U S WIRELESS DATA INC, 10KSB, 1999-10-14

U S WIRELESS DATA INC
10KSB, 1999-10-14
CALCULATING & ACCOUNTING MACHINES (NO ELECTRONIC COMPUTERS)

Previous: EUROPEAN BANK FOR RECONSTRUCTION & DEVELOPMENT, SC 13D, 1999-10-14

Next: REINSURANCE GROUP OF AMERICA INC, 8-K, 1999-10-14

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-KSB

[Mark One]

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

For the fiscal year ended June 30, 1999

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

For the transition period from to .
------------------ -----------------

Commission file no.: 0-22848

U.S. WIRELESS DATA, INC.
--------------------------------------------
(Name of small business issuer in its charter)

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

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

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

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

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

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

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]

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

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

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

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

Transitional Small Business Disclosure Format (check one):

Yes [ ] No [X]

<PAGE>

PART I

ITEM 1. DESCRIPTION OF BUSINESS

General Development of Business

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

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

WEPS proprietary technology allows for:

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

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

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

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

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

<PAGE>

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

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

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

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

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

The Transaction Processing Industry

Electronic payment transaction processing involves:

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

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

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

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

3
<PAGE>

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

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

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

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

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

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

4
<PAGE>

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

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

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

The Wireless Industry

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

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

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

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

<PAGE>

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

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

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

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

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

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

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

6
<PAGE>

The Internet

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

Company History

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

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

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

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

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

7
<PAGE>

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

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

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

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

8
<PAGE>

WEPS Operational Overview

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

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

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

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

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

Business Strategy

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

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

9
<PAGE>

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

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

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

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

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

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

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

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

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

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

10
<PAGE>

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

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

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

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

Additional Opportunities

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

These opportunities may include, but not be limited to:

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

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

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

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

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

11
<PAGE>

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

Target Market

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

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

Marketing Strategy

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

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

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

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

12
<PAGE>

Implementation

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

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

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

Customer Service

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

Research and Development

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

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

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

Patents and Trademarks

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

13
<PAGE>

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

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

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

Competition

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

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

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

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

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

Government Regulation

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

14
<PAGE>

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

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

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

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

Customers

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

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

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

Employees

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

Transaction Processing and Manufacturing Agreements

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

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

15
<PAGE>

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

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

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

Seasonal Variation of Business

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

Impact of Environmental Laws

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

Year 2000 Issues

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

16
<PAGE>

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

Insurance

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

ITEM 2. DESCRIPTION OF PROPERTIES

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

ITEM 3. LEGAL PROCEDINGS

Settlement of Claims of Certain Noteholders

In April 1998, USWD entered into an agreement with holders of $185,000 of
demand notes USWD issued from April to June 1997. Under this agreement, USWD
issued shares of common stock in settlement of a dispute regarding conversion
terms of their notes. Terms of the settlement entitled the noteholders to
certain guarantee or put provisions related to the shares issued for the notes.
The guarantee provision of the settlement agreement allowed the former
noteholders to recover the difference between the guarantee price ($3.00 per
share for all the shares that remained eligible for the guarantee as of April,
1999) and the gross amount the noteholder receives upon a sale of the shares.
The guarantee was operative at any time during the one year period commencing on
the date the shares became saleable under SEC Rule 144, and expired as to all
shares no later than June 19, 1999. The Company was obligated to pay the amount
due within thirty days of receiving a demand, accompanied by documentation
confirming the sale. Under the "put" provision of the settlement agreement, the
former noteholders had a five day period commencing on the date one year from
the date the shares become saleable under SEC Rule 144 during which the former
noteholders may "put" any shares remaining unsold by them at the time back to
USWD. Upon exercise of the put, USWD was to either (1) purchase the shares for
the put price ($3.00 per share for all shares that remained eligible for the put
as of April, 1999), or (2) require the shareholder to sell the shares into the
market, with USWD making up the difference between the put price and the gross
amount received by the shareholder upon such sale, within 15 days after receipt
of written notice and documentation confirming the sale. The put rights expired
as to all of the shares no later than June 24, 1999. On April 29, 1999, holders
of approximately 83,500 shares which were entitled to the guarantee/put rights,
agreed to waive these rights in return for the issuance of 200,000 restricted
shares of USWD's common stock.

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

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

17
<PAGE>

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(a) Market Information.

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

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

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

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

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

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

(b) Holders.

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

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

(d) Recent Sales of Unregistered Securities

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

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

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

18
<PAGE>

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

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

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

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

19
<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

The Company may, in discussions of its future plans, objectives and
expected performance in periodic reports filed by the Company with the
Securities and Exchange Commission (or documents incorporated by reference
therein) and in written and oral presentations made by the Company, include
projections or other forward-looking statements within the meaning of Section
27A of the Securities Exchange Act of 1933 or Section 21E of the Securities Act
of 1934, as amended. Such projections and forward-looking statements are based
on assumptions, which the Company believes are reasonable but are, by their
nature, inherently uncertain. In all cases, results could differ materially from
those projected. Some of the important factors that could cause actual results
to differ from any such projections or other forward-looking statements are
detailed below, and in other reports filed by the Company under the Securities
Exchange Act of 1934. Risks and uncertainties relating to forward-looking
statements are set forth in this Item 6 under the caption "Risk Factors," below.

Company Background

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

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

Revision of Business Plan

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

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

20
<PAGE>

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

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

WEPS Operational Overview

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

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

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

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

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

21
<PAGE>

Year 2000 Issues

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

Fiscal 1999 Compared to Fiscal 1998

Net Revenue

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

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

Gross Profit

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

22
<PAGE>

Operating Expenses

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

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

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

Interest Expense and Other Expense

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

Extraordinary Item

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

FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY

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

23
<PAGE>

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

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

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

Securities Issuances to Fund Operations

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

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

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

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

24
<PAGE>

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

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

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

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

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

Other Recent Borrowings and Financing Activities

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

25
<PAGE>

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

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

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

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

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

RISK FACTORS

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

RISKS ARISING FROM USWD'S FINANCIAL CONDITION

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

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

26
<PAGE>

USWD Needs Immediate Additional Financing In Order to Remain In Business

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

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

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

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

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

RISKS RELATING TO USWD'S OPERATIONS

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

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

27
<PAGE>

USWD's Distribution Program Relies on Outside Parties

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

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

USWD Depends on Certain Key People

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

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

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

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

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

28
<PAGE>

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

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

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

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

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

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

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

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

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

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

29
<PAGE>

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

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

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

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

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

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

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

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

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

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

30
<PAGE>

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

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

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

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

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

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

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

31
<PAGE>

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

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

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

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

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

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

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

32
<PAGE>

ITEM 7: FINANCIAL STATEMENTS

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

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

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

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

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

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

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

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

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

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

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

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

33
<PAGE>

INDEPENDENT AUDITORS' REPORT

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

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

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

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

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

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

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

34
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

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

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

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

/s/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP

San Jose, California
November 6, 1998

35
<PAGE>
<TABLE>
<CAPTION>

U.S. WIRELESS DATA, INC.
BALANCE SHEETS

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

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

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

LIABILITIES AND STOCKHOLDERS' DEFICIT

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

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

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

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

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

The accompanying notes are an integral part of the financial statements

36
<PAGE>
<TABLE>
<CAPTION>

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

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

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

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

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

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

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

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

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

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

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

The accompanying notes are an integral part of the financial statements

37
<PAGE>
<TABLE>
<CAPTION>

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

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

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

<PAGE>

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

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

The accompanying notes are an integral part of the financial statements

38
<PAGE>

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

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

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

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

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

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

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

39
<PAGE>

Supplemental disclosure of non-cash financing and investing activities:

Year ended June 30, 1999

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

Year Ended June 30, 1998

1. Conversion of $50,000 notes payable to 75,000 shares of common stock.
2. Conversion of $3,060,000 convertible debentures to 3,060,000 shares of
preferred stock.
3. Conversion of $202,000 note payable to 496,221 shares of common stock.
4. Conversion of $164,000 note payable to 328,750 shares of common stock

The accompanying notes are an integral part of the financial statements

40
<PAGE>

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

NOTE 1. OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Operations

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

Financial Condition

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

Due to the change in its distribution strategy to channel product sales and
service offerings through existing merchant acquirers, the Company has been able
to make significant reductions in its direct sales force and reduce its cash
requirements. The Company continues to work both directly and through its
consultants to secure such financing which is required to fund operations while
a significant recurring revenue stream is developed. There can be no assurance
that the Company will be successful with efforts to raise additional capital.
The inability of the Company to secure additional financing in the near term
could adversely impact the Company's financial position, including its ability
to continue as a going concern.

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

Use of Estimates

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

Cash Equivalents

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

41
<PAGE>

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

Inventory

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

Property and Equipment

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

Processing Units Deployed

Until the third quarter of fiscal 1999, merchants that subscribed to the
Company's credit card processing service usually received a TRANZ Enabler unit
that provides the wireless communications and processing functionality. As these
units are deployed at a customer location, the asset value is transferred from
inventory to "Processing units - deployed" and depreciated via a charge to Cost
of Revenue over its estimated useful life of 48 months. The Company retains
title to the TRANZ Enabler units and earns usage income on the units while they
are deployed at the customer location. With the evolution of the Company's
business plan to distribution through merchant acquirers, the Company phased out
the sale of credit card offerings direct to merchants and the associated
"deployment" of the TRANZ Enabler.

Impairment of Long-lived Assets

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

Revenue Recognition and Major Customers

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

Research and Development Costs

Research and development costs are expensed as incurred.

Income Taxes

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

Net Loss Per Share

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

42
<PAGE>

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

Fair Value of Financial Instruments

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

Stock-based Compensation

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

Accounting Standards Changes

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

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

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

New Pronouncements

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

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

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

43
<PAGE>

Advertising Expense

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

NOTE 2. INVENTORY

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

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

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

NOTE 3. PROCESSING UNITS DEPLOYED AND PROPERTY AND EQUIPMENT

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

NOTE 4. ACCRUED LIABILITIES

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

NOTE 5. BORROWINGS

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

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

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

44
<PAGE>

Note Payable - Supplier - OMRON

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

Note Payable - Investors - RBB

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

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

Note Payable - entrenet

On March 12, 1998, the Company entered into an agreement with entrenet
to provide business and financial consulting services to the Company and to
assist the Company in locating additional financing. The term of the
agreement was for six months and renews for additional six-month terms
unless at least 60 days notice is given to terminate the agreement prior to
the end of a term. The Company paid this in full in July 1998. The
agreement was terminated in September 1998.

Note Payable - Lawsuit Settlement

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

6% Convertible Subordinated Debentures

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

45
<PAGE>

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

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

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

NOTE 6. OTHER CURRENT LIABILITIES

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

NOTE 7. SERIES A PREFERRED STOCK

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

46
<PAGE>

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

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

Registration Rights

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

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

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

Conversion

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

47
<PAGE>

Dividends

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

Voting

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

Liquidation

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

Voluntary Redemption

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

Optional Redemption

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

48
<PAGE>

NOTE 8. SERIES B CUMULATIVE CONVERTIBLE REDEEMABLE PREFERRED STOCK

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

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

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

Dividends

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

Voting Rights

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

Conversion Terms

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

49
<PAGE>

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

Registration and Redemption Rights

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

NOTE 9. COMMON STOCK TO BE DISTRIBUTED

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

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

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

Series A Preferred Stock Dividend

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

Relinquishment of "Put Rights"

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

NOTE 10. STOCK OPTIONS

Stock Option Plan

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

50
<PAGE>

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

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

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

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

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

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

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

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

Fair value disclosures

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

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

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

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

Other Stock Options Granted Outside the Plan

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

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

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

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

NOTE 11. STOCK WARRANTS AND CALL OPTION

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

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

52
<PAGE>

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

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

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

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

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

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

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

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

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

53
<PAGE>

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

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

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

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

NOTE 12. INCOME TAXES

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

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

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

54
<PAGE>

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

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

NOTE 13. EMPLOYEE BENEFIT PLAN

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

NOTE 14. COMMITMENTS AND CONTINGENCIES

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

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

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

NOTE 15. LITIGATION

Settlement of Claims of Certain Noteholders

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

55
<PAGE>

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

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

NOTE 16. RELATED PARTIES

Transactions with Cardservice International, Inc.

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

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

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

Transactions with Liviakis Financial Communications, Inc.

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

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

56
<PAGE>

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

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

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

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

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

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

57
<PAGE>

Transactions with entrenet Group, LLC

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

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

Transactions with ADATOM, Inc.

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

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

NOTE 17. DEBT EXTINGUISHMENT

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

NOTE 18. SUBSEQUENT EVENTS

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

58
<PAGE>

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

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

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

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

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

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

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

59
<PAGE>

PART III

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

Directors and Executive Officers

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

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

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

Rod L. Stambaugh 39 President of USWD August 1991

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

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

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

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

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

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

60
<PAGE>

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

Board of Directors and Committees

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

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

Other Significant Executive Officers

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

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

Business Experience of Significant Executive Officers

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

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

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

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

ITEM 10. EXECUTIVE COMPENSATION

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

61
<PAGE>
<TABLE>
<CAPTION>

Summary Compensation Table

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

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

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

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

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

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

Option Grants in Fiscal Year Ending June 30, 1999

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

62
<PAGE>

Option Grants in Last Fiscal Year
(Individual Grants)

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

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

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

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

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

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

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

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

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

63
<PAGE>

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

Director Compensation

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

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

Other Executive Compensation Paid During Fiscal 1999

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

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

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

64
<PAGE>

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

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

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

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

65
<PAGE>

Proposed Executive Bonus Plan

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

1992 Stock Option Plan

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

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

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

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

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

66
<PAGE>

Federal Income Tax Consequences Applicable to Options Granted Under the Plan

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

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

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

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

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

Options Presently Outstanding Under the Plan

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

ITEM 11. SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT

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

67
<PAGE>

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

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

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

* Represents less than 1% of outstanding shares.

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

68
<PAGE>

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

69
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

70
<PAGE>

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

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

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

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Transactions with Cardservice International, Inc.

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

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

Transactions with Liviakis Financial Communications, Inc.

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

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

71
<PAGE>

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

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

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

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

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

72
<PAGE>

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

Transactions with entrenet Group, LLC

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

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

Transactions with RBB Bank Aktiengesellschaft

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

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

As of March 12, 1998, USWD and Mr. Richard P. Draper and his assignee,
Tillicombe International, LDC ("Tillicombe") entered into an agreement by which
Mr. Draper and Tillicombe agreed to allow USWD to assign to third parties USWD's
rights in a call option which USWD had on 367,684 shares of USWD's Common Stock
owned by Tillicombe (the "Call Option") in return for payment to Tillicombe of
$25,000 and the release of USWD's voting and option rights as to 30,000 shares
which were also subject to the Call Option. USWD originally acquired the Call
Option in October 1995, in conjunction with the dissolution of a subsidiary,
Direct Data, Inc., which USWD had acquired in 1994, in which Mr. Draper was a
principal shareholder. Between March 15 and June 15, 1998, USWD sold and
assigned the Call Option on 250,000 shares to RBB Bank. RBB Bank purchased the
Call Option in five increments of 50,000 share options each, and paid USWD 85%
of the average last sale price of the underlying shares over the five days prior
to the date of acquiring each Call Option, less the Call Option exercise price
of $.25 per share. In each transaction, RBB Bank paid the acquisition price for
the Call Option, as well as the exercise price to Tillicombe prior to taking
delivery of the shares. USWD realized a total of approximately $997,000 from the
sale of these Call Options to RBB Bank.

73
<PAGE>

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

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

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

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

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

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

74
<PAGE>

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

Transactions with ADATOM, Inc.

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

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

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

3.1 Amended Articles of Incorporation (8)

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

3.3 Amended Bylaws (3)

4.1 Specimen Common Stock Certificate (14)

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

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

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

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

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

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

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

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

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

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

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

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

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

75
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

76
<PAGE>

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

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

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

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

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

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

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

10.3 Release Agreement with Richard P. Draper (3)

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

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

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

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

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

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

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

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

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

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

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

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

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

77
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

78
<PAGE>

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

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

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

27.1 Financial Data Schedule

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

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

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

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

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

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

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

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

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

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

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

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

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

79
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

(b) Reports on Form 8-K.

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

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

80
<PAGE>

SIGNATURES

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

Dated: October 13, 1999

U.S WIRELESS DATA, INC.

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

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

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

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

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

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

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

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

U.S. WIRELESS DATA(R) INC.

STOCK OPTION CERTIFICATE

1992 STOCK OPTION PLAN

U.S. Wireless Data, Inc., a Colorado corporation ("Company"), for good and
valuable consideration, including the incentive to the Optionee to remain as an
employee of the Company as a result of ownership or increased ownership of the
Company's no par value common stock ("Common Stock"), the receipt and
sufficiency of which consideration hereby is acknowledged, irrevocably grants to
the Optionee the option ("Option") to purchase the following number of shares of
Common Stock:

Optionee Number of Shares

- ----------------------- -----------------

The effective date of this grant is _____________ ("Date of Grant) and is
subject to (i) the terms and conditions of the Company's 1992 Stock Option Plan
("Plan"), (ii) the rules and regulations for the administration of the Plan
which may be adopted from time to time and (iii) the following terms and
conditions:

1. Exercise Price. The purchase price ("Exercise Price") for shares of Common
Stock purchased pursuant to this Option shall be the "fair market value" on
the day of the grant, which is $______ per share, and shall be paid in full
in cash at the time of exercise, provided that the Committee administering
the Plan may in its sole discretion permit payment to be made with shares
of the Company's Common Stock owned by Optionee. Optionee shall have no
rights with respect to dividends or have any other rights as a shareholder
with respect to shares subject to this Option until Optionee has given
written notice of the exercise of the Option and has paid in full for such
shares.

2. Time of Exercise. This Option may be exercised as to ___ of the totoal
shares covered by this Option on the Date of Grant, and ___ per month
thereafter, until fully vested, so long as the Optionee remains employed by
the Company. This Option shall terminate 10 years from the Date of Grant of
this Option, or three months after the termination of employment with the
Company, whichever is shorter. The period of time during which the Option
may be exercised is referred to herin as the "Option Period."

<PAGE>

3. Number of Shares. This Option shall be exercised only for 100 shares of
Common Stock or a multiple thereof or for the full number of shares for
which the Option is then exercised.

4. Representation as to Stock Ownership. Optionee does not own stock
possessing more that 10% of the total combined voting power or value of all
classes of stock of the Company outstanding ("10% Ownership"). If Optionee
has more that 10% Ownership, the purchase price of the shares upon exercise
of the Option will be adjusted to reflect an exercise price of 110% of the
fair market value of Common Stock at the close of business as of the date
of the grant of the opton represented by this Option Certificate. For
purposes of calculating such stock ownership by Optionee, the attribution
rules of stock ownership set forth in Section 425 (d) of the Internal
Revenue Code of 1954, as amended, ("Code") shall apply.

5. Limitations on Exercise of Option. If the aggregate fair market value of
the shares subject to this Option and all other options granted under the
1992 Stock Option Plan ("Plan") and any other incentive stock option plans
("other plans") of the Company which are exercisable for the first time by
Optionee during any calendar year, exceeds $100,000, the exercise of this
Option is subject to the following limitation: The fair value of the shares
which first become exercisable under this and all other incentive stock
options of Optionee during any one calendar shall not exceed $100,000. Any
portion of this Option which does not become in any year in order to effect
the foregoing limitation shall become exercisable on the earliest date
therafter as shall be available consistent with the Plan and all other
stock options then heldby Optionee. For purposes of tis Section 5, the fair
market value of the shares subject to the Plan or any other plan with
respect to options granted after 1986 shall be determined as of the date
such options are granted.

6. Death of Optionee. If Optionee dies during Optionee's employment by the
Company, this Option shall be exercisable only as to that portion
exercisable as of the date of death and only within one year after
Optonee's death or the last day of the Option Period, whichever is earlier,
by the personal representative or administrator of Optionee's estate, or by
any trustee, heir, legatee or beneficiary to whom Optionee's rights under
this Option shall pass by will or the laws of descent and distribuition to
the extent that Optionee was entitled to exercise this Optoin at the time
of Optionee's death.

7. Retirement of Optionee. If Optionee's employment with the Company
terminates by reason of retirement, the Option shall be exercisable only
within three months after the date of such terminsation, but not later than
the last day of the Option Period and then only to the extent to which the
Option was exercisable at the time of such termination of employment by
retirement. However, if Optionee dies within three months after termination
by retirement, the Option, to the extent it was exercisable at the time of
Optionee's death, shall thereafter be exercisable for one year after the
date of Optionee's death, but not later than the last day of the Option
Period.

2
<PAGE>

8. Disability of Optionee. If Optionee becomes permanently and totally
disabled, and at the time of such disability Optionee is entitled to
exercise one or more installments under this Option, Optionee shall have
the right to exercise this Option within one year after such disability
provided Optionee exercises this Option within the Option Period and then
only to the extent to which this Option was exercisable at the time of such
disability. For purposes of this Section 8 an Optionee shall be considered
to be totally and permanently disabled if a qualified medical physician
approved by the Company certifies to the Company that such Optionee is
unable to be gainfully employed by the Compant by reason of a diagnosed and
determinable physical or mental impairment which can be expected to result
in death or has lasted and can be expected to last for a continuous period
of not less than 12 months.

9. Termination of Employment. If Optionee's employment is terminated for any
reason other than death, disability or retirement, any option which was
exercisable at the time of termination shall terminate three months after
the date upon which Optionee's employment terminates.

10. Nontransferability of Option. This Option may not be transferred by
Optionee otherwise than by will or the laws of descent and distribution.
During Optionee's lifetime, this Option shall be exercisable only by
Optionee.

11. Leave of Absence. For purposes of this Option, (i) a leave of absence, duly
authorized in writing by the Company, for military service or sickness, or
for any other purpose approved by the Company, if the period of such leave
does not exceed 90 days, and (ii) a leave of absence in excess of 90 days,
duly authorized in writing by the company, provided Optionee's right to
reemployment is guaranteed either by satute or by contract, shall not be
deemed a termination of employment.

12. Changes in Capital. If the outstanding Comon Stock of the Company which is
subject to this Option shall at any time be changed or exchanged by
declaration of a stock dividend, split-up, subdivision or combination of
shares, recapitalization, merger, consolidation or other corporate
reorganization in which the Company is the surviving corporation, the
number and kind of shares subject to the Option and Option Price shall be
appropriately and equitably adjusted so as to maintain the proportionate
number of shares without changing the aggregate option price. In the event
of a dissolution or liquidation of the Company, or a merger, consolidation,
sale of all or substantially all of its assets, or other corporate
reorganization in which the Company is not the surviving corporation, or in
which the Company is the surviving corporation but holders of Common Stock
receive securities of another corporation, this Option shall terminate as
of the effective date of such event, provided that immediately prior to
such event, Optionee shall have the right to exercise this Option in whole
or in part.

3
<PAGE>

13. Manner of Exercise. Subject to the terms and conditions contained herein
and in the Plan, this Option may be exercised in whole or in part at any
time and from time to time within the Option Period by the delivery of
written notice to any officer or director of the Company other that
Optionee, together with full payment, in cash or with the Company's Common
Stock if authorized by the Committee administering the Plan for the number
of shares purchased. The notice (i) shall state the election to exercise
the Option, (ii) shall state the number of shares in respect to which the
Option is being exercised, (iii) shall state Optionee's address, (iv) shall
state Optionee's social security number, (v) shall contain such
representations and agreements concerning Optionee's investment intent with
respect to such shares of Common Stock as shall be satisfactory to the
Company's counsel, and (vi) shall be signed by Optionee. As a further
condition to the exercise of this Option, the Company may require Optionee
to make any representation and warranty to the Company as may be required
by any applicable law or regulation.

14. Amendment and Administration. The Compensation Committee of the company's
Board of Directors shall have the authority, consistent with the Plan, to
interpret the Plan and this Option, to adopt, amend and rescind rules and
regulations for the administration of the Plan and this Option, and
generally to conduct and administer the Plan and to make all determinations
in connection therewith which may be necessary or advisable, and all such
actions of the Compensation committee shall be final and conclusive for all
purposes and binding upon Optionee.

15. Miscellaneous. This Option shall inure to the benefit of and be binding
upon each successor of the Company. All obligations inposed upon and all
rights granted to the Optionee and all rights reserved by the Company under
this Option shall be binding upon and inure to the benefit of Optionee,
Optionee's heirs, personal representatives, adminsitrators and successors.
Unless the context requires otherwise, words denoting the singular may be
construed as denoting the plural, and words of the plural may be construed
as denoting the singular words of one gender may be construed as denoting
such other gender as is appropriate.

4
<PAGE>

Date of Grant:
---------------------
SEAL U.S. WIRELESS DATA(R) INC.
a Colorado corporation
ATTEST:

- -------------------------------------- By
Robert E. Robichaud, Secretary -----------------------------
Dean M. Leavitt
Chief Executive Officer

Accepted by Optionee:

-----------------------
(Name)

THIS OPTION AND THE STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND CAN BE
TRANSFERRED ONLY IN COMPLIANCE WITH THE ACT AND APPLICABLE STATE SECURITIES
LAWS. THIS OPTION AND SUCH SHARES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT, UNLESS, IN THE OPINION OF
COUNSEL FOR THE COMPANY OR COUNSEL FOR THE REGISTERED HOLDER (WHICH SHALL BE IN
FORM AND FROM SUCH COUNSEL AS SHALL BE REASONABLY SATISFACTORY TO THE COMPANY),
SUCH REGISTRATION IS NOT THEN REQUIRED. NO REGISTRATION RIGHTS HAVE BEEN GRANTED
WITH RESPECT TO THIS OPTION AS OF ITS ORIGINAL DATE OF ISSUANCE.

U.S. WIRELESS DATA, INC.

NONQUALIFIED STOCK OPTION CERTIFICATE

Optionee Number of Shares

Rod L. Stambaugh 600,000

The effective date of this grant is May 13,1999 ("Date of Grant") and is subject
to the following terms and conditions:

1. EXERCISE PRICE. The purchase price ("Exercise Price") for shares of
Common Stock purchasable pursuant to this Option shall be Zero and 813/1000
Dollars ($0.813) per share, which shall be paid in full in cash at the time of
exercise; provided, however, that the Board of Directors of the Company may in
its sole discretion permit payment to be made with shares of the Company's
Common Stock owned by Optionee or shares purchasable by Optionee pursuant to
exercise of this Option in such a manner that Optionee shall not have to
surrender any cash to exercise this Option (a "Cashless Exercise"). The Exercise
Price represents the fair market price of the Company's Common Stock as of the
date this Option is granted. Optionee shall have no rights with respect to
dividends or have any other rights as a shareholder with respect to shares
subject to this Option until Optionee has given written notice of the exercise
of the Option and has paid in full for such shares.

2. VESTING AND TIME OF EXERCISE. This Option will vest 50% upon the grant
date and one twelfth (1/12) per month at the end of each monthly period
following grant date. This Option may be exercised as to all or any portion of
the vested shares covered by this Option Grant, and shall expire on the later of
ten years from the grant date, or one year after cessation of the Executive's
relationship with the Company in any capacity, including service provided to the
Company as an employee, officer, director or consultant. The period of time
during which the Option may be exercised is referred to herein as the "Option
Period."

3. NUMBER OF SHARES PURCHASABLE AT ANY ONE TIME. This Option may be
exercised only for at least 100 shares of Common Stock or a multiple thereof or
for the full number of shares for which the Option is then exercisable.

4. DEATH OF OPTIONEE. If Optionee dies during Optionee's employment with
the Company, this Option shall be exercisable only as to that portion
exercisable as of the date of death and within one year after Optionee's death,
or the last day of the Option Period, whichever is earlier, by the personal
representative or administrator of Optionee's estate, or by any trustee, heir,
legatee or beneficiary to whom Optionee's rights under this Option shall pass by
will or the laws of descent and distribution to the extent that Optionee was
entitled to exercise this Option at the time of Optionee's death.

<PAGE>

5. RETIREMENT OF OPTIONEE. If Optionee's employment with the Company
terminates by reason of retirement, the Option shall be exercisable within the
one year period following Optionee's retirement as described above, but not
later than the last day of the Option Period, and then only to the extent to
which the Option was exercisable at the time of such termination of employment
by retirement. However, if Optionee dies within three months after termination
by retirement, the Option, to the extent it was exercisable at the time of
Optionee's death, shall thereafter be exercisable for one year after the date of
Optionee's death, but not later than the last day of the Option Period.

6. DISABILITY OF OPTIONEE. If Optionee becomes permanently and totally
disabled, and at the time of such disability Optionee is entitled to exercise
one or more installments under this Option, Optionee shall have the right to
exercise this Option within one year after such disability provided Optionee
exercises this Option within the Option Period and then only to the extent to
which this Option was exercisable at the time of such disability. For purposes
of this Section 7 an Optionee shall be considered to be totally and permanently
disabled if a qualified medical physician approved by the Company certifies to
the Company that such Optionee is unable to be gainfully employed by the Company
by reason of a diagnosed and determinable physical or mental impairment which
can be expected to result in death or has lasted and can be expected to last for
a continuous period of not less than 12 months.

7. NONTRANSFERABILITY OF OPTION. This Option may not be transferred by
Optionee otherwise than by will or the laws of descent and distribution. During
Optionee's lifetime, this Option shall be exercisable only by Optionee.

8. LEAVE OF ABSENCE. For purposes of this Option, (i) a leave of absence,
duly authorized in writing by the Company, for military service or sickness, or
for any other purpose approved by the Company, if the period of such leave does
not exceed 90 days, and (ii) a leave of absence in excess of 90 days, duly
authorized in writing by the Company, provided Optionee's right to reemployment
is guaranteed either by statute or by contract, shall not be deemed a
termination of employment.

9. CHANGES IN CAPITAL; CERTAIN REORGANIZATIONS. If the outstanding Common
Stock of the Company which is subject to this Option shall at any time be
changed or exchanged by declaration of a stock dividend, split-up, subdivision
or combination of shares, recapitalization, merger, consolidation or other
corporate reorganization in which the Company is the surviving corporation, the
number of and kind of shares subject to the Option and the Option Price shall be
appropriately and equitably adjusted so as to maintain the proportionate number
of shares without changing the aggregate option price. In the event of a
dissolution or liquidation of the Company, or a merger, consolidation, sale of
all or substantially all of its assets, or other corporate reorganization in
which the Company is not the surviving corporation, or in which the Company is
the surviving corporation but holders of Common Stock receive securities of
another corporation, this Option shall terminate as of the effective date of
such event, provided that immediately prior to such event, Optionee shall have
the right to exercise this Option as to all shares underlying this Option,
irrespective of the number of Options actually vested at the time.

2
<PAGE>

10. MANNER OF EXERCISE.

(a) This Option may be exercised in whole or in part at any time and
from time to time within the Option Period, subject to the terms and conditions
contained herein, by the delivery of written notice of exercise to the Chief
Financial Officer of the Company, as required by subsection (c) of this Section
11, accompanied by: (i) full payment, in cash or certified or bank check,
payable to the Company, or, (ii) if permitted by the Company's Board of
Directors, shares of the Company's Common Stock having a fair market value equal
to the aggregate exercise price for the number of shares purchased. This Option
may also be exercised by "cashless exercise," as described below.

(b) Certificates for the shares of Common Stock purchased upon
exercise of this Option shall be delivered by the Company to the Purchaser
within five (5) business days after the Exercise Date. However, if the Purchaser
has elected to make a "cashless exercise," the Company shall deliver
certificates for the number of shares that results from subtracting, from the
total number of shares otherwise deliverable upon exercise, the number of shares
whose value, calculated using the Market Price, is equal to the value of the
payment otherwise required for exercise by Paragraph (a)(iv) of this Subsection
2.2. For purposes of this section, "Market Price" means the average of the
closing prices of sales on the principal domestic securities exchange on which
such security may at the time be listed, or, if there have been no sales on any
such exchange on any day, the average of the highest bid and lowest asked prices
on all such exchanges at the end of such day, or, if on any day such security is
not so listed, the average of the bid and asked prices quoted on Nasdaq as of
the close of trading in New York City on such day, in each such case averaged
over a period of five (5) consecutive days consisting of the business day
immediately preceding the day as of which Market Price is being determined and
the four (4) consecutive business days prior to such day; provided that if such
security is listed on any principal domestic securities exchange or quoted on
Nasdaq, the terms "business day" and "business days" means a day or days, as
applicable, on which such exchange or Nasdaq is open for trading or quotation,
as the case may be, notwithstanding whether any quotation is available on any
particular business day and, if not, then the Market Price shall be determined
based upon those remaining days during the aforesaid 5-day period for which
quotations are available. If the shares are not so listed or traded on any
principal domestic securities exchange or quoted on Nasdaq, the Market Price
shall be the fair value thereof, as determined in good faith by the Board of
Directors of the Company.

(c) The notice of exercise (i) shall state the election to exercise
the Option, (ii) shall state the number of shares in respect to which the Option
is being exercised, (iii) shall state Optionee's address, (iv) shall state
Optionee's social security number, (v) shall contain such representations and
agreements concerning Optionee's investment intent with respect to such shares
of Common Stock as shall be satisfactory to the Company's counsel, and (vi)
shall be signed by Optionee. As a further condition to the exercise of this
Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.

(d) Unless this Option has expired or all of the purchase rights
represented hereby have been exercised, the Company shall, in addition to
certificates for Common Stock issued upon exercise of this Option, prepare upon
exercise of this Option, a new Option representing the rights formerly
represented by this Option that have not expired or been exercised. The Company
shall, within five (5) business days after the Exercise Date, deliver such new
Option to the Optionee designated for delivery in the Exercise Agreement.

3
<PAGE>

11. AMENDMENT AND ADMINISTRATION. The Board of Directors shall have the
authority to interpret the Plan this Option, and generally to conduct and
administer the exercise of this Option and to make all determinations in
connection herewith which may be necessary or advisable, and all such actions of
the Board shall be final and conclusive for all purposes and binding upon
Optionee.

12. MISCELLANEOUS. This Option shall inure to the benefit of and be binding
upon each successor of the Company. All obligations imposed upon and all rights
granted to the Optionee and all rights reserved by the Company under this Option
shall be binding upon and inure to the benefit of Optionee, Optionee's heirs,
personal representatives, administrators and successors. Unless the context
requires otherwise, words denoting the singular may be construed as denoting the
plural, and words of the plural may be construed as denoting the singular and
words of one gender my be construed as denoting such other gender as is
appropriate.

IN WITNESS WHEREOF, this Option has been issued by the Company effective as
of the Date of Grant, which is May 13, 1999.

U.S. WIRELESS DATA, INC. Accepted by Optionee:
a Colorado corporation

/s/ Dean M. Leavitt /s/ Rod L. Stambaugh
------------------------ -------------------------
Dean M. Leavitt Rod L. Stambaugh
Chief Executive Officer

Attest:

/s/ Robert E. Robichaud
--------------------------
Robert E. Robichaud
Secretary

U.S. WIRELESS DATA, INC.

NONQUALIFIED STOCK OPTION CERTIFICATE

Optionee Number of Shares

Robert E. Robichaud 250,000

The effective date of this grant is May 13,1999 ("Date of Grant") and is subject
to the following terms and conditions:

<PAGE>

2
<PAGE>

10. MANNER OF EXERCISE.

3
<PAGE>

IN WITNESS WHEREOF, this Option has been issued by the Company effective as
of the Date of Grant, which is May 13, 1999.

U.S. WIRELESS DATA, INC. Accepted by Optionee:
a Colorado corporation

/s/ Dean M. Leavitt /s/ Robert E. Robichaud
--------------------------- ------------------------
Dean M. Leavitt Robert E. Robichaud
Chief Executive Officer

Attest:

/s/ Robert E. Robichaud
--------------------
Robert E. Robichaud
Secretary

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1999
<CASH> 425,000
<SECURITIES> 0
<RECEIVABLES> 221,000
<ALLOWANCES> (43,000)
<INVENTORY> 215,000
<CURRENT-ASSETS> 944,000
<PP&E> 1,137,000
<DEPRECIATION> 324,000
<TOTAL-ASSETS> 1,771,000
<CURRENT-LIABILITIES> 4,333,000
<BONDS> 0
1,587,000
752,000
<COMMON> 17,816,000
<OTHER-SE> (22,742,000)
<TOTAL-LIABILITY-AND-EQUITY> 1,771,000
<SALES> 0
<TOTAL-REVENUES> 1,424,000
<CGS> 1,028,000
<TOTAL-COSTS> 6,193,000
<OTHER-EXPENSES> 5,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,528,000
<INCOME-PRETAX> (5,485,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,292,000)
<DISCONTINUED> 807,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,485,000)
<EPS-BASIC> (0.51)
<EPS-DILUTED> (0.51)

</TABLE>