purposes.  To properly  ascribe a fair
       value to the Consulting  Agreement,  the Company  obtained an independent
       valuation of the Company's share price from an accredited valuation firm.
       Based on the fair  market  value of the Common  Stock  determined  by the
       valuation, the total of all shares issuable in the transactions,  and the
       cash proceeds received, the Consulting Agreement was valued at $1,400,000
       and recorded as prepaid consulting services with a corresponding increase
       in equity.  The consulting  services will be amortized on a straight-line
       basis over the term of the Consulting  Agreement (one year) as an element
       of operating expense, within selling,  general and administrative expense
       in the  statement  of  operations,  commencing  with the  July  25,  1997
       effective  date of the agreement.  Through March 31, 1998,  approximately
       $960,000 has been expensed.



Note 6 - ACCOUNTING FOR PROCESSING UNITS DEPLOYED

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


7 -- LITIGATION

       Securities Class Actions Settlements

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

                                       8
<PAGE>
       To resolve  cross-claims  asserted by the underwriters in the litigation,
       the Company agreed to issue to RAS Securities Corporation,  H.J. Meyers &
       Co,  Inc.,  Sands & Co. Ltd.  and R.J.  Steichen & Co. a total of 600,000
       shares  of  Common  Stock  upon  the  effective  date  of the  Settlement
       Agreement,  which  was April 25,  1997.  The  shares  issued  under  this
       settlement  become  saleable  under SEC Rule 144  commencing on April 26,
       1998.  The  Company  has agreed to  register  such  shares upon demand of
       holders of not less than 25% of the  shares,  not  sooner  than April 26,
       1998.  Further,  on September  17, 1997 the Company  agreed to entry of a
       consent  judgment  against  it and in  favor  of Don  Walford,  the  sole
       shareholder of  underwriter  Walford  Securities,  Inc., in the amount of
       $60,000,  payable over a three year period.  The total charge  recognized
       during  fiscal 1997 consists of the  following:  $93,600 for the value of
       the  common  shares  issued  based  upon  the  fair  market  value of the
       Company's  Common  Stock on the date the  commitment  of such  shares was
       made;  $10,000 for actual cash to be paid by the Company  pursuant to the
       settlement with  stockholders;  and $60,000 for the note payable executed
       with Don Walford as discussed above.


       Settlement with Consultant

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

       Settlement of Claims of Certain Noteholders

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

       During March 1998, the Company  reached a settlement with the complaining
       Noteholders'  by  agreeing  to issue  1.4  times  the  number  of  shares
       originally  issuable  as  principal  and  interest  on the  Demand  Notes
       purchased  by the  complaining  Noteholders  (plus an  additional  11,000
       shares to one Noteholder who purchased $50,000 of the Demand Notes). As a
       result of the settlement,  the issuance of "premium"  shares was recorded
       in Operating Expense as a litigation settlement of approximately $921,000
       in March 1998. The agreement also provides the  Noteholders  with certain

                                       9
<PAGE>
     guarantees  as to the amount for which the shares can be resold and a "put"
     which  allows the  Noteholders  to require  the Company to  repurchase  any
     restricted  shares remaining unsold at the end of the one year period after
     the shares  become  saleable  under SEC Rule 144. The shares  issuable upon
     conversion of the Demand Notes will be  "restricted  securities" as defined
     under SEC Rule 144, but will become saleable  pursuant to Rule 144 one year
     from the date the converted Demand Note was purchased by the Noteholder.  A
     total of  525,800  shares  have been or will be  issued to the  complaining
     Noteholders  upon  conversion  of their  notes which will be subject to the
     guarantee and put  agreements.  The holder of the other $50,000 Demand Note
     will be given the  enhanced  conversion  rate (of 1.4  times the  number of
     shares originally issuable) and will receive 154,000 shares upon conversion
     of his Demand Note but will not be given the guarantee or put.

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

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



Note 8 -- RECENT ACCOUNTING PRONOUNCEMENTS

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

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

                                       10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS



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

       The Company  may, in  discussions  of its future  plans,  objectives  and
       expected  performance  in periodic  reports filed by the Company with the
       Securities  and  Exchange   Commission  (or  documents   incorporated  by
       reference  therein)  and in written  and oral  presentations  made by the
       Company,  include projections or other forward-looking  statements within
       the meaning of Section 27A of the  Securities  Act of 1933 or Section 12E
       of the Securities Exchange Act of 1934, as amended.  Such projections and
       forward-looking  statements  are based on  assumptions  which the Company
       believes are reasonable, but are by their nature inherently uncertain. In
       all cases, results could differ materially from those projected.  Some of
       the important  factors that could cause actual results to differ from any
       such projections or other forward-looking  statements are detailed below,
       and in other reports filed by the Company under the  Securities  Exchange
       Act of 1934, including the Company's Annual Report on Form 10-KSB for the
       fiscal year ended June 30, 1997 and the current  Report on Form 8-K filed
       on May 20,  1998,  Reporting  an  Event  of May 14,  1998.  The  Form 8-K
       incorporates the Company's  Registration Statement on Form SB-2 (SEC File
       No. 333-52625).

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

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

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

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

                                       11
<PAGE>
     finalized  before  the  Company  will be able to draw upon  this  financing
     source.  Although this  financing  provides the Company with needed support
     for units placed through the GTE Wireless marketing agreement,  third party
     financing  of all TRANZ  Enabler  units  placed by the Company  through any
     source is a required  element of the Company's  business model. The Company
     must therefore seek similar  financing  arrangements for units  distributed
     through  other  marketing  channels,  including  the Bell  Atlantic  Mobile
     marketing  agreement.  The inability to fund  inventory  needs from outside
     sources could have a material adverse impact on the Company,  its liquidity
     and results of operations.

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

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

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

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


     RESULTS OF OPERATIONS

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

     A key element of USWD's strategic direction is to establish close alliances
     with large communications  carriers through joint distribution programs. In
     August  1997,  USWD  and  GTE  Wireless  announced  a joint  marketing  and
     operating  agreement to distribute USWD's  proprietary TRANZ Enabler credit
     card  processing  system using GTE's CDPD network.  The agreement  contains
     certain operational and financial performance criteria which must be met by
     the  Company.  During  the second  fiscal  quarter,  USWD made  significant
     investments  to execute a  nationwide  deployment,  which will extend TRANZ
     Enabler sales to merchants  through GTE's national sales force. The Company
     added significant sales and support personnel and infrastructure to provide
     local support for the GTE sales representatives.  The initial placements of
     the TRANZ Enabler units did not develop as rapidly as anticipated; however,
     recent  actions by GTE are  expected to favorably  impact the program.  The
     Company  expects  that  the  transition  from a  "voice"  to  "data"  sales

                                       12
<PAGE>
     orientation  for the GTE  sales  personnel  will be  aided by  several  new
     operational  initiatives  implemented in February 1998 by GTE Wireless, and
     that this will have a positive  impact on product  placement and revenue to
     the  Company.  By  leveraging  the sales  organizations  of the major  CDPD
     providers, the Company has the potential to quickly reach a large number of
     merchants.  The Company has CDPD air time agreements in place with AT&T and
     Bell Atlantic and has selectively added sales personnel in these markets to
     begin  deployment of TRANZ Enabler units.  See discussion of agreement with
     Bell Atlantic Mobile, below.

     In July 1997, the Company retained Liviakis Financial Communications,  Inc.
     (LFC) to advise  and assist the  Company  in  matters  concerning  investor
     relations,   corporate   finance   and   strategic   management   planning.
     Remuneration to LFC under the Consulting Agreement, which has a term of one
     year, includes $10,000 in cash over a one year period and 300,000 shares of
     unregistered  stock with 150,000  shares of the stock  issuable at November
     15, 1997 and 150,000  additional  shares  issuable  over a 10-month  period
     thereafter.  The  Company  completed  a  private  placement  of  restricted
     securities  pursuant to Regulation D of the Securities Act of 1933 with two
     officers of Liviakis.  The Company raised  $500,000 in cash for 3.5 million
     shares of common  stock and 1.6 million  warrants to purchase  common stock
     for $.01 per share,  exercisable  from January 15, 1998  through  August 4,
     2002.  In May 1998,  1.2  million of the  warrants  were  exercised  by one
     warrant holder. The securities carry future registration rights,  including
     a one-time demand  registration,  with fees to be paid by the Company.  See
     "Note  4 - LFC  Financing"  and  "Note  5 - LFC  Consulting"  in  Notes  to
     Financial  Statements  for a description  of the  accounting  treatment for
     these transactions.

     Between  October and December 1997, the Company  received bridge loans from
     Liviakis Financial Communications,  Inc. for $475,000 pending completion of
     the private placement offering. Following the funding in mid-December,  the
     notes were  immediately  repaid by the Company  along with interest of nine
     percent per annum.

     On December  10, 1997 the Company  closed a private  placement  offering of
     $3,060,000 principal amount of 8% Adjustable Rate Convertible  Subordinated
     Debentures.  After  associated  fees and repayment of bridge loans incurred
     during the quarter, the Company retained approximately  $2,200,000 to apply
     to  immediate  working  capital  needs  and  the  national  launch  of  its
     proprietary  wireless  transaction   processing  solution.  See  Note  4  -
     Financing in Notes to Financial Statements.

     During the second  quarter,  the Company  completed  the  relocation of its
     customer   support,   administrative   and  accounting   functions  to  the
     Emeryville,  California headquarters. The lease on the Wheatridge, Colorado
     office has terminated.  Engineering  functions will remain at the Company's
     Palmer Lake, Colorado facility.

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

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

     The Company also signed a merchant  acquiring  agreement with National Bank
     of Commerce  "NBC",  in March 1998.  NBC is the lead  banking  affiliate of
     National Commerce Bancorporation. USWD expects the agreement to broaden its
     ability to provide  credit card  processing  services for  merchants in the
     retail, restaurant, and hotel/lodging industries.

                                       13
<PAGE>
     As of March 12, 1998,  the Company  entered into an agreement with entrenet
     Group,  LLC  ("entrenet")  to provide  business  and  financial  consulting
     services to the  Company  and to assist the Company in locating  additional
     financing.  The term of the agreement is for six months from March 12, 1998
     and renews for additional six month terms unless at least 60 days notice is
     given  to  terminate  the  agreement  prior  to the end of a term.  For its
     advisory  services  under the  agreement,  entrenet  will  receive a fee of
     $60,000, payable in the form of a promissory note bearing 10% interest, due
     on or before the earlier of March 11,  1999,  or the receipt by the Company
     of aggregate  gross proceeds from  financings of  $2,000,000.  In addition,
     entrenet received a Common Stock Purchase Warrant to purchase 10,435 shares
     at $5.75 per share, exercisable until March 11, 2003. Upon the consummation
     of any financing transaction entered into by the Company during the term of
     the agreement  (with the exception of financings  from certain  identified,
     excluded  sources) or for two years after  termination  with respect to any
     financing obtained from a source introduced to the Company by entrenet,  or
     if entrenet  assists the Company in locating an  executive-level  candidate
     who is hired by the Company, entrenet is entitled to compensation under the
     agreement.

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

     Net Sales

     Revenue of  $245,439  for the third  quarter of fiscal 1998 was up slightly
     from  revenue of  $243,446  generated  during the third  fiscal  quarter of
     fiscal  1997 as the  Company  continued  the shift  from a  per-unit  sales
     approach to a recurring  revenue model. The Company was also able to resume
     shipment  of POS-50  units  following  a  product  shortage  in the  second
     quarter. For the nine-month period,  revenue of $599,296 decreased 43% from
     the prior period amount of $1,046,359 due to the strategy  shift  described
     above. Product placements of the TRANZ Enabler to merchants through the new
     distribution   program  have  not  developed  as  rapidly  as  anticipated,
     consequently revenue has been minimal,  while at the same time; significant
     expenses have been incurred.  The Company hopes that the transition  from a
     "voice" to "data" sales  orientation  for the GTE sales  personnel  will be
     aided by several new operational  initiatives  implemented in February 1998
     by GTE  Wireless.  The Company  also  expects a positive  impact on product
     placement and revenue from the recently  signed Bell  Atlantic  joint sales
     and marketing agreement. However, for both programs, expenses are likely to
     exceed revenues, at least over the near term.

     Gross Margin

     Gross margins in the third fiscal quarter of 1998 were $130,100 compared to
     $128,666 for the same period in fiscal 1997. As a percent of revenue, gross
     margins in both  periods were almost  identical at 53%. For the  nine-month
     periods,  gross margins  decreased from $444,281 in fiscal 1997 to $247,550
     in the current period on the corresponding revenue decline. For the current
     nine-month period,  gross margin as a percent of revenue was down 1.2% from
     the prior  period due to the mix of product  sales in the first half of the
     current year.

     Operating Expenses

     Selling,  general and administrative expense increased from $122,691 in the
     third fiscal  quarter of 1997 to $1,999,817 in the third fiscal  quarter of
     1998.  For the  nine-month  periods,  selling,  general and  administrative
     expense  increased  from  $463,009 in the prior year to  $4,271,625  in the
     current year. The current quarter  contains  several  significant  non-cash
     charges.  These  include a  $350,000  charge  related to the  revalued  LFC
     consulting  agreement and a $156,000  charge  related to the extension of a
     common  stock  warrant   exercise  period  which  was  expiring.   Non-cash
     consulting fees related to business development of approximately $1,121,000
     are  reflected  in the fiscal  1998 nine month  results,  and  include  the
     termination  of the  original  entrenet and Woolley  consulting  agreements
     entered  into during  fiscal year 1997,  and  amortization  of the Liviakis

                                       14
  <PAGE>
     Financial  Communications  consulting services (see Note 5 to the financial
     statements). The nine-month period was also impacted by the $156,000 charge
     related to the warrant extension.

     The balance of the selling, general and administrative expense increased by
     approximately  $1,371,000 and $2,531,000 for the three month and nine month
     periods,  respectively.  A significant  portion of the increase in both the
     three and nine month periods resulted from the aggressive addition of sales
     and support  personnel and  infrastructure to provide local support for the
     GTE nationwide deployment. Headcount increased from approximately 18 at the
     end of September  1997,  to  approximately  50 employees as of December 31,
     1997 and  approximately 60 at the end of March 1998.  Expenditures  include
     increased   compensation   expense  for  new  sales  and  sales  management
     personnel, selective additions to the management team, increased travel and
     communication  expense  related to the new marketing  program,  and expense
     related to the resolution of several  outstanding legal issues. The Company
     continues to hire sales and support  personnel to support the new marketing
     programs.  At least in the near term,  operating  expense will  continue to
     increase ahead of revenue.

     Research  and  development  expenses  decreased  from  $87,914 in the third
     fiscal quarter of 1997 to $78,000 in the first third quarter of 1998.  This
     decrease was due to lower engineering  material  purchases.  The nine-month
     period expense decreased from $301,315 in fiscal 1997 to $251,000 in fiscal
     1998 due to one  vacancy  in the  department  during a portion of the first
     half of fiscal 1998 and due to lower occupancy costs.

     The third quarter  results  include a $921,000  charge for the valuation of
     common shares issued to a group of Certain Noteholders,  in settlement of a
     dispute regarding rights related to the conversion of the notes into shares
     of Common Stock.  Refer to Settlement of Claims of Certain  Noteholders  in
     Note  7 to the  financial  statements  for a  complete  description  of the
     settlement.

     Interest Expense

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


     Financial Condition, Capital Resources and Liquidity

     The Company  continues to have  significant  problems due to its  financial
     condition and lack of liquidity.  While  management is optimistic  with its
     medium  and long term  opportunities,  the  Company is  constrained  by its
     immediate financial condition and requirement for increased liquidity.  The
     Company has  accumulated  a deficit of  approximately  $22.8  million since
     inception to December 31, 1997. The Company's CDPD based products,  the GTE
     and Bell Atlantic  joint  marketing and  distribution  agreements,  pending
     distribution  agreements  (if realized)  and the  transition to a recurring
     revenue  focus  present an  opportunity  for  significant  revenue  growth,
     eventual  profitability,  and the  generation  of  positive  cash flow from
     operations.   At   present,   however,   development   of   the   Company's
     infrastructure  and  expansion  of the  sales  and  marketing  organization
     requires  immediate,   additional  financing.  Proceeds  from  the  private
     placement  offering  which was completed in December  1997,  have been used
     primarily  to complete the launch of the joint  marketing  program with GTE
     Wireless,  build the related  corporate  infrastructure  and make selective
     inventory purchases.

     Based on current staffing levels, the Company's expenditures are running at
     a monthly rate of approximately  $450,000. In order to meet its obligations
     under its  agreement  with Bell Atlantic  Mobile,  the Company will require
     additional sales personnel for significant  product to be placed under that
     agreement.  This will further  increase  the  Company's  expenditures  over
     present levels.  As a result,  execution of the Company's  business plan is
     dependent on a  significant  debt or equity  financing  event.  The Company
     continues  to work both  directly  and  through its  consultants  to secure
     additional  debt or equity  financing  which is required to fund operations

                                       15

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

     In an  attempt  to finance a portion  of its  inventory  requirements,  the
     Company engaged in discussions  with GTE Leasing  Corporation for some time
     regarding a program to fund the  manufacture  of TRANZ  Enabler units which
     are  deployed  and to be deployed  through the joint USWD and GTE  Wireless
     marketing   agreement.   As  described  below  in  this  discussion   under
     "Subsequent  Events,"  the Company  entered into this  inventory  financing
     agreement with GTE Leasing Corporation as of April 2, 1998 and is presently
     completing  certain  technical  and  legal  requirements  to  finalize  the
     agreement and begin to draw funding  thereunder.  Third-party  financing of
     TRANZ Enabler units is a required  element of the Company's  business model
     and it is  likely  that the  Company  will have to seek  similar  financing
     arrangements for units distributed  through other marketing  channels.  The
     inability  to fund  inventory  needs  from  outside  sources  could  have a
     material  adverse  impact on the Company.  In order to satisfy a portion of
     its immediate short term capital  requirements the Company has entered into
     an  agreement  with a  shareholder  to allow the Company to assign to third
     parties, options it has held since 1995, on 367,684 shares of the Company's
     Common Stock owned by that shareholder,  which the Company has the right to
     purchase at $.25 per share.  The Company  anticipates that it will sell and
     assign  these  options to  accredited  investors  in blocks of no less than
     50,000  shares  between the present  time and October 5, 1998,  the date on
     which its option  expires.  The amount of cash that may be  provided to the
     Company  through this source is not readily  determinable,  as it will vary
     depending on the market price of the Company's Common Stock at the time the
     Company sells each option.

     Inventory increased from $208,867 as June 30, 1997 to $879,952 at March 31,
     1998.  Approximately  $359,000  of  this  increase  was for  TRANZ  Enabler
     inventory,  with the  remaining  portion  being  for  components  needed to
     initiate new builds of POS-50(R)  and POS-500  units.  This  inventory  was
     purchased  directly by the Company.  The Company's  business plan calls for
     all TRANZ Enablers to be financed  through third party  financing  sources.
     While  the  Company  has  entered  into  the  agreement  with  GTE  Leasing
     (described   below)  to  fund  product  placed  through  the  GTE  Wireless
     agreement,  it must obtain  inventory  financing from external  sources for
     other  placements,  and at present the Company  has not yet  obtained  such
     financing.  As described in Note 6 to the financial  statements,  merchants
     that  subscribe to the Company's  credit card  processing  service  usually
     receive a TRANZ Enabler unit which provides the wireless communications and
     processing  functionality.  As  these  units  are  deployed  at a  customer
     location,  the asset value is  transferred  from  inventory to  "Processing
     units - deployed" and  depreciated  via a charge to Cost of Sales over a 48
     month life.  The net value of this  equipment  was $383,100 as of March 31,
     1998.

     As the result of the  approval by  shareholders  on  February 6, 1998,  the
     Company  authorized  4,000,000 shares of no par value Series "A" Cumulative
     Convertible  Redeemable  Preferred  Stock (the "Preferred  Stock"),  with a
     stated  value  of  $1.00  per  share.  On  that  date,  the  $3,060,000  of
     Convertible  Debentures  issued in December 1997,  automatically  converted
     into 3,060,000  shares of Preferred  Stock.  The Preferred  Stock gives the
     holder the right to convert  principal  into shares of Common  Stock in the
     future at 80% of  market  price,  but not  lower  than $4 per share for the
     first 270 days, and no higher than $6 per share. The security carries an 8%
     dividend rate, which drops to a 4% dividend rate once the underlying shares
     of Common Stock are registered with the Securities and Exchange Commission.
     The Company is required to register the shares of Common  Stock  underlying
     the  securities  sold in the  offering,  plus the  shares of  Common  Stock
     issuable as interest  on the  Debentures  and  dividends  on the  Preferred
     Stock.

                                       16

<PAGE>
     Subsequent Events

     Agreement with GTE Leasing Corporation

     On April 2, 1998 the Company  entered  into a Loan and  Security  Agreement
     with GTE Leasing Corporation to fund the manufacture of TRANZ Enabler units
     by Wellex  which are or will be  deployed  through the GTE  Wireless  joint
     marketing  agreement.  The  agreement  with GTE Leasing is in the form of a
     revolving credit facility in the maximum amount of $1,200,000.  GTE Leasing
     will  pay  the  Company  a  fixed  amount  for  each  TRANZ   Enabler  unit
     manufactured by Wellex for placement under the GTE Wireless joint marketing
     agreement.  At approximately  $400 per unit, the Company has the ability to
     finance  up to  3,000  TRANZ  Enabler  units  at any one  time  under  this
     agreement. The Company expects that repayment of the amounts financed under
     the credit  facility will be made from the recurring  revenue  generated by
     the units placed under the GTE Wireless joint marketing agreement. However,
     the Company is  primarily  obligated  to repay all amounts  owing under the
     credit facility, irrespective of whether processing revenues are sufficient
     to pay such amounts.  To secure payment under the agreement the Company has
     granted  GTE Leasing a security  interest  in the units and the  processing
     revenues from those units. The Company also entered into a Notice,  Consent
     and Agreement between itself, NOVA Information  Systems,  Inc. ("NOVA") and
     GTE Leasing which  acknowledges  the  obligation of NOVA to pay GTE Leasing
     directly  from amounts owed to the Company by NOVA for amounts owing by the
     Company to GTE Leasing under the credit  facility.  The agreement  with GTE
     Leasing is terminable on certain  defined events of default,  including the
     failure  to pay any  installment  within  ten  days of its due date and for
     other events of default which remain  unremedied  for ten days after notice
     is given to the Company by GTE Leasing. The Company is presently finalizing
     several  technical and legal  requirements that must be completed before it
     can begin to draw funds under this agreement.


Part II

     ITEM 1 -- LEGAL PROCEEDINGS

     Securities Class Actions Settlements

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

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

                                       17

<PAGE>
     Settlement with Consultant

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

     Settlement of Claims of Certain Noteholders

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

     During March 1998, the Company  reached a settlement  with the  complaining
     Noteholders' by agreeing to issue 1.4 times the number of shares originally
     issuable as principal  and  interest on the Demand  Notes  purchased by the
     complaining Noteholders (plus an additional 11,000 shares to one Noteholder
     who purchased  $50,000 of the Demand Notes). As a result of the settlement,
     the  issuance of "premium"  shares was  recorded in Operating  Expense as a
     litigation  settlement  of  approximately   $921,000  in  March  1998.  The
     agreement also provides the Noteholders  with certain  guarantees as to the
     amount  for which the shares  can be resold  and a "put"  which  allows the
     Noteholders  to require the Company to  repurchase  any  restricted  shares
     remaining  unsold at the end of the one year period after the shares become
     saleable  under SEC Rule 144. The shares  issuable  upon  conversion of the
     Demand Notes will be "restricted securities" as defined under SEC Rule 144,
     but will  become  saleable  pursuant to Rule 144 one year from the date the
     converted  Demand Note was purchased by the Noteholder.  A total of 525,800
     shares  have  been or will be issued to the  complaining  Noteholders  upon
     conversion  of their notes which will be subject to the  guarantee  and put
     agreements.  The holder of the other $50,000  Demand Note will be given the
     enhanced  conversion  rate (of 1.4  times the  number of shares  originally
     issuable)  and will receive  154,000  shares upon  conversion of his Demand
     Note but will not be given the guarantee or put.

     The  guarantee  provision  of the  settlement  agreement  allows the former
     Noteholders to recover the difference between the guarantee price (which is
     $3.00 per share as to  360,800  of the shares and $4.29 per share as to the
     remaining  165,000 shares issuable upon conversion of the Demand Notes) and

                                       18

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

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

     Dispute with Supplier

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



ITEM 2 - CHANGES IN SECURITIES

     Recent Issuances of Unregistered Securties:

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

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

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

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

                                       19
<PAGE>
     The Company  relied upon the  registration  exemption  contained in Section
     4(2) of the  Securities  Act of 1933 for  these  transactions.  None of the
     transactions involved a public offering. Representations were received from
     the  purchasers of the  securities to the effect that the  purchasers  were
     taking for  investment  purposes only and not with a view to  distribution;
     "restricted  securities"  legends  were or will be  imprinted  on all stock
     certificates; and stop-transfer instructions were lodged with the Company's
     transfer agent as to all shares of common stock issued in the transactions.



     Changes in Securities:

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

ITEM 3 -- DEFAULTS UPON SENIOR SECURITIES

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


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

         ----------------------------------------------------- ------------- ----------- ---------- ------------- --------------
         Proposals                                                      For     Against    Abstain     Not Voted    Total Voted
         ----------------------------------------------------- ------------- ----------- ---------- ------------- --------------
<S>                                                               <C>          <C>         <C>       <C>            <C>      
         1. Elect five directors to the Company's Board of
         Directors
                Evon A. Kelly                                     8,177,029                 11,467                    8,188,496
                Rod L. Stambaugh                                  8,177,029                 11,467                    8,188,496
                Richard S. Barton                                 8,177,029                 11,467                    8,188,496
                Caesar Berger                                     8,177,029                 11,467                    8,188,496
                Chester N. Winter                                 8,177,029                 11,467                    8,188,496
-------------------------------------------------------------------------------------------------------------------------------
         2.    Amendments    to    Company's    Articles   of     8,081,829      90,504     16,163                    8,188,496
         Incorporation  to  increase  the number of shares of
         no par value Common Stock to 40,000,000
-------------------------------------------------------------------------------------------------------------------------------
         3.    Amendments    to    Company's    Articles   of     5,216,071      91,287     20,554     2,860,584      5,327,912
         Incorporation  to authorize up to 15,000,000  shares
         of preferred  stock,  up to 4,000,000  designated as
         Series   A   Cumulative    Convertible    Redeemable
         Preferred Stock
-------------------------------------------------------------------------------------------------------------------------------
         4.  Amendments  to  Company's   Amended  1992  Stock     5,178,657     126,187     22,168     2,861,484      5,327,012
         Option  Plan  to  increase   the  number  of  shares
         available  for issuance  upon  exercise to 2,680,000
         shares
-------------------------------------------------------------------------------------------------------------------------------
         5.  Ratify  selection  of  Price  Waterhouse  LLP as     8,170,676       8,470      9,350                    8,188,496
         Company's Independent Accountants
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
                                       20
<PAGE>
ITEM 5 -- OTHER INFORMATION


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

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

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


                        27        Financial Data Schedule



         b) Reports on Form 8-K

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






                                   SIGNATURES


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



                                                U.S. WIRELESS DATA, INC.
                                                Registrant


Date:    May 27, 1998                           By: \s\ Evon A. Kelly
         ---------------------------                -----------------
                                                    Chief Executive Officer


         May 27, 1998                           By: \s\ Robert E. Robichaud
         ---------------------------                -----------------------
                                                    Chief Financial Officer

                                       21