SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

                                   [Mark One]

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934

                     For the fiscal year ended June 30, 1999

[ ]  TRANSITION  REPORT  PURSUANT  TO  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.
                  --------------------------------------------
                 (Name of small business issuer in its charter)

               Colorado                                  84 -1178691
      -----------------------------                    -------------------
     (State or other jurisdiction of                  (I.R.S. Employer
      incorporation or organization)                   Identification No.)

           2200 Powell Street, Suite 800, Emeryville, California 94608
           ----------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

       Registrant's telephone number, including area code: (510) 596-2025

        Securities registered pursuant to Section 12(b) of the Act: None

          Securities registered under Section 12(g) of the Exchange Act

                        No Par Value Class A Common Stock
                        ---------------------------------
                                (Title of Class)

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 90 days.  Yes [X]  No  [ ]

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the  best  of  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [ ]

The issuer's revenues for the fiscal year ended June 30, 1999 were $1,424,000.

The aggregate market value of the issuer's voting stock held as of September 27,
1999 by non-affiliates of the Registrant was approximately $15,757, 000 based on
an average price of $1.25 as of September 27, 1999.

As of September 27, 1999, the issuer had  19,829,526  shares of its no par value
common stock outstanding.

Transitional Small Business Disclosure Format (check one):

                                                   Yes  [ ]   No [X]

                                        1

<PAGE>

PART I

ITEM 1. DESCRIPTION OF BUSINESS

General Development of Business

     U.S.  Wireless Data, Inc. ("USWD") was founded in July 1991 for the purpose
of designing,  manufacturing and marketing wireless and portable credit card and
check authorization  terminals for use in the transaction  processing  business.
The Company completed an initial public offering in December 1993.

     USWD's  terminals were initially  designed to enable  transactions to occur
over analog wireless  channels,  rather than over conventional phone lines. USWD
began by selling analog terminals, and subsequently developed and sold a line of
terminals that allow data transport over the newly developed  digital  networks.
USWD then ventured briefly into the realm of transaction processing, and has now
repositioned    itself   as   a    terminal-neutral,    transport-neutral    and
processor-neutral  enabler of wireless  transaction  processing services through
the creation of what USWD calls  Wireless  Express  Payment  ServiceSM or WEPSSM
("WEPS").

     WEPS proprietary technology allows for:

     o    Transactions to be carried over different  wireless networks utilizing
          different  communications  technologies  (i.e.,  CDPD and ARDIS)  from
          various wireless terminals (i.e.,  terminals manufactured by companies
          such as Lipman,  Tillsmith,  and  Intellect)  to  various  "front-end"
          processors   (i.e.,   First  Data  Resources,   Paymentech,   Maverick
          International, etc.);
     o    Internet-based   on-line   activation,   deactivation   and   terminal
          diagnostic tools; and,
     o    Internet-based on-line access to real-time transaction reports.

     USWD serves the  transaction  processing  community  by  applying  wireless
technology  and  value-added   services  to  the  transportation  of  electronic
transactions.  USWD's WEPS  technology  provides  fast and flexible  transaction
processing capabilities and advanced on-line customer service capabilities. USWD
provides merchant acquirers,  Independent Sales Organizations ("ISOs") and third
party  processors  with a wireless  transaction  management  service that can be
utilized  in new  merchant  segments,  permits  real-time  information  via  the
Internet and simplifies the customer service and development  efforts. Via WEPS,
merchants  can  process  payments  as  fast  as  cash,   without  the  cost  and
inconvenience of being tethered to a telephone line.

     In  creating  WEPS,  USWD  has  capitalized  on what it  perceives  to be a
significant opportunity based on the growth and convergence of three industries:
transaction  processing,  wireless  technology and the Internet.  USWD generates
revenue from four primary sources:

     o    One-time set-up charges per terminal device;
     o    Monthly service fees for each terminal device;
     o    Transaction fees for each processed transaction; and,
     o    Sale of  WEPS-compatible  modems to device  manufacturers  and  system
          integrators.

     WEPS was  implemented  to facilitate  the  introduction  and  deployment of
smaller,  faster  and more  flexible  wireless  terminals  without  the need for
extensive software  development by the terminal  manufacturers.  It also enables
the transaction  processors to accept card  transactions from these new wireless
terminals  without  extensive   front-end  system  and  communication   protocol
development on the part of the front-end processor.

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<PAGE>

     End-users  that  utilize WEPS have the ability to process  transactions  in
three to five seconds versus the 12 to 15 seconds typical of traditional dial-up
methods. The service is cost effective since the merchant replaces their current
monthly telephone bill of up to $45.00 for a dedicated  telephone line for their
payment  terminal  with a  monthly  fee of $10 or $20  for  WEPS  services.  The
wireless  capability  also  allows for the  flexibility  and  mobility of device
utilization.

     WEPS  positions  USWD as a  vendor-neutral  wholesaler of wireless  payment
processing  solutions.  USWD is targeting  its products and services to merchant
acquirers,  ISOs (i.e.,  independent sales  organizations that solicit merchants
for transaction  processing)  and credit card processors  looking to enhance and
expand their merchant service offerings. These "customers" will, in turn, market
the WEPS suite of products and services to new or under-served merchants.  WEPS'
neutrality permits all terminal  manufacturers to use its service without regard
to software compatibility issues between the terminal and the wireless networks.
Further, there is minimal cost for a front-end processor to implement and manage
wireless technology via WEPS.

     With wireless data transmission  capabilities  leveraging on the success of
cellular voice  systems,  electronic  payments  should become a reality for many
market segments that heretofore  have been  under-served by land-based,  dial-up
communication facilities.  The Company intends to focus its marketing efforts to
educate  its  customers  about the  significant  speed,  mobility  and  economic
advantages of wireless  technology.  USWD's business should initially be derived
from its  targeted  sales  effort,  business-to-business  advertising  campaign,
partnerships  in business,  industry and trade  events,  and  subsequently  from
referrals from its network of customers.

     The Company has recently  completed the installation of its  communications
connectivity  to the  CDPD  and  Ardis  networks  as well as  several  front-end
processors to whom WEPS will be sending  transactional data and has successfully
integrated WEPS to the respective  credit card processors  designated  under the
recent  WEPS  agreements  with  merchant  acquirers.   It  is  anticipated  that
commercial  transactions  will start running  through the WEPS host early in the
second quarter of fiscal 2000 (October / Novermber 1999).

     In the  future,  USWD  intends  to expand its WEPS  suite of  products  and
services by:  expanding into selected  international  markets;  recognizing  and
storing signatures in the WEPS network;  becoming a vehicle for the transport of
frequency  and  loyalty  program   information;   processing  ATM  transactions;
accommodating  nonconventional payment and debit transactions;  and transporting
non-payment  oriented  transactions such as health care claims,  vending machine
inventory reports, EBT transactions, telemetric data, etc.

The Transaction Processing Industry

Electronic payment transaction processing involves:

     o    "Capturing"  relevant data (i.e.,  the  transaction  amount,  date and
          time,  information  contained on the magnetic stripe on the reverse of
          the card, the merchant's  identity and account number, the identity of
          the card issuer and related  issuing  bank) at a  merchant's  location
          (the  "point of sale" or "POS")  through  the swipe of the card or key
          entering of card data on a point-of-sale terminal;

     o    Transporting  the  aforementioned  data to a  "front-end"  transaction
          processor for authorization of the transaction;

     o    Returning an authorization code to the merchant,  which then completes
          the transaction; and,

     o    The accounting of transactions  processed by a merchant during a given
          period  and  authorization  of the  actual  transfer  of  funds to the
          merchant's  bank  account  from the  account of the  cardholder.  This
          process is referred to as "back-end processing."

                                       3
<PAGE>

     The  electronic  payments  industry  has  steadily  grown over the last ten
years.  According to The Nilson Report's April 1999 issue, Americans reached for
their  plastic  credit and debit cards over 13.8 billion  times to purchase over
$1.1  trillion  in goods and  services  in 1998.  Spending  on Visa cards  alone
climbed  16% last  year to  $610.3  billion,  the  seventh  consecutive  year of
double-digit  growth.  Spending  on all  MasterCard  credit and debit  cards was
$310.7 billion in 1998, a 17% increase. American Express reported total spending
volume of $165.6  billion  last year,  10% higher than in 1997.  Global Visa and
MasterCard  volume is forecast to expand to $5.7 trillion by 2005.  According to
Information  Week,  online  sales  reached $3.3 billion in 1998 and credit cards
were used for 90% of those purchases. Visa and MasterCard attributed their gains
to targeted marketing  efforts,  the rising popularity of debit and charge cards
for small businesses, and card-based transactions over the Internet.

     Until the  mid-1980s,  banks  controlled  both the merchant  acquiring  and
credit  card  issuing  ends  of  the  credit  card  process.  Independent  Sales
Organizations  became the sales and  deployment arm of the acquiring  banks,  as
merchant  needs and  applications  became more advanced and  sophisticated.  Now
acquiring banks rely on ISOs for the majority of their new merchant accounts.

     Merchant  acquirers,   transaction-processors   and  card  issuers  require
merchants to utilize electronic draft capture ("EDC") terminals to conduct safer
on-line  credit and debit card  transactions.  As a result,  the majority of the
transaction dollars from merchant locations accepting bankcards are processed by
EDC  terminals.   An  EDC  terminal   magnetically  reads  the  encoded  account
information  from the  magnetic  strip on the back of a credit or debit  card or
takes the key entered data and sends it, along with the  transaction  amount and
terminal  specification  data to a front-end  processor for  electronic  on-line
authorization.  The front-end  processor  authorizes the card with the bank card
issuer, electronically captures the transaction,  generates an approval code and
returns the data to the terminal,  which prints a customer receipt. Each dial-up
transaction process takes approximately 10 to 18 seconds to complete. At the end
of the business  day,  the EDC  terminal  dials the  front-end  processor  via a
telephone line to initiate the settlement,  collection and electronic deposit of
funds to the  merchant's  local  bank  account  typically  via the U.S.  Federal
Reserve's ACH network.

     Various card types including bankcards and certain travel and entertainment
cards are now being  accepted  at  locations  such as the U.S.  Postal  Service,
municipalities,  hospitals and other places of business  that have  historically
not been  considered  card  acceptors.  According  to Visa,  the  quick  service
restaurant industry represents $108 billion in revenue. Yet in 1998, credit card
usage  accounted for only $564 million or 0.5% of all quick  service  restaurant
purchases.  Visa  projects  that the  overall  potential  of this market is $9.7
billion.

     The recent need for mobile transaction  processing has paralleled America's
demand for  convenience and desire to save time. The retail point of sale is now
expected to be located wherever the customer resides.  As a result, the merchant
must be prepared to complete the sale at the cardholder's location. Thus, a wide
range of business services such as towing services, locksmiths, concessionaires,
special event vendors,  in-home  appliance repair services,  mobile auto repair,
door-to-door   sales,   and  delivery   services  may  now  complete  the  sales
transactions at the cardholder's  location  utilizing WEPS.  Recent studies have
indicated that consumers spend up to 50% more per transaction  when using credit
cards  than when using cash or checks.  Further,  the  increase  in the types of
credit and debit cards, rapid technological  advances in transaction  processing
and  financial  incentives  or loyalty  reward  programs  offered by credit card
issuers have  contributed  greatly to wider  merchant  acceptance  and increased
consumer use of cards.

     As with many rapid growth industries,  the transaction  processing industry
has undergone rapid  consolidation.  The cost to maintain EDC systems,  merchant
requirements  for  improved  customer  service,  and the demands for  additional
customer  applications  have made it difficult for some banks and ISOs to remain
competitive.  Many of these  providers  are  unwilling  or unable to invest  the
capital required to meet these evolving  demands,  and are increasingly  exiting

                                       4
<PAGE>

the transaction  processing  business or otherwise  seeking alliance partners to
provide  transaction   processing  for  their  customers.   In  addition,   many
transaction-processors  utilize and maintain legacy  front-end  systems that are
difficult   to   adapt   to  new   communications   technologies.   Accordingly,
transaction-processors  that utilize these systems find it difficult to meet the
increasing merchant demands for more sophisticated  products and services.  WEPS
can be utilized by merchant  acquires and card  processors  to  alleviate  these
issues by allowing them to offer wireless  products while  eliminating  the need
for them to expend any developmental resources at their front-end.

     Despite this ongoing  consolidation,  the industry remains  fragmented with
respect to the number of entities providing merchant services.  Industry sources
indicate  that  although  the ten  largest  bankcard  processors  accounted  for
approximately  67.7% of the total charge  volume  processed in 1998,  there were
over  400  additional   registered  service  providers   marketing  and  selling
transaction  processing  services to merchants.  Management  believes that these
factors will result in continuing  industry  consolidation over the next several
years as indicated by Nova Information System's recent acquisition of PMT, First
Bank of Commerce,  and  CoreStates.  WEPS can help simplify the  management of a
diverse suite of terminals placed in the market through multiple distributors.

     Management  further  believes it is  reasonable  to expect that  electronic
payments within the United States will likely continue its current trajectory of
12% to 17% annual increases, while growth outside the U.S. will be even greater.
Current dial-up technology is not sufficient to support this growth. Rewiring in
order to take advantage of  improvements  in technology is quite costly and time
intensive.  This  suggests  that a growing  percentage  of the legacy  terminals
attached  to  telephone  lines  will  need to be  replaced  to meet the  various
technical  and  functional  demands of the  changing  marketplace.  As a result,
wireless technology is being viewed as commercially viable by the card-accepting
merchants  including those currently  transmitting  via  conventional  telephone
lines.

The Wireless Industry

     It is estimated that the present cellular  service  footprint covers 95% of
the  U.S.  population.   According  to  the  Cellular  Telecommunications  Trade
Association, as of June 1998, there were over 60 million wireless subscribers in
the United  States.  Experts  estimate that by the end of 1999 there will be 200
million  wireless  telephone  users around the world.  To support this explosive
growth,  the cellular carriers are spending a substantial part of their revenues
to  expand  capacity  by  upgrading  their   infrastructure   with  new  digital
technology.  The cellular carriers are focusing on incremental  revenue streams,
including  spending  substantial  amounts of  revenue  deploying  wireless  data
infrastructure on their existing networks.

     Accessing the Internet through the use of cellular  communications  is also
on the rise. In May 1999, the ARC Group, a technology  consulting  firm based in
the  United  Kingdom,  reported  that by 2004 more  end-users  would  access the
Internet via  handheld  mobile  terminals  than via  landline  connections.  The
research forecasts that there will be more than one billion Internet subscribers
in five years,  with 750 million  using  mobile  terminals  and only 670 million
using landlines.  Further, companies such as 3Com and Microsoft subscribe to the
wireless  view of the  world and have  begun  aggressive  campaigns  to turn the
computing public into wireless users. For example,  the new Palm Pilot VII has a
wireless data modem to provide Internet access and e-mail services.

     Several  networks  on which USWD  currently  operates,  as well as those it
perceives  as  potential  wireless  carriers of POS data  traffic are  described
below.  USWD  continuously  monitors and evaluates this  technology to determine
feasibility and applicability for POS data transmission via WEPS.

     o    Cellular Digital Packet Data ("CDPD").  CDPD is the wireless  protocol
          for  transmitting  data over a cellular  network.  Presently  over 260
          metropolitan  statistical  areas have CDPD  service  provided  by AT&T
          Wireless  Services,  Bell Atlantic  Mobile,  GTE  Wireless,  Ameritech
          Cellular  and  360   Communications.   CDPD   technology,   which  was

                                        5

<PAGE>

          commercially  deployed  starting in 1996,  was designed for high speed
          encrypted  data  transmission  over  dedicated  channels that does not
          interfere with or degrade  cellular voice traffic.  Deployment of CDPD
          networks  is  expected  to  continue  to expand  throughout  the U.S.,
          Canada,  Latin America and China. Because of the encrypted packet data
          and Internet  protocol ("IP") nature of CDPD technology,  CDPD-enabled
          POS terminals can outperform  traditional  dial-up terminal technology
          operating  over public  switched  telephone  networks.  A CDPD network
          provides  high-speed (19.2 bps) wireless access between a CDPD-enabled
          POS terminal and a transaction-processor,  effectively bypassing local
          phone line  service  and the  monthly  costs  associated  with it. The
          result  of  utilizing   CDPD   technology  is  three  to  five  second
          authorization  response  times at rates less  expensive  then dial-up.
          USWD utilizes the CDPD network for most of the current transactions.

     o    American   Mobile/Ardis.   The  American  Mobile/ARDIS  network  is  a
          combination of satellite and  terrestrial  based wireless  packet data
          networks.  The terrestrial  based ARDIS network is the oldest and most
          mature wide-area,  wireless data-only network in the U.S. marketplace.
          The Company has recently integrated the ARDIS network into WEPS and is
          in the process of certifying a handheld  terminal for use on the ARDIS
          network.  The ARDIS network provides  wireless coverage in many of the
          smaller   markets  where  CDPD  is  absent.   It  also  has  favorable
          in-building  penetration  characteristics  that position this wireless
          technology for use with wireless payment terminals.

     o    BellSouth  Mobile Data ("BMD").  BMD is a wireless packet data network
          currently available in over 7,500 U.S. cities and towns,  covering 90%
          of the urban  business  population.  BMD is  designed  as a  data-only
          infrastructure.   BMD  is  also  connected  to  a  limited  number  of
          transaction processors and currently has credit card data transversing
          its network. USWD has requested that BellSouth consider a distribution
          agreement between the two companies.

     o    Nextel.  Nextel  currently  has a  digital  Specialized  Mobile  Radio
          ("SMR") network. This network provides voice and messaging services in
          the top 50 major metropolitan  service areas,  covering  approximately
          65% of the U.S. population. Nextel's network is not compatible for POS
          data  traffic,  but it is  anticipated  that it will be  upgraded to a
          packet-based data-ready network.

     o    Metrocom.  Metrocom is currently operating a packet-based data network
          in a few major cities including San Francisco, Seattle, and Washington
          D.C. Metrocom's Ricochet network is a packet data network designed for
          wireless mobile computing  applications  including E-mail and Internet
          access. USWD is not using the Metrocom network at this time.

     o    Digital  Cellular.  Present  cellular  networks consist of digital and
          analog   technology.   There  are  three  digital  voice  technologies
          competing  for  market   acceptance  and   dominance:   Code  Division
          Multiplexing Access (CDMA), Time Division  Multiplexing Access (TDMA),
          and the European standard known as GSM. All three digital technologies
          have the ability to transmit data over their respective networks.

     o    Personal  Communication  Services  ("PCS").  With  the  allocation  of
          additional  RF spectrum and the FCC's  successful  auctioning of these
          air wave  licenses,  a variety of competing PCS networks are beginning
          to offer local and regional wireless voice and data services. As these
          networks are  developed  and  deployed,  PCS could become a viable POS
          wireless  access  technology;  however,  it  is  not  currently  being
          utilized by USWD.


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<PAGE>

The Internet

     The Internet  has emerged as a global  medium  enabling  millions of people
worldwide to share information, communicate and conduct business electronically.
Americans are accessing the Internet at a phenomenal  pace.  With the tremendous
growth in daily Internet users, consumers are becoming more and more comfortable
using the  Internet  for a wide  variety of  services  such as paying  bills and
purchasing  consumer and specialty items.  Most research  suggests that sometime
during 2002 and 2003 that more  consumers  will be connected to the Internet via
handheld  wireless  devices than with PC's.  Wireless  access to the Internet is
already a reality and new  wireless  protocols  are being  developed to expedite
Internet  content  to be  delivered  to  the  wireless  handset.  WEPS  will  be
compatible with these new communications  protocols and can process transactions
that originate from the Internet via wired or wireless devices.  WEPS offers the
merchant acquirer  complete control and management of their wireless  terminals.
USWD's  user-friendly  Internet-based  tools  provide the  merchant and merchant
acquirer with valuable reporting and customer service information.

Company History

     U.S.  Wireless  Data,  Inc.  was  founded  in July 1991 for the  purpose of
designing,  manufacturing  and marketing  wireless and portable  credit card and
check  authorization  terminals.  In December  1993,  the Company  completed  an
initial public offering,  raising approximately  $12,200,000 through the sale of
1,650,000 shares of common stock.

     The Company has confronted  obstacles and growth pains typical of expanding
businesses.  At  three  points  in  the  company's  history,  senior  management
recognized  these  obstacles,  isolated them and developed new  strategies.  The
Company's  lack of financial  resources has also impeded the  development of the
business.

     Initially  established to manufacture and sell portable  electronic payment
terminals   ("boxes")  to  communicate  via  circuit  switched   cellular  voice
technology, the Company designed, manufactured and marketed the POS-50(R), which
was  recognized  as the world's  first truly  integrated  and portable  wireless
credit card and check  authorization  terminal.  The product was launched in the
first quarter of 1994 and was marketed  through  acquiring  banks,  POS hardware
distributors, ISOs and by the company directly.

     The POS-50  allowed a merchant  to  electronically  capture a credit  card,
debit  card or  check  transaction  at the  point of  sale,  virtually  anywhere
cellular  voice  service  existed,  and  complete the  authorization  process in
approximately 16 to18 seconds.  Because of its portable and wireless nature, the
POS-50 was well suited for the small to medium sized mobile  retailer or service
company.  Examples of POS-50  customers  included  craft show vendors,  sporting
event concessionaires,  towing services,  cart and kiosk vendors and essentially
any business  on-the-go  that wanted to safely accept credit and debit cards for
their products and services.

     While the POS 50 did receive much  recognition  from various sectors of the
credit  card  processing  industry  as the first  truly  wireless  point-of-sale
terminal,  only approximately 7,000 devices were sold between 1994 and 1998. The
reasons  driving USWD's  failure to attract broad market  acceptance for its new
device and,  hence,  more terminal sales,  stemmed  primarily from four factors.
They  were:  a) cost - the  device  was very  expensive  to  manufacture  versus
traditional POS terminals,  b) lack of broad terminal application  certification
by front-end processors,  c) slow transaction speed, and d) USWD's primary focus
on the development of the POS-50 technology versus very little resource directed
at  marketing  and  promotion  of the new  wireless  device to the  credit  card
processing industry.  Because of these four factors,  USWD was unable to capture
broad market  acceptance  and realize  meaningful  levels of sales of the POS-50
terminal.



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<PAGE>

     Starting in 1997,  USWD attempted to reposition  itself from being solely a
manufacturer  of  wireless  point-of-sale  terminals  to  becoming a provider of
transaction  processing  services.  This  realignment  was sought to augment its
one-time  equipment  sales  with  recurring  revenue  generated  by the  sale of
wireless credit and debit card processing services to retail merchants. In doing
so,  USWD set out to  offer a  "one-stop"  wireless  solution  directly  to card
accepting  merchants.  The suite of services offered included the sale of USWD's
own wireless  point-of-sale  terminals,  the resale of the newly  introduced and
speedier CDPD wireless  services and the establishment of credit card acceptance
capabilities for merchant clients through USWD's  relationships  with two credit
card acquiring institutions.

     Throughout  1997  and  1998,  USWD  focused  its  resources  on  selling  a
transaction  processing  "solution"  consisting  of  a  terminal,  CDPD  airtime
purchased from major cellular  providers,  and transaction  processing  services
directly to merchants. To accomplish this, USWD began marketing its products and
services  through a series of distribution  and joint marketing  agreements with
the major CDPD service providers.  This effort required the creation of a large,
regionalized  USWD sales  organization  that  trained and  supported  data sales
representatives  from each  respective  cellular  carrier.  GTE Wireless was the
first  cellular  organization  mobilized  to sell  the  Company's  products  and
services  followed by AT&T  Wireless,  Bell  Atlantic  Mobile  and,  ultimately,
Ameritech.  The sales force was built  primarily on  individuals  with  wireless
product  expertise versus  individuals  skilled in the distribution of bank card
products.  In its  efforts  to  provide a  turnkey  solution  to card  accepting
merchants,  USWD had inadvertently  positioned itself in direct competition with
the industry's  largest  acquirers,  banks and independent  sales  organizations
("ISOs.")  This  competitive  stance  resulted  in  disappointing  sales and the
alienation of USWD by the credit card industry as a direct  competitor and not a
provider of value added  services,  thus  hampering  USWD's  ability to sell its
services to many players in the industry.

     Faced with disappointing sales and high overhead expenses due to a recently
expanded  sales-oriented  headcount,  the Company hired Mr. Roger Pierce, former
President  of  First  Data  Corporation  and  Chief  Operating  Officer  of Visa
International,  as its Chief  Executive  Officer  in August  1998.  Early in his
tenure, Mr. Pierce recognized the apparent danger of USWD's competitive  posture
and set out to re-orient the company,  as an enabler of the marketplace.  It was
during this period that the Company began the development of WEPS, however,  Mr.
Pierce resigned for personal reasons in March of 1999.

     In May 1999, Dean M. Leavitt,  the founder and former  President of US Data
Capture,   a  credit  card  processing  company  serving  a  broad  spectrum  of
conventional  card  acceptors  and emerging  markets,  was hired as Chairman and
Chief Executive  Officer of USWD. Mr. Leavitt  immediately began redirecting the
Company's  resources in an effort to have it be  recognized  as the standard for
the  development,   implementation   and  management  of  wireless   transaction
processing  solutions.  To accomplish this goal, USWD has repositioned itself as
an enabler of the merchant  acquirer/ISO  marketplace on a "wholesale" basis and
has discontinued its direct marketing activities to end-user merchants.  As part
of this strategy,  the Company has re-positioned itself to be completely neutral
with  respect  to  point-of-sale  terminal  manufacturers,   wireless  carriers,
front-end and back-end processors and merchant acquirers. In order to facilitate
this process, the company has begun aligning itself with strategic partners such
as merchant acquirers,  terminal  manufacturers,  ISOs, front-end processors and
terminal  deployment  companies  through the execution of "WEPS  Agreements." As
evidence of this neutrality  strategy,  USWD has discontinued its development of
proprietary terminals,  focusing instead on its proprietary WEPS host technology
and the  certification  of other  terminal  manufacturers'  products on the WEPS
platform.  Furthermore,  in May of 1999,  USWD entered  into an  agreement  with
American  Mobile under which USWD will add that company's  Ardis  communications
technology to its WEPS suite of services,  thereby officially  signaling the end
to USWD's CDPD-only orientation. In addition, as evidence of its neutrality with
respect to its merchant  acquirers and ISOs, USWD has discontinued all acquiring
activities  and in July of 1999,  USWD sold one of its two merchant  portfolios.
The  Company  intends to sell its  remaining  merchant  portfolio  as soon as it
identifies  a qualified  purchaser.  As part of the  strategy to  re-orient  the
Company as a neutral  enabler of the credit  card  processing  marketplace,  the
Company's  financial  model is being  transformed  from one that was based  upon
one-time  product  sales  revenues  to one  that  now  relies  heavily  upon the
development of recurring revenues generated from WEPS enabled sites.

                                       8
<PAGE>

WEPS Operational Overview

     WEPS is a comprehensive and integrated suite of wireless transport services
and network  technology  designed to deliver payment  transactions  securely and
efficiently  between  a  merchant's  location  and  a  payment  processor.  WEPS
technology includes the following key features:

     o    Internet-based   account   set-up  with   automated   IP  /  Radio  ID
          provisioning and terminal activation / deactivation services;
     o    High-speed wireless packet data transport;
     o    Real-time authorization and capture;
     o    Message formatting and protocol conversion;
     o    Real-time remote terminal diagnostics;
     o    Ability to use wireless  devices from diverse Point of Sale  terminals
          and systems;
     o    Second level customer support services;
     o    A customer attrition prevention program;
     o    WEPS certification lab for new terminals; and,
     o    WEPS training center for clients' customer service departments.

     Starting  with the various WEPS  certified  wireless  terminals,  a card is
swiped and the sales amount is entered.  The terminal  then  assembles a message
format with all the necessary data to authorize a credit card transaction and is
then  packetized  by the wireless  modem and sent over the CDPD,  ARDIS or other
wireless networks in a wireless communication  protocol. This protocol is routed
to the WEPS servers via the  high-speed  AT&T frame relay, a very fast dedicated
point-to-point  data  communications  link.  The  WEPS  servers  parse  the data
enveloped  in the  packet  and then  reassemble  the  message  in a  format  and
communication  protocol that the selected  front-end  processor can accept.  The
transaction is routed via frame relay to the appropriate front-end processor for
authorization  by the card  issuing  institution.  The card issuer  generates an
approval code and the response is captured by the  front-end  processor and sent
to the  WEPS  server  via  frame  relay.  The WEPS  server  captures  the  data,
reassembles the approval response in the original message format,  and routes it
back to the originating terminal.  This entire credit card authorization process
takes three to five seconds to complete.

     Prior  to the  first  transaction  by a  merchant,  the  merchant  acquirer
accesses  the WEPS  server via a web  browser to set-up  the  merchant  account.
During this process,  the merchant  acquirer selects the type of wireless device
that will be  installed at the  merchant  location  and  activates a wireless IP
address or radio ID for the specific terminal device.  The merchant ID, terminal
ID and front-end processor  information is also entered into the WEPS server via
any conventional  web browser by the acquirer.  All user access is restricted by
ID's and passwords, which are assigned by USWD.

     Essentially,  WEPS  offers  the  merchant  acquirer  complete  control  and
management of their  wireless  terminals.  USWD's  user-friendly  Internet-based
tools provide the merchant and merchant  acquirer  with  valuable  reporting and
customer service information. The Company's help desk service providers are able
to perform  real-time  diagnostic  services on the wireless devices resulting in
immediate  solutions.  The  merchant  or  merchant  acquirer  can also  retrieve
real-time  transaction  reporting details for the current day's  transactions or
any specified date.

Business Strategy

     USWD's goal is to be a premier provider of wireless transaction services to
merchant  acquirers.  USWD  intends  to  accomplish  this goal by  creating  the
standard  for  the  development,   implementation  and  management  of  wireless
transaction processing solutions. The Company intends to leverage its ability to
provide  high-speed,   cost-effective   wireless  connectivity,   and  real-time
activation,  diagnostics  and reporting via the Internet.  To achieve this goal,
the Company is pursuing the following strategies:

     o    Reposition USWD as a Vendor-Neutral  Provider.  USWD intends to become
          an enabler of  wireless  payment  services.  As a supplier  or enabler
          rather than a competitor, USWD hopes to enter into agreements with the


                                       9
<PAGE>

          industry's  largest  merchant   acquirers  and  front-end   processors
          pursuant  to which the  acquirers  and  processors  will offer WEPS to
          merchants as a transaction  processing solution.  In order to solidify
          its position as a neutral provider of wireless transaction processing,
          USWD will support multiple  wireless  networks,  a variety of wireless
          terminals and any front-end processor.

     o    Sell Products and Services Wholesale to Merchant  Acquirers,  ISOs and
          Third Party  Processors.  USWD intends to focus its primary  marketing
          efforts  on the top 30  merchant  acquirers  that  represent  the vast
          majority   of   transaction   activity  in  the   electronic   payment
          marketplace.

     o    Transition  Business  Strategy from "Razor" to "Razor  Blade"  Pricing
          Model.  The Company  will shift the  perception  that it sells  razors
          (i.e. wireless terminals) to that of a seller of razor blades (i.e., a
          fee for each transaction  processed  through WEPS).  Under this model,
          USWD the Company will realize  recurring  revenue.  The Company  will,
          however,  continue to sell selected POS  terminals  that are not being
          adequately  marketed  and  distributed  to the credit card  processing
          community.

     o    Focus Initially on Under-Served End-Users. The Company, in partnership
          with its primary customers (i.e.,  merchant acquirers,  ISOs and third
          party processors),  will identify and target under-served markets such
          as fast food companies,  taxi and limousine services,  other facets of
          the  transportation  industry,  delivery-based  businesses  and  other
          sectors requiring high speed transactions or mobility.

     o    Develop Brand Awareness and Achieve  Marketshare by Promoting  Faster,
          Cost-Effective and Feature-Rich Services. USWD will position itself as
          a high quality,  feature-rich and cost effective wireless solution for
          processing  credit  card  transactions.  The  Company  will  price its
          services  competitively  to gain early  market  share and will clearly
          communicate  its  value-added  services  such as access  to  immediate
          activation,  deactivation  and diagnostics  through the Internet,  and
          real-time transaction reports.

     o    Encourage All Point of Sale Terminal and ATM  Manufacturers to Produce
          WEPS Friendly Products. A critical component to the success of WEPS is
          the availability of wireless devices that can meet the requirements of
          the  targeted  market  segments.  Several new and  incumbent  terminal
          manufacturers  are  beginning  to  develop  wireless  devices  for the
          marketplace.  As part of the Company's "device neutral" strategy, USWD
          will  encourage  these  manufacturers  to  develop  products  that are
          certified on the WEPS platform.

     USWD is confident  that its new business  strategy will be well received by
the  transaction  processing  community  and  will  lead to  improved  financial
performance due to several key factors that may be summarized as follows:

     o    WEPS:  specifically  designed to simplify  the process of  activating,
          deploying,   diagnosing,   managing,  monitoring  and  reporting  from
          wireless  point-of-sale  terminals  in a  manner  that  has  not  been
          previously presented to the market.

     o    Advances in wireless communications technology. Since the introduction
          of the CDPD,  Ardis  and other  wireless  networks  to the  commercial
          sector,  USWD has been able to offer  super high speed,  reliable  and
          secure  end-to-end  transaction  processing  services  in  a  wireless
          environment to certain merchant  segments that had not been previously
          disposed to card acceptance.

     o    Reduction in communication costs. Due to the competitive nature of the
          wireless  carrier  environment,  the cost of transmitting  data (e.g.:
          credit card transactions) wirelessly is now comparable and, in certain
          cases,  less  expensive  than that to  transmit  data via  traditional
          land-line, dial-up methods.

                                       10
<PAGE>

     o    Reduction  in  equipment  costs.  As is the case with many  electronic
          devices, the cost to manufacture wireless point-of-sale  terminals has
          dropped precipitously over the past couple of years.

     o    General  awareness  of  wireless  technology  as a viable  method  for
          transporting  data. Recent  developments in wireless  technology as it
          relates to the transport of data to/from  consumer devices such as lap
          top computers,  interactive  pagers,  cellular telephones and personal
          digital  assistants  ("PDAs")  have  created  a general  awareness  of
          wireless data transport in the public marketplace like never before.

     o    Acceptance of USWD by acquirers as an enabler,  not a  competitor.  By
          positioning  itself as a  vendor-neutral  enabler of the  marketplace,
          USWD   believes   that  those   prospective   clients  that  may  have
          historically  viewed the  company as a  competitor  and,  as a result,
          chose not to  conduct  business  with USWD,  may now accept  USWD as a
          neutral provider and elect to utilize the WEPS suite of services.

     Once  these  objectives  are well into  their  implementation  phases,  the
Company plans to focus on value-added services and additional opportunities.

Additional Opportunities

     For the  foreseeable  future,  USWD will  concentrate on  implementing  its
strategy in the domestic U.S. transaction processing industry.  Assuming USWD is
able to  implement  its  current  strategy,  management  believes  there will be
significant  opportunities to leverage the Company's product offering and expand
into new product categories and new geographic territories.

     These opportunities may include, but not be limited to:

     o    International Expansion. The International  marketplace,  particularly
          Latin  America,  Asia  and  Europe,  represents  a  tremendous  growth
          opportunity  for USWD.  To USWD's  advantage,  many of the  developing
          countries  are  leapfrogging   traditional   dial-up  or  copper  wire
          infrastructures  and  building  wireless  networks  for voice and data
          communications. For instance, several Latin American countries already
          have wireless data networks installed and operating.  China is rapidly
          deploying  wireless voice and data networks and Europe has substantial
          wireless networks already in use.

          As a result,  WEPS should be easily  deployed  in these  international
          markets  because of its  vendor-neutral  carrier  approach  and device
          technology.  Essentially,  USWD could potentially  "airlift" WEPS into
          these  countries  and the  technology  could work in parallel with the
          existing networks. Further, WEPS is Y2K compliant and can be installed
          independently  of legacy  systems that are not.  The Company  plans to
          enter the  international  marketplace  during  calendar 2000 using its
          domestic model as the basis for its international offering.

     o    Expand WEPS Suite of Products and Services.  WEPS is designed for easy
          integration  and  migration of future  value-added  card  services and
          programs such as:

           o      ATM Services
           o      Signature Capture Services
           o      E-mail Advertising Services
           o      Customer Attrition Prevention Program
           o      Customized Reporting Services for both Acquirers and Merchants
           o      Frequency and Loyalty Programs

     o    Penetrate  the  Conventional  Wired  Marketplace.   Assuming  USWD  is
          securely established as a provider of wireless transaction  processing
          services  to  merchant  acquirers  for  the  benefit  of  under-served
          merchants,  the Company  will turn its  attention  to  converting  the
          conventional wired marketplace into wireless users.

                                       11
<PAGE>

     o    Pursue Non-Payment Data Transactions.  WEPS has the capacity to handle
          any transaction-based data from any wireless network. Thus, the system
          can  accommodate  non-payment  applications  such  as  medical  claims
          processing,  collecting and processing telemetry data for oil, gas and
          other meter reading applications, coupling dispatch and "panic button"
          communications with in-vehicle payment processing applications. In the
          future,  plans will be made to analyze and target  potential  customer
          groups.

Target Market

     USWD has identified three primary customer groups: merchant acquirers, ISOs
and  front-end  transaction  processors.  The  Company  intends to sell its WEPS
offering on a wholesale basis to this market segment,  which will, in turn, sell
the service to a broad range of card accepting merchants.  USWD expects merchant
acquirers,   ISOs  and  front-end   processors  to  market  WEPS   initially  to
under-served  industries  such as fast  food  restaurants,  taxi  and  limousine
services and delivery-based businesses.

     At first,  USWD will focus its sales effort on the top 30  acquirers,  ISOs
and  front-end  processors.  According  to the March  1999  issue of The  Nilson
Report, these 30 companies service over 2 million clients and 3.5 million client
outlets that have combined annual revenues of more than $639.7 billion.

Marketing Strategy

     The  Company's  primary  marketing  objective is to quickly  develop  brand
awareness  for the WEPS suite of products and services.  The Company  intends to
position  itself as the premier  provider  of high  quality,  feature-rich,  and
cost-effective wireless solutions for processing electronic payment transactions
both domestically and abroad. Resources permitting,  an aggressive campaign will
be mounted to educate all wireless carriers,  point-of-sale  device manufactures
and credit card acquirers as to USWD's recent  re-orientation as vendor neutral.
This will be accomplished through the activities of the Company's in-house sales
force,  the  use  of  industry  public  relations  specialists,  attendance  and
exhibition at various trade shows and advertisements in key trade periodicals.

     In addition,  the Company  hopes to continue to leverage its  relationships
with  both  MasterCard  International  and Visa,  U.S.A.  in an effort to secure
additional  co-marketing  alliances  with the two bank card  associations.  USWD
presently has two such co-marketing alliances underway with Visa U.S.A. aimed at
the fast food market and the taxi and limousine industries.

     USWD  has  targeted  a  broad  spectrum  of  prospective  clients  covering
geographical  territories in much of the United States that are being  contacted
by its account  executives in the "field."  These  prospects will be assigned to
account executives whose background, geographic base and personal skill set best
fit the anticipated needs of the prospective client. The account executives will
work closely with the  Company's  marketing  communications  staff through their
regional sales managers so as to insure that the account executives are provided
up-to-date  marketing and  presentation  materials  customized to the prospects'
requirements.

     USWD plans to expand the  existing  sales  force in  response  to  coverage
requirements.  The nature of the Company's newly implemented marketing strategy,
specifically the re-orientation of the Company as an enabler of wireless payment
processing  services  for  all  wireless  carriers,   device  manufacturers  and
front-end  processors,  will require the Company and its account  executives  to
pursue a more strategic and consultative sell cycle. It is expected that in many
instances,  the Company's account executives will make joint sales presentations
to  prospective  end users along with a wireless  carrier,  a bank or ISO and an
equipment  manufacturer.  USWD  intends to expand  its  services  into  selected
international markets during fiscal year 2001. Several targeted geographies have
been identified that are well suited for the implementation of WEPS.

                                       12
<PAGE>

Implementation

     Upon execution of a "WEPS  Agreement"  with a bank, ISO or processor,  USWD
will  send  an  implementation  team  to the  customer  location  to  train  the
appropriate   representatives   on  all  aspects  of  the  WEPS   program.   The
implementation  team will train the new users to access  the WEPS  system via an
Internet  browser,  set-up new  accounts,  provision  and  activate  wireless IP
addresses or radio ID's,  perform  diagnostic  services  and obtain  transaction
reporting details.

     The USWD  implementation  training process will be documented and available
via USWD's web site. Further,  the Company intends to schedule periodic training
classes to educate its WEPS  customers  on new products  and  services,  as they
become available.

     The intent of the implementation  process is to provide WEPS customers with
all  the  tools   they  need  to  offer  a  simple   and   successful   wireless
transaction-processing program for their merchants. The training program is also
designed to minimize the amount of second level customer  support  required from
USWD. Initially, there will be two implementation teams assigned to support WEPS
customers.

Customer Service

     USWD currently provides standard business hours support and will eventually
provide 24/7 second level technical  support.  USWD's help desk will be accessed
only if the merchant acquirers,  ISOs and third-party transaction processors are
unable to assist a customer.  The Company intends to staff the support  function
with customer service agents focused on providing responsive, proactive service.
In addition,  the Company plans to offer Internet-based  customer service tools,
including an online tutorial for new WEPS users and a live bulletin board, where
users  can  post  questions  that  will be  answered  by USWD  customer  support
personnel or other USWD users.

Research and Development

     Substantial  portions  of USWD's  early  activities  were  involved  in the
engineering  and development of the initial  POS-50(R)  terminal  product.  USWD
completed the development of the POS-50(R) in early 1993.  During the last three
fiscal  years,  efforts  have been  directed  almost  exclusively  on CDPD based
products and more recently Ardis based  products.  In fiscal 1998 and 1999, USWD
spent approximately $295,000 and $461,000 respectively,  on research and product
development activities.

     The Company will soon occupy a 3,000 square foot  research and  development
center  in  Palmer  Lake,  Colorado  with an  expansion  to 6,000  square  feet.
Presently,  the Company  employs five engineers and several  consultants who are
responsible  for developing  the WEPS software and server  technology as well as
new applications  and interface  technology that allows WEPS to communicate with
the various  front-end  card  processors.  The Palmer Lake facility  serves as a
product development lab and training center for newly acquired WEPS customers as
well  as the  location  for  joint  product  development  efforts  with  new and
incumbent terminal manufacturers.

     The Company plans to increase the size of the engineering group in order to
continue the  development  of the WEPS  technology  and support plans for future
enhancements.

Patents and Trademarks

     The Company was  granted a design  patent on certain  aspects of the POS-50
product in June 1994. In April 1999, the Company received a design patent on the
TRANZ Enabler  housing.  USWD's name and POS-50(R) are registered  trademarks of
USWD.  USWD has recently filed for a service mark on "Wireless  Express  Payment
ServiceSM".

                                       13
<PAGE>


     The Company is  applying  for patent  coverage on various  aspects of WEPS.
This  patent  protection  will  cover  functional,  design and  overall  process
components  of the WEPS  technology  including  the  proprietary  internet-based
interface and the  transaction  message  formatting and  communication  protocol
software  that  performs  various  functions  related  to WEPS.  The  Company is
currently  reviewing final  application  documents  related to this intellectual
property protection.

     The Company jointly  developed a CDPD modem with a Taiwan-based  technology
company. Under the terms of the agreement,  the Company owns at least 50% of the
intellectual  property  rights.  The Company also has  worldwide  rights for the
product's use within the electronic payments industry.

     The Company may pursue additional  intellectual  property protection on its
hardware, software and/or processes where applicable.

Competition

     Despite the existence of several  wireless  processing  terminal  products,
wireless  transaction  processing is a new and  relatively  open playing  field.
Management  believes that there are no products,  completed or in a pilot stage,
that directly  compete with WEPS. To the best of management's  knowledge,  there
are no  applications  currently  available  that are designed  specifically  for
wireless  transaction  processing  and the  Internet  or that have the  carrier,
device and  front-end  neutral  structure  and  potential  to become an industry
standard.  The Company  currently has no one single competitor that provides the
end-to-end  systems "turn key" approach to the wireless  transaction  processing
industry.

     Competition,  however, is expected to increase,  especially if USWD is able
to  demonstrate  its ability to build market share and  acceptance.  Barriers to
entry are relatively insubstantial and the Company may face competitive pressure
from companies both in the United States and abroad. USWD expects competition to
most likely arise from the current  transport  providers of dial-up  transaction
services.

     Management believes that growth in the quality and number of competitors in
the wireless transaction processing market will be driven principally by:

     o    Interest  among  merchants for an alternative to the dial-up system in
          order to achieve faster transactions and better pricing;
     o    Inability  of  telecommunications  companies  to  upgrade  traditional
          landline wiring quickly and inexpensively;
     o    Increases in data applications for high speed Internet access;
     o    Growing customer desire for real time information;
     o    Resolution  of  Y2K  issues  currently   occupying  the  attention  of
          companies that could become competitors.

     The  Company's  believes  that  its best  defense  is to  remain a  neutral
provider of its products and services  while  building a network of  reliability
and  integrity.  The Company will also  continue to enhance its menu of products
and services to further distance any potential  competitors who attempt to enter
this neutral space. The Company must also continue to leverage its unique set of
WEPS alliances  (wireless  carriers,  card  associations and large acquirers) to
strengthen its competitive position going forward.

Government Regulation

     The  POS-50(R),  POS-500 and TRANZ  Enabler use cellular RF channels in the
800-900  megahertz  bandwidth  and are subject to regulation by the FCC for both
cellular  transmission and unintentional  interference  radiation.  The products


                                       14
<PAGE>

incorporate either a circuit-switched  cellular or CDPD transceiver manufactured
by suppliers that comply with the  appropriate  FCC  requirements  and have been
issued a FCC identification  number. USWD has received confirmation from the FCC
that the POS-50(R)  terminal  product does not require FCC approval for sales of
the terminal in the U.S. marketplace.

     The  POS-50(R),  POS-500 and TRANZ Enabler have passed all known UL and CSA
requirements in testings conducted at an independent certified test site.

     In February 1999 USWD received  regulatory approval from the FCC on its new
high-speed   packet  data  wireless  modem.   The  USWD500  wireless  modem  was
specifically  designed for the electronic  payment industry and easy integration
into point-of-sale terminals, PC-based systems and ATM machines. It incorporates
proprietary  features that improve the  performance  and reliability of wireless
credit, debit and ATM transactions.

     Most foreign countries accept United States federal regulatory approval for
purposes  of  permitting  commercial  sales  of  electronic  products;  however,
specific  regulatory  approval of the product may be required in some  countries
and could become an obstacle to sales of the product in such areas.

Customers

     Since the implementation of its new business plan, USWD has been successful
in signing a variety of  merchant  acquirers  and payment  processors  including
Paymentech, Maverick International,  WestAmerica Bank, Cardservice International
and various small to mid-size ISOs. Under these  agreements,  the acquirers have
agreed to offer  WEPS as a  transaction  processing  alternative  to  merchants.
USWD's  success  will depend  ultimately  on a  sufficient  response  from those
merchants to generate adequate revenue to USWD.

     With respect to POS terminal sales, Cardservice  International continues to
be USWD's single largest customer. Cardservice International is a large merchant
acquirer  with over  2,200  sales  representatives,  and  distributes  a variety
products and services through its sales channels.

     During  fiscal 1999,  sales of USWD's  CDPD-based  products  and  recurring
revenue  earned from credit card  processing  services  represented  the largest
source of revenue.  The TRANZ Enabler and POS-500 products were sold or deployed
to merchants  through the  distribution  organizations  of the  respective  CDPD
carriers  and USWD's own direct  sales force.  During  fiscal 1998,  Cardservice
International,  Inc. ("CSI")  accounted for 20% of revenue.  During fiscal 1999,
CSI accounted for 40% of revenues.

Employees

     With the  implementation  of the new  distribution  strategy adopted in the
latter  part of the first  quarter of fiscal 1999 USWD has taken steps to reduce
spending.  With the new focus on distribution  through large merchant acquirers,
USWD has reduced  personnel  from 60 at June 30, 1998,  to 25 as of September 1,
1999,  with most of the  reduction  occurring in the direct  sales  force.  USWD
presently has 3 executive officers.

Transaction Processing and Manufacturing Agreements

     Under its  previous  marketing  strategy  as a merchant  acquirer in fiscal
1998,   USWD   built  up  two   merchant   portfolios   in  which  it   provided
bankcard-processing  services.  With the current strategy of remaining a neutral
wholesale provider of wireless products and processing  services,  USWD sold its
first  portfolio  to  Nova/PMT  in  July  1999.  The  portfolio  was  originally
established  under  a  Member  Service  Provider  ("MSP")  agreement  with  NOVA
Information  Systems.  USWD intends to sell its remaining portfolio  established
under an agreement  with  National  Bank of Commerce as soon as it  identifies a
purchaser.

     In May, 1999, USWD entered into a software license  agreement with Maverick
International  Processing Services,  Inc. ("Maverick") which grants USWD a fully
paid perpetual license to software used for front-end  authorization and capture


                                       15
<PAGE>

services.  Maverick is a full service third party credit card  processor,  which
has both  "front-end"  authorization  and capture and "back end"  settlement  of
credit  card  transaction  capabilities.  USWD has been  using  Maverick  as the
front-end  processor for transactions  under USWD's agreement with National Bank
of  Commerce.  USWD issued  425,000  shares of  restricted  common stock for the
license  and three  months  payment on a related  operating  agreement,  thereby
guaranteeing USWD's access to, and control of, a front-end system for processing
credit  card  transactions.  USWD and  Maverick  also  entered  into a five-year
Management  Services  Agreement  pursuant to which  Maverick will provide "front
end"  authorization  and transaction  capture services to USWD's customers using
the licensed  Maverick  software.  The agreement also sets forth the terms under
which Maverick will maintain the existing software,  develop additional software
and perform various optional  services for USWD relating to customer service and
transaction processing.

     USWD has utilized  high  quality,  third party  manufacturers  to build its
products. Uniform Industrial Corporation, of Fremont Califor+-nia,  manufactures
USWD's  POS-50(R)  product.  Wellex  Corporation,  also in Fremont,  California,
builds the TRANZ Enabler product line. Finite  Technologies of Pueblo,  Colorado
manufacturers  the  POS-500  CDPD-based   terminal;   and,  Z-Com,  a  Taiwanese
engineering and manufacturing firm, manufactures the USWD500 CDPD modem that may
be integrated  into various  terminal  platforms  manufactured by other terminal
providers.  With the  transition  to its new  business  plan,  USWD  expects  to
discontinue production of its own terminal products.

     USWD outsources its deployment  services to TASQ  Technology  Inc., a third
party  that  specializes  in credit  card  terminal  deployment  and  management
services.  TASQ provides  equipment  repair,  deployment,  call tag  management,
encryption services,  inventory  management  services,  product sales (including
equipment,  accessories and supplies),  leasing,  rentals,  customer support and
other  related  services on an  as-requested  basis to  merchants  using  USWD's
wireless solutions.

Seasonal Variation of Business

     USWD anticipates that the recurring revenue generated under WEPS agreements
with merchant  acquirers and credit card processors will be relatively immune to
seasonal variations, although USWD expects that transaction related revenue will
reflect seasonal variations  paralleling  consumer spending patterns,  generally
increasing somewhat during the Christmas holiday season.  However, the placement
of  point-of-sale  terminals  can be expected to be slower during that season as
well,  due to the  reluctance of merchants to change  processors  during premier
shopping seasons.

Impact of Environmental Laws

     USWD does not believe that it is  substantially  affected by  environmental
laws and does not expect any material impact as a result of such laws.

Year 2000 Issues

     USWD has completed a review of the impact of the Year 2000 ("Y2K") issue on
USWD'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.  USWD's  internal  business
systems have been  evaluated,  and with the exception of the accounting  system,
are Year 2000 compatible. USWD intends to replace the accounting software during
the fourth  calendar  quarter of 1999.  The  accounting  software  is a business
critical system; however, the cost of conversion is not expected to be material.
The  engineering  staff has made an assessment  of USWD products and  determined
them to be Y2K compliant. The specific entities providing credit card processing
services  to USWD have been  surveyed  and have active Y2K  compliance  projects
underway.  It is USWD's  understanding  that these  providers are or will be Y2K
compliance on or before January 1, 2000. On a broader basis,  USWD is reliant on
the electronic payments infrastructure utilized by credit card processors, banks
and financial  institutions  within the United  States,  and could be subject to


                                       16
<PAGE>

unresolved  issues which impact this  infrastructure.  USWD could be  adversely,
materially  affected,  both  operationally and financially,  to the extent third
parties  with  which it  interfaces,  either  directly  or  indirectly,  has not
properly  addressed  their  Year  2000  issues.  The  Company  does  not have an
available  contingency  plan that would alleviate a disruption of service in the
electronic transaction sector.

Insurance

     The Company  believes  that it maintains the types and amounts of insurance
customary in the industry,  including  coverage for general  liability,  product
liability, property damage, and workers' compensation.  Although there can be no
assurance that the Company's property damage and business interruption insurance
will adequately compensate the Company for losses that it may incur, the Company
considers its insurance coverage to be adequate both as to risks and amounts.

ITEM 2.  DESCRIPTION OF PROPERTIES

     The  Company now  occupies  approximately  6,800  square feet of office and
general-purpose space in a building in Emeryville, California, a suburb adjacent
to Oakland and San Francisco, California. The Company executed a five-year lease
term  for  this  space  in  September  1997,   which  serves  as  its  corporate
headquarters at an initial rate of  approximately  $10,000 per month  commencing
October 1997, and subsequently raised due to expansion and relocation to another
floor at approximately  $15,000 per month.  Engineering  functions remain at the
Company's  Palmer Lake,  Colorado leased  facility,  where USWD is expanding its
research and engineering capabilities.

ITEM 3.  LEGAL PROCEDINGS

Settlement of Claims of Certain Noteholders

     In April 1998,  USWD entered into an agreement  with holders of $185,000 of
demand  notes USWD issued from April to June 1997.  Under this  agreement,  USWD
issued shares of common stock in settlement  of a dispute  regarding  conversion
terms of their  notes.  Terms of the  settlement  entitled  the  noteholders  to
certain guarantee or put provisions  related to the shares issued for the notes.
The  guarantee  provision  of  the  settlement   agreement  allowed  the  former
noteholders  to recover the  difference  between the guarantee  price ($3.00 per
share for all the shares that  remained  eligible for the guarantee as of April,
1999) and the gross amount the  noteholder  receives  upon a sale of the shares.
The guarantee was operative at any time during the one year period commencing on
the date the shares  became  saleable  under SEC Rule 144, and expired as to all
shares no later than June 19, 1999.  The Company was 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  had a five day period  commencing on the date one year from
the date the shares become  saleable  under SEC Rule 144 during which the former
noteholders  may "put" any shares  remaining  unsold by them at the time back to
USWD.  Upon  exercise of the put, USWD was to either (1) purchase the shares for
the put price ($3.00 per share for all shares that remained eligible for the put
as of April,  1999),  or (2) require the shareholder to sell the shares into the
market,  with USWD 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. The put rights expired
as to all of the shares no later than June 24, 1999. On April 29, 1999,  holders
of approximately 83,500 shares which were entitled to the guarantee/put  rights,
agreed to waive these  rights in return for the  issuance of 200,000  restricted
shares of USWD's common stock.

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

     No matter was submitted to a vote of the Company's  shareholders during the
fourth quarter of the Company's fiscal year ended June 30, 1999.

                                       17
<PAGE>

PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(a)  Market Information.

     The  Company's no par value common stock is traded in the  over-the-counter
market and quoted on the OTC Electronic Bulletin Board under the symbol "USWDA."
The following table sets forth, for the fiscal quarters indicated,  the range of
high and low prices for the common stock.  These  quotations  have been obtained
from the OTC  Electronic  Bulletin  Board and  reflect  inter-dealer  prices (in
dollars),  without any retail  mark-up,  mark-down or  commissions,  and may not
necessarily represent actual transactions.

       Fiscal 1999               High              Low
       -----------               ----              ---

       Fourth Quarter           $1.250            $0.600
       Third Quarter             4.250             0.563
       Second Quarter            4.438             2.313
       First Quarter             4.875             1.938

       Fiscal 1998               High              Low
       -----------               ----              ---

       Fourth Quarter            5.310             2.625
       Third Quarter             7.625             5.000
       Second Quarter            8.750             4.500
       First Quarter             6.875             0.281

     There is no public trading  market for the Company's  Series A and Series B
Preferred  Stock or any other  securities  of the Company  other than the common
stock.

(b)  Holders.

     As of June 30, 1999,  there were 169 holders of record of the common stock.
There  were also an  undetermined  number of  holders  who hold  their  stock in
nominee or "street" name.

(c)  Dividends.

     The Company has not declared  cash  dividends on its common stock since its
inception and the Company does not  anticipate  paying any cash dividends in the
foreseeable future.

(d)  Recent Sales of Unregistered Securities

     During the fiscal  quarter ended June 30, 1999,  the Company sold or issued
the following  equity  securities  without  registering the securities under the
Securities Act of 1933, as amended (the "Act").

May 3, 1999:  5,375,000  share common stock purchase  warrants issued to the new
Chief Executive Officer and Chairman exercisable as follows: 2,687,500 shares at
$.875 per share,  10% vested at date of grant and the balance over the following
12 months;  2,687,500  shares at $3.00 per share,  50% vesting one year from the
date of grant and the balance over the following six months;

May 6, 1999: 1,500,000 shares of Series B Cumulative Convertible Preferred Stock
at $1.00 per share.  For no additional  consideration  USWD also issued  300,000
common stock  purchase  warrants  exercisable  at $1.50 per share for five years
from April 30,1999 to the purchaser of the Series B Preferred  Stock.  USWD also
issued  454,705 shares of Series B Preferred  Stock to pay accrued  interest and
penalties owing to holders of the Company's 6% Debentures due July 21, 2000. The
Company paid $180,000 of the cash proceeds to Greenfield  Capital Partners,  LLC
as a finders  fee related to the  investment.  A  principal  shareholder  of the
Company  transferred  443,077  shares of common stock owned by him to Greenfield
Capital Partners, LLC as a finder's fee;

                                       18
<PAGE>

June 24,  1999:  2,933,671  shares of common  stock  issued upon  conversion  of
$2,490,000 of principal  plus accrued  interest on notes payable to an affiliate
of the Company and a private investor;

June 30, 1999: 425,000 shares of restricted common stock issued for the purchase
of a perpetual license to software used for front-end  authorization and capture
services  and three months  payment on a related  operating  agreement  with the
licensor;

April 1, 1999 through June 30, 1999:  37,716 shares of Series A Preferred  stock
were  converted to 58,860  shares of common  stock.  For the entire  fiscal year
ended June 30, 1999,  approximately 1,475,000 shares of Series A Preferred Stock
were converted to 1,323,000 shares of common stock.

     As to each of the  foregoing  transactions,  the  Company  relied  upon the
registration  exemption contained in Section 4(2) of the Securities Act of 1933,
as amended (the "Act").  The  transactions  did not involve a public offering of
securities;  the Company received investment representations from each purchaser
to the effect that such purchaser was taking for investment  only and not with a
view to distribution  of the securities;  the Company had reason to believe that
each  purchaser  had such  knowledge and  experience,  either alone or through a
purchaser  representative  not affiliated with the Company,  that such purchaser
was capable of evaluating  the merits and risks of an investment in the Company;
each  purchaser,  either in his or her capacity as an investor or an employee or
consultant to the Company,  had access to adequate  information  concerning  the
Company and its business;  all  certificates  representing  the securities  were
imprinted with customary "restricted  securities" legends, and instructions were
lodged with the  Company's  transfer  agent with respect to all shares of common
stock issued in the transactions as "restricted securities."




















                                       19
<PAGE>


ITEM 6.  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  Exchange Act of 1933 or Section 21E of the Securities Act
of 1934, as amended.  Such projections and forward-looking  statements are based
on  assumptions,  which 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.  Risks  and  uncertainties  relating  to  forward-looking
statements are set forth in this Item 6 under the caption "Risk Factors," below.

Company Background

     The Company was  incorporated in the State of Colorado in July 1991 for the
purposes of designing,  manufacturing and marketing wireless and portable credit
card and check  authorization  terminals for use in the  transaction  processing
business. The Company completed an initial public offering in December 1993.

     USWD's terminals were initially  designed to create the terminal  interface
for transactions to occur over wireless channels,  rather than over conventional
phone lines. USWD began by selling terminals,  eventually developing and selling
a line of terminals that allow data transport over the newly  developed  digital
networks.  USWD then ventured briefly into the realm of transaction  processing,
and has now repositioned  itself as a  terminal-neutral,  transport-neutral  and
processor neutral enabler of wireless  transaction  processing  services through
the creation of what USWD calls  Wireless  Express  Payment  ServiceSM or WEPSSM
("WEPS").

     USWD serves the  transaction  processing  community  by  applying  wireless
technology  and  value-added   services  to  the  transportation  of  electronic
transactions.  USWD's WEPS  technology  provides  fast and flexible  transaction
processing capabilities and advanced on-line customer service capabilities. USWD
provides merchant acquirers,  Independent Sales Organizations ("ISOs") and third
party  processors  with a wireless  transaction  management  service that can be
utilized  in new  merchant  segments,  permits  real-time  information  via  the
Internet and simplifies the customer service and development  efforts. Via WEPS,
merchants  can  process  payments  as  fast  as  cash,   without  the  cost  and
inconvenience of being tethered to a telephone line.

Revision of Business Plan

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

     Placements  of TRANZ  Enabler  units  pursuant  to USWD's  agreements  with
telecommunications  carriers did not develop as rapidly as  anticipated  and did
not reached  anticipated (and necessary) levels to pay for the infrastructure to
support the  programs.  Costs to USWD of  implementing  the joint  marketing and
distribution  agreements  with GTE Wireless,  Bell Atlantic Mobile and Ameritech
have exceeded revenue generated by the programs since they began.

                                       20
<PAGE>

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

     In May 1999, Dean M. Leavitt,  former President and Chief Executive Officer
of U.S. Data Capture,  a credit card processing company serving a broad spectrum
of conventional card acceptors and emerging  markets,  was hired as Chairman and
Chief  Executive  Officer  of USWD.  Mr.  Leavitt  has  continued  to focus  the
Company's  mission  as a  terminal  neutral,  carrier-neutral  service  aimed at
simplifying  the  availability  of  wireless   transaction   processing  to  all
merchants.  The Company now has significant  efforts underway to broaden the use
of  WEPS  through   additional   merchant   acquirers  and   independent   sales
organizations,  expand the offering of WEPS capable  point-of-sale  devices, and
expand wireless network coverage.

WEPS Operational Overview

     WEPS is a comprehensive and integrated suite of wireless transport services
and network  technology  designed to deliver payment  transactions  securely and
efficiently  between  a  merchant's  location  and  a  payment  processor.  WEPS
technology includes the following key features:

     o    Internet-based   account   set-up  with   automated   IP  /  Radio  ID
          provisioning and terminal activation / deactivation services;
     o    High-speed wireless packet data transport;
     o    Real-time authorization and capture;
     o    Message formatting and protocol conversion;
     o    Real-time remote terminal diagnostics;
     o    Ability  to  use  WEPS  certified   wireless   devices  from  terminal
          manufactures;
     o    Second level customer support services;
     o    A customer attrition prevention program;
     o    WEPS certification lab for new terminals; and,
     o    WEPS training center for clients' customer service departments.

     USWD is targeting  large  merchant  acquirers and card  processors for this
service.  The initial  response for WEPSSM from the targeted  prospects has been
positive.  USWD has entered into sixteen WEPSSM agreements with various merchant
acquirers,  including Card Service  International,  Paymentech Network Services,
Westamerica  Bank,  and  anticipates  adding  additional  agreements in the near
future.  The WEPS  agreement  defines the services and billing terms between the
Company and merchant acquirer.

     USWD is presently in the process of establishing  connectivity  between the
wireless  networks,  WEPS server and respective  credit card  processors.  It is
anticipated that commercial  transactions  will start running through WEPS early
in the second quarter of fiscal 2000.

     USWD is  working  with  several  terminal  manufactures  including  Lipman,
Intellect,  Keycorp and others on the  integration and  certification  of USWD's
WEPS application into the manufacture's  terminal.  Initial product availability
for  distribution to the market is expected to commence in the second quarter of
fiscal 2000.

     Implementation  of USWD's  business  plan is dependent  upon the  Company's
ability to obtain adequate  financing.  See "Liquidity and Capital Resources" in
this section below.


                                       21
<PAGE>


Year 2000 Issues

     USWD has completed a review of the impact of the Year 2000 ("Y2K") issue on
USWD'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.  USWD's  internal  business
systems have been  evaluated,  and with the exception of the accounting  system,
are Year 2000 compatible. USWD intends to replace the accounting software during
the forth  calendar  quarter  of 1999.  The  accounting  software  is a business
critical system; however, the cost of conversion is not expected to be material.
The  engineering  staff has made an assessment  of USWD products and  determined
that  they are Y2K  compliant.  The  specific  entities  providing  credit  card
processing  services to USWD have been  surveyed and have active Y2K  compliance
projects underway.  It is USWD's  understanding that these providers are or will
be Y2K  compliance  on or before  January 1, 2000. On a broader  basis,  USWD is
reliant  on the  electronic  payments  infrastructure  utilized  by credit  card
processors, banks and financial institutions within the United States, and could
be subject to unresolved issues which impact this infrastructure.  USWD could be
adversely,  materially  affected,  both  operationally  and financially,  to the
extent third parties with which it  interfaces,  either  directly or indirectly,
has not properly  addressed their Year 2000 issues. The Company does not have an
available  contingency  plan that would alleviate a disruption of service in the
electronic transaction sector.

Fiscal 1999 Compared to Fiscal 1998

Net Revenue

     For the fiscal year ended June 30, 1999,  total  revenue  increased  57% to
$1,424,000  from  $909,000 in the prior year as USWD  implemented  a significant
shift to its new  business  model.  Product  sales of POS-500,  WEPSSM  Enabler,
POS-50 and other equipment sales increased  approximately $120,000 during fiscal
1999  while  service  revenue,  which  includes  application  fees,  transaction
processing,  and  repair  revenue,  increased  by  approximately  $395,000.  The
increase in service  revenue is  principally  attributable  to the growth of the
revenue derived from the credit card portfolio which was established  during the
second half of fiscal 1998 and  continued  into 1999.  In the latter part of the
first  quarter of fiscal  1999,  USWD  embarked  on a  significant  shift in its
product and distribution strategy.  This involves the integration of USWD's WEPS
modem  and  server  technology  into the  product  offerings  of other  terminal
manufacturers and development of distribution agreements with the major merchant
card acquirers and card processors. The transition to the new business model has
been delayed somewhat due to USWD's constrained financial resources. USWD is now
introducing new products,  services and distribution  capabilities to the market
as its resources permit.

     With USWD's change in focus from building direct credit card portfolios via
the  acquisition of merchant  accounts,  to providing  services  directly to the
merchant  acquirers  and card  processors,  the  Company  sold a portion  of its
merchant  credit card portfolio to PMT Services Inc., a wholly owned  subsidiary
of Nova  Corporation,  in the first  quarter  of fiscal  2000.  The  transaction
resulted in a cash payment to USWD of $450,000.  The sale included approximately
450 installed  USWD owned TRANZ Enabler  point-of-sale  devices  deployed with a
portion of the respective merchants.  A gain or loss on the sale of the merchant
credit card portfolio will be recognized in the Company's  fiscal quarter ending
September 30, 1999. USWD intends to provide  services to Nova under its Wireless
Express  Payment   ServiceSM  for  the  merchant  base  Nova  acquired  in  this
transaction, although an agreement to do so has not yet been signed.

Gross Profit

     Gross profit of $396,000 in the year ended June 30, 1999 increased from the
comparable prior period level of $1,000.  Prior year's gross profit was impacted
by a one-time  inventory  adjustment  of  $227,000  while the fiscal  1999 gross
profit  includes a $240,000  credit  related to an agreement  with a supplier to
reduce the cost of inventory  previously  purchased.  Excluding this adjustment,
product gross margin was 20% and reflects the  adjustment  of product  prices to
wholesale  versus retail  structure.  The services cost  structure  reflects the
components of the previous  business model which includes  ongoing TRANZ Enabler
amortization  for  processing  units  deployed.  Efforts  are also  underway  to
eliminate excess CDPD addresses from the CDPD carrying cost. Billing for the new
WEPS service is minimal at this point since the Company is working on installing
the communications connectivity and integration of WEPS to the respective credit
card  processors  designated  under the recent  WEPS  agreements  with  merchant
acquires.  The Company  expects the service  margins to improve as WEPS  billing
becomes a more predominate component of the services offering in the future.



                                       22
<PAGE>

Operating Expenses


     Selling,  general and  administrative  expense decreased from $8,408,000 in
the twelve months ended June 30, 1998 to  $4,655,000  in fiscal 1999.  The large
decrease in expense was primarily attributable to a variable stock option issued
in fiscal year 1998 which  resulted in a $1,327,000  non-cash  credit to reflect
the change in the carrying value of the option due to the change in USWD's stock
price during the fiscal year versus a charge to operation expense in fiscal 1998
of  $1,327,000.  Investor  relations  and  other  consulting  expense  decreased
$1,103,000  in the current  fiscal year  primarily  due to the  valuation of the
common stock issued under the Company's investor  relations'  agreement.  During
the second and third fiscal quarters,  several key consultants were added to the
management  staff and compensated with stock options instead of cash. The option
issuance  resulted  in a $368,000  non-cash  consulting  charge to  general  and
administrative  expense. In response to the new business model, USWD's personnel
was  reduced  from 60 as of the end of June 1998 to 20 at the end of June  1999,
thereby  reducing  salary related  expense by  approximately  $130,000 per month
between June of 1998 and June 1999

     For the fiscal year ended June,  1999,  research  and  development  expense
increased  by $166,000 to $461,000,  as compared to the 1998  period,  due to an
increase in materials expense,  staff expense related to increased personnel and
consulting  expense.  During the second half of fiscal 1999, almost all research
and development expense was directed towards the development of WEPS.

     The  fiscal  1998  results  include  a  $1,353,000   charge  to  Litigation
Settlement  for the valuation of common shares issued to a group of  noteholders
in settlement of a dispute  regarding  rights  related to the  conversion of the
notes into shares of common stock. In April, 1999, certain  noteholders  holding
approximately 83,500 shares,  agreed to waive there "guarantee" and "put" rights
in return for the issuance of 200,000  restricted shares of USWD's common stock,
resulting in a $49,000 charge to litigation settlement.

Interest Expense and Other Expense

     Interest  expense,  of $1,528,000 in fiscal 1999 includes  accrued interest
expense on the 6% Convertible Debentures and various notes payable, and $341,000
of late registration penalties related to the 6% Convertible Debentures. Accrued
interest and penalties on the Debentures  were converted into shares of Series B
Preferred Stock in the fourth quarter of fiscal 1999. The $400,000 third quarter
accrual  to reflect  the  contractual  redemption  penalty  associated  with the
Convertible Debentures was reversed in the forth quarter upon receipt of waivers
from the investors as to certain  applicable  penalties.  Interest  expense also
included  $279,000 of  accelerated  amortization  of debt  issuance  expense and
$145,000 of  accelerated  amortization  of debt discount as a result of the debt
becoming due on demand.  The Company also accrued $74,000  interest  expense for
late registration filing penalties on the Series B Convertible  Preferred Stock.
The prior year interest expense includes a $697,000  non-cash charge to interest
expense  related to an  "in-the-money"  convertible  option  associated with the
December 1997 private  placement and other expense consists of a $167,000 charge
related to the  extension of a common  stock  warrant  exercise  period that was
expiring.

Extraordinary Item

     Agreement was reached with two note holders to convert  $2,490,000 of notes
payable  plus  accrued  interest  to  2,933,671  shares  of common  stock.  This
transaction was recorded in the fourth quarter upon consummation of the exchange
and resulted in an extraordinary gain of $807,000.

FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY

     USWD  continues  to  face  significant  challenges  due  to  its  financial
condition and lack of liquidity.  While management is optimistic with its medium
and long term  opportunities,  USWD is  constrained  by its immediate  financial
condition and  requirement  for increased  liquidity.  USWD has an accumulated a
deficit of  approximately  $35 million since  inception to June 30, 1999, with a
working  capital  deficit  of  approximately  $3,389,000,  versus a  deficit  of
$2,967,000 at year-end June 30, 1998. The June 30, 1999 working  capital deficit
includes  $2,000,000  of 6%  Convertible  Debentures  classified  as  short-term
borrowings.  The Company has  continued to operate at a loss  subsequent to June


                                       23
<PAGE>

30, 1999. The Company has defaulted on certain  obligations  which,  among other
things,  as of October 10, 1999  entitle the holders of the  Company's  Series B
Preferred  Stock and 6%  Debentures  to redeem  those  securities  for cash plus
applicable  penalties,  interest  and  dividends.  The  holders  of the Series B
Preferred  Stock may require USWD to redeem the shares of the Series B Preferred
Stock for  $1.25  per  share (up to  $2,461,000  as of June 30,  1999), plus all
accumulated  dividends  and  penalties.  The  holders of the 6%  Debentures  may
require the Company to redeem the  current  $1,800,000  face amount at 120% plus
accrued interest and penalties.

     The Company has  financed  its recent  operations  through  borrowings  and
private sales of  securities.  In fiscal 1999,  USWD's cash flows from financing
activities  were $4.5 million as compared to $4.5  million in fiscal  1998.  The
fiscal 1999 financing  activities  consisted  primarily of $1.8 million from the
sale of 6% Convertible Subordinated  Debentures,  $3.0 million from the issuance
of notes  payable  ($2.5  million  subsequently  converted to common stock) $1.0
million from the sale of Series B Cumulative  Redeemable  Convertible  Preferred
Stock  and  related  bridge  loan,  and  the  payment  of $1.0  million  for the
redemption of Series A Preferred  Stock.  The fiscal 1998  financing  activities
consisted  primarily of $1.2  million  from the sale of common stock  repurchase
rights, $2.6 million net proceeds from the issuance of debt and $664,000 for the
issuance  of  common  stock.  In fiscal  1999 and 1998,  USWD used $3.9 and $3.7
million in cash from operating activities, respectively. Cash used in operations
principally resulted from net losses offset by non-cash charges.

     USWD is continuing to work with key vendors on payables. USWD believes that
it will be able to restructure  commitments  as necessary  while it completes an
anticipated  financing  event designed to satisfy its  obligations  and fund the
business plan, although no assurance can be given that this will be the case.

Securities Issuances to Fund Operations

     To fund its operating  requirements,  USWD has had to rely primarily on the
sale of debt or equity securities over the last two fiscal years.

     Private  Offering  of  Series A  Preferred  Stock.  USWD  closed a  private
offering  of  $3,060,000  principal  amount of 8%  Adjustable  Rate  Convertible
Subordinated Debentures Due December 31, 1999 (the "8% Convertible  Debentures")
on December 10, 1997, raising net proceeds of approximately  $2,600,000.  The 8%
Convertible Debentures  automatically  converted to 3,060,000 shares of Series A
Preferred  Stock  as of  February  9,  1998.  See also  Note 7 to the  Financial
Statements entitled "Series A Preferred Stock."

     Private  Offering of 6%  Convertible  Subordinated  Debentures due July 21,
2000.  USWD completed a private  offering of $2,000,000  principal  amount of 6%
Convertible  Subordinated Debentures due July 21, 2000 (the "6% Debentures") and
common stock purchase warrants  exercisable to purchase 100,000 shares of common
stock  exercisable  at $4.50 per share until July 21, 2001 on July 27, 1998. The
proceeds to USWD from the offering were approximately $1,800,000.  See also Note
5 to the Financial Statements entitled "Borrowings - 6% Convertible Subordinated
Debentures."

     Private Offering of Series B Cumulative  Convertible  Redeemable  Preferred
Stock. On May 6, 1999, USWD completed a $1.5 million private placement  pursuant
to Regulation D of the Securities Act of 1933. The Company raised gross proceeds
of $1,500,000 and issued 6% Cumulative  Convertible  Redeemable  Preferred Stock
(Series B Preferred  Stock) for $1.00 per share. The instrument gives the holder
the right to convert the Series B Preferred  Stock into shares of USWD's  common
stock in the future at 80% of then current  market price.  Concurrent  with this
transaction,  the holders of USWD's 6% Debentures  agreed to convert all accrued
interest and penalties into  approximately  455,000 shares of Series B Preferred
Stock.  The value of the "in the  money"  conversion  feature  of  $391,000  was
recognized  as a charge to  retained  earnings.  The  proceeds  were used to pay
finders fees of $180,000 plus estimated  offering expenses of $41,000 (including
approximately $26,000 for the investor's legal fees), professional services fees
of  $413,000,  with the  estimated  balance of  $676,000  being used for working
capital.  See  also  Note 8 to  the  Financial  Statements  entitled  "Series  B
Cumulative Convertible Redeemable Preferred Stock."

                                       24
<PAGE>

     In April 1999,  USWD received  $400,000 in return for a 10% promissory note
from the investor  that  purchased  the Series B Preferred  Stock.  The note was
repaid with the  issuance of 408,000  shares of Series B Preferred  Stock in May
1999.

     The Company  also issued a common stock  purchase  warrant  exercisable  to
purchase  300,000  shares of common stock at $1.50 per share for five years from
April 30, 1999 (the "Series B Warrants")  to the cash  purchaser of the Series B
Preferred Stock.

     In May 1999, the Company issued 454,705 shares of Series B Preferred  Stock
at $1.00 per share to compensate the 6% Debenture  holders for the penalties and
interest  owed on the 6%  Debentures  through  June  30,  1999.  As part of this
agreement,  the 6% Debenture  holders agreed to adopt the default  timetable and
remedies defined in the Series B Preferred Stock purchase agreement and to waive
their rights under certain prior defaults on the 6% Debentures.

     The Company  also  entered  into an  agreement  (the  "Registration  Rights
Agreement")  with  the  purchasers  of the  Series B  Preferred  Stock to file a
registration  statement  with the SEC covering the common stock  underlying  the
Series B Preferred  Stock,  the Series B  Warrants,  the 6%  Debentures  and the
common stock  purchase  warrants  issued at the same time as the 6%  Debentures,
within 30 days of May 6,  1999 to be  effective  within 90 days of May 6,  1999.
This date was  extended to May 11, 1999 by the holders of the Series B Preferred
Stock and 6% Debentures.  Failure to meet these requirements  results in monthly
penalties at the rate of 2% to 3% of the purchase  price,  until the requirement
is  satisfied.  In addition,  if the  Registration  Statement has not been filed
within 60 days of May 11,  1999 or has not been  declared  effective  within 150
days of May 11,  1999,  the holders of the Series B Preferred  Stock may require
USWD to redeem  the  Series B  Preferred  Stock for  $1.25 per  share,  plus all
accumulated  dividends and penalties,  and the 6% Debenture  holders may require
USWD to redeem their  securities at 120% of face value plus accrued interest and
penalties.  The filing of this  registration  statement  activates certain prior
registration  rights  granted by USWD to  holders of certain of its  securities.
USWD filed the required registration statement on June 30, 1999, and following a
waiver of the penalty  from the cash  investor in the Series B Preferred  Stock,
was subject to a 3% penalty of approximately  $74,000.  As of August 10,1999 the
registration statement had not become effective,  thereby subjecting the Company
to the "late  effectiveness"  penalty.  As of October 10, 1999, the registration
statement  had not been  declared  effective  thereby  entitling  holders of the
Series B Preferred  Stock to redeem their shares at $1.25 per share plus accrued
penalties  and  dividends,  approximately  $2,500,000,  and  holders  of  the 6%
Debentures  to redeem the current  $1,800,000  face amount at 120% plus  accrued
penalties  and  interest.  The  Company  intends  to  file an  amendment  to the
Registration Statement with the SEC as soon as practicable.

     Mr.  John  Liviakis,  a  significant  shareholder  of USWD,  also agreed to
transfer a total of 443,077  shares of Company  common stock owned by him to the
finder who located the cash  purchaser  of the Series B Preferred  Stock.  These
shares had a value of  $360,000  on the date of  issuance,  which  were  charged
against the proceeds of the offering. The shares were transferred as "restricted
securities"  as defined in Rule 144 under the  Securities Act of 1933 and do not
have any registration rights.

Other Recent Borrowings and Financing Activities

     Between October 1, 1998 and March 31, 1999, USWD borrowed $500,000 from the
Chief Executive Officer and 50% owner of Cardservice International, Inc. ("CSI")
and $1,990,000 from Liviakis Financial  Communications,  Inc. ("LFC"). The loans
bore interest at 8% per annum. In consideration  for the loan from the CSI Chief
Executive Officer,  USWD also issued a common stock purchase warrant exercisable
to purchase  25,000 shares of common stock at $3.038 per share  through  October
27,  2001.  On March 19,  1999,  USWD and  holders  of these 8% notes  agreed to
convert all $2,490,000 of principal plus accrued interest to common stock at the
rate of $.875 per share and 2,933,671  restricted  shares were issued under this
agreement. This rate was established at a 20% discount from the closing price of
the common  stock as of March 18,  1999.  The market price on the actual date of
issuance of the shares of common  stock  (June 24,  1999) was $.60 per share and
therefore the transaction resulted in an extraordinary gain of $807,000.

                                       25
<PAGE>

     On March 12, 1999, USWD borrowed $250,000 from RBB Bank Aktiengesellschaft,
which is the  agent  for the  holders  of  certain  shares  of  USWD's  Series A
Preferred Stock and $1,000,000 of the 6% Debentures.  As part of this agreement,
USWD issued 50,000 shares of common stock to RBB Bank. The Company was unable to
repay  the  loan by the  required  due  date and RBB  Bank  agreed  to  forebear
initiating an action against USWD to collect the amount due until the earlier of
receipt by USWD of funding in the aggregate of at least $2,500,000,  or December
1, 1999. See also "Item 13 - Certain  Relationships  and Related  Transactions -
Transactions with RBB Bank Aktiengesellschaft."

     In March 1999, USWD entered into a consulting agreement with EBI Securities
Corporation for purposes of assisting USWD as a corporate finance  consultant in
connection  with  merger and  acquisition  activities  or  obtaining  additional
capital.  By mutual  agreement,  the agreement and associated  compensation were
cancelled in the fourth quarter of fiscal 1999.

     As of May 28, 1999,  USWD entered into a software  license  agreement  with
Maverick International Processing Services which provides a perpetual license to
software  used for front-end  authorization  and capture  services.  USWD issued
425,000  shares of restricted  common stock for this license and three months of
service under a separate operating agreement.

     As of June 23, 1999,  an  additional  450,000  shares of Series B Preferred
Stock and 90,000 Series B Warrants had been subscribed for $450,000 in cash, but
the  closing  of the sale had not  occurred  as of June 30,  1999.  In the first
quarter of fiscal 2000,  the  investors  elected to purchase  restricted  common
stock and common  stock  purchase  warrants  instead  of the Series B  Preferred
Stock.  As of September  27, 1999,  USWD has issued  1,333,333  shares of common
stock and warrants  exercisable  to purchase  266,667  shares of common stock at
$1.50 per share until the first quarter of 2004 to these investors.

     With the  implementation of the new distribution  strategy initiated in the
latter  part of the first  quarter of fiscal  1999 (see  "Revision  of  Business
Plan," above),  USWD has taken steps to reduce  spending.  With the new focus on
distribution  through large merchant acquirers,  USWD has reduced personnel from
60 at June 30,  1998,  to 20 as of June 30,  1999,  with  most of the  reduction
occurring  in the  direct  sales  force.  During the  implementation  of the new
business  plan,  the Company  expects  expenses to remain at a higher level than
revenues.  Therefore  the  execution of USWD's  business  plan is dependent on a
significant  debt or  equity  financing  event  in the  immediate  future.  USWD
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,  the  inability  of USWD to secure  additional
financing in the near term could  adversely  impact USWD's  financial  position,
including its ability to continue as a going concern.

RISK FACTORS

     Ownership of USWD's securities is subject to certain risks, including,  but
not limited to, the  following,  which are  considered  by  management  to be of
material importance.

RISKS ARISING FROM USWD'S FINANCIAL CONDITION

USWD Has  Never  Been  Profitable,  and  Currently  Lacks  Revenue  to Cover Its
Recurring Monthly Expenses

     USWD has never been  profitable and has continued to lose money through the
end of the fiscal  year ended June 30,  1999,  and after that date.  USWD has an
accumulated  deficit of  approximately  $35 million at June 30, 1999,  and had a
working   capital  deficit   (current   assets  less  current   liabilities)  of
approximately  $3,389,000  at June 30, 1999.  USWD  presently  owes  substantial
amounts of money to creditors that it is unable to presently pay and its monthly
revenues are not sufficient to pay its recurring monthly expenses.

                                       26
<PAGE>

USWD Needs Immediate Additional Financing In Order to Remain In Business

     USWD's  development  of  products,  services  and  infrastructure  and  the
transition to a new business model requires immediate additional financing. USWD
does not have any assured  source for such a financing and there is no guarantee
that  funding  will occur in the time frame  required  to assure the Company can
remain in business.  From August 1997 through the  present,  operating  expenses
have been largely  satisfied by several  financings.  The fiscal 1998  financing
activities  consisted  primarily  of $1.2  million from the sale of common stock
repurchase  rights and $2.6 million net proceeds  from the issuance of debt.  In
fiscal  1999 and 1998,  USWD used $3.9  million  and $3.7  million  in cash from
operating  activities,   respectively.  The  fiscal  1999  financing  activities
consisted primarily of $1.8 million from the sale of 6% Convertible Subordinated
Debentures,  $3.0  million  from the  issuance of notes  payable  ($2.5  million
subsequently converted to common stock) and $1.0 million from the sale of Series
B Cumulative Redeemable  Convertible Preferred Stock and bridge financing.  USWD
continues to work both directly and through its consultants to secure additional
financing  required to meet its obligations and fund operations  while recurring
revenue is built.  While  management  is  hopeful  that it can  accomplish  this
objective,  the  failure  of USWD to obtain  additional  financing  could have a
material  adverse  impact on USWD,  including its ability to continue as a going
concern.

USWD's Accountant's Opinion Contains a "Going Concern" Assumption

     USWD's independent accountants have included in their opinions, a reference
to a  substantial  doubt  about the  Company's  ability to  continue  as a going
concern,  covering USWD's  financial  statements for the fiscal years ended June
30,  1997,  1998 and 1999.  No  assurance  can be given that USWD will raise the
funds it needs in the short run to continue as a going  concern.  USWD's present
financial condition may make it more difficult to raise the needed capital or to
do so on terms that are favorable to USWD.

USWD's Internal  Expense Levels May  Not Match  Available Revenues and  this May
Create Cash Shortages

     USWD's operating expense levels are based on internal  forecasts and not on
firm  customer  orders  for  products  or  services.   In  the  past,  USWD  has
consistently failed to achieve internal  forecasts,  resulting in expense levels
that are higher than revenue,  with consequential cash shortages to USWD. USWD's
results may also be affected by fluctuating demand for its products and services
from one  quarter  to the  next  and by  increases  in the  costs of  components
acquired from  vendors.  This has and may continue to make it difficult for USWD
to satisfy its cash requirements.

RISKS RELATING TO USWD'S OPERATIONS

USWD's New Business Plan is Unproven and Will Need to Be  Successfully  Executed
to Achieve Profits

     USWD's business plan has changed from generating  revenue from direct sales
of its products (i.e., the retail sale of a "box") on which it attempted to earn
only a margin, to generating  recurring revenue from selling its WEPS service to
merchants  through its employees,  agents or acquirer  partners.  USWD will also
continue to sell  authorization  devices  during the  immediate  future.  USWD's
previous  attempt to attain  profitable  operations as a full service credit and
debit card  transaction  processing  business by offering  products and services
through  wireless  carriers proved  unsuccessful.  USWD's present plan to enable
transaction  processing over wireless  networks and with multiple  processors is
still under  development.  USWD hopes it will be successful in making money with
this business strategy,  however,  it has not yet begun to do so and there is no
guarantee  that  USWD  will be able to  become  profitable  with  this  business
strategy.

                                       27
<PAGE>

USWD's Distribution Program Relies on Outside Parties

     Through  the end of the  fiscal  year  ended  June  30,  1999,  Cardservice
International,  Inc. ("CSI") accounted for 40% of USWD's revenue, primarily from
direct sales of products to CSI.  Although  USWD has shifted its focus away from
strictly  selling products and is concentrating on trying to develop a recurring
revenue  stream  from  product  sales  in  conjunction  with  the  sale  of  its
proprietary Wireless Express Payment Service (WEPS) service offering, it remains
to be seen whether this business plan will be successful.

     The  success of USWD's new  business  plan is  dependent  on the WEPS being
utilized by merchant acquirers,  processors and ISOs in sufficient quantities to
generate  profits  to USWD.  USWD  currently  has  agreements  in place  with 12
merchant acquirers under which these entities have agreed to make WEPS available
as a  wireless-processing  offering through their respective marketing programs.
The  failure  to  successfully  execute  programs  through  any  of  these,  and
additional  distributors which agree to offer USWD's WEPS processing service, is
likely  to be  harmful  to USWD.  In  addition,  USWD may not be  successful  in
entering into marketing and related arrangements on terms acceptable to it.

USWD Depends on Certain Key People

     USWD's future depends in significant part on the continued contributions of
key senior management personnel,  several of whom would be difficult to replace.
Future operating  results also depend in significant part upon USWD's ability to
attract and retain qualified  people as employees or consultants,  especially in
the areas of  product  development  and  programming.  People  who  possess  the
requisite skills and experience to perform certain technical functions have been
in limited supply in the past, and there can be no assurance that USWD, with its
limited resources, will be successful in attracting or keeping these people. The
loss of key employees, the failure of key employees to perform satisfactorily in
their  current  position  or USWD's  inability  to attract  and  retain  skilled
employees as needed, could have a material adverse effect on USWD.

USWD Will Have to Keep Pace With New Products and Rapid Technological
Change in Order to Remain Competitive in the Marketplace

     If USWD is able to sufficiently penetrate the market with its WEPS offering
initially,  USWD's  future  success is likely to depend upon its ability to keep
pace with  technological  development and respond to evolving  merchant demands.
Failure to anticipate or respond  adequately to  technological  developments  or
significant delays in product development could damage USWD's potential position
in the  marketplace and could result in less revenue or an inability to generate
profits.  With its current limited financial and technical  resources,  USWD may
not be able to develop or market new  services or  enhancements  to its existing
service offerings.  It is possible that USWD could experience significant delays
in these endeavors.  Any failure to successfully develop and market services and
service  enhancements  could have a material  adverse effect on USWD's financial
condition, business and operations.

USWD Markets and Sells a Single Type of Service And Would Suffer
Unduly If Its Service Offering Fails to Be Accepted in the Market

     USWD generates  almost all of its revenue from the sale of products serving
the  transaction  processing  industry.  Demand for these  products and services
could be affected by numerous factors outside USWD's control,  including,  among
others, market acceptance by prospective  customers,  the introduction of new or
superior  competing  technologies or products and/or services that are available
on more  favorable  pricing  terms than  those  being  offered by USWD,  and the
general  condition of the  economy.  USWD's  success  will likely  depend on its
ability to market and sell its WEPS offering to transaction processors, merchant
acquirers  and ISOs,  as well as to  increase  the  availability  of credit card
terminals  that  interface with WEPS. If USWD is unable to do so, it will likely
have a material  adverse  effect on USWD's  financial  condition,  business  and
operations.

                                       28
<PAGE>

USWD Faces Competition and Pricing Pressures from Larger,
Well Financed and More Recognized Companies

     The  markets  for  certain  of USWD's  products  and  services  are  highly
competitive,  including pressure to maintain  competitive pricing structures for
credit  card  processing   services.   USWD  has  identified  several  potential
competitors  attempting to develop CDPD based terminals and solutions,  although
at the present time, it is aware of no other  applications  currently  available
that are designed  specifically  for  wireless  transaction  processing  and the
Internet or that have the carrier,  device and front-end  neutral  structure and
potential  to become an  industry  standard.  However,  barriers to entry in the
Company's business are relatively insubstantial and companies with substantially
greater financial, technical,  marketing,  manufacturing and human resources, as
well as those with far greater name  recognition than USWD, may attempt to enter
the market. USWD believes that its ability to compete depends on product design,
quality  and  price,  distribution  and  quality  of  service.  There  can be no
assurance that USWD will be able to compete successfully in the market.

USWD's Liability Insurance May Not be Adequate to Protect
Against All Possible Risks

     USWD has liability insurance policies to cover liability claims arising out
of the  products it sells and the  services it  provides.  USWD has not been the
subject of any material  liability  claims;  however,  there can be no assurance
that liability  insurance  policies will cover all possible claims,  or that the
policies can be  maintained at an  acceptable  cost. If USWD incurs  liabilities
which are not  covered by  insurance,  or in an amount  that is in excess of the
limits of the policies, USWD would likely suffer material adverse effects.

USWD May Be At Risk Because of "Year 2000" Issues

     The  engineering  staff  has  made  an  assessment  of  USWD  products  and
determined that they are Y2K compliant.  The specific entities  providing credit
card  processing  services  to USWD  have  been  surveyed  and have  active  Y2K
compliance  projects underway.  It is USWD's  understanding that these providers
are or will be Y2K  compliance on or before January 1, 2000. On a broader basis,
USWD is reliant on the  electronic  payments  infrastructure  utilized by credit
card processors,  banks and financial institutions within the United States, and
could be subject to  unresolved  issues which impact this  infrastructure.  USWD
could be adversely,  materially affected, both operationally and financially, to
the  extent  third  parties  with  which  it  interfaces,   either  directly  or
indirectly,  has not properly addressed their Year 2000 issues. The Company does
not have an available  contingency  plan that would  alleviate a  disruption  of
service in the electronic transaction sector.

USWD Has Not Filed Its 1996, 1997, 1998 or 1999 Federal or
State Corporate Tax Returns

     USWD has not  completed  federal or state  income tax  return  filings  for
fiscal years 1996,  1997 1998 or 1999.  While it is unlikely  that USWD will owe
any taxes due to the sustained  losses during the periods,  it may be subject to
penalties  for the  delinquency.  USWD  intends  to take the steps  required  to
complete the tax filings before the end of the 1999 calendar year.

USWD's  Products and Services Rely on a Combination of  Technologies  that Could
Encounter Capacity Constraints or Systems Failures

     USWD utilizes a variety of technologies in the production of WEPS including
wireless networks, web servers, internet information servers, SQL servers, local
area network, data storage devices and proprietary  applications.  These systems
are designed to be scaleable and redundant. However, certain circumstances or an
unexpected surge in transaction  volume could result in capacity  constraints or
system failures.  The impact of a capacity issue or service  interruption  could
have a  detrimental  impact  on the  financial  or  operational  aspects  of the
Company.


                                       29
<PAGE>


USWD's Use of Wireless  and Internet  Technologies  Could Pose  Security  Issues
Regarding Data Transmission and Reporting

     Utilization of WEPS involves the  transmission of payment  transactions via
the wireless  network and WEPS server from the merchant's  point-of-sale  to the
payment  processor  and back.  All airlink data is  transmitted  in an encrypted
format through secure channels.  The reporting and utility functions  accessible
via the Internet are designed  with a variety of security  precautions,  and the
end-user's  card number is not  contained  in the  database  accessible  via the
Internet.  However,  potential  unauthorized  access  to  the  data  can  not be
guaranteed  and could have an adverse  impact on the Company or its customers if
such an event were to occur.

RISKS ARISING OUT OF OWNERSHIP 0F USWD's COMMON STOCK

The  Market for  USWD Stock Could Suffer Because There May Be Too Many Available
Shares

     USWD  had  19,829,526  total  shares  of  common  stock  outstanding  as of
September 27, 1999. Of that number,  7,839,358 are in the public float. USWD has
a  substantial  number of  additional  shares of common  stock  that are  either
presently   outstanding  or  issuable  upon  conversion  or  exercise  of  other
securities that were issued as "restricted securities" that are either presently
saleable  under SEC Rule 144 or which will  become  eligible  for sale under SEC
Rule 144 over the next several months to one year.

     As of September  27,1999,  significant  sources of additional  common stock
which may enter the market  include:  4,455,239  shares of common stock issuable
upon conversion of 672,513 shares of Series A Preferred Stock,  $1,800,000 of 6%
Debentures and 1,954,705 shares of Series B Preferred Stock (based on the market
price of the  Company's  common  stock and  applicable  discounts  that apply to
conversion of these  securities as of September 27, 1999);  8,281,480  shares of
common  stock  subject to a "lock-up"  agreement  until Jan 1, 2000,  and shares
issuable  upon  exercise of various  stock  options and warrants as described in
Notes 10 and 11 to the Financial  Statements.  These securities are described in
more  detail in the  Liquidity  and Capital  Resources  section  above,  and the
financial  statements and Notes thereto.  (See also the discussion  contained in
the immediately  following Risk Factor describing  potential  dilution and other
adverse effects of USWD's outstanding convertible securities.)

     USWD  also has a Form  SB-2  registration  statement  pending,  but not yet
effective  with, the SEC (SEC File No.  333-81897) to register  shares  issuable
upon  conversion  of Series A  Preferred  Stock,  Series B Preferred  Stock,  6%
Debentures,  various common stock purchase warrants and outstanding common stock
(some of which are also presently  saleable  under SEC Rule 144).  When declared
effective,  the  registration  will  permit a large  number of shares to be sold
immediately  into the  market,  as  opposed  to SEC Rule 144 sales  which may be
subject to volume limitations.

     The market for USWD's  stock may not be strong  enough to absorb all of the
shares that may be offered by shareholders  under Rule 144 or pursuant to USWD's
pending SB-2 registration  statement (if and when it becomes effective) or under
USWD's  presently  effective  S-8  registration  statement.  If an oversupply of
shares develops, it is likely that the market price for the common stock will be
depressed from its present levels.

USWD's Outstanding  Convertible  Preferred Stock and 6% Convertible  Debentures,
Options and  Warrants  Involve  Possible  Dilution  and Other  Possible  Adverse
Effects

     As noted above,  USWD has a  substantial  number of  outstanding  rights to
acquire  its  common  stock in the form of Series A  Preferred  Stock,  Series B
Preferred Stock, 6% Convertible Debentures and various warrants and options. The
holders of the Series A and B Preferred Stocks and the 6% Debentures are able to
convert those  securities  into common stock at the market price less a discount


                                       30
<PAGE>

percent  ranging  from 20% to 25% off  market  price at the time of  conversion.
Because of the  "floorless"  conversion  feature of the Series A and B Preferred
Stocks and the 6% Debentures,  the lower the market price of the common stock on
the date of  conversion,  the greater the number of shares that would need to be
issued  to  honor  the  conversion.   The  conversion  and  subsequent  sale  of
substantial  numbers of shares  would  likely  depress the market  price for the
common stock, thereby requiring the issuance of larger number of shares to honor
conversion  rights,  which would then further  adversely impact the market price
for USWD stock.

     The holders of warrants and options  exercisable for shares of common stock
can also be expected to exercise their securities at a time when they can profit
from a rise in the market price of the common stock with a resulting dilution in
the  interests of other  shareholders.  This could have the effect of depressing
the market  price for the  common  stock and cause  dilution  to holders of USWD
common stock.

     USWD has in the past, and may be in the future, find it difficult to obtain
additional  financing  on  affordable  terms  because of the  existence of these
various instruments and rights.

USWD's Common Stock May Be Harder to Sell Because of the "Penny Stock Rules"

     Regulations  under the  Securities  Exchange  Act of 1934,  as amended (the
"1934 Act"),  which are know as the "Penny Stock Rules," regulate the trading of
"penny  stocks,"  which are  generally  defined as any  security not listed on a
national securities exchange or NASDAQ, priced at less than $5.00 per share, and
offered by an issuer with limited net tangible assets and revenue. USWD's common
stock presently is classified as a "penny stock," and trading of it is therefore
subject to the Penny Stock Rules.  Under these rules,  broker-dealers  must take
certain steps prior to selling a "penny stock" including (i) obtaining financial
and  investment  information  from  the  investor,   (ii)  obtaining  a  written
suitability  questionnaire and purchase agreement signed by the investor,  (iii)
providing the investor with a written identification of the shares being offered
and the quantity; (iv) providing the customer with a written disclosure document
containing SEC required  disclosure as to risks  involving  investments in penny
stocks;  (v) providing  written  disclosure as to compensation of the broker and
associated persons;  and (vi) providing  customer's whose accounts contain penny
stocks with certain required disclosure on the account statements.  If the Penny
Stock Rules are not followed by the broker-dealer in conjunction with sales of a
penny stock, the investor has no obligation to purchase the shares. Accordingly,
the Penny  Stock Rules may make it more  difficult  for  broker-dealers  to sell
USWD's common stock in the secondary  market and  consequently  may make it more
difficult for a holder of a penny stock to dispose of the shares as and when the
holder might desire to do so. In addition,  the  application  of the Penny Stock
Rules to the common stock could also impair USWD's  ability to raise  additional
capital through the sale of common stock or securities  convertible  into common
stock.

The Market  Price for,  and  Trading  Volume in,  USWD's  Common  Stock is Quite
Volatile

     The market price for USWD's common stock may not bear any  relationship  to
any  established  valuation  criteria  such as assets,  book  value,  or current
earnings.  USWD  attributes  the current  market  price for the common  stock to
anticipated  benefits  to USWD of its WEPS  product  offering  and  distribution
strategy.  Market prices and daily transaction volume in securities of small-cap
emerging  companies,  including  USWD,  have  historically  been quite volatile.
General   economic,   industry  and  market   conditions,   as  well  as  future
announcements  concerning USWD, its financial condition,  prospects,  contracts,
competitors, technological innovations or new products or services, developments
concerning  proprietary rights,  litigation involving USWD, or other factors may
have a  significant  effect on the market  price and sales  volume of the common
stock.

                                       31
<PAGE>

USWD has Never Paid  Common  Stock  Dividends  and Is  Unlikely To Do So For the
Foreseeable Future

     USWD has never  paid cash or other  dividends  on its common  stock.  It is
USWD's  intention to retain any earnings to finance the  operation and expansion
of its business, and therefore,  it does not expect to pay any cash dividends in
the foreseeable  future. In addition,  the terms and conditions of the presently
outstanding  Series A Preferred  Stock and Series B  Preferred  Stock will limit
USWD's ability to pay dividends on the common stock.

USWD has a 32.6% Shareholder Who Is Able to Effectively Control USWD

     USWD is  effectively  controlled by Mr. John  Liviakis,  who currently owns
approximately  32.6% of USWD's common stock (based on shares issued as of August
31, 1999).  Through his stock  ownership,  Mr.  Liviakis is able to  effectively
elect all of the  directors of USWD and control USWD.  Mr.  Liviakis is also the
principal owner of Liviakis Financial Communications,  Inc., the firm with which
USWD has had a financial consulting relationship since August 1997.

USWD Has  Failed  to File  and  Obtain  Effectiveness  of  Various  Registration
Statements under the Securities Act of 1933 within Prescribed  Periods,  Thereby
Subjecting the Company to Substantial Penalties,  Including the Right of Certain
Security Holders to Require USWD to Redeem Their Securities

     USWD has failed to file and/or obtain effectiveness of various registration
statements  that it has agreed to file for holders of its  securities  under the
Securities Act of 1933 since  December 1997.  USWD agreed to file a registration
statement covering the shares issuable upon conversion of its Series A Preferred
Stock by March 10, 1998, which it filed as of May 7, 1998. USWD failed to obtain
effectiveness of that  registration  statement by the prescribed date of May 11,
1998. A penalty in the form of a discount to the conversion price for the Series
A Preferred Stock became effective,  and the present  conversion rate applicable
to the  Series  A  Preferred  Stock  is 75% of  market  price  as of the date of
conversion versus the original 80% of market price.

     USWD  was  unable  to file a  registration  for the 6%  Debentures  thereby
subjecting the Company to penalties and redemption rights as described in Note 5
to the Financial Statements.  In the fourth quarter of fiscal 1999, USWD entered
into an  agreement  with the  purchasers  of the  Series B  Preferred  Stock and
holders  of the 6%  Debentures  to file a  registration  statement  with the SEC
covering the common stock underlying the Series B Preferred Stock,  common stock
purchase  warrants issued at the same time as the Series B Preferred  Stock, and
6% Debentures,  within 30 days of May 6, 1999, to be effective within 90 days of
May 6, 1999  (which was  extended  to May 11,  1999).  USWD  filed the  required
registration  statement as of June 30, 1999. The Company accrued $74,000 related
to the late  filing  penalty  and is  currently  subject  to  penalties  on late
effectiveness  commencing  August 6, 1999. The penalties  range from 2% to 3% of
the  original  purchase  price of the  security  and will be accrued as interest
expense  in  subsequent  periods.  As of  October  10,  1999,  the  registration
statement  had not been  declared  effective  thereby  entitling  holders of the
Series B Preferred  Stock to redeem their shares at $1.25 per share plus accrued
penalties  and  dividends,  approximately  $2,500,000,  and  holders  of  the 6%
Debentures  to redeem the current  $1,800,000  face amount at 120% plus  accrued
penalties  and  interest.  The Company  intends to file an amended  registration
statement with the SEC as soon as practicable.




                                       32
<PAGE>

ITEM 7:  FINANCIAL STATEMENTS

         Report of Independent Accountants - fiscal 1999......     34

         Report of Independent Accountants - fiscal 1998......     35

         Balance Sheet as of
                   June 30, 1999 and 1998.....................     37

         Statement of Operations for the fiscal year ended
                  June 30, 1999 and 1998......................     38

         Statement of Changes in Stockholders' Deficit for the
                  fiscal year ended June 30, 1999 and 1998....     40

         Statement of Cash Flows for the fiscal year ended
                  June 30, 1999 and 1998......................     41

         Notes to Financial Statements........................     43

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

     On August 5, 1999, USWD dismissed PricewaterhouseCoopers LLP ("PWC") as its
independent  accountants.  The reports of PWC on USWD's financial statements for
the two fiscal  years  ending June 30, 1998 and 1997 did not contain any adverse
opinion or  disclaimer  of opinion  and were not  qualified  or  modified  as to
uncertainty,  audit scope or accounting  principles,  except that the reports of
PWC included a reference to a substantial doubt about USWD's ability to continue
as a going concern. In connection with its audits for the two most recent fiscal
years and through August 5, 1999,  there were no  disagreements  with PWC on any
matter of accounting principles or practices, financial statement disclosure, or
auditing  scope  or  procedure,  which  disagreements,  if not  resolved  to the
satisfaction  of PWC would have caused them to make  reference  thereto in their
report on the financial statements for such years.

     USWD  requested  that  PWC  furnish  it  with  a  letter  addressed  to the
Securities  and Exchange  Commission  stating  whether or not it agrees with the
above statements.  PWC furnished USWD with such a letter, dated August 20, 1999,
a copy of which was filed by USWD as Exhibit 16 to a Current Report on Form 8-KA
filed by USWD as of August 20, 1999.

     USWD engaged M.R. Weiser & Co., LLP ("M.R. Weiser"), as its new independent
accountants  as of August 5, 1999. In  connection  with its audit for the fiscal
year ended June 30, 1999, there have not been any disagreements with M.R. Weiser
on any  matter  of  accounting  principles  or  practices,  financial  statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved
to the  satisfaction  of M.R.  Weiser  would have caused them to make  reference
thereto in their report on the financial statements for such year.

     USWD's Board of Directors  recommended  and approved the decision to change
independent accountants.



                                       33
<PAGE>



INDEPENDENT AUDITORS' REPORT

To the Board of Directors and
Stockholders of U.S. Wireless Data, Inc.

     We have audited the accompanying  balance sheet of U.S. Wireless Data, Inc.
as of June 30,  1999,  and the  related  statements  of  operations,  changes in
stockholders'  deficit and cash flows for the year then ended.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

     We conducted  our audit in  accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and  disclosures  in the  financial  statements.  An audit  includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

     In our opinion,  the financial statements referred to above present fairly,
in all material respects,  the financial position of U.S. Wireless Data, Inc. as
of June 30, 1999,  and the results of its  operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.

     The accompanying  financial statements have been prepared assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
financial statements,  the Company has suffered recurring losses from operations
and at June 30, 1999,  has an  accumulated  deficit,  a net capital  deficiency,
negative working capital and has defaulted on certain  obligations  which, among
other  things,  cause the  balance  to become due on  demand.  Furthermore,  the
Company  has  redeemable  preferred  stock  outstanding  that could  require the
Company  to redeem  the  shares.  As set forth in Note 1, if the  holders of the
Series B Preferred  Stock and/or the holders of the 6%  Debentures  redeem their
securities,  the Company  would not  currently be able to fund such  redemption.
Furthermore,  as set  forth  in Note 1,  the  Company  has  concluded  that  the
implementation of its business plan is dependent on a significant debt or equity
financing in the immediate  future.  Those  conditions raise  substantial  doubt
about the Company's ability to continue as a going concern.  Management's  plans
in  regard  to  these  matters  are  also  described  in Note 1.  The  financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.


/s/ M.R.Weiser&Co.LLP
M.R.Weiser&Co.LLP

New York, New York
August 26, 1999, except for the last paragraph
of note 18 which is as of October 10, 1999



                                       34
<PAGE>



                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Stockholders of U.S. Wireless Data, Inc.

     In our opinion,  the accompanying  balance sheet and the related statements
of  operations,  of changes in  stockholders'  deficit and of cash flows present
fairly, in all material respects,  the financial position of U.S. Wireless Data,
Inc. at June 30, 1998,  and the results of its operations and its cash flows for
the year in conformity  with generally  accepted  accounting  principles.  These
financial  statements are the  responsibility of the Company's  management;  our
responsibility  is to express an opinion on these financial  statements based on
our  audit.  We  conducted  our audit of these  statements  in  accordance  with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable  assurance about whether the financial statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and  disclosures  in the financial  statements,
assessing the  accounting  principles  used and  significant  estimates  made by
management,  and evaluating the overall  financial  statement  presentation.  We
believe  that our audit  provides a reasonable  basis for the opinion  expressed
above. We have not audited the financial  statements of U.S. Wireless Data, Inc.
for any period subsequent to June 30, 1998.

     The accompanying  financial statements have been prepared assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
financial statements,  the Company has suffered recurring losses from operations
and has a net capital  deficiency that raise substantial doubt about its ability
to continue as a going  concern.  Management's  plans in regard to these matters
are also  described  in Note 1. The  financial  statements  do not  include  any
adjustments that might result from the outcome of this uncertainty.


/s/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP

San Jose, California
November 6, 1998




                                       35
<PAGE>
<TABLE>
<CAPTION>

                                      U.S. WIRELESS DATA, INC.
                                           BALANCE SHEETS

                                                                                                                 June 30,
ASSETS                                                                                                 1999                   1998
------                                                                                                 ----                   ----
<S>                                                                                              <C>                   <C>
Current assets:
     Cash ..............................................................................         $    425,000          $      4,000
     Accounts receivable, net of allowance for doubtful
       accounts of $43,000 (1999); and $22,000 (1998) ..................................              178,000                55,000
     Inventory .........................................................................              215,000               480,000
     Other current assets ..............................................................               14,000               187,000
     Escrow held for payment of professional fees ......................................              112,000                  --
                                                                                                 ------------          ------------
                 Total current assets ..................................................              944,000               726,000
Processing units - deployed, net .......................................................              408,000               517,000

Property and equipment, net ............................................................              405,000               253,000
Other assets ...........................................................................               14,000                69,000
                                                                                                 ------------          ------------

Total assets ...........................................................................         $  1,771,000          $  1,565,000
                                                                                                 ============          ============

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
         Accounts payable ..............................................................         $  1,198,000          $  1,506,000
         Accrued liabilities ...........................................................              413,000             1,735,000
         Borrowings, current portion ...................................................            2,272,000               452,000
         Other current liabilities .....................................................              450,000                  --
                                                                                                 ------------          ------------
                  Total current liabilities ............................................            4,333,000             3,693,000
Borrowings, long-term portion ..........................................................               25,000                45,000
                                                                                                 ------------          ------------
Total liabilities ......................................................................            4,358,000             3,738,000
                                                                                                 ------------          ------------

Redeemable preferred stock:
    Series B 6% cumulative  convertible  redeemable  preferred stock,
    $1.00 par value, 5,000,000 shares authorized,  1,954,705 shares
    issued and outstanding at June 30, 1999. Redeemable at
    approximately $2,461,000  ..........................................................            1,587,000                  --
Redeemable common stock and warrants ...................................................                 --                 372,000
                                                                                                 ------------          ------------

Commitments and contingencies (Notes 14,15,16 and 18)

Stockholders' deficit:
    Preferred stock, at $1.00 stated value,15,000,000 authorized,
        752,000 (1999) and 3,060,000 (1998) Series A
        issued and outstanding .........................................................              752,000             3,060,000
    Common stock, at $1.00 stated value, 40,000,000 shares
        authorized, 17,816,075 (1999) and 12,195,358
        (1998) shares issued and outstanding ...........................................           17,816,000            12,195,000
    Common stock to be distributed (243,000 shares) ....................................              243,000                  --
    Additional paid-in capital .........................................................           12,082,000            10,222,000
    Accumulated deficit ................................................................          (35,067,000)          (28,022,000)
                                                                                                 ------------          ------------
                  Total stockholders' deficit ..........................................           (4,174,000)           (2,545,000)
                                                                                                 ------------          ------------

Total liabilities and stockholders' deficit ............................................         $  1,771,000          $  1,565,000
                                                                                                 ============          ============
</TABLE>

     The accompanying notes are an integral part of the financial statements



                                       36
<PAGE>
<TABLE>
<CAPTION>

                                      U.S. WIRELESS DATA, INC.
                                      STATEMENTS OF OPERATIONS

                                                                                     For the year ended June 30,
                                                                                   1999                      1998
                                                                                   ----                      ----
<S>                                                                          <C>                        <C>
Net revenues:
     Product sales ............................................              $    770,000               $    650,000
     Services .................................................                   654,000                    259,000
                                                                             ------------               ------------
                                                                                1,424,000                    909,000
                                                                             ------------               ------------
Cost of revenues:
     Product sales ............................................                   373,000                    786,000
     Services .................................................                   655,000                    122,000
                                                                             ------------               ------------
                                                                                1,028,000                    908,000
                                                                             ------------               ------------

         Gross profit .........................................                   396,000                      1,000
                                                                             ------------               ------------

Operating expenses:
     Selling, general and administrative ......................                 4,655,000                  8,408,000
     Research and development .................................                   461,000                    295,000
     Litigation settlement ....................................                    49,000                  1,353,000
                                                                             ------------               ------------

                                                                                5,165,000                 10,056,000
                                                                             ------------               ------------
         Loss from operations .................................                (4,769,000)               (10,055,000)

Interest expense ..............................................                (1,528,000)                  (778,000)
Other income(expense) .........................................                     5,000                   (167,000)
                                                                             ------------               ------------

Loss before extraordinary gain ................................                (6,292,000)               (11,000,000)

    Extraordinary gain ........................................                   807,000                       --
                                                                             ------------               ------------
Net loss ......................................................                (5,485,000)               (11,000,000)

    Preferred stock dividends .................................                (1,446,000)                   (61,000)
                                                                             ------------               ------------

Net loss available to common stockholders .....................              $ (6,931,000)              $(11,061,000)
                                                                             ============               ============

    Basic and diluted net loss per share, (after
    provision for preferred stock dividends)
    Loss before extraordinary gain ............................              $      (0.57)              $      (1.18)
    Extraordinary gain ........................................                      0.06                       --
                                                                             ------------               ------------
    Net loss available to common stockholders .................              $      (0.51)              $      (1.18)
                                                                             ============               ============
Weighted average common shares outstanding-
basic and diluted .............................................                13,597,000                  9,369,000
                                                                             ============               ============
</TABLE>


     The accompanying notes are an integral part of the financial statements


                                       37
<PAGE>
<TABLE>
<CAPTION>

                                           U.S. WIRELESS DATA, INC.
                                 STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT

                                                                         Series A
                                                                      Preferred Stock               Common Stock
                                                                   Shares          Amount       Shares        Amount
                                                                   ------          ------       ------        ------
<S>                                                              <C>         <C>              <C>         <C>
Balance at June 30, 1997 ....................................         --     $       --       5,613,952   $  5,614,000

Issuance of common stock for cash ...........................         --             --       1,428,571      1,428,000
Issuance of common stock for services .......................         --             --       2,621,429      2,621,000
Issuance of common stock for litigation settlement and
  related  note conversion ..................................         --             --         679,800        680,000
Reclassification of redeemable common stock and warrants ....         --             --        (128,307)      (128,000)
Exercise of stock options ...................................         --             --         340,640        341,000
Exercise of stock warrants ..................................         --             --       1,203,947      1,204,000
Issuance of common stock for conversion of notes payable ....         --             --         422,257        422,000
Issuance of common stock for interest on debenture ..........         --             --          13,069         13,000
Sale of common stock repurchase right .......................         --             --            --             --
Issuance of convertible debentures ..........................         --             --            --             --
Issuance of warrants for services ...........................         --             --            --             --
Issuance of Series A preferred stock ........................    3,060,000      3,060,000          --             --
Payment of notes receivable .................................         --             --            --             --
Net loss ....................................................         --             --            --             --
Preferred stock dividend ....................................         --             --            --             --
                                                              ------------   ------------  ------------   ------------
Balance at June 30, 1998 ....................................    3,060,000      3,060,000    12,195,358     12,195,000
Conversion of Series A preferred stock to common stock ......   (1,475,000)    (1,475,000)    1,322,752      1,323,000
Redemption of Series A preferred stock ......................     (833,000)      (833,000)         --             --
Issuance of common stock and warrants for services ..........         --             --         320,000        320,000
Issuance of shares for Series A preferred stock dividend ....         --             --          27,528         28,000
Issuance of common stock ....................................         --             --         475,000        475,000
Exercise of stock warrants ..................................         --             --         408,459        408,000
Exercise of stock options ...................................         --             --           5,000          5,000
Issuance of common stock in conversion of bridge loan .......         --             --       2,933,671      2,934,000
Issuance of stock options for services ......................         --             --            --             --
Issuance of warrants for services ...........................         --             --            --             --
Issuance of warrants in consideration of Series B preferred
  stock .....................................................         --             --            --             --
Series B preferred stock "in the money conversion feature" ..         --             --            --             --
Series A preferred stock dividend declared ($.08 per share) .         --             --            --             --
Series B preferred stock dividend declared($.01 per share) ..         --             --            --             --
Issuance of warrants with 6% convertible debenture ..........         --             --            --             --
6% convertible subordinated debentures "in the money
  conversion feature" .......................................         --             --            --             --
Accretion of mandatorily redeemable preferred stock .........         --             --            --             --
Net loss ....................................................         --             --            --             --
Expiration of  "put" feature on redeemable common stock .....         --             --          44,807         45,000
Reclassification of redeemable common stock .................         --             --          83,500         83,000
                                                              ------------   ------------  ------------   ------------
Balance at June 30, 1999 ....................................      752,000   $    752,000    17,816,075   $ 17,816,000
                                                              ============   ============  ============   ============


<PAGE>

<CAPTION>

                                                               Additional       Common         Note
                                                                 Paid in      Stock to be   Receivable    Accumulated
                                                                 Capital      Distributed   Stockholder      Deficit        Total
                                                               ----------     -----------   -----------   -----------       -----
<S>                                                           <C>            <C>          <C>            <C>           <C>
Balance at June 30, 1997 .................................... $ 10,613,000   $       --        (28,000)  $(16,961,000) $   (762,000)

Issuance of common stock for cash ...........................     (929,000)          --           --             --         499,000
Issuance of common stock for services .......................     (810,000)          --           --             --       1,811,000
Issuance of common stock for litigation settlement and
  related  note conversion ..................................      875,000           --           --             --       1,555,000
Reclassification of redeemable common stock and warrants ....     (244,000)          --           --             --        (372,000)
Exercise of stock options ...................................     (167,000)          --           --             --         174,000
Exercise of stock warrants ..................................   (1,190,000)          --           --             --          14,000
Issuance of common stock for conversion of notes payable ....     (186,000)          --           --             --         236,000
Issuance of common stock for interest on debenture ..........       62,000           --           --             --          75,000
Sale of common stock repurchase right .......................    1,240,000           --           --             --       1,240,000
Issuance of convertible debentures ..........................      622,000           --           --             --         622,000
Issuance of warrants for services ...........................      753,000           --           --             --         753,000
Issuance of Series A preferred stock ........................     (417,000)          --           --             --       2,643,000
Payment of notes receivable .................................         --             --         28,000           --          28,000
Net loss ....................................................         --             --           --      (11,000,000)  (11,000,000)
Preferred stock dividend ....................................         --             --           --          (61,000)      (61,000)
                                                              ------------   ------------  -----------   ------------  ------------
Balance at June 30, 1998 ....................................   10,222,000           --           --      (28,022,000)   (2,545,000)
Conversion of Series A preferred stock to common stock ......      183,000           --           --          (31,000)         --
Redemption of Series A preferred stock ......................      (53,000)          --           --         (114,000)   (1,000,000)
Issuance of common stock and warrants for services ..........    1,157,000           --           --             --       1,477,000
Issuance of shares for Series A preferred stock dividend ....       77,000           --           --             --         105,000
Issuance of common stock ....................................     (159,000)          --           --             --         316,000
Exercise of stock warrants ..................................     (243,000)          --           --             --         165,000
Exercise of stock options ...................................       (4,000)          --           --             --           1,000
Issuance of common stock in conversion of bridge loan .......   (1,173,000)          --           --             --       1,761,000
Issuance of stock options for services ......................      449,000           --           --             --         449,000
Issuance of warrants for services ...........................      264,000           --           --             --         264,000
Issuance of warrants in consideration of Series B preferred
  stock .....................................................      168,000           --           --             --         168,000
Series B preferred stock "in the money conversion feature" ..      391,000           --           --         (391,000)         --
Series A preferred stock dividend declared ($.08 per share) .      354,000         43,000         --         (439,000)      (42,000)
Series B preferred stock dividend declared($.01 per share) ..         --             --           --          (14,000)      (14,000)
Issuance of warrants with 6% convertible debenture ..........      218,000           --           --             --         218,000
6% convertible subordinated debentures "in the money
  conversion feature" .......................................      279,000           --           --             --         279,000
Accretion of mandatorily redeemable preferred stock .........         --             --           --         (571,000)     (571,000)
Net loss ....................................................         --             --           --       (5,485,000)   (5,485,000)
Expiration of  "put" feature on redeemable common stock .....      (45,000)          --           --             --            --
Reclassification of redeemable common stock .................       (3,000)       200,000         --             --         280,000
                                                              ------------   ------------  -----------   ------------  ------------
Balance at June 30, 1999 .................................... $ 12,082,000   $    243,000  $      --     $(35,067,000) $ (4,174,000)
                                                              ============   ============  ===========   ============  ============
</TABLE>


     The accompanying notes are an integral part of the financial statements


                                       38
<PAGE>

<TABLE>
<CAPTION>


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


                                                                                                     For the year ended June 30,
                                                                                                    1999                    1998
<S>                                                                                            <C>                     <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss .......................................................................           $ (5,485,000)           $(11,000,000)
    Adjustments to reconcile net loss to net cash used in
      Operating activities:
       Depreciation and amortization ...............................................                301,000                 111,000
       Non-cash consulting services and other ......................................              1,652,000               2,734,000
       Non-cash compensation expense-variable stock option .........................             (1,327,000)              1,327,000
       Non-cash interest expense ...................................................              1,307,000                 654,000
       Non-cash litigation expense .................................................                   --                 1,353,000
       Non-cash reduction of payment due supplier ..................................               (240,000)                   --
       Extraordinary gain ..........................................................               (807,000)                   --
       Changes in current assets and liabilities:
          Accounts receivable ......................................................               (123,000)                 77,000
          Inventory ................................................................                284,000                (271,000)
          Other current assets .....................................................                111,000                 (85,000)
          Accounts payable .........................................................               (307,000)              1,153,000
          Accrued liabilities ......................................................                745,000                 281,000
                                                                                               ------------            ------------
          Net cash used in operating activities ....................................             (3,889,000)             (3,666,000)
                                                                                               ------------            ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
       Purchase of property and equipment ..........................................                (47,000)               (256,000)
       Processing units - deployed .................................................                (81,000)               (564,000)
       Increase in other assets ....................................................                (57,000)                (58,000)
                                                                                               ------------            ------------
          Net cash used in investing activities ....................................               (185,000)               (878,000)
                                                                                               ------------            ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
       Proceeds from issuance of common stock ......................................                 27,000                 664,000
       Proceeds from sale of common stock repurchase right .........................                   --                 1,240,000
       Principal payment on borrowings .............................................               (149,000)                   --
       Net proceeds from issuance of debt ..........................................              3,141,000               2,623,000
       Net proceeds from issuance of convertible debenture .........................              1,800,000                    --
       Payment of note receivable from stockholder .................................                   --                    28,000
       Net proceeds from issuance of Series B preferred stock ......................                676,000                    --
       Payment of note payable .....................................................                   --                   (13,000)
       Redemption of Series A preferred stock ......................................             (1,000,000)                   --
                                                                                               ------------            ------------
          Net cash provided by financing activities ................................              4,495,000               4,542,000
                                                                                               ------------            ------------

Net increase(decrease) in cash .....................................................                421,000                  (2,000)

Cash at beginning of year ..........................................................                  4,000                   6,000
                                                                                               ------------            ------------

Cash at end of year ................................................................           $    425,000            $      4,000
                                                                                               ============            ============
</TABLE>



                                       39
<PAGE>


Supplemental disclosure of non-cash financing and investing activities:

Year ended June 30, 1999

1.   Conversion of $2,567,000  notes payable and interest to 2,934,000 shares of
     common stock.
2.   Conversion  of  1,475,000  shares of Series A preferred  stock to 1,323,000
     shares of common stock.
3.   Conversion of redeemable warrants to 400,000 shares of common stock.
4.   Expiration of put rights on 45,000 shares of redeemable common stock.
5.   Relinquishment of put rights on 83,000 shares of redeemable common stock.
6.   Issuance  of  warrants  to  purchase  300,000  shares  of  common  stock to
     purchaser of Series B preferred stock.
7.   Recording of "in the money conversion  feature" on Series B preferred stock
     for $391,000.
8.   Series   A   Preferred   stock   redemption   premium   of   $167,000   and
     reclassification of paid in capital to retained earnings of $114,000.
9.   The majority  shareholder  agreed to transfer a total of 443,000  shares of
     the Company's  common stock owned by him to the finder who located the cash
     purchaser  of the  Series B  preferred  Stock.  The  shares  had a value of
     $360,000 on date of transfer.
10.  Declaration of $137,000 dividends on Series A and Series B preferred stock.
11.  Purchase of software in exchange for 375,000 shares of common stock.
12.  Accretion on mandatorily redeemable preferred stock of $571,000

Year Ended June 30, 1998

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.
3.   Conversion of $202,000 note payable to 496,221 shares of common stock.
4.   Conversion of $164,000 note payable to 328,750 shares of common stock


     The accompanying notes are an integral part of the financial statements


                                       40
<PAGE>

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


NOTE 1.  OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Operations

     U.S.  Wireless Data, Inc. (the "Company" or "USWD") was incorporated in the
state of Colorado on July 30, 1991.  The Company is in the business of providing
products and services to enable the use of wireless  technology  for  electronic
payment and other transactions.  USWD is a  terminal-neutral,  transport-neutral
and  processor-neutral  enabler  of  wireless  transaction  processing  services
through  the  creation of what USWD calls  Wireless  Express  Payment  ServiceSM
(WEPSSM,  "WEPS").  WEPS is a  comprehensive  and  integrated  suite of wireless
transport   services  and  network   technology   designed  to  deliver  payment
transactions  securely  and  efficiently  between a  merchant's  location  and a
payment processor.

Financial Condition

     The Company continues to have  difficulties due to its financial  condition
and  lack  of  liquidity.   The  Company  has  incurred  recurring  losses  from
operations,  has an  accumulated  deficit of  approximately  $35 million,  a net
capital  deficiency of $4,174,000 and negative  working capital of $3,389,000 at
June 30, 1999, and has limited financial resources. The Company had defaulted on
certain  obligations  related to filing of a  registration  statement  on its 6%
Convertible  Subordinated  Debentures,  as of January 18, 1999, which caused the
debt to  become  due on  demand  although  this  default  was  waived  by the 6%
Debenture  holders as of May 6, 1999. If, as of October 10, 1999, a registration
statement  covering the common stock underlying the Series B Preferred Stock, 6%
Debentures and other  unregistered  securities had not been declared  effective,
thereby entitling holders of the Series B Preferred Stock to redeem their shares
at  $1.25  per  share  plus  accrued  penalties  and  dividends,   approximately
$2,500,000,  and  holders of the 6%  Debentures  to redeem the  $1,800,000  face
amount at 120% plus accrued penalties and interest. If the holders of the Series
B  preferred  Stock  and/or  the  holders  of the  6%  Debentures  redeem  their
securities,  the Company  would not  currently be able to fund such  redemption.
During the implementation of the new business plan, the Company expects expenses
to remain at a higher level than revenues. The implementation of USWD's business
plan is  dependent  on a  significant  debt  or  equity-financing  event  in the
immediate future.

     Due to the change in its distribution strategy to channel product sales and
service offerings through existing merchant acquirers, the Company has been able
to make  significant  reductions  in its direct  sales force and reduce its cash
requirements.  The  Company  continues  to work both  directly  and  through its
consultants to secure such financing which is required to fund operations  while
a significant  recurring revenue stream is developed.  There can be no assurance
that the Company will be successful  with efforts to raise  additional  capital.
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.

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

Use of Estimates

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that affect the amounts  reported in the financial  statements  and
accompanying notes. Actual results could differ from the estimates used.

Cash Equivalents

     The Company  considers  all highly  liquid  investments  purchased  with an
original  maturity  of  three  months  or  less  to be  cash  equivalents.  Cash
equivalents are carried at cost, which approximates fair value.



                                       41
<PAGE>

     The  Company   maintains   its  cash   balances   with  certain   financial
institutions.  Accounts at the  institutions  are insured by the Federal Deposit
Insurance   Corporation  up  to  $100,000.   Uninsured   balances  aggregate  to
approximately  $444,000 at June 30, 1999. No uninsured  balances were present at
June 30, 1998.

Inventory

     Inventory is stated at the lower of cost or market,  cost being  determined
by the first-in, first-out method.

Property and Equipment

     Property  and  equipment   are  stated  at  cost.   The  Company  uses  the
straight-line  method of depreciation based on the estimated useful lives of the
assets (generally three to seven years).  Maintenance and repairs are charged to
operations as incurred.

Processing Units Deployed

     Until the third quarter of fiscal 1999,  merchants  that  subscribed to the
Company's  credit card processing  service usually received 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 Revenue  over its  estimated  useful life of 48 months.  The Company  retains
title to the TRANZ  Enabler units and earns usage income on the units while they
are  deployed at the customer  location.  With the  evolution  of the  Company's
business plan to distribution through merchant acquirers, the Company phased out
the sale of  credit  card  offerings  direct  to  merchants  and the  associated
"deployment" of the TRANZ Enabler.

Impairment of Long-lived Assets

     The Company  evaluates  the  recoverability  of its  long-lived  assets and
recognizes an impairment in the event the net book value of such assets  exceeds
the future undiscounted cash flow attributable to such assets.

Revenue Recognition and Major Customers

     Revenue  from  product  sales is  generally  recognized  upon  shipment  of
products to customers.  Service revenue consists primarily of  transaction-based
fees,  one-time  activation fees and monthly  subscription fees. Service revenue
related to  transactions  processed or  activation  fees are  recognized  in the
period the services are provided. During fiscal 1998, Cardservice International,
Inc. ("CSI") accounted for 20% of revenue. During fiscal 1999, CSI accounted for
40% of revenues.

Research and Development Costs

     Research and development costs are expensed as incurred.

Income Taxes

     The Company  accounts for income taxes under the  liability  method,  which
requires  recognition  of  deferred  taxes and  liabilities  for the  income tax
consequences  of  temporary  differences  between  the tax basis of  assets  and
liabilities and their reported amounts.

Net Loss Per Share

     Earnings  (loss) per common  share (EPS) is  computed  using  Statement  of
Financial  Accounting  Standards (SFAS) No. 128,  "Earnings per Share." SFAS No.
128 establishes standards for the computation,  presentation,  and disclosure of
earnings  per share.  Basic per share  amounts are  computed by dividing the net
loss available to common  stockholders by the weighted  average number of common
shares outstanding  during the year.  Diluted per share amounts  incorporate the



                                       42
<PAGE>


incremental  shares  issuable upon the assumed  exercise of the Company's  stock
options and warrants and assumed  conversion of convertible  securities.  During
fiscal  1998 and 1999  such  incremental  amounts  have been  excluded  from the
calculation  since their  effect  would be  anti-dilutive.  Such stock  options,
warrants and  conversions  could  potentially  dilute  earnings per share in the
future.

Fair Value of Financial Instruments

     The  carrying  value  of  the  Company's  financial  instruments  including
accounts receivable,  accounts payable, accrued liabilities and debt approximate
their fair values due to their relatively short maturities.

Stock-based Compensation

     The Company accounts for stock-based employee compensation  arrangements in
accordance  with the provisions of APB No. 25,  "Accounting  for Stock Issued to
Employees," and complies with disclosure provisions of SFAS No. 123, "Accounting
for Stock Based Compensation."

Accounting Standards Changes

     In fiscal 1999, the Company  adopted the following  Statements of Financial
Accounting Standards ("SFAS"):

     SFAS 130, Reporting  Comprehensive Income, which requires the components of
comprehensive income to be disclosed in the financial statements.

     SFAS  131,   Disclosures  about  Segments  of  an  Enterprise  and  Related
Information,  which  requires  disclosures  of  certain  information  about  the
Company's  operating  segments on a basis  consistent  with the way in which the
Company is managed and operated.

New Pronouncements

     In April 1998, the Accounting  Standards  Executive  Committee ("AcSEC") of
the American  Institute  of Certified  Public  Accountants  issued  Statement of
Position  ("SOP")  98-5,  Reporting  on the Costs of Start-up  Activities.  This
statement,  which is effective  for fiscal years  beginning  after  December 15,
1998,  requires that such costs be expensed as incurred.  The Company will adopt
the provisions of SOP 98-5 in its fiscal year ending June 30, 2000, and does not
expect such adoption to have a material effect on the Company's reported results
of operations, financial position, or cash flows.

     In June 1998, the FASB issued SFAS No. 133,  Accounting for Derivatives and
Financial  Instruments and Hedging Activities.  SFAS 133 establishes  accounting
and reporting standards of derivative instruments,  including certain derivative
instruments  embedded in other contracts,  and for hedging  activities.  In July
1999, the FASB issued SFAS No. 137,  Deferral of the Effective Date of SFAS 133,
which amends SFAS 133 by deferring the effective date to fiscal years  beginning
after June 15, 2000. The adoption of SFAS 133 is not expected to have a material
impact on the Company's  reported results of operations,  financial  position or
cash flows.

     In March 1998, AcSEC issued SOP 98-1,  Accounting for the Costs of Computer
Software  Developed or Obtained  for  Internal  Use.  This  statement,  which is
effective  for fiscal years  beginning  after  December 15, 1998,  requires that
certain  costs  of  developing  or  obtaining   software  for  internal  use  be
capitalized.  The Company  will adopt the  provisions  of SOP 98-1 in its fiscal
year ending June 30, 2000,  and does not expect such adoption to have a material
effect on the Company's reported results of operations,  financial position,  or
cash flows.


                                       43
<PAGE>

Advertising Expense

     Advertising  costs are  expensed as incurred.  Advertising  expense for the
years  ended  June 30,  1999 and 1998  amounted  to  approximately  $45,000  and
$24,000.

NOTE 2.  INVENTORY

                                                               June 30,
                                                         1999           1998
                                                         ----           ----
Inventory consists of:
   Raw material .................................   $   144,000    $   153,000

   Finished goods ...............................       331,000        556,000
   Spare parts and accessories ..................          --            8,000
   Lower of cost or market reserve ..............      (260,000)      (237,000)
                                                     -----------   -----------
                                                    $   215,000    $   480,000
                                                     ===========   ===========

     The  Company  has  established  a reserve  against  finished  goods and raw
materials to reflect the estimated net  realizable  value of the inventory as of
June 30, 1999 and 1998, based on the then current selling prices.

NOTE 3.  PROCESSING UNITS DEPLOYED AND PROPERTY AND EQUIPMENT

                                                                 June 30,
                                                            1999          1998
                                                            ----          ----
Processing units deployed consists of:
   Processing units deployed .......................... $  600,000   $  564,000
   Less: accumulated depreciation .....................   (192,000)     (47,000)
                                                        ----------   ----------
                                                        $  408,000   $  517,000
                                                        ==========   ==========
Property and equipment consists of:
  Equipment and furniture ............................. $  509,000   $  523,000
  Tooling .............................................       --        124,000
  Demo equipment ......................................     28,000       28,000
  Less:  accumulated depreciation and amortization ....   (132,000)    (422,000)
                                                        ----------   ----------
                                                        $  405,000   $  253,000
                                                        ==========   ==========

NOTE 4.  ACCRUED LIABILITIES

                                                                 June 30,
                                                             1999        1998
Accrued liabilities consists of:
    Accrued compensation ..............................  $  143,000  $  224,000
    Accrued compensation - stock option ...............        --     1,327,000
    Accrued consulting fees ...........................      65,000        --
    Accrued professional fees .........................     130,000     112,000
    Accrued Series B Preferred stock penalty ..........      74,000        --
    Other .............................................       1,000      72,000
                                                         ----------  ----------
                                                         $  413,000  $1,735,000
                                                         ==========  ==========

NOTE 5.  BORROWINGS


Borrowing consist of the following:                              June 30,
Current portion:                                             1999          1998
                                                             ----          ----

  Note payable - supplier - OMRON ....................  $    2,000  $   375,000
  Note payable - investors - RBB .....................     250,000         --
  Note payable - entrenet ............................        --         62,000
  Note payable - lawsuit settlement ..................      20,000       15,000
  Convertible debenture ..............................   2,000,000         --
                                                        ----------  -----------
                                                        $2,272,000  $   452,000
                                                        ==========  ===========

Long-term portion - lawsuit settlement ...............  $   25,000  $    45,000
                                                        ==========  ===========



                                       44
<PAGE>

     Note Payable - Supplier - OMRON

          The note payable to a supplier  was in default at June 30,  1998.  The
     Company continued to accrue monthly interest payments.  During August 1998,
     the Company and the supplier  reached an agreement to cure the default with
     a  restructuring  of the terms of the note that  reduced the balance due by
     $240,000.  This adjustment was recorded as a credit to cost of revenue. The
     Company paid the remaining  principal  balance and owes $47,000 of interest
     payable as of June 30, 1999 which is included in accounts payable.

     Note Payable - Investors - RBB

          In July 1998,  the  Company  obtained  a bridge  loan in the amount of
     $250,000 from a holder of the Series A Preferred  Stock. The Company issued
     a warrant to purchase  20,000  shares of common  stock at $4.375 per share,
     exercisable  through  September 9, 2001, in connection  with the borrowing.
     The warrant had a fair value of $52,000 at date of issuance  which has been
     recorded as interest expense. The warrant contains anti-dilution provisions
     and "piggyback" registration rights applicable to the common stock issuable
     upon  exercise of the warrant.  The Company  used the proceeds  from the 6%
     Convertible  Subordinated Debentures to pay off the bridge loan during July
     1998.

          On  March   12,   1999,   USWD   borrowed   $250,000   from  RBB  Bank
     Aktiengesellschaft, which is the agent for the holders of certain shares of
     USWD's  Series A Preferred  Stock,  $1,000,000  of the 6%  Debentures,  and
     227,000 shares of Series B Preferred Stock,  through a $250,000  promissory
     note bearing  interest at 10% per annum due July 12, 1999 or upon obtaining
     certain  financing.  Liviakis  Financial  Communications,  Inc.  agreed  to
     guarantee the note. The Company issued 50,000 shares of common stock with a
     fair  market  value of  $44,000  at date of  closing  to RBB Bank which was
     recorded  as  interest  expense.  RBB Bank  agreed  to waive  the  right to
     immediate repayment of the $250,000 note (which was originally payable upon
     completion  of the next funding  received by USWD of at least  $1,000,000).
     RBB Bank agreed to forebear  initiating  an action  against USWD to collect
     the  amount  due until the  earlier  of  receipt  by USWD of funding in the
     aggregate of at least $2,500,000, or December 1, 1999.

     Note Payable - entrenet

          On March 12, 1998, the Company entered into an agreement with entrenet
     to provide business and financial consulting services to the Company and to
     assist  the  Company  in  locating  additional  financing.  The term of the
     agreement  was for six months 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.  The  Company  paid  this  in  full  in July  1998.  The
     agreement was terminated in September 1998.

     Note Payable - Lawsuit Settlement

          As part of a lawsuit  settlement,  the Company executed a $60,000 note
     payable in September 1997 which is due in installments  as follows:  $5,000
     due March 17, 1998;  $10,000 due September 17, 1998;  $20,000 due September
     17, 1999; and $25,000 due September 17, 2000.  The first two  installments,
     due in March 1998 and September 1998, were paid during the first quarter of
     fiscal 1999.

     6% Convertible Subordinated Debentures

          In July 1998,  USWD  completed a private  offering of $2,000,000 of 6%
     Convertible Subordinated Debentures ("6% Debentures") due July 21, 2000 and
     warrants  to  purchase  100,000  shares of common  stock at $4.50 per share
     which expire on July 21, 2001. The shares of common stock underlying the 6%
     Debentures and warrants carry  registration  rights.  The 6% Debentures are
     subordinated  to generally all other  obligations of the Company  excluding



                                       45
<PAGE>


     obligations to any subsidiary of the Company and  obligations  with respect
     to shares of capital  stock of the  Company.  The net proceeds to USWD from
     the  offering   were   approximately   $1.8   million.   The  Company  used
     approximately  $250,000 of the  proceeds  from the  offering to pay off the
     $250,000  bridge loan. The warrants had a fair value of $218,000 at date of
     issuance  which was being  recognized as interest  expense over the term of
     the 6%  Debentures.  The Company  also issued a warrant to purchase  60,000
     shares of its common stock at $4.50 per share  expiring on July 21, 2001 to
     the finder  which  assisted  the Company  with the private  placement.  The
     shares  underlying the warrant have "piggyback"  registration  rights.  The
     fair value of the  warrant was  approximately  $131,000 at date of issuance
     and was being expensed to operations over the term of the 6% Debentures.

          The 6% Debentures  include an "in the money" conversion  feature which
     allows the holder to convert to common stock at an initial  discount of 20%
     from  fair  market  value,  as  defined.  The  value of the "in the  money"
     conversion  feature  approximated  $279,000 and was  recognized as interest
     expense. The Company also agreed to a 2% cash penalty if USWD was unable to
     obtain an effective  registration  statement on the shares  within 120 days
     from the issue date and an additional 3% for every 30-day period thereafter
     until  the   registration   statement  is  effective.   In  the  event  the
     registration  statement is not effective  within 180 days of July 21, 1998,
     the holders can require  redemption  by USWD at an amount  equal to 120% of
     the face value, plus accrued interest.

          The Company had a commitment to file a registration statement with the
     Securities and Exchange  Commission by October 7, 1998, with  effectiveness
     by November 18, 1998,  covering  the shares of common stock  issuable  upon
     conversion of the 6% Debentures and related  warrants.  A registration  was
     not effective with the Securities and Exchange Commission by that date, and
     USWD became obligated to pay a cash penalty of two percent (2%) of the face
     amount of the 6% Debentures and thereafter an amount equal to three percent
     (3%) of the face amount for every  thirty  calendar  days (or any  fraction
     thereof)  until  the  registration  is  effective.  USWD  had not  filed or
     obtained  effectiveness  of a  registration  statement by January 18, 1999,
     thereby  giving  the  holders  the right to  require  USWD to redeem the 6%
     Debentures  at 120% of face value plus  accrued  and  unpaid  interest  and
     penalties to the date of redemption.  Therefore,  the Company recorded this
     20% premium as interest  expense in the amount of $400,000 in January 1999.
     In addition,  the Company expensed the remaining  unamortized debt issuance
     cost  of   approximately   $279,000  and   unamortized   debt  discount  of
     approximately  $145,000  due to the debt being  redeemable  for  failure to
     obtain  effectiveness  of the  registration  statement.  The  Company  also
     recorded $340,000 in penalties as of June 30, 1999 for this obligation.  On
     May 6, 1999,  USWD and the 6% Debenture  holders  agreed to convert all the
     accrued  interest  and  penalties  into  shares of the  Company's  Series B
     Preferred  Stock.  The Company  issued 454,705 shares of Series B Preferred
     Stock at $1.00 per share to  compensate  the 6%  Debenture  holders for the
     penalties and interest owed on the 6% Debentures  through June 30, 1999. As
     part of this  agreement,  the 6%  Debenture  holders  agreed  to adopt  the
     default  timetable  and  remedies  defined in the Series B Preferred  Stock
     purchase  agreement and to waive their rights under certain prior defaults.
     In connection  with the 20%  redemption  premium  noted above,  the Company
     reversed the $400,000 accrual as a credit to interest expense in the fourth
     quarter of fiscal 1999 related to the waiver. See also Note 18, "Subsequent
     Events," below.

NOTE 6.  OTHER CURRENT LIABILITIES

     Other current  liabilities  consist of deposits for the purchase of 727,273
shares of common stock of the Company  which were issued in the first quarter of
fiscal 2000.

NOTE 7.  SERIES A PREFERRED STOCK

     The  Company has  authorized  15,000,000  shares of no par value  preferred
stock,  of which  4,000,000  shares have been  designated as Series A Cumulative
Convertible  Redeemable  Preferred Stock ("the Series A Preferred Stock") with a
stated  value of $1.00 per share.  On  February  9,  1998,  the  Company  issued
3,060,000  shares of its Series A Preferred Stock in exchange for all $3,060,000
of the Company's 8%  Convertible  Debentures.  The 8% Debentures  were issued in
December  1997.  Net  proceeds  approximated  $2.6  million.   Interest  on  the
debentures was settled with 13,000 shares of common stock valued at $75,000. The



                                       46
<PAGE>


debentures  included an "in the money"  convertible option valued at $622,000 on
date of issuance, which allowed the holder to convert preferred shares to common
shares at a  discount  from fair  market  value.  Non-cash  interest  expense of
approximately $622,000 was recognized in fiscal 1998 related to this debenture.

     In conjunction  with the Series A Preferred  Stock,  on August 7, 1998, the
Company  registered  7,240,356 shares of common stock for sale solely by certain
security  holders.  This  offering  resulted in no proceeds to the Company.  All
costs relating to the registration, estimated to be approximately $140,000, were
borne by the Company.

Registration Rights

     USWD  entered  into an  agreement  with  the  purchasers  of the  Series  A
Preferred  Stock to file a  registration  statement  with the SEC  covering  the
underlying common stock within 90 days of December 10, 1997 (which was March 10,
1998).  USWD  agreed  to use its best  efforts  to obtain  effectiveness  of the
registration  statement. If USWD was unable to do so within 150 days of December
10,  1997  (which  was May 11,  1998),  the  Conversion  Price for the  Series A
Preferred Stock is discounted by 2% off the  then-existing  Conversion Price for
each thirty day period (or  fraction of any thirty day period)  during which the
registration statement is not effective after such 150th day. This discount then
applies  thereafter to determine the Conversion Price applicable to the Series A
Preferred Stock. USWD did not file the registration statement by March 10, 1998,
nor obtain its  effectiveness  by May 11, 1998,  and as a result the  Conversion
Price became fixed at 75% of the Market  Price.  USWD is to use its best efforts
to maintain  effectiveness of the registration statement for 16 months from June
30, 1998. All expenses of the registration  are to be borne by USWD,  except for
selling  expenses,  commissions  or counsel fees incurred by or on behalf of the
holders of Series A Preferred  Stock.  Holders of the Series A  Preferred  Stock
have  the  right  to  be  included  in  an   unlimited   number  of   "piggyback
registrations"  if and when USWD registers any securities for its own account or
for any other selling security  holders,  subject to certain  limitations in the
event that such a registration is for an underwritten offering of securities.

     As described above, the Company filed a registration statement on Form SB-2
with  the SEC on May 14,  1998  (SEC  File  No.  333-52625)  to  register  up to
1,030,310 shares of common stock previously issued or issuable on conversion of,
or as dividends on, the Series A Preferred Stock. 6,210,046 additional shares of
common stock were included in the  registration  statement to honor  "piggyback"
registration rights granted to other holders of the Company's  previously issued
securities.  The  registration  statement  became  effective  with the SEC as of
August 7, 1998. A total of 239,961  shares of Common Stock issued on  conversion
of, or as  dividends  on,  the  Series A  Preferred  Stock  were sold  under the
registration statement.  The registration statement was done solely to allow the
shares  to  be  resold  by  selling  security  holders.   The  Company  filed  a
post-effective  amendment  to the  registration  statement  on June 24,  1999 to
remove all but the 239,961 shares of common stock that were sold under it.

     The Company  filed a new  registration  statement  on Form SB-2 on June 30,
1999 (SEC File No. 333-81897) which has not become effective.  This registration
statement  included up to 1,074,617  shares of common stock that are issuable on
conversion of, or as dividends on, the Series A Preferred  Stock. See also: Note
5 - Borrowings - 6% Convertible Subordinated  Debentures;  and Note 8 - Series B
Cumulative Convertible Redeemable Preferred Stock.

Conversion

     Each share of Series A Preferred  Stock is  convertible  at the election of
the holder into  common  stock based on the face value of the Series A Preferred
Stock being  converted,  at a rate equal to the lesser of $6.00 per share or 75%
of the average of the  closing bid price of the common  stock as reported on the
OTC Electronic Bulletin Board or, if available,  the closing bid price as quoted
on NASDAQ or any other national  securities exchange upon which the common stock
is then  listed,  over the five  trading  days  prior to  conversion.  A minimum
conversion price of $3.76 per share was in effect from the issuance date through
September 6, 1998. Between April 1, 1999 through June 30, 1999, 37,716 shares of
Series A Preferred stock were converted to 58,860 shares of common stock. During
the fiscal year 1999, approximately 1,475,000 shares of Series A Preferred Stock
were  converted  into  1,322,752 of common stock at various  price  levels.  The
common stock issued upon conversion  included common stock issuable as dividends
accrued on the Series A Preferred Stock at time of conversion.



                                       47
<PAGE>


Dividends

     Holders of Series A  Preferred  Stock are  entitled  to receive  cumulative
quarterly dividends upon declaration by the Board of Directors at an annual rate
of 8% per share  which was  reduced  to 4% per  share on  August  7,  1998,  the
effective  date of the SEC  registration  statement  covering  the common  stock
reserved for  conversion.  The annual  dividend was increased to 8% in September
1998 in  conjunction  with a partial  redemption  and  agreement to refrain from
conversions  except  per an  agreed  upon  schedule.  The  Company  can  pay the
dividends  in shares of  common  stock,  the  number  of shares  issuable  being
determined by dividing the amount of the dividend by the same formula as applies
to conversions. Unless the full amount of cumulative dividends have been paid or
sufficient funds set aside,  dividends may not be paid or declared on the common
stock or any  other  stock  ranking  junior  to the  Series A  Preferred  Stock.
Additionally,  under  Colorado  law,  certain  conditions  must be met  prior to
dividend  distributions of cash or property.  As a result, the Company's ability
to pay cash or property (but not stock) dividends in the future depends upon its
financial results, liquidity and financial condition.

Voting

     Generally,  the Series A Preferred Stock is not entitled to vote on matters
submitted to shareholders except as specifically authorized under Colorado law.

Liquidation

     In the  event  of a  liquidation  or  sale of the  Company,  the  Series  A
Preferred Stockholders are entitled to a per share distribution in preference to
common  shareholders  or any stock of the company ranking junior to the Series A
Preferred  Stock of $1.00 plus any accrued but unpaid  dividends.  If the amount
available in liquidation is  insufficient  to pay the full amount,  the Series A
Preferred  Stockholders will ratably share any distribution  first in proportion
to their  respective  liquidation  preferences  and then in  proportion to their
respective amounts of accrued but unpaid dividends. A consolidation or merger of
the Company will not be deemed to be a liquidation  provided it is approved by a
majority of the Series A Preferred Stock.

Voluntary Redemption

     On September  22,  1998,  the Company  borrowed  $1,300,000  from  Liviakis
Financial  Communications,  Inc.  (LFC), a shareholder  of USWD,  through a note
payable.  The note payable was due April 1, 1999,  bore interest at 8% per year,
and was  collateralized  by  substantially  all  available  assets of USWD.  The
Company  used  $1,000,000  of the  proceeds  to redeem  $833,000 of its Series A
Convertible  Preferred  Stock.  The  Company  paid  120% of face  value  for the
redemption.  The  amount of  $167,000  paid in  excess of the face  value of the
preferred  shares was recorded as a reduction of additional  paid-in  capital as
the  Company  had  previously  recorded  as a charge  to  retained  earnings  an
equivalent  amount at the date of  issuance  for the value of the "in the money"
feature.  The  participating  investors,  representing  approximately  1,342,000
shares of the remaining Series A Preferred Stock,  agreed to hold their Series A
Preferred shares until at least October 15, 1998, after which time, one-third of
the Series A Preferred  shares  could be  converted  to common  stock on each of
October 15, November 15, and December 15 of 1998, respectively.  As an incentive
to these investors,  the Company agreed to issue common stock purchase  warrants
exercisable  to  purchase  that  number of shares of common  stock equal to five
percent  of the  number  of  shares  of  Series A  Preferred  Stock  held by the
participating  investor at the end of each  period.  Pursuant to the  agreement,
USWD issued  warrants for 78,098 shares  exercisable  at $2.40 per share through
October 15, 2001;  warrants  for 67,084  shares  exercisable  at $3.36 per share
through  November 15, 2001; and warrants for 67,084 shares  exercisable at $3.69
per share through December 15, 2001. These warrants had a fair value of $351,000
at date of issuance which has been recorded as a charge to retained earnings.

Optional Redemption

     The  Company  may redeem any Series A  Preferred  Stock  outstanding  after
December  10,  2000 by payment of $1.00 per share  plus all  accrued  and unpaid
dividends to the date of redemption. If fewer than all of the shares of Series A
Preferred  Stock were to be redeemed,  the redemption will be pro rata among all
shares outstanding.


                                       48
<PAGE>


NOTE 8.  SERIES B CUMULATIVE CONVERTIBLE REDEEMABLE PREFERRED STOCK

     USWD's  Articles of  Incorporation  were  amended by director  action as of
April 29, 1999,  to designate  5,000,000  shares of Preferred  Stock as Series B
Cumulative  Convertible  Redeemable  Preferred  Stock (the  "Series B  Preferred
Stock").  On May 6, 1999, USWD sold $1,500,000 worth of Series B Preferred Stock
at $1.00 per share. For no additional  consideration  USWD issued 300,000 common
stock purchase warrants exercisable at $1.50 per share for five years from April
30,1999  to the  purchaser  of the  Series B  Preferred  Stock  (the  "Series  B
Preferred Warrants").  Concurrent with the transaction, the holders of USWD's 6%
Convertible Debentures agreed to convert all accrued interest and penalties into
454,705 shares of Series B Preferred  Stock.  The proceeds of the financing were
used to pay finders fees of $180,000 plus estimated offering expenses of $41,000
(including  approximately  $26,000 for the investor's legal fees),  professional
services  fees of  $413,000,  with the  estimated  balance of $676,000  used for
working  capital.  In April 1999,  USWD  received  $400,000 in the form of a 10%
promissory note from the investor in the Series B Preferred  Stock. The note was
repaid through the issuance of 400,800 of the 1,500,000  issued shares of Series
B Preferred Stock.

     Mr.  John  Liviakis,  a  significant  shareholder  of USWD,  also agreed to
transfer a total of 443,077  shares of Company  common stock owned by him to the
finder who located the cash  purchaser  of the Series B Preferred  Stock.  These
shares  had a value of  $360,000  on the date of  issuance,  which  was  charged
against the proceeds of the offering. The shares were transferred as "restricted
securities"  as defined in Rule 144 under the  Securities Act of 1933 and do not
have any registration rights.

     USWD  does not have any  redemption  rights  as to the  Series B  Preferred
Stock.  The Series B Preferred Stock is convertible  into shares of common stock
at the option of the holders as described  below.  The Series B Preferred  Stock
has the following additional rights and preferences.

Dividends

     The Series B Preferred  Stock  accrues a cumulative  dividend at the annual
rate of 6% per annum, payable semi-annually on March 31 and September 30 of each
year.  The  dividend  may be paid at  USWD's  option in cash or shares of common
stock.  If paid in common stock,  the number of shares issuable as a dividend is
determined  based on the  amount of the  dividend  being  paid,  divided  by the
"Average Quoted Price" of the common stock,  which is defined in the Designation
of Series B Cumulative Convertible Preferred Stock (the "Designation") to be the
five-day  average  closing  bid price of the  common  stock as quoted on the OTC
Electronic Bulletin Board or one of the NASDAQ markets (if so listed and quoted)
or any other exchange where the common stock is listed and quoted. All dividends
owing to the date of conversion are payable upon any conversion.

Voting Rights

     Generally,  the  Series B  Preferred  Stock  does not have  voting  rights,
although it is entitled  to one vote per share on those  matters  upon which all
classes of a Colorado  corporation's  shares are entitled by law to vote upon by
class.

Conversion Terms

     50% of the Series B  Preferred  Stock is  convertible  at the option of the
holders into shares of USWD's  common stock  beginning on the earlier of 90 days
after  its  issuance  date  (May 6,  1999)  or five  days  after  notice  by the
Securities and Exchange Commission that the registration  statement (to be filed
pursuant  to the terms of the  Registration  Rights  Agreement)  may be declared
effective.  Thirty  days  thereafter,  the  remaining  shares  of the  Series  B
Preferred  Stock become  convertible  into common  stock.  The rate at which the
Series B Preferred Stock is convertible  (per share of Series B Preferred Stock)
into common stock is equal to 80% of the average of the closing bid price of the
common  stock over the five trading days prior to  conversion  (the  "Conversion
Rate").  The Company may convert the Series B Preferred  Stock into common stock
at its option at any time after the close of business on the second  anniversary
of  the  effective  date  of  the  Series  B   Registration   Statement  at  the
then-applicable  Conversion  Rate.  The value of the "in the  money"  conversion
feature  approximated  $391,000  which was  recognized  as a charge to  retained
earnings.


                                       49
<PAGE>


     Subject to certain  exceptions  applicable to mandatory  conversions at the
behest  of USWD  and  automatic  conversions  upon  the  occurrence  of  certain
"Fundamental  Changes"  (as  defined in the  Designation),  to the  extent  that
convertibility of Series B Preferred Stock would result in beneficial  ownership
(as calculated pursuant to Section 13(d) of the Securities Exchange Act of 1934,
as amended) by a holder in excess of 4.99% of USWD's common stock, the number of
shares of Series B Preferred  Stock that result in  beneficial  ownership  above
4.99% is not then  convertible,  notwithstanding  any other provision making the
shares eligible for conversion.

Registration and Redemption Rights

     USWD also  entered into an agreement  with the  purchasers  of the Series B
Preferred  Stock to file a  registration  statement  with the SEC  covering  the
common  stock  underlying  the Series B  Preferred  Stock and the  common  stock
purchase  warrants  issued at the same  time as the  Series B  Preferred  Stock,
within 30 days of the May 6, 1999 closing  date (June 6, 1999),  to be effective
within 90 days of the closing date. This date was  subsequently  extended to May
11, 1999. If USWD fails to meet these requirements,  monthly penalties accrue at
the rate of 2% to 3% of the purchase  price,  and in certain  circumstances  can
equal up to 6% per month.  In addition,  if the Series B Registration  Statement
has not been  filed  within 60 days of May 11,  1999,  or has not been  declared
effective within 150 days of May 11, 1999, the holders of the Series B Preferred
Stock may  require  USWD to redeem the Series B  Preferred  for $1.25 per share,
plus accrued  dividends,  approximately  $2,500,000 as of October 10, 1999.  The
redemption  provision  may also apply if the Company has  insufficient  issuable
shares of common stock to honor Series B Preferred  Stock  conversion  requests.
The  filing  of  this   registration   statement  will  activate  certain  prior
registration  rights  granted  by  USWD  to  holders  of  certain  of its  other
securities.  Since USWD filed the  required  registration  statement on June 30,
1999  following  the filing  due date,  it became  subject  to a 3%  late-filing
penalty  of  approximately  $74,000  which has been  accrued.  The  registration
statement was not effective by August 10, 1999 and subsequent late-effectiveness
penalties  will be accrued in the following  accounting  periods as  applicable.
Offering  costs were  recorded  against the  aggregate  preference  value of the
preferred  stock and will be  accreted up to the date of  mandatory  redemption.
Accretion  for the year  ended  June 30,  1999 was  $571,000.  See also Note 18,
"Subsequent Events," below.

NOTE 9.  COMMON STOCK TO BE DISTRIBUTED

                                                                   June 30,
                                                                1999      1998
                                                                ----      ----
   Common stock to be distributed consists of:
        Series A Preferred Stock Dividend (43,000 shares)   $  43,000  $   --

      Relinquishment of "Put Rights" (200,000 shares)         200,000      --
                                                            ---------  ---------

                                                            $ 243,000  $   --
                                                            =========  =========

Series A Preferred Stock Dividend

     Series A Preferred  Stock dividends for the last  three-quarters  of fiscal
1999 have been declared but not issued at June 30, 1999.

Relinquishment of "Put Rights"

     As described in Note 15 to these financial  statements,  on April 29, 1999,
certain former noteholders holding  approximately 83,500 shares of common stock,
agreed to waive their  guarantee  and "put" rights in return for the issuance of
200,000 restricted shares of USWD's common stock.

NOTE 10.   STOCK OPTIONS

Stock Option Plan

     In  September  1992,  the  Company  adopted  a  combined  incentive  and  a
non-qualified  stock option plan (the "Plan"),  which, as amended,  provides for
the issuance of 2,680,000 shares of common stock under the Plan.



                                       50
<PAGE>


     Stock  options have been granted under the Plan and outside the Plan at the
fair market  value of the common stock on the date of grant and  generally  vest
over a period of between  two and four  years.  Options  granted  under the Plan
generally  must be  exercised  no later  than 10 years  from the date of  grant.
Included  in the option  grants for the year ended June 30,  1999,  are  options
issued by the Company to purchase  450,000  shares of common  stock,  to various
consultants  with exercise  prices  ranging from $2.25 to $3.81 per share with a
value of $449,000 at date of issuance.  Approximately  304,000 of these  options
had expired as of June 30, 1999.

     Directors who are not employees of the Company each receive an annual stock
option to  purchase  20,000  shares of USWD's  common  stock.  The grant is made
pursuant  to  the  Company's  1992  Stock  Option  Plan  as of  each  director's
anniversary  date,  with an  exercise  price  equal to the  market  value of the
underlying  stock as of the date of grant.  Options  vest 25% on each  six-month
anniversary following the date of grant.

     The following table summarizes  information about stock options outstanding
both under the Plan and outside the Plan at June 30, 1999:

                        Outstanding Options                  Options Exerisable
                        -------------------                  ------------------
                       Average      Weighted                Weighted
                       Remaining    Average                 Average
     Range of          Contractual  Exercise  Number        Exercise Number
     Exercise Price    Life         Price     Outstanding   Price    Exercisable
     ---------------------------------------------------------------------------

     $0.00 - $0.22      6.6          $0.15       232,781     $0.15       232,781
     $0.23 - $0.84     11.8          $0.84     1,080,000     $0.84       477,896
     $0.85 - $2.56     10.3          $2.38     1,538,584     $2.34       789,564
     $2.57 - $4.19      9.1          $3.74       290,000     $3.88       118,300
     $4.20 - $7.55      8.4          $6.46       165,000     $6.48       109,300
                                               ---------               ---------
                                               3,306,365               1,727,841
                                               =========               =========

     Stock option  transactions  relating to both options granted under the Plan
and other stock options  (discussed below) for the years ended June 30, 1998 and
1999 were are follows:
<TABLE>
<CAPTION>

                                 Under The Plan                    Outside The Plan
                                 Weighted Average                  Weighted Average
                                 Number of        Exercise Price   Number of         Exercise Price
     Options Outstanding         Shares           Per Share        Shares            Per Share
     ---------------------------------------------------------------------------------------------
<S>                               <C>              <C>               <C>               <C>
     Balance at June 30, 1997        429,649       $0.16                    --            --
     Granted                         608,000       $4.30               600,000         $1.00
     Exercised                      (340,640)      $0.48                    --            --
     Cancelled                       (89,728)      $4.32                    --            --
                                  ----------                        ----------         -----
     Balance at June 30, 1998        607,281       $3.51               600,000         $1.00
     Granted                       1,690,000       $2.56             3,150,000         $2.38
     Exercised                       (5,000)       $1.58                    --            --
     Cancelled                     (517,500)       $3.72            (2,218,416)        $2.98
                                  ----------                        ----------
     Balance at June 30, 1999     1,774,781        $2.55             1,531,584         $1.11
                                  ==========                        ==========

     Exercisable at June 30, 1999   615,374        $1.03             1,112,467         $1.20
                                  =========                         ==========
</TABLE>

Fair value disclosures

     Had  compensation  expense for the Plan been  determined  based on the fair
value of the  options at the grant  dates for awards  under the Plan  consistent
with the method of accounting prescribed by SFAS No. 123, the Company's net loss
and loss per share would have been increased to the proforma  amounts  indicated
below:

                                       51
<PAGE>
<TABLE>
<CAPTION>
                                                                         June 30,
                                                                    1999            1998
                                                  -------------------------------------------
<S>                                                             <C>             <C>
      Net loss available to common stockholders   As reported   ($6,931,000)    ($11,061,000)
        after provision for preferred stock       Pro forma      (8,138,000)    ( 11,567,000)
        dividends

      Basic and diluted loss per share            As reported         $(.51)          $(1.18)
                                                  Pro forma           $(.60)          $(1.24)
</TABLE>

     The weighted  average fair value of options  granted  during the year ended
June 30, 1999 and 1998 under the Company's stock option plan was $1.63 and $3.22
per option, respectively.  In determining the minimum fair value of each option,
the Company used the  Black-Scholes  option-pricing  model as prescribed by SFAS
No.  123 using  the  following  assumptions:  dividend  yield of zero;  expected
volatility of 90% for 1999 and 1998;  risk-free  interest rate of 5.7% and 5.6%,
respectively; and an average expected option life of 3.5 years.

Other Stock Options Granted Outside the Plan

     On August 21,1998,  the Company granted options to a former Chief Executive
Officer (Mr. Peirce) to purchase  1,000,000 shares of the Company's common stock
at $3.438  per share,  the  estimated  fair  market  value at date of grant.  In
November  1998,  the  Company  and Mr.  Peirce  agreed  to cancel  the  original
1,000,000  share option and the Company granted Mr. Peirce an option to purchase
1,300,000 shares of the Company's common stock, exercisable at $2.563 per share,
the  estimated  fair  market  value at date of the  grant,  for ten  years  from
November 23, 1998.  39,016 shares were granted as incentive  stock options under
the Company's  Plan. As of Mr. Peirce's March 19, 1999  resignation,  options to
purchase 189,583 shares were vested. None of the options have been exercised.

     In addition to the options  granted under the Plan, on August 4, 1997,  the
Company  granted to an employee  600,000  options to purchase common stock at an
exercise  price of $1.00 per  share,  the  market  price at date of  grant.  The
options  vest  ten  percent  on  date of  grant  and  three  percent  per  month
thereafter. At June 30, 1999, all options remained unexercised.  On November 21,
1997,  the Company  agreed to pay to the  employee any  additional  income taxes
which the  employee  may incur as a result of the  options  being  non-qualified
stock options as compared to incentive stock options. Due to this agreement, the
stock options are being accounted for as variable stock options which results in
recognition of compensation expense based on the fair market value of the common
stock at the end of each reporting period.  During the year ended June 30, 1999,
the Company recognized $1,327,000 as a credit to compensation expense related to
this option as compared  to a charge of  $1,327,000  for the year ended June 30,
1998.

     On May 13, 1999, the Board of Directors granted non-qualified stock options
(not under the plan) to two executives of the Company. The President was granted
600,000 options to purchase common stock exercisable at $0.844 per share for ten
years. The option vests 50% at date of grant,  with the balance vesting 1/12 per
month  thereafter.  The Chief  Financial  Officer was granted 250,000 options to
purchase common stock with identical exercise price and vesting terms.

     In  connection  with stock  options  granted and to be granted and warrants
issued,  the Company has reserved  10,537,617 shares of common stock at June 30,
1999.

NOTE 11.  STOCK WARRANTS AND CALL OPTION

     The following table summarizes information about stock warrants outstanding
at June 30, 1999:

                       Outstanding Warrants       Warrants Exercisable
                       --------------------       --------------------
                      Weighted                  Weighted
                      Average                   Average
    Range of          Exercise    Number        Exercise    Number
    Exercise Price    Price       Outstanding   Price       Exercisable
    -------------------------------------------------------------------
    $0.88            $0.88         2,687,500     $0.88         470,313
    $1.50            $1.50           300,000     $1.50         300,000
    $2.40 - $3.60    $2.99         2,881,015     $2.84         193,515
    $3.60 - $5.40    $4.17           397,084     $4.17         397,084
    $5.40 - $6.53    $6.39            60,435     $6.39          60,435
                                   ---------                 ---------
                                   6,326,034                 1,421,347
                                   =========                 =========

                                       52
<PAGE>

     Prior to going public, USWD issued a warrant to purchase a total of 150,000
shares of common stock to a former officer, exercisable at $4.00 per share until
April 2003. The officer's  Warrants do not have registration  rights. As of June
30, 1999, the warrants had not been exercised.  In fiscal 1993, the Company also
issued  warrants to one  director of the Company to purchase  100,000  shares of
common  stock at $4.00 per share.  These were set to expire  April 12,  1998 but
were extended to February 7, 1999. The Company  recorded a charge of $156,000 in
connection with the extension of these warrants. The 100,000 warrants expired in
February 1999.

     In connection with the Company's December 1993 initial public offering, the
Company issued warrants to the  underwriters  to purchase  165,000 shares of the
Company's common stock at $12.33 per share,  which were fully vested at the date
of issuance. Such warrants expired on December 2, 1998.

     In fiscal 1994, in  conjunction  with an  acquisition,  the Company  issued
warrants to four former  shareholders  to purchase 29,548 shares of common stock
at $2.625 per share,  which were fully vested at the date of issuance.  Of those
warrants,  17,406 had been  exercised,  and the 12,142 balance expired as of May
31, 1999.

     In August  1997,  for total  consideration  of  $500,000,  the Company sold
3,500,000 shares of common stock and 1,600,000 common stock warrants to Liviakis
Financial  Communications,  Inc. and its  affiliates.  The warrants  entitle the
holders to purchase up to 1,600,000 shares of the Company's common stock at $.01
per share during the period from January 15, 1998  through  August 4, 2002.  The
warrant shares have certain  registration  rights and  antidilution  provisions.
1,200,000 of these  warrants  were  exercised in fiscal 1998 with the  remaining
400,000 warrants exercised in fiscal 1999.

     The Company obtained a call option on 397,684 shares of its common stock in
fiscal 1996 in connection with the surrendering of the assets to the seller of a
previously acquired company. The call option allowed the Company to purchase the
shares at $.25 per share  through  October 5, 1998.  In March 1998,  the Company
entered into an agreement  with the  shareholder  to assign the options to third
parties. As of June 30, 1998, the Company sold the call options for net proceeds
of approximately $1.2 million.

     In connection  with the private  offering of 8%  Convertible  Debentures in
December  1997, the Company issued a warrant as part of the finder's fee payment
related to the  offering.  The warrant  entitles  the holder to purchase  50,000
shares of common stock at $6.525 per share  during the period from  December 10,
1997, through December 9, 2000. The warrant also provides for cashless exercise.
The warrant contains antidilution protection and "piggyback" registration rights
applicable to the common stock issuable upon exercise of the warrant. As of June
30, 1999 no warrants were exercised.

     In March 1998,  the  Company  issued a warrant to  entrenet  Group,  LLC to
purchase  10,435 shares of common stock at $5.75 per share as a consulting  fee.
The warrant expires on March 11, 2003. The warrant has  antidilution  provisions
and "piggyback" registration rights applicable to the common stock issuable upon
exercise of the warrant.  In  September  1998,  as a consulting  fee the Company
issued additional warrants to purchase 8,333 shares of common stock at $2.40 per
share exercisable  through September 2003. As of June 30, 1999, the warrants had
not been exercised.

     In July 1998, the Company issued common stock purchase warrants to RBB Bank
Aktiengesellschaft  ("RBB  Bank") to purchase  20,000  shares of common stock at
$4.375 per share,  exercisable through September 9, 2001. The warrant was issued
in consideration  for RBB Bank's $250,000 loan to USWD. As of June 30, 1999, the
warrants had not been exercised.

     In  conjunction   with  the  July  1998  issuance  of  the  6%  Convertible
Subordinated  Debentures  Due July 21, 2000, the Company  issued,  on a pro rata
basis,  three  year,  common  stock  purchase  warrants,  with a fair  value  of
$218,000, to purchase a total of 100,000 shares of common stock,  exercisable at
$4.50 per share. As of June 30, 1999, the warrants had not been exercised.


                                       53
<PAGE>


     In  September  1998,  the Company  agreed with four holders of its Series A
Preferred Stock to redemption of 833,000 shares of Series A Preferred  Stock. In
conjunction with that  redemption,  USWD issued three year common stock purchase
warrants covering a total of 212,266 shares of common stock to the four Series A
Preferred Stock holders who participated in the partial redemption. The Series A
Redemption  Warrants were issued as of October 15,  November 15 and December 15,
1998.  As of June  30,  1999,  the  warrants  had not  been  exercised.  Also in
September  1998,  USWD agreed to issue  warrants to  purchase  15,000  shares of
common stock  exercisable  at $2.70 per share through  September 13, 2001, to JW
Genesis  Securities,   Inc.  for  its  assistance  in  negotiating  the  partial
redemption  of the Series A Preferred  Stock.  These  shares had a fair value of
$17,000  on the  date of  issuance  which  has  been  recorded  as  general  and
administrative  expense. The shares of common stock underlying the warrants have
"piggy-back"  registration  rights.  The Company  agreed to file a  registration
statement  covering the remaining shares of common stock underlying the Series A
Preferred  Stock and shares of common stock  underlying  the Series A Redemption
Warrants by October 31,1998, with "penalties similar to the current deal if late
on effectiveness."  The Company did not file the registration  statement by that
date but has  included  the  shares  of common  stock  underlying  the  Series A
Redemption  Warrants in the pending  registration  statement filed with the SEC.
The Company can not determine  with any certainty  what liability or claim might
be asserted  based on the language in the  agreement.  As of June 30, 1999,  the
warrants had not been exercised.

     In  conjunction  with the  issuance of the Series B Preferred  Stock in May
1999,  the Company  issued a common stock purchase  warrants  exercisable  until
April 30, 2004, to purchase  300,000  shares of common stock at $1.50 per share,
to the cash purchaser of the Series B Preferred  Stock. As of June 30, 1999, the
warrants had not been exercised.

     In  conjunction  with  a  $500,000  loan  to the  Company  from  Mr.  Chuck
Burtzloff,  the CEO and 50%  shareholder of Cardservice  International,  Inc, in
October  1998,  USWD  issued a common  stock  purchase  warrant  exercisable  to
purchase  25,000 shares of common stock at $3.038 per share through  October 27,
2001. The warrant had a fair value of $52,000 at date of issuance which has been
recorded as interest  expense.  As of June 30,  1999,  the warrants had not been
exercised.

     As part of an  employment  agreement,  the Company  issued  warrants to its
Chief  Executive  Officer and  Chairman,  to purchase up to 5,375,000  shares of
USWD's common stock.  Half of the warrants,  or 2,687,500,  are  exercisable  at
$.875 per share,  the market price of the  underlying  stock at May 3, 1999, the
date of  grant,  and vest 10% upon  grant  with  the  balance  vesting  over the
following 12 months.  The second  2,687,500  warrants have an exercise  price of
$3.00  per  share  and vest 50% one  year  following  the  grant  date  with the
remaining  balance  vesting over the following six months.  As of June 30, 1999,
the warrants had not been exercised.

NOTE 12.  INCOME TAXES

     At June 30, 1999 and 1998, the Company had net operating loss carryforwards
for federal and state income tax purposes of  approximately  $26 million and $21
million,  respectively.  Annual utilization of the loss carryforwards is subject
to  significant  limitations  due to changes in the Company's  ownership,  which
could result in little or no benefit  being  derived  from these  carryforwards.
Future  changes in ownership  could further  reduce the annual  availability  of
these benefits. If unused, the carryforwards will expire beginning in 2008.


     Deferred income taxes reflect the net tax effects of temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes,  and  operating  loss and
tax credit  carryforwards.  The tax effects of significant  items comprising the
Company's deferred taxes are as follows:

                                                          June 30,
                                                    1999           1998
                                                    ----           ----
     Deferred tax assets
         Net operating loss carry-forwards    $  9,721,000   $  8,125,000
         Inventory reserves                          9,000         47,000
         Allowance for bad debts                     8,000         (8,000)
         Other                                     (23,000)        64,000
                                               -----------    -----------
                                              $  9,715,000   $  8,228,000
         Valuation allowance                    (9,715,000)    (8,228,000)
                                               -----------    -----------
     Net deferred tax asset                   $         --   $         --
                                               ===========    ===========



                                       54
<PAGE>


     The Company has recorded a full valuation allowance on its net deferred tax
assets based on current  evidence  which  indicates  that it is considered  more
likely  than  not  that  these  benefits  will not be  realized.  The  valuation
allowance  increased  during fiscal 1999 and 1998 by $1,487,000  and  $3,778,000
respectively, due to additional losses for which no tax benefits were recorded.

     The Company has not completed  federal income tax filings since fiscal year
1995 and intends to take the steps  required to complete the tax filings as soon
as practicable.

NOTE 13.  EMPLOYEE BENEFIT PLAN

     In April 1994, the Company  established a qualified  Section 401(K) Savings
Plan.  The Plan  allows  eligible  employees  to  contribute  up to 15% of their
salaries on a pre-tax basis.  The Company did not make any  contributions to the
Plan during fiscal year 1999 or 1998.

NOTE 14.  COMMITMENTS AND CONTINGENCIES

     The Company leases office facilities in Colorado and California. The leases
contain  certain  provisions  for rental  adjustments.  In addition,  the leases
require the Company to pay  property  taxes,  insurance  and normal  maintenance
costs.  Rent expenses  were  $188,000 and $119,000  during fiscal years 1999 and
1998.  As of June 30, 1999,  future  minimum lease  commitments  are $200,000 in
2000, $233,000 in 2001, $240,000 in 2002, and $61,000 in 2003.

     Through June 30, 1999, the Company has entered into four agreements,  which
include various  marketing,  distribution  and CDPD service  purchase terms. The
agreement with AT&T Wireless includes  purchase  obligations for a term of three
years,  with  automatic  renewals of additional  one-year  terms if either party
fails to give 90 days  prior  notice  of  termination  at the end of  term.  The
Company is obligated to maintain a minimum  number of active CDPD addresses over
the term of the agreement, or pay for such addresses even if the Company has not
resold the numbers to merchants.  Based on the  agreement of April 1, 1997,  the
Company is  obligated  to have minimum  monthly  CDPD  billings of $13,500.  The
Company  believes the exposure  under this  agreement is  immaterial at June 30,
1999.

     Under one of the Company's transaction processing  agreements,  the Company
is  required  to pay 50 percent of the  amounts  due to the  processor  from the
merchant,  which remain unpaid for 60 days. As of June 30, 1999, no amounts were
due.

NOTE 15.  LITIGATION

Settlement of Claims of Certain Noteholders

     In  April  1998,  USWD  entered  into  an  agreement  with  certain  former
noteholders of its Demand Notes under which USWD issued 525,800 shares of common
stock in settlement of the dispute  regarding  conversion  terms of their notes.
Terms of the settlement  entitled the  noteholders to certain  guarantee and /or
"put"  provisions  related to the shares issued in conversion of the notes.  The
guarantee provision of the settlement agreement allows the former noteholders to
recover the  difference  between the guarantee  price (which was $3.00 per share
for all of the  shares  that were  still  entitled  to the  guarantee  as of its
expiration date) and the gross amount the noteholder receives upon a sale of the
shares.  The  guarantee  was  operative  at any time  during the one year period
commencing  on the date the  shares  became  saleable  under SEC Rule  144.  The
Company was  obligated  to pay the amount due within  thirty days of receiving a
demand,  accompanied by documentation confirming the sale. The guarantee expired
as to all shares no later than June 19, 1999.  Under the "put"  provision of the
settlement agreement,  the former noteholders were entitled to a five day period
commencing on the date one year from the date the shares become  saleable  under
SEC Rule 144 during which the former  noteholders may "put" any shares remaining
unsold by them at the time back to USWD.  Upon exercise of the "put",  USWD must
either (1)  purchase  the shares for the "put" price  (which was $3.00 per share
for all of the shares that were still  entitled to the put as of its  expiration
date), or (2) require the  shareholder to sell the shares into the market,  with
USWD  making up the  difference  between  the "put"  price and the gross  amount



                                       55
<PAGE>


received  by the  shareholder  upon such sale,  within 15 days after  receipt of
written  notice and  documentation  confirming the sale. The "put" expired as to
all  shares no later  than June 24,  1999.  The shares  originally  issued  upon
conversion of the notes and the additional  shares resulting from the settlement
were reflected as redeemable  common stock on the balance sheet.  As of June 30,
1999,  the  "put"  provisions   related  to  the  shares  had  expired  or  been
relinquished in  consideration  of 200,000 shares of common stock. In the fourth
fiscal quarter of 1999,  $49,000 was accrued to reflect the settlement  which is
subject to a final agreement  prior to issuance of the shares.  The value of the
settlement may be adjusted at the date of share issuance.

     On July 2, 1997, the Company also issued a promissory note in the amount of
$16,825 to one of the investors who purchased a USWD Demand Note.  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
claimed that a  representative  of the Company  promised  that the Company would
treat the note the same as the other Demand Notes and convert it to common stock
on the same terms.  In  conjunction  with the Demand Note  settlement  with this
investor,  the  Company  agreed to convert all amounts  owing as  principal  and
interest by it under this note to a total of 18,507 shares of common stock.  The
shares issued upon conversion of this note were not entitled to the guarantee or
put rights described above.

NOTE 16.  RELATED PARTIES

Transactions with Cardservice International, Inc.

     Until May 1999,  a  director  of the  Company  was also an  officer  of the
Company's largest customer,  Cardservice  International,  Inc. ("CSI").  Another
officer and director of the Company was a "nonvoting"  director of CSI. Sales to
CSI approximated $564,000 and $178,000 in fiscal 1999 and 1998, respectively.

     On October 28, 1998,  the Company  borrowed  $500,000  from the CEO and 50%
owner of CSI. The note bore  interest at 8% per annum and was payable in full on
the  earlier of the  receipt by the  Company  of  proceeds  from the sale of the
Company's  common stock to this individual or January 1, 1999. In  consideration
for the loan, the Company also agreed to issue a common stock  purchase  warrant
exercisable  to  purchase  25,000  shares  of common  stock at $3.038  per share
through October 27, 2001. On March 19, 1999,  USWD and the noteholder  agreed to
convert the principal and accrued  interest into 589,213 shares of common stock.
The shares were issued on June 24, 1999.

     During fiscal 1996,  CSI  purchased  $162,500 of raw materials on behalf of
the Company in exchange for 142,544 shares of common stock issued  subsequent to
June 30, 1996 at 150% of the then current  fair market  value plus  registration
rights  after one year on all stock  owned by CSI.  This  transaction  increased
CSI's  ownership  in the  Company  from 2% to 5%.  At  June  30,  1998,  CSI had
completely divested its stock interest in the Company. Additionally, the Company
provides  sales  rebates to CSI on  POS-50(R)  units sold by CSI to end users of
product built with the raw materials  purchased using the amounts  advanced from
CSI.  Through  June  30,  1999,  a total of  $93,000  had been  paid  under  the
agreement.

Transactions with Liviakis Financial Communications, Inc.

     In July of 1997,  the Company  entered  into a  Consulting  Agreement  with
Liviakis Financial  Communications,  Inc. and its affiliates ("LFC") pursuant to
which LFC agreed to provide the Company with  financial and business  consulting
and public and investor relations services. The Company was obligated to pay LFC
consulting  fees of $10,000 in cash and 300,000  shares of its common stock over
the  one-year  term of the  Consulting  Agreement.  Pursuant  to the  Consulting
Agreement,  the Company was also  obligated to pay LFC cash equal to 2.5% of the
gross proceeds received in any direct financing located for the Company by LFC.

     The  Company  also sold a total of  3,500,000  shares  of common  stock and
warrants  to  purchase  up to an  additional  1,600,000  shares of common  stock
exercisable  at $.01 per share to two LFC affiliates in August 1997 for $500,000
in cash.  The warrants were exercised  during fiscal 1998 and 1999.  Pursuant to
this transaction,  LFC and these affiliates became  significant  shareholders of
the Company.  The common stock issued for cash,  under the Consulting  Agreement
and  upon  exercise  of the  warrants  to LFC and its  affiliates,  has  certain
registration rights.


                                       56
<PAGE>

     Pursuant to the  agreements,  LFC and/or its  affiliates  were  granted the
right to approve  the  appointment  of certain  officers  and  directors  of the
Company.

     Since  the  LFC  related  financing  transaction  and  the  LFC  Consulting
Agreement were entered into by the Company at  approximately  the same time, the
Company  has  treated  these  transactions  as one  transaction  for  accounting
purposes. Based on the fair market value of the common stock as determined by an
independent valuation, the initial 3,500,000 shares of common stock and warrants
for  1,600,000  shares of common stock issued in the  transactions,  net of cash
proceeds  received,  were valued at  approximately  $1,285,000  and  recorded as
prepaid  consulting  services.  The  consulting  services  were  amortized  on a
straight-line  basis over the term of the Consulting  Agreement  commencing with
the July 25, 1997 effective date of the agreement. The 300,000 shares which were
issuable  over the term of the contract were valued as such shares  vested,  and
resulted in an additional  $1,085,000 in consulting expenses during fiscal 1998.
All of these  shares were  included in the  registration  statement  that became
effective  August 7,  1998,  although  none of the  shares  were sold  under the
registration  statement prior to the shares being removed from registration by a
post-effective amendment filed as of June 24, 1999.

     In connection  with the closing of the sale of $3,060,000 of 8% Convertible
Debentures,  the Company paid LFC $76,500 in December 1997. In conjunction  with
the July 1998 closing of the sale of $2,000,000 of 6%  Convertible  Subordinated
Debentures due July 21, 2000, LFC was paid $50,000, as a finder's fee.

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

     On June 30,  1998,  the Company and LFC agreed to extend  their  consulting
relationship through the entry of a new consulting agreement covering the period
from August 1, 1998 through March 15, 1999 (the "New LFC Agreement").  The terms
of the New  LFC  Agreement  are  substantially  the  same  as the  original  LFC
Agreement. For services to be rendered under the New LFC Agreement, LFC received
290,000  shares of common stock,  issuable as a signing bonus upon  execution of
the New LFC  Agreement.  The common stock issued to LFC under the new Consulting
Agreement has certain  registration rights. In conjunction with the entry of the
New LFC Agreement LFC agreed to a further lock-up of all shares owned by LFC and
its  affiliates,  pursuant to which they  agreed not to sell such shares  before
February 1, 1999,  even  though  certain of those  shares  were  included in the
registration statement which became effective August 7, 1998.

     On September 22, 1998,  the Company  borrowed  $1,300,000  from LFC under a
note payable, which was due April 1, 1999, and bore interest at 8% per year. The
Company  used $1  million of the  proceeds  to redeem  $833,000  of its Series A
Convertible  Preferred Stock.  Substantially all available  intangible assets of
the  Company  were  pledged to  collateralize  the note.  During the period from
November  1998  through  February  1999,  USWD  received  bridge  loans from LFC
totaling  $690,000 in the form of 8% notes  payable due April 1, 1999.  On March
19, 1999, USWD and Liviakis Financial Communications agreed to the conversion of
$1,990,000  of  principal  plus accrued  interest to 2,344,458  shares of common
stock. The shares were issued on June 24, 1999.

     LFC,  its  present and former  affiliates  have agreed not to sell any USWD
common stock acquired in these various  transactions  before the end of calendar
year 1999.







                                       57
<PAGE>


Transactions with entrenet Group, LLC

     In June 1997, the Company entered into a consulting agreement with entrenet
Group,  LLC  ("entrenet"),  for purposes of  assisting  the Company in strategic
planning, the creation of a detailed business and marketing plan and in locating
financing sources.  For its services,  the Company issued a $150,000 convertible
promissory note to entrenet, with interest payable at 10% per annum, due in full
on or before June 2, 1998.  At entrenet's  election,  the principal and interest
were  converted  into 328,750  shares of common stock of the Company  during the
year ended June 30,  1998,  at $.50 per share.  In  addition,  the  Company  was
obligated  to pay  entrenet a finder's  fee of 8% for any  direct  financing  it
located for the Company, payable in Company securities.  During fiscal 1998, the
Company  and  entrenet  were  in  discussions  over  the  interpretation  of the
provisions  specifying the consideration payable to entrenet as its finder's fee
for locating LFC. The matter was resolved in November 1997,  whereby the Company
agreed to issue  entrenet a total of 280,000 shares of its common stock issuable
to it under the note and as payment  of the  finder's  fee.  Those  shares  were
issued in April 1998 and included in the  registration  statement,  which became
effective  August 7,  1998,  although  none of the  shares  were sold  under the
registration  statement prior to the shares being removed from registration by a
post-effective amendment filed as of June 24, 1999. .

     As of March 12, 1998,  the Company  entered into an agreement with entrenet
to provide  business  and  financial  consulting  services to the Company and to
assist the Company in locating additional  financing.  The term of the agreement
was for six months  from March 12, 1998 and  renewed  for  additional  six-month
terms unless at least 60 days notice was given to terminate the agreement  prior
to the end of a term. For its advisory  services  under the agreement,  entrenet
was paid a fee of $60,000  plus  interest in July 1998.  In  addition,  entrenet
received a common stock purchase  warrant to purchase 10,435 shares at $5.75 per
share, exercisable until March 11, 2003. The Consulting Agreement was terminated
in September  1998.  The Company agreed to pay the remaining fees to entrenet of
$20,000 and issued a common stock purchase warrant for 8,333 shares  exercisable
at $2.40 per share until  September 11, 2003. The shares issuable on exercise of
this warrant carry certain  registration rights. No warrants have been exercised
as of June 30, 1999.  entrenet is entitled to receive  certain  finder's fees on
future  financings  between the Company and certain specified parties within two
years of September 12, 1998. A financing  requiring payment of a fee to entrenet
had not occurred as of June 30, 1999.

Transactions with ADATOM, Inc.

     During fiscal 1998,  the Company  purchased  furniture and equipment in the
approximate  amount of  $200,000  through a company  owned by a director  of the
Company.

     See Notes 5, 7, 8, 11, 17 and 18 for other related party transactions.

NOTE 17. DEBT EXTINGUISHMENT

     On March 19, 1999, USWD and Liviakis  Financial  Communications,  Inc., and
Charles Burtzloff,  CEO and 50% owner of Cardservice  International,  holders of
the Company's 8% notes payable,  agreed to convert  $2,490,000 of principal plus
accrued  interest to  2,933,671  shares of common stock at the rate of $.875 per
share. This rate was established at a 20% discount from the closing price of the
common  stock as of March 18,  1999.  The  market  price on the  actual  date of
issuance of the shares of common  stock  (June 24,  1999) was $.60 per share and
therefore the transaction resulted in an extraordinary gain of $807,000.

NOTE 18. SUBSEQUENT EVENTS

     On July 1, 1999 USWD  entered  into an agreement  with  Liviakis  Financial
Communications,  Inc.  (LFC),  to provide the Company with public  relations and
investor  relations  services  through March 15, 2000 The Company issued 690,000
shares of common  stock to LFC for its  services  under this  agreement.  LFC is
entitled to receive a 2.5% cash finder's fee for financing  located by LFC and a
2%  finder's  fee  based  on the  "total  consideration  provided"  through  any
acquisition located by LFC.




                                       58
<PAGE>


     On July 7, 1999,  USWD sold a portion of its merchant credit card portfolio
to PMT  Services  Inc.,  a wholly  owned  subsidiary  of Nova  Corporation.  The
transaction  resulted in a cash payment to USWD of $450,000.  The sale  included
approximately  450  installed  USWD owned TRANZ  Enabler  point-of-sale  devices
deployed with a portion of the respective merchants.  A gain or loss on the sale
of the merchant  credit card  portfolio will be recognized in the quarter ending
September 30, 1999.

     During the first quarter of fiscal 2000, the Company has raised $825,000 to
fund operations through the sale of 1,333,333  restricted shares of common stock
and 266,667 common stock purchase warrants in a private  offering.  The Warrants
are exercisable over a 5-year period with a strike price of $1.50

     In the first  quarter of fiscal  year 2000,  a  Colorado  based  management
recruiting firm  successfully  completed a search for a key product  development
engineer. The consulting firm requested that half the $17,000 fee be paid in the
form of a warrant.  The  Company  expects to issue an  appropriately  structured
warrant as soon as practicable.

     On August 2, 1999, the Company entered into an exclusive financial advisory
agreement with an investment banking firm to assist the Company with a financing
on a best  efforts  basis.  The  investment  banking firm has no  obligation  to
participate in the financing  directly.  The agreement  calls for the Company to
grant  warrants  equal  to 2% of  the  shares  issued  in  the  offering  to the
investment  banking firm that will be convertible  for a period of five years at
an exercise  price equal to 125% of the share price  specified in the  offering.
The Company agrees to reimburse the  investment  banking firm for reasonable out
of pocket expenses incurred up to a maximum of $100,000.

     In the fourth  quarter of fiscal 1999,  USWD entered into an agreement with
the purchasers of the Series B Preferred  Stock and holders of the 6% Debentures
to  file a  registration  statement  with  the SEC  covering  the  common  stock
underlying the Series B Preferred  Stock, a common stock purchase warrant issued
at the same time as the Series B Preferred  Stock,  the 6%  Debentures,  and the
common stock purchase warrants issued to the 6% Debenture holders in July, 1998,
within 30 days of the of May 6, 1999,  to be effective  within 90 days of May 6,
1999.  This date was  subsequently  extended  to May 11,  1999.  USWD  filed the
required  registration  statement on June 30, 1999.  The Company  thereby became
subject  to a late  filing  penalty of  $74,000  (following  waiver of the "late
filing" penalty by the holder of 1,500,000 shares of Series B Preferred  Stock).
The  registration  statement  did not become  effective by August 10, 1999.  The
Company therefore become subject to an initial "late  effectiveness"  penalty of
$113,000 (3% of the total original purchase price of $1,800,000 of 6% Debentures
and 1,954,705 shares of Series B Preferred  Stock,  which were outstanding as of
August 10, 1999). Additional late effectiveness penalties accrue monthly (or for
any portion of any month) that the registration  statement is not effective,  in
amounts equal to 2% of the original  purchase price of the outstanding  Series B
Preferred Stock and 3% of the face amount of the  outstanding 6% Debentures.  As
of October  10,  1999,  an  additional  penalty of  approximately  $186,000  had
accrued. The applicable penalties will be accrued as interest expense.

     In the  first  quarter  of  fiscal  2000,  holders  of  the 6%  Convertible
Debentures  converted  $200,000  of the debt to common  stock per the  specified
conversion formula.

     As of October 10, 1999,  the Series B  Registration  Statement has not been
declared effective. The holders of the Series B Preferred Stock may require USWD
to redeem  the  shares of  Series B  Preferred  Stock for $1.25 per share (up to
$2,461,000 as of June 30, 1999) plus all  accumulated  dividends and  penalties.
Also,  the  holders of the 6%  Debentures  may require the Company to redeem the
current $1,800,000 face amount at 120% plus accrued interest and penalties.


                                       59
<PAGE>


PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

Directors and Executive Officers

The following table contains  certain  information with respect to the directors
and executive officers of USWD.

Name                   Age     Principal Occupation               Director Since
----                   ---     --------------------               --------------

Dean M. Leavitt         40     CEO & Chairman of                  May 1999
                                USWD

Rod L. Stambaugh        39     President of USWD                  August 1991

Chester N. Winter       68     General Partner of Colorado        February 1994
                                Incubator Fund, L.P.

Alvin C. Rice           75     Vice Chairman of Merchant's        June 1998
                                Group International, Inc

     Dean M.  Leavitt.  Mr.  Leavitt  became  the Chief  Executive  Officer  and
Chairman  of USWD on May 3,  1999.  Prior  to  joining  USWD,  Mr.  Leavitt  was
President  of US Data  Capture,  Inc.,  which  is  headquartered  in  Greenwich,
Connecticut.  US Data Capture is a  "boutique"  credit card  processing  company
which Mr.  Leavitt  founded in 1990. US Data Capture  specialized in formulating
and  implementing  sophisticated  credit card acceptance  applications  for such
clients as hospitals,  universities,  municipalities,  publishing houses,  kiosk
sellers,  direct  marketers,  professional  sports  teams and  sporting  events,
transportation  companies  and  internet-based  sales  organizations.  Prior  to
founding  US Data  Capture,  Mr.  Leavitt  served as Senior Vice  President  and
Director  of  Finance  at  Rosenschein  Properties,  a real  estate  development
company,  Senior Vice President of Finance at Kellogg Properties,  a real estate
acquisitions and development  firm and Director of Equity Private  Placements at
Sybedon  Corporation,  an  investment  banking  firm that served the real estate
community.  Mr.  Leavitt  holds a  Bachelor  of Arts  degree  in  economics  and
psychology from Emory University in Atlanta, Georgia.

     Rod L. Stambaugh.  Mr. Stambaugh served as Chief Executive  Officer of USWD
from  October  1996 until August  1997,  when he became  President.  He was Vice
President in charge of marketing  and  business  development  for USWD from 1991
through  October  1996.  Mr.  Stambaugh was also the  Corporate  Secretary  from
September 1995 until October 1996. Mr. Stambaugh is one of the founders of USWD.
Mr. Stambaugh served on USWD's Board of Directors from July 1991 through October
1994, rejoining the Board as Chairman in July 1995. Mr. Stambaugh graduated from
Baker  University  in 1982  with a B.S.  degree  in  Psychology,  and a minor in
Business Administration.

     Chester N. Winter.  Mr. Winter is a general  partner of Colorado  Incubator
Fund,  L.P., a venture capital fund which invests in early stage high technology
enterprises  including  software,  materials,  medical  and  bio-technology;   a
position  he has  held  since  1991.  Since  March  1993 he has also  been  Vice
President of Paradigm Partners,  LLC, a consulting  company.  From February 1994
until  September  1995 he  served  as  Chairman  of  Highland  Energy,  Inc.,  a
subsidiary  of Eastern  Utility  Associates.  He holds B.A. and M.S.  degrees in
Economics from the University of Colorado and has completed the  Owner/President
Management Program at Harvard University Graduate School of Business.

     Alvin  C.  Rice.  Mr.  Rice  is  currently  employed  as Vice  Chairman  of
Merchant's  Group  International,  Inc., a private  merchant bank located in San
Francisco,  California,  which he joined on June 1, 1999. Prior to June 1, 1999,
and since June 1, 1998, Mr. Rice was affiliated with entrenet  Group,  LLC, as a
senior  associate.  He became a director of USWD on June 1, 1998.  His career in
banking,  investment banking and commercial business management has spanned over
40 years. He served as Chairman of California Bancorp Systems, Inc. from January
1994 until  December  1997 and as Chairman of the First  National  Bank of Marin
from 1989 until December 1993. Mr. Rice has also served as a Director of Memorex
Corporation,  Fairchild Camera & Instrument Co., and the Montreal Trust Company.



                                       60
<PAGE>


He is a cum laude graduate Phi Beta Kappa graduate of Stanford  University  from
which he received a B.A.  degree.  He attended the Graduate School of Banking at
the University of Wisconsin and Harvard's Advanced Management Program.

Board of Directors and Committees

     USWD has an audit  committee,  which consisted of Mr. Winter and two former
directors who resigned in May 1999,  Messrs.  Richard  Barton and Caesar Berger.
The audit committee  recommends  engagement of USWD's  independent  accountants,
approves  services  performed  by such  accountants,  and reviews and  evaluates
USWD's accounting system of internal controls.  The audit committee did not meet
during  fiscal year 1999;  however the  functions  of the audit  committee  were
exercised  by the full  board.  The Board of  Directors  plans to  appoint a new
committee  in  the  near  term.  USWD  does  not  have  standing  nominating  or
compensation committees.  The Board as a whole performs the functions that these
committees would perform.

     During fiscal year 1999,  the Board of Directors  held twelve  meetings and
acted once by consent without a meeting. All directors attended more than 75% of
the aggregate number of meetings of the Board.

Other Significant Executive Officers

     Other  significant  executive  officers of USWD who are not also  directors
are:

Name                   Age   Position with USWD                   Officer Since
----                   ---   ------------------                   -------------
Robert E. Robichaud     46   Chief Financial and Accounting       September 1997
                              Officer, Treasurer and Secretary

Business Experience of Significant Executive Officers

     Robert  E.  Robichaud.  Since  1985  Mr.  Robichaud  has held  several  key
financial  management  positions at Triad  Systems Corp.  including  Director of
Financial  Planning and Analysis and most recently,  Director of Finance.  Triad
Systems is a provider of software, hardware and information management solutions
which  recorded  1997  revenues in excess of $175  million.  Triad Systems was a
NASDAQ listed company and was acquired by Cooperative Computing Inc. on February
27, 1997. Mr. Robichaud  received a Bachelors Degree in Economics from Fairfield
University in 1976 and M.B.A. from Rutgers Graduate School of Business in 1978.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

     Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers,  directors,  and persons  owning more than ten percent of a registered
class of the Company's equity  securities ("ten percent  shareholders")  to file
reports of ownership and changes of ownership  with the  Securities and Exchange
Commission  ("SEC").  Officers,  directors,  and  ten-percent  shareholders  are
required by SEC  regulations  to furnish the Company  with copies of all Section
16(a) reports they file with the SEC.

     To the  Company's  knowledge,  based  solely on its review of the copies of
such  reports and  amendments  thereto  furnished  to the  Company,  and written
representations  that no other reports were required,  the Company believes that
during the Company's  fiscal year ended June  30,1999,  all Section 16(a) filing
requirements  applicable to the Company's officers,  directors,  and ten percent
shareholders  were met,  except as follows:  the timely  filing of Form 3 by Mr.
Dean Leavitt, the Company's current Chief Executive Officer.

ITEM 10. EXECUTIVE COMPENSATION

     The following  table shows all the  compensation  paid by USWD to its Chief
Executive  Officer (the "Named  Executive  Officer") and certain other  officers
during the fiscal years ended June 30, 1999, 1998 and 1997.


                                       61
<PAGE>
<TABLE>
<CAPTION>

                           Summary Compensation Table


                                                 Annual Compensation             Long Term Compensation
                                           ---------------------------------    ------------------------
     Name and Principal       Fiscal       Salary       Bonus       Other       Restricted    Securities     All Other
          Position             Year         ($)          ($)        Annual        Stock       Underlying     Compensa-
                                                                   Compen-        Awards     Options and      tion ($)
                                                                   sation($)       ($)        Warrants(#)
                                                                                                 (7)
-----------------------------------------------------------------------------------------------------------------------
<S>                            <C>         <C>          <C>          <C>           <C>         <C>              <C>
Rod L. Stambaugh,              1999        $ 130,000    $-0-         (6)           $-0-        700,000          $-0-
President (1) (5)              1998        $ 113,333    $34,750      (6)           $-0-          -0-            $-0-
                               1997        $  79,881    $-0-         (6)           $-0-          -0-            $-0-

                               1999        $ 150,000    $-0-         (6)           $-0-          -0-            $-0-
Evon  A. Kelly,                1998        $ 131,250    $-0-         (6)           $-0-        600,000 (8)      $-0-
Chief Executive Officer (2)
                               1999        $  43,750    $-0-         (6)           $-0-      1,300,000- (9)     $-0-

Roger L. Peirce
Chief Executive Officer (3)    1999        $  21,667    $-0-         (6)           $-0-      5,375,000          $-0-


Dean M. Leavitt                1999        $ 125,000    $-0-         (6)           $-0-        300,000          $-0-
Chief Executive Officer (4)    1998        $ 101,756    $10,417      (6)           $-0-         50,000          $-0-


Robert E. Robichaud,
Chief Financial and
Accounting Officer (5)
</TABLE>

(1)  Mr.  Stambaugh  served as CEO from  October 1996 until August 1997 when Mr.
     Kelly commenced service as CEO.
(2)  Mr. Kelly  commenced  service to USWD as of August 1997 and resigned as CEO
     and  Chairman  in August  1998.  He served as an  employee of USWD under an
     employment agreement with USWD until August 20, 1999.
(3)  Mr.  Peirce  served as USWD's CEO and Chairman from August 17, 1998 through
     March 1999.
(4)  Mr. Leavitt joined USWD in May 3, 1999 as CEO and Chairman of the Board and
     presently serves in that capacity.
(5)  Mr.  Robichaud  commenced  service as of September  1997. The bonus amounts
     include $25,000 for Mr. Stambaugh and $10,000 for Mr. Robichaud, which were
     accrued but not paid as of yet.
(6)  No amounts are shown under "Other",  as the aggregate  incremental  cost to
     USWD of personal  benefits provided to the executive officer did not exceed
     10% of his annual salary and bonus during the year.
(7)  All options were granted outside the 1992 Stock Option Plan, except certain
     options issued to Mr.  Stambaugh  (100,000 option shares) and Mr. Robichaud
     (100,000 option shares).
(8)  Reflects  options  granted to Mr. Kelly during 1998; of that number 492,000
     options had vested as of the date Mr. Kelly left the Company.
(9)  Reflects  options granted to Mr. Peirce during 1999; of that number 189,583
     options had vested as of the date Mr. Peirce left the Company.

Option Grants in Fiscal Year Ending June 30, 1999

     The following table reports  information with respect to individual  grants
of options to the Named Executive Officer and the other executive officers named
in the Summary Compensation Table above.



                                       62
<PAGE>

                        Option Grants in Last Fiscal Year
                               (Individual Grants)

    Name               Number of       Percent of Total
                      Securities       Options/Warrants   Exercise Or
                      Underlying          Granted to      Base Price  Expiration
                   Options/Warrants  Employees in Fiscal   ($/Share)     Date
                      Granted (#)          Year (1)
--------------------------------------------------------------------------------
Rod L. Stambaugh         100,000             1.1               2.563    11/23/08
                         600,000             6.5               0.844     5/13/09

Evon A. Kelly              -0-               -0-                n/a        -0-

Roger L. Peirce (2)    1,300,000            14.1                n/a      9/1/02

Dean M. Leavitt        2,687,500            29.2               0.875     5/06/09
                       2,687,500            29.2               3.000     5/06/09

Robert E. Robichaud       50,000             0.5               2.563    11/23/08
                         250,000             2.7               0.844    05/13/09

(1)  A total of  9,215,000  options  and  warrants  were  granted to  employees,
     including executive officers, during fiscal year 1999.
(2)  On August  21,  1998,  USWD  granted  options  to Mr.  Peirce  to  purchase
     1,000,000  shares of USWD's  common stock at $3.438 per share the estimated
     fair market value at date of grant.  In November 1998,  USWD and Mr. Peirce
     agreed to cancel the original  1,000,000  share option and USWD granted Mr.
     Peirce an option  to  purchase  1,300,000  shares of USWD's  common  stock,
     exercisable at $2.563 per share.  As of March 19, 1999, the date Mr. Peirce
     left USWD, a total of 189,583 of the options were fully vested.

     As  reflected  in  the  following  table,   reported  are  the  values  for
"in-the-money" options, which represent the positive spread between the exercise
price of any existing stock options owned by the Named Executive Officer and the
year-end price of USWD's common stock.

       Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End
                                  Option Values

<TABLE>
<CAPTION>
   Name              Shares            Value           Number of Securities                 Value of
                   Acquired on      Realized ($)      Underlying Unexercised          Unexercised In-the-
                   Exercise (#)        (1)           Options and Warrants at      Money Options and Warrants
                                                            FY-End (#)                  at FY-End ($)
                                                         Vested/Unvested           Vested/Unexercisable(2)
------------------------------------------------------------------------------------------------------------
<S>                   <C>            <C>                <C>                             <C>
Rod L. Stambaugh                                          479,990/375,010                 $22,352/$0
Evon A. Kelly                                             456,000/36,000(3)                   0/0
Roger L. Peirce                                           189,583/0                           0/0
Dean M. Leavitt                                           470,313/4,904,687                   0/0
Robert E. Robichaud                                       171,913/178,088                     0/0
</TABLE>

                                       63
<PAGE>

(1)  Calculated by subtracting the average traded price of the underlying shares
     of USWD's common stock on the date of exercise  less the exercise  price of
     the option.
(2)  Represents the difference between $0.66, the average traded price of USWD's
     common stock at fiscal year end, and the exercise price of the option.
(3)  Per Mr. Kelly's employment  agreement,  a maximum of 492,000 of the 600,000
     shares  granted  may become  exercisable  through  the end of his  one-year
     employment term.

Director Compensation

     Directors  who are not  employees of USWD receive an annual stock option to
purchase  20,000 shares of USWD's  common  stock.  The grant is made pursuant to
USWD's 1992 Stock Option Plan as of each  director's  anniversary  date, with an
exercise price equal to the market value of the underlying  stock as of the date
of grant. Options vest 25% on each six-month  anniversary  following the date of
grant.  This is the only regular  arrangement for  compensation of directors.  A
total of 80,000 stock options were granted to four non-employee directors during
the fiscal year ended June 30, 1999.

     On November 23, 1998,  USWD's  outside  directors  were each granted 50,000
non-qualified  stock  options  exercisable  at $2.563  per  share  for  services
rendered to USWD. The options vest monthly over a period of 36 months,  assuming
the director remains a director of USWD through the vesting period.

Other Executive Compensation Paid During Fiscal 1999

     Mr. Roger L. Peirce served as USWD's CEO from August 17, 1998 through March
19, 1999  pursuant to an employment  agreement  with USWD. He was paid salary at
the rate of $75,000  per year.  He  received a total of $44,000 in  compensation
during his tenure with USWD.  On August 21, 1998,  USWD  granted  options to Mr.
Peirce to purchase  1,000,000  shares of USWD's common stock at $3.438 per share
the estimated fair market value at date of grant. In November 1998, USWD and Mr.
Peirce agreed to cancel the original 1,000,000 share option and USWD granted Mr.
Peirce  an  option  to  purchase   1,300,000  shares  of  USWD's  common  stock,
exercisable  at $2.563 per share,  the estimated fair market value of the grant,
for ten years from  November 23, 1998.  Options to purchase  39,016  shares were
granted as  incentive  stock  options  under USWD's 1992 Stock Option Plan ("the
Plan") and those  options will be subject to all of the terms and  conditions of
incentive  stock options  issued under the Plan. The balance of the options were
issued outside the Plan as "non-qualified  options." They have the same exercise
terms as the incentive  options  issued under the Plan but expire on the earlier
of September 1, 2002 or one year from the date Mr.  Peirce  ceases to serve USWD
in any capacity,  including as an employee, officer, director or consultant. All
of the options vested  immediately upon issuance but are subject to USWD's right
to repurchase the shares at the price Mr. Peirce paid for them.  USWD's right to
repurchase the shares expires over a 48 month period at the rate of 2.08% of the
shares per month. The repurchase  rights of USWD terminate  completely  (thereby
vesting  Mr.  Peirce's  right in and to 100% of the  shares)  in the  event of a
change in control of USWD. As of March 19, 1999,  the date Mr. Peirce left USWD,
a total of 189,583 of the options were vested,  and thus beyond  USWD's right of
repurchase.

Current Employment Agreements and Change In Control
Provisions Applicable To Executive Officers and Directors

     Dean M. Leavitt.  USWD has an employment  agreement with Dean M. Leavitt to
act as USWD's Chief Executive  Officer and Chairman of the Board.  The agreement
was  effective  as of May 3, 1999 and has a basic term of two years,  subject to
automatic  renewal for one-year terms if not terminated by either party at least
one month prior to the end of each term. Mr. Leavitt is to receive salary at the
rate of $130,000 per year during the first 90 days of the agreement and $200,000
per year thereafter,  plus reimbursement of certain customary business expenses.
If Mr.  Leavitt is terminated  without  "cause" or determines to leave for "good
reason" (as these terms are defined in the  agreement),  Mr. Leavitt is entitled
to severance pay for one year,  payable at regular pay  intervals,  at a rate of
his base salary at the time of termination for any part of the severance  period
falling  within  the  initial  two-year  term or any  extension  term,  and at a
negotiated  rate for any payments  due after such term,  but no less than 50% of
his base salary at the time of  termination.  USWD also  issued  warrants to Mr.
Leavitt to purchase up to 5,375,000  shares of USWD's common stock.  Half of the

                                       64
<PAGE>

warrants,  or 2,687,500,  are exercisable at $.875 per share, the exercise price
being the estimated  fair market value of the  underlying  stock at May 3, 1999,
the date of grant,  and vest 10% upon grant with the  balance  vesting  over the
following 12 months.  The second  2,687,500  warrants have an exercise  price of
$3.00  per  share  and vest 50% one  year  following  the  grant  date  with the
remaining  balance  vesting over the following six months.  All warrants held by
Mr. Leavitt  immediately prior to termination of employment within six months of
a "change of control" or upon a  termination  by USWD without  "cause" or by Mr.
Leavitt for "good reason" become immediately  vested and exercisable.  A "change
of control" is defined as (a) any  consolidation or merger of USWD in which USWD
is not the  continuing or surviving  corporation  or pursuant to which shares of
USWD's capital stock are converted into cash, securities or other property other
than a  consolidation  or merger of USWD in which the  holders of USWD's  voting
stock  immediately prior to the consolidation or merger shall, upon consummation
of the  consolidation  or merger,  own at least 50% of the  voting  stock of the
surviving  corporation,  or any sale, lease,  exchange or other transfer (in one
transaction or a series of transactions contemplated or arranged by any party as
a single plan) of all or  substantially  all of the assets of USWD;  or (b) more
than 75% of the Board of Directors of USWD  (including Mr.  Leavitt) is replaced
with new  directors,  except  that this  shall  not  apply to any new  Directors
sponsored by Mr. Leavitt or voted in favor of by him in  constituting a slate of
directors  otherwise.  Mr.  Leavitt  has also  entered  into an  indemnification
agreement  with USWD  pursuant to which USWD has agreed to provide the  broadest
possible indemnification that is available under Colorado law

     Rod L.  Stambaugh.  USWD  has an  arrangement  under  which  it pays Rod L.
Stambaugh,  its President,  $130,000 per year. Mr. Stambaugh may also be granted
bonus  compensation  and/or stock  options as approved by the Board of Directors
from time to time.  It is  anticipated  that Mr.  Stambaugh  will be entitled to
participate  in any  performance-based  bonus  plan  approved  by the  Board  of
Directors.  In November  1998,  Mr.  Stambaugh  was granted  options to purchase
100,000  shares of common  stock at $2.563 per share,  with a four-year  vesting
schedule of 25% per year.  Mr.  Stambaugh was granted  non-qualified  options to
purchase an additional  600,000 shares of common stock exercisable at $0.813 per
share on May 13, 1999, which vest at the rate of 50% upon grant with the balance
vesting over the following 12 months.

     Evon A. Kelly.  USWD had an employment  agreement  with Evon A. Kelly,  its
former CEO,  pursuant to which Mr. Kelly receives  $150,000 in cash compensation
per year. The agreement expired on August 20, 1999. Mr. Kelly was also granted a
non-qualified  stock  option to purchase up to 600,000  shares of USWD's  common
stock at $1.00 per share,  exercisable as to 10% as of the date of grant (August
4, 1997) and vesting at the rate of 3% per month thereafter so long as Mr. Kelly
remains in the employ of USWD. All options must be exercised  within 10 years of
the date of grant. All options  immediately  vest and become  exercisable upon a
change in control of USWD. As of August 20, 1999, a total of 492,000 options had
vested.  USWD has  agreed  to  indemnify  Mr.  Kelly  for a  portion  of the tax
liability  differential  between  non-qualified stock option and incentive stock
option tax treatment,  when and if he should exercise his options and dispose of
the shares.  USWD has also agreed to register the shares  underlying Mr. Kelly's
option with the SEC on a Form S-8 registration statement as soon as practicable.

     Other  Executive  Officers.  USWD also has an employment  arrangement  with
Robert E.  Robichaud,  its Chief Financial  Officer.  Mr.  Robichaud  receives a
salary of  $125,000  per year and  received a bonus of $10,417  for fiscal  year
1998.  Mr.  Robichaud  may also be entitled to an annual bonus of up to $25,000.
Mr.  Robichaud is entitled to severance of one year's salary if he is terminated
without  cause.  As of September 5, 1997, Mr.  Robichaud was granted  options to
purchase up to 50,000  shares of common  stock at $3.95 per share  under  USWD's
1992 Stock  Option Plan,  with a vesting  schedule of 10% as of his date of hire
(September 5, 1997) and 3% per month thereafter. In November 1998, Mr. Robichaud
was granted  additional  options to purchase  50,000  shares of common  stock at
$2.563 per share, with a four-year vesting schedule of 25% per year. Pursuant to
the Amended 1992 Stock Option Plan, all options granted to employees immediately
vest and become  exercisable upon a merger,  acquisition,  sale of all assets or
other change in control of USWD. Mr. Robichaud was granted non-qualified options
to purchase an additional  250,000 shares of common stock  exercisable at $0.813
per share on May 13,  1999,  which  vest at the rate of 50% upon  grant with the
balance vesting over the following 12 months.

                                       65
<PAGE>


Proposed Executive Bonus Plan

     Management  of USWD is in the process of  formulating  a  performance-based
bonus plan for USWD's  executive  officers and key personnel,  which may include
provisions for cash bonus compensation as well as stock based compensation under
USWD's 1992 Stock Option Plan or otherwise.  Other than certain contingent bonus
compensation  that has been  offered to certain  executive  officers  of USWD as
described  above,  and which is subject to  adoption of criteria by the Board of
Directors, the Board has not yet approved the parameters of such a bonus plan.

1992 Stock Option Plan

     General. USWD's Amended 1992 Stock Option Plan (the "Plan") was adopted for
the purpose of granting employees,  directors and consultants of USWD options to
purchase  common stock so that they may have the  opportunity  to participate in
the growth of USWD and to provide  these people with an  increased  incentive to
promote the interests of USWD.

     Administration  of the  Plan.  The Plan is  administered  by at  least  two
disinterested  members  of the Board of  Directors  (the  "Board")  or the Board
itself. The Board may from time to time adopt rules and regulations, as it deems
advisable for the  administration  of the Plan, and may alter,  amend or rescind
any such rules and  regulations  in its  discretion.  The Board has the power to
interpret, amend or discontinue the Plan.

     Grant of  Options.  Options  may be  granted  under the Plan for a total of
2,680,000 shares of common stock. The Board of Directors increased the number of
shares  underlying  options  available to the Plan to 2,680,000  from 880,000 on
August 6, 1997.  This  amendment  was  approved  by  shareholders  at the Annual
Meeting of Shareholders held February 6, 1998.  Additional grants of options may
be made only to employees,  directors and  consultants of USWD and any parent or
subsidiary.  The Board  determines the terms of options  granted under the Plan,
including the type of option (which can be an incentive  stock option within the
meaning of Section 422 of the  Internal  Revenue  Code of 1986,  as amended (the
"Code"),  or a non-qualified  stock option),  the exercise price,  the number of
shares subject to the option,  and the  exercisability  thereof.  The Board also
determines,  at the time of grant,  the period  during  which the option will be
exercisable,  subject to the limitations of the Plan. Unless otherwise  provided
at the time of grant,  options to employees vest 25% one year from date of grant
and 25% on each yearly  anniversary  thereafter.  An option to  purchase  20,000
shares  at fair  market  value is  automatically  issued  under the Plan to each
non-employee director as of the director's  anniversary date. Options granted to
non-employee  directors'  vest  25% at each  six-month  anniversary  thereafter.
Information  regarding options presently outstanding under the Plan is set forth
below.

     Terms and  Conditions  of  Options.  The Board may  impose on an option any
additional  terms  and  conditions  which it deems  advisable  and which are not
inconsistent with the Plan. The exercise price of any stock option granted under
the Plan  must not be less  than  100% of the  fair  market  value of a share of
common stock on the date of grant, except that as to an optionee who at the time
an incentive stock option is granted owns stock  possessing more than 10% of the
total combined  voting power of all classes of stock of USWD, the exercise price
of such incentive stock option must be at least equal to 110% of the fair market
value of the shares as of the date prior to the date of the grant.  In addition,
no incentive  stock option can be granted to any  employee  where the  aggregate
fair market value of the shares  (determined  at the date of such option  grant)
for which such incentive stock options are exercisable for the first time in any
calendar  year exceeds  $100,000.  In connection  with a merger,  sale of all of
USWD's assets,  or other  transaction which results in the replacement of USWD's
common  stock  with the  stock  of  another  corporation,  all  granted  options
(including  unvested  options)  become  exercisable  immediately  prior  to  the
consummation of the  transaction,  unless other provisions are made with respect
to those options.

     Exercise of Options.  An optionee may exercise  less than the entire vested
portion  of an option,  in which case such  unexercised,  vested  portion  shall
continue  to remain  exercisable,  subject  to the terms of the Plan,  until the
option  terminates.  Vested options must be exercised  within three months of an
optionee's termination of employment with USWD.

                                       66
<PAGE>

Federal Income Tax Consequences Applicable to Options Granted Under the Plan

     Incentive Stock Options.  USWD  anticipates  that all options granted under
the Plan and  treated by USWD as  "incentive  stock  options,"  that is, a stock
option described in Section 422 of the Code, will have the following anticipated
(but not guaranteed) federal income tax consequences, among others: the optionee
will  recognize no income at the time of grant;  upon  exercise of the incentive
stock option,  no income will result to any party; if there is no disposition of
the  shares  until a date  that is both  (i) two  years  from  the  grant  of an
incentive  stock option and (ii) one year from its  exercise,  no amount will be
ordinary  income and, upon  disposition in a taxable  transaction,  the employee
will receive  long-term  capital gain or loss treatment  equal to the difference
between the amount  realized  and the option  price;  any gain  realized  upon a
disposition  other  than as set forth  above may result in  ordinary  income tax
treatment to the optionee;  generally,  USWD receives no deduction in connection
with the transaction;  and, certain optionees may incur alternative  minimum tax
treatment under the Code upon exercise of an incentive stock option.

     Non-qualified Stock Options.  USWD anticipates that all non-qualified stock
options  granted  under the Plan will have the  following  anticipated  (but not
guaranteed)  federal income tax  consequences,  among others:  the optionee will
recognize  no income at the time of grant;  upon  exercise of the  non-qualified
stock option,  the  individual to whom the option is granted should be deemed to
receive ordinary income at the time of exercise equal to the excess,  if any, of
the fair market value of the acquired  shares at such time over the option price
for such shares;  if the shares  acquired  upon the exercise of a  non-qualified
stock option are disposed of in a taxable transaction,  the individual disposing
of such shares will have a realized and recognized capital gain or loss equal to
the  difference,  if any,  between the amount realized and the adjusted basis of
such shares to the holder;  such gain or loss will be  long-term  or  short-term
depending  on whether or not such  shares are held for longer  than six  months;
and, the adjusted  basis  usually (but not always) will include the option price
plus any ordinary income described above with respect to such shares.

Form S-8 Registration of Shares of Common Stock
Issuable Pursuant to Options Under the Plan or Otherwise

     USWD registered  880,000 shares of common stock underlying options issuable
under the Plan with the United States  Securities and Exchange  Commission  (the
"SEC")  under  a Form  S-8  Registration  Statement  that  was  effective  as of
September 1995. USWD intends to file another registration  statement on Form S-8
in the near future to register the additional  shares  issuable  pursuant to the
exercise of options that have been or may be issued under the Plan.

     In  addition,  USWD  intends to register on Form S-8 the shares  underlying
option grants issued  outside the Plan covering  189,583  shares of common stock
for Mr. Roger Peirce, 492,000 shares of common stock for Mr. Evon Kelly, 600,000
shares for Mr. Rod Stambaugh and 250,000 shares for Mr. Robert E. Robichaud,  to
the extent the options remain outstanding and exercisable at the time USWD files
the registration statement.

Options Presently Outstanding Under the Plan

     As of August 31, 1999 there were a total of 1,222,281  options  outstanding
under the Plan,  455,810 of which were vested at that date. Of the total options
outstanding at August 31, 1999,  447,781 were held by directors (two of whom are
also officers of USWD), 219,781 of which were vested, 100,000 were held by other
executive  officers,  39,500 of which  were  vested,  and  674,500  were held by
employees or  consultants  of USWD,  196,529 of which were vested.  The weighted
average per share exercise price of all options outstanding under the Plan as of
August 31, 1999, was $2.25.

ITEM 11. SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT

     The following tables set forth certain information regarding the beneficial
ownership  of the  Company's  common  stock and Series A and Series B  Preferred
Stocks as of August 31,  1999,  by (i) each  Director,  (ii) the  current  Chief
Executive  Officer and each person who served in that capacity during the fiscal
year, (iii) the Chief Financial  Officer,  (iv) all persons,  including  groups,
known to the  Company to own  beneficially  more than five  percent  (5%) of the
outstanding  common stock of the  Company,  and (v) all  executive  officers and
directors as a group. A person (or group) is deemed to be a beneficial  owner of
common  stock that can be acquired  by such person or group  within 60 days from
August  31,  1999  upon the  exercise  of  warrants,  options  or  other  rights


                                       67
<PAGE>

exercisable for, or convertible into, common stock. As of August 31, 1999, there
were a total of 19,100,879  shares of common stock,  752,000  shares of Series A
Preferred Stock and 1,954,705 shares of Series B Preferred Stock outstanding.

     Except as otherwise indicated, the address of each of the following persons
is c/o U.S. Wireless Data, Inc., 2200 Powell Street, Suite 800,  Emeryville,  CA
94608.

Certain Holders of Common stock
<TABLE>
<CAPTION>
                                                                                          Shares of Common Stock
                                                                                           Beneficially Owned (1)
                                                                                          -----------------------
                                                                                          Number
                                                                                            of          Percent of
Name of Beneficial Owner                                                                  Shares           Class
------------------------                                                                  ------        ----------
<S>                                                                                    <C>               <C>
Dean M. Leavitt...............................................................         1,276,563 (2)        6.3%
Rod L. Stambaugh..............................................................           908,500 (3)        4.6%
Chester N. Winter.............................................................           136,781 (4)          *
Alvin C. Rice.................................................................            26,500 (5)          *
Roger L. Pierce...............................................................           189,583 (6)          *
Evon A. Kelly.................................................................           492,000 (7)        2.5%
Robert E. Robichaud...........................................................           203,167 (8)        1.1%
John M. Liviakis..............................................................         7,000,381 (9)       32.6%
  2420 "K" Street, Suite 220
  Sacramento, CA  95816
Robert B. Prag................................................................        1,422,599 (10)        7.5%
  2455 El Amigo Road
  Del Mar, CA  92014
RBB Bank Aktiengesellschaft...................................................        1,990,056 (11)        9.5%
  Burgring 16,
  8010 Graz, Austria
Bold Street, LLC..............................................................        2,052,336 (12)        9.7%
  c/o Thomson Kernaghan & Co.
  365 Bay Street, Suite 1000, 10th Fl.
  Toronto, Ontario M5H2V2
Tonga Partners LP and Cuttyhunk Fund Limited..................................        1,483,824 (13)       7.21%
  c/o Cannell Capital Management
  600 California Street, 14th Fl.
  San Francisco, CA 94108
All directors and executive officers as a group (7 persons)...................        3,233,093 (14)       14.7%
------------------
</TABLE>

 * Represents less than 1% of outstanding shares.

(1)  Except as  specifically  indicated  in the  footnotes  to this  table,  the
     persons  named in this table have sole  voting  and  investment  power with
     respect to all shares of common stock shown as beneficially  owned by them,
     subject to community property laws where applicable.  Beneficial  ownership
     is determined in accordance with the rules of the United States  Securities
     and Exchange  Commission.  In computing  the number of shares  beneficially
     owned by a person and the  percentage  ownership of that person,  shares of
     common  stock  subject to  options,  warrants or rights held by that person
     that are currently  exercisable  or  exercisable,  convertible  or issuable
     within 60 days of August 31,  1999,  are deemed  outstanding.  Such shares,
     however,  are not  deemed  outstanding  for the  purpose of  computing  the
     percentage ownership of any other person.

                                       68
<PAGE>

(2)  Includes 1,276,563 shares which Mr. Leavitt has the right to acquire within
     60 days of August 31, 1999,  through the exercise of common stock  purchase
     warrants.  Does not include up to 4,098,437  additional  shares  subject to
     warrants which Mr.  Leavitt has been granted but which are not  exercisable
     prior to November 1, 1999.
(3)  Includes 555,000 shares which Mr. Stambaugh has the right to acquire within
     60 days of August 31, 1999, through the exercise of stock options.
(4)  Includes 136,781 shares which Mr. Winter has the right to acquire within 60
     days of August 31, 1999, through the exercise of stock options.
(5)  Includes 26, 500 shares  which Mr. Rice has the right to acquire  within 60
     days of August 31, 1999, through the exercise of stock options.
(6)  Represents  189,583 shares which Mr. Peirce has the right to acquire within
     60 days of August 31, 1999, through the exercise of stock options.
(7)  Represents  492,000  shares which Mr. Kelly has the right to acquire within
     60 days of August 31, 1999, through the exercise of stock options.
(8)  Represents  203,167  shares  which Mr.  Robichaud  has the right to acquire
     within 60 days of August 31, 1999, through the exercise of stock options.
(9)  The  information  shown is based upon Schedule 13D  (Amendment No. 6) dated
     May 24, 1999, filed on behalf of Liviakis  Financial  Communications,  Inc.
     ("LFC"),  John M. Liviakis and Renee A. Liviakis and  information  known to
     USWD based on its consulting  agreements  with LFC and the number of shares
     issued for the conversion of debt (in the form of notes payable due LFC) to
     equity.  John M. and Renee A. Liviakis are the owners of LFC. The number of
     shares shown includes a total of 3,523,423  shares of common stock owned by
     Mr. Liviakis as an individual, plus 1,132,580 shares of common stock issued
     to LFC  pursuant  to  three  consulting  agreements  between  USWD  and LFC
     effective as of July 25, 1997,  August 1,1998 and July 1, 1999. USWD issued
     225,000  shares,  217,500  shares and 690,000 shares to LFC under the three
     agreements,  respectively. Also included are 2,344,458 shares issued to LFC
     upon  conversion  of  $1,990,000  principal  amount of debt (in the form of
     notes  payable due LFC) to common stock  pursuant to an  agreement  entered
     into  as  of  March  19,  1999.  See  "Certain  Relationships  and  Related
     Transactions - Transactions with Liviakis Financial Communications, Inc."
(10) Mr. Prag is a former  executive  officer of LFC. The shares of common stock
     are owned by Mr. Prag as an  individual.  See  "Certain  Relationships  and
     Related Transactions - Transactions with Liviakis Financial Communications,
     Inc."
(11) RBB Bank is the record owner,  as agent for various of its clients,  of the
     securities  included in the table.  Includes 40,242 shares held by RBB Bank
     on behalf of its  clients,  328,563  shares  issuable  upon  conversion  of
     270,000  shares of USWD's  Series A Preferred  Stock,  1,168,224  shares of
     common  stock  issuable  upon the  conversion  of  $1,000,000  of USWD's 6%
     Convertible  Debentures due July 21, 2000, and 265,599 shares issuable upon
     conversion  of 227,353  shares of Series B  Preferred  Stock,  based on the
     Market Price (as defined in the instruments) and the applicable discount to
     Market Price as of August 31, 1999. The number shown also includes:  50,000
     shares of common stock underlying a common stock purchase warrant issued to
     RBB Bank in conjunction with the purchase of the 6% Convertible Debentures;
     20,000 shares of common stock  underlying a common stock  purchase  warrant
     issued as interest on a bridge  loan;  and 117,427  shares of common  stock
     underlying  common stock purchase  warrants  issued in  conjunction  with a
     partial  redemption of Series A Preferred Stock, all of which are presently
     exercisable.   See  "Certain   Relationships  and  Related  Transactions  -
     Transactions with RBB Bank Aktiengesellschaft."
(12) Represents  1,752,336  shares  issuable upon  conversion of USWD's Series B
     Preferred  Stock,  based on the Market Price (as defined in the instrument)
     and the  applicable  discount to Market  Price as of August 31,  1999,  and
     300,000 shares of common stock  underlying  common stock purchase  warrants
     issued  to Bold  Street  in  conjunction  with  the  purchase  of  Series B
     Preferred Stock.
(13)Represents 1,168,224 shares issuable upon conversion of $1,800,000 of USWD's
     6% Convertible  Debentures and 265,599 shares  issuable upon  conversion of
     227,353 shares of Series B Preferred  Stock,  based on the Market Price (as
     defined in the instruments) and the applicable  discount to Market Price as
     of August 31, 1999,  and 50,000  shares of common stock  underlying  common
     stock purchase warrants issued to Tonga Partners and Cuttyhunk Fund Limited
     in conjunction with the purchase of the 6% Convertible Debentures.
(14) Includes  all shares  underlying  options  and  warrants  as  described  in
     footnotes (2) - (5) and (8) of this table.



                                       69
<PAGE>

            Certain Holders of Series A and Series B Preferred Stock
<TABLE>
<CAPTION>

                                                              Stock Beneficially Owned (1)
                                                 ---------------------------------------------------
          Name of Beneficial Owner                   Number of           Percent of        Number of           Percent of
          ------------------------               Shares - Series A         Class            Shares -              Class
                                                     Preferred           ----------         Series B           ----------
                                                 -----------------                         Preferred
                                                                                           ---------
<S>                                                <C>                   <C>               <C>                 <C>
Dean M. Leavitt                                         -0-                  0%               -0-                  0%

Rod L. Stambaugh                                        -0-                  0%               -0-                  0%

Robert E. Robichaud                                     -0-                  0%               -0-                  0%

Chester N. Winter                                       -0-                  0%               -0-                  0%

Alvin C. Rice                                           -0-                  0%               -0-                  0%

Roger L. Peirce                                         -0-                  0%               -0-                  0%

Evon A. Kelly                                           -0-                  0%               -0-                  0%

All directors and executive officers as a group         -0-                  0%               -0-                  0%
(7 persons)

RBB Bank Aktiengesellschaft (2)                       270,000              35.9%             227,353              11.6%
Burgring 16
8010 Graz Austria

The Endeavor Capital Fund                             389,110              51.8%              -0-                  0%
14/14 Divrei Chaim Street
Jerusalem  94479 Israel

CNCA - SCT Brunoy                                      92,500              12.3%              -0-                  0%
Sub A/C BGP
30 Rue des Vallies
91300 Brunoy  France

Cuttyhunk Fund Limited (3)                              -0-                  0%               90,941              4.7%
73 Front Street
Hamilton Hm 12 Bermuda

Tonga Partners LP (3)                                   -0-                  0%              136,411              7.0%
c/o Cannell Capital Management
600 California Street, 14th Fl.
San Francisco, CA 94108

Bold Street, LLC                                        -0-                  0%            1,500,000              76.7%
c/o Thomson Kernaghan & Co.
365 Bay Street, Suite 1000, 10th Fl.
Toronto, Ontario M5H 2V2
------------------
</TABLE>

(1)  To the Company's knowledge,  except as otherwise indicated in the footnotes
     to this  table,  all  persons  named in this  table  have sole  voting  and
     investment  power with  respect to all shares of Series A  Preferred  Stock
     shown as  beneficially  owned by them,  subject to community  property laws
     where applicable. Beneficial ownership is determined in accordance with the
     rules of the United States Securities and Exchange Commission. There are no

                                       70
<PAGE>

     shares of Series A Preferred Stock or Series B Preferred  Stock,  which are
     subject to options,  warrants  or rights  held by any person.  The Series A
     Preferred  Stock and Series B Preferred  Stock are not  publicly  traded or
     registered  under the  Securities  Exchange  Act of 1934.  The Series A and
     Series B Preferred  Stocks do not  generally  have voting  rights except as
     specifically provided under Colorado law.

(2)  RBB Bank  Aktiengesellschaft  is the record owner of the shares.  RBB holds
     the shares as agent for various individuals who share voting and investment
     power  over the  shares.  The  Company  has  been  advised  that no  single
     individual  in the RBB Bank  client  group owns 5% or more of the shares of
     Series A Preferred Stock or Series B Preferred Stock.

(3)  The Company has been  advised  that  voting and  investment  power over the
     shares is exercisable by Cannell Capital Management, located at 750 Battery
     Street, San Francisco, CA, 94111.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Transactions with Cardservice International, Inc.

     Mr. Caesar  Berger,  a director of the Company until May 1999,  was also an
officer of the  Company's  largest  customer,  Cardservice  International,  Inc.
("CSI").  Mr. Roger Peirce,  another  former officer and director of the Company
was a  "nonvoting"  director  of CSI.  Sales to CSI  approximated  $564,000  and
$178,000 in fiscal 1999 and 1998, respectively.

     On October 28, 1998, the Company borrowed $500,000 from the Chief Executive
Officer  and 50% owner of CSI.  The note bore  interest  at 8% per annum and was
payable in full on the earlier of the  receipt by the  Company of proceeds  from
the sale of the Company's common stock to this individual or January 1, 1999. In
consideration  for the loan,  the Company  also  agreed to issue a common  stock
purchase warrant exercisable to purchase 25,000 shares of common stock at $3.038
per share through  October 27, 2001. On March 19, 1999,  USWD and the noteholder
agreed to convert the  principal  and accrued  interest  into 589,213  shares of
common stock. The shares were issued on June 24, 1999.

     During fiscal 1996,  CSI  purchased  $162,500 of raw materials on behalf of
the Company in exchange for 142,544 shares of common stock issued  subsequent to
June 30, 1996 at 150% of the then current  fair market  value plus  registration
rights  after one year on all stock  owned by CSI.  This  transaction  increased
CSI's  ownership  in the  Company  from 2% to 5%.  At  June  30,  1998,  CSI had
completely divested its stock interest in the Company. Additionally, the Company
provides  sales  rebates to CSI on  POS-50(R)  units sold by CSI to end users of
product built with the raw materials  purchased using the amounts  advanced from
CSI.  Through  June  30,  1999,  a total of  $93,000  had been  paid  under  the
agreement.

Transactions with Liviakis Financial Communications, Inc.

     In July of 1997,  the Company  entered  into a  Consulting  Agreement  with
Liviakis  Financial  Communications,  Inc.  and  its  affiliates,  Messrs.  John
Liviakis and Robert B. Prag, ("LFC") pursuant to which LFC agreed to provide the
Company with financial and business consulting and public and investor relations
services.  The Company was  obligated to pay LFC  consulting  fees of $10,000 in
cash and  300,000  shares of its  common  stock  over the  one-year  term of the
Consulting Agreement.  75% of the shares were issued to LFC and 25% to Mr. Prag.
Pursuant to the Consulting Agreement,  the Company was also obligated to pay LFC
cash  equal to 2.5% of the  gross  proceeds  received  in any  direct  financing
located for the Company by LFC.

     The  Company  also sold a total of  3,500,000  shares  of common  stock and
warrants  to  purchase  up to an  additional  1,600,000  shares of common  stock
exercisable at $.01 per share to Mr.  Liviakis  (2,625,000  shares and 1,200,000
warrants) and Mr. Prag (825,000 shares and 400,000  warrants) in August 1997 for
$500,000 in cash.  The  warrants  were  exercised  during  fiscal 1998 and 1999.
Pursuant  to this  transaction,  LFC and  these  affiliates  became  significant
shareholders  of the  Company.  The  common  stock  issued  for cash,  under the



                                       71
<PAGE>


Consulting  Agreement  and  upon  exercise  of  the  warrants  to  LFC  and  its
affiliates,  has certain registration  rights,  including one-time demand rights
and unlimited piggyback rights.

     Pursuant to the  agreements,  Messrs.  Liviakis  and Prag were  granted the
right to approve  the  appointment  of certain  officers  and  directors  of the
Company.

     Since  the  LFC  related  financing  transaction  and  the  LFC  Consulting
Agreement were entered into by the Company at  approximately  the same time, the
Company  has  treated  these  transactions  as one  transaction  for  accounting
purposes. Based on the fair market value of the common stock as determined by an
independent valuation, the initial 3,500,000 shares of common stock and warrants
for  1,600,000  shares of common stock issued in the  transactions,  net of cash
proceeds  received,  were valued at  approximately  $1,285,000  and  recorded as
prepaid  consulting  services.  The  consulting  services  were  amortized  on a
straight-line  basis over the term of the Consulting  Agreement  commencing with
the July 25, 1997 effective date of the agreement. The 300,000 shares which were
issuable  over the term of the contract were valued as such shares  vested,  and
resulted in an additional  $1,085,000 in consulting expenses during fiscal 1998.
All of these  shares were  included in the  registration  statement  that became
effective  August 7,  1998,  although  none of the  shares  were sold  under the
registration  statement prior to the shares being removed from registration by a
post-effective amendment filed as of June 24, 1999.

     In connection  with the closing of the sale of $3,060,000 of 8% Convertible
Debentures,  the Company paid LFC $76,500 in December 1997. In conjunction  with
the July 1998 closing of the sale of $2,000,000 of 6%  Convertible  Subordinated
Debentures due July 21, 2000, LFC was paid $50,000, as a finder's fee.

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

     On June 30,  1998,  the Company and LFC agreed to extend  their  consulting
relationship through the entry of a new consulting agreement covering the period
from August 1, 1998 through March 15, 1999 (the "New LFC Agreement").  The terms
of the New  LFC  Agreement  are  substantially  the  same  as the  original  LFC
Agreement. For services to be rendered under the New LFC Agreement, LFC received
290,000  shares of common stock,  issuable as a signing bonus upon  execution of
the New LFC Agreement. LFC received 75% of the shares and 25% were issued to Mr.
Prag.  The common stock  issued to LFC under the new  Consulting  Agreement  has
certain  registration  rights.  In  conjunction  with  the  entry of the New LFC
Agreement  LFC agreed to a further  lock-up  of all shares  owned by LFC and its
affiliates,  pursuant  to which  they  agreed  not to sell  such  shares  before
February 1, 1999,  even  though  certain of those  shares  were  included in the
registration  statement which became effective August 7, 1998. Under the New LFC
Agreement,  USWD also  agreed to expand its Board of  Directors  to include  two
additional outside directors who are acceptable to LFC. During the first half of
fiscal  1999,  the  appointment  of Messrs.  Peirce and  Russell to the Board of
Directors was approved by LFC.  Messrs.  Peirce and Russell have since  resigned
from the Board.

     On September 22, 1998,  the Company  borrowed  $1,300,000  from LFC under a
note payable, which was due April 1, 1999, and bore interest at 8% per year. The
Company  used $1  million of the  proceeds  to redeem  $833,000  of its Series A
Preferred Stock.  Substantially  all available  intangible assets of the Company
were pledged to secure the note.  During the period from  November  1998 through
February 1999, USWD received bridge loans from LFC totaling $690,000 in the form
of 8% notes  payable due April 1, 1999.  On March 19,  1999,  USWD and  Liviakis
Financial  Communications  agreed to the  conversion  of $1,990,000 of principal
plus  accrued  interest to  2,344,458  shares of common  stock.  The shares were
issued on June 24, 1999.

     On July 1, 1999 USWD  entered  into an  agreement  with LFC, to provide the
Company with public relations and investor  relations services through March 15,
2000.  The Company issued 690,000 shares of common stock to LFC for its services
under this  agreement.  LFC is entitled to receive a 2.5% cash  finder's fee for
financing located by LFC and a 2% finder's fee based on the "total consideration
provided" through any acquisition located by LFC.



                                       72
<PAGE>


     LFC,  its  present and former  affiliates  have agreed not to sell any USWD
common stock acquired in these various  transactions  before the end of calendar
year 1999.

Transactions with entrenet Group, LLC

     In June 1997, the Company entered into a consulting agreement with entrenet
Group,  LLC  ("entrenet"),  for purposes of  assisting  the Company in strategic
planning, the creation of a detailed business and marketing plan and in locating
financing sources.  For its services,  the Company issued a $150,000 convertible
promissory note to entrenet, with interest payable at 10% per annum, due in full
on or before June 2, 1998.  At entrenet's  election,  the principal and interest
converted  into 328,750  shares of common  stock of the Company  during the year
ended June 30, 1998, at $.50 per share.  In addition,  the Company was obligated
to pay entrenet a finder's fee of 8% for any direct financing it located for the
Company,  payable  in Company  securities  identical  to what for that  $500,000
financing. During fiscal 1998, the Company and entrenet were in discussions over
the  interpretation of the provisions  specifying the  consideration  payable to
entrenet  as its  finder's  fee for  locating  LFC.  The matter was  resolved in
November  1997,  whereby the Company agreed to issue entrenet a total of 280,000
shares of its common  stock  issuable to it under the note and as payment of the
finder's  fee.  Those  shares  were  issued in April  1998 and  included  in the
Registration Statement,  which became effective August 7, 1998, although none of
the shares were sold under the registration  statement prior to the shares being
removed from  registration  by a  post-effective  amendment filed as of June 24,
1999.

     As of March 12, 1998,  the Company  entered into an agreement with entrenet
to provide  business  and  financial  consulting  services to the Company and to
assist the Company in locating additional  financing.  The term of the agreement
was for six months  from March 12, 1998 and  renewed  for  additional  six-month
terms unless at least 60 days notice was given to terminate the agreement  prior
to the end of a term. For its advisory  services  under the agreement,  entrenet
was paid a fee of $60,000  plus  interest in July 1998.  In  addition,  entrenet
received a common stock purchase  warrant to purchase 10,435 shares at $5.75 per
share, exercisable until March 11, 2003. The Consulting Agreement was terminated
in September  1998.  The Company agreed to pay the remaining fees to entrenet of
$20,000 and issued a common stock purchase warrant for 8,333 shares  exercisable
at $2.40 per share until  September 11, 2003. The shares issuable on exercise of
this warrant carry certain  registration rights. No warrants have been exercised
as of June 30, 1999.  entrenet is entitled to receive  certain  finder's fees on
future  financings  and other  transactions  between  the  Company  and  certain
specified parties within two years of September 12, 1998.

Transactions with RBB Bank Aktiengesellschaft

     USWD and RBB Bank have  engaged in various  transactions  over the last two
years, as follows:

     RBB Bank Aktiengesellschaft  ("RBB Bank") is the record owner, as agent for
various of its clients,  of 270,000  shares of USWD's Series A Preferred  Stock,
which it purchased in December of 1997. RBB Bank  originally  purchased as agent
for its  clients,  $1,600,000  of 8%  Convertible  Subordinated  Debentures  Due
December  31,  1999  (all of which  converted  to  1,600,000  shares of Series A
Preferred Stock as of February 9, 1998) in an "arms-length" transaction, thereby
making RBB Bank, as agent for its clients, a significant shareholder of USWD

     As of March 12,  1998,  USWD and Mr.  Richard P.  Draper and his  assignee,
Tillicombe International,  LDC ("Tillicombe") entered into an agreement by which
Mr. Draper and Tillicombe agreed to allow USWD to assign to third parties USWD's
rights in a call option which USWD had on 367,684  shares of USWD's Common Stock
owned by Tillicombe  (the "Call  Option") in return for payment to Tillicombe of
$25,000 and the release of USWD's  voting and option  rights as to 30,000 shares
which were also subject to the Call Option.  USWD  originally  acquired the Call
Option in October 1995, in  conjunction  with the  dissolution  of a subsidiary,
Direct Data,  Inc.,  which USWD had acquired in 1994,  in which Mr. Draper was a
principal  shareholder.  Between  March  15 and  June 15,  1998,  USWD  sold and
assigned the Call Option on 250,000  shares to RBB Bank.  RBB Bank purchased the
Call Option in five  increments of 50,000 share options each,  and paid USWD 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 paid the acquisition price for
the Call Option,  as well as the exercise  price to  Tillicombe  prior to taking
delivery of the shares. USWD realized a total of approximately $997,000 from the
sale of these Call Options to RBB Bank.



                                       73
<PAGE>


     Effective July 1, 1998,  USWD borrowed  $250,000 from RBB Bank and issued a
promissory  note which was payable in full on or before  September 9, 1998.  The
loan was intended as a  short-term  bridge loan and was repaid from the proceeds
Company's 6% Debentures  issued on July 22, 1998. In conjunction with this loan,
USWD also issued a Common Stock purchase  warrant to RBB Bank to purchase 20,000
shares of Common  Stock at $4.375 per share,  exercisable  through  September 9,
2001. See also Note 11 to the Financial Statements.

     On July 22, 1998,  RBB Bank  purchased  $1,000,000 of USWD's 6% Convertible
Subordinated  Debentures Due July 21, 2000,  together with Common Stock purchase
warrants  exercisable  to purchase  50,000  shares of Common  Stock at $4.50 per
share through July 21, 2001.  The shares  underlying  the 6% Debentures  and the
warrants are included in the  registration  statement filed by USWD with the SEC
as of June 30, 1999 (SEC File No.  333-81897)  which was not yet effective as of
the date of filing of this Report.

     Effective  September  17,  1998 USWD and RBB Bank  agreed  that USWD  would
redeem 440,583 shares of Series A Preferred Stock held by RBB Bank for $528,700.
RBB Bank agreed to refrain from  converting  any  additional  shares of Series A
Preferred  Stock until at least  October 15, 1998 after which time  one-third of
the Series A Preferred  shares  could be  converted  to Common  Stock on each of
October 15,  November 15, and December 15, 1998,  respectively.  In  conjunction
with this  transaction,  USWD agreed to issue  Common  Stock  purchase  warrants
exercisable  to  purchase  that  number of shares of Common  Stock equal to five
percent  of the  number  of  shares  of  Series A  Preferred  Stock  held by the
participating  investor at the end of each one month period,  exercisable at the
current  market price of the Common Stock at each  issuance  date (the "Series A
Redemption  Warrants").  USWD  issued RBB Bank Series A  Redemption  Warrants to
purchase: 46,485 shares exercisable at $2.40 per share through October 15, 2001;
35,471  shares  exercisable  at $3.36 per share through  November 15, 2001;  and
35,471 shares  exercisable  at $3.69 per share through  December 15, 2001.  USWD
also agreed to increase  the  dividend  rate from 4% to 8% on the balance of the
unconverted  Series A Preferred Stock and to file a new  registration  statement
with the SEC by October 31, 1998, to register the shares underlying the Series A
Redemption Warrants as well as additional shares issuable upon conversion of the
Series  A  Preferred  Stock  beyond  those  included  in the  SB-2  Registration
Statement  declared  effective August 7, 1998. That registration had included an
insufficient  number of shares to cover all  conversions  of Series A  Preferred
Stock because of a decline in the market price of USWD's Common Stock subsequent
to  effectiveness  of that  registration  statement.  USWD  failed  to file  the
required  registration  statement  but has  included the shares  underlying  the
Series A Redemption Warrants in the registration statement filed with the SEC as
of June 30, 1999 (SEC File No.  333-81897) which was not yet effective as of the
date of filing of this Report.

     On March 12, 1999,  USWD borrowed  $250,000 from RBB Bank,  entering into a
Note and Common  Stock  Purchase  Agreement.  As part of the  agreement,  50,000
shares of Common Stock and a $250,000  promissory  note bearing  interest at 10%
due June 12, 1999 were issued to RBB Bank.  Liviakis  Financial  Communications,
Inc.  agreed to guarantee the note. In connection with the issuance of the note,
USWD  also  granted  RBB Bank a right of first  refusal  to fund any  additional
bridge  financing  needed by USWD,  to be  exercised  within one day of RBB Bank
being notified of the terms of any such additional bridge financing.  The shares
issued under this  agreement are  restricted  securities,  with USWD agreeing to
include the shares in the  registration  statement  filed for the 6% Convertible
Debentures  and  other  share   issuances.   The  shares  are  included  in  the
registration  statement  filed  with the SEC as of June 30,  1999  (SEC File No.
333-81897), which was not yet effective as of the date of filing of this Report.

     The March 12, 1999 loan from RBB Bank was intended as a  short-term  bridge
loan and was originally required to be repaid from the proceeds of any aggregate
equity  placements  done by USWD that amounted to at least  $1,000,000 in equity
financing.  In April  1999,  in  conjunction  with the  closing  of the Series B
Preferred  Stock  placement,  RBB Bank  agreed to waive  the right to  immediate
repayment of the $250,000 owed to it. RBB Bank agreed to forebear  initiating an
action  against  USWD to collect  the amount due until the earlier of receipt by
USWD of funding in the aggregate of at least $2,500,000, or December 1, 1999.

     In May 1999,  RBB Bank agreed to accept a total of 227,353 shares of USWD's
Series B Preferred  Stock in lieu of penalties  and interest  owing through June
30, 1999 on $1,000,000 of USWD's 6% Debentures held by RBB Bank's  clients,  and
to  waive  certain  prior   defaults  on  the  6%  Debentures  and  the  related
registration  rights  agreement.  RBB Bank also  agreed  not to  declare  the 6%
Debentures  in default for failure to pay  interest or register  the  underlying
shares of Common  Stock  unless and until the  holders of the Series B Preferred
Stock have the right to require USWD to redeem the Series B Preferred Stock.


                                       74
<PAGE>

     On June 30,  1999,  USWD filed a  registration  statement on Form SB-2 (SEC
File No.  333-81897) in which RBB Bank is named as selling  security  holder for
shares of Common Stock  underlying  $1,000,000 of 6% Debentures,  various common
stock purchase warrants (described above),  227,353 shares of Series B Preferred
Stock and 50,000 shares of Common Stock, all held by RBB Bank's clients. A total
of 4,127,639 shares of Common Stock are included in that registration  statement
for sale by RBB Bank's clients.  As of the date of this report, the registration
statement has not yet been declared effective.  RBB Bank has requested that upon
filing an amendment to that  registration  statement  USWD include all shares of
Common Stock underlying RBB Bank's clients Series A Preferred Stock.

Transactions with ADATOM, Inc.

     During fiscal 1998,  the Company  purchased  furniture and equipment in the
approximate  amount of $200,000 through a company owned by Mr. Richard Barton, a
director of the Company at the time of the purchases.

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

 Exhibit
 Number   Description of Exhibit
 -------  ----------------------

     3.1  Amended Articles of Incorporation (8)

     3.2  Articles of  Amendment  to the  Articles of  Incorporation  (including
          Designation of Series B Cumulative  Convertible  Redeemable  Preferred
          Stock) filed by USWD on April 29, 1999 (18)

     3.3  Amended Bylaws (3)

     4.1  Specimen Common Stock Certificate (14)

     4.2  1992 Stock Option Plan, as amended (7) (Z)

     4.3  Common Stock Purchase Warrant issued to Kenneth DeJohn on or about May
          1, 1993 (5)

     4.4  Form of Common  Stock  Purchase  Warrant  issued to John  Liviakis and
          Robert Prag as of August 4, 1997 (Included IN Exhibit 10.11)


     4.5  Designation  of  Series  A  Cumulative   Convertible  Preferred  Stock
          (Included in Exhibit 3.1)

     4.6  Designation  of  Series  B  Cumulative   Convertible  Preferred  Stock
          (Included in Exhibit 3.2)

     4.7  Common Stock  Purchase  Warrant  dated  December 10, 1997 issued to JW
          Genesis Securities, Inc. (10)

     4.8  Common Stock Purchase Warrant dated March 12, 1998, issued to entrenet
          Group, LLC (12)

     4.9  Promissory Note for $60,000 issued to entrenet Group, LLC, as of March
          12, 1998 (12)

     4.10 Form of Registration  Rights  Agreement - Issued to Series A Preferred
          Stockholders as of December 10, 1997 (10)

     4.11 Form of  Subscription  Agreement  entered into with Series A Preferred
          Stockholders as of December 10, 1997 (10)

     4.12 Common Stock  Purchase  Warrant issued to James B. Walters on or about
          April 12, 1993 (5)

     4.13 Agreement to Amend Stock Purchase Warrant effective April 1, 1998 with
          James Walters (13)

     4.14 Promissory  Note - $250,000  dated June 26,  1998,  issued to RBB Bank
          Aktiengesellschaft (13)



                                       75
<PAGE>


     4.15 Common Stock  Purchase  Warrant dated June 26, 1998 issued to RBB Bank
          Aktiengesellschaft (13)

     4.16 Lock-up  Letter   Agreement   between  USWD  and  Liviakis   Financial
          Communications,  Inc.,  John M. Liviakis and Robert B. Prag dated June
          30, 1998 (13)

     4.17 Debenture  Agreement for 6%  Convertible  Subordinated  Debentures Due
          July 21, 2000 (11)

     4.18 Form  of  Common  Stock  Purchase   Warrant  issued  to  6%  Debenture
          Purchasers  and JW Genesis  Securities,  Inc. as of July 21 - 27, 1998
          (11)

     4.19 Form of Registration Rights Agreement for 6% Convertible  Subordinated
          Debentures Due July 21, 2000 and Common Stock Purchase  Warrant issued
          to 6% Debenture Purchasers and JW Genesis Securities,  Inc. as of July
          21 - 27, 1998 (11)

     4.20 Modification  Agreement  with  Certain  Holders of Series A  Preferred
          Stock Effective as of September 17, 1998 (15)

     4.21 Form of Common Stock Purchase  Warrants  issued to Certain  Holders of
          Series A Preferred Stock  participating  in the  modifications  to the
          terms of the  Series A  Preferred  Stock  (which was  effective  as of
          September 17, 1998) (15)

     4.22 Form of Common Stock Purchase  Warrant issued to Charles  Burtzloff in
          conjunction with the $500,000 loan made to USWD as of November 1, 1998
          (15)

     4.23 Non-Qualified Common Stock Option issued to Evon A. Kelly effective as
          of August 4, 1997 (15) (Z)

     4.24 Non-Qualified  Common Stock Option issued to Roger L. Peirce effective
          as of November 23, 1998 (in  replacement  for  cancelled  Stock Option
          originally issued August 22, 1998) (16) (Z)

     4.25 Confirmation  Letter  Agreement  dated  December  23,  1998 re:  stock
          lock-up,  between USWD and  Liviakis  Financial  Communications,  John
          Liviakis and Robert B. Prag (16)

     4.26 Note and Common Stock Purchase  Agreement  with RBB Bank,  dated March
          12, 1999 (17)

     4.27 Promissory  Note  Conversion and Common Stock Purchase  Agreement with
          Burtzloff Family Trust, dated March 19, 1999 (17)

     4.28 Common Stock Purchase Agreement Pursuant to Note Payable Conversion to
          Equity with Liviakis Financial  Communications,  Inc., dated March 19,
          1999 (17)

     4.29 Form of Series B Preferred Stock Securities Purchase Agreement entered
          into with purchasers of Series B Preferred Stock dated as of April 30,
          1999 (18)

     4.30 Form of Series B Preferred Stock Registration Rights Agreement entered
          into with purchasers of Series B Preferred Stock dated as of April 30,
          1999 (18)

     4.31 Form of Common  Stock  Purchase  Warrant  issued to cash  purchaser of
          Series B Preferred Stock as of May 6, 1999 (18)

     4.32 Form of Waiver of Rights and First  Amendment to  Debenture  Agreement
          (relating to 6% Convertible Subordinated Debentures Due July 21, 2000)
          entered into as of April 30, 1999 (18)

     4.33 Form of Supplement  to Series B Preferred  Stock  Securities  Purchase
          Agreement  entered  into with  holders of USWD's 6%  Debentures  as of
          April 30, 1999 (18)

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<PAGE>

     4.34 First  Amendment to Note and Common Stock Purchase  Agreement  entered
          into with RBB Bank Aktiengesellschaft AG as of April 22, 1999 (18)

     4.35 Common Stock  Purchase  Warrant issued to Dean M. Leavitt as of May 3,
          1999 (19) (Z)

     4.36*Form of Stock Option Agreement under 1992 Stock Option Plan (Z)

     4.37*Non-Qualified  Common  Stock  Option  issued  to  Rod L.  Stambaugh  ,
          effective as of May 13, 1999.

     4.38*Non-Qualified  Common  Stock  Option  issued to  Robert E.  Robichaud,
          effective as of May 13, 1999.

     10.1 License and Volume  Purchase  Agreement  with OMRON Systems of America
          with Solectron Addendum (1)

     10.2 Promissory Note with OMRON Systems, Inc. (3)

     10.3 Release Agreement with Richard P. Draper (3)

     10.5 Agreement  for   Manufacture  and  Purchase   between  USWD,   Uniform
          Industrial Corp and Cardservice International, Inc. (3)

     10.6 AT&T CDPD Value Added Reseller Agreement dated April 30, 1997** (6)

     10.7 Bell Atlantic  AIRBRIDGE  Packet  Service  Agreement  dated August 12,
          1997** (6)

     10.8 Engagement  Agreement  between USWD and entrenet Group, LLC dated June
          3, 1997 (6)

     10.9 GTE Leasing Corporation Promissory Note dated August 6, 1997 (6)

    10.10 GTE Mobilnet  Communications  Service and  Equipment  Agreement  dated
          August 1, 1997** (6)

    10.11 Liviakis  Financial  Communications,  Inc.  Consulting  Agreement  and
          forms of  Subscription  Agreements  for the purchase of U.S.  Wireless
          Data,  Inc. Common Stock and Warrants from John M. Liviakis and Robert
          B. Prag and effective as of July 25, 1997 (6)

    10.12 Member  Service  Provider  Sales and Service  Credit  Card  Processing
          Agreement  between  U.S.  Wireless  Data,  Inc.  and NOVA  Information
          Systems, Inc. dated January 1, 1997** (6)

    10.13 Purchase  Agreement with Unicard  Systems,  Inc.  dated  September 18,
          1997** (6)

    10.14 Purchase  Agreement with Wellex Systems  Manufacturing  & Distribution
          Group dated August 7, 1997 (6)

    10.15 Underwriting  Agreement between USWD, RAS Securities Corp.,  Walford &
          Company, Incorporated and Thomas James Associates, Inc. dated December
          2, 1993 (2)

    10.16 Merchant  Marketing  and  Services  Agreement  with  National  Bank of
          Commerce dated March 9, 1998** (12)

    10.17 Assignment  Agreement (with Escrow Provisions) with Richard P. Draper,
          Tillicombe International LDC and Ireland,  Stapleton,  Pryor & Pascoe,
          P.C., as escrow agent, dated March 12, 1998 (12)


                                       77
<PAGE>


    10.18 Form  of  Option  Purchase  and  Assignment   Agreement  (relating  to
          assignment of call option on Tillicombe stock) (12)

    10.19 Joint CDPD Sales and Marketing  Agreement  with Bell  Atlantic  Mobile
          dated as of March 23, 1998** (12)

    10.20 Engagement  Agreement  between USWD and entrenet Group,  LLC, dated as
          of March 12, 1998 (12)

    10.21 Form of Settlement and Mutual Release  Agreement  between USWD and the
          Delle Donne Noteholders entered into as of April 9, 1998 (12)

    10.22 Form of  Settlement  and Mutual  Release  Agreement  between  USWD and
          certain Noteholders entered into as of April 7, 1998 (12)

    10.23 Note and Warrant  Purchase and Security  Agreement dated June 25, 1998
          between USWD and RBB Bank Aktiengesellschaft (13)

    10.24 Consulting    Agreement   between   USWD   and   Liviakis    Financial
          Communications, Inc. dated June 30, 1998 (13)

    10.25 Joint  Marketing  and  Operating   Agreement  with  Ameritech   Mobile
          Communications, Inc. dated July 16, 1998 (11)

    10.26 Amendment to Promissory Note with OMRON Systems,  Inc. effective as of
          August 27, 1998 (15)

    10.27 Amendment  dated  September  9,  1998 to GTE  Mobilnet  Communications
          Service and Equipment Agreement dated August 1, 1997 (15)

    10.28 Promissory   Note   ($1,300,000)    issued   to   Liviakis   Financial
          Communications, Inc. dated September 22, 1998 (15)

    10.29 Extension   of   Promissory   Notes   issued  to  Liviakis   Financial
          Communications, Inc., dated January 1, 1999 (16)

    10.30 Promissory  Note  ($500,000)  issued to Chuck  Burtzloff,  Inc.  dated
          October 28, 1998 (15)

    10.31 Extension  of  Promissory  Note  issued to R. Chuck  Burtzloff,  dated
          January 1, 1999 (16)

    10.32 Employment  Agreement  between USWD and Evon A. Kelly dated August 21,
          1998 (15) (Z)

    10.33 Employment  Agreement  between  USWD and Roger L. Peirce  dated August
          17, 1998 (15) (Z)

    10.34 Offer Letter - Robichaud, dated August 21, 1997 (15) (Z)

    10.35 Offer Letter - Mueller, dated November 24, 1997 (15) (Z)

    10.36 Employment  Agreement between USWD and Dean M. Leavitt entered into as
          of May 3, 1999 (19)(Z)

    10.37 Indemnification  Agreement  between USWD and Dean M.  Leavitt  entered
          into as of May 3, 1999 (19)(Z)

    10.38 Software  License  Agreement  -  Maverick   International   Processing
          Service, Inc. - May 28, 1999 (19)


                                       78
<PAGE>

    10.39 Purchase  Agreement  dated as of June 30,  1999 and  closed on July 7,
          1999, between U.S. Wireless Data, Inc. and PMT Services Inc., a wholly
          owned subsidiary of Nova Corporation (20)

    10.40 Consulting  Agreement,  effective  as of July 1,  1999,  between  U.S.
          Wireless Data, Inc. and Liviakis Financial Communications, Inc. (21)

    16    Letter from PricewaterhouseCoopers LLP to the United States Securities
          and Exchange Commission dated August 12, 1999 (22)

    27.1  Financial Data Schedule

    99.1  Letter of Intent with Cardservice International,  Inc. dated September
          30, 1998 (15)

    99.2  Secretary's  Certificate  Re:  Kelly Tax  Indemnification  Agreement -
          November 21, 1997 (15) (Z)
 -----------------

*    Filed herewith.
**   Confidential  treatment  for  certain  portions of this  document  has been
     granted to USWD pursuant to Commission Rule 24b-2  promulgated under of the
     Securities  Exchange  Act of 1934  and/or  Rule 406  promulgated  under the
     Securities  Act of 1933,  as  identified on the first page of the document,
     and at the specific item in the document for which such  treatment has been
     requested.  The  omitted  material  has  been  filed  separately  with  the
     Commission pursuant to Rules 24b-2 and/or 406.

(Z)  This exhibit  constitutes  a  "Management  Contract,  Compensatory  Plan or
     Arrangement" required to be filed as an Exhibit to this Report.

(1)  Incorporated  by reference  from the  like-named  exhibit filed with USWD's
     Registration Statement on Form SB-2, effective on or about December 2, 1993
     (SEC File No. 33-69776).

(2)  Incorporated by reference from the like-named  exhibit filed with Amendment
     No.  5 to  USWD's  Registration  Statement  on  Form  SB-2,  SEC  File  No.
     33-69776-D (filed on December 2, 1993).

(3)  Incorporated  by reference  from the  like-named  exhibit filed with USWD's
     Annual Report on Form 10-KSB for the Fiscal Year Ended June 30, 1995, filed
     on October 13, 1996 (SEC Control No. 95201388).

(4)  Incorporated  by reference  from the  like-named  exhibit filed with USWD's
     Annual Report on Form 10-KSB for the Fiscal Year Ended June 30, 1996, filed
     on October 21, 1996 (SEC Control No. 96645557).

(5)  Incorporated  by reference  from the  like-named  exhibit filed with USWD's
     Annual Report on Form 10-KSB/A  (Amendment No. 2) for the Fiscal Year Ended
     June 30, 1997, filed on January 2, 1998.

(6)  Incorporated  by reference  from the  like-named  exhibit filed with USWD's
     Annual Report on Form 10-KSB/A  (Amendment No. 3) for the Fiscal Year Ended
     June 30, 1997, filed on February 25, 1998.

(7)  Incorporated by reference from the like-named exhibit filed as Exhibit C to
     USWD's  Definitive  Revised Proxy  Statement for the 1997 Annual Meeting of
     Shareholders held on February 6, 1998, filed on January 14, 1998.

(8)  Incorporated  by reference  from the  like-named  exhibit filed with USWD's
     Quarterly  Report on Form 10-QSB for the fiscal  quarter ended December 31,
     1997, filed on February 23, 1998.

(9)  Incorporated  by reference  from the  like-named  exhibit filed with USWD's
     Quarterly  Report on Form 10- QSB/A (1st  Amendment) for the fiscal quarter
     ended December 31, 1997, filed on March 18, 1998.


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<PAGE>


(10) Incorporated  by reference  from the  like-named  exhibit filed with USWD's
     Current  Report  on Form  8-K  Reporting  an  Event of  November  14,  1997
     (earliest event reported), filed on December 17, 1997.

(11) Incorporated  by reference  from the  like-named  exhibit filed with USWD's
     Current  Report on Form 8-K  Reporting an Event of July 16, 1998  (earliest
     event reported), filed on July 31, 1998.

(12) Incorporated  by reference  from the  like-named  exhibit filed with USWD's
     Registration  Statement on Form SB-2 (SEC File No. 333-52625) as of May 14,
     1998.

(13) Incorporated by reference from the like-named  exhibit filed with Amendment
     No.  1 to  USWD's  Registration  Statement  on  Form  SB-2  (SEC  File  No.
     333-52625) as of July 16, 1998.

(14) Incorporated by reference from the like-named  exhibit filed with Amendment
     No.  2 to  USWD's  Registration  Statement  on  Form  SB-2  (SEC  File  No.
     333-52625) as of August 3, 1998.

(15) Incorporated  by reference  from the  like-named  exhibit filed with USWD's
     Annual Report on Form 10-KSB for the Fiscal Year Ended June 30, 1998, filed
     on December 18, 1998.

(16) Incorporated  by reference  from the  like-named  exhibit filed with USWD's
     Quarterly  Report on Form 10-QSB for the fiscal quarter ended September 30,
     1998, filed on January 28, 1999.

(17) Incorporated  by reference  from the  like-named  exhibit filed with USWD's
     Quarterly  Report on Form  10-QSB for the fiscal  quarter  ended  March 31,
     1999, filed on .May 18, 1999.

(18) Incorporated  by reference  from the  like-named  exhibit filed with USWD's
     Current  Report on Form 8-K  Reporting  an Event of May 6,  1999  (earliest
     event reported), filed on May 11, 1999.

(19) Incorporated  by reference  from the  like-named  exhibit filed with USWD's
     Registration Statement on Form SB-2 (SEC File No. 333-81897), filed on June
     30, 1999.

(20) Incorporated  by reference  from the  like-named  exhibit filed with USWD's
     Current  Report on Form 8-K/A  Reporting an Event of July 1, 1999 (earliest
     event reported), filed on July 26, 1999.

(21) Incorporated  by reference  from the  like-named  exhibit filed with USWD's
     Current  Report on Form 8-K  Reporting  an Event of July 1, 1999  (earliest
     event reported), filed on July 22, 1999.

(22) Incorporated  by reference  from the  like-named  exhibit filed with USWD's
     Current Report on Form 8-K/A Reporting an Event of August 5, 1999 (earliest
     event reported), filed on August 20, 1999.

(b)  Reports on Form 8-K.

     During the  fiscal  quarter  ended June 30,  1999,  the  Company  filed the
following Current Reports on Form 8K:

     (1)  Current  Report  reporting  an Event of May 6,  1999  (earliest  event
          reported),  which contained  information under Item 5, "Other Events,"
          reporting the filing of the Company's  Registration  Statement on Form
          SB-2 (SEC File No. 333-81897).


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<PAGE>


                                   SIGNATURES

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

         Dated:  October 13, 1999

                                                     U.S WIRELESS DATA, INC.

                                                     By: /s/ Dean M. Leavitt
                                                         -----------------------
                                                         Dean M. Leavitt
                                                         Chief Executive Officer

     In accordance with the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons in the capacities and
on the dates indicated.

Signatures                     Title                           Date
----------                     -----                           ----


/s/ Dean M. Leavitt           Chief Executive Officer          October 13, 1999
----------------------------   & Director (Principal
Dean M. Leavitt                Executive Officer)


 /s/ Rod L. Stambaugh         President & Director             October 13 , 1999
----------------------------
Rod L. Stambaugh


 /s/ Robert E. Robichaud      Chief Financial Officer,         October 13 , 1999
----------------------------    Secretary & Treasurer
Robert E. Robichaud             (Principal Financial and
                                Accounting Officer)


 /s/ Alvin C. Rice            Director                         October 13 , 1999
----------------------------
Alvin C. Rice


                              Director
----------------------------
Chester N. Winter



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