UNITED STATESSECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549FORM 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, 2004

| | [  ] | 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)

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

420
Lexington Avenue, Suite 2450, New York, New York 10170
(Address of principal executive offices)   
   (Zip Code)

Registrants
telephone number, including area code:     (646)
452-6128

Securities
registered pursuant to Section 12(b) of the Act:    None
Securities registered under Section 12(g) of the Exchange Act$01 Par Value 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 
[   ]     No  [X]

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.     [X]

The
issuers revenues for the fiscal year ended June 30, 2004 were $0. The
aggregate market value of the issuers voting common equity held as of
February 17, 2005 by non-affiliates of the Issuer was approximately $17,000 based
on the closing price of $0.001 as of February 17, 2005.

As of
February 17, 2005, the issuer had 18,159,556 shares of its $0.01 par value common
stock outstanding.

Transitional
Small Business Disclosure Format (check one):     Yes  [   ]     No  [X]

---

U.S.
Wireless Data, Inc.
(Debtor in Possession)
ANNUAL REPORT ON FORM 10-KSB
FOR THE YEAR ENDED JUNE 30, 2004
INDEX

Page

|                                                                     | 
|-------------------------------------------------------------------- | 
|PART I                                                               | 
|Item 1.     DESCRIPTION OF BUSINESS                                  | 
|Item 2.     DESCRIPTION OF PROPERTY                                  | 
|Item 3.     LEGAL PROCEEDINGS                                        | 
|Item 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS      | 
|PART II                                                              | 
|Item 5.     MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS | 
|Item 6.     MANAGEMENTS PLAN OF OPERATION                           | 
|Item 7.     FINANCIAL STATEMENTS                                     | 
|Item 8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON         | 
|ACCOUNTING AND FINANCIAL DISCLOSURE                                  | 
|Item 8A.   CONTROLS AND PROCEDURES                                   | 
|Item 8B.   OTHER INFORMATION                                         | 
|PART III                                                             | 
|Item 9.      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT      | 
|Item 10.    EXECUTIVE COMPENSATION                                   | 
|Item 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS          | 
|AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS                       | 
|Item 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS           | 
|Item 13.    EXHIBITS                                                 | 
|Item 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES                   | 

2

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PART I

ITEM 1.   
DESCRIPTION OF BUSINESS

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

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

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

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

The
Plan also contemplates that the Liquidation Trust will pay
for the prosecution of our pending litigation against AT&T Wireless.
 On February 20, 2004, we commenced arbitration proceedings against
AT&T Wireless whereby we are seeking a $12 million judgment against AT&T
Wireless relating to its decommissioning of the cellular digital packet data
(CDPD) network. Any recoveries, net of the costs of prosecuting the arbitration
and administering the trust, will be distributed by the Liquidation Trust
as described above. Please see Item 3. Legal Proceedings for a more
complete description of the arbitration with AT&T Wireless.

3

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

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

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

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

4

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Certain
information with respect to Messrs. Ellin, Wolf and Regenstein is set forth in
Item 9. Directors and Executive Officers of this Form 10-KSB.

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

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

Through
May 21, 2004, we operated our business from bridge loans and a factoring
agreement pursuant to which funds were advanced to us in anticipation of the
bankruptcy proceedings.

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

ITEM 2.   
DESCRIPTION OF PROPERTY

Until
May 28, 2004, we occupied office space located at 750 Lexington Avenue,
20th Floor, New York, NY 10022 and were party to a lease for such
space with International Associates, L.P. As a result of the reorganization, we
have vacated this space and have occupied a much smaller space at 420 Lexington
Avenue, Suite 2450, New York, NY 10170 for approximately 216 sq. ft plus use of
common area at a cost of $2,295.00 per month, on a month to month basis until
all winding down operations conclude.

5

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ITEM 3.
LEGAL PROCEEDINGS

We are
engaged in ongoing arbitration with AT&T Wireless. In 2000, we entered into
an agreement with AT&T Wireless pursuant to which AT&T Wireless was to
provide CDPD Wireless service to us. In reliance upon that agreement, we
purchased substantially all the assets and assumed certain liabilities of
Cellgate Technologies, LLC. Shortly after completion of the Cellgate
acquisition, AT&T Wireless announced that it was going to launch a new GPRS
network. AT&T Wireless also later announced that it was going to
decommission its CDPD network. We were materially harmed by AT&T
Wirelesss decision to launch a GPRS network and decommission its CDPD
network, and by AT&T Wirelesss failure to advise us prior to the
Cellgate acquisition that it was considering these decisions. We attempted, but
were unable, to resolve our claims for damages with AT&T Wireless without
litigation. Accordingly, on February 20, 2004, we commenced an arbitration
against AT&T Wireless before the American Arbitration Association seeking an
amount in excess of $12 million. The action is still pending.

On
March 26, 2004, we filed a petition for relief under Chapter 11 of the
Bankruptcy Code with the Court. On May 21, 2004, the Court closed the sale of
all of our assets and operations to TNS.

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

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

The
Plan also contemplates that the Liquidation Trust will pay
for the prosecution of the pending litigation against AT&T Wireless
described above. Any recoveries, net of the costs of prosecuting the arbitration
and administering the trust, will be distributed by the Liquidation Trust
as described above.

6

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

Not applicable.

PART II

ITEM 5.   
MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES
OF EQUITY SECURITIES

Market
Information

Holders
of record of our common and preferred stock as of February 7, 2005 will be
entitled to receive an aggregate of 7% of our common stock, with 3.5% going to
each class, when we emerge from bankruptcy. The remaining 93% will be owned by
Trinad.

Our
common stock, par value $.01 per share, was formerly on the Over-the-Counter
Bulletin Board under the symbol, USWE.OB. Our common stock is
currently traded in the pink sheets, under the symbol
USWE.PK, and trades sporadically.

Any
investor who purchases our common stock is not likely to find any liquid trading
market for our common stock and there can be no assurance that any liquid
trading market will develop. There is no assurance that the stock will be
approved for trading on the Over-the-Counter Bulletin Board or will be liquid
following our reorganization and the issuance of the new common stock in
exchange for our outstanding common and preferred stock.

The
following table reflects the high and low closing quotations of our common stock
for the two years ended June 30, 2004.

|Fiscal 2004    | High | Low      
|-------------- | ---- | ---------
|First quarter  |      | $       0
|Second quarter |      | $       0
|Third quarter  |      | $       0
|Fourth quarter |      | $       0
|
|First quarter  |      | $       1
|Second quarter |      | $       1
|Third quarter  |      | $       0
|Fourth quarter |      | $       0

7

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There
has never been a public trading market for our Series C Preferred Stock or any
of our securities other than our common stock.

Holders

As of
February 17, 2005, there were 264 holders of record of the common stock. There
were also an undetermined number of holders who hold their stock in nominee or
street name.

Dividends

We
have not declared cash dividends on our common stock since our inception and we
do not anticipate paying any cash dividends in the foreseeable future, including
after our emergence from bankruptcy.

Securities
Authorized for Issuance Under Equity Compensation Plans

The
following table sets forth information regarding outstanding options, warrants
and rights, and shares reserved for future issuance under our existing equity
compensation plans as of June 30, 2004. Our stockholder approved equity
compensation plans consist of the 2002 Stock Option Plan, the 2000 Stock Option
Plan and the 1992 Stock Option Plan.  We have a number of options and
warrants which were granted pursuant to equity compensation plans not approved
by security holders and such securities are aggregated in the table below.
All options and warrants were terminated as a result of the Plan approved by the
Court.

|Plan Category             | Number of securitiesto be issued uponexercise of outstandingoptions, warrants andrights as of June 30,2004 (1) | Weighted averageexercise price ofoutstanding options,warrants and rights(1) | Number of securitiesremaining availablefor future issuanceunder equitycompensation plansas of June 30, 2004(excluding securitiesin column (a))(1)
|------------------------- | -------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------
|                         
|
|                         
|Equity compensation plans |                                                                                                                |                                                                             |                                                                                                                                                  
|approved by security      |                                                                                                               
|holders                   |                                                                                                                | 3,157,249                                                                   |                                                                                                                                                  
|                         
|Equity compensation plans |                                                                                                               
|not approved by security  |                                                                                                               
|holders                   |                                                                                                                | 11,290,086                                                                  |                                                                                                                                                  
|                         
|Total                     |                                                                                                                | 14,447,335                                                                  |                                                                                                                                                  
|                         

8

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|(1) |  | All options and warrants were terminated as a result of the Plan approved by the
Court.
|--- |  | ---------------------------------------------------------------------------------------

We had
authorized the issuance of equity securities under the compensation plans listed
below without the approval of security holders:

On
September 12, 1998, we issued a 2,083 share common stock purchase warrant to
entrénet Group, LLC, exercisable at $9.60 per share. The warrant was
fully vested and expired September 3, 2003.

On May
3, 1999, as part of an employment agreement, we issued warrants to our Chief
Executive Officer, to purchase up to 1,343,750 shares of our common stock. Half
of the warrants, or 671,875, are exercisable at $3.50 per share, the market
price of the underlying stock on the date of grant. The remaining 671,875
warrants have an exercise price of $5.86 per share. The warrants are fully
vested and were to expire on May 3, 2009.

On
January 20, 2000, we issued a 5,625 share common stock purchase warrant to RBB
Bank as an inducement to redeem shares of Series B Preferred Stock and 6%
Debentures held by RBB Bank, exercisable at $6.00 per share. The warrant was
fully vested and expired July 6, 2004.

On
February 15, 2000, we issued an 87,500 share nonqualified common stock option
(not under a Stock Option Plan) to an executive officer. The options are
exercisable at $9.72 per share, which equals the fair market value at the date
of grant, with one third of the shares vesting annually. The options was to
expire on the earlier of ten years from the grant date or one year after
cessation of the optionees relationship with us.

On
March 28, 2000, we issued a 3,750 share common stock purchase warrant to an
investor relations firm, exercisable at $21.376 per share. The warrant is fully
vested and was to expire March 27, 2006.

On
March 28, 2000, we issued a 12,500 share common stock purchase warrant to an
executive search firm, exercisable at $21.376 per share. The warrant is fully
vested and was to expire on March 27, 2005.

On
March 29, 2000, we issued each of the four new members of the Board of Directors
(the Board) a nonqualified stock option for 62,500 shares of our
common stock. The options are exercisable at $6.00 per share, vest one third per
annual anniversary date following grant date and expire on the earlier of ten
years from the grant date or one year after cessation of the optionees
relationship with us. Due to Michael Falks resignation from the Board on
March 7, 2002, and Edwin Coopermans resignation from the Board on January
13, 2003, option shares aggregating 125,000 shares remain outstanding.

9

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On
March 31, 2000, we issued a 37,500 share common stock purchase warrant to an
investor, exercisable at $9.12 per share. The warrant is fully vested and was to
expire on April 30, 2004.

On May
3, 2000, we issued a 3,750 share common stock purchase warrant to an investor,
exercisable at $6.00 per share. The warrant was fully vested and expired April
30, 2004.

On May
3, 2000, we issued a 2,500 share common stock purchase warrant to an investor,
exercisable at $6.00 per share. The warrant was fully vested and expired April
30, 2004.

On May
4, 2000, we issued a 6,250 share common stock purchase warrant to an executive
search firm, exercisable at $12.750 per share. The warrant is fully vested and
was to expire on May 3, 2005.

On May
31, 2000, as part of their compensation related to the private placement,
Commonwealth Associates and Peter J. Solomon Securities Company Limited received
warrants to purchase an aggregate of 167,599 Units (which are identical to the
units sold in the Private Placement). The warrants were exercisable at $100,000
per unit commencing on the date of issuance and expire May 31, 2007. Effective
September 7, 2000, the warrants to purchase units consisting of (a) Series C
Convertible Preferred Stock and (b) additional warrants to purchase common stock
at $6.00 per share were amended so that such warrants are now exercisable, at
$6.00 per share, solely for the total number (3,491,625) of shares of common
stock into which the underlying Series C Convertible Preferred Stock and
warrants would have been convertible and exercisable. The change did not alter
the aggregate number of shares of common stock which the holders would have
received upon exercise in full of the unit purchase warrants and conversion and
exercise in full of the underlying securities. The change also does not affect
the aggregate purchase price, which such holders would have paid for the
underlying common stock.

On
June 30, 2000, we issued a 25,000 share common stock purchase warrant to a
consultant for consulting services, exercisable at $9.875 per share. The warrant
is fully vested and was to expire on June 30, 2005.

On
July 16, 2002, we issued a 50,000 share common stock purchase option to an
investment bank for investment-banking services, exercisable at $0.66 per share.
The option is fully vested and was to expire on July 16, 2007.

On
October 1, 2002, we issued a 100,000 share common stock purchase option to
American Express in connection with our sale of NXT, exercisable at $0.40 per
share. The option is fully vested and was to expire on October 1, 2007.

On  October 24,
2002, we issued a 164,000 share common stock purchase option to our  counsel as a
reduction of $80,000 of outstanding legal fees for services  performed, exercisable at
$0.66 per share. The option is fully vested and was to  expire on October 24, 2007.

10

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On
October 24, 2002, we issued common stock purchase options aggregating 884,886
shares (865,046 remained outstanding as of June 30, 2003) to employees to offset
a reduction of approximately $442,000 in salaries for the twelve-month period
beginning November 1, 2002, exercisable at $0.66 per share. The options are
fully vested and were to expire on October 24, 2012.

Prior
to the bankruptcy filing, we financed our business through a $2.75 million
bridge loan (the Bridge Loan) made by Brascan Financial Corporation
(Brascan), a subsidiary of the Toronto, Canada-based Brascan
Corporation. In connection with the Bridge Loan, Brascan received a warrant on
September 16, 2003 exercisable for 10,000,000 shares of our common stock at $.15
per share (the Bridge Loan Warrant). The Bridge Loan Warrant was
subsequently amended and reduced to 5,000,000 shares on the date on which we
filed for bankruptcy. The Bridge Loan Warrant became exercisable on December 31,
2003 and was to expire in September 2008.

11

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ITEM 6.   MANAGEMENTS PLAN
OF OPERATION

MANAGEMENTS PLAN OF
OPERATION

As
described under Item 1. Description of Business, on May 11, 2004,
the Court conducted an auction of our assets and on May 21, 2004, the sale of
all of our assets and operations to TNS closed. TNS paid $6,000,000 for the
wireless payment processing business and $3,700,000 for the wireless vending
business. On November 4, 2004, we filed the Plan, which contemplates that all
cash after the payment of administrative costs will be used to pay our
liabilities and any remaining cash will be used to settle a portion of the
aggregate $32,02,000 liquidation preference to which the holders of our Series C
Preferred Stock are entitled.

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

The
Plan also contemplates that the Liquidation Trust will pay
for the prosecution of our pending litigation against AT&T Wireless.
 On February 20, 2004, we commenced arbitration proceedings against
AT&T Wireless whereby we are seeking a $12 million judgment against AT&T
Wireless relating to its decommissioning of the cellular digital packet data
(CDPD) network. Any recoveries, net of the costs of prosecuting the arbitration
and administering the trust, will be distributed by the Liquidation Trust
as described above. Please see Item 3. Legal Proceedings for a more
complete description of the arbitration with AT&T Wireless.

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

12

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

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

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

Certain
information as to Messrs. Ellin, Wolf and Regenstein is set forth in Item
9. Directors and Executive Officers of this Form 10-KSB.

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

13

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

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

CRITICAL
ACCOUNTING POLICIES

Critical
accounting policies reflect significant judgments and uncertainties and
potentially result in materially different results under different assumptions
and conditions. We have prepared the accompanying financial statements in
conformity with generally accepted accounting principles, which require
management to make estimates and assumptions that affect the reported amounts in
the accompanying financial statements and notes thereto. Actual results could
differ from those estimates under different assumptions or conditions. We have
identified the following critical accounting policies utilized in the
preparation of such financial statements.

Basis of
Presentation and Use of Estimates

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

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

14

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

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

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

Revenue
Recognition from Discontinued Operations

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

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

Services.
Service fees consist of: (a) one-time, non-refundable service activation fees;
(b) monthly minimum subscription fees for the availability of service; (c) fees
for transactions delivered on wireless or other methods through the
Companys hosts; and (d) other fees, including administration and other
fees for certain wireless services, certain charges for telecommunications
connections between the Company and a party, and installation fees and expenses.
Service fees are generated from the Companys Synapse Service. Service
activation fees are recognized ratably over the estimated average life of a
customer contract. During the year ended June 30, 2003, the Company changed its
estimate of average customer contract life from six to twelve months. This
change did not have a material impact on revenues from activation fees. All
other service revenues are recognized as services are provided.

15

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Product Sales.
Product sales (i.e., sales of equipment) are primarily derived from the sale
of USWDs proprietary Synapse Adapter and Synapse Enabler products. Revenues
from product sales are recognized upon shipment and acceptance.

Valuation of
Long-Lived and Intangible Assets

The
carrying values of our assets are reviewed when events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Asset impairment is determined to exist if estimated future cash
flows, undiscounted and without interest charges, are less than the carrying
amount. If it is determined that an impairment loss has occurred, then an
impairment loss is recognized in the statement of operations. The resulting
impairment loss is measured as the amount by which the carrying amount of the
asset exceeds its fair value, estimated using quoted market prices, if
available, or other acceptable valuation methodologies, including discounted
cash flows or comparable sales.

Stock-based
Compensation

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

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

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

16

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|                                            | Year ended June 30, |                         
|------------------------------------------- | ------------------- | ------------------------
|
|Income (loss) from continuing operations    |                     | $        (2,569,000     
|Income (loss) from discontinued  operations |                     | 3,754,000               
|                                            |                     |                         
|Net income (loss), as reported              |                     | $         1,185,000     
|Deduct: Total stock-based compensation      |                    
|expense determined under fair value         |                    
|based method                                |                     | (1,014,000              
|                                            |                     |                         
|Pro forma net loss                          |                     | $            171,000    
|                                            |                     |                         
|                                            |                     |                         
|Per share, as reported                      |                    
|From continuing operations                  |                     | $                (0.14) 
|From discontinued operations                |                     | 0.21                    
|                                            |                     |                         
|Net                                         |                     | $                   0.07
|                                            |                     |                         
|                                            |                     |                         
|Per share, pro forma                        |                    
|From continuing operations                  |                     | $                (0.20) 
|From discontinued operations                |                     | 0.21                    
|                                            |                     |                         
|Net                                         |                     | $                  0.01 
|                                            |                     |                         
|                                            |                     |                         

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

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

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

RECENT
ACCOUNTING PRONOUNCEMENTS

In
November 2002, the FASB issued FASB Interpretation No. 45,
Guarantors Accounting and Disclosure Requirements for Guarantees,
including Indirect Guarantees of Indebtedness of Others (FIN
45). FIN 45 elaborates on the disclosures to be made by a guarantor in its
interim and annual financial statements about its obligations under certain
guarantees that it has issued. FIN 45 requires a guarantor to recognize, at the
inception of a guarantee, a liability for the fair value of the obligations
undertaken in issuing the guarantee. The disclosure provisions of FIN 45 are
effective for financial statements of periods ending after December 15, 2002.
Additionally, the recognition of a guarantors obligation should be applied
on a prospective basis to guarantees issued after December 31, 2002. The
adoption of the disclosure and recognition provisions of FIN 45 did not have a
material effect on our results of operations or financial position.

17

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In
January 2003, the FASB issued FASB Interpretation (FIN) No. 46,
Consolidation of Variable Interest Entities. In December 2003, the
FASB issued FIN No. 46 (Revised) (FIN 46-R) to address certain FIN
46 implementation issues. This interpretation requires that the assets,
liabilities, and results of activities of a Variable Interest Entity
(VIE) be consolidated into the financial statements of the
enterprise that has a controlling interest in the VIE. FIN 46-R also requires
additional disclosures by primary beneficiaries and other significant variable
interest holders. For entities acquired or created before February 1, 2003, this
interpretation is effective no later than the end of the first interim or
reporting period ending after March 15, 2004, except for those VIEs that
are considered to be special purpose entities, for which the effective date is
no later than the end of the first interim or annual reporting period ending
after December 15, 2003. For all entities that were acquired subsequent to
January 31, 2003, this interpretation is effective as of the first interim or
annual period ending after December 31, 2003. The adoption of the provisions of
this interpretation did not have a material effect on our financial condition or
results of operations.

In
April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. This standard amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts,
collectively referred to as derivatives, and for hedging activities under SFAS
No. 133, Accounting for Derivative Instruments and Hedging
Relationships. SFAS No. 149 is effective for contracts entered into or
modified after June 30, 2003 and for hedging relationships after June 30, 2003.
The adoption of this statement did not have a material impact on our results of
operations or financial condition.

In May
2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. SFAS No.
150 clarifies the accounting for certain financial instruments with
characteristics of both liabilities and equity and requires that those
instruments be classified as liabilities in statements of financial condition.
Previously, many of those financial instruments were classified as equity. SFAS
No. 150 is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003. The adoption the provisions of SFAS No.
150 did not have a material effect on our results of operations or financial
condition.

In
December 2003, the SEC issued Staff Accounting Bulletin No. 104, Revenue
Recognition (SAB 104), which supersedes SAB 101, Revenue
Recognition in Financial Statements. The primary purpose of SAB 104 is to
rescind accounting guidance contained in SAB 101 related to multiple element
revenue arrangements, which was superseded as a result of the issuance of EITF
00-21, Accounting for Revenue Arrangements with Multiple
Deliverables. While the wording of SAB 104 has changed to reflect the
issuance of EITF 00-21, the revenue recognition principles of SAB 101 remain
largely unchanged by the issuance of SAB 104. The adoption of SAB 104 did not
have a material impact on our financial statements.

18

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

RISK FACTORS

Cautionary
Statements Regarding Forward-Looking Statements

Statements
in this Annual Report on Form 10-KSB under the captions Description of
Business, Managements Discussion and Analysis or Plan of
Operation, and elsewhere in this Form 10-KSB, as well as statements made
in press releases and oral statements that may be made by us or any of our
officers, directors or employees acting on our behalf that are not statements of
historical fact, constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors,
including those described in this Form 10-KSB under the caption Risk
Factors, that could cause our actual results to be materially different
from the historical results or from any future results expressed or implied by
such forward-looking statements. In addition to statements which explicitly
describe such risks and uncertainties, readers are urged to consider statements
with the terms believes, belief, expects,
plans, anticipates, or intends, to be
uncertain and forward-looking. All cautionary statements made in this Form
10-KSB should be read as being applicable to all related forward-looking
statements wherever they appear. Investors should consider the following risk
factors as well as the risks described elsewhere in this Form 10-KSB.

We
may not be successful in identifying and evaluating suitable business
opportunities or in consummating a business combination.

Trinad
intends to raise capital to make us a more attractive acquisition vehicle and
then seek a suitable merger candidate. Trinad has not identified acquisition
candidates at this juncture. There can be no assurance that Trinad will be
successful in raising capital on favorable terms, or at all, or in finding a
suitable merger candidate for us. No particular industry or specific business
within an industry has been selected for a target company. Accordingly, we may
enter into a merger or other business combination with a business entity having
no significant operating history, losses, limited or no potential for immediate
earnings, limited assets, negative net worth or other negative characteristics,
such as dependency on management that has not proven its abilities or
effectiveness. In the event that we complete a merger or other business
combination, the success of our operations will be dependent upon the management
of the target company and numerous other factors beyond our control. There is no
assurance that we will be able to negotiate a merger or business combination on
favorable terms, or at all.

19

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We
currently do not have any full-time employees and are dependent on independent
contractors and consultants for the operation of our business.

Our
Executive Vice President and Chief Administrative Officer and Estate
Representative, Charles I. Leone, is our sole officer and Estate Representative.
The loss of the services of Mr. Leone would adversely affect the company until
the reorganized company emerges from bankruptcy.

We
may be subject to regulation under the Investment Company Act of 1940 if we were
to engage in certain activities or business combinations.

In the
event that we engage in a business combination or engage in other activities
that result in our holding passive investment interests in a number of entities,
we could be subject to regulation under the Investment Company Act of 1940. In
such event, we would be required to register as an investment company and could
be expected to incur significant registration and compliance costs.

We
do not anticipate paying dividends.

We
have never paid cash or other dividends on our common stock. Payment of
dividends on our common stock is within the discretion of our Board of Directors
and will depend upon our earnings, our capital requirements and financial
condition, and other factors deemed relevant by the Board. However, the earliest
the Board would likely consider a dividend is after the acquisition has occurred
if the acquired entity generated excess cash flow.

We
may be unable to meet our future capital requirements.

After we
emerge from bankruptcy, we will need to raise additional funds in order to make
ourselves a more attractive acquisition vehicle. There is no assurance that we
will be able to consummate the financing on favorable terms or at all. Any such
financing will dilute the percentage ownership of existing stockholders.

The
trading of our common stock is limited and sporadic.

Our
common stock has been traded on the pink sheets under the symbol
USWE.PK. The trading volume of our common stock is limited and
sporadic, and with only limited and minimal interest by market makers. When we
emerge from bankruptcy, the holders of record of our common and preferred stock
as of February 7, 2005, will received an aggregate of 7% of the new common stock
with the remaining 93% balance going to Trinad. There is no assurance that any
liquid trading market will emerge. The price at which our common stock will
trade in the future may be highly volatile and may fluctuate as a result of a
number of factors, including, without limitation, announcements concerning
potential acquisitions, quarterly variations in our operating results, other
business partners and opportunities, as well as the number of shares available
for sale in the market.

Penny
stock rules may restrict the market for our common stock.

Our
common stock is subject to rules promulgated by the SEC relating to penny
stocks, which apply to companies whose shares are not traded on a national
stock exchange or on the Nasdaq SmallCap or National Market Systems, trade at
less than $5.00 per share, or who do not meet certain other financial
requirements specified by the SEC. These rules require brokers who sell
penny stocks to persons other than established customers and
accredited investors to complete certain documentation, make
suitability inquiries of investors, and provide investors with certain
information concerning the risks of trading in such penny stocks. These rules
may discourage or restrict the ability of brokers to sell our common stock and
may affect the secondary market for our common stock. These rules could also
hamper our ability to raise funds in the primary market for our common stock.

20

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ITEM 7.   
FINANCIAL STATEMENTS

|                                                                                 | 
|-------------------------------------------------------------------------------- | 
|Reports of Registered Public Accounting Firms                                    | 
|Consolidated Balance Sheets as of June 30, 2004 and 2003                         | 
|Consolidated Statements of Operations for the years ended June 30, 2004 and 2003 | 
|Consolidated Statements of Cash Flows for the years ended June 30, 2004 and 2003 | 
|Consolidated Statements of Stockholders Equity                                  | 
|for the years ended June 30, 2004 and 2003                                       | 
|Notes to Consolidated Financial Statements                                       | 

21

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REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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
December 31, 2004,  and the related  statements of  operations,  stockholders equity,
and cash flows for the year then ended.  These  financial  statements are the
responsibility of U.S. Wireless Data, Inc.s  management.  Our  responsibility is to
express an opinion on these financial statements based on our audit.

We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). 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 also 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 audits provide a
reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of U.S. Wireless Data,
Inc. as of December 31, 2004, and the results of its operations,
stockholders equity, and its cash flows for the year ended, in conformity
with accounting principles generally accepted in the United States of America.

As
discussed in Notes 1 and 2, the Company has filed for reorganization under
Chapter 11 of the Federal Bankruptcy Code. The accompanying consolidated
financial statements do not purport to reflect or provide for the consequences
of the bankruptcy proceedings. In particular, such financial statements do not
purport to show (a) as to assets, their realizable value on a liquidation basis
or their availability to satisfy liabilities; (b) as to prepetition liabilities,
the amounts that may be allowed for claims or contingencies, or the status and
priority thereof; (c) as to stockholder accounts, the effect of any changes
that may be made in the capitalization of the Company; or (d) as to operations,
the effect of any changes that may be made in its business.

The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Companys plan of reorganization was
confirmed by the Bankruptcy Court on December 21, 2004. The consolidated
financial statements do not include any adjustments that might result from the
outcome of the uncertainties concerning the Companys future.

Friedman LLP

New York, New
YorkFebruary 14, 2005

1700 BROADWAY,
NEW YORK, NY 10019  T 212.842.7001 WWW.FRIEDMANLLP.COMOFFICES IN NEW YORK LONG ISLAND
AND NEW JERSEY AND A MEMBER OF DFK WITH AFFILIATES WORLDWIDE

22

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REPORT OF
REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of
Directors and Stockholders ofU.S. Wireless Data, Inc.New York, New York

We
have audited the accompanying consolidated balance sheet of U.S. Wireless Data,
Inc. (the Company) as of June 30, 2003, and the related consolidated
statements of operations, stockholders equity, 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 the standards of the Public Company
Accounting Oversight Board (United States). 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 also 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 consolidated financial statements present fairly, in all material
respects, the financial position of the Company as of June 30, 2003 and the
results of its operations and its cash flows for the year then ended in
conformity with accounting principles generally accepted in the United States of
America.

The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 1 to the consolidated
financial statements, the Companys substantial recurring losses from
operations since inception and working capital deficiency at June 30, 2003,
raise substantial doubt about its ability to continue as a going concern.
Managements plans concerning these matters are also described in Note 1.
The consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

/s/ Deloitte
& Touche LLP

October
13, 2003 (March 26, 2004 and May 21, 2004 as to Notes 1(a) and 5, respectively)
New York, New York

23

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

|                                                               | June 30,2004 | June 30,2003     
|-------------------------------------------------------------- | ------------ | -----------------
|ASSETS                                                         |              |                  
|Current assets:                                                |             
|Cash and cash equivalents                                      |              | $        912,000 
|Cash and cash equivalents in escrow                            |              | 3,388,000        
|Accounts receivable, net of allowance for                      |             
|doubtful accounts of $26,000 and $18,000                       |             
|at June 30, 2004 and 2003, respectively                        |              | 14,000           
|Due from factor                                                |              | 63,000           
|Due from winning auction sale bidder                           |              | 171,000          
|Deferred cost of revenue of discontinued operations            |              | --               
|Assets held for sale                                           |              | --               
|Restricted cash                                                |              | 456,000          
|Prepaids and other current assets                              |              | 370,000          
|                                                               |              |                  
|Total current assets                                           |              | 5,374,000        
|Restricted cash                                                |              | --               
|Other assets                                                   |              | --               
|                                                               |              |                  
|Total assets                                                   |              | $     5,374,000  
|                                                               |              |                  
|                                                               |              |                  
|LIABILITIES AND STOCKHOLDERS EQUITY                           |             
|Current liabilities:                                           |             
|Accounts payable                                               |              | $          38,000
|Accrued liabilities                                            |              | 559,000          
|Customer advances                                              |              | --               
|Accrued restructuring expense                                  |              | --               
|Obligation under capital lease, current portion                |              | --               
|Deferred revenue of discontinued operations                    |              | --               
|                                                               |              |                  
|Total liabilities not subject to compromise                    |              | 597,000          
|Prepetition liabilities subject to compromise                  |              | 2,937,000        
|Obligation under capital lease, less current portion           |              | --               
|Deferred rent expense                                          |              | --               
|Other liabilities                                              |              | --               
|                                                               |              |                  
|Total liabilities                                              |              | 3,534,000        
|                                                               |              |                  
|Commitments and contingencies                                  |             
|Stockholders equity:                                          |             
|Preferred stock, 25,000,000 shares authorized:                 |             
|Series C convertible, at $.01 par value, liquidation value     |             
|$10.00 per share, aggregating $32,402,000 and $35,487,000      |             
|at June 30, 2004 and 2003, respectively; 8,450,000             |             
|shares authorized, 3,240,200 and 3,548,700 issued and          |             
|outstanding at June 30, 2004 and 2003, respectively            |              | 32,000           
|Common stock, 200,000,000 shares authorized at $.01 par value; |             
|18,142,889 and 17,628,716 shares issued and outstanding        |             
|at June 30, 2004 and 2003, respectively                        |              | 181,000          
|Additional paid-in capital                                     |              | 143,077,000      
|Accumulated deficit                                            |              | (141,450,000     
|                                                               |              |                  
|Total stockholders equity                                     |              | 1,840,000        
|                                                               |              |                  
|Total liabilities and stockholders equity                     |              | $     5,374,000  
|                                                               |              |                  
|                                                               |              |                  

Accompanying
notes are an integral part of the financial statements

24

---

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

|                                                              | For the years endedJune 30, |                     
|------------------------------------------------------------- | --------------------------- | --------------------
|
|Continuing operations                                         |                             |                     
|General and administrative expenses                           |                             | $        (89,000    
|Interest income                                               |                             | 6,000               
|Interest expense                                              |                             | (753,000            
|Other income                                                  |                             | 75,000              
|                                                              |                             |                     
|Income (loss) before reorganization items                     |                             | (761,000            
|Reorganization items                                          |                            
|Professional fees and U.S. Trustee fees                       |                             | (804,000            
|Rejection of real property lease                              |                             | (460,000            
|Rejection of executory agreements                             |                             | (544,000            
|                                                              |                             |                     
|Income (loss) before discontinued operations                  |                             | (2,569,000          
|                                                              |                             |                     
|Discontinued operations                                       |                            
|Loss from discontinued operations                             |                             | (4,432,000          
|Gain on sale of discontinued operations                       |                             | 8,186,000           
|                                                              |                             |                     
|Income (loss) on discontinued operations                      |                             | 3,754,000           
|                                                              |                             |                     
|Net income (loss)                                             |                             | $   1,185,000       
|                                                              |                             |                     
|                                                              |                             |                     
|Basic and diluted net loss per share:                         |                            
|Income (loss) before discontinued operations                  |                             | $              (0.14
|Income (loss) on discontinued operations                      |                             | 0.21                
|                                                              |                             |                     
|Net income (loss) per share                                   |                             | $               0.07
|                                                              |                             |                     
|                                                              |                             |                     
|Weighted average common shares outstanding, basic and diluted |                             | 17,900,000          
|                                                              |                             |                     
|                                                              |                             |                     

Accompanying
notes are an integral part of the financial statements

25

---

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

|                                                               | For the years ended June 30, |             
|-------------------------------------------------------------- | ---------------------------- | ------------
|
|CASH FLOWS FROM OPERATING ACTIVITIES:                          |                              |             
|Net income (loss)                                              |                              | $ 1,185,000 
|Adjustments to reconcile net income (loss) to net cash used in |                             
|operating activities:                                          |                             
|Depreciation and amortization from discontinued operations     |                              | 524,000     
|Accretion of bridge loan discount                              |                              | 390,000     
|Provision for rejected real property lease                     |                              | 460,000     
|Provision for rejected executory agreements                    |                              | 544,000     
|Gain on sale of discontinued operations                        |                              | (8,186,000  
|Customer advances assigned as part of auction sales            |                              | (225,000    
|Provision for doubtful accounts                                |                              | 45,000      
|Deferred rent                                                  |                              | 13,000      
|Impairment of intangible assets                                |                              | --          
|Write-down of inventory                                        |                              | 79,000      
|Non-cash compensation for directors                            |                              | --          
|Non-cash consulting and other                                  |                              | --          
|Loss on settlement of notes receivable                         |                              | --          
|Changes in operating assets and liabilities:                   |                             
|Accounts receivable                                            |                              | 247,000     
|Due from factor                                                |                              | 77,000      
|Due from winning auction sale bidder                           |                              | (171,000    
|Inventory                                                      |                              | --          
|Deferred cost of revenue                                       |                              | 63,000      
|Prepaids and other current assets                              |                              | 189,000     
|Other assets                                                   |                              | --          
|Accounts payable                                               |                              | (6,000      
|Accrued liabilities                                            |                              | (162,000    
|Accrued restructuring expense                                  |                              | 65,000      
|Customer advances                                              |                              | (668,000    
|Deferred revenue                                               |                              | (159,000    
|Prepetition liabilities                                        |                              | 150,000     
|Other liabilities                                              |                              | (144,000    
|                                                               |                              |             
|Net cash (used in) operating activities                        |                              | (5,690,000  
|                                                               |                              |             
|CASH FLOWS FROM INVESTING ACTIVITIES:                          |                             
|Proceeds from the Auction Sales                                |                              | 9,700,000   
|Proceeds from the sale of NXT                                  |                              | --          
|Payment of expenses for sale of NXT                            |                              | --          
|Purchase of property and equipment                             |                              | (201,000    
|Decrease in restricted cash                                    |                              | 625,000     
|Payment for acquisition, net of cash acquired                  |                              | --          
|Transfer to Chapter 11 escrow accounts                         |                              | (3,388,000  
|                                                               |                              |             
|Net cash provided by investing activities                      |                              | 6,736,000   
|                                                               |                              |             
|CASH FLOWS FROM FINANCING ACTIVITIES:                          |                             
|Proceeds from DIP loan                                         |                              | 1,600,000   
|Repayment of DIP loan                                          |                              | (1,600,000  
|Proceeds from bridge loan                                      |                              | 3,000,000   
|Repayment of bridge loan                                       |                              | (3,000,000  
|Proceeds from notes payable                                    |                              | 450,000     
|Payment of notes payable                                       |                              | (450,000    
|Payments for real estate lease termination                     |                              | (625,000    
|Payments of obligations under capital lease                    |                              | (111,000    
|                                                               |                              |             
|Net cash (used in) financing activities                        |                              | (736,000    
|                                                               |                              |             
|Net increase (decrease) in cash and cash equivalents           |                              | 310,000     
|Cash and cash equivalents, beginning of year                   |                              | 602,000     
|                                                               |                              |             
|Cash and cash equivalents, end of year                         |                              | $    912,000
|                                                               |                              |             
|                                                               |                              |             

Accompanying
notes are an integral part of the financial statements

26

---

U.S.
WIRELESS DATA, INC.(Debtor in Possession)CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITYFor the years ended June 30, 2004 and 2003

|                                      | Series C Convertible  Preferred Stock | Common Stock | AdditionalPaid-in | UnearnedCompensation and | Accumulated | TotalStockholders |   |          
|------------------------------------- | ------------------------------------- | ------------ | ----------------- | ------------------------ | ----------- | ------------------ | - | ---------
|
|BALANCE AT JUNE 30, 2002              |                                       | 3,941,325    |                   | $      39,000            |             | 14,813,927         |   | $ 149,000
|Amortization of non-cash compensation |                                      
|for directors                         |                                       | --           |                   | --                       |             | --                 |   | --       
|Cancellation of options issued to     |                                      
|Board member                          |                                       | --           |                   | --                       |             | --                 |   | --       
|Issuance of options for services      |                                       | --           |                   | --                       |             | --                 |   | --       
|Amortization of non-cash investment   |                                      
|banking services                      |                                       | --           |                   | --                       |             | --                 |   | --       
|Issuance of options related to the    |                                      
|sale of NXT                           |                                       | --           |                   | --                       |             | --                 |   | --       
|Issuance of common stock to former    |                                      
|NXT shareholders                      |                                       | --           |                   | --                       |             | 2,241,658          |   | 22,000   
|Retirement of common stock in         |                                      
|settlement of notes receivable        |                                       | --           |                   | --                       |             | (81,818            | ) | (1,000   
|Conversion of Series C convertible    |                                      
|preferred stock                       |                                       | (392,625     | )                 | (3,000                   | )           | 654,949            |   | 6,000    
|Net loss                              |                                       | --           |                   | --                       |             | --                 |   | --       
|                                      |                                       |              |                   |                          |             |                    |   |          
|BALANCE AT JUNE 30, 2003              |                                       | 3,548,700    |                   | $      36,000            |             | 17,628,716         |   | $ 176,000
|Conversion of Series C convertible    |                                      
|preferred stock                       |                                       | (308,500     | )                 | (4,000                   | )           | 514,173            |   | 5,000    
|Issuance of warrants for bridge loan  |                                       | --           |                   | --                       |             | --                 |   | --       
|Termination of warrants for bridge    |                                       | --           |                   | --                       |             | --                 |   | --       
|loan                                  |                                      
|Net income                            |                                       | --           |                   | --                       |             | --                 |   | --       
|                                      |                                       |              |                   |                          |             |                    |   |          
|BALANCE AT JUNE 30, 2004              |                                       | 3,240,200    |                   | $      32,000            |             | 18,142,889         |   | $ 181,000
|                                      |                                       |              |                   |                          |             |                    |   |          
|                                      |                                       |              |                   |                          |             |                    |   |          

Accompanying
notes are an integral part of the financial statements

27

---

U.S. WIRELESS DATA, INC.
(Debtor in Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended June 30, 2004 and 2003

NOTE 1
 THE COMPANY

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

(a)  Going
Concern, Liquidity Uncertainties and Chapter 11 Proceedings

Since
the Companys inception, the Company has incurred significant losses and
negative cash flow from operations. As of June 30, 2004, we had an accumulated
deficit of approximately $143 million. Managements concerns about capital
led it to take additional steps to cut costs, dispose of operations and, on
March 26, 2004, we filed a voluntary petition for relief under Chapter 11 of the
United States Bankruptcy Code (the Bankruptcy Code) in the United
States Bankruptcy Court for the Southern District of New York (the
Court), in re U.S. Wireless Data, Inc., Case Number 04-12075.

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

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

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

28

---

U.S. WIRELESS DATA, INC.
(Debtor in Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the years ended June 30, 2004 and 2003

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

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

On
December 27, 2004, the Court confirmed our Amended Plan of Reorganization (the
Plan). The Plan contemplates that the primary source of cash for
distributions will be the proceeds from the aforementioned sale of our
businesses and the cash contribution of Trinad Capital, L.P.
(Trinad), the plan sponsor. Trinad will contribute $500,000 in cash
to us in exchange for 93% of the new common stock to be issued under the Plan,
with the remaining 7% of the new common stock being issued to the holders of
record of our Series C Preferred Stock and our common stock as of February 7,
2005, with 3.5% going to each class. Of such $500,000 from Trinad, $400,000 will
be added to the funds used to pay administrative costs, creditors and, possibly,
a small portion of the liquidation preference. The remaining $100,000 will be
retained by us to fund the expenses of remaining public. The Plan contemplates
that all cash (other than the $100,000 to be retained by the reorganized debtor)
will be placed in a liquidation trust (the Liquidation Trust) and,
after the payment of administrative costs, will be used to pay our liabilities.
If there is any remaining cash, it will be used to settle a small portion of the
aggregate $32,302,000 liquidation preference to which the holders of our Series
C Preferred Stock are entitled as of January 11, 2005.

The
Plan also contemplates that the Liquidation Trust will pay for the prosecution
of our pending litigation against AT&T Wireless. On February 20, 2004, we
commenced arbitration proceedings against AT&T Wireless whereby we are
seeking a $12 million judgment against AT&T Wireless relating to its
decommissioning of the cellular digital packet data (CDPD) network. Any
recoveries, net of the costs of prosecuting the arbitration and administering
the trust, will be distributed by the Liquidation Trust as described above.

There
is no assurance that there will be sufficient assets to satisfy all of our
liabilities, or to pay any portion of the Series C Preferred liquidation
preference. Our disclosure statement projected that available cash would be
adequate to pay 70-80% of the unsecured claims made. However, we do plan to
challenge certain of the claims and, if successful, of which there is no
assurance, we may be able to pay 100% of such claims and retain a small surplus
for payment of a small portion of the Series C Liquidation preference. Only
holders of record of our Series C Preferred Stock as of February 7, 2005 will be
entitled to receive any payments towards the Series C liquidation preference, or
to receive any pro rata share of the new common stock allocated to Series C
Preferred Stock. Cash distributions shall be made as soon as practicable, as
determined by the trustee of the Liquidation Trust. Distributions of the new
stock shall be made as soon as practicable after we make certain filings with
the Securities and Exchange Commission (SEC) which were not made, in
light of the uncertainties associated with the bankruptcy, in order to conserve
cash. Such filings include our Annual Report on Form 10-KSB for the fiscal year
ended June 30, 2004, which will need to include audited financial statements. In
light of the sale of our operating assets to TNS in May 2004, the information to
be contained in such reports will be largely irrelevant to stockholders of the
reorganized USWD.

29

---

U.S. WIRELESS DATA, INC.
(Debtor in Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the years ended June 30, 2004 and 2003

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

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

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

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

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

30

---

U.S. WIRELESS DATA, INC.
(Debtor in Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the years ended June 30, 2004 and 2003

(b)  Bridge Loan

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

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

As of
January 31, 2004, the Company was not in compliance with the minimum net worth
requirement set forth in the Bridge Loan documents and was in technical default
under several provisions of the Bridge Loan. Nonetheless, Brascan continued to
extend the balance of the remaining unadvanced amounts under the Bridge Loan to
us. As of January 31, 2004, we had drawn down the full amount of the $2.75
million Bridge Loan commitment. The Bridge Loan was repaid, with interest, on
May 21, 2004 from the proceeds of the Auction Sales.

NOTE 2
 BASIS OF CONSOLIDATION AND PRESENTATION

Basis of
Consolidation, Asset Sale of Subsidiary and Auction Sales

Our
consolidated financial statements include the accounts of our former
wholly-owned subsidiary, UNS Corporation, formerly known as NXT Corporation
(NXT). UNS Corporation was dormant during the nine months ended
March 31, 2004 and was dissolved on December 11, 2003.

During
May 2002, we developed a formal plan to sell NXT. Effective as of the close of
business on August 31, 2002, we sold, for $5 million in cash, substantially all
of the operating assets associated with NXT, to Paymentech, L.P.
(Paymentech). NXT provided data services and landline-based
connectivity for credit-card transaction processing. NXT has been classified as
a discontinued operation in the accompanying consolidated financial statements.

31

---

U.S. WIRELESS DATA, INC.
(Debtor in Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the years ended June 30, 2004 and 2003

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

Basis of
Presentation and Use of Estimates

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

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

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

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

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

Long Lived
Assets Held For Sale

Long-lived
assets are classified as held for sale when certain criteria are met, which
include: managements commitment to a plan to sell the assets; the
availability of the assets for immediate sale in their present condition;
whether an active program to locate buyers and other actions to sell the assets
have been initiated; whether the sale of the assets is probable and their
transfer is expected to qualify for recognition as a completed sale within one
year; whether the assets are being marketed at reasonable prices in relation to
their fair value; and how unlikely it is that significant changes will be made
to the plan to sell the assets.

32

---

U.S. WIRELESS DATA, INC.
(Debtor in Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the years ended June 30, 2004 and 2003

We
measure long-lived assets to be disposed of by sale at the lower of carrying
amount or fair value less cost to sell. These assets are not depreciated. Fair
value is determined using quoted market prices or the anticipated cash flows
discounted at a rate commensurate with the risk involved.

Reclassifications

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

Cash and
Cash Equivalents and Cash and Cash Equivalents in Escrow

Investments
in money market funds and highly liquid investments purchased with an original
maturity of three months or less are classified as cash equivalents. Cash
equivalents are carried at cost, which approximates fair value. We maintain all
of our cash balances with major financial institutions, which are insured by the
Federal Deposit Insurance Corporation up to $100,000. Uninsured balances of
Cash and cash equivalents aggregate approximately $810,000 at June
30, 2004.

Our
bankruptcy counsel maintains escrow accounts on our behalf with a large
financial institution, which are insured by the Federal Deposit Insurance
Corporation up to $100,000. Such funds are invested in money market accounts or
short-term certificates of deposits. Uninsured balances of Cash and cash
equivalents in escrow aggregate approximately $3,288,000 at June 30, 2004.

Inventory

Inventory
is stated at the lower of cost or market, cost being determined by the first-in,
first-out method. Allowances are established to reduce the recorded cost of
obsolete and slow moving inventory to its net realizable value. Inventory of
$137,000 at June 30, 2003 was included in Assets held for sale.

Goodwill and
Other Intangible Assets

In
June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 142,
Goodwill and Other Intangible Assets. SFAS No. 142 requires that
goodwill and other intangible assets with indefinite lives no longer be
amortized, but instead be tested for impairment at least annually. In addition,
the standard includes provisions for the reclassification of certain existing
intangibles as goodwill and the reassessment of the useful lives of existing
recognized intangibles. SFAS No. 142 is effective for fiscal years beginning
after December 15, 2001. The Company adopted this standard on July 1, 2002. As a
result of the write-off of all of the Companys goodwill during the year
ended June 30, 2002, the adoption of SFAS No. 142 did not have an impact on the
Company in the first quarter of fiscal 2003. The remaining intangibles at June
30, 2003 are subject to the impairment provisions of SFAS No. 144. The
provisions of SFAS No. 142 are effective for periods after adoption and
retroactive application is not permitted. Therefore, the historical operating
results for periods prior to the fiscal year ended 2003 do not reflect the
effect of SFAS No. 142. Since no goodwill remained for the periods reported, had
the Company been accounting for goodwill under the provisions of SFAS No. 142
for the fiscal year ended June 30, 2004 and 2003, the Companys net loss
and net loss per share would not be different than that reported for such
periods.

33

---

U.S. WIRELESS DATA, INC.
(Debtor in Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the years ended June 30, 2004 and 2003

Property and
Equipment

Property
and equipment are stated at cost. Equipment and furniture are depreciated on a
straight-line basis over their estimated useful lives (generally three to seven
years). Leasehold improvements are amortized on a straight-line basis over the
term of the lease, or the estimated useful lives, whichever is shorter.
Maintenance and repairs are charged to operations as incurred.

Revenue
Recognition from Discontinued Operations

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

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

Services.
Service fees consist of: (a) one-time, non-refundable service activation fees;
(b) monthly minimum subscription fees for the availability of service; (c) fees
for transactions delivered on wireless or other methods through the
Companys hosts; and (d) other fees, including administration and other
fees for certain wireless services, certain charges for telecommunications
connections between the Company and a party, and installation fees and expenses.
Service fees are generated from the Companys Synapse Service. Service
activation fees are recognized ratably over the estimated average life of a
customer contract. During the year ended June 30, 2003, the Company changed its
estimate of average customer contract life from six to twelve months. This
change did not have a material impact on revenues from activation fees. All
other service revenues are recognized as services are provided.

Product  Sales.
Product  sales  (i.e.,  sales  of  equipment)  are  primarily  derived  from  the  sale
of  USWDs  proprietary  Synapse  Adapter and Synapse  Enabler  products.  Revenues
from  product  sales are  recognized  upon  shipment and acceptance.

Research and
Development Costs

Research
and development costs are expensed as incurred. Research and development costs
included in Loss from discontinued operations approximated $313,000
and $520,000 during the years ended June 30, 2004 and 2003, respectively.

Advertising
and Promotion

Costs
of advertising are expensed as incurred. Advertising and promotion expense
included in Loss from discontinued operations for the years ended
June 30, 2004 and 2003 amounted to approximately $8,000 and $223,000,
respectively.

34

---

U.S. WIRELESS DATA, INC.
(Debtor in Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the years ended June 30, 2004 and 2003

Income Taxes

We
follow SFAS No. 109, Accounting for Income Taxes. Under the asset
and liability method of SFAS No. 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Since the Company has no prior history of profits,
management has recorded a full valuation allowance as it is more likely than not
that the deferred tax assets will not be realized.

Stock-based
Compensation

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

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

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

|                                            | Year ended June 30, |                         
|------------------------------------------- | ------------------- | ------------------------
|
|Income (loss) from continuing operations    |                     | $        (2,569,000     
|Income (loss) from discontinued  operations |                     | 3,754,000               
|                                            |                     |                         
|Net income (loss), as reported              |                     | $         1,185,000     
|Deduct: Total stock-based compensation      |                    
|expense determined under fair value         |                    
|based method                                |                     | (1,014,000              
|                                            |                     |                         
|Pro forma net loss                          |                     | $            171,000    
|                                            |                     |                         
|                                            |                     |                         
|Per share, as reported                      |                    
|From continuing operations                  |                     | $                (0.14) 
|From discontinued operations                |                     | 0.21                    
|                                            |                     |                         
|Net                                         |                     | $                   0.07
|                                            |                     |                         
|                                            |                     |                         
|Per share, pro forma                        |                    
|From continuing operations                  |                     | $                (0.20) 
|From discontinued operations                |                     | 0.21                    
|                                            |                     |                         
|Net                                         |                     | $                  0.01 
|                                            |                     |                         
|                                            |                     |                         

35

---

U.S. WIRELESS DATA, INC.
(Debtor in Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the years ended June 30, 2004 and 2003

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

Fair Value
of Financial Instruments

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

NOTE 3
 RECENT ACCOUNTING PRONOUNCEMENTS

In
November 2002, the FASB issued FASB Interpretation No. 45,
Guarantors Accounting and Disclosure Requirements for Guarantees,
including Indirect Guarantees of Indebtedness of Others (FIN
45). FIN 45 elaborates on the disclosures to be made by a guarantor in its
interim and annual financial statements about its obligations under certain
guarantees that it has issued. FIN 45 requires a guarantor to recognize, at the
inception of a guarantee, a liability for the fair value of the obligations
undertaken in issuing the guarantee. The disclosure provisions of FIN 45 are
effective for financial statements of periods ending after December 15, 2002.
Additionally, the recognition of a guarantors obligation should be applied
on a prospective basis to guarantees issued after December 31, 2002. The
adoption of the disclosure and recognition provisions of FIN 45 did not have a
material effect on our results of operations or financial position.

In
January 2003, the FASB issued FASB Interpretation (FIN) No. 46,
Consolidation of Variable Interest Entities. In December 2003, the
FASB issued FIN No. 46 (Revised) (FIN 46-R) to address certain FIN
46 implementation issues. This interpretation requires that the assets,
liabilities, and results of activities of a Variable Interest Entity
(VIE) be consolidated into the financial statements of the
enterprise that has a controlling interest in the VIE. FIN 46-R also requires
additional disclosures by primary beneficiaries and other significant variable
interest holders. For entities acquired or created before February 1, 2003, this
interpretation is effective no later than the end of the first interim or
reporting period ending after March 15, 2004, except for those VIEs that
are considered to be special purpose entities, for which the effective date is
no later than the end of the first interim or annual reporting period ending
after December 15, 2003. For all entities that were acquired subsequent to
January 31, 2003, this interpretation is effective as of the first interim or
annual period ending after December 31, 2003. The adoption of the provisions of
this interpretation did not have a material effect on our financial condition or
results of operations.

36

---

U.S. WIRELESS DATA, INC.
(Debtor in Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the years ended June 30, 2004 and 2003

In
April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. This standard amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts,
collectively referred to as derivatives, and for hedging activities under SFAS
No. 133, Accounting for Derivative Instruments and Hedging
Relationships. SFAS No. 149 is effective for contracts entered into or
modified after June 30, 2003 and for hedging relationships after June 30, 2003.
The adoption of this statement did not have a material impact on our results of
operations or financial condition.

In May
2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. SFAS No.
150 clarifies the accounting for certain financial instruments with
characteristics of both liabilities and equity and requires that those
instruments be classified as liabilities in statements of financial condition.
Previously, many of those financial instruments were classified as equity. SFAS
No. 150 is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003. The adoption the provisions of SFAS No.
150 did not have a material effect on our results of operations or financial
condition.

In
December 2003, the SEC issued Staff Accounting Bulletin No. 104, Revenue
Recognition (SAB 104), which supersedes SAB 101, Revenue
Recognition in Financial Statements. The primary purpose of SAB 104 is to
rescind accounting guidance contained in SAB 101 related to multiple element
revenue arrangements, which was superseded as a result of the issuance of EITF
00-21, Accounting for Revenue Arrangements with Multiple
Deliverables. While the wording of SAB 104 has changed to reflect the
issuance of EITF 00-21, the revenue recognition principles of SAB 101 remain
largely unchanged by the issuance of SAB 104. The adoption of SAB 104 did not
have a material impact on our financial statements.

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

37

---

U.S. WIRELESS DATA, INC.
(Debtor in Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the years ended June 30, 2004 and 2003

NOTE 4
 DUE FROM FACTOR

On May
14, 2003, we entered into an agreement (the Factoring Agreement)
with a finance company to sell a portion of our trade receivables on a regular
monthly basis. Under the terms of the Factoring Agreement, the Company receives
70% of the face amount of approved invoices. Receivables may be sold in lots of
not less than $10,000. We receive the remaining 30% of a lot sold, net of fees
and expenses, upon the finance companys receipt of payment of the entire
lot. The Factoring Agreement required that we sell not less than $450,000 per
quarter until the expiration of the agreement in May 2005. The Factoring
Agreement expired with the filing of the petition for the Chapter 11
Proceedings. By orders dated March 30, 2004 and April 15, 2004, the Court
approved a post petition factoring agreement. Prior to the closing of the
Auction Sales on May 21, 2004, all amounts due to Platinum had been repaid in
full or repurchased by us, and the factors claims have been satisfied in
full. For the year ended June 30, 2004, we paid $137,000 included in
Interest expense and $115,000 in other expenses related to the
Factoring Agreement. For the year ended June 30, 2003, we paid $25,000 included
in Interest expense and $0 in other expenses related to the
Factoring Agreement.

NOTE 5
 ASSETS HELD FOR SALE AND AUCTION SALES

In
August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets (SFAS 144), which addressed
financial accounting and reporting for the impairment or disposal of long-lived
assets. SFAS 144 is applicable to certain long-lived assets, including those
reported as discontinued operations, and develops one accounting model for
long-lived assets to be disposed of by sale. SFAS 144 superseded SFAS No. 121,
Accounting for the Impairment of Long-lived Assets and for Long-lived
Assets to be Disposed Of, and APB 30 for the disposal of a segment of a
business. We adopted the provisions of SFAS 144 effective January 1, 2002.

SFAS
144 requires that long-lived assets to be disposed of by sale be measured at the
lower of carrying amount or fair value less cost to sell, whether reported in
continuing operations or in discontinued operations. Discontinued operations
will no longer be measured at net realizable value or include amounts for
operating losses that have not yet been incurred. SFAS 144 also broadened the
reporting of discontinued operations to include the disposal of a component of
an entity provided that the operations and cash flows of the component will be
eliminated from the ongoing operations of the entity and the entity will not
have any significant continuing involvement in the operations of the component.
We recorded write downs for inventory as disclosed further below.

38

---

U.S. WIRELESS DATA, INC.
(Debtor in Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the years ended June 30, 2004 and 2003

Assets
held for sale at June 30, 2003 representing the assets held for the Auction
Sales closed on May 21, 2004 are as follows:

|                                                 | June 30, 2003
|------------------------------------------------ | -------------
|Assets held for sale consist of:                 |              
|Property and equipment, net                      |              
|Inventory                                        |              
|                                                 |              
|                                                 |              
|                                                 |              
|                                                 |              
|
|Property and equipment,  included in Assets held |              
|for sale, consist of:                            |              
|Equipment and furniture                          |              
|Leasehold improvements                           |              
|Less accumulated depreciation                    |              
|and amortization                                 |              
|                                                 |              
|                                                 |              
|                                                 |              
|                                                 |              

Depreciation
and  amortization  expense  related to property and equipment was $479,000 and $885,000
for the years  ended June 30, 2004 and 2003, respectively.

|                                       | June 30, 2003
|-------------------------------------- | -------------
|Inventory, included in Assets held for |              
|sale, consists of:                     |              
|Raw materials                          |              
|Work in process                        |              
|Finished goods                         |              
|                                       |              
|                                       |              
|                                       |              
|                                       |              

In the
second half of the fiscal year ended June 30, 2002, product sales of the Synapse
Adapter trailed off substantially as the Company found it challenging to get
clients to commit to purchases. The Company instituted alternative strategies to
improve sales, which have been unsuccessful in moving any significant volume of
units. This product is based on the Cellular Digital Packet Data
(CDPD) wireless medium, which has certain coverage issues in various
markets and which the existing wireless carriers will ultimately migrate away
from as they move to next generation mediums. In the fourth quarter of the
fiscal year ended June 30, 2002, the Company recorded a charge of $3,481,000 to
write-down the inventory of Synapse Adapters to the value of the number of units
the Company expected to realize over the remaining expected life of this
product.

As of
April 1, 2003, AT&T Wireless is no longer activating new units on their CDPD
network and has stated that they intend to completely shutdown their CDPD
network in June 2004. In addition, Verizon Wireless has stated that they intend
to completely shutdown their CDPD network in December 2005. As a result, in the
quarter ended December 31, 2002, the Company recorded a charge of $333,000 to
completely write-down the remaining inventory of Synapse Adapters and other
CDPD-based inventory. In addition, the Company recorded a charge of $246,000 to
write-down certain other inventory that management believed would not be
recoverable from projected operations.

39

---

U.S. WIRELESS DATA, INC.
(Debtor in Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the years ended June 30, 2004 and 2003

In
addition, we curtailed further efforts and resources associated with our Synapse
Enabler for Transportation and Synapse Enabler T8, and intended to liquidate our
remaining inventory of these products and other materials. As a result, during
the quarter ended December 31, 2003, we recorded a charge of $79,000 to
write-down the remaining inventory to the net realizable value we estimated we
would realize from such sales. In this regard, subsequent to December 31, 2003,
we had returned for a refund approximately $69,000 of previously purchased
inventory items and sold approximately $29,000 of other materials.

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

|                                  | Year ended June 30, |            
|--------------------------------- | ------------------- | -----------
|
|Revenues                          |                     | $ 4,925,000
|Loss from discontinued operations |                     | (4,432,000 

|(a) |  | Excludes
the results of NXT (see Note 22 - Sale of NXT).
|--- |  | --------------------------------------------------------

For
the year ended June 30, 2004 and 2003, we recorded a gain of $8,186,000 and $0,
respectively, on the sale of discontinued operations related to the Auction
Sales.

NOTE 6
 INTANGIBLE ASSETS

All of
USWDs acquired intangible assets are subject to amortization. There were
no material acquisitions of intangible assets during the years ended June 30,
2004 and 2003. Amortization expense related to intangible assets was $45,000 and
$178,000 for the years ended June 30, 2004 and 2003, respectively.

Intangibles
related to the acquisition of Cellgate

As
indicated in Note 5, in the second half of the fiscal year ended June 30, 2002,
product sales of the Synapse Adapter trailed off substantially and the remaining
useful life of the CDPD-based products was believed to be limited. As a result,
at December 31, 2002, we recorded an impairment charge of $836,000 to write-down
the value of the acquired assets of Cellgate Technologies LLC
(Cellgate) to managements estimate of fair value. The
remaining $45,000 of intangibles as of June 30, 2003 was amortized over the
estimated remaining useful life of six months. The following reflects the
activity in intangibles for the periods presented.

40

---

U.S. WIRELESS DATA, INC.
(Debtor in Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the years ended June 30, 2004 and 2003

|                      | Year ended June 30, 2004 |            |  |            
|--------------------- | ------------------------ | ---------- |  | -----------
|
|Intellectual property |                          | $2,579,000 |  | $(1,743,000
|Goodwill              |                          | 406,000    |  | (406,000   
|                      |                          |            |  |            
|                      |                          |            |  |            
|Total                 |                          | $2,985,000 |  | $(2,149,000
|                      |                          |            |  |            
|                      |                          |            |  |            
|
|
|Intellectual property |                          | $2,579,000 |  | $(1,698,000
|Goodwill              |                          | 406,000    |  | (406,000   
|                      |                          |            |  |            
|Total                 |                          | $2,985,000 |  | $(2,104,000
|                      |                          |            |  |            
|                      |                          |            |  |            

NOTE 7
 ACCRUED LIABILITIES

|                                 | June 30, |         
|-------------------------------- | -------- | --------
|
|Accrued liabilities consists of: |          |         
|Accrued professional fees        |          | $303,000
|Accrued telecom services         |          | 52,000  
|Accrued compensation             |          | 15,000  
|Other                            |          | 189,000 
|                                 |          |         
|                                 |          | $559,000
|                                 |          |         
|                                 |          |         

NOTE 8 
ACCRUED RESTRUCTURING EXPENSE

During
the fourth quarter of fiscal year 2001, we recorded a restructuring charge of
$2.4 million related to the consolidation and relocation of our former Bethesda,
Maryland network operations center with its research, development and operations
center, located in Palmer Lake, Colorado.

As
part of the consolidation of our technical and network operations and the
closure of our Bethesda facility, a restructuring charge of $625,000 was
recorded in the first quarter of the year ended June 30, 2002 related to the
termination of thirty-seven employees. The charge represents the cost of
involuntary severance and related benefits for technical, operations,
engineering, and administrative employees located in the Bethesda and Palmer
Lake facilities.

During
the fourth quarter of the year ended June 30, 2002, as a result of completing a
sublease arrangement for our former Bethesda facility, we re-evaluated the
balance of the restructuring accrual and adjusted our estimates of sublease
income and related costs. As a result, we reduced the restructuring accrual
balance by $714,000.

41

---

U.S. WIRELESS DATA, INC.
(Debtor in Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the years ended June 30, 2004 and 2003

In
June 2003, we revised our restructuring accrual related to a settlement of our
Bethesda lease obligation. Accordingly, the restructuring accrual was adjusted
by approximately $131,000 to reflect the actual amount that was paid in fiscal
2004.

The
following is an analysis of the changes in the restructuring accrual:

|                                                    | 
|--------------------------------------------------- | 
|Balance at June 30, 2001                            | 
|Charges against accrual (Bethesda rent              | 
|payments, severance and benefit payments)           | 
|Additions to accrual (severance and benefits        | 
|accrual)                                            | 
|Change in estimate (based on sublease)              | 
|                                                    | 
|Balance at June 30, 2002                            | 
|Charges against accrual                             | 
|Change in estimate (for Bethesda lease termination) | 
|                                                    | 
|                                                    | 
|Balance at June 30, 2003                            | 
|Charges against accrual                             | 
|                                                    | 
|Balance at June 30, 2004                            | 
|                                                    | 
|                                                    | 

NOTE 9
 PREPETITION LIABILITIES SUBJECT TO COMPROMISE

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

|                                             | 
|-------------------------------------------- | 
|Accounts payable                             | 
|Accrued liabilities                          | 
|Obligation under capital lease               | 
|Obligation for rejected real property lease  | 
|Obligation for rejected executory agreements | 
|                                             | 
|Balance at June 30, 2004                     | 
|                                             | 
|                                             | 

NOTE 10
 CAPITAL LEASE OBLIGATION

In
November 2000, we purchased the assets and assumed liabilities of Cellgate.
Included in the assumed liabilities were leases related to equipment used in the
ordinary course of business. In addition, NXT entered into capital leases for
certain computer and network equipment, which expired on various dates through
2002.

On
July 29, 1999, Cellgate entered into a Master Purchase and Lease Agreement with
Tellus Technology Inc. (Tellus) and Varilease Corporation
(Varilease) in which Tellus agreed to sell to Varilease and
Varilease agreed to lease to the Company wireless IP modem adapters (the
Synapse Adapters). In connection therewith, Cellgate entered into a
separate Master Lease Agreement with Varilease to lease Synapse Adapters. On
April 4, 2002, we entered an agreement with Varilease to extend the term of the
lease for an additional twelve months. On October 25, 2002, we paid the lessor
$462,000, which included the application of a $52,000 deposit held by the
lessor, to buy out the first five of eleven leases.

42

---

U.S. WIRELESS DATA, INC.
(Debtor in Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the years ended June 30, 2004 and 2003

In
July 2003, we paid $24,000 representing six monthly installments of interest due
from May 25th to October 25th. The lessor agreed to defer all
principal payments until November 25, 2003. In the event that the Company raises
net debt or net equity in the amount of $2 million or more, up to and including
$5 million dollars, prior to November 25, 2003, the Company shall immediately
commence making additional monthly payments aggregating approximately $26,000 to
the lessor. In the event that the Company raises net equity in an amount in
excess of $5 million dollars at any time during the terms of the remaining
leases, all amounts due under the remaining leases shall be immediately due and
payable to the lessor.

Unpaid
minimum lease payments due on capital leases are as follows (listed in years
payments were originally due):

|                                  | 
|--------------------------------- | 
|For fiscal year ending June 30:   | 
|2003                              | 
|2004                              | 
|2005                              | 
|                                  | 
|Total minimum payments required   | 
|Less amount representing interest | 
|                                  | 
|Present value of net minimum      | 
|lease payments                    | 
|                                  | 
|                                  | 

The
present value of net minimum lease payments of $510,000 at June 30, 2004 is
included in Prepetition liabilities subject to compromise.

NOTE 11
 OTHER LIABILITIES

Other
liabilities of $151,000 at June 30, 2003, consist of (i) deposits of $66,000 due
to the sub-lessee of the former office space in Bethesda, which was subsequently
transferred to the landlord in August 2003 under the term of a lease termination
agreement, (ii) deposits of $10,000 due to the sub-lessee of the office space in
New York, which was used as payment towards the final rent due for the sub-lease
which terminated on May 31, 2004, and (iii) $75,000 due to an investment-banking
firm for past services, which is included in Prepetition liabilities
subject to compromise at June 30, 2004.

NOTE 12
 STOCKHOLDERS EQUITY

On
October 6, 2000, authorized capital was increased to 225,000,000 shares,
200,000,000 of which are $.01 par value common stock and 25,000,000 of which are
$.01 par value preferred stock. At June 30, 2004 and 2003, the only preferred
stock issued and outstanding is the Series C Convertible Preferred Stock.

43

---

U.S. WIRELESS DATA, INC.
(Debtor in Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the years ended June 30, 2004 and 2003

On
December 23, 2002, 2,241,658 shares of Common Stock were issued to the former
NXT shareholders pursuant to the terms of the acquisition agreement of NXT.

The
Bridge Loan Warrant was valued at $780,000 and was being accreted to interest
expense over the 18-month period of the Bridge Loan. In determining the fair
value of the warrants issued, we used the Black-Scholes option pricing model as
prescribed by SFAS No. 123 using the following assumptions: dividend yield of
zero, volatility of 144%, expected life of 18 months, an exercise price of
$0.15, and an average risk free rate of 1.74%. On the Petition Date, the Bridge
Loan Warrant was amended and restated to 5 million shares and we reversed the
associated $390,000 of debt discount and adjusted additional paid in capital for
the same amount. Interest expense for the year ended June 30, 2004
includes accretion of $390,000 of the amended debt discount.

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

NOTE 13
 SERIES C CONVERTIBLE PREFERRED STOCK

Under
the terms of, and in accordance with the Plan, holders of record of our Series C
Preferred Stock as of February 7, 2005 will receive a pro rata share of an
aggregate of 3.5% of the new common stock to be issued in exchange for the
Series C Preferred Stock.

Commonwealth
Associates, L.P. (Commonwealth) acted as placement agent in the
Private Placement pursuant to which an aggregate of 558.66 Units were sold at
$100,000 per Unit for aggregate gross proceeds of $55,866,000. The Private
Placement was closed in three tranches on March 17, 2000, March 28, 2000 and May
31, 2000. Each Unit consists of 10,000 shares of the Companys Series C
Preferred Stock (which is initially convertible into 16,667 shares of Common
Stock) and warrants to purchase Common Stock equal to 25% of the number of
shares into which the Series C Preferred Stock is convertible.

The
warrants issued in connection with the Private Placement (the Unit
Warrants) are exercisable for a period of seven years for an aggregate
number of shares of Common Stock equal to 25% of the number of shares into which
the Series C Preferred Stock are convertible, at an exercise price equal to the
then applicable conversion price. The initial exercise price is $6.00 per share,
subject to adjustment under the same circumstances as the conversion price of
the Series C Preferred Stock. The Unit Warrants are callable for a nominal price
at the Companys option on 30 days notice to the holders of the Unit
Warrants if (a) the average closing bid price of the Companys Common Stock
for 20 consecutive trading days exceeds 300% of the exercise price, as adjusted,
(b) the Companys Common Stock is trading on a national securities exchange
or Nasdaq SmallCap or National Market Systems, and (c) a registration statement
covering the shares issuable upon exercise of the Unit Warrants has been
declared effective and the shares issuable upon exercise of the Unit Warrants
are not otherwise subject to any lock-up restrictions.

44

---

U.S. WIRELESS DATA, INC.
(Debtor in Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the years ended June 30, 2004 and 2003

The
Company is obligated to file a registration statement with respect to the shares
of Common Stock issuable upon conversion of the Series C Preferred Stock and
exercise of the Unit Warrants under the Securities Act of 1933 within twelve
months of the closing of the Private Placement. The investors also have certain
piggyback registration rights with respect to the shares of Common
Stock issuable upon conversion of the Series C Preferred Stock and the exercise
of the Unit Warrants. As of June 30, 2004, the Company has not registered the
Common Stock underlying the Series C Preferred Stock and related Unit Warrants
as required by the agreement.

Several
of the Companys officers and directors purchased Units in the Private
Placement. Dean M. Leavitt, the Companys Chairman and Chief Executive
Officer purchased 2.5 Units, Charles I. Leone, the Companys Executive Vice
President, Chief Administrative Officer and Secretary purchased 1 Unit and
Robert E. Robichaud, the Companys former Chief Financial and Accounting
Officer, Treasurer and Secretary purchased 0.75 of a Unit. Edwin Cooperman, a
former member of the Board, purchased 1 Unit and each of Michael S. Falk and Amy
Newmark, the first a former member of the Board and the second a present member
of the Board, purchased 2.5 Units. Barry Kaplan, also a current member of the
Board, purchased 25 Units. Mr. Kaplan also received from Commonwealth at no
charge a warrant to purchase 1.5 Units exercisable at $100,000 per Unit (from
the warrants Commonwealth received as compensation for services in the Private
Placement).

As
part of its compensation, Commonwealth received warrants to purchase 139.664
Units, exercisable at $100,000 per Unit, a commission of $3,910,620, which is 7%
of the gross proceeds raised in the Private Placement, and a structuring fee of
$1,675,980, which is 3% of the gross proceeds raised in the Private Placement.
Pursuant to a prior agreement with Peter J. Solomon Securities Company Limited
(PJSC) relating to financing transactions entered into by the
Company, the Company issued to PJSC warrants to purchase 27.935 Units at
$100,000 per Unit and a fee of $400,000. The warrants are exercisable commencing
on the date of issuance and for seven years thereafter. The Company valued all
of the unit warrants, in the aggregate at a fair value of $6.15 million.

As a
condition to the completion of the Private Placement, the Company agreed that
the exercise price of a warrant owned by Dean M. Leavitt, the Companys
Chairman and Chief Executive Officer, to purchase 671,875 shares of Common Stock
should be reduced from $12.00 per share to the market price of the Common Stock
on January 4, 2000. In March 2000, the FASB issued Interpretation No. 44
Accounting for Certain Transactions Involving Stock Compensation.
The interpretation was not effective until July 1, 2000. Had the interpretation
been in effect on the date of the repricing, the warrant would have been
considered a variable warrant at that time. In compliance with this new
interpretation, the Company recorded this as a variable warrant and will adjust
compensation expense based upon the Common Stock price difference from the
closing Common Stock price on July 1, 2000 versus the closing Common Stock price
at any measurement date multiplied by the number of outstanding warrants at the
measurement date. On June 30, 2003, the closing stock price was less than the
closing stock price at July 1, 2000, therefore, no compensation expense has been
recorded.

As a
result of previous financing arrangements and the Private Placement, Mr. Falk,
through his direct ownership in the Company and his control of Commonwealth, is
deemed to control the Company.

45

---

U.S. WIRELESS DATA, INC.
(Debtor in Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the years ended June 30, 2004 and 2003

Authorization
and Stated Value

On
March 10, 2000, the Company authorized 8,450,000 shares as Series C Convertible
Preferred Stock with a stated value of $0.01 per share.

Liquidation
Value

In the
event of a liquidation, dissolution or winding up of the Company, either
voluntary or involuntary, the holders of the Series C Preferred Stock will be
entitled to receive for each of their shares, prior and in preference to any
distribution to the holders of the Common Stock or other series of preferred
stock, a Liquidation Value equal to $10.00 per share, plus any accrued and
unpaid dividends.

Optional
Conversion

Each
Series C Preferred Stock is convertible, at the option of the holder into a
number of shares of Common Stock determined by dividing (A) the Liquidation
Value by (B) the Conversion Price ($6.00 per share) which is subject to
adjustment for stock splits, recapitalizations and other similar events. During
fiscal year 2004, 308,500 preferred shares were converted into 514,173 shares of
common stock. During fiscal year 2003, 392,625 preferred shares were converted
into 654,949 shares of common stock.

Automatic
Conversion

The
Series C Preferred Stock automatically converts into shares of Common Stock at
the then Conversion Price if, commencing three months after the Initial Closing,
the average closing bid price of the Common Stock exceeds 300% of the Conversion
Price for 20 consecutive trading days. In addition, the Series C Preferred Stock
automatically converts into shares of Common Stock at the Conversion Price upon
a public offering of the Companys securities raising gross proceeds in
excess of $30,000,000.

Ranking

The
Company cannot create or authorize any other stock ranking senior to the Series
C Preferred Stock.

Anti-dilution

In the
event of any capital reorganization or reclassification of the Company, or any
consolidation or merger of the Company, or sale, transfer, or lease of all or
substantially all of its assets which affects the holders of Common Stock in
such a way that entitles them to receive stock, securities, or assets with
respect to or in exchange for their shares, then the holder of the Series C
Preferred Stock shall have the right to purchase and receive such securities or
assets as would have been issued and payable if the holders of the Series C
Preferred Stock had converted their shares into Common Stock immediately prior
to such reorganization, reclassification, consolidation, merger, or sale.

46

---

U.S. WIRELESS DATA, INC.
(Debtor in Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the years ended June 30, 2004 and 2003

If at
any time the Company distributes to holders of Common Stock (i) securities, (ii)
property, or (iii) cash, without fair payment, then the holders of the Series C
Preferred Stock, upon conversion, shall be entitled to receive such securities,
property or cash that they would have received if they had converted their
shares into Common Stock immediately prior to the distribution.

In the
event the Company at any time issues additional Common Stock, preferred stock,
options, warrants or convertible securities after the date or issuance of the
Series C Preferred Stock, at a purchase price lower than the Conversion Price,
then, subject to certain exceptions, the Conversion Price will be automatically
reduced to such lower purchase price and the number of shares issuable upon
conversion of the Preferred Shares shall be increased proportionately.

The
anti-dilution rights may be waived by a vote of the holders of at least 20% of
the Series C Preferred Stock.

Voting Rights

The
holders of Series C Preferred Stock are entitled to one vote per share of Common
Stock issuable upon conversion of the Series C Preferred Stock as of the record
date for any such vote on all matters submitted to a vote of shareholders of the
Company, and the holders of Series C Preferred Stock will vote as a single class
with the holders of Common Stock on all matters, except as otherwise required
under applicable law and except that the holders of the Series C Preferred Stock
are entitled to elect two directors.

Distribution
and Dividends

If any
dividend is declared on the Common Stock, the holders of the Series C Preferred
Stock will be entitled to receive dividends pari passu out of legally available
funds as if each such share of the Series C Preferred Stock had been converted
to Common Stock. No dividend shall be paid on the Common Stock at a rate greater
than the rate at which dividends are paid on the Series C Preferred Stock.
Dividends to the holder of Series C Preferred Stock will be non-cumulative.

Modifications
and Waivers

The
terms of the Series C Preferred Stock may be amended, modified or waived by
agreement of the Company, the Commonwealth and a committee, to be designated by
the Commonwealth whose members hold in the aggregate not less than 20% of the
outstanding Series C Preferred Stock and 20% of the outstanding Unit Warrants
(the Committee), provided, however, that no such amendment,
modification or waiver which would decrease the number of Conversion Shares
issuable upon the exercise of the Series C Preferred Stock, or increase the
Conversion Price therefore (other than as a result of the waiver or modification
of any anti-dilution provisions) may be made without approval of the holders of
at least 50% of the outstanding Series C Preferred Stock.

47

---

U.S. WIRELESS DATA, INC.
(Debtor in Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the years ended June 30, 2004 and 2003

NOTE 14
 STOCK OPTIONS

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

During
the year ended June 30, 2003, 1,503,182 stock options were granted to employees
with exercise prices equal to the fair market value of the Companys common
stock at the date of grant, with 884,886 options granted to employees as
additional compensation to offset a reduction of approximately $442,000 in
salaries for the twelve-month period beginning November 1, 2002.

On
July 16, 2002, 50,000 stock options were granted to an investment-banking firm
for services to be performed. These options were valued at $21,000 and were
amortized to expense over the six-month contract period ending January 16, 2003.
In determining the fair value of the options issued, the Company used the
Black-Scholes option pricing model as prescribed by SFAS No. 123 using the
following assumptions: dividend yield of zero, volatility of 123%, expected life
of two years and an average risk free rate of 2.1%.

On
August 30, 2002, 50,000 stock options were granted to an investment-banking firm
pursuant to their service agreement. These options were recorded as an expense
of $27,000 in relation to the sale of NXT. Also in relation to the sale of NXT,
100,000 options were granted to a vendor as consideration for their consent of
assignment and modifications of their service agreement. These options were
valued at $25,000 and recorded as an expense of the NXT sale. In determining the
fair value of the options issued, the Company used the Black-Scholes option
pricing model as prescribed by SFAS No. 123 using the following assumptions:
dividend yield of zero, volatility of 123%, expected life of two years and an
average risk free rate of 2.1%.

On
October 16, 2002, 65,000 stock options were granted to our investor relations
firm for services to be performed from July 1, 2002 through June 30, 2003. These
options were valued at $29,000 and amortized to expense over the period of the
contract. In determining the fair value of the options issued, the Company used
the Black-Scholes option pricing model as prescribed by SFAS No. 123 using the
following assumptions: dividend yield of zero, volatility of 123%, expected life
of two years and an average risk free rate of 2.1%.

On
October 24, 2002, 164,000 stock options were granted to our counsel as a
reduction of $80,000 of outstanding legal fees for services performed. These
options were valued at the amount of the cash reduction, which approximated the
fair value using the Black-Scholes option pricing model. In determining the fair
value of the options issued, the Company used the Black-Scholes option pricing
model as prescribed by SFAS No. 123 using the following assumptions: dividend
yield of zero, volatility of 123%, expected life of two years and an average
risk free rate of 2.1%.

48

---

U.S. WIRELESS DATA, INC.
(Debtor in Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the years ended June 30, 2004 and 2003

For
the year ended June 30, 2003, $563,000 was charged to compensation expense
relating to options granted to two board members on March 29, 2000, offset by
the reversal of $94,000 related to the resignation of a third director on
January 13, 2003. In addition, since the last year of vesting was forfeited upon
the resignation of the director, $375,000 of unearned compensation was removed
from stockholders equity.

Stock Option
Plans

In
December 2002, the Company adopted a new combined incentive and a non-qualified
stock option plan (the 2002 Stock Option Plan), which provides for
the issuance of up to 3,500,000 shares of Common Stock under the plan. As of
June 30, 2003, there were no option grants issued under the 2002 Stock Option
Plan. Although options remain outstanding under the 1992 Stock Option Plan and
the 2000 Stock Option Plan, as of June 30, 2003 the Company no longer issues new
grants under those plans. Options granted under the plans generally vest over a
period of three years and must be exercised no later than ten years from the
date of grant.

The
following table summarizes information for stock options outstanding under the
plans and outside the plans at June 30, 2004:

|               | Outstanding Options                                       Options Exercisable |      |  |            |    
|-------------- | ----------------------------------------------------------------------------- | ---- |  | ---------- | ---
|
|$0.00 - $0.65  |                                                                               | 5.23 |  | $        0 | .51
|$0.66 - $0.66  |                                                                               | 7.35 |  | $        0 | .66
|$0.67 - $1.00  |                                                                               | 5.33 |  | $        0 | .81
|$1.01 - $2.00  |                                                                               | 6.18 |  | $        1 | .61
|$2.01 - $4.00  |                                                                               | 6.75 |  | $        2 | .25
|$4.01 - $7.50  |                                                                               | 6.14 |  | $        7 | .24
|$7.51 - $26.00 |                                                                               | 5.32 |  | $      11  | .15
|               |                                                                               |      |  |            |    
|               |                                                                               |      |  |            |    
|               |                                                                               |      |  |            |    
|               |                                                                               |      |  |            |    

Stock
option transactions relating to options granted under the plans and other stock
options (discussed below) for the years ended June 30, 2004 and 2003 were as
follows:

1992 Stock
Option Plan

|                             | Number ofShares | Weighted  AverageExercise  Price PerShare
|---------------------------- | --------------- | -----------------------------------------
|Balance at June 30, 2002     |                 | 212,570                                  
|Granted                      |                 | 250,000                                  
|Exercised                    |                 | --                                       
|Cancelled                    |                 | (60,625                                  
|                             |                 |                                          
|Balance at June 30, 2003     |                 | 401,945                                  
|Granted                      |                 | --                                       
|Exercised                    |                 | --                                       
|Cancelled                    |                 | (3,750                                   
|                             |                 |                                          
|Balance at June 30, 2004     |                 | 398,195                                  
|                             |                 |                                          
|                             |                 |                                          
|Exercisable at June 30, 2004 |                 | 210,695                                  
|                             |                 |                                          
|                             |                 |                                          

49

---

U.S. WIRELESS DATA, INC.
(Debtor in Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the years ended June 30, 2004 and 2003

2000 Stock
Option Plan

|                             | Number ofShares | Weighted  AverageExercise  Price PerShare
|---------------------------- | --------------- | -----------------------------------------
|Balance at June 30, 2002     |                 | 3,280,897                                
|Granted                      |                 | 483,296                                  
|Exercised                    |                 | --                                       
|Cancelled                    |                 | (963,527                                 
|                             |                 |                                          
|Balance at June 30, 2003     |                 | 3,280,897                                
|Granted                      |                 | --                                       
|Exercised                    |                 | --                                       
|Cancelled                    |                 | (41,612                                  
|                             |                 |                                          
|Balance at June 30, 2004     |                 | 2,759,054                                
|                             |                 |                                          
|                             |                 |                                          
|Exercisable at June 30, 2004 |                 | 1,968,911                                
|                             |                 |                                          
|                             |                 |                                          

The
following option activity relates to options issued by the Company, which are
unrelated to the foregoing plans.

|                             | Number ofShares | Weighted  AverageExercise  Price PerShare
|---------------------------- | --------------- | -----------------------------------------
|Balance at June 30, 2002     |                 | 295,833                                  
|Granted                      |                 | 1,198,886                                
|Exercised                    |                 | --                                       
|Cancelled                    |                 | (103,173                                 
|                             |                 |                                          
|Balance at June 30, 2003     |                 | 1,391,546                                
|Granted                      |                 | --                                       
|Exercised                    |                 | --                                       
|Cancelled                    |                 | (33,710                                  
|                             |                 |                                          
|Balance at June 30, 2004     |                 | 1,357,836                                
|                             |                 |                                          
|                             |                 |                                          
|Exercisable at June 30, 2004 |                 | 1,357,836                                
|                             |                 |                                          
|                             |                 |                                          

NOTE 15
 STOCK WARRANTS

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

50

---

U.S. WIRELESS DATA, INC.
(Debtor in Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the years ended June 30, 2004 and 2003

The
following table summarizes information about stock warrants outstanding at June
30, 2004:

|              | Outstanding and Exercisable Warrants |            | 
|------------- | ------------------------------------ | ---------- | 
|
|$0.00-$0.15   |                                      | 5,000,000  | 
|$0.16-$3.50   |                                      | 671,875    | 
|$3.51-$5.99   |                                      | 671,875    | 
|$6.00-$6.00   |                                      | 6,017,766  | 
|$6.01-$ 21.38 |                                      | 85,000     | 
|              |                                      |           
|              |                                      | 12,446,516
|              |                                      |           
|              |                                      |           

Provided
below are stock warrant transactions for the years ended June 30, 2004 and 2003.

|                             | Number of Shares | Weighted AverageExercise Price
|---------------------------- | ---------------- | ------------------------------
|
|Balance at June 30, 2002     |                  | 7,488,708                     
|Granted                      |                  | --                            
|Exercised                    |                  | --                            
|Cancelled                    |                  | (40,109                       
|                             |                  |                               
|Balance at June 30, 2003     |                  | 7,448,599                     
|Granted                      |                  | 10,000,000                    
|Exercised                    |                  | --                            
|Cancelled                    |                  | (5,002,083                    
|                             |                  |                               
|Balance at June 30, 2004     |                  | 12,446,516                    
|                             |                  |                               
|                             |                  |                               
|Exercisable at June 30, 2004 |                  | 12,446,516                    
|                             |                  |                               
|                             |                  |                               

As
part of their compensation related to the Private Placement, Commonwealth and
PJSC received warrants to purchase an aggregate of 167.599 Units (which are
identical to the units sold in the Private Placement). The warrants are
exercisable at $100,000 per Unit commencing on the date of issuance and for
seven years thereafter. The Company valued all of the unit warrants, in the
aggregate, at $6.15 million.

Effective
September 7, 2000, unit purchase warrants to purchase units consisting of (a)
Series C Convertible Preferred Stock and (b) additional warrants to purchase
Common Stock at $6.00 per share were amended so that such warrants are now
exercisable, at $6.00 per share, solely for the total number (3,491,625) of
shares of Common Stock into which the underlying Series C Convertible Preferred
Stock and warrants would have been convertible and exercisable. The modified
warrants are held by Commonwealth and PJSC. The change does not change the
aggregate number of shares of Common Stock, which the holders would have
received upon exercise in full of the unit purchase warrants and conversion and
exercise in full of the underlying securities. The change also does not affect
the aggregate purchase price, which such holders would have paid for the
underlying Common Stock. The change in the agreement did not provide additional
value to the warrant holders, therefore, the Company did not give accounting
recognition to the change.

51

---

U.S. WIRELESS DATA, INC.
(Debtor in Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the years ended June 30, 2004 and 2003

See
the caption Bridge Loan contained in Note 1  The Company
regarding the Bridge Loan Warrants.

NOTE 16
 NET LOSS PER SHARE

Loss
per common share is computed in accordance with the provisions of SFAS No. 128,
Earnings per Share. SFAS No. 128 establishes standards for the
computation, presentation, and disclosure of earnings per share. Basic per share
amounts are computed by dividing the net loss available to common stockholders
by the weighted average number of common shares outstanding during the year.
Diluted per share amounts incorporate the incremental shares issuable upon the
assumed exercise of the Companys stock options and warrants and assumed
conversion of convertible securities. During the years ended June 30, 2004 and
2003, such incremental amounts have been excluded from the calculation since
their effect would be anti-dilutive. Such stock options, warrants and
conversions could potentially dilute earnings per share in the future.

NOTE 17
 INCOME TAXES

At
June 30, 2004 and 2003, we had net operating loss carry-forwards for federal and
state income tax purposes of approximately $81 and $75 million, respectively.
Annual utilization of the loss carry-forwards is subject to significant
limitations due to changes in our ownership. Future changes in ownership could
further limit the utilization of these net operating loss carry-forwards. If
unused, the carry-forwards will expire between 2009 and 2024.

We
incurred Delaware and other state and local taxes of $55,000 and $34,000 for the
years ended June 30, 2004 and 2003, respectively.

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
carry-forwards. The tax effects of significant items comprising the
Companys deferred taxes are as follows:

|                                  | June 30, |                     
|--------------------------------- | -------- | --------------------
|
|Deferred tax assets               |          |                     
|Net operating loss carry-forwards |          | $ 27,540,000        
|Intangible assets                 |          | --                  
|Inventory reserves                |          | 1,443,000           
|Accrued restructuring expense     |          | --                  
|Other                             |          | --                  
|                                  |          |                     
|                                  |          | $ 28,983,000        
|Valuation allowance               |          | (28,983,000         
|                                  |          |                     
|                                  |          | $                 --
|                                  |          |                     
|                                  |          |                     

52

---

U.S. WIRELESS DATA, INC.
(Debtor in Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the years ended June 30, 2004 and 2003

Realization
of deferred tax assets is dependent upon future earnings. We recorded a full
valuation allowance against the deferred tax assets since management believes
that it is more likely than not that these assets will not be realized.
Accordingly, no income tax benefit has been recorded because of the valuation
allowance. The valuation allowance decreased during fiscal 2004 by $783,000.

A
reconciliation between the statutory tax rate and the effective tax rate for the
periods indicated is presented below:

|                           | Year ended June 30, |    
|-------------------------- | ------------------- | ---
|
|Federal statutory tax rate |                     | 35 
|State taxes                |                     | 7  
|Valuation allowance        |                     | (42
|                           |                     |    
|Effective tax rate         |                     | -- 
|                           |                     |    
|                           |                     |    

NOTE 18
 EMPLOYEE BENEFIT PLAN

We
maintain a qualified Section 401(k) Savings Plan. The 401(k) Savings Plan allows
eligible employees to contribute up to 15% of their salaries on a pre-tax basis,
subject to certain limitations imposed by current tax law and regulations.
During the fiscal years 2004 and 2003, we contributed $0 and $26,000,
respectively, to the plan.

NOTE 19
 RELATED PARTY TRANSACTIONS

No
fees were paid to Commonwealth during fiscal year 2004 or 2003. See additional
disclosures of related party transactions in the Note entitled Series C
Convertible Preferred Stock and the Note entitled Stock
Options relating to options granted to the Board of Directors.

We received
payments for services  provided to two  shareholders,  Paymentech,  a subsidiary of First
USA Inc. and  its subsidiary,  Merchant-Link,  Inc.  (Merchant-Link) and
American Express Travel Related Services Company, Inc.  (Amex).  In May 2003,
Amex sold its shareholdings in the Company.  We obtained these relationships as part of
our  acquisition of NXT in December 2000.

Paymentech

During
the years ended June 30, 2004 and 2003, NXT recorded approximately $0 and
$100,000, respectively, in revenue from Paymentech for transaction fees, monthly
data transport services, leased line revenue, and software development services.

During
the years ended June 30, 2004 and 2003, the Company, excluding NXT, recorded
approximately $1,133,000 and $301,000, respectively, in revenue from Paymentech
for Synapse services and product purchases.

53

---

U.S. WIRELESS DATA, INC.
(Debtor in Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the years ended June 30, 2004 and 2003

There
were no Accounts receivable due from Paymentech at June 30, 2004 and
2003. Also see Note 22  Sale of NXT for additional information.

Merchant-Link

NXT
provides Merchant-Link with transaction transport services as contracted for in
a service agreement dated June 21, 1996. During the years ended June 30, 2004
and 2003, NXT recorded revenue from Merchant-Link of approximately $0 and
$835,000, respectively. We also recognized $213,000 in fees for the transition
discussed in Note 22  Sale of NXT.

Amex

Pursuant
to an agreement with Amex dated January 29, 1996 as amended on October 16, 1997,
February 11, 1999, May 10, 1999, December 30, 1999, May 24, 2000, August 22,
2000 and December 22, 2000, NXT provides to and receives from Amex various
services related to transport and management of credit card transactions. During
the years ended June 30, 2004 and 2003, NXT recorded no revenue from Amex from
transaction management fees, leased line reimbursements, software development
and other services. NXT recognized costs of sales to Amex of approximately $0
and $627,000 for transaction transport services, host connection fees and
transaction commissions during the years ended June 30, 2004 and 2003,
respectively. There were no amounts due to Amex, and no amounts due from Amex,
as of June 30, 2004 and 2003.

NOTE 20
 SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental
disclosure of cash flow information:

$272,000
and $118,000 was paid in cash for interest for the years ended June 30, 2004 and
2003, respectively.

Supplemental
disclosure of non-cash financing and investing activities:

Year ended June
30, 2004

|1. |  | Conversion
of 308,500 shares of Series C Convertible Preferred Stock into 514,173 shares of Common
Stock.
|-- |  | ---------------------------------------------------------------------------------------------------------

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

|3. |  | Accretion
of Bridge Loan discount of $390,000.
|-- |  | ----------------------------------------------

|4. |  | Reversal
of $390,000 of debt  discount  and adjust of  additional  paid in capital for the same
amount for  the amended and restated warrant.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------

54

---

U.S. WIRELESS DATA, INC.
(Debtor in Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the years ended June 30, 2004 and 2003

Year ended June
30, 2003

|1. |  | Conversion
of 392,625 shares of Series C Preferred Stock into 654,949 shares of Common Stock.
|-- |  | ---------------------------------------------------------------------------------------------

|2. |  | Issuance
of 2,241,658  shares of Common Stock to former NXT  shareholders  in connection  with
stock price  guarantees.
|-- |  | -----------------------------------------------------------------------------------------------------------------------

|3. |  | Issuance
of 329,000 options for services valued at $157,000.
|-- |  | ------------------------------------------------------------

|4. |  | Retirement
of 81,818 common shares received in connection with  settlement of notes  receivable
valued at $25,000.
|-- |  | ------------------------------------------------------------------------------------------------------------------

NOTE 21
 COMMITMENTS AND CONTINGENCIES

The
Company had entered into leases for facilities. Future minimum lease payments
and sublease income under non-cancelable operating leases as of June 30, 2004,
before adjustment for the Chapter 11 Proceedings, are as follows:

|                                | FacilityLeases | Less SubleasedFacilities | Net
|------------------------------- | -------------- | ------------------------ | ---
|For fiscal years                |                |                          |    
|2005                            |                | $   613,000              |    
|2006                            |                | 667,000                  |    
|2007                            |                | 667,000                  |    
|2008                            |                | 667,000                  |    
|Thereafter                      |                | 1,278,000                |    
|                                |                |                          |    
|Total minimum payments required |                | $3,892,000               |    
|                                |                |                          |    
|                                |                |                          |    

The
real property leases for our facilities located in Colorado were assigned in
conjunction with the Auction Sales.

On May
31, 2004, we vacated our former leased office space in New York and rejected the
balance of the lease. In addition, the sub-lease of this facility was terminated
on May 31, 2004. We accrued an aggregate of $668,000 at June 30, 2004 as an
estimated obligation on the rejected lease plus the associated New York City
Commercial Rent Taxes, recognizing that this amount is subject to rejection and
reduction for a variety of reasons. Such amount was reduced by the elimination
of $206,000 of deferred rent expense. We had maintained a letter of credit in
the amount of $456,000 as a security deposit for this lease and had restricted
cash of the same amount on deposit in a money market fund as collateral for the
letter of credit maintained by the issuing bank. In September 2004, the issuing
bank claimed the collateral in settlement of the letter of credit, which was
presented and drawn by the landlord. The actual amount of the remaining claim
may be greater or less than the remaining estimated accrual.

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

Rent
expense for the years ended June 30, 2004 and 2003 was $710,000 and $720,000,
respectively.

55

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U.S. WIRELESS DATA, INC.
(Debtor in Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the years ended June 30, 2004 and 2003

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

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

The
Company maintains agreements with wireless, landline and other carriers for
certain telecommunication services. The agreements include pricing for various
services, including volume discounts. Should the Company fail to maintain or
reach minimum volume levels, the prices the Company pays for services may
increase and this may have an adverse effect on the results of operations. These
agreements were assigned as a component of the operations sold in the Auction
Sales.

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

The
Company is not currently subject to any other material legal proceedings.
However, the Company may from time to time become a party to legal proceedings
arising in the ordinary course of its business.

See Note 1 -
The Company.

NOTE 22
 SALE OF NXT

In May
2002, the Company adopted a formal plan to sell its wholly-owned subsidiary NXT.
Pursuant to an Asset Purchase Agreement dated August 31, 2002 (the
Agreement), the Company sold, for $5 million in cash, substantially
all of the operating assets and operating obligations of NXT to Paymentech,
which subsequently transferred the acquired assets and obligations to its
wholly-owned subsidiary Merchant-Link. Pursuant to a Transition Services
Agreement the Company entered into on the same date with Merchant-Link, certain
of the NXT assets continued to be located in the Companys Colorado
facility and the Company provided certain services for payment to Merchant-Link
for a limited period of time. NXT provides data services and landline-based
connectivity for credit-card transaction processing.

56

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U.S. WIRELESS DATA, INC.
(Debtor in Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the years ended June 30, 2004 and 2003

Revenues
and income from the discontinued operations of NXT are as follows:

|                              | Year ended June 30, |         
|----------------------------- | ------------------- | --------
|
|Revenues                      |                     | $     --
|Income (loss) from operations |                     | --      

|(a) |  | Includes
results through August 31, 2002.
|--- |  | -----------------------------------------

We
recorded a gain on the sale of discontinued operations of $133,000 for the year
ended June 30, 2004 due to the reversal of an accrued vendor obligation as a
result of the sale of NXT, partially offset by additional transaction costs.

Paymentech
was obligated under the Agreement, subject to certain conditions, to purchase
goods or services from the Company or its affiliates over a three (3) year
period that commenced September 1, 2002, in an amount aggregating a minimum of
$3,472,500. Paymentech is obligated to pay the Company at least $1,000,000
during the first year, in installments of $83,333 per month, at least $1,150,000
during the second year, in installments of $95,833 per month, and at least
$1,322,500 during the third year, in installments of $110,208. This obligation
of Paymentech to us was assigned in the Auction Sales.

57

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

As
previously disclosed, on March 26, 2004, we filed a petition for relief under
Chapter 11 of the United States Bankruptcy Code. Since that time, in light of
the uncertainties associated with the bankruptcy and in order to conserve cash,
we have not filed annual and quarterly reports with the Securities and Exchange
Commission and therefore, have not employed the services of an independent
public accounting firm.

Prior
to filing for bankruptcy, Deloitte & Touche (Deloitte) served as
our independent public accounting firm. Deloitte has not audited any financial
statements of the Company for any date or period subsequent to the year ended
June 30, 2003.

On
January 7, 2005, Deloitte was dismissed as our independent public accounting
firm. The decision to discontinue our relationship with Deloitte was approved by
The Audit Committee of our Board of Directors, and was based exclusively on the
fact that Deloittes audit fees are too costly for us at the present time.
Deloittes reports with respect to the financial statements for the fiscal
years ended June 30, 2003 and 2002 did not contain an adverse opinion or a
disclaimer of opinion and were not qualified or modified with respect to
uncertainty, audit scope, or accounting principles except that Deloittes
report on its audit of our financial statements for the year ended June 30, 2003
contained an explanatory paragraph concerning matters that raised substantial
doubt about our ability to continue as a going concern.

During
the fiscal years ended June 30, 2002 and 2003 and the subsequent interim period
through the date of Deloittes dismissal, there were no disagreements with
Deloitte on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure which, if not resolved to
Deloittes satisfaction, would have caused it to make reference to the
subject matter of the disagreement(s) in connection with its reports on our
consolidated financial statements. We have provided Deloitte with a copy of this
disclosure and requested that Deloitte furnish us with a letter addressed to the
Securities and Exchange Commission stating whether it agrees with the above
statements.

On
January 7, 2005, we engaged Friedman LLP (Friedman) as our
independent public accounting firm. The decision to retain Friedman as our
independent public accounting firm was made by our Audit Committee. We engaged
Friedman to audit our financial statements for the fiscal year ended June 30,
2004. During the years ended June 30, 2004 and June 30, 2003 and through January
7, 2005, neither we nor anyone on our behalf has consulted with Friedman
regarding the application of accounting principles to a specific transaction,
either completed or proposed, or the type of audit opinion that might be
rendered on our financial statements.

58

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ITEM 8A.  
CONTROLS AND PROCEDURES

(a)
Evaluation of Disclosure Controls and Procedures. Our principal executive
officer and principal financial officer, after evaluating the effectiveness of
our disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) on June 30, 2004, have concluded that, based on such
evaluation, our disclosure controls and procedures were adequate and effective
to ensure that material information relating to us, including our consolidated
subsidiaries, was made known to them by others within those entities,
particularly during the period in which this Annual Report on Form 10-KSB was
being prepared.

(b)
Changes in Internal Controls. There were no significant changes in our
internal controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation, nor were there any
significant deficiencies or material weaknesses in our internal controls.
Accordingly, no corrective actions were required or undertaken.

ITEM 8B.  
OTHER INFORMATION.

Not applicable.

PART III

ITEM 9.   
DIRECTORS AND EXECUTIVE OFFICERS

The
following table contains certain information with respect to our directors prior
to our petition for relief under Chapter 11 of the United States Bankruptcy
Code. Subsequent to such event, Amy Newmark resigned as a director.

|Name              | Age | Principal Occupation
|----------------- | --- | --------------------
|Dean M. Leavitt   |     | 44                  
|Barry A. Kaplan   |     | 48                  
|Amy L. Newmark    |     | 46                  
|Chester N. Winter |     | 72                  

Dean M.
Leavitt. Mr. Leavitt has been our Chief Executive Officer and Chairman of the Board
of Directors since May 3, 1999. Prior to joining us, Mr. Leavitt was founder and
President of US Data Capture, Inc., a boutique credit card processing
company specializing in formulating and implementing sophisticated credit card
acceptance applications for institutional clients such as hospitals, universities,
municipalities, publishing houses, professional sports teams and transportation
companies. Prior to founding US Data Capture, Mr. Leavitt served in several management
positions at real estate development, acquisitions and investment banking
organizations. Mr. Leavitt serves on the board of the Electronic Transactions
Association, the international trade association serving the needs of the
electronic payments industry. Mr. Leavitt holds a Bachelor of Arts degree in economics
and psychology from Emory University in Atlanta, Georgia.

59

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Barry A.
Kaplan. Mr. Kaplan is a private investor. For 16 years, until June 2002, he worked for
Goldman, Sachs & Co., where he was a Managing Director. From May 2001 through May
2002, he managed proprietary investments for the firm's Equity Division in the
media and telecommunications area. Prior to that he spent 15 years in the
Investment Research Department where he co-headed the departments communications
and media research efforts, and was responsible for coverage of the wireless
communications and cable television sectors. Prior to joining Goldman, Sachs in
1986, Mr. Kaplan was an analyst at Bear, Stearns & Co. and A.G. Becker Inc. and,
before that, worked in the broadcasting industry. He is a Chartered Financial Analyst
and a member of the New York Society of Security Analysts and the Media and
Entertainment Analysts Association of New York. He is also a member of the Board of
Overseers of the Brandeis University Graduate School of International Economics and
Finance. Mr. Kaplan graduated from Brandeis University in 1977, and received his
MBA from the Wharton School of the University of Pennsylvania in 1980.

Amy L. Newmark.
Ms. Newmark is a private investor in the technology, Internet and telecommunication
fields. From 1995 to 1997, she was Executive Vice President - Strategic Planning
at Winstar Communications, Inc., a telecommunications, Internet and media
company. From 1993 to 1995, Ms. Newmark was the general partner of Information
Age Partners, a hedge fund investing primarily in technology and emerging growth
companies. Prior to that she was a securities analyst specializing in
telecommunications and technology companies. She is a director of Verso
Technologies, Inc. Ms. Newmark graduated magna cum laude from Harvard College in
1979, and is a Chartered Financial Analyst. Ms. Newmark resigned from our Board
of Directors subsequent to our filing for bankruptcy.

Chester N.
Winter. Mr. Winter is a general partner of Colorado Incubator Fund, L.P., a venture
capital fund that invests in early stage high technology enterprises, including
software, materials, medical and biotechnology; a position he has held since 1991.
Since March 1993, he has also been Vice President of Paradigm Partners, LLC, a
consulting company. Mr. Winter became a director of the Company in February 1994.
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.

Audit
Committee

Our
audit committee consists of Messrs. Kaplan and Winter, each of whom is
independent in accordance with the regulations promulgated by the SEC. We
believe that Mr. Kaplan qualifies as an audit committee financial
expert, as that term is defined in Item 401(e) of Regulation S-B.

60

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Executive
Officers

The
names of, and certain information regarding, our executive officers who are not
also directors, are set forth below. Again, the information set forth below
relates to periods prior to the bankruptcy as Ms. Goff and Mr. Ravi resigned
subsequent to the sale of our assets in May 2004.

|Name             | Age | Position with the Company | Officer Since
|---------------- | --- | ------------------------- | -------------
|Heidi R. Goff    |     | 56                        |              
|Charles I. Leone |     | 42                        |              
|                 |     |                           |              
|Adi Raviv        |     | 48                        |              
|                 |     |                           |              

Heidi R. Goff.
Ms. Goff has served as our President and Chief Operating Officer since October 2001.
Prior to joining us, Ms. Goff was President and Chief Executive Officer of
ExchangePath, LLC, an Internet payments start-up company, from June 1999 to March
2001. From April 1996 to June 1999, Ms. Goff served as Executive Vice President,
Strategy and Market Development for Global Payment Systems, a joint venture company of
National Data Corporation and MasterCard International. From November 1984 to April
1996, Ms. Goff served in several executive positions for MasterCard International.
During her tenure at MasterCard International, Ms. Goff's executive positions
included: Vice President, Debit Services, Senior Vice President and General Manager,
Merchant Services and Senior Vice President, Global Merchant Services. At
MasterCard and Global Payment Systems, Ms. Goff had primary oversight and
responsibility for the development and growth of the MasterCard Automated Processing
Program (MAPP), a leading payment processing network. Ms. Goff developed MAPP while at
MasterCard and managed the sale of MAPP to National Data Corporation, creating Global
Payments. Ms. Goff moved to Global Payments to continue her stewardship of MAPP. From
1982 to 1984, Ms. Goff served as Vice President of Marketing, Electronic Financial
Services Division (EFS) for Automatic Data Processing. At EFS, Ms. Goff was a major
contributor to the successful start-up of the company until its ultimate sale to
Electronic Data Systems (EDS). From 1975 to 1982, Ms Goff Served as Vice President
and General Manager, The ATM Cooperative with California Credit Union League
Services Corporation, a processing services company for over 2,500 credit unions.
Ms. Goff started her career with a division of IBM Corporation. Ms. Goff holds a
Bachelors of Business Administration Degree from Spencerian College.

61

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Charles I.
Leone. Mr. Leone joined us as Chief Financial Officer and Chief Operating Officer in
February 2000. He currently serves as our Executive Vice President, Chief
Administrative Officer and Secretary. Mr. Leone previously served as Senior Vice
President, Systems and Finance, Retail Division for Phoenix Investment Partners, Ltd.,
a leading U.S. investment management company (Phoenix). Mr. Leone served as
Chief Financial Officer and a First Vice President of Zweig/Glaser Advisers and Zweig
Securities Corp. and as an executive officer and/or director of various affiliates
of such entities. He joined these entities at their formation in 1989 and served with
them until their acquisition by Phoenix on March 1, 1999. Prior to that, Mr. Leone was
in public accounting at Coopers & Lybrand (now PricewaterhouseCoopers LLP) and
McGladrey & Pullen. Mr. Leone is a Certified Public Accountant and received a
B.S. in Accounting from C.W. Post Center of Long Island University.

Adi Raviv. Mr.
Raviv joined us as Executive Vice President and Chief Financial Officer in August
2002. From November 1999 to September 2001, Mr. Raviv served as the Co-Chairman and
Chief Financial Officer of THCG, Inc., a publicly traded technology merchant
banking and consulting company. There he was responsible for the finance, legal,
administration, corporate development, and investor relations departments. He and his
partner created THCG through the merger of their investment banking firm with a
publicly traded venture capital firm in 1999. Mr. Raviv spent over 14 years in
Investment Banking: as an Associate and Vice President at Lehman Brothers from
1987-1993; as the head of Global Investment Banking at Oscar Gruss & Son
Incorporated from 1994-1996; and, from 1996-2001, as a Managing Director of Tower
Hill Securities, Inc., the successor of the U.S. investment banking arm of Hambros
Bank Limited. He also has significant merchant banking, private equity and
venture capital experience. Mr. Raviv received his bachelors degree, with honors,
in International Relations from the Hebrew University of Jerusalem, and his MBA, with
honors, from Columbia Universitys Graduate School of Business.

Section
16(A) Beneficial Ownership Reporting Compliance

Section
16(a) of the Exchange Act requires our officers, directors, and persons owning
more than ten percent of a registered class of our equity securities (ten
percent stockholders) to file reports of ownership and changes of
ownership with the SEC. Officers, directors, and ten-percent stockholders are
required by SEC regulations to furnish us with copies of all Section 16(a)
reports they file with the SEC. To the best of our knowledge, based solely on
review of the copies of such reports and amendments thereto furnished to us, we believe that
during our fiscal year ended June 30, 2004, all Section 16(a) filing
requirements applicable to our officers, directors, and ten percent stockholders
were met.

Post-Bankruptcy
Board of Directors and Executive Officers

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

62

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Robert S.
Ellin, age 39, is a Managing Member of Trinad, which is a hedge fund dedicated to
investing in micro-cap public companies. Mr. Ellin is also a director and
officer of Amalgamated Technologies, Inc. ("Amalgamated"), Shells Seafood
Restaurants, Inc. ("Shells Seafood") and Command Security Corporation. Prior
to joining Trinad Capital LP, Mr. Ellin was the founder and President of Atlantis
Equities, Inc., a personal investment company. Founded in 1990, Atlantis has
actively managed an investment portfolio of small capitalization public company
as well as select private company investments. Mr. Ellin frequently played an
active role in Atlantis investee companies including Board representation,
management selection, corporate finance and other advisory services. Through
Atlantis and related companies Mr. Ellin spearheaded investments into ThQ, Inc.
(OTC:THQI), Grand Toys (OTC: GRIN), Forward Industries, Inc. (OTC: FORD) and completed
a leveraged buyout of S&S Industries, Inc. where he also served as President from
1996 to 1998. Prior to founding Atlantis Equities, Mr. Ellin worked in Institutional
Sales at LF Rothschild and prior to that he was the Manager of Retail Operations at
Lombard Securities. Mr. Ellin received a Bachelor of Arts from Pace University.

Jay A. Wolf,
age 32, is a Managing Director of Trinad Capital LP. Mr. Wolf is also a director
and officer of Amalgamated and Shells Seafood. Mr. Wolf has nine years of investment
and operations experience in a broad range of industries. Mr. Wolf's investment
experience includes senior and subordinated debt, private equity, mergers & acquisitions
and public equity investments. Prior to joining Trinad Capital LP, Mr. Wolf served
as the Vice President of Corporate Development for a marketing communications firm
where he was responsible for the company's acquisition program. Prior to that he
worked at CCFL Ltd. a Toronto based merchant bank in the Senior Debt Department
and subsequently for Trillium Growth Capital the firm's venture capital Fund. Mr.
Wolf received a Bachelor of Arts from Dalhousie University.

Barry
Regenstein, age 48, has over 25 years of experience with 21 years of such
experience in the aviation services industry. Mr. Regenstein was formerly Senior
Vice President and Chief Financial Officer of Globe Ground North America (previously
Hudson General Corporation), and previously served as the Corporations
Controller and as a Vice President. Prior to joining Hudson General Corporation in
1982, he had been with Coopers & Lybrand in Washington, D.C. since 1978. Mr.
Regenstein is a Certified Public Accountant and received his Bachelor of Science in
Accounting from the University of Maryland and an M.S. in Taxation from Long Island
University.

Code of
Ethics

We do
not currently have a code of ethics because we are not an operating company. If
and when we find a suitable merger candidate and we successfully enter into a
merger transaction whereby a company with assets and operations survives, we
intend to establish code of ethics.

63

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ITEM 10.
EXECUTIVE COMPENSATION

Executive
Compensation

The
following table sets forth information concerning the compensation paid by us
to: (i) the Chief Executive Officer; (ii) up to four other most highly
compensated individuals who were serving as our executive officers at the end of
the fiscal year ended June 30, 2004; and (iii) up to two individuals, of which
there was one, who would constitute one of the four most highly compensated
executive officers (other than the chief executive officer) but for the fact
that they were not serving as an executive officer at the end of the fiscal year
ended June 30, 2004 (collectively, the Named Executive Officers).

SUMMARY
COMPENSATION TABLE

|                     |  | AnnualCompensation | Long-TermCompensation |         |  |        
|-------------------- |  | ------------------ | --------------------- | ------- |  | -------
|
|Dean M. Leavitt      |  | 2004               |                       | 175,000 |  | --     
|Chief Executive      |  | 2003               |                       | 220,833 |  | --     
|Officer (1)          | 
|                     |  | 2002               |                       | 250,000 |  | 125,000
|                     |  |                    |                       |         |  |        
|Heidi R. Goff        |  | 2004               |                       | 150,901 |  | --     
|President (2)        |  | 2003               |                       | 192,500 |  | --     
|                     |  | 2002               |                       | 164,063 |  | --     
|                     |  |                    |                       |         |  |        
|Charles I. Leone     | 
|Chief Administrative |  | 2004               |                       | 168,750 |  | --     
|Officer (3)          |  | 2003               |                       | 181,333 |  | 11,167 
|                     |  | 2002               |                       | 225,000 |  | 58,172 
|                     |  |                    |                       |         |  |        
|Adi Raviv            |  | 2004               |                       | 192,524 |  | --     
|Chief Financial      |  | 2003               |                       | 132,404 |  | --     
|Officer (4)          |  | 2002               |                       | --      |  | --     
|                     |  |                    |                       |         |  |        
|Marc R. Shultz       |  | 2004               |                       | 100,601 |  | 5,000  
|Vice President       |  | 2003               |                       | 141,000 |  | 20,568 
|Business             | 
|Development (5)      |  | 2002               |                       | 153,000 |  | 85,100 

_________________

64

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|(1) |  | Mr.
Leavitt became an employee in May 1999.
|--- |  | -------------------------------------------

|(2) |  | Ms.
Goff  became an  employee in October  2001,  and  transferred  to TNS with the closing of
the Auction  Sales in May 2004.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------

|(3) |  | Mr.
Leone became an employee in February 2000.
|--- |  | ----------------------------------------------

|(4) |  | Mr.
Raviv became an employee in August 2002.
|--- |  | --------------------------------------------

|(5) |  | Mr.
Shultz became an employee in June 1999,  and  transferred to TNS with the closing of the
Auction Sales  in May 2004.
|--- |  | ------------------------------------------------------------------------------------------------------------------------

|(6) |  | Comprised
of  $5,400,  $7,200  and  $7,200  for  parking  paid by us on behalf of the  executive;
$0, $0 and  $4,600  for our  matching  contribution  under our 401k Plan for the  fiscal
years  2004,  2003 and 2002,  respectively;  and with respect to 2004,  $55,000 in
connection with a key employee  retention program for  the retention of certain
executives that  participated in the winding down of operations  approved by the  Court,
which was paid at the end of May 2004.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) |  | Comprised
of rental of an  apartment  paid by us on behalf of the  executive  and with  respect  to
2004,  $55,000 in connection with a key employee  retention program for the retention of
certain  executives that  participated  in the winding down of  operations  approved by
the Court,  which was paid at the end of May  2004.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) |  | Represents
our  matching  contribution  under our 401(k) Plan for such  period;  with  respect to
Messrs.  Leone and Raviv,  $55,000 in  connection  with a key  employee  retention
program  for the  retention  of  certain  executives that participated in the winding
down of operations  approved by the Court,  which was  paid at the end of May 2004; and
with respect to Mr. Shultz, $44,970 in sales commissions paid in 2004.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Option
Grants in Last Fiscal Year

The following
table  provides  information  regarding the grant of stock options during the fiscal year
ended June  30, 2004 to the Named Executive Officers.

OPTIONS
GRANTED IN FISCAL YEAR 2004(Individual Grants)

|Name             | Number ofShares Coveredby OptionGrant | % of TotalOptions Grantedto Employeesin Fiscal Year | Exercise Price($/share) | ExpirationDate
|---------------- | ------------------------------------- | --------------------------------------------------- | ----------------------- | --------------
|Dean M. Leavitt  |                                       | None                                                |                         | --            
|Heidi R. Goff    |                                       | None                                                |                         | --            
|Charles I. Leone |                                       | None                                                |                         | --            
|Adi Raviv        |                                       | None                                                |                         | --            
|Marc R. Shultz   |                                       | None                                                |                         | --            

65

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Aggregated
Option and Warrant Exercises in Fiscal 2004 and Fiscal Year-End Option Values

None
of the executive officers exercised stock options during the fiscal year ended
June 30, 2004. The following table provides information regarding the number of
shares covered by both exercisable and unexercisable stock options and warrants
held by each of the Named Executive Officers as of June 30, 2004 and the values
of the in-the-money options and warrants, which values represent the
positive spread between the exercise price of any such option and warrant and
the fiscal year-end value of our common stock. All options and warrants were
terminated as a result of the Plan approved by the Court.

OPTION AND
WARRANT EXERCISES IN FISCALYEAR 2004 AND FISCAL YEAR-END OPTION VALUES

|                 | SharesAcquired on | Value | Number of SecuritiesUnderlying UnexercisedOptions and Warrantsat Fiscal Year-End (2) | Value of UnexercisedIn-The-Money Options andWarrants at Fiscal Year-End (1) |  |          
|---------------- | ----------------- | ----- | ------------------------------------------------------------------------------------ | --------------------------------------------------------------------------- |  | ---------
|
|Dean M. Leavitt  |                   | --    |                                                                                      | --                                                                          |  | 2,318,750
|Heidi R. Goff    |                   | --    |                                                                                      | --                                                                          |  | 229,167  
|Charles I. Leone |                   | --    |                                                                                      | --                                                                          |  | 318,167  
|Adi Raviv        |                   | --    |                                                                                      | --                                                                          |  | 221,315  
|Marc R. Shultz   |                   | --    |                                                                                      | --                                                                          |  | 181,625  

______________

|(1) |  | Based on the closing price of $0.003 per share of the Companys Common
Stock as reported by the pink sheets on June 30, 2004.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------

|(2) |  | All options and warrants were terminated as a result of the Plan approved by the
Court.
|--- |  | ---------------------------------------------------------------------------------------

Compensation
of Directors

During
the fiscal year ended June 30, 2004, our directors did not receive any
compensation in their capacity as director.

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

Each
of the employment agreements referred to below was terminated as a result of the
bankruptcy.

66

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Dean
M. Leavitt. We had an employment agreement with Dean M. Leavitt to act as
our Chief Executive Officer and Chairman of the Board. The agreement became
effective as of May 10, 2001 and has a an initial term of three years, subject
to automatic renewal for one-year terms if not terminated by either party at
least three months prior to the end of each term. Mr. Leavitt is entitled to
receive salary at the rate of $250,000 (reduced to $175,000 effective November
1, 2002) per year, plus reimbursement of certain customary business expenses.
Mr. Leavitt is entitled to an annual cash bonus contingent upon the achievement
of certain corporate and/or individual performance goals established by the
Board in its discretion. Throughout the employment period, Mr. Leavitt has the
right to sponsor up to three Board members for the consideration of the Board,
and the Company shall use its best efforts to include such nominees on its slate
of nominees at the shareholders meeting immediately following Mr. Leavitts
sponsorship of such nominees, if they are reasonably acceptable to the Board. 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 the greater of the remainder of the
then current term or eighteen months, payable at regular pay intervals, at a
rate of his base salary at the time of termination. In case we offers any shares
of common stock, or any rights, options, or warrants to subscribe for or
purchase common stock (or securities convertible into or exchangeable for common
stock), as part of a financing (and not pursuant to an acquisition, merger,
incentive or compensatory arrangement approved by the Board), Mr. Leavitt shall
be entitled to subscribe for such common stock, or any rights, options, or
warrants to subscribe for or purchase common stock (or securities convertible
into or exchangeable for common stock), at such price as shall be so offered in
proportion to the holdings Mr. Leavitt would have had his warrant been exercised
immediately prior to the offerings in relationship to all of our issued and
outstanding equity securities. Mr. Leavitt has also entered into an
indemnification agreement with us pursuant to which we have agreed to provide
the broadest possible indemnification that is available under applicable law.

Heidi
R. Goff.We had an employment agreement with Ms. Goff to act as our
President and Chief Operating Officer. The agreement became effective as of
October 10, 2001 and has a term of two years, subject to automatic renewal for
one-year terms if not terminated by either party at least ninety days prior to
the end of each term. Ms. Goff is entitled to receive a base salary of $225,000
(reduced to $168,750 effective November 1, 2002) per year, plus reimbursement of
customary business expenses. In addition, Ms. Goff is also eligible to receive
an annual targeted bonus of $112,500 at our discretion. Ms. Goff was also
granted an option to purchase 175,000 shares of Common Stock at $0.67 per share.
If Ms. Goff is terminated without cause or determines to leave for
good reason (as such terms are defined in the agreement), Ms. Goff
is entitled to severance pay for the 180-day period following the termination
date or until Ms. Goff obtains full time employment, payable at regular pay
intervals, at the rate of her base salary at the time of termination.

Charles
I. Leone.We had an employment agreement with Mr. Leone who currently serves
as Executive Vice President, Chief Administrative Officer and Secretary. The
agreement became effective as of November 8, 2002 and has a term of one year,
subject to automatic renewal for one-year terms if not terminated by either
party at least ninety days prior to the end of each term. Mr. Leone is entitled
to receive a base salary of $150,000 per year, plus reimbursement of customary
business expenses. In addition, Mr. Leone is also eligible to receive an annual
bonus at our discretion subject to a minimum cash bonus of $18,750. If Mr. Leone
is terminated without cause or determines to leave for good
reason or if the employment agreement is not renewed by us (as such terms
are defined in the agreement), Mr. Leone is entitled to severance pay for the
greater of the remainder of the then current term or six months, payable at
regular pay intervals, at the rate of his base salary plus the guaranteed
minimum annual cash bonus at the time of termination.

67

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Adi
Raviv.We had an employment agreement with Mr. Raviv to act as our Executive
Vice President and Chief Financial Officer. The agreement became effective as of
August 13, 2002 and has an initial term of two years, subject to automatic
renewal for one-year terms if not terminated by either party at least ninety
days prior to the end of each term. Mr. Raviv is entitled to receive a base
salary of $150,00 for the first year and $225,000 for the second year of the
initial term, plus reimbursement of customary business expenses. In addition,
Mr. Raviv is also eligible to receive an annual bonus at the discretion of the
Board. Mr. Raviv was also granted options to purchase 111,940 and 250,000 shares
of common stock at $0.81 per share. If Mr. Raviv is terminated without
cause or determines to leave for good reason (as these
terms are defined in the agreement), Mr. Raviv is entitled to severance pay for
the greater of the remainder of the then current term or six months, payable at
regular pay intervals, at a rate of his base salary at the time of termination.

In
accordance with the executive employment agreements described above, any options
or warrants to purchase shares of our common stock held by an executive officer
immediately prior to termination of employment within six months of a
change of control or upon a termination by us without
cause or by the executive for good reason, as such terms are
defined in the agreements, shall become immediately vested and exercisable,
subject to the other terms of the option or warrant itself. The executive
officers would also be entitled to receive a pro-rated portion of their annual
bonus in the event of a change in control.

The 2002
Stock Option Plan

General.The 2002 Stock Option Plan was adopted for the purpose of granting our
selected employees, officers, directors, agents, consultants and independent
contractors options to purchase common stock so that they may have the
opportunity to participate in our growth and to provide these people with an
increased incentive to promote our interests. All options and warrants were
terminated as a result of the bankruptcy.

Administration
of the 2002 Stock Option Plan.The Board will administer the 2002 Stock
Option Plan, except to the extent the Board delegates its authority to a
committee of the Board to administer the 2002 Stock Option Plan. The Board may
from time to time adopt rules and regulations, as it deems advisable for the
administration of the 2002 Stock Option 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 2002 Stock Option Plan. Unless sooner
terminated by the Board, the 2002 Stock Option Plan shall terminate on October
24, 2012.

68

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Grant
of Options.Options may be granted under the plan for a total of 3,500,000
shares of common stock. Options may be either incentive stock
options within the meaning of Section 422 of the Code, or nonqualified
options. Incentive stock options may be granted only to any individual who, at
the time the option is granted, is an employee of ours or any related
corporation, while nonqualified options may be granted to any director,
employee, officer, agent, consultant or independent contractor of ours or any
related corporation, whether an individual or an entity. Options under the 2002
Stock Option Plan must be issued by October 24, 2012. During the fiscal year
ended June 30, 2004, we did not issue options under this plan.

Terms
and Conditions of Options.The maximum number of shares that may be
purchased pursuant to the exercise of each option and the price per share at
which such option is exercisable (the Exercise Price) shall be
established by the 2002 Plan Administrator, provided that the 2002 Plan
Administrator shall act in good faith to establish the Exercise Price which
shall be not less than the fair market value per share of the Common Stock at
the time the option is granted with respect to incentive stock options and not
less than par value per share of the Common Stock at the time the option is
granted with respect to nonqualified stock options and also provided that, with
respect to incentive stock options granted to greater than 10% stockholders, the
Exercise Price shall be as required by Section 6 of the 2002 Stock Option Plan.
In addition, no individual may be granted options under the 2002 Stock Option
Plan to purchase more than 1,166,000 shares of Common Stock during any one year,
subject to adjustment as set forth in Section 7 of the 2002 Stock Option Plan.

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 2002 Stock Option Plan, until
the option terminates. Stock options granted under the 2002 Stock Option Plan
cannot be exercised more than 10 years from the date of grant. Stock options
issued to a 10% stockholder are limited to five-year terms. Any unexercised
options that expire or that terminate upon an employees ceasing to be
employed by us become available again for issuance under the 2002 Stock Option
Plan.

Registration
of Shares Issued Under the 2002 Stock Option Plan.On March 10, 2003, we
filed a Registration Statement on Form S-8 to register 3,500,000 shares issuable
pursuant to the exercise of options that may be issued under the 2002 Stock
Option Plan.

ITEM 11.  
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS

As
soon as practicable after we become current on our filings with the SEC, Trinad,
with an address at 153 East 53rd Street, 48th Floor, New
York, NY 10022, will own 93% of our outstanding common stock. Robert Ellin and
Jay Wolf, who will be two of our directors and executive officers, are
principals of Trinad and may be deemed to beneficially own such stock.

69

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The
following tables set forth certain information regarding the beneficial
ownership of our common stock and Series C Preferred Stock as of February 7,
2005, by the (i) Named Executive Officers, (ii) all persons, including groups,
known to us to own beneficially more than five percent (5%) of the outstanding
common stock, and (iii) 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 February 7, 2005, upon the
exercise of warrants, options or other rights exercisable for, or convertible
into, common stock. As of February 7, 2005, there were a total of 18,159,556
shares of common stock and 3,230,200 shares of Series C Preferred Stock
outstanding, convertible into an aggregate of 5,383,667 shares of common stock.

Except
as otherwise indicated, the address of each of the following persons is c/o U.S.
Wireless Data, Inc., 420 Lexington Avenue, Suite 2450, New York, New York 10170.

CERTAIN
HOLDERS OF COMMON STOCK

|                                                      | Beneficially Owned as ofFebruary 7, 2005 (1) |           |  |    
|----------------------------------------------------- | -------------------------------------------- | --------- |  | ---
|
|Jess S. Morgan & Co., Inc.                            |                                              |           |  |    
|5750 Wilshire Blvd                                    |                                             
|Suite 590                                             |                                             
|Los Angeles, CA 90036                                 |                                              | 2,510,600 |  | (2 
|Regen Acquisition I, LLC                              |                                             
|c/o Regen Capital, LLC                                |                                             
|2109 Broadway, Suite 206                              |                                             
|New York, New York 10023                              |                                              | 2,205,083 |  | (3 
|Michael S. Falk                                       |                                             
|c/o Commonwealth Management, LLC                      |                                             
|830 Third Avenue                                      |                                             
|New York, NY 10022                                    |                                              | 495,273   |  | (5 
|Barry A. Kaplan                                       |                                              | 457,071   |  | (6 
|Dean M. Leavitt                                       |                                              | 330,576   |  | (7 
|Charles I. Leone                                      |                                              | 16,667    |  | (8 
|Marc R. Shultz                                        |                                              | 16,667    |  | (9 
|Chester N. Winter                                     |                                              | 3,125     |  | (10
|Heidi R. Goff                                         |                                              | 0         |  |    
|Adi Raviv                                             |                                              | 0         |  |    
|All directors and named executive officers as a group |                                             
|(seven persons)                                       |                                              | 824,106   |  | (11

__________

*
Represents less than 1% of outstanding shares.

70

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|(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 SEC. 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 February
7, 2005, are deemed outstanding. Such shares, however, are not deemed
outstanding for the purpose of computing the percentage ownership of any other
person.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | The information shown is based on information provided us by Jess S. Morgan
& Co., Inc. in a Schedule 13D filed with the SEC on January 29, 2004.
Represents 2,510,600 shares of common stock.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | The information shown is based on information provided us by Regen Acquisition
I, LLC (Acquisition) in a Schedule 13D filed with the SEC on January
10, 2005. Includes: (i) 1,204,583 shares of common stock owned by Acquisition,
(ii) 500,250 shares of common stock owned by Regen Partners I, L.P.
(Partners) and (iii) 500,250 shares of common stock owned by
Riverside Contracting LLC (Riverside). Elliot H. Herskowitz and Neil
Herskowitz are the only members and managers of Riverside, and are the managing
members of Acquisition and of ReGen Partners LLC, which is the general partner
of Partners.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | Represents 833,333 shares of common stock issuable upon conversion of 500,000
shares of Series C Preferred Stock.
|--- |  | -----------------------------------------------------------------------------------------------------------------

|(5) |  | The information shown is based on information provided to us by Commonwealth
Associates, L.P. (Commonwealth) in a Schedule 13D and a Form 4 filed
on October 29, 2003. Includes: (i) 58,333 shares of common stock issuable upon
conversion of 35,000 shares of Series C Preferred Stock and (ii) 436,940 shares
of common stock.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) |  | Includes 416,667 shares of common stock issuable upon conversion of 250,000
shares of Series C Preferred Stock and 40,404 shares of common stock.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------

|(7) |  | Includes 41,667 shares of common stock issuable upon conversion of 25,000 shares
of Series C Preferred Stock and 288,909 shares of common stock.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------

|(8) |  | Represents 16,667 shares of common stock issuable upon conversion of 10,000
shares of Series C Preferred Stock.
|--- |  | ---------------------------------------------------------------------------------------------------------------

|(9) |  | Represents 16,667 shares of common stock issuable upon conversion of 10,000
shares of Series C Preferred Stock.
|--- |  | ---------------------------------------------------------------------------------------------------------------

|(10) |  | Represents 3,125 shares of common stock.
|---- |  | ----------------------------------------

|(11) |  | Includes
all shares underlying convertible securities as described in the footnotes to
this table. Holders of Series C Preferred Stock vote as a class with respect to
election of the Series C Directors.
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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CERTAIN
HOLDERS OF SERIES C PREFERRED STOCK

|                                                             | Beneficially Owned as ofFebruary 7, 2005 (1) |        
|------------------------------------------------------------ | -------------------------------------------- | -------
|
|Regen Acquisition I, LLC                                     |                                              |        
|c/o Regen Capital, LLC                                       |                                             
|2109 Broadway, Suite 206                                     |                                             
|New York, New York 10023                                     |                                              | 777,750
|Barry A. Kaplan                                              |                                              | 250,000
|Michael S. Falk                                              |                                              | 35,000 
|c/o Commonwealth Associates Group Holdings, LLC              |                                             
|830 Third Avenue, 8th Floor                                  |                                             
|New York, NY 10022                                           |                                             
|Dean M. Leavitt                                              |                                              | 25,000 
|Charles I. Leone                                             |                                              | 10,000 
|Marc R. Shultz                                               |                                              | 10,000 
|Heidi R. Goff                                                |                                              | --     
|Adi Raviv                                                    |                                              | --     
|Chester N. Winter                                            |                                              | --     
|All directors and named executive officers as a group (seven |                                             
|persons)                                                     |                                              | 295,000

__________

*
Represents less than 1% of outstanding shares.

|(1) |  | To our 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 C 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 SEC. The Series C Preferred
Stock is not publicly traded or registered under the Exchange Act.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

ITEM 12.  
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Not applicable.

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ITEM 13. EXHIBITS

ExhibitNumber         Description of Exhibit

|2.1 |  | Amended
Disclosure Statement filed with the United States Bankruptcy Court  for the Southern
District of New York (1)
|--- |  | ---------------------------------------------------------------------------------------------------------------------

|2.2 |  | Amended
Plan of Reorganization filed with the United States Bankruptcy  Court for the Southern
District of New York (1)
|--- |  | -----------------------------------------------------------------------------------------------------------------------

|2.3 |  | Order
Confirming Amended Plan of Reorganization issued by the United States  Bankruptcy Court
for the Southern District of New York (1)
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------

|3.1 |  | Certificate
of Incorporation (2)
|--- |  | --------------------------------

|3.2 |  | Certificate
of Amendment to the Certificate of Incorporation (2)
|--- |  | ----------------------------------------------------------------

|3.3 |  | Bylaws
(3)
|--- |  | ----------

|10.1 |  | Agreement
of Purchase and Sale,  dated as of March 26, 2004, by and between U.S.  Wireless Data,
Inc. and NBS Synapse Corporation (4)
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------

|10.2 |  | Agreement
of Purchase and Sale,  dated as of March 26, 2004, by and between U.S.  Wireless Data,
Inc. and SANI Operating Co., LLC (4)
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------

|16. |  | Letter
from Deloitte & Touche LLP, dated January 12, 2005. (5)
|--- |  | --------------------------------------------------------------

|31.1 |  | Certification
of Chief Executive Officer *
|---- |  | ------------------------------------------

|31.2 |  | Certification
of Chief Financial Officer *
|---- |  | ------------------------------------------

|32.1 |  | Certification
of Principal Executive Officer pursuant to U.S.C. Section 1350 *
|---- |  | ------------------------------------------------------------------------------

|32.2 |  | Certification
of Principal Financial Officer pursuant to U.S.C. Section 1350 *
|---- |  | ------------------------------------------------------------------------------

*
Filed herewith.

|(1) |  | Incorporated by reference from the like-named exhibit filed with our Current
Report on Form 8-K, filed on January 18, 2005.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------

|(2) |  | Incorporated by reference from the like-named exhibit filed with our Quarterly
Report on Form 10-QSB for the fiscal quarter ended September 30, 2000, filed on
November 14, 2000.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|(3) |  | Incorporated by reference Annex D of our Definitive Proxy Statement for the 1999
Annual Meeting of Stockholders held on September 7, 2000, filed on August 9,
2000.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | Incorporated by reference from the like-named exhibit filed with our Current
Report on Form 8-K, filed on April 12, 2004.
|--- |  | -------------------------------------------------------------------------------------------------------------------------

|(5) |  | Incorporated by reference from the like-named exhibit filed with our Current
Report on Form 8-K, filed on January 13, 2005.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------

ITEM 14.    PRINCIPAL
ACCOUNTANT FEES AND SERVICES.

The
following table presents fees for professional audit services rendered by
Deloitte for the audit of our annual financial statements and fees for other
services for the year ended June 30, 2003, and fees for professional audit
services rendered by Friedman for the audit of our annual financial statements
and fees for other services for the year ended June 30, 2004.

|                   | 2003 | 2004     
|------------------ | ---- | ---------
|Audit fees:(1)     |      | $ 213,000
|Audit related      |     
|fees:(2)           |      | None     
|Tax fees:(3)       |      | None     
|All other fees:(4) |      | None     
|                   |      |          
|Total              |      | $ 213,000
|                   |      |          
|                   |      |          
|                   |     

|(1) |  | Augit fees consisted of audit work performed in the audit of our annual financial
statements and review of financial statements included in our quarterly reports
filed with the SEC.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | We did not incur audit related fees from our principal accountants for the period
presented.
|--- |  | --------------------------------------------------------------------------------------------

|(3) |  | We did not incur tax fees from our principal accountants for the period presented.
|--- |  | ----------------------------------------------------------------------------------

|(4) |  | did
We not incur other fees from our principal accountants for the period presented.
|--- |  | ------------------------------------------------------------------------------------

Policy on
Audit Committee Pre-Approval of Audit and Permissible Non-audit Services of Independent
Auditors

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Consistent
with SEC policies regarding auditor independence, the Audit Committee has
responsibility for appointing, setting compensation and overseeing the work of
the independent auditor. In recognition of this responsibility, the Audit
Committee has established a policy to pre-approve all audit and permissible
non-audit services provided by the independent auditor.

Prior
to engagement of the independent auditor for the next years audit,
management will submit an aggregate of services expected to be rendered during
that year for each of the following four categories of services to the Audit
Committee for approval.

1.  Audit services
include audit work performed in the preparation of financial statements, as well
as work that generally only the independent auditor can reasonably be expected
to provide, including comfort letters, statutory audits, and attest services and
consultation regarding financial accounting and/or reporting standards.

2.  Audit-Related services
are for assurance and related services that are traditionally performed by the
independent auditor, including due diligence related to mergers and
acquisitions, employee benefit plan audits, and special procedures required to
meet certain regulatory requirements.

3.  Tax services
include all services performed by the independent auditors tax personnel
except those services specifically related to the audit of the financial
statements, and includes fees in the areas of tax compliance, tax planning, and
tax advice.

4.  Other Fees 
are those associated with services not captured in the other categories.

Prior
to engagement, the Audit Committee pre-approves these services by category of
service. The fees are budgeted and the Audit Committee requires the independent
auditor and management to report actual fees versus the budget periodically
throughout the year by category of service. During the year, circumstances may
arise when it may become necessary to engage the independent auditor for
additional services not contemplated in the original pre-approval. In those
instances, the Audit Committee requires specific pre-approval before engaging
the independent auditor.

The
Audit Committee may delegate pre-approval authority to one or more of its
members. The member to whom such authority is delegated must report, for
informational purposes only, any pre-approval decisions to the Audit Committee
at its next scheduled meeting.

Our
Audit Committee pre-approved the retention of Deloitte for all audit,
audit-related and tax services during fiscal 2003, and the retention of Friedman
for all audit, audit-related and tax services during fiscal 2004.

75

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SIGNATURES

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

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

|Dated:    February 18, 2005
|---------------------------
|                           

In
accordance with the requirements of the Exchange Act, 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   |       | Chairman of the Board                  
|Dean M. Leavitt       |       | (Former Chief Executive Officer        
|                      |       | and Acting Principal Executive Officer)
|/s/ Charles I. Leone  |       | Executive Vice President and Chief     
|Charles I. Leone      |       | Administrative Officer                 
|                      |       | (Acting Chief Financial Officer        
|                      |       | and Principal Financial Officer)       
|/s/ Barry A. Kaplan   |       | Director                               
|Barry A. Kaplan       |      
|/s/ Chester N. Winter |       | Director                               
|Chester N. Winter     |      

76

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