StarVox Communications, Inc./DE – ‘424B1’ on 9/14/98

As of:  Monday, 9/14/98   ·   Accession #:  927797-98-117   ·   File #:  333-52625

in

this entire Filing. an “Entity” Search.

Show

Documents searched

and

each “hit”. the 1st “hit”.

↓↑Hints

Prospectus   —   Rule 424(b)(1)
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 424B1       Supplement No.1 to Prospectus Dated August 7, 1998   121    754K 

Document Table of Contents

424B1
1st Page of 121
TOC
↑Top
Previous
Next
↓Bottom
Just 1st
 
 SUPPLEMENT NO. 1 TO PROSPECTUS DATED AUGUST 7, 1998

U.S. WIRELESS DATA, INC.

 RELATING TO THE SALE OF UP TO
 7,240,356 SHARES OF COMMON STOCK BY CERTAIN
 SELLING SECURITY HOLDERS OF THE COMPANY

     The following  information  supplements  and is a part of the Prospectus of
U.S.   Wireless  Data,   Inc.  (the   "Company")   dated  August  7,  1998  (the
"Prospectus"):                                                                  

Changes in Management                                                           
---------------------                                                           

Roger Peirce Appointed CEO                                                      
--------------------------                                                      

     On August 21, 1998, Mr. Roger Peirce became the Chief Executive Officer and
Chairman  of the Board of the  Company.  Mr.  Peirce  joined  the  Company  as a
director as of July 22, 1998. Information  concerning Mr. Peirce,  including his
business  experience,  is contained in the Prospectus under the section entitled
"Management."  Mr.  Peirce is a nonvoting  member of the Board of  Directors  of
Cardservice International,  Inc., a company for which Mr. Caeser Berger, another
director of the Company,  serves as a vice  president and with which the Company
has engaged in certain transactions.  See the section of the Prospectus entitled
"Certain Transactions - Transactions with Cardservice International, Inc."      

     Mr.  Peirce  replaced  Mr. Evon A. Kelly as the  Company's  CEO and Mr. Rod
Stambaugh  as  Chairman.  Mr.  Kelly  resigned as an officer and director of the
Company  effective  as of August 21,  1998,  but will  remain an employee of the
Company  under  a  one  year   employment   agreement  at  his  former  rate  of
compensation.  Mr.  Stambaugh  will  remain as  President  and a director of the
Company.                                                                        

     Mr. Peirce will receive a salary of $75,000 per year plus  reimbursement of
certain  customary  business  expenses.  He has also  been  granted  options  to
purchase up to 1,000,000  shares of the Company's  Common Stock,  exercisable at
$3.438 per share for ten years from  August 22,  1998.  The  Company  will issue
29,086 of the options as incentive  stock options under the Company'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. See the section
of the  Prospectus  entitled  "Executive  Compensation - Stock Option Plan." The
balance  of the  options  will be  issued  outside  the  Plan as  "non-qualified
options" and will have the same exercise  terms as the incentive  options issued
under the Plan but will expire on the earlier of  September  1, 2002 or one year
from the date Mr. Peirce ceases to serve the Company in any capacity,  including
as an  employee,  officer,  director  or  consultant.  All of the  options  vest
immediately  upon issuance but are subject to the Company's  right to repurchase
the  shares at the price  Mr.  Peirce  paid for  them.  The  Company's  right to
repurchase the shares expires over a 48 month period at the rate of 2.08% of the
share per month.  The  repurchase  rights of the  Company  terminate  completely
(thereby  vesting Mr. Peirce's rights in and to 100% of the shares) in the event
of a change in control of the  Company.  Mr.  Peirce has also been  granted  the
option to  purchase  up to 200,000  shares of Common  Stock owned by Mr. John M.
Liviakis, a significant shareholder of the Company. Those options are subject to
the same terms and conditions as the  non-qualified  stock options issued by the
Company.                                                                        

     Mr. Peirce's stock options give him the right to purchase up to 7.7% of the
Company's outstanding stock, based on the number of shares outstanding as of May
31, 1998, and increase the number of shares  beneficially owned by the Company's
officers and directors as a group to 15.6% of the outstanding  shares as of that
date.  See  the  section  of the  Prospectus  entitled  "Security  Ownership  of
Principal Shareholders and Management."                                         

424B1
2nd Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 2nd
Appointment of Charles T. Russell as Director                                   
---------------------------------------------                                   

     On September 1, 1998,  Charles T.  Russell,  age 68, became a member of the
Company's Board of Directors. Mr. Russell retired as Chief Executive Officer and
President of VISA  International  in 1994. He held those positions for the prior
ten years. Mr. Russell joined VISA (then National  BankAmericard,  Inc.) in 1971
as vice  president  for  operations.  He also served as senior  vice  president,
executive  vice president and Chief  Operating  Officer of VISA USA. Mr. Russell
has 26 years of experience in the credit card and electronic  commerce industry.
Mr. Russell  currently serves as a director on the Boards of two publicly traded
companies,  First Data Corp. and Cybercash,  Inc. Mr. Russell holds a bachelor's
degree in business administration, cum laude, from the University of Pittsburgh,
and a graduate  banking  degree from the Stonier  Graduate  School of Banking at
Rutgers University.                                                             

THE DATE OF THIS SUPPLEMENT IS SEPTEMBER 9, 1998

 -2-

424B1
3rd Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 3rd
U.S. WIRELESS DATA, INC.

7,240,356 Shares of Common Stock

         A total of 7,240,356 shares of the Common Stock (the "Shares"),  no par
value per share (the "Common Stock") of U.S.  Wireless Data, Inc. (the "Company"
or "USWD") are being  offered by certain  securityholders  of the  Company  (the
"Selling Security  Holders"),  if at all, on a delayed basis. A detailed listing
and  description  of the Shares being offered  hereby is set forth on the inside
cover page of this Prospectus.                                                  

         The Shares  offered by this  Prospectus may be resold from time to time
by the Selling Security Holders in one or more  transactions that may take place
on  the  over-the-counter  market,  including  ordinary  brokers'  transactions,
privately  negotiated  transactions  or through sales to one or more dealers for
resale of such securities as principals, at market prices prevailing at the time
of sale,  at prices  related to such  prevailing  market prices or at negotiated
prices.  agreed upon by the individual  Selling  Security  Holder at the time of
sale.  Usual  and  customary  or  specifically   negotiated  brokerage  fees  or
commissions may be paid by the Selling Security Holders.  No proceeds from sales
of the Shares will inure to the benefit of the  Company.  All costs  relating to
the registration of the Shares,  estimated to be approximately  $140,000 will be
borne by the  Company.  See  "Selling  Security  Holders"  and  "Description  of
Securities."                                                                    

         The Selling  Security  Holders  and  intermediaries  through  whom such
securities  are sold may be deemed  "underwriters"  within  the  meaning  of the
Securities Act of 1933, as amended (the "Securities  Act"),  with respect to the
securities  offered,  and any profits  realized or  commissions  received may be
deemed  underwriting  compensation.  The  Company  has agreed to  indemnify  the
Selling  Security  Holders against certain  liabilities,  including  liabilities
under the Act.  See  "Selling  Security  Holders"  and  "Commission  Position on
Indemnification for Securities Act Liabilities and Related Matters."            

         The Company's  Common Stock is presently  traded on the OTC  Electronic
Bulletin  Board  under the  symbol  "USWDA."  There can be no  assurance  that a
substantial trading market for the Common Stock will be sustained in the future.
At March 31, 1998, the net tangible book value of the Company's Common Stock was
approximately  $.002 per share.  See "Market for the Company's  Common Stock and
Related Matters," "Description of Securities" and "Risk Factors."               

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

THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 9 OF THIS PROSPECTUS.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
 EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
 ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
 REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
 EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
 SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD
BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER
THE SECURITIES LAWS OF ANY SUCH STATE.

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

        The date of this Prospectus is August 7, 1998.

424B1
4th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 4th
[Inside front cover.]                                                           

 The Shares offered by this Prospectus consist of the following:

956,250 Shares  estimated to be issuable upon conversion of a total of 3,060,000
shares ($3,060,000 face value) of the Company's Series A Cumulative  Convertible
Preferred  Stock (the "Series A Preferred  Stock") (the actual  number of Shares
issuable  upon  conversion of the Series A Preferred  Stock is not  determinable
until such time as conversion is actually elected by the holder as the number of
Shares  is  determined  based on the  stated  value of the  shares  of  Series A
Preferred  Stock being converted and the Market Price (as defined) of the Common
Stock at such time; the number of Shares being registered hereunder is estimated
based on a Market Price of $4.00 per Share; no implication  should be drawn that
the fair value of the  Shares is in any way  related  to such  estimated  Market
Price);                                                                         

60,991 Shares estimated as issuable as dividends on the Series A Preferred Stock
from April 1, 1998 through  December 31, 1999 (the actual  number of such Shares
is not  determinable  as it is based on the  Market  Price (as  defined)  of the
Common  Stock as of each  dividend  payment  date;  the  number of Shares  being
registered hereunder is estimated based on a Market Price of $4.00 per Share; no
implication  should  be drawn  that the fair  value of the  Shares is in any way
related to such estimated Market Price);                                        

13,069 Shares  previously issued as interest on the Company's 8% Adjustable Rate
Convertible  Subordinated  Debentures Due December 31, 1999 (the "8% Convertible
Debentures"),  all of which  were  converted  to  3,060,000  shares  of Series A
Preferred  Stock  as of  February  9,  1998  and as  dividends  on the  Series A
Preferred Stock through March 31, 1998;                                         

82,500 Shares  underlying  Common Stock purchase  warrants  issued to one of the
underwriters of the Company's initial public offering, 16,500 of which have been
assigned to a principal of the firm (the "Underwriter's Warrants");             

50,000  Shares  underlying  a Common  Stock  purchase  warrant  held by a former
director of the Company (the "Walter's Warrant");                               

50,000  Shares  underlying  a  Common  Stock  purchase  warrant  (the  "Finder's
Warrant")  issued as part of a finder's  fee to a  registered  broker-dealer  in
conjunction with the private offering of the Company's 8% Convertible Debentures
in December, 1997;                                                              

18,796  Shares  issued or issuable  upon the exercise of Common  Stock  purchase
warrants held by former  shareholders of a company which was acquired by USWD in
1994 (the "Direct Data Warrants");                                              

328,750  Shares issued to a consultant of the Company,  entrenet Group LLC, upon
conversion of principal and interest owing on a $150,000 convertible  promissory
note due June 3, 1998, at a value of $.50 per share;                            

280,000 Shares owned by entrenet Group,  LLC, which was issued as a finder's fee
in conjunction with a private offering completed by the Company in August, 1997;

4,700,000  Shares presently owned by two significant  shareholder  affiliates of
the Company (which cannot be sold prior to February 1, 1999);                   

400,000 Shares  underlying  Common Stock purchase warrants held by a significant
shareholder  affiliate of the Company (which cannot be sold prior to February 1,
1999); and                                                                      

300,000 Shares issued or issuable to a financial and shareholder  relations firm
and an executive officer of that firm pursuant to a consulting agreement between
the Company and that firm (which cannot be sold prior to February 1, 1999).     

 -2-

424B1
5th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 5th
 AVAILABLE INFORMATION

         The Company has filed with the Securities and Exchange  Commission (the
"Commission")  a  Registration   Statement  on  Form  SB-2  (together  with  all
amendments  and  exhibits  thereto,  the  "Registration  Statement")  under  the
Securities  Act of 1933, as amended (the  "Securities  Act") with respect to the
shares of Common Stock  offered by this  Prospectus.  This  Prospectus  does not
contain all the information  set forth in the  Registration  Statement,  part of
which has been  omitted  in  accordance  with the rules and  regulations  of the
Commission.  For  further  information,  reference  is made to the  Registration
Statement,  including  the  exhibits  filed  as a  part  thereof  and  otherwise
incorporated  therein.  Statements made in this Prospectus as to the contents of
any document  referred to are not  necessarily  complete,  and in each  instance
reference  is made to the  copy of such  document  filed  as an  exhibit  to the
Registration Statement,  and each such statement is qualified in all respects by
such reference.                                                                 

         The  Company  is a  reporting  company  subject  to  the  informational
requirements  of the Securities  Exchange Act of 1934, as amended (the "Exchange
Act"),  and,  in  accordance   therewith,   files  periodic  reports  and  other
information with the Commission. The Registration Statement, including exhibits,
as well as such other reports,  proxy  statements and  information  filed by the
Company may be inspected,  without  charge,  and copied at the public  reference
facilities  maintained by the Commission at Room 1024,  450 Fifth Street,  N.W.,
Washington,  D.C. 20549 and at the Commission's  regional offices located at 500
West Madison Street,  Suite 1400, Chicago,  Illinois 60661, and at 7 World Trade
Center,  Suite 1300, New York, New York 10048.  Reports,  proxy and  information
statements and other  information  filed  electronically by the Company with the
Commission   are  available  at  the   Commission's   World  Wide  Web  site  at
http://www.sec.gov. Copies of such material may also be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 
20549, at prescribed rates.                                                     

 -3-

424B1
6th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 6th
--------------------------------------------------------------------------------
PROSPECTUS SUMMARY

         The  following  summary is  qualified  in its entirety by and should be
read in conjunction with the more detailed  information and financial statements
and notes thereto  appearing  elsewhere in this  Prospectus.  Unless the context
otherwise  requires,  references  in this  Prospectus to the "Company" or "USWD"
mean U.S. Wireless Data, Inc. U.S Wireless Data(R) is a registered  trademark of
the Company.  All other trade names and trademarks  appearing in this Prospectus
are the  property of their  respective  holders.  Prospective  investors  in the
Common  Stock should  carefully  consider  the  information  set forth under the
heading "Risk Factors" prior to making an investment in the Common Stock offered
hereby.                                                                         

         This Prospectus contains certain statements of a forward-looking nature
relating to future events or the future  financial  performance  of the Company.
Forward-looking  statements are  identifiable  by the prefatory  language "may,"
"will," "expects,"  "anticipates,"  "estimates,"  "hopes," "continues," "if," or
synonyms or variations of such terms or the negative of such terms.  Prospective
investors are  cautioned  that such  statements  are only  predictions  and that
actual  events or results may differ  materially  from those  predicted  in such
statements.   In  evaluating  such  statements,   prospective  investors  should
specifically  consider  the  various  factors  identified  in  this  Prospectus,
including  the matters set forth under the caption "Risk  Factors,"  which could
cause  actual  results  to  differ  materially  from  those  indicated  in  such
forward-looking statements.                                                     

 The Company
 -----------

         The  Company's  principal  offices are  located at 2200 Powell  Street,
Suite 450,  Emeryville,  California  94608,  and its  telephone  number is (510)
596-2025.                                                                       

         The  Company  was  organized  on  July  30,  1991  for the  purpose  of
designing,  manufacturing  and marketing a line of wireless and portable  credit
card and check authorization  terminals.  The Company's first product,  known as
the POS-50(R),  is the world's first  integrated  wireless credit card and check
authorization terminal using cellular communication technology.  With over 4,000
POS-50(R) terminals in the marketplace,  the Company is recognized as the leader
in providing wireless terminal transaction equipment for the mobile marketplace.
The POS-50(R)  product  accounted for most of the sales  recorded in fiscal year
1997.                                                                           

         Over the past three  years,  USWD has focused  its product  development
effort on incorporating  Cellular Digital Packet Data (CDPD) technology into its
product line. CDPD is a high-speed  digital packet data,  internet protocol (IP)
based technology that operates in parallel with current cellular voice networks.
It is designed for high speed encrypted data  transmission over the air-link and
will not interfere with or degrade  cellular voice traffic.  Because of the high
speed nature of CDPD  technology,  and the ability to bypass the public switched
telephone  network,  the  Company's  new line of CDPD- based  terminals can have
significant performance and communication cost advantages when compared with the
traditional dial-up terminals currently being sold in the U.S. market today. The
Company now offers two new CDPD products  that reduce the current  authorization
time for a credit or debit card transaction  from  approximately 15 seconds to 3
to 5 seconds.                                                                   

         The most  significant  USWD product is the TRANZ*  Enabler which allows
current VeriFone TRANZ(R) 330 or TRANZ(R) 380 users to immediately convert their
terminals and printers from a land-line  telephone  dial-up mode to a high-speed
wireless mode of operation. By effecting this technological upgrade, the cost of
dedicated  telephone  lines is  eliminated  as are the  delays  created  by busy
telephony networks during peak periods of authorization  activity.  Furthermore,
the  efficiencies  created by adopting the CDPD  technology and USWD's  alliance
with a major transaction  processor have enabled U.S. Wireless Data to develop a
pricing schedule which lowers  transaction and/or discount rates from those that
most   retailers  are   currently   paying  to  handle  credit  and  debit  card
transactions.  The TRANZ Enabler is directed at the existing U.S. installed base
of more than 3.5 million TRANZ(R)330 and TRANZ(R)380 terminals.                 
*TRANZ is a registered trademark of Verifone, Inc.                              
--------------------------------------------------------------------------------
 -4-

424B1
7th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 7th
--------------------------------------------------------------------------------
         The second  CDPD  product  created by the  Company  is the  POS-500,  a
self-contained  card  terminal  and  printer  that  provides  the same  mobility
features of the POS-50(R) product,  but incorporates the processing  benefits of
the TRANZ  Enabler.  The unit is geared for the user who either  does not have a
dial-up  terminal/printer  in  place  or  requires  the  advantages  of the CDPD
technology in a mobile application.                                             

         In late 1996 - early 1997,  the Company made a fundamental  decision to
change the manner in which it generates  revenue.  If successfully  implemented,
this  decision  will  transform  the Company from being a "box maker" and seller
from which it earned one time  wholesale  margins from the sale of its products,
to earning  recurring  revenue by providing  wireless credit card and debit card
processing  services to retail  merchants.  In  furtherance  of this process the
Company  entered into a Member  Service  Provider  ("MSP")  agreement  with NOVA
Information  Systems ("NOVA"),  the nation's 7th largest credit card transaction
processor,  in January 1997. As a registered MSP of NOVA, the Company can enroll
merchants to process  their credit and debit card  transactions  with NOVA.  The
Company also entered into a "Merchant  Marketing  and Services  Agreement"  with
National Bank of Commerce  ("NBC") as of March 9, 1998,  under which the Company
also became an ISO/MSP of NBC and can thereby offer NBC's transaction processing
services to merchants, subject to final approval of each merchant by NBC. Once a
merchant  is  accepted,  the  Company  sets up point of sale  access,  including
maintenance of electronic  terminal hardware and other equipment,  and must also
supply the merchant  with  training,  supplies,  program  information  and other
services related to the program.  These MSP agreements allow U.S.  Wireless Data
to earn  revenue  on each card swipe and every  dollar  processed  by  merchants
enrolled by the Company. See "Business - Transaction Processing Agreements."    

     Another key element of USWD's  strategic  direction is to  establish  close
alliances with large  communications  carriers such as GTE, Bell Atlantic,  AT&T
Wireless,  Ameritech and others. The Company has to date entered into agreements
for CDPD airtime purchase by the Company with GTE Mobile Communications  Service
Corporation,  on its behalf and on behalf of GTE Mobilnet  Incorporated,  Contel
Cellular Inc. and their  respective  affiliates  (collectively  "GTE Wireless"),
Cellco  Partnership,  by its general partner Bell Atlantic/NYNEX  Mobile,  Inc.,
which does business as Bell Atlantic  Mobile ("Bell  Atlantic  Mobile") and AT&T
Wireless Data, Inc., doing business as AT&T Wireless Services ("AT&T Wireless").
In  addition to these CDPD  service  provider  agreements,  the Company has also
entered  into joint  marketing  agreements  with GTE  Wireless  (as of August 1,
1997),  Bell  Atlantic  Mobile  (as of March  23,  1998)  and  Ameritech  Mobile
Communications, Inc. ("Ameritech") (as of July 16, 1998) to market the Company's
TRANZ Enabler and processing services through GTE Wireless, Bell Atlantic Mobile
and  Ameritech's  commercial  and  major  account  sales  forces in all of those
companies'  CDPD  markets.  The  Company  has  established  a sales and  support
organization  to provide  local  support  for more than 300 GTE  Wireless  sales
representatives  and is in the process of building a similar sales  organization
to support  approximately  300 Bell Atlantic Mobile sales  representatives.  The
Company  may also need to add sales  representatives  to  support  the  recently
executed Ameritech agreement. The Company has specific,  significant commitments
under these CDPD airtime and joint marketing agreements,  including minimum CDPD
airtime purchase obligations to GTE Wireless and AT&T Wireless, and staffing and
inventory  delivery  requirements  to fulfill  its  obligations  under the joint
marketing agreements with GTE Wireless, Bell Atlantic Mobile and Ameritech.  See
"Business - Marketing and Distribution  Arrangements for the Company's  Products
and Related Services."                                                          

         By leveraging  the sales  organizations  of major CDPD  providers,  the
Company has the potential to reach a large number of merchants very quickly. The
Company hopes to execute similar joint marketing  agreements with the other CDPD
service providers for which it currently has cellular service resale agreements.
--------------------------------------------------------------------------------

 -5-

424B1
8th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 8th
--------------------------------------------------------------------------------
The Offering
------------

Securities Offered.............. 7,240,356 shares of Common Stock (the "Shares")

Selling Security Holders........ A total of 7,240,356 Shares are being offered  
                         by Selling Security Holders as follows:

                  * 956,250 Shares estimated to be issuable upon conversion of a
                    total of  3,060,000  shares  ($3,060,000  face value) of the
                    Company's  Series A Cumulative  Convertible  Preferred Stock
                    (the  "Series A  Preferred  Stock")  (the  actual  number of
                    Shares  issuable  upon  conversion of the Series A Preferred
                    Stock is not  determinable  until such time as conversion is
                    actually  elected  by the  holder as the number of Shares is
                    determined based on the stated value of the shares of Series
                    A Preferred  Stock being  converted and the Market Price (as
                    defined)  of the Common  Stock at such  time;  the number of
                    Shares being registered  hereunder was calculated based on a
                    Market Price of $4.00 per Share;  no  implication  should be
                    drawn  that  the  fair  value  of the  Shares  is in any way
related to such estimated Market Price);

                  * 60,991  Shares  estimated  as issuable as  dividends  on the
                    Series A Preferred Stock from April 1, 1998 through December
                    31,  1999  (the   actual   number  of  such  Shares  is  not
                    determinable  as it is also  based on the  Market  Price (as
                    defined)  of the Common  Stock as of each  dividend  payment
                    date;  the number of Shares  being  registered  hereunder is
                    estimated  based on a Market  Price of $4.00 per  Share;  no
                    implication  should  be drawn  that  the fair  value of such
                    Shares  is in any  way  related  to  such  estimated  Market
Price);                                 

                  * 13,069 Shares previously issued as interest on the Company's
                    8%  Convertible  Debentures,  all of which  Debentures  were
                    converted to 3,060,000 shares of Series A Preferred Stock as
                    of  February  9,  1998,  and as  dividends  on the  Series A
Preferred Stock through March 31, 1998; 

                  * 82,500 Shares underlying Common Stock purchase warrants (the
                    "Underwriters'  Warrants") issued to one of the underwriters
                    of the Company's  initial public  offering in December 1993,
                    16,500 of which have been  assigned  to a  principal  of the
         firm, presently exercisable at $12.325 per Share;

                  * 50,000  Shares  underlying a Common Stock  purchase  warrant
                    (the "Director's  Warrant") held by a former director of the
                   Company, Mr. James Walters, exercisable at $4.00 per Share;

                  * 50,000  Shares  underlying a Common Stock  Purchase  Warrant
                    (the "Finder's  Warrant") held by a finder for the Company's
                   8% Convertible Debentures, exercisable at $6.525 per Share;

                  * 18,796  Shares  issued or issuable  upon  exercise of Common
                    Stock  purchase  warrants held by former  shareholders  of a
                    company which was acquired by USWD in 1994 (the "Direct Data
    Warrants"), exercisable at $2.625 per Share;

                  * 328,750  Shares  issued  to a  consultant  of  the  Company,
                    entrenet  Group  LLC,  upon   conversion  of  principal  and
                    interest owing on a $150,000 convertible promissory note due
   June 3, 1998, at a value of $.50 per share;

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

 -6-

424B1
9th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 9th
--------------------------------------------------------------------------------
                  * 280,000  Shares owned by entrenet Group LLC or its assignees
                    which  were  issued  as  a  finder's  fee  owing  to  it  in
                    connection  with a  private  financing  for the  Company  in
August 1997;                            

                  * 4,700,000  Shares  owned  by  two  significant   shareholder
                    affiliates,  Messrs. John M. Liviakis (3,825,000 shares) and
                    Robert B. Prag  (875,000  shares),  3,500,000  of which were
                    acquired  in  August  1997  as part  of a  $500,000  private
                    offering  by  the  Company,  and  1,200,000  of  which  were
                    acquired  by Mr.  Liviakis  upon  exercise  of Common  Stock
                    purchase  warrants  also acquired in the August 1997 private
                    offering  (which  shares  cannot be resold  hereunder  until
February 1, 1999);                      

                  * 400,000 Shares  underlying  Common Stock  purchase  warrants
                    owned by Mr.  Prag which are  exercisable  at $.01 per share
                    which were  issued in August 1997  (which  shares  cannot be
     resold hereunder until February 1, 1999); and

                  * 300,000  shares issued or issuable  pursuant to a consulting
                    agreement   between  the  Company  and  Liviakis   Financial
                    Communications,  Inc. ("LFC")  effective as of July 25, 1997
                    (the "LFC Consulting Agreement"); 225,000 of such Shares are
                    issuable to LFC and 75,000  Shares are issuable to Robert B.
                    Prag,  an executive  officer of LFC (which  cannot be resold
hereunder until February 1, 1999).      

               See "Description of Securities," "Security Ownership of Principal
               Shareholders and Management," "Certain Transactions" and "Selling
Security Holders."                                

Resale Restrictions of Certain                                                  
Selling Security Holders........                                                

                    LFC and  Messrs.  Liviakis  and Prag  cannot sell any of the
                    Shares presently owned by them, or issuable to them upon the
                    exercise  of,  warrants or  pursuant  to the LFC  Consulting
                    Agreement prior to February 1, 1999, even though such shares
                    are  being   registered  for  sale  under  the  Registration
                    Statement of which this  Prospectus is a part. See "Security
                    Ownership  of  Principal   Shareholders   and   Management,"
              "Certain Transactions" and "Selling Security Holders."

Use of Proceeds.... All  proceeds  from  sales of the  Shares  will inure to the
                    benefit  of the  Selling  Security  Holders  and  not to the
                    Company.   See  "Use  of  Proceeds"  and  "Selling  Security
Holders."                               

Trading ............The Company's Common Stock is traded in the over-the-counter
                    market and is quoted on the OTC  Electronic  Bulletin  Board
                    under the symbol  "USWDA."  See  "Market  for the  Company's
Common Stock and Related Matters."      

Risk Factors........An investment in the Company's  Common Stock involves a high
degree of risk. See "Risk Factors."     
--------------------------------------------------------------------------------

 -7-

424B1
10th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 10th
--------------------------------------------------------------------------------
 Summary Financial Information
 -----------------------------

The following summary financial  information  should be read in conjunction with
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations"  and the  Company's  Financial  Statements  and the  Notes  thereto,
included elsewhere in this Prospectus.  The Statement of Operations data for the
two years ended June 30, 1997,  and the balance sheet data at June 30, 1997, are
derived from,  and should be read in conjunction  with, the Company's  Financial
Statements  and  the  Notes  thereto  audited  by   PricewaterhouseCoopers  LLP,
independent accountants, included elsewhere in this Prospectus. The statement of
operations  data for the three and nine month  periods  ended March 31, 1997 and
1998,  and the balance  sheet data at March 31,  1998,  have been  derived  from
unaudited  interim  financial   statements  and  include,   in  the  opinion  of
management,  all adjustments  (consisting only of normal recurring  adjustments)
necessary  in  order  to make  the  financial  statements  not  misleading.  The
operating  results for the three and nine months ended March 31,  1998,  are not
necessarily  indicative  of the results to be expected  for the full year or any
future period.                                                                  

                                                        [Enlarge/Download Table]

                                                                       Nine Months                  Three Months      
                                             Year Ended                   Ended                        Ended          
                                              June 30                  March 31 (4)                 March 31 (4)      

Statement of Operations Data:           1997           1996          1998          1997          1998         1997    
                                        ----           ----          ----          ----          ----         ----    

                                                                                                                      
Revenues (1)                           $1,315,542  $1,582,553   $   599,296    $1,046,359   $   245,439   $  243,446  

Costs and expenses (1)                  2,028,656   4,710,074     5,795,503     1,366,402     3,114,288      325,385  
                                        ---------   ---------     ---------     ---------     ---------      -------  

Loss from operations (1)                (713,114) (3,127,521)   (5,196,207)     (320,043)   (2,868,849)     (81,939)  

Other income, interest(expense)(1)      (151,270)    (37,442)     (668,362)         6,776     (432,904)      (1,112)  

Loss from discontinued operations,                                                                                    
net of income tax benefit (5)                   -   (309,206)             -             -             -            -  

Extraordinary gain on restructuring                                                                                   
of payables and debt (5)                       -   3,431,823              -             -             -            -  
                                     ------------   --------- -------------  ------------ -------------  -------      

Net loss                               $(864,384)   $(42,346)  $(5,864,569)    $(313,267)  $(3,301,753)    $(83,051)  
                                       ==========   =========  ============    ==========  ============    =========  

Basic/diluted loss from continuing                                                                                    
operations per share (3)                   $(.17)      $(.72)        $(.67)        $(.07)        $(.36)       $(.02)  

Basic/diluted loss per share (3)           $(.17)      $(.01)        $(.67)        $(.07)        $(.36)       $(.02)  

Weighted average number of                                                                                            
Common shares outstanding               4,986,767   4,418,618     8,753,321     4,814,900     9,280,963    4,983,852  
----------------------------------------------------------------------------------------------------------------------
                                                        [Enlarge/Download Table]

Balance Sheet Data: (4)                          June 30, 1997              March 31, 1998 (2)            
                                                 -------------              --------------                
                                                                                                          
Cash and cash equivalents                          $    6,083                 $    64,640                 
Working capital (deficit)                           (768,326)                   (677,059)                 
Total assets                                          501,280                   2,341,932                 
Long-term liabilities                                  45,000                      45,000                 
Total stockholders' equity (deficit)               $(761,386)                   $  15,792                 
==========================================================================================================
<FN>                                                                                                      
(1) All amounts are from continuing operations.                                                           
(2)  The  balance  sheet as of March 31,  1998,  reflects  the  completion  of a                          
     private placement  offering on December 10, 1997, in which the Company sold                          
     $3,060,000 principal amount of 8% Convertible Debentures.  After associated                          
     fees and repayment of bridge loans incurred during the quarter, the Company                          
     retained  approximately  $2,200,000 to apply to immediate  working  capital                          
     needs and the  national  launch  of its  proprietary  wireless  transaction                          
     processing  solution.  The  convertible  features  of  the  8%  Convertible                          
     Debentures  include an  "in-the-money"  convertible  option that allows the                          
     holder to obtain  shares of Common  Stock at a  discount  from fair  market                          
     value.  The  value of the  in-the-money  provision  has been  allocated  to                          
     stockholders'  equity.  The difference  between the realized value and face                          
     value of the debt was recognized as non-cash  interest  expense between the                          
     date of issue  and date of  conversion  into  Preferred  Stock,  which  was                          
     effected as of February 9, 1998.                                                                     
(3)  Basic/diluted  loss from continuing  operations per share is computed using                          
     Statement of Financial  Accounting  Standards No. 128, "Earnings Per Share"                          
     (SFAS 128).  All periods prior to December 31, 1997,  have been restated to                          
     conform  with  SFAS 128.  Company  stock  options  and  warrants  have been                          
     excluded from the  computation of diluted loss from  continuing  operations                          
     per share and net loss per common share as their effect is antidilutive for                          
     the periods  presented.  Such stock options and warrants could  potentially                          
     dilute earnings or losses per share in the future.                                                   
(4)  Refer to  Management's  Discussion and Analysis of Financial  Condition and                          
     Results  of  Operations,   Financial  Statements  and  Notes  to  Financial                          
     Statements  for  a  more  complete   explanation  of  accounting  policies,                          
     significant accounting entries and variance analysis.                                                
(5)  The 1996 loss from discontinued operations resulted from the dissolution of                          
     Direct Data, Inc. in October 1995. The 1996  extraordinary  gain is related                          
     to the  restructuring  of $3.4 Million of debt and payables for Direct Data                          
     and an inventory supplier.  See Note 10 to the Financial Statements for the                          
     Fiscal Year ended June 30, 1997 included in this Prospectus.                                         
</FN>                                                                                                     

--------------------------------------------------------------------------------
 -8-

424B1
11th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 11th
RISK FACTORS

         In addition to the other information contained in this Prospectus,  the
following risk factors should be considered  carefully before  purchasing shares
of Common Stock.                                                                

Risks Involving the Company and Its Business                                    
--------------------------------------------                                    

History of Losses; Going Concern Assumption                                     

     Through the end of the fiscal  quarter ended March 31, 1998, and subsequent
thereto, the Company has continued to experience  significant  operating losses.
The Company's independent accountants have included a paragraph in their opinion
covering the Company's financial  statements for the fiscal years ended June 30,
1996 and 1997 that states the  uncertainty of the Company's  ability to continue
as a going concern.  In an attempt to continue as a going  concern,  the Company
has embarked upon a plan to transition to a recurring revenue stream, is working
on programs to increase  revenue levels and product  margins,  and is seeking to
implement new marketing and  distribution  agreements.  In  furtherance  of this
change in focus,  over the last six months,  the Company  has  strengthened  its
management team, signed several  significant  distribution  agreements which are
expected  to build a  recurring  revenue  base,  expanded  its  sales  force and
expanded its contract  manufacturing  relationships.  However,  current  revenue
remains inadequate to fund the infrastructure  growth,  business  transition and
current expenses.  As a result, the Company is seeking additional debt or equity
financing;  however, it is constrained to do so by its agreement with holders of
its Series A Preferred  Stock  until the  registration  statement  of which this
Prospectus  is a part is declared  effective  by the SEC.  See  "Description  of
Securities - Preferred  Stock - Series A Preferred  Stock." No assurance  can be
given that the Company will obtain  sufficient  revenues from operations or gain
access to the capital it needs in the short run to continue as a going  concern.
See "Management's  Discussion and Analysis of Financial Condition and Results of
Operations."                                                                    

Slower Than Expected Development of Revenue from Relationship with GTE Wireless;
Greater Expenses than Anticipated                                               

     In order to fulfill its joint service and marketing  obligations  under its
agreements with GTE Wireless, Bell Atlantic Mobile and Ameritech, and to support
sales in selective AT&T and other  markets,  the Company has hired and trained a
sales and support staff that consisted of  approximately 50 people as of May 30,
1998.  However,  product  placements  with  merchants  through the GTE  Wireless
program have not developed as rapidly as anticipated, while costs to the Company
to fulfill its obligations  under this and the other  agreements have been quite
high.  Consequently,  the Company  expended  the  proceeds  from the  $3,060,000
private  offering of 8%  Convertible  Debentures  which it completed in December
1997, over a shorter period than expected. Although the Company has been able to
meet its short term cash needs through the private sale of certain  Common Stock
purchase  options  (the  "Call  Options")  and has  just  recently  completed  a
$2,000,000 private offering of 6% Convertible  Subordinated  Debentures Due July
21, 2000 (the "6% Debentures"), these are only short-term solutions. The Company
has also recently entered into a revolving  credit financing  agreement with GTE
Leasing  Corporation  to  finance  inventory  placed  through  the GTE  program,
although due to technical and legal  reasons,  the Company has not yet been able
to draw on this financing and may not be able to do so. Despite the availability
of these short term sources of capital and the  potential  funding that might be
obtained from GTE Leasing,  the Company will need additional  financing over the
short term, and growth in cash flow and  eventually,  profitability  to meet its
longer term needs. There can be no assurance that the Company will be successful
in obtaining the short term  financing it requires or in meeting its longer term
goals even if it obtains  immediate  financing.  If it fails to do so,  there is
likely to be a serious  impact  upon the  Company,  its  operating  results  and
financial  condition,  including its ability to continue as a going concern. See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations"  and "Business - Marketing  and  Distribution  Arrangements  for the
Company's Products and Related Services."                                       

-9- 

424B1
12th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 12th
Need for Additional Financing                                                   

     Although  the  Company  completed  a  private  offering  of 8%  Convertible
Debentures  in December  1997 by which it raised net  proceeds of  approximately
$2,700,000,  after commissions and expenses, has raised approximately $1,265,000
through the sale of call options on certain shares of its Common Stock,  and has
recently raised net proceeds of  approximately  $1,810,000 from the private sale
of $2,000,000 of 6% Convertible  Subordinated  Debentures Due July 21, 2000, the
Company will require additional  financing before it is able to achieve revenues
sufficient to support its cash needs.  The Company has no  commitments to obtain
any  additional  financing  at this  time and  there  can be no  assurance  that
additional  financing can be obtained on favorable terms, if at all. The Company
agreed with the  purchasers of its 8% Convertible  Debentures  that it would not
raise  additional  private  capital  prior to 150 days from  December  10, 1997,
without first obtaining permission from all of those investors. After that time,
and until the shares of Common  Stock  underlying  the Series A Preferred  Stock
have been  registered  for public  sale,  the  holders of the Series A Preferred
Stock have a first right of refusal on any private capital-raising  transactions
that the Company embarks upon. In addition,  the Company issued Common Stock and
stock  purchase  warrants at prices  substantially  less than the present market
price of the Common Stock which are being registered for resale  hereunder.  See
"Certain  Transactions" and "Selling Security Holders." The possibility of sales
of the shares  into the  market  under this  registration  statement  and/or the
saleability of substantial  numbers of shares of Common Stock which are, or will
shortly become,  eligible for sale under Rule 144 of the Securities Act of 1933,
at any time could make it  difficult  for the Company to raise money  through an
equity  offering at a time when it needs to do so. The absence of  financing  if
and when it is needed by the Company could have a material adverse effect on the
Company's  business,  operating results and financial  condition,  including its
ability  to  continue  as a going  concern.  See  "Management's  Discussion  and
Analysis of Financial  Condition and Results of Operations"  and "Risk Factors -
Risks  Relating to the  Company's  Securities  - Market  Overhang;  Registration
Rights; Possible Effect on Market for the Company's Common Stock."              

Need for Third-Party Inventory Financing                                        

     The  Company  has  recently  entered  into an  agreement  with GTE  Leasing
Corporation  to pay for the  manufacture  of TRANZ  Enabler units to be deployed
under the GTE Wireless marketing  agreement.  The agreement grants GTE Leasing a
security  interest in the units as well as certain  rights to cash flow from the
processing  revenue  payable to the Company under its agreement with NOVA. It is
expected that repayment of the financing will be made from the recurring revenue
generated  by units  placed  under the GTE  Wireless  marketing  agreement.  GTE
Leasing and GTE Wireless are  requiring  that the Company  obtain the consent of
NOVA, the processing  entity,  and RegionsBank,  NOVA's acquiring bank, to honor
the assignments if and when the Company  defaults on payments due to GTE Leasing
and/or GTE  Wireless.  Although the Company is  negotiating  with the parties to
implement an acceptable consent, it may not be able to do so and would therefore
not be able to obtain inventory  financing from GTE Leasing.  If funding through
GTE Leasing becomes available,  this source will provide the Company with needed
support only for units  placed  through the GTE  Wireless  marketing  agreement.
Third party  financing of all TRANZ Enabler units placed by the Company  through
any source is a required  element of the Company's  business model.  The Company
must therefore obtain such financing  arrangements for units distributed through
other  marketing  channels,  including  the Bell  Atlantic  Mobile and Ameritech
marketing agreements. The inability to fund inventory needs from outside sources
could have a material  adverse impact on the Company,  its liquidity and results
of operations.  See "Management's Discussion and Analysis of Financial Condition
and  Results  of  Operations"  and  "Business  -  Manufacturing  and  Deployment
Arrangements."                                                                  

Ability to Execute Business Plan to Attain Profitable Operations                

     The Company has embarked  upon a business  plan which shifts the  Company's
strategy from generating  revenue from direct sales of its products  (i.e.,  the
retail sale of a "box") on which it  attempted to earn a margin,                

-10-

424B1
13th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 13th
to generating  recurring credit card processing revenue from each CDPD device it
or its agents  place with a  merchant.  In order to convince  merchants  to open
accounts with the Company, its CDPD providers and its transaction processor, the
Company  provides the TRANZ  Enabler unit as part of the credit card  processing
solution at no up-front cost to the merchant; rather, the cost of the unit is to
be recovered through the monthly revenues generated by the merchant's processing
activities.  The Company is  obligated to repair  and/or  replace the unit if it
fails under normal  conditions.  The merchant is obligated to return the unit to
the Company upon ceasing to subscribe to the Company's processing services. This
business plan means that the Company has                                        

assumed the  financial  risk for the cost of the unit placed with the  merchant,
even under those situations where a merchant  dishonors its obligation to return
the unit at the required  time.  No assurance can be given that the Company will
be successful in placing a sufficient number of its products with merchants that
will generate enough revenue to meet the cash needs of the Company.  The failure
to do so and/or a significant number of defaults by merchants in returning units
upon termination of their processing  relationship with the Company is likely to
have a material  adverse  effect upon the  Company,  its  operating  results and
financial  condition,  including its ability to continue as a going concern. See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" and "Business - Manufacturing and Deployment Arrangements."         

Distribution Programs                                                           

     In the fiscal year ended June 30,  1997,  Cardservice  International,  Inc.
("CSI")  accounted for over 50% of the Company's  revenue,  which  resulted from
direct  sales of POS-50  product to CSI.  Although  the  Company has shifted its
focus away from strictly  selling its product and is  concentrating on trying to
develop a recurring  revenue  stream from product  placements,  the GTE Wireless
distribution  program,  as noted above, has not generated product  placements at
the rate the Company had hoped for. At the same time,  POS 50 product sales have
declined.  While the Company hopes that the GTE Wireless,  Bell Atlantic  Mobile
and Ameritech  relationships will develop as expected,  and the Company hopes to
enter into distribution agreements with other significant partners, a failure to
generate  product  placements  through  GTE  Wireless,   Bell  Atlantic  Mobile,
Ameritech or other  partners is likely to have a material  adverse effect on the
Company,  its  operations  and  financial  condition,  including  its ability to
continue  as a  going  concern.  See  "Business  -  Marketing  and  Distribution
Arrangements for the Company's  Products and Related Services" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."      

Potential Fluctuations in Operating Results                                     

     Because the  Company  generally  ships its  products on the basis of credit
card processing  applications or purchase orders,  incremental recurring revenue
and other component  sales in any quarter are highly  dependent on orders filled
in that quarter  and,  accordingly,  may  fluctuate  materially  from quarter to
quarter.  The  Company's  operating  expense  levels are based on the  Company's
internal forecasts for future demand and not on firm customer orders. Failure by
the Company to achieve these internal  forecasts  could result in expense levels
that are  inconsistent  with actual revenue.  The Company's  results may also be
affected by  fluctuating  demand for the Company's  products and by increases in
the costs of components  acquired from the Company's  vendors.  See "Business `-
Customers' and `- Manufacturing and Deployment Arrangements.'"                  

New Products and Rapid Technological Change                                     

     Assuming the Company is able to sufficiently penetrate the perceived market
for wireless  credit card  processing  hardware and  processing  initially,  the
Company's  future success is likely to depend upon its ability to keep pace with
technological  development and respond to evolving merchant demands.  Failure by
the Company to anticipate or respond adequately to technological developments or
significant delays in product  development could damage the Company's  potential
position in the marketplace and could result in less revenue and/or an inability
to generate profits. There can be no assurance the Company will be successful in
hiring and training adequate product development personnel,  if such persons are
needed to meet its needs or that it will have the                               

-11 

424B1
14th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 14th
resources to do so. There can be no assurance  the Company will be successful in
marketing  its current CDPD  products,  in developing  and/or  marketing any new
products, or product enhancements,  or will not experience significant delays in
such endeavors in the future. Any failure to successfully develop and market its
products and product  enhancements  could have a material  adverse effect on the
Company's financial condition, business and operations. See "Business."         

Dependence on a Single Product Type                                             

     All of the Company's revenue is derived from sales of its credit/debit card
transaction  or CDPD  enabling  products.  Demand  for these  products  could be
affected by numerous  factors outside the Company's  control,  including,  among
others, market acceptance by prospective  customers,  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 the Company, and the
general  condition of the economy.  The Company's success will depend in part on
its ability to penetrate  the market with its  existing  products and to respond
quickly to changes in merchant demand. No assurance can be given that it will be
able to do so. See "Business."                                                  

Dependence on Outside Parties for Advertising, Marketing and Distribution       

     Although the Company does market its products and services  through its own
personnel,  it has also entered into marketing and distribution  agreements with
third parties,  the most significant of which are the joint marketing agreements
with GTE Wireless,  Bell  Atlantic  Mobile and Ameritech to market the Company's
CDPD Tranz Enabler  product and  processing  services  using GTE Wireless,  Bell
Atlantic Mobile and Ameritech sales  personnel.  The Company also has other less
significant  marketing  agreements  with third party  marketing  entities and it
hopes to enter into similar contractual arrangements with others to assist it in
marketing its products. This may result in a lack of control by the Company over
some or all of the material marketing and distribution  aspects of its products,
although  the Company  does retain the  ultimate  right to reject any  potential
customer presented to it by its third party marketing partners.  There can be no
assurance  that the Company  will be able to  adequately  oversee the  marketing
efforts of unrelated  parties.  Any significant  problems with these third party
marketing and  distribution  channels could result in reduced market  acceptance
and lack of product placements for the Company.                                 

     In addition,  there can be no assurance  the Company will be  successful in
entering into  marketing  and related  arrangements  on terms  acceptable to the
Company,  or that any marketing  efforts  undertaken on behalf of the Company by
third parties will be as successful  as needed to generate  adequate  revenue to
support the Company.  The inability of the Company to place its products through
the efforts of its own marketing  personnel or third parties would likely have a
material  adverse  impact on the ability of the Company to generate  revenue and
attain profitable operations.                                                   

     The Company has a limited  marketing  budget and  resources.  The Company's
present  plans involve  primarily the attempt to leverage its resources  through
the entry of marketing and  distribution  agreements with third parties,  rather
than a large-scale  attempt to expand its in-house  capabilities.  The Company's
future growth and profitability is therefore  expected to depend, in large part,
on the success of its third-party licensees, sub- licensees and distributors, if
any,  and  others  who may  participate  in  marketing  efforts on behalf of the
Company.  Success in marketing  the  Company's  products  will be  substantially
dependent   on   educating   the   targeted   markets  as  to  the   distinctive
characteristics and perceived benefits of the Company's  products.  No assurance
can be given that these  efforts will be  successful.  See "Business - Marketing
and Distribution Arrangements for the Company's Products and Related Services." 

-12 

424B1
15th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 15th
CDPD Resale Agreements Containing Minimum Purchase Obligations                  

     The Company has to date entered  into three  air-time  CDPD service  resale
agreements,  two of which  contain  minimum  purchase  obligations  which can be
characterized as "take or pay" provisions.  The agreements with GTE Wireless and
AT&T Wireless  contain  provisions which require the Company to purchase minimum
amounts of airtime from each  provider.  In the case of the  agreement  with GTE
Wireless,  such minimum purchase obligations  escalates over the term of the GTE
Agreement from $20,000 during the first quarter  commencing  February 1, 1998 to
$2.75 Million by the eighth  quarter.  The  provisions  under the agreement with
AT&T are based on minimum  numbers of activated IP addresses  and the Company is
obligated to have 1,000 active  addresses by one year from April 1, 1997,  3,000
active numbers within 18 months of April 1, 1997 and 4,500 active numbers within
three years of April 1, 1997.  The Company is  obligated  to pay for the minimum
amount of  service  stated in the  agreements  even if it fails to place  enough
service with merchants to meet the minimums.  The Company has failed to meet its
minimum  purchase  obligations  to GTE  Wireless  and  although GTE Wireless has
acknowledged  that its failure to perform certain of its  obligations  under the
agreement has contributed to this problem and has therefore not demanded payment
and has expressed a willingness to renegotiate these terms of the agreement, the
failure  of the  Company  to meet these  service  minimums  could have a serious
adverse effect upon the Company and its business.  See "Business - Marketing and
Distribution Arrangements for the Company's Products and Related Services."     

Obligations of the Company Under Joint Marketing Agreements                     

     The Company has to date entered into joint  marketing  agreements  with GTE
Wireless,  Bell Atlantic Mobile and Ameritech.  These agreements  impose certain
obligations on the Company to place  inventory and provide  training and support
services and personnel to both the merchants who purchase the Company's services
and the GTE Wireless,  Bell Atlantic Mobile and Ameritech sales  representatives
who  solicit the  merchants.  In addition  to  inventory  placement  and support
service  requirements,  these agreements require payments of one-time activation
fees to be  paid to GTE  Wireless,  Bell  Atlantic  Mobile  and  Ameritech.  The
obligations  of the  Company  under these  agreements  could be  burdensome  and
difficult for the Company to meet,  especially if it does not obtain the outside
financing it requires to supply its current cash  requirements.  See "Business -
Marketing and Distribution  Arrangements for the Company's  Products and Related
Services."                                                                      

Security Interests in Company Assets                                            

     The Company has pledged certain of the Company's assets (including tangible
and intangible  assets) to secure the Company's  obligations  under two separate
agreements.  A security interest in certain assets (including  certain inventory
and accounts  receivable assets) has been granted to GTE Leasing  Corporation to
secure the Company's  obligations for inventory  financing to be supplied by GTE
Leasing.  See " Risk  Factors - Risks  Involving  the Company and Its Business -
Need For Third Party Inventory Financing," "Management's Discussion and Analysis
of Financial Condition and Results of Operations  Financial  Condition,  Capital
Resources and Liquidity - Agreement with GTE Leasing Corporation," and "Business
- Manufacturing and Deployment Arrangements - Inventory Financing." In addition,
the  Company  has  pledged  all  assets  not  pledged or to be pledged to secure
inventory financing and required to successfully implement any bridge financings
up to $2,000,000 to Houlihan, Lokey, Howard and Zukin Capital ("Houlihan Lokey")
to secure the Company's  obligations under a finder's  agreement that it entered
into with Houlihan Lokey as of June 19, 1998. See  "Management's  Discussion and
Analysis of Financial Condition and Results of Operations - Financial Condition,
Capital Resources and Liquidity - Current Financing  Initiatives." The inability
of the Company to honor its obligations to any of these firms under any of these
agreements   could  result  in  the  sale  of  Company  assets  to  satisfy  the
obligations.  The sale of the  underlying  assets in  satisfaction  of either of
these  security  interests  could have an adverse  impact on the Company and its
business.                                                                       

-13-

424B1
16th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 16th
Competition and Pricing Pressures                                               

     The markets for certain of the  Company's  products and services are highly
competitive,  including pressure to maintain  competitive pricing structures for
credit card processing services. In addition, the Company has identified several
potential competitors  attempting to develop CDPD based terminals and solutions.
Companies  with   substantially   greater   financial,   technical,   marketing,
manufacturing,  human resources,  as well as name recognition,  than the Company
may also enter the  market.  The  Company  believes  that its ability to compete
depends on  product  design,  quality  and price,  distribution  and  quality of
service.  There can be no  assurance  that the  Company  will be able to compete
successfully with respect to these factors. See "Business Competition."         

Dependence Upon Suppliers; Availability of Raw Materials                        

     The  Company  currently  depends  upon third  parties as the sole source of
supply for the components  comprising its products as well as the manufacture of
completed products.  The Company does not have long-term  agreements with any of
its  suppliers  and has not been a major  customer  to any of its  suppliers  or
manufacturers  and therefore may not be able to obtain inventory at a cost or on
the schedule which it requires.  In addition,  the Company's financial condition
could  have an  adverse  effect  on its  ability  to  obtain  components  and or
manufacturing services on a credit basis. If manufacture of any of the Company's
products is interrupted for any extended  period,  or if the Company is not able
to purchase and deliver sufficient quantities of its products on a timely basis,
there is likely to be a  material  adverse  effect  on the  Company's  business,
financial condition and results of operations. See "Business - Manufacturing and
Deployment Arrangements."                                                       

Liability Insurance                                                             

     The Company has  liability  insurance  policies  that provide  coverage for
liability  claims  arising  out of the  products  it sells and the  services  it
provides. The Company has not been the subject of any material liability claims;
however,  there  can be no  assurance  that the  Company's  liability  insurance
policies will cover any such claims,  or that such policies can be maintained at
an  acceptable  cost.  Any liability of the Company which is not covered by such
policies,  or is in excess of the limits of  liability of such  policies,  could
have a  material  adverse  effect on the  financial  condition  and  results  of
operations of the Company.                                                      

Dependence on Key Personnel                                                     

     The Company's future operating  results depend in significant part upon the
continued  contributions of its key senior  management  personnel,  many of whom
would be difficult  to replace.  The  Company's  future  operating  results also
depend in  significant  part upon its  ability to attract  and retain  qualified
personnel. Personnel that possess the requisite skills and experience to perform
certain  technical  functions for the Company have been in limited supply in the
past,  and there can be no  assurance  that the Company  will be  successful  in
attracting or retaining such personnel.  The loss of key employees,  the failure
of key  employees to perform  satisfactorily  in their  current  position or the
Company's  inability to attract and retain  skilled  employees as needed,  could
materially and adversely affect the Company's  business,  operating  results and
financial  condition.  The Company does not have employment  agreements with its
management personnel. See "Management."                                         

"Year 2000" Issues                                                              

     The Company has not completed a comprehensive review of impact of the "Year
2000" issue on the Company's  business.  This issue concerns  potential problems
and liabilities faced by all users and persons dependent on computers that might
result from software or system  failure or  malfunctions  if the systems fail to
properly  recognize the date change between 1999 and 2000. The engineering staff
has made a preliminary                                                          

-14-

424B1
17th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 17th
assessment  of  the  Company's  products  and  is  not  aware  of  any  material
complications.  In the first  quarter of fiscal  1999,  the  Company  expects to
confirm  the  impact,  if any,  on  products  it  distributes,  and  complete an
assessment of external factors,  including key vendors and licensed software for
internal  business  applications.  The Company has therefore not yet  determined
what impact,  if any, the Year 2000 problem may have on its  operational  needs,
financial results or financial condition/liquidity.                             

Settlement of Claims by Certain Holders of Convertible Demand Notes             

     In early April 1998,  the Company  settled  certain claims by purchasers of
$135,000  (out of a total of  $185,000)  of  convertible  demand notes which the
Company issued from April through June,  1997. By their terms,  the notes became
convertible  to Common  Stock at $.35 per share (as to $75,000 of the notes) and
$.50 per share (as to $110,000 of the notes) on November 1, 1997. The essence of
the claims of the  complaining  noteholders  was that the  Company,  through its
agents,  "promised"  that the Common Stock issuable upon conversion of the notes
was to be "freely  tradeable."  The  documentation  evidencing the notes did not
bear any language  indicating the nature of the shares issuable upon conversion.
The holder of the  remaining  $50,000  note  (which is  convertible  at $.50 per
share) has not asserted any claims  against the Company in  connection  with his
purchase of the note.  Without  admitting  liability,  the  Company  settled the
complaining  noteholders'  claims by  agreeing  to issue 1.4 times the number of
shares  originally  issuable  as  principal  and  interest on the notes (plus an
additional 11,000 shares to one of the noteholders who purchased an aggregate of
$50,000 of the notes) and providing the noteholders  with certain  guarantees as
to the amount for which the shares can be resold (with the difference to be made
up by the Company) and a five-day "put" which allows the  noteholders to require
the Company to repurchase any shares  remaining  unsold at the end of the period
ending  one year  after  the  shares  become  saleable  under SEC Rule 144 for a
certain price, subject to certain conditions. The holder of the other $50,000 of
notes will be given the  enhanced  conversion  rate but will not be offered  the
guarantee  or  put.  A total  of  525,800  shares  have  been  issued  to  these
noteholders  upon  conversion  of their notes.  Of that  number,  360,800 of the
shares were given a $3.00 per share  guarantee and put and 165,000 of the shares
were given a $4.29 per share guarantee and put. The Company also settled a claim
concerning an additional  $16,825  promissory note that was issued to one of the
holders of the $135,000 of notes  described  above,  by issuing 18,507 shares of
Common  Stock;  these shares were not given any guarantee or put.  Finally,  the
Company has issued 154,000 shares upon conversion of the remaining $50,000 note,
but did not give that  noteholder  the guarantee or put. The shares issued under
this settlement  become saleable under SEC Rule 144 at various times  (depending
on the  issuance  date of each note)  commencing  April 11, 1998 through July 2,
1998. As a result of this settlement,  the issuance of "premium" shares has been
recorded  as a  litigation  settlement  expense  and  resulted  in a  charge  to
operations of approximately  $921,000 in the Company's fiscal 1998 third quarter
results. See "Risk Factors - Risks Relating to the Company's Securities - Market
Overhang;  Registration  Rights;  Possible  Effect on Market  for the  Company's
Common Stock," "Management's  Discussion and Analysis of Financial Condition and
Results of Operations" and "Business - Legal  Proceedings - Settlement of Claims
of Certain  Noteholders."  The obligation of the Company to honor the guarantees
and put  options  given to the  complaining  noteholders  could  have a material
impact upon the Company,  its financial condition and results of operation.  See
"Management's  Discussion of Financial  Condition and Results of Operations" and
"Business - Legal Proceedings - Settlement of Claims of Certain Noteholders."   

Continuing Default to Former Trade Creditor                                     

     The  Company  has a note  payable to a former  trade  creditor  which is in
default in the approximate  amount of $388,000.  The note is  collateralized  by
certain of the  Company's  inventory,  and  although  the Company  continues  to
discuss  options  with the creditor  regarding  the  possible  restructuring  or
mutually  agreeable  settlement of this note,  no agreement has been reached.  A
decision by this  creditor to seek to recover the amount due on this note, or to
foreclose on the collateral, could have an adverse impact on the Company and its
business.                                                                       

-15-

424B1
18th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 18th
Status of Federal Corporate Tax Filings                                         

     The Company has not completed  federal  income tax filings for fiscal years
1996 and 1997.  While it is unlikely  that the Company will owe any taxes due to
the sustained losses during the periods, the Company may be subject to penalties
for the delinquency.  The Company intends to take the steps required to complete
the tax filings by October 31, 1998.                                            

Untimely Filing of 1996 Proxy Statement                                         

     The  Company  apparently  inadvertently  failed  to  file  its  1996  Proxy
Statement with the Securities and Exchange Commission within 120 days of the end
of fiscal  year 1996.  Copies of the Proxy  Statement  were  distributed  to all
shareholders  of the  Company in  conjunction  with the  Company's  1996  Annual
Shareholder  Meeting held November 15, 1996, which involved only the election of
directors.  The Company filed the 1996 Proxy Statement with the Commission as of
October 10, 1997.  The Company is not certain what  liability,  if any, it might
have as a result of this untimely filing.                                       

Risks Relating to the Company's Securities                                      
------------------------------------------                                      

Market  Overhang;  Registration  Rights;  Possible  Effect  on  Market  for  the
Company's Common Stock                                                          

     There are a total of 7,240,356 Shares owned or subject to warrants or other
rights to acquire Common Stock which the Company is  registering  for sale under
the  Registration  Statement of which this  Prospectus is a part.  Most of those
shares are  issuable or were issued at prices  which are less (and in some cases
substantially  less) than the  present  market  price for the  Company's  Common
Stock.  There  were  also   approximately   1,417,345  shares  of  Common  Stock
outstanding  that either are presently,  or shortly will be,  saleable under SEC
Rule 144 as of May 31, 1998, plus an additional 362,631 shares issuable pursuant
to the exercise of options  granted under the  Company's  1992 Stock Option Plan
which were  vested as of May 31,  1998 or which will vest within 60 days of such
date,  which are or will be saleable  under an effective  Form S-8  Registration
Statement  covering a total of up to 880,000  option  shares.  The Company  also
intends  to  file  two  additional  S-8  Registration   Statements  as  soon  as
practicable to cover a total of 2,400,000 additional shares of Common Stock that
are either presently  issuable under  outstanding  stock options or which may be
issued  pursuant to options that have been or are  authorized to be issued under
the  Company's  1992 Stock Option Plan.  The  exercise  prices of a  significant
number of these options are substantially less than the present market price for
the Company's  Common Stock.  In June 1998,  the Company agreed to issue 290,000
shares of restricted  Common Stock to Liviakis  Financial  Communications,  Inc.
("LFC") and Robert B. Prag, an officer of LFC, in connection with the entry of a
new  consulting  agreement  with LFC.  These shares carry  registration  rights,
although  LFC  and  Mr.  Prag  have  agreed  not to  sell  the  shares,  even if
registered,  before  February 1, 1999.  Finally,  there are  472,935  additional
shares  of  Common  Stock  which  have not been  included  in this  Registration
Statement which are issuable upon the exercise of presently outstanding warrants
that can be  exercised  in the  future,  a  substantial  number  of  which  have
registration rights. No assurance can be given that the market for the Company's
Common Stock will be robust  enough to absorb all of the shares being offered by
Selling  Security  Holders  under this  Registration  Statement  or which may be
offered  by  shareholders  under  Rule  144 or the  Company's  S-8  Registration
Statements.  If an oversupply of shares of Common Stock  develops as a result of
the number of shares that  shareholders may wish to sell into the market,  it is
likely that the market  price for the Common  Stock will be  depressed  from its
present  levels.   See   "Capitalization,"   "Business  -  Legal   Proceedings,"
"Management  -  Executive   Compensation,"   "Security  Ownership  of  Principal
Shareholders   and   Management,"   "Certain   Transactions,"   "Description  of
Securities" and "Selling Security Holders."                                     

-16-

424B1
19th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 19th
Possible  Limitations  on Sales of Common Stock;  Possible  Application of Penny
Stock Rules                                                                     

     Regulations  under the  Securities  Exchange  Act of 1934 (the "1934  Act")
regulate  the trading of "penny  stocks" (the "Penny  Stock  Rules"),  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.  The Common  Stock has recently  been
trading in a range  which would  classify  it as a penny stock and is  therefore
subject to the Penny  Stock  Rules.  Despite  the fact that the stock  price has
recently  traded above $5.00 per share,  the Company's stock has traded over the
last  several  years in a price range which makes it as a "penny  stock."  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 the Company'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 the Company's ability to raise additional  capital through the
sale of Common Stock.                                                           

No Dividends                                                                    

     The Company has never paid cash or other  dividends on its Common Stock. It
is the Company's intention to retain earnings,  if any, 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 will limit the  Company's
ability to pay dividends on the Common Stock.  See  "Description of Securities -
Series A  Preferred  Stock -  Dividends."  No person  seeking a dividend  paying
security should invest in the Common Stock. See "Dividend Policy."              

Dilutive and Other Possible Adverse Effects of Outstanding Options, Warrants and
Other Rights to Acquire Common Stock                                            

     The  Company  has a  substantial  number of  outstanding  rights to acquire
Common Stock in the form of the Series A Preferred Stock,  various  warrants,  a
convertible promissory note, and contract rights, including a substantial number
of such  rights  for which the Common  Stock  underlying  those  rights is being
registered for resale in the registration  statement of which this Prospectus is
a part. A substantial number of these rights, plus additional rights in the form
of  options  that  have  been  or may be  granted  to  the  Company's  officers,
directors,  employees or consultants  under the Company's 1992 Stock Option Plan
or otherwise,  are  exercisable at prices which are less than the present market
price for the Common Stock.  Under the terms of such rights, the holders thereof
are given an opportunity to profit from a rise in the market price of the Common
Stock with a resulting  dilution in the  interests  of other  shareholders.  The
terms on which the  Company may obtain  additional  financing  may be  adversely
affected by the  existence  of such rights.  For  example,  the holders of these
rights could  exercise them at a time when the Company was  attempting to obtain
additional  capital through a new offering of securities on terms more favorable
than those provided by the rights. See "Management's  Discussion and Analysis of
Financial  Condition  and  Results  of  Operations,"   "Management  -  Executive
Compensation," "Certain Transactions," "Description of Securities," and "Selling
Security Holders."                                                              

-17-

424B1
20th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 20th
Offering to Benefit Certain Existing  Shareholders and Other Persons Holding the
Company's Securities                                                            

     This Offering will provide substantial benefits to existing shareholders of
the Company and other persons holding the Company's securities. No proceeds from
sales of the Shares being  registered in this offering will inure to the benefit
of the  Company.  Rather  this  Offering  is being  effected  by the  Company in
satisfaction  of its  registration  obligations  to  various  purchasers  of its
securities over the last several years. A substantial number of the Shares being
registered  for sale  hereunder  were  purchased  or can be  purchased at prices
substantially  less than the  present  market  price for the Common  Stock.  See
"Certain  Transactions,"  "Description  of  Securities,"  and "Selling  Security
Holders."                                                                       

Potential Volatility of Market Price for Common Stock                           

     The current market price for the Company's  Common Stock does not appear to
bear any relationship to any established valuation criteria such as assets, book
value, or current earnings.  The Company  attributes the current market price of
the Company's  Common Stock to  anticipated  benefits to the Company of its CDPD
products and  distribution  strategy.  Market prices for securities of small-cap
emerging  companies have  historically  been quite volatile.  General  economic,
industry and market conditions,  as well as future announcements  concerning the
Company or its competitors, including technological innovations or new products,
developments concerning proprietary rights, litigation involving the Company, or
other  factors may have a  significant  impact on the market price of the Common
Stock. See "Market for the Company's Common Stock and Related Matters."         

Discount To Conversion  Price of Series A Preferred  Stock for Failure to Obtain
Effectiveness of Registration Statement within Prescribed Period                

     In connection with the sale of the 8% Convertible Debentures which have now
been  converted to  3,060,000  shares of Series A Preferred  Stock,  the Company
agreed to file a  registration  statement  covering  the  shares  issuable  upon
conversion of the 8% Convertible  Debentures  and/or Series A Preferred Stock by
March  10,  1998 (90 days from  December  10,  1997) and that if a  registration
statement  covering such shares was not  effective  with the SEC by May 11, 1998
(150 days from  December 10,  1997),  a penalty in the form of a discount to the
conversion  price for the Series A Preferred Stock would become  effective.  The
pre-penalty conversion price (the "Conversion Price") applicable to the Series A
Preferred  Stock is  calculated  based on a $1.00  stated  value of the Series A
Preferred  Stock and is the lesser of: (i) $6.00 per share of Common  Stock;  or
(ii) 80% of Market Price for the Common Stock (as defined).  Until  September 8,
1998,  the Conversion  Price is never to be less than $4.00 per share,  less any
applicable  penalty  discount  (the  "Minimum  Conversion  Price").  The penalty
discount reduces the Conversion Price (including the Minimum  Conversion  Price)
by 2% of the pre- penalty  Conversion  Price for each 30 day period (or any part
thereof) after May 11, 1998, that the  registration  statement is not effective.
The Company did not file a registration statement by March 10, 1998, and did not
obtain its  effectiveness by May 11, 1998, and it is therefore  certain that the
penalty for failure to obtain effectiveness of the registration statement by May
11, 1998 will become effective.  Assuming the discounted Conversion Price (based
on then  current  Market  Price) is not  greater  than $6.00 per share of Common
Stock (in which  case the  maximum  $6.00  Conversion  Price  would  nonetheless
apply), the application of the discount will reduce the cost of acquiring Common
Stock to the holders of the Series A Preferred  Stock.  As of July 31, 1998, the
Minimum Conversion Price has been reduced to $3.76 per share by application of a
6% penalty  discount to the original $4.00 per share Minimum  Conversion  Price.
See "Description of Securities - Series A Preferred Stock."                     

-18-

424B1
21st Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 21st
Possible Loss of NOLs                                                           

     The  issuance or sale of  additional  Common Stock by the Company will have
the effect of reducing  the ability of the Company to utilize its net  operating
loss  carryforwards  ("NOLs") prior to expiration,  which are  substantial.  Any
reduction  or loss of the NOLs  could have a material  adverse  effect  upon the
Company's  business,  operating results and financial  condition.  However,  the
overriding need for additional  financing could cause the Company to carry out a
transaction which could result in the loss of its NOLs.                         

Compliance with Securities Laws                                                 

     The Company has recently  sold a  substantial  amount of its  securities in
unregistered  transactions  that the Company  believes  qualify for registration
exemptions  under state and federal  securities laws. In the event any violation
of these laws occurred as to past sales of  securities,  the  purchasers of such
securities  may have the right to rescind the purchase  and receive  their money
back,  with  interest.  Any attempt by a  securityholder  to assert a rescission
right could have a material  adverse  effect upon the  financial  condition  and
results of operations of the Company, even if such person were not successful in
prosecuting  such a claim.  See  "Business  - Legal  Proceedings"  and  "Certain
Transactions."                                                                  

Anti-Takeover Considerations Including Authorization of Preferred Stock         

     Certain provisions of the Company's Articles of Incorporation may be deemed
to have  anti-takeover  effects  and may  discourage  or make more  difficult  a
takeover  attempt  that a  shareholder  might  consider in his,  her or its best
interest.  The Articles of Incorporation  authorize a total of 15,000,000 shares
of no par value preferred stock (the Preferred  Stock"),  4,000,000 of which are
designated as Series A Preferred  Stock. The Board of Directors may issue shares
of previously  undesignated  preferred stock without  shareholder  approval upon
such terms as the Board of Directors may determine. The rights of the holders of
Common Stock will be subject to, and may be adversely affected by, the rights of
the  holders  of any  preferred  stock  that may be  issued in the  future.  The
issuance of preferred  stock,  while  providing  flexibility in connection  with
possible  acquisitions  and other corporate  purposes,  could have the effect of
delaying or preventing a change in control of the Company without further action
by the  shareholders.  The Company has no present plans to issue any  additional
shares of  Preferred  Stock beyond  those  already  issued as Series A Preferred
Stock. See "Description of Securities `- Preferred Stock' and `- Certain Effects
of Authorized But Unissued Stock.'"                                             

     Under Section 7-106-205 of the Colorado Business Corporation Act, the Board
of Directors of a Colorado  corporation may issue rights,  options,  warrants or
other convertible  securities  (hereafter "rights") entitling the holders of the
rights to  purchase,  receive or acquire  shares or  fractions  of shares of the
corporation  or assets or debts or other  obligations of the  corporation,  upon
such terms as are  determined  by the Board of  Directors.  The Board is free to
structure  the  issuance or exercise of the rights in a manner which may exclude
"significant  shareholders,"  as defined,  from being  entitled to receive  such
rights or to exercise  such rights or in a way which may  effectively  prevent a
takeover of the  corporation by persons  deemed  hostile to management.  Nothing
presently  contained in the Articles of Incorporation  of the Company  prohibits
the Board from using these types of rights in this manner.  See  "Description of
Securities - Certain Anti-Takeover Provisions of Colorado Law."                 

     In  addition,  because  any  takeover of the  Company  could  result in the
inability  of the  Company to utilize  its NOLs prior to  expiration,  potential
acquirors may be deterred from acquiring the Company.  See "Risk Factors - Risks
Relating to the Offering and the Company's Securities - Possible Loss of NOLs." 

-19-

424B1
22nd Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 22nd
Maintenance of Effective Registration Statement                                 

     The Company has agreed with the holders of its Series A Preferred  Stock to
maintain  an  effective  registration  statement  under  which they may sell the
Common Stock  issuable  upon  conversion  of, or as  dividends  on, the Series A
Preferred  Stock,  for at least 16 months from June 30, 1998. The Company is not
presently able to utilize  registration  on Form S-3, and in all likelihood will
not be able to do so for the foreseeable future. Consequently, the registrations
that the Company is obligated to keep  effective for the holders of its Series A
Preferred  Stock, or which it must undertake for other  securityholders  holding
demand registration  rights, are likely to be quite expensive to the Company and
there  can  be  no  assurance   that  the  Company  will  be  able  to  maintain
effectiveness of such registration statements for such extended periods of time.
See "Description of Securities" and "Selling Security Holders."                 

Possible Future Application of California General Corporation Law to the Company
and Its Shareholders                                                            

     Under  Section 2115 of the  California  General  Corporation  Law,  foreign
corporations  that exceed an average of fifty percent for "the property  factor,
the  payroll  factor and sales  factor"  for its  latest  full  income  year (as
computed  under the same methods as are used in computing  franchise tax payable
in  California)  and  which  have  more  than  one-half  of  the   corporation's
outstanding  voting securities (as determined  pursuant to Section 2115) held of
record by persons  having  addresses in  California,  become  subject to certain
specified chapters and sections of the California  General  Corporation Law upon
the first day of the first income year of the corporation commencing on or after
the 135th day of the latest income year during which the  above-described  tests
have  been met or during  which a final  order  has been  entered  by a court of
competent  jurisdiction  declaring  that those tests have been met.  The Company
presently exceeds the shareholder  address test and may exceed the other test as
of the 135th day of its fiscal year ending June 30,  1999,  which would  subject
the  Company  to  certain  provisions  of  California  law as of July  1,  1999.
Application of certain aspects of the California  General  Corporation Law would
to the Company and its  shareholders  may give greater or lesser  protection  to
shareholders  in certain  instances  than is  available  to  shareholders  under
Colorado law (the State in which the Company is  incorporated).  Compliance with
applicable  provisions  of  California  law may be more or less  onerous  to the
Company  than  compliance  with  analogous   provisions  of  Colorado  law.  See
"Description  of Securities - Possible  Future  Application of California Law to
the Company and Its Shareholders."                                              

-20-

424B1
23rd Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 23rd
 USE OF PROCEEDS

     The proceeds  from this offering of Shares will inure solely to the benefit
of the Selling Security Holders.  The Company will not receive any proceeds from
sales of the Shares being  offered  under this  Prospectus.  See "Risk Factors -
Risks  relating  to the  Company's  Securities  - Offering  to  Benefit  Certain
Existing Shareholders and Other Persons Holding the Company's Securities."      

 DIVIDEND POLICY

     The Company has never  declared  or paid any cash  dividends  on its Common
Stock and does not  anticipate  paying any  dividends on the Common Stock in the
foreseeable  future.  Any cash that might be available  for payment of dividends
will be used to expand the Company's business.                                  

     In addition, the terms and conditions of the presently outstanding Series A
Preferred Stock will limit the Company's  ability to pay dividends on the Common
Stock. See "Description of Securities - Series A Preferred Stock - Dividends."  

-21-

424B1
24th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 24th
 MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED MATTERS

         The Company's 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. The Company's stock has  historically  been
thinly  traded,  although there has been  substantial  volume in the stock since
approximately August 1, 1997. Average trading volume over the three months ended
June 30, 1998 has been  approximately  97,000 shares per day.  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 1998             High              Low
       -----------             ----              ---

         Fourth Quarter         $5.310            $2.375
         Third Quarter           7.625             5.000
         Second Quarter          8.750             4.500
         First Quarter           6.875             0.281

       Fiscal 1997             High              Low
       -----------             ----              ---

         Fourth Quarter          0.625             0.218
         Third Quarter           0.281             0.125
         Second Quarter          0.375             0.156
         First Quarter           0.406             0.125

       Fiscal 1996             High              Low
       -----------             ----              ---

         Fourth Quarter          0.844             0.281
         Third Quarter           1.063             0.109
         Second Quarter          0.469             0.094
         First Quarter           0.469             0.125

     As of May 31, 1998,  there were 182 holders of record of the Common  Stock.
There  were also an  undetermined  number of  holders  who hold  their  stock in
nominee or "street" name, although at December 15, 1997, in conjunction with the
record date for its 1997 Annual  Shareholder  Meeting held  February 6, 1998 the
Company determined that there were approximately 2,557 beneficial holders of its
Common  Stock.  As of May 31,  1998,  a total of  4,458,272  shares were held by
depository  companies in street name.  On July 31, 1998,  the last sale price of
the Common Stock was $3.625 as reported on the OTC Electronic Bulletin Board.   

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

-22-

424B1
25th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 25th
CAPITALIZATION

         The following  table sets forth the Company's  capitalization  at March
31, 1998.                                                                       

                                                        [Enlarge/Download Table]

                                                                                  March 31, 1998
                                                                                  --------------

                                                                                                
Notes Payable ...............................................................          827,863  

Long-term liabilities .......................................................           45,000  

Shareholders' equity:                                                                           

         Preferred Stock, no par value; 15,000,000 shares authorized; 4,000,000                 
         shares  designated  as  Series  A  Cumulative Convertible Redeemable                   
         Preferred Stock; 3,060,000 shares issued and                                           
         outstanding at March 31, 1998 ......................................        3,060,000  

         Common Stock, no par value; 12,000,000 shares authorized;                              
         9,324,601 shares issued and outstanding at March 31, 1998 (1) ......        9,324,601  

         Additional paid in capital .........................................       10,456,612  

         Accumulated deficit ................................................      (22,825,421) 
                                                                                   ------------ 

         Total shareholders' equity (deficit) ...............................           15,792  
                                                                                  ------------  

         Total capitalization ...............................................     $    888,655  
                                                                                  ============  
<FN>                                                                                            
         ---------------                                                                        

(1)  Excludes a total of 4,963,244  shares of Common Stock as of March 31, 1998,                
     comprised of the following:  (a) 719,653  shares  issuable upon exercise of                
     outstanding  stock options issued under the 1992 SOP at a weighted  average                
     exercise  price of  $2.96  per  share;  (b)  600,000  shares  underlying  a                
     non-qualified  stock  option  that was granted to the  Company's  CEO as of                
     August 4, 1997, which is exercisable at $1.00 per share; (c) 250,000 shares                
     issuable at $4.00 per share upon exercise of outstanding  warrants owned by                
     two former  officers of the Company;  (d) 14,849 shares  issuable at $2.624                
     per share  upon  exercise  of  outstanding  warrants;  (e)  165,000  shares                
     issuable upon exercise of the Underwriters'  Warrants at a price of $12.325                
     per share;  (f) 679,800  shares  issuable upon  conversion of principal and                
     interest on a total of $185,000  of  convertible  notes sold by the Company                
     from April - June of 1997;  (g) 18,507 shares  issuable upon  conversion of                
     principal  and interest on a $16,825  promissory  note issued as of July 2,                
     1997;  (h)  1,600,000  shares  issuable  to  two  significant   shareholder                
     affiliates  of the Company upon the exercise of warrants at $.01 per share,                
     which were issued as of August 6, 1997; (i) 225,000  shares  issuable as of                
     March 31, 1998, pursuant to a consulting  agreement with Liviakis Financial                
     Communications,  Inc. ("LFC") entered into as of July 25, 1997; (j) 605,000                
     shares  issuable to entrenet  Group,  LLC  (325,000  shares  issuable  upon                
     conversion of principal and accrued interest on a $150,000  promissory note                
     at $.50 per share and 280,000 shares issuable as a finder's fee; (k) 75,000                
     shares  issuable  as a  result  of the  exercise  of a stock  option  by an                
     officer/director  of the Company prior to March 31, 1998, for which a share                
     certificate had not been issued as of March 31, 1998; and (l) 10,435 shares                
     issuable  upon  exercise of a common  stock  purchase  warrant at $5.75 per                
     share  issued to entrenet as of March 12,  1998.  See  "Management  - Stock                
     Option   Plan,"   "Security   Ownership  of  Principal   Shareholders   and                
     Management,"  "Certain  Transactions"  and  "Description  of  Securities  -                
     Warrants."                                                                                 
</FN>                                                                                           

-23-

424B1
26th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 26th
 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THE STATEMENTS IN THIS DISCUSSION CONTAIN BOTH HISTORICAL AND FORWARD-LOOKING   
STATEMENTS.  THE FORWARD-LOOKING STATEMENTS ARE BASED UPON CURRENT              
EXPECTATIONS AND ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE              
ANTICIPATED.  FACTORS THAT MAY AFFECT SUCH FORWARD-LOOKING STATEMENTS           
INCLUDE, AMONG OTHERS, THOSE SET FORTH UNDER THE CAPTION "RISK FACTORS."        

Results of Operations                                                           

General Overview                                                                

         U.S.  Wireless Data, Inc. ("USWD" or the "Company") was incorporated on
July 30, 1991, and is in the business of designing,  manufacturing and marketing
a line of wireless and portable credit card and check  authorization  terminals.
The Company  completed an initial  public  offering in December of 1993,  and in
1994, completed  development of its initial product,  negotiated agreements with
suppliers of components,  developed a marketing strategy, and initiated sales of
the  POS-50(R)  portable  credit card and check  verification  terminal.  During
fiscal 1996, the Company  continued to promote its product  through  Independent
Sales  Organization (ISO) channels and began development on its new CDPD product
line. The Company continued its efforts on the POS- 50(R) and in the second half
of 1996, introduced two new CDPD-based products.  The Company's largest customer
during fiscal 1996 and 1997 was Cardservice International, Inc., which purchased
POS-50(R) terminals.                                                            

         As the Company  entered fiscal year 1997, it continued to struggle with
profitability  and  liquidity.  In October 1996,  the Company closed its Boulder
office and  consolidated  operations  in  Colorado  Springs,  Colorado.  A small
customer  service and  POS-50(R)  deployment  office was opened in Wheat  Ridge,
Colorado.  As  part  of  the  restructuring  plan,  Michael  J.  Brisnehan,  its
president,  principal executive officer and chief financial officer resigned and
Rod L.  Stambaugh,  chairman and former vice president of marketing and business
development was appointed  president and chief executive officer.  During fiscal
year 1997,  head count was  maintained at  approximately  10 employees and ended
June  1997  at  eight.  During  the  first  half of  fiscal  1998,  the  Company
significantly  increased personnel in response to the new distribution  programs
described below. The Company had 50 employees by the end of December 1997 and 60
employees as of the end of June 1998.                                           

         A strategic  decision  was made to  transition  the Company from a "box
maker" to providing a credit/debit card processing  solution to the marketplace.
In January 1997, the Company executed a Member Service  Provider  agreement with
NOVA Information  Systems that  establishes U.S.  Wireless Data as a transaction
processing  service  provider to retail  merchants.  The NOVA  arrangement  also
allows the Company to generate a recurring revenue stream from each installation
instead  of the  previous  per unit  sales  approach.  Another  key piece of the
strategic  direction  was to  significantly  broaden  distribution  of the TRANZ
Enabler CDPD based  product by  developing  distribution  agreements  with large
communications  carriers for direct distribution of products and services to the
merchant.  In  preparation  for this  effort,  the Company  signed CDPD  airtime
agreements with AT&T Wireless Services, Bell Atlantic NYNEX Mobile and initiated
discussions with GTE Wireless regarding airtime  purchases,  joint marketing and
operating agreements.  The Company was ultimately successful in entering into an
airtime agreement with GTE Wireless which contains joint marketing and operating
provisions.  USWD has specific,  significant  commitments under these agreements
including both minimum purchase obligations and staffing requirements.          

         In the fourth quarter of fiscal 1997, it was clear that the Company had
a very significant  market  opportunity but had extremely  limited financial and
human resources to apply to an aggressive CDPD product  roll-out.  In June 1997,
the Company engaged entrenet Group, LLC.  ("entrenet"),  a management consulting

-24-

424B1
27th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 27th
group, to assist with the development of a detailed  marketing and business plan
and introduction of financing sources.  The Agreement had a term of one year and
USWD agreed to pay  entrenet  $150,000 in the form of a  convertible  promissory
note,  bearing  interest  at 10% per  annum.  Entrenet  was also  entitled  to a
finder's  fee for locating  direct  financing  sources for the Company.  In July
1997,  through an  introduction  by  entrenet,  the  Company  retained  Liviakis
Financial  Communications  Inc.  ("LFC") to advise  and  assist  the  company in
matters  concerning   investor   relations,   corporate  finance  and  strategic
management  planning.   The  Company  also  completed  a  private  placement  of
restricted securities, raising $500,000 in cash from two LFC affiliates, Messrs.
John M. Liviakis and Robert B. Prag,  for  3,500,000  shares of Common Stock and
warrants to purchase an additional  1,600,000  shares,  exercisable  at $.01 per
share. This transaction entitled entrenet to a finder's fee under its consulting
agreement.  For its fee, the Company ultimately agreed to issue entrenet 280,000
shares of Common Stock at such time as the shareholders  approved an increase in
capital stock to at least  40,000,000  shares,  which occurred as of February 6,
1998. The 280,000 shares were issued to entrenet and five members of entrenet as
of April 3, 1998.                                                               

         Following  the  Liviakis  investment,  the Company  undertook a focused
effort to strengthen and broaden its management  team. In early August 1997, the
Company retained Evon A. Kelly as its chief executive  officer.  Also in August,
the Company hired a vice president of sales,  vice president of major  accounts,
and in September  added a chief  financial  officer.  The Company then  actively
recruited  and hired  marketing and sales  personnel to support  deployment on a
nationwide basis under the joint marketing program with major wireless carriers.
The  retention of these people is expected to bring the  necessary  expertise to
implement the Company's  business plan;  however,  at least in the near term, it
has increased expense levels above revenue.                                     

     As noted above, in August 1997, USWD and GTE Wireless  entered into a joint
marketing and operating agreement to distribute USWD's proprietary TRANZ Enabler
credit card processing system using GTE's CDPD network.  The agreement  contains
certain significant  operational and financial  performance  criteria (including
minimum airtime  purchases)  that must be met by the Company.  Commencing in the
second quarter of fiscal 1998 and continuing through the present,  USWD has made
significant  investments to support a nationwide deployment of TRANZ Enablers to
merchants through GTE's national sales force. Under this deployment program, the
GTE sales  representative  introduces 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) is/(are) provided to the merchant
by USWD. The Company  retains a portion of the monthly credit card fees based on
the  dollar  volume  and  number of  transactions  processed  through  the TRANZ
Enabler.  The Company's business model is based on the manufacturing cost of the
TRANZ Enabler being financed by a third party.  Although the Company has entered
into an agreement  with GTE Leasing  Corporation  as of April 2, 1998 to finance
product to be placed under the joint marketing  agreement with GTE Wireless,  it
has not yet been able to draw funding  under that  agreement.  The agreement has
not yet been implemented  because GTE Leasing and GTE Wireless are now requiring
that the Company obtain the written  consent of  RegionsBank,  NOVA's  acquiring
bank, that it will honor the Company's revenue assignment to GTE Leasing and pay
over directly amounts owed to the Company to GTE Leasing and GTE Wireless if the
Company defaults on its obligations to pay GTE Leasing and/or GTE Wireless.  The
Company is actively  negotiating  with all  parties to obtain  this  consent and
expects that it will be able to do so;  however,  no assurance can be given that
this consent will be obtained thereby allowing the Company to draw funding under
its agreement  with GTE Leasing.  In addition,  the Company has not entered into
any  other  agreements  nor  does it  have  any  other  arrangements  to  obtain
additional   financing  to  fund   inventory  for  placement   with   merchants.
Consequently,  to date it has had to rely  primarily  on its working  capital to
procure  product to be placed with  merchants and will need to continue to do so
until it can obtain financing form other sources. The monthly financing cost and
CDPD airtime expense are recorded as cost of sales against the monthly recurring
revenue.  See "Management's  Discussion and Analysis of Financial  Condition and
Results of Operations - Financial  Condition,  Capital Resources and Liquidity -
Agreement with GTE Leasing Corporation."                                        

-25-

424B1
28th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 28th
     As required under the agreements  with GTE Wireless,  the Company has added
significant  sales and support  personnel  and  infrastructure  to provide local
support for the GTE sales  representatives.  The initial placements of the TRANZ
Enabler  units have not  developed  as rapidly as  anticipated,  and expenses to
support this program have far exceeded revenue generated by the Company from the
deployment of Tranz  Enablers  under it to date. It is hoped that recent actions
by GTE will  favorably  impact the program;  however,  there can be no assurance
that this will be the case.                                                     

         As noted  above,  the Company also has a CDPD air time  agreement  with
AT&T Wireless and has  selectively  added sales  personnel in markets  served by
AT&T Wireless to deploy TRANZ Enabler units, although it does not presently have
a joint marketing agreement in place with AT&T Wireless.                        

         In  October  1997,   the  Company  signed  an  agreement  with  GoldCan
Recycling, Inc. to provide wireless monitoring of its state-of-the-art automated
aluminum can redemption  centers.  This is the first application of USWD's TRANZ
Enabler technology  outside the credit  card/point-of-sale  industry.  USWD will
receive  monthly  equipment  and wireless  service  fees on every TRANZ  Enabler
placed by GoldCan.  Although the Company has successfully  tested application of
its  technology  for use in this  application,  to date,  no placements of TRANZ
Enablers have been placed with Goldcan.                                         

         To meet its working  capital needs,  between October and December 1997,
the Company obtained bridge loans from Liviakis Financial  Communications,  Inc.
for $475,000  pending  completion of a private  placement  offering which it was
conducting at the time.  Following the closing of the offering in  mid-December,
the notes were  immediately  repaid by the Company  along with  interest of nine
percent per annum.                                                              

         On December 10, 1997 the Company closed a private placement offering of
$3,060,000 principal amount of 8% Convertible  Debentures,  which were converted
to 3,060,000  shares of Series A Preferred  Stock as of February 9, 1998.  After
associated fees and repayment of bridge loans incurred  during the quarter,  the
Company retained approximately  $2,200,000 to apply to immediate working capital
needs and the national launch of its proprietary wireless transaction processing
solution.                                                                       

         During the second  quarter of fiscal 1998,  the Company  completed  the
relocation of its customer support,  administrative and accounting  functions to
the Emeryville,  California headquarters. The lease on the Wheat Ridge, Colorado
office has terminated. Engineering functions will remain at the Company's Palmer
Lake, Colorado facility.                                                        

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

     In March 1998 the Company signed a joint sales and marketing agreement with
Bell Atlantic  Mobile.  Bell  Atlantic  Mobile is the largest  wireless  service
provider on the East Coast and the second largest in the United States.  In July
1998,  the  Company  signed  a Joint  Marketing  and  Operating  Agreement  with
Ameritech Mobile Communications,  Inc. ("Ameritech"),  another large provider of
cellular phone and data services. The agreements are similar in structure to the
GTE Wireless  agreement  described  above,  and the Company  anticipates  adding
additional  personnel  to support  these  agreements.  By  leveraging  the sales
organizations  of the major CDPD  providers,  the Company has the  potential  to
quickly  reach a large  number of  merchants.  However,  costs to the Company of
implementing the joint marketing and distribution  agreements with GTE Wireless,
Bell Atlantic Mobile and Ameritech will exceed  short-term  revenue generated by
the programs.                                                                   

-26-

424B1
29th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 29th
         The Company also signed a merchant  acquiring  agreement  with National
Bank of Commerce  "NBC",  in March 1998.  NBC is the lead  banking  affiliate of
National  Commerce  Bancorporation.  USWD  expects the  agreement to broaden its
ability to provide credit card processing  services for merchants in the retail,
restaurant, and hotel/lodging industries.                                       

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

     On  June  26,  1998,   the  Company   borrowed   $250,000   from  RBB  Bank
Aktiengesellschaft,  under a  promissory  note  which was  payable in full on or
before  September 9, 1998. The note was paid as of July 21, 1998,  from proceeds
obtained from the sale of $2,000,000 of 6% Convertible  Subordinated  Debentures
Due July 21, 2000. In  conjunction  with this loan,  the Company issued a Common
Stock purchase warrant to RBB Bank  Aktiengesellschaft to purchase 20,000 shares
of Common Stock at $4.375 per share,  exercisable through September 9, 2001. The
warrant has antidilution provisions that protect the holders against dilution in
the event of certain transactions. The warrant also has "piggyback" registration
rights  entitling the holders to have the  underlying  shares  registered in any
registration done by the Company,  other than  registrations on ineligible forms
and the  Registration  Statement  of which  this  Prospectus  forms a part.  The
expenses of such registrations  (other than selling expenses) are to be borne by
the  Company.   See  "Certain   Transactions  -   Transactions   with  RBB  Bank
Aktiengesellschaft" and "Selling Security Holders."                             

         On June 30, 1998,  the Company and Liviakis  Financial  Communications,
Inc. ("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 and Mr. Prag are to receive  290,000
shares of Common Stock, issuable upon execution of the New LFC Agreement, 75% to
LFC and 25% to Mr. Prag. In conjunction with the entry of the New LFC Agreement,
the  Company  also  agreed  to expand  its Board of  Directors  to  include  two
additional  outside  directors  which are  acceptable  to LFC.  See  "Business -
History of the  Company - Recent  Significant  Securities  Issuances,"  "Certain
Transactions - Transactions with Liviakis Financial Communications, Inc. ("LFC")
and Affiliates of LFC" and "Selling Security Holders."                          

     On July 27, 1998,  the Company  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 $4.25 per share until July 21,
2001.  The net  proceeds to the Company  from the  offering  were  approximately
$1,810,000, after paying finder's fees of $190,000, but before paying additional
expenses of the  offering,  which the Company  estimates  will be  approximately
$20,000.  The Company used $251,537 of the proceeds from the offering to pay off
the $250,000 short term bridge loan from RBB Bank Aktiengesellschaft,  which was
evidenced by a promissory  note dated June 26, 1998, and will use the balance of
the  proceeds as working  capital and to repay  existing  obligations.  RBB Bank
Aktiengesellschaft,  the  record  holder of  1,600,000  shares of the  Company's
Series A                                                                        
-27-

424B1
30th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 30th
Cumulative Convertible Redeemable Preferred Stock, purchased $1,000,000         
of  the  6%  Debentures.  See  "Business  -  History  of the  Company  -  Recent
Significant  Securities  Issuances," "Certain  Transactions `- Transactions with
RBB  Bank   Aktiengesellschaft,'   `-  Transactions   with  Liviakis   Financial
Communications, Inc. ("LFC") and Affiliates of LFC,'" "Description of Securities
- 6%  Convertible  Subordinated  Debentures  Due July  21,  2000"  and  "Selling
Security Holders."                                                              

Fiscal 1997 Compared to Fiscal 1996                                             

     Net  sales of  $1,315,542  for  fiscal  1997  decreased  from net  sales of
$1,582,553  generated  during  fiscal  1996.  Unit sales  during both years were
approximately  the same.  The decrease in sales dollars is  attributable  to: a)
reductions in retail prices from one year to the next, and b) the product mix of
POS 50(R) versus POS 500 units.                                                 

     Gross  margins  increased  from a negative  $1,303,879  in fiscal 1996 to a
positive $506,095 for fiscal 1997. This increase is attributable to a $1,525,000
write-down of inventories during fiscal 1996,  resulting from declines in market
value of such  inventories  relative to cost,  compared to the 1997 gross margin
which shows a  significant  increase due mainly to lower costs for the POS-50(R)
from a major supplier.                                                          

     Selling,  general and administrative  expenses decreased from $1,365,235 in
fiscal 1996 to $812,687 in fiscal 1997.  This  decrease was due primarily to: a)
headcount  reductions in sales,  marketing and administration from 1996 staffing
levels  reduced  salary  expense by  approximately  $182,000;  b) legal  expense
reductions  in 1997 from the  approximately  $226,000  incurred  in fiscal  1996
(related to class action lawsuits filed against the Company); and c) significant
reductions  in bad  debt  expense,  depreciation,  royalty  expense,  relocation
expense, and rent expense.                                                      

         Research and development expense decreased from $458,407 in fiscal 1996
to $406,522 in fiscal 1997 due to lower occupancy  expense and reduced  staffing
in the second half of 1997.                                                     

     The 1996 loss from discontinued operations resulted from the dissolution of
Direct Data, Inc. in October 1995.                                              

         The 1996  extraordinary  gain is related to the  restructuring  of $3.4
Million of debt and payables for Direct Data and an inventory supplier.         

Three and Nine Month Periods Ended March 31, 1998 and 1997                      

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

-28-

424B1
31st Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 31st
         Gross  margins  in the  third  fiscal  quarter  of 1998  were  $130,100
compared  to  $128,666  for the same  period in  fiscal  1997.  As a percent  of
revenue,  gross  margins in both periods  were almost  identical at 53%. For the
nine-month  periods,  gross  margins  decreased  from $444,281 in fiscal 1997 to
$247,550 in the current period on the  corresponding  revenue  decline.  For the
current  nine-month  period,  gross margin as a percent of revenue was down 1.2%
from the prior  year's  period due to the mix of product  sales in the first two
quarters of the 1998 fiscal year.                                               

     Selling,  general and administrative expense increased from $122,691 in the
third fiscal  quarter of 1997 to $1,999,817 in the third fiscal quarter of 1998.
The current quarter contains several significant non-cash charges. These include
a $350,000  charge  related  to the  revalued  LFC  consulting  agreement  and a
$156,000  charge  related to the  extension of a common stock  warrant  exercise
period which was expiring.  For the  nine-month  periods,  selling,  general and
administrative  expense  increased from $463,009 in the prior year to $4,271,625
in the current year. Non-cash consulting fees related to business development of
approximately  $1,121,000  are reflected in the fiscal 1998 nine month  results,
and include the  termination  of the original  entrenet  and Woolley  consulting
agreements  entered  into  during  fiscal  year 1997,  and  amortization  of the
Liviakis  Financial  Communications  consulting  services  (see  Note  5 to  the
financial  statements).  The nine-month period was also impacted by the $156,000
charge related to the warrant extension.                                        

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

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

     The third  quarter  fiscal  1998  results  also  include a $921,000  charge
recorded in Operating Expense as a litigation settlement for the value of common
shares  issued to a group of Certain  Noteholders,  in  settlement  of a dispute
regarding  rights  related to the  conversion of the notes into shares of Common
Stock. Note 7 to the Financial  Statements for the quarter ended March 31, 1998,
entitled  "Settlement  of Claims of  Certain  Noteholders,"  contains a complete
description of the settlement and its accounting treatment.                     

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

-29-

424B1
32nd Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 32nd
Financial Condition, Capital Resources and Liquidity                            

     The Company  continues to have  significant  problems due to its  financial
condition and lack of liquidity.  While management is optimistic with its medium
and long  term  opportunities,  the  Company  is  constrained  by its  immediate
financial  condition and  requirement for increased  liquidity.  The Company has
accumulated a deficit of  approximately  $22.8 million since  inception to March
31,  1998.  The  Company's  CDPD based  products,  the GTE,  Bell  Atlantic  and
Ameritech  joint marketing and  distribution  agreements,  pending  distribution
agreements (if realized) and the transition to a recurring revenue focus present
an opportunity for significant revenue growth, eventual  profitability,  and the
generation  of  positive  cash  flow  from  operations.   At  present,  however,
development  of the  Company's  infrastructure  and  expansion  of the sales and
marketing organization requires immediate,  additional financing.  Proceeds from
the private  placement  offering which was completed in December 1997, have been
used  primarily to complete the launch of the joint  marketing  program with GTE
Wireless,   build  the  related  corporate  infrastructure  and  make  selective
inventory purchases. Cash raised through recent private securities offerings has
been and will be used primarily for working capital and to pay certain  accounts
payable.                                                                        

     Based on current staffing levels, the Company's expenditures are running at
a monthly rate of approximately $450,000. In order to meet its obligations under
its agreement  with Bell Atlantic  Mobile and Ameritech the Company will require
additional  sales  personnel  for  significant  product to be placed under those
agreements.  This will further increase the Company's  expenditures over present
levels.  Proceeds from the recent sale of 6% Debentures are expected to fund the
Company's  cash needs only for  approximately  60 days from August 1, 1998. As a
result,  execution of the Company's  business plan is dependent on a significant
debt or equity financing event in the immediate future. The Company continues to
work both  directly and through its  consultants  to secure  additional  debt or
equity  financing  which is  required  to fund  operations  while a  significant
recurring  revenue  stream  is  built.  While  management  is  confident  it can
accomplish  this objective,  there is no guarantee that this additional  funding
will be  accomplished  or that it will occur in the  required  time  frame.  The
inability of the Company to secure  additional  financing in the near term could
adversely  impact the  Company's  financial  position,  including its ability to
continue as a going concern.                                                    

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

Sale of Call Options on Certain Shares of Common Stock                          

     In  order  to  satisfy  a  portion  of its  immediate  short  term  capital
requirements,  on March 12, 1998,  the Company  entered into an agreement with a
shareholder,  Mr.  Richard P.  Draper,  to allow the  Company to assign to third
parties,  options it has held since  1995,  on 367,684  shares of the  Company's
Common  Stock  owned by Mr.  Draper's  assignee,  Tillicombe  International  LDC
("Tillicombe"),  which the  Company has the right to purchase at $.25 per share.
Mr. Draper was the principal  shareholder of a company called Direct Data, Inc.,
which the Company  acquired in 1994.  In  conjunction  with the  acquisition  of
Direct Data,  Mr.  Draper was issued a total of 397,684  shares of the Company's
Common Stock.  The  acquisition did not create the synergies                    

-30-

424B1
33rd Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 33rd
that were hoped for and in October 1995, the Direct Data assets were surrendered
to Mr.  Draper,  as Direct Data's  secured  creditor,  in lieu of the creditor's
foreclosure on a past due $1.31 Million obligation. Direct Data was left with no
assets, ceased operations, and was dissolved on October 19, 1995. In conjunction
with that  transaction,  Mr. Draper  entered into an agreement  with the Company
effective  until  October 5, 1998,  pursuant to which he granted the Company the
right to vote his 397,684  shares in its discretion and to purchase those shares
for $.25 per share (the "Call Option").                                         

     Through  June 30,  1998,  the Company has  assigned  its Call Option on all
367,784 of the shares owned by Tillicombe. RBB Bank Aktiengesellschaft purchased
250,000 options, Kennedy Capital Management,  Inc. purchased 100,000 options and
the remaining 17,684 options were purchased by another individual investor.  RBB
Bank  Aktiengesellschaft  is  the  agent  which  owns  1,600,000  shares  of the
Company's  Series A Preferred  Stock.  See "Certain  Transactions - Transactions
with RBB Bank  Aktiengesellschaft"  and  "Selling  Security  Holders."  RBB Bank
purchased the Call Option in five  increments of 50,000 share options each,  and
paid the  Company 85% of the average  last sale price of the  underlying  shares
over the five days prior to the date of acquiring the Call Option, less the Call
Option  exercise  price of $.25 per  share.  Kennedy  Capital  Management,  Inc.
purchased the Call Option on the 100,000 options it acquired at a price of $2.25
per share as of June 10, 1998.  In each  transaction,  the option  purchaser was
required  to pay the  acquisition  price  for the  Call  Option,  as well as the
exercise price to Tillicombe prior to taking delivery of the shares. The Company
raised a total of  approximately  $1,265,000 from the sale of these Call Options
through June 30, 1998.                                                          

Agreement with GTE Leasing Corporation                                          

     In an  attempt  to finance a portion  of its  inventory  requirements,  the
Company engaged in discussions with GTE Leasing  Corporation ("GTE Leasing") for
some time  regarding a program to fund the  manufacture  of TRANZ  Enabler units
which are  deployed  and to be deployed  through the joint USWD and GTE Wireless
marketing  agreement.  On April  2,  1998 the  Company  entered  into a Loan and
Security  Agreement  with GTE Leasing to fund the  manufacture  of TRANZ Enabler
units by Wellex  which are or will be deployed  through the GTE  Wireless  joint
marketing  agreement.  The  agreement  with  GTE  Leasing  is in the  form  of a
revolving credit facility in the maximum amount of $1,200,000.  GTE Leasing will
pay the  Company a fixed  amount for each TRANZ  Enabler  unit  manufactured  by
Wellex for  placement  under the GTE  Wireless  joint  marketing  agreement.  At
approximately  $400 per unit, the Company has the ability to finance up to 3,000
TRANZ Enabler units at any one time under this  agreement.  The Company  expects
that repayment of the amounts  financed  under the credit  facility will be made
from the recurring  revenue generated by the units placed under the GTE Wireless
joint marketing agreement.  However, the Company is primarily obligated to repay
all amounts owing under the credit facility,  irrespective of whether processing
revenues  are  sufficient  to pay such  amounts.  To  secure  payment  under the
agreement  the Company has granted GTE Leasing a security  interest in the units
and the processing  revenues from those units. The agreement with GTE Leasing is
terminable on certain  defined  events of default,  including the failure to pay
any installment  within ten days of its due date and for other events of default
which remain unremedied for ten days after notice is given to the Company by GTE
Leasing. The Company,  GTE Leasing and NOVA Information  Systems,  Inc. ("NOVA")
also  entered  into a Notice,  Consent  and  Agreement  which  acknowledges  the
obligation of NOVA to pay GTE Leasing  directly from amounts owed to the Company
by NOVA for  amounts  owing by the  Company  to GTE  Leasing  under  the  credit
facility.  However,  GTE Leasing and GTE  Wireless  are now  requiring  that the
Company obtain the consent of RegionsBank,  the acquiring bank for NOVA, that it
will honor the  Company's  cash flow  assignments  and pay GTE  Leasing  and GTE
Wireless directly in the event of a default by the Company in the payment of its
obligations to GTE Leasing or GTE Wireless. The Company is presently negotiating
with all parties in an attempt to finalize  this consent  before it can begin to
draw funds  under this  agreement.  No  assurance  can be given that this can be
accomplished  so that the  Company  can  obtain  funding  under the GTE  Leasing
Agreement.                                                                      
-31-

424B1
34th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 34th
Private Offering of 6% Convertible Subordinated Debentures Due July 21, 2000    

     On July 27, 1998,  the Company  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 $4.25 per share until July 21,
2001.  The net  proceeds to the Company  from the  offering  were  approximately
$1,810,000, after paying finder's fees of $190,000, but before paying additional
expenses of the  offering,  which the Company  estimates  will be  approximately
$20,000.  The Company used $251,537 of the proceeds from the offering to pay off
the $250,000 short term bridge loan from RBB Bank Aktiengesellschaft,  which was
evidenced by a promissory  note dated June 26, 1998, and will use the balance of
the proceeds as working  capital and to repay existing  obligations.  Management
estimates  that the  proceeds  from this  offering  will  satisfy its  immediate
capital needs through approximately the end of September 1998.                  

Current Financing Initiatives                                                   

     The Company has several initiatives which it is currently pursuing to raise
additional capital.                                                             

     As of March 12, 1998,  the Company  entered into an agreement with entrenet
Group,  LLC to  assist  the  Company  in  raising  additional  capital.  See the
discussion  in this  section  above,  under  "Results  of  Operations  - General
Overview" and "Certain Transactions - Transactions with entrenet Group, LLC."   

     As of June 19, 1998,  the Company  entered  into an agreement  with the Los
Angeles  based  investment  banking  firm of Houlihan,  Lokey,  Howard and Zukin
Capital  ("Houlihan  Lokey")  whereby  Houlihan Lokey is to act as the Company's
exclusive agent for purposes of structuring  mergers (excluding  acquisitions by
the  Company),  sale of assets or similar  transactions  involving  a portion or
substantially  all of the  business,  assets or stock of the Company  (which are
defined in the agreement as a "Transaction"). The agreement is terminable at any
time by either  party,  but unless  terminated  early,  runs for a basic term of
twelve months,  with automatic one month  extensions  thereafter,  unless either
party  gives  seven  days'  prior  written  notice  of  termination.  Under  the
agreement, the Company is obligated to pay a cash retainer fee to Houlihan Lokey
of $30,000,  payable $5,000 a month for six months, reimburse Houlihan Lokey for
reasonable  out-of-pocket  expenses  and pay a  "contingent  fee" equal to three
percent (3%) of the "Aggregate Gross  Consideration"  received by the Company in
connection with a Transaction. "Aggregate Gross Consideration" is defined as the
sum of the fair market values of any  consideration  received by the Company and
or  its  creditors  or  shareholders,  whether  in  cash,  securities  or  other
intangibles,  subject to  adjustments  to reflect the fair  market  value of any
liabilities assumed or assets retained. Customary valuation methodology is to be
used to value the  consideration  received by the Company in a Transaction.  The
Company is also  required to pay  Houlihan  Lokey a  "break-up  fee" of $100,000
(reduced by the aggregate  amount of retainer fees previously paid) in the event
that a Transaction that has been publicly announced or an agreement in principal
for a  Transaction  has been  reached is  rescinded,  invalidated  or  otherwise
canceled.  Houlihan Lokey is also entitled to its contingent fee and/or break-up
fee, as the case may be, under various circumstances, in the event a Transaction
occurs or is broken during the twelve month period following  termination of the
agreement.  The Company has secured its  obligations to Houlihan Lokey under the
agreement  with all of the Company's  assets,  excluding  Tranz  Enabler  assets
and/or  portions  of  monthly  credit  card  processing  revenue  related to the
repayment of equipment  financing.  The  security  interest  granted to Houlihan
Lokey is also subject to change to allow the Company to successfully  complete a
bridge  financing of up to $2,000,000.  The Company has also agreed to indemnify
Houlihan Lokey for certain liabilities,  including potential liabilities arising
under the federal  securities  laws.  See "Risk  Factors - Risks  Involving  the
Company and Its Business - Security Interests in Company Assets."               

Paragraph deleted here.                                                         

-32-

424B1
35th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 35th
Year 2000 Issues                                                                

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

-33-

424B1
36th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 36th
BUSINESS

Company Overview                                                                
----------------                                                                

         U.S.  Wireless  Data,  Inc., a Colorado  corporation  (the "Company" or
"USWD"),  was  organized  on  July  30,  1991  for  the  purpose  of  designing,
manufacturing  and  marketing a line of wireless  and  portable  credit card and
check authorization terminals.                                                  

         The Company's  first product,  known as the POS-50(R),  was the world's
first  integrated  wireless credit card and check  authorization  terminal using
cellular communication technology.  The POS-50(R) is certified to operate on the
major  credit  card  transaction  processing  networks  and is  presently  being
marketed in the U.S. by a variety of Independent Sales  Organizations  ("ISOs"),
cellular service providers,  and directly by the Company. The POS-50(R) allows a
merchant  to  electronically   capture  a  credit  card,  debit  card  or  check
transaction  at the point of sale  virtually  anywhere  cellular  voice  service
exists and complete the  authorization  process in approximately  16-18 seconds.
Because of its portable and wireless  nature,  the  POS-50(R) is well suited for
the small to medium  sized  mobile  retailer  or service  company.  Examples  of
current  POS-50(R)   customers  include  craft  show  vendors,   sporting  event
concessionaires,  towing  services,  cart and kiosk vendors and  essentially any
business  on the go that wants to safely  accept  credit  cards,  debit cards or
checks for their products and services.  With over 4,000 POS-50(R)  terminals in
the marketplace,  the Company is recognized as the leader in providing  wireless
terminal transaction equipment for the mobile marketplace. The POS-50(R) product
accounted for most of the sales recorded in fiscal year 1997.                   

          Over the past two and a half  years,  USWD  has  focused  its  product
development  efforts  on  incorporating  Cellular  Digital  Packet  Data  (CDPD)
technology  into its product  lines.  CDPD is a high speed digital  packet data,
internet  protocol (IP) based  technology that operates in parallel with current
cellular  voice  networks.   It  is  designed  for  high  speed  encrypted  data
transmission  over the air-link and will not interfere with or degrade  cellular
voice  traffic.  Because of the high speed  nature of CDPD  technology,  and the
ability to bypass the public switched telephone network,  the Company's new line
of CDPD-based terminals can have significant  performance and communication cost
advantages when compared with the traditional  dial-up terminals currently being
sold in the U.S.  market  today.  The Company  now offers two new CDPD  products
(POS-500 & TRANZ  Enabler)  that  reduce the  current  authorization  time for a
credit  or debit  card  transaction  from  approximately  15  seconds  to 3 to 5
seconds.                                                                        

         The most  significant  new USWD  product is the TRANZ*  Enabler,  which
allows  current  Verifone  TRANZ(R)  330 or  TRANZ(R)  380 users to  immediately
convert their terminals and printers from a land-line  telephone dial-up mode to
a  high-speed  wireless  mode of  operation.  By  effecting  this  technological
upgrade,  the cost of dedicated  telephone lines is eliminated as are the delays
created  by  busy  telephony  networks  during  peak  periods  of  authorization
activity.  Furthermore, the efficiencies created by adopting the CDPD technology
and USWD's alliance with a major  transaction  processor has enabled the Company
to develop a pricing schedule which lowers  transaction and/or discount(s) rates
from what most  retailers are  currently  paying to handle credit and debit card
transactions.  The TRANZ  Enabler was  introduced in pilot mode in March of 1996
and is directed at the  existing  U.S.  installed  base of more than 3.5 million
TRANZ(R) 330 and TRANZ(R) 380 terminals.                                        

*TRANZ is a registered trademark of Verifone, Inc.            

         The second  CDPD  product  created by the  Company  is the  POS-500,  a
self-contained  card  terminal  and  printer  that  provides  the same  mobility
features of the POS-50(R) product and also incorporates the processing  benefits
of the TRANZ Enabler. The unit is geared for the user who either does not have a
dial-up  terminal/printer  in  place  or  requires  the  advantages  of the CDPD
technology in a mobile application. This product was introduced in pilot mode in
January of 1996.                                                                
-34-

424B1
37th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 37th
         In mid fiscal year 1997,  the Company  made a  fundamental  decision to
change the manner in which it generates  revenue.  If successfully  implemented,
this decision  will  transform the Company from a "box maker" in which it earned
one time  wholesale  margins from the sale of its products to earning  recurring
revenue by providing wireless credit card and debit card processing  services to
retail  merchants.  In  January,  1997 the  Company  executed  a Member  Service
Provider ("MSP") agreement with NOVA Information Systems ("NOVA"),  the nation's
7th largest credit card transaction  processor.  The Company also entered into a
"Merchant  Marketing  and Services  Agreement"  with  National  Bank of Commerce
("NBC") as of March 9, 1998,  under which the Company  also became an ISO/MSP of
NBC and can thereby offer NBC's  transaction  processing  services to merchants,
subject to final  approval of each  merchant by NBC. Once a merchant is accepted
by the  processing  company the Company sets up point of sale access,  including
maintenance of electronic  terminal hardware and other equipment,  and must also
supply the merchant  with  training,  supplies,  program  information  and other
services related to the program.  These MSP agreements allow U.S.  Wireless Data
to earn  revenue  on each card swipe and every  dollar  processed  by  merchants
enrolled by the Company.  See  "Business - Transaction  Processing  Agreements,"
below.                                                                          

         The Company's strategy also involves the entry of CDPD cellular service
resale  agreements with major CDPD service  providers.  To date, USWD has signed
agreements  with GTE  Mobile  Communications  Service  Corporation  and  certain
related entities ("GTE  Wireless"),  AT&T Wireless Services (AT&T Wireless") and
Bell Atlantic  Mobile.  The net result of the NOVA and NBC MSP  agreements,  the
Company's new CDPD  products,  and becoming a national  reseller of CDPD service
positions the Company to offer high performance  transaction processing services
at competitive  discount rates.  These  relationships  are significant in USWD's
strategy of providing high performance, low cost transaction processing services
to the merchant base.                                                           

     Another key element of USWD's  strategic  direction is to  establish  close
alliances with large  communications  carriers such as GTE, Bell Atlantic,  AT&T
Wireless,  Ameritech and others. The Company has to date entered into agreements
for CDPD airtime purchase by the Company with GTE Mobile Communications  Service
Corporation,  on its behalf and on behalf of GTE Mobilnet  Incorporated,  Contel
Cellular Inc. and their  respective  affiliates  (collectively  "GTE Wireless"),
Cellco  Partnership,  by its general partner Bell Atlantic/NYNEX  Mobile,  Inc.,
which does business as Bell Atlantic  Mobile ("Bell  Atlantic  Mobile") and AT&T
Wireless Data, Inc., doing business as AT&T Wireless Services ("AT&T Wireless").
In addition to these CDPD service provider  agreements,  the Company has entered
into joint marketing  agreements with GTE Wireless (as of August 1, 1997),  Bell
Atlantic Mobile (as of March 23, 1998) and Ameritech Mobile Communications, Inc.
("Ameritech")  to market the  Company's  TRANZ Enabler and  processing  services
through GTE Wireless,  Bell Atlantic Mobile and Ameritech's commercial and major
account sales forces in all of those  company's  CDPD  markets.  The Company has
established a sales and support  organization  to provide local support for more
than  300 GTE  Wireless  and is in the  process  of  building  a  similar  sales
organization for approximately  300 Bell Atlantic Mobile sales  representatives.
In  addition,  the Company is  required  to  maintain at least one sale  support
person in each of the seven  Ameritech  CDPD markets.  The Company has specific,
significant commitments under these CDPD airtime and joint marketing agreements,
including  minimum CDPD airtime  purchase  obligations  to GTE Wireless and AT&T
Wireless,  and  staffing and  inventory  delivery  requirements  under the joint
marketing agreements with GTE Wireless, Bell Atlantic Mobile and Ameritech.  See
"Business - Marketing and Distribution  Arrangements for the Company's  Products
and Related Services" below.                                                    

History of the Company                                                          
----------------------                                                          

         As noted  above,  the Company was  incorporated  in July 1991.  It went
public in December  1993,  raising a total of  approximately  $12,200,000 of net
proceeds  through the sale of 1,650,000  shares of Common  Stock.  The Company's
focus until 1997 has been as a "box" maker and seller.  It  attempted  to sell a
sufficient  number of its cellular  data  processing  products to earn a profit.
Unfortunately,  it was never able to do so on                                   
-35-

424B1
38th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 38th
that basis and in 1997 management made the fundamental  shift described above to
transition the Company into a position where it can earn recurring  revenue from
the data processing products it places with merchants.                          

Recent Significant Securities Issuances                                         

         Sale of Demand Notes. From April through June 1997 the Company issued a
total of $185,000 of Demand  Notes  payable in full on or before  April 11, 1998
(the  "Notes").   The  principal  and  accrued  interest  on  the  Notes  became
convertible  into shares of the Company's Common Stock as of November 1, 1997 at
prices of $.35 per share (as to  $75,000 of the Notes) and $.50 per share (as to
$110,000  of the Notes).  Commencing  on  November  3, 1997,  the Company  began
receiving  conversion demands from certain of the Noteholders and as of November
14,  1997,  holders of $135,000 of the Notes had  demanded  conversion  of their
Notes into Common  Stock,  at the same time  insisting  that the  Company  issue
"free-trading"  shares  to  them.  The  Company  settled  the  claims  of  these
Noteholders  in April 1998 by  agreeing  to issue 1.4 times the total  number of
shares originally  issuable pursuant to the terms of the Notes and providing the
Noteholders  with  certain  guarantees  and a  "put  option"  which  allows  the
Noteholders  to require  the  Company to  repurchase  the shares  under  certain
limited circumstances.  As a result of the settlement,  the issuance of "premium
shares"  was  recorded  in  Operating  Expense  as a  litigation  settlement  of
approximately  $921,000  in March  1998.  The  shares  into  which the Notes are
convertible become saleable under SEC Rule 144 commencing in the Spring of 1998,
one year from the dates on which the Notes were issued. The Company has issued a
total of  698,307  shares  of  Common  Stock in  conversion  of the  Notes.  See
"Business - Legal Proceedings - Settlement of Noteholder Claims."               

Issuance of Securities as Consulting Fees                     

         In late fiscal  1997,  the Company was at a critical  phase in terms of
its very  survival.  In order to attempt to  reorganize  its business and obtain
financing, the Company first entered into a consulting agreement with a business
consulting  company  called  entrenet  Group,  LLC, of Santa  Rosa,  California,
pursuant to which entrenet  assisted the Company in reorganizing  its objectives
and preparing a new business plan. The Company paid entrenet for its services by
issuance of a $150,000  convertible  promissory note due June 3, 1998.  Entrenet
then introduced the Company to Liviakis Financial  Communications,  Inc. ("LFC")
and two of its  affiliates,  Messrs.  John M.  Liviakis and Robert B. Prag.  The
Company  retained  LFC to  serve as its  investment  relations  counsel  under a
consulting   agreement  effective  as  of  July  25,  1997  (the  "Original  LFC
Agreement").  A cash  consulting  fee of  $10,000  is  payable  to LFC under the
Original LFC Agreement and a total of 300,000 shares of Common Stock is issuable
pursuant to the Original LFC Agreement,  225,000 shares to LFC and 75,000 shares
to Mr. Prag.  Through  June 30, 1998,  the Company has issued a total of 270,000
shares under the Original LFC Agreement,  75% to LFC and 25% to Mr. Prag. LFC is
also  entitled to a finder's  fee of 2.5% of the gross  amount of any  financing
that it introduces to the Company.  See "Certain  Transactions  `-  Transactions
with  entrenet  Group,  LLC'  and  `  -  Transactions  with  Liviakis  Financial
Communications,  Inc.  ("LFC") and  Affiliates  if LFC.' and  "Selling  Security
Holders."                                                                       

         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 and Mr.
Prag are to receive  290,000 shares of Common Stock,  issuable upon execution of
the New LFC Agreement,  75% to LFC and 25% to Mr. Prag. In conjunction  with the
entry of the New LFC  Agreement  LFC and Messrs.  Liviakis  and Prag agreed to a
further lock-up of their Company shares, pursuant to which they will not be able
to sell their Company  shares before  February 1, 1999,  even though  certain of
those  shares are being  included in the  registration  statement  of which this
Prospectus is a part. The 290,000 shares  issuable to LFC and Mr. Prag under the
New LFC Agreement carry  registration  rights that are essentially  identical to
those  covering the prior shares issued or issuable to them under their original
subscription  agreements  and the Original  LFC  Agreement,  although  they have
agreed that the shares issuable under the New LFC Agreement will not be included
in the                                                                          

-36-

424B1
39th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 39th
registration  statement of which this Prospectus is a part. LFC is entitled to a
finder's fee of 2.5% of the gross  proceeds of any financing  that it introduces
to the  Company.  In  addition,  the  Company  has agreed to expand its Board of
Directors to include two additional  outside  directors  which are acceptable to
LFC.  See  "Certain   Transactions  -  Transactions   with  Liviakis   Financial
Communications,  Inc.  ("LFC")  and  Affiliates  if LFC" and  "Selling  Security
Holders."                                                                       

         Issuance of  Securities  To Messrs.  Liviakis  and Prag.  In  addition,
Messrs. Liviakis and Prag agreed to personally invest $500,000 in the Company in
return  for  3,500,000  shares  of Common  Stock and  warrants  to  purchase  an
additional  1,600,000  shares  of  Common  Stock at $.01 per  share.  Under  its
consulting  agreement  with  entrenet,  the Company had agreed to pay entrenet a
finder's fee for all financing  located by entrenet.  To honor that  obligation,
the  Company  agreed  to issue a total of  280,000  shares  of  Common  Stock to
entrenet at such time as the shareholders of the Company approved an increase in
the number of authorized shares of Common Stock to no less than 40,000,000. That
approval occurred on February 6, 1998, and the Company issued the 280,000 shares
to entrenet  and five  assignee  members of  entrenet  as of April 3, 1998.  See
"Certain  Transactions - Transactions  with Liviakis  Financial  Communications,
Inc. ("LFC") and Affiliates of LFC" and "Selling Security Holders."             

     The  Company  agreed  to  register  the  shares  owned by and  issuable  to
entrenet,  LFC and Messrs.  Liviakis and Prag and other than the 290,000  shares
issuable to LFC under the New LFC Agreement and the 10,435 shares  issuable upon
exercise of a Common Stock  Purchase  Warrant issued to entrenet as of March 12,
1998,  such shares are  included  in the  registration  statement  of which this
Prospectus is a part. LFC and Messrs.  Liviakis and Prag have agreed not to sell
any of their shares until at least  February 1, 1999,  even though some of their
shares  are being  registered  under the  Registration  Statement  of which this
Prospectus  forms a part.  See "Certain  Transactions,"  "Security  Ownership of
Principal Shareholders and Management" and "Selling Security Holders."          

         Private  Offering  of  8%  Adjustable  Rate  Convertible   Subordinated
Debentures  Due December 31, 1999.  To satisfy its short term needs for capital,
the Company  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.  The net proceeds to the
Company from the offering were approximately  $2,700,300,  after paying finder's
commissions  of  $290,700  and  additional  expenses  of  the  offering,   which
approximated  $69,000.  The  Company  is using the  proceeds  from the  offering
primarily  as working  capital to fund the  national  launch of its  proprietary
wireless  transactions  processing solutions and to repay existing  obligations.
The 8%  Convertible  Debentures  converted  to  3,060,000  shares  of  Series  A
Preferred  Stock as of February 9, 1998. The Series A Preferred Stock is further
convertible  at the option of the holder into shares of Common  Stock  effective
upon the earlier of (i) a declaration  of  effectiveness  by the  Securities and
Exchange Commission (the "SEC") of a registration  statement covering the shares
of Common  Stock into which the Series A Preferred  Stock are  convertible  (the
"Common Stock Registration  Statement") or (ii) 150 days from December 10, 1997.
Based on a face value of $1.00 per share of Series A Preferred  Stock,  the rate
at which the Series A Preferred  Stock is  convertible  into  Common  Stock (the
"Conversion  Price")  is equal to the  lesser  of (i)  $6.00 per share of Common
Stock or (ii) 80% of the average of the  closing  bid price of the Common  Stock
over the five trading days prior to conversion.  The Conversion Price is no less
than $4.00 per share of Common  Stock for 270 days from  December  10, 1997 (the
"Minimum Conversion  Price").  After that 270 day period, the Minimum Conversion
Price is no longer applicable.  The Conversion Price (and the Minimum Conversion
Price) are  reduced by 2% per month for every 30 days (or any part of any 30 day
period)  commencing on May 11, 1998, that the Company does not have an effective
registration  statement  on file with the SEC covering the sale of the shares of
Common Stock issuable on conversion of the Series A Preferred Stock. The Company
had not obtained effectiveness of such a registration and as of June 30, 1998, a
4% penalty was applicable to the Conversion and Minimum  Conversion  Prices. The
Common Stock into which the Series A Preferred  Stock is  convertible  (together
with shares of Common  Stock that were issued as interest on the 8%  Convertible
Debentures  and which is issuable as dividends on the Series A Preferred  Stock)
is                                                                              
-37-

424B1
40th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 40th
included  in the  shares  offered  for  sale  pursuant  to the  Registration    
Statement of which this  Prospectus is a part.  See  "Description  of Securities
Series A Preferred Stock" and "Selling Security Holders."                       

     Private  Offering of 6%  Convertible  Subordinated  Debentures Due July 21,
2000. On July 27, 1998, the Company  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 $4.25 per share until July 21,
2001 (the  "Warrants").  The net proceeds to the Company from the offering  were
approximately  $1,810,000,  after paying  finder's fees of $190,000,  but before
paying additional expenses of the offering,  which the Company estimates will be
approximately  $20,000.  The  Company  used  $251,537 of the  proceeds  from the
offering  to  pay  off  a  $250,000   short  term  bridge  loan  from  RBB  Bank
Aktiengesellschaft,  which was  evidenced  by a  promissory  note dated June 26,
1998,  and will use the balance of the proceeds as working  capital and to repay
existing  obligations.  RBB  Bank  Aktiengesellschaft,   the  record  holder  of
1,600,000  shares of the Company's  Series A Cumulative  Convertible  Redeemable
Preferred  Stock,  purchased  $1,000,000  of  the  6%  Debentures.   JW  Charles
Securities,  Inc. of Boca  Raton,  Florida,  acted as the primary  finder in the
transaction  and the  Company  paid JW  Charles  a  finder's  fee equal to seven
percent  (7%) of the amount  raised  from the sale of the 6%  Debentures,  which
amounted to $140,000. One percent of the cash finder's fee payable to JW Charles
($14,000)  is to remain in escrow and will be  refunded to the Company if the 6%
Debentures are redeemed within 60 days of the initial  issuance date,  which was
July 22,  1998.  In  addition,  JW Charles is  entitled to receive a three year,
60,000 share Common Stock purchase  warrant  exercisable at $4.50 per share. The
shares  underlying  the Warrant are entitled to piggyback  registration  rights,
with the  registration  expenses to be paid by the  Company.  The  Company  also
agreed to pay a finder's fee to Liviakis Financial Communications,  Inc. ("LFC")
in the  amount of 2.5% of the  amount  raised on the sale of the 6%  Debentures,
which amounts to $50,000, under the consulting  relationship between the Company
and LFC. Messrs. John M. Liviakis and Robert B. Prag, who are affiliates of LFC,
are  significant  shareholders  of the Company.  The 6% Debentures  have rights,
including  registration  rights as to the  underlying  shares  of  Common  Stock
issuable  upon  conversion,  which are  substantially  similar  to the  Series A
Preferred  Stock  described   above.   See  "Description  of  Securities  `-  6%
Convertible Subordinated Debentures Due July 21, 2000,' `- Common Stock Purchase
Warrants - Common Stock  Purchase  Warrants  Expiring July 21, 2001,'" `- Common
Stock  Purchase  Warrants - Finder's  Warrants'"  and "Certain  Transactions  `-
Transactions with RBB bank Aktiengesellschaft' and `- Transactions with Liviakis
Financial Communications, Inc. ("LFC") and Affiliates of LFC.'"                 

Direct Data Acquisition and Dissolution                                         

         During fiscal 1995, the Company acquired all of the outstanding  shares
of Direct Data, Inc., a distributor of POS-related products. The acquisition did
not create the synergies that were hoped for and in fiscal 1996, the Direct Data
assets  were  surrendered  to  Direct  Data's  secured  creditor  in lieu of the
creditor's  foreclosure on a past due $1.31 Million obligation.  Direct Data was
left with no assets,  ceased operations,  and was dissolved on October 19, 1995.
As a result of the  surrender of Direct  Data's assets in settlement of the $1.3
million  obligation  and the  dissolution  of Direct  Data in fiscal  1996,  the
Company recognized a gain on restructuring of payables and debt of $2,332,411.  

Industry Overview                                                               
-----------------                                                               

Credit and Debit Card Industry                                                  

         Americans  reached  for their  plastic  credit and debit  cards over 32
billion  times to  purchase  over $800  billion in goods and  services  in 1995,
however, nearly 80% of all retail payments were non-electronic.  Credit card and
debit card purchases are growing at a rate of 16% annually with volumes expected
to reach $1 Trillion in 1997. Recent studies have indicated that consumers spend
30% more per transaction when using credit cards than when using cash or checks.
The  proliferation  in the uses and types of credit,  charge,  stored-value  and

-38-

424B1
41st Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 41st
debit  cards,  rapid  technological   advances  in  transaction  processing  and
financial  incentives  offered by credit  card  associations  and  issuers  have
contributed  greatly to wider merchant  acceptance and increased consumer use of
transaction cards.                                                              

         Unfortunately,  fraud  is also on the rise  and as a  result,  merchant
acquirors,  transaction processors and card issuers are trying to minimize their
losses by offering  incentives  and  requiring  merchants to utilize  electronic
draft  capture  ("EDC")  terminals  to  conduct  on-line  credit  and debit card
transactions. An EDC terminal magnetically reads the encoded account information
from the magnetic  strip on the back of a credit or debit card and sends it to a
transaction  processor for electronic  on-line  authorization.  The  transaction
processor  authorizes  the card with the  issuer,  electronically  captures  the
transaction,  generates an approval  code and returns the data to the  terminal,
which  prints a customer  receipt.  Presently,  the  majority  of EDC  terminals
communicate with the transaction  processor via a telephone or leased line. This
dial-up  type  transaction  process  takes  approximately  10  - 30  seconds  to
complete. At the end of the business day, the EDC terminal dials the transaction
processor to initiate the settlement, collection and electronic deposit of funds
to the  merchant's  local bank account.  Losses from  fraudulent  cardholder use
where  no   authorization   was  obtained  at  the  retail  point  of  sale  are
electronically "charged back" to the merchant.                                  

         Payment acceptance guidelines have been introduced by Visa that require
a merchant to comply  with  specific  procedures  in order to receive the lowest
transaction  processing fees or discount rates. These requirements  include: (1)
the presence of the bank card at the point of sale, (2) transmission of all data
encoded on the card's magnetic strip, and (3) settlement  within two days of the
authorization.  If any one of these  requirements  is not met,  the  merchant is
penalized  with a  higher  discount  rate and a  surcharge  is  applied  to each
transaction not complying with the new requirements.                            

Transaction Processing Industry                                                 

     The transaction  processing  industry is characterized by a small number of
large  transaction  processors that primarily focus on servicing large merchants
and by many  smaller  transaction  processors  that  provide a limited  range of
services to  small-to-medium  sized merchants.  Large merchants (i.e. those with
multiple locations and high volumes of card  transactions)  typically demand and
receive the full range of transaction  processing services as well as customized
information services at low per-transaction costs. By contrast, small- to-medium
sized merchants historically have not been offered the same level of services as
large merchants and have incurred relatively higher  per-transaction  costs. The
growth in card  transactions  and the transition from  paper-based to electronic
transaction  processing have caused small-to-medium sized merchants increasingly
to demand  sophisticated  transaction  processing and services  similar to those
provided to large merchants.                                                    

         Transaction   processing   services   are  marketed  and  sold  to  the
small-to-medium  sized  merchant  market  segment  primarily  by  community  and
regional banks and Independent Sales Organizations  (ISOs) that outsource all or
a portion  of the  transaction  processing  services  they  offer.  The costs to
convert from  paper-based to electronic  processing,  merchant  requirements for
improved customer service, and demands for additional customer applications have
made it  difficult  for  community  and  regional  banks  and  ISO's  to  remain
competitive.  As a result,  transaction  processing  continues to undergo  rapid
consolidation in recent years.  The industry remains  fragmented with respect to
the number of entities  providing merchant services and the economic factors are
expected to drive additional consolidation of transaction processors.           

Check Payment Industry                                                          

         Checks are still the American  consumers second favorite way to pay for
purchases,  behind  cash.  Americans  wrote 60  billion  checks  last  year.  Of
approximately  $3 trillion  worth of retail  purchases  nationwide,  almost $700
billion were paid by check,  of which  approximately  $13 billion were  returned
unpaid for insufficient funds or other reasons.                                 

-39-

424B1
42nd Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 42nd
         Nationwide,  the  number  of bad  checks  is  increasing.  The  cost of
insufficient  funds  checks  often  leads  merchants  either to refuse to accept
checks  or  to  utilize  check  verification  and  guarantee   services.   Check
verification or guarantee services require the merchant to magnetically read the
MICR line of a check or hand key certain  information into an EDC terminal which
communicates  with a  database  maintained  and  operated  by  the  verification
service.  If the check is approved,  an approval code is generated and sent back
to the terminal to complete the check verification or guarantee.                

The Company's Products                                                          
----------------------                                                          

         The  Company  manufactures  a line of  wireless  point-of-sale  ("POS")
terminals and wireless  enabling products that allow a merchant to safely accept
credit and debit  cards  virtually  anywhere  cellular  and/or  CDPD  service is
available.  The Company's  products  comply with the recent  payment  acceptance
guidelines  and allow a merchant to qualify for the lowest  discount  rates when
processing credit and debit card transactions.                                  

         The  Company's  wireless  terminal  and enabling  products  also can be
applied  to  expand  check  verification  services  to mobile  and fixed  retail
merchants  where phone lines are either not available or too slow and expensive,
and the risks of accepting checks are high.                                     

         In  addition,  the Company has  successfully  adapted its  terminals to
provide data  processing  capabilities  to a Texas based company which processes
club membership  verifications for customers of establishments serving alcoholic
beverages and for a recycling  container company which is using the terminals to
monitor its unmanned aluminum  recycling  containers.  See "Business - Marketing
Arrangements for the Company's Products and Related Services."                  

Initial Product Line - The POS-50(R)                                            

     The  Company's  first  product,  known  as  the  POS-50(R),  is  the  first
fully-integrated,  wireless portable  credit/debit card  authorization and check
verification  terminal.  It is packaged in a compact,  lightweight  design which
includes an  ergonomic  handle for  maximum  portability.  The battery  operated
POS-50(R) uses a proprietary  printed circuit board module to integrate a 3-watt
cellular transceiver,  credit card terminal, rechargeable battery and a printer.
The POS-50(R) has been in the U.S.  market since January 1994, and addresses the
mobile  retail  sales and  service  marketplace.  A  merchant  can  utilize  the
POS-50(R)  to safely  accept  and  process a credit  or debit  card  transaction
anywhere  cellular voice service is available.  With the cellular  handset,  the
terminal can also be used as a cellular telephone. The POS-50(R) may be operated
in a vehicle,  at a weekend craft show or similar  temporary  locations,  can be
carried from site-to-site or can be used at a fixed location.  When a phone line
is available,  intelligent  circuitry  recognizes the connection to a phone line
and  automatically  transmits  data by telephone line without using the cellular
transceiver, thereby reducing cellular charges.                                 

New Products                                                                    

         POS-500  - During  the  third  quarter  of  fiscal  1996,  the  Company
introduced two new products utilizing CDPD technology.  The Company's first CDPD
product,  known as the POS-500,  is a fully  integrated  EDC  terminal,  receipt
printer and CDPD  wireless  modem that allows a merchant to complete a credit or
debit card transaction in less than 5 seconds. The POS-500 is designed to target
the traditional  small-to-medium sized retailer.  Because response times are 3-5
times faster than dial-up terminals, and per-transaction communication costs are
competitive  with current dial-up costs,  the POS-500 can compete  favorably and
eventually  replace dial-up credit card terminal  technology in areas where CDPD
service is  available.  The POS-500 has been  deployed with a number of small to
medium sized retailers as well as some high profile  customers such as Villanova
University, The Houston Astrodome and some of the AT&T Wireless retail stores.  

-40-

424B1
43rd Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 43rd
     TRANZ Enabler - The TRANZ Enabler,  which is described in detail above, was
also  released in test mode  during the third  fiscal  quarter of 1996,  and was
designed to enable the existing  installed base of Verifone  TRANZ(R) 330 or 380
dial-up  terminals to operate over the CDPD network resulting in high speed, low
cost  transaction  processing  for the  retail  marketplace.  The TRANZ  Enabler
connects to the printer  port of the  TRANZ(R)  330 or 380 terminal and utilizes
power from the credit card terminal power supply.  The TRANZ Enabler  features a
printer port for  connection  to a receipt  printer and can complete a credit or
debit card  transaction in less than 5 seconds.  In addition to credit and debit
card transactions, the TRANZ Enabler has recently been successfully tested in an
Electronic   Benefit  Transfer  (EBT)   application,   a  College  student  card
application and a vending machine application.                                  

     The Company's new CDPD products and transaction processing services benefit
merchants in the following ways:                                                

     Faster  Transactions.  A CDPD-enabled  credit card  authorization is 3 to 4
times faster than a transaction  completed via a telephone  line. A CDPD-enabled
credit card transaction  bypasses the local telephone and interexchange  carrier
networks resulting in faster transactions and fewer delays due to busy telephony
networks and inefficiencies. The TRANZ Enabler and POS-500 can complete a credit
card transaction in less than 5 seconds. Faster transactions afford the merchant
the ability to process more  business in a given period of time while  improving
customer convenience and satisfaction.                                          

     Lower  Transaction  Fees.  Because of the ability to bypass the traditional
telephony  networks and the costs  associated  with them,  the Company can often
offer its customers lower  transaction  fees and discount  rates.  Favorable buy
rates under the NOVA MSP agreement also  contribute to the Company's  ability to
offer  competitive  rates.  Lower  transaction fees and discount rates are a key
component  in  the  merchant's   decision   making  process  when  evaluating  a
transaction  processing  relationship  that  can  have a  positive  effect  on a
merchant's bottom line.                                                         

     Increased  Sales.  Consumers often make purchases when they have no cash on
hand if the merchant  accepts  credit cards or checks.  Research  indicates that
when  customers  have the option to use a credit  card,  they spend 30% more per
transaction.  Merchants  that  accept  alternative  methods of  payment  such as
credit/debit  cards  or  checks  believe  such  alternative  methods  provide  a
competitive advantage over merchants who do not.                                

     Controls Bad Debt. All of the Company's products allow a merchant to obtain
an  on-line   authorization   and   electronically   capture  each  credit  card
transaction. Once the customer's credit card transaction has been electronically
authorized, an approval code is assigned and funds are electronically "captured"
(i.e., reserved to pay for the authorized  transaction).  Since each transaction
begins by swiping the credit card through the  terminal's  magnetic card reader,
there is a significant  reduction in the risk of fraud loss due to lost, stolen,
overextended,  or  physically-altered  credit cards.  Debit or ATM  transactions
require that the customer keys in a personal  identification  number  ("PIN") to
complete a transaction.  Debit or ATM transactions cannot be reversed or charged
back to a merchant thereby further reducing bad debt.  Losses from  insufficient
checks are collected or guaranteed by check service  companies  under a separate
fee agreement with the merchant.                                                

     Improves  Cash Flow.  Once funds have been  authorized  and  electronically
captured  and  the  settlement   procedure   initiated,   they  are  transferred
electronically  to the  merchant's  local bank  account.  When compared to paper
submission  of credit card  transactions,  the Company's  products  expedite the
funding process by electronically  depositing the day's credit card transactions
into the merchant's local bank account usually within 24 to 48 hours.           

-41-

424B1
44th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 44th
Overview of Cellular Technology                                                 
-------------------------------                                                 

Circuit Switched Cellular, CDPD, and EDC Terminal Technology                    

         The Company's products integrate  circuit-switched  cellular, CDPD, and
credit card  terminal  technology  to access  credit card,  debit card and check
verification  services.  The POS-50(R)  terminal can be used  anywhere  advanced
mobile phone service (AMPS) cellular service is available.  Upon card swipe, and
once  the  sales  amount  is  entered  via the  terminal  keypad,  the  cellular
transceiver  acquires a cellular  channel  and  transmits  the data over the air
waves to a cell site, which is connected to a mobile telephone  switching office
(MTSO) and then connected to the public switched  telephone network (PSTN).  The
call is then routed over one of several inter- exchange  carriers (IEC's) to the
transaction  processor.  Once an  authorization  is  obtained,  a  corresponding
approval  code is returned to the  terminal,  which prints a duplicate  customer
receipt  and  electronically  captures  the  entire  transaction  data.  A check
authorization  utilizes  essentially the same technology and communication path,
but  authorizes  the  check  data with a  negative  file  maintained  by a check
verification or guarantee company.                                              

         The CDPD  products,  including the TRANZ  Enabler and POS-500,  utilize
dedicated  CDPD  channels  to  transmit  high  speed,   encrypted   credit  card
authorization  from the  merchant  location to the nearest  CDPD cell site which
routes the data to the local mobile data  intermediate  system (MDIS) which then
routes the transaction to NOVA via a leased line or frame relay connection. Once
the transaction is authorized,  the response is returned to the terminal in less
than 300 milliseconds.  The CDPD protocol is based on internet protocol (IP) and
each  terminal and  authorization  host has its own unique IP address.  The CDPD
infrastructure  includes  a  network  of  routers  that  direct  the data to the
appropriate IP addresses.  A CDPD enabled  terminal is essentially  on-line with
the transaction processor whenever it is powered up.                            

Cellular Communication Networks                                                 

         Presently there are cellular  communication networks providing coverage
in over 700 metropolitan statistical area ("MSA") and rural service area ("RSA")
markets in the U.S. It is estimated that the present cellular service  footprint
covers 95% of the U.S.  population.  The POS-50(R) can be used in any area where
cellular voice-grade coverage is present.                                       

     With  approximately  20,000 cellular  phones being sold each day,  cellular
voice technology is rapidly becoming a commodity  service.  To support this type
of 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 Company believes the cellular carriers are now focusing
on incremental revenue streams,  including wireless data transmission.  Wireless
data can be transmitted over the same cellular  infrastructure  as voice. It has
been estimated that, by the year 2000, as much as 30% of cellular  revenues will
be derived from data transmission.                                              

Wireless Data Networks                                                          

         There are several land-based wireless data networks currently providing
regional and national data services in the U.S. market. Listed below are several
networks the Company  perceives as current and potential  future carriers of POS
data  traffic.  USWD  continuously  monitors and  evaluates  this  technology to
determine feasibility, and applicability for POS data transmission.             

         Cellular Digital Packet Data (CDPD).  The Company believes that CDPD is
the superior wireless data technology for transaction processing. 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,  and an aggressive  deployment  schedule is expected to continue
throughout the U.S., Canada                                                     

-42-

424B1
45th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 45th
and Latin America.  Despite the widespread  presence                            
of CDPD  networks,  there  are  presently  two  major  markets  that do not have
operating CDPD networks - Los Angeles, California and Atlanta, Georgia.         

         CDPD appears to be fast becoming the standard protocol for transmitting
data over a cellular  network  and  presently  covers  approximately  70% of the
retail  marketplace.  Because  of the  encrypted  packet  data and IP  (internet
protocol) nature of CDPD technology,  CDPD-enabled POS terminals can out-perform
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 sub-5 second authorization  response times at lower
than dial-up rates. In addition to fast,  secure and low transaction  costs, the
merchant can also  eliminate  the monthly  recurring  cost of a dedicated  phone
line, which averages between $30-40 per month.  However,  the Company recommends
that at least one dial-up  line be  maintained  as a back up in the event that a
CDPD network interruption occurs.                                               

         Digital  Cellular.  Present  cellular  networks  consist of digital and
analog technology. There are two digital voice technologies competing for market
acceptance  and  dominance:  Code Division  Multiplexing  Access (CDMA) and Time
Division  Multiplexing  Access (TDMA).  Both digital voice technologies have the
ability to transmit data over their respective networks,  but a data standard is
presently not established.  The Company perceives these networks as suitable for
nationwide POS  applications if the pricing  structure is competitive with other
packet data networks.                                                           

         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  Personal  Communication  Services  ("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. The future viability of PCS as a wireless
POS access  technology  will be  contingent on a  "standardized"  protocol and a
competitive data pricing structure.  Presently,  the major PCS service providers
are deploying GSM, CDMA and TDMA  infrastructure and products.  The Company will
continue to evaluate the benefits and customer opportunities regarding PCS based
products and services.                                                          

     BellSouth  Mobile Data.  BellSouth Mobile Data ("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.  The  network  is very  similar  to, but
separate  from the  cellular  voice  network.  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.  The
Company  believes,  however,  that BMD is not the most effective  technology for
widespread  deployment due to its data pricing structure,  building  penetration
inefficiencies and other factors.                                               

         Nextel.  Nextel currently has a digital  Specialized Mobile Radio (SMR)
network, based on TDMA technology, providing voice and messaging services in the
top 50 major metropolitan service areas, covering  approximately 65% of the U.S.
population.  Presently,  Nextel's  network is not suitable for POS data traffic,
but it is  anticipated  that  over the next two years it will be  upgraded  to a
packet-based  data-ready  network.  When the network is upgraded to packet-based
status,  it could become a viable POS data  network if the pricing  structure is
competitive.  The Company will continue to evaluate  Nextel as a potential  data
highway for its wireless products and services.                                 

         Metrocom.  Metrocom is currently  operating a packet-based data network
in major cities including San Francisco, Seattle, and Washington D.C. Metrocom's
Ricochet network is a low power packet data network designed for wireless mobile
computing  applications  including  E-mail  and  internet  access.  The  Company
perceives the Ricochet network as a potentially viable POS data network when the
coverage area expands to a nationwide footprint.                                

-43-

424B1
46th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 46th
Markets                                                                         

         Current  market  research  indicates  that  there  are  over 4  million
stand-alone  credit  card  terminals  installed  in the  U.S.  market.  In 1996,
1,088,000 POS  terminals  were shipped in the U.S.  market,  a 36% increase over
1995. One  contributing  factor to this healthy  increase is the growth of debit
card  processing  and  larger  memory  requirements  due to the amount of data a
credit card terminal must capture on each transaction.  A debit card transaction
requires  a personal  identification  number  (PIN) to be  entered  into the POS
terminal,  and a large  percentage  of the existing  terminal  base is not debit
ready.  In addition to the increased  demand for  debit-ready  terminals,  other
market  segments  are emerging for POS  terminal  devices  including  Electronic
Benefit Transfer (EBT) transactions.                                            

         In the U.S., mobile service and retail sales companies have experienced
large growth as Americans have developed a demand for  convenience and a need to
save time.  To a larger  extent than in past years,  the retail point of sale is
often  wherever  the customer is located,  and the merchant  must be prepared to
complete the sale at that 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, delivery, and similar businesses
depend almost exclusively on completing the sales transactions at the customer's
location.  A recent  research  report  estimates  that the total North  American
wireless POS market size is in excess of 4 million  units and will increase over
5% annually.                                                                    

International Applications                                                      

         The same research  report  referenced  above  estimates  that the total
international  wireless POS market size is in excess of 4 million units and will
increase  over 5% annually.  The Company  believes that  international  markets,
particularly Latin America, where land-based telephone lines are not in place or
are unreliable,  represent  realistic market potential for the Company's POS-500
and  TRANZ  Enabler   products.   The  Company  is  presently   evaluating   its
international  strategy  and will  enter  these  markets if it can  establish  a
recurring revenue model that is consistent with its business plan.              

         Several Latin American countries have operational CDPD networks and POS
transaction  processing is being viewed as one of the initial and most immediate
applications to be pursued.  The Company expects that it may be able to leverage
its current cellular alliances to assist it in entering international markets.  

Transaction Processing Agreements                                               
---------------------------------                                               

     NOVA  Information  Systems.  In January,  1997 the Company  entered  into a
Member  Service  Provider  ("MSP")  agreement  with  NOVA  Information   Systems
("NOVA"), of Atlanta,  Georgia, the nation's 7th largest credit card transaction
processor,  together  with  Regions Bank (Nova's  procuring  bank),  a principal
member of VISA U.S.A.,  Inc. and  MasterCard  International  Incorporated.  As a
registered MSP of NOVA,  the Company is entitled to enroll  merchants to process
their credit and debit card transactions with NOVA. The Company sells processing
to merchants it enrolls at a retail rate and purchases that processing from NOVA
at  wholesale,  thereby  generating  revenue on each card swipe and every dollar
processed  from  merchants  enrolled by the Company.  The Company is required to
train the  merchants  it enrolls in using  credit card  processing  hardware and
services and must also provide merchant support to assure that the merchants are
continually  apprised of their customer  service  requirements and to remedy any
problems   encountered  by  the  merchants  in  conjunction   with  credit  card
processing.  The term of the  agreement is for three years from January 1, 1997,
and  renews  automatically  for  additional,  successive  one-year  terms if not
terminated at least 90 days prior to the expiration of the current term.        

         National  Bank  of  Commerce.  The  Company  entered  into a  "Merchant
Marketing and Services  Agreement" with National Bank of Commerce  ("NBC") as of
March 9, 1998,  under  which the  Company  also                                 

-44-

424B1
47th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 47th
became an ISO/MSP of NBC and can  thereby  offer  NBC's  transaction  processing
services  to  merchants.  The  Company  will  solicit  potential  merchants  for
submission  of  applications  to NBC,  which  then has the right to  accept  the
merchant for  participation in NBC's program.  Once a merchant is accepted,  the
Company  sets up point  of sale  access,  including  maintenance  of  electronic
terminal  hardware and other  equipment,  and must also supply the merchant with
training,  supplies,  program  information  and other  services  related  to the
program.  The  Company  will  receive a residual on all  transactions  processed
through NBC for which it is the procurer.  The Company also has been granted the
right to own a 50% equity interest in the merchant accounts it procures for NBC.
This means that the Company will receive 50% of the amount paid by a third party
upon a sale of the merchant account. However, the Company must also stand behind
nonpayment  of amounts  owed to NBC by the merchant  which remain  unpaid for 60
days,  including fraud,  chargebacks,  adjustments,  fees and any other charges.
Upon termination of the agreement (for any reason other than  deregistration  of
the Company with Visa  U.S.A.,  Inc. or  MasterCard  International,  Inc.),  the
Company has the right to transfer  NBC's  interest in the  merchant  accounts in
which the Company owns an interest to another  processor  upon payment to NBC of
one-half  of the equity  value of the  portfolio,  or, if such a transfer is not
practicable,  NBC has agreed to terminate  the merchant  agreements to allow the
Company to allow the  merchants  to sign with another  processor.  To allow this
transfer,  NBC is entitled  to be paid its  out-of-pocket  expenses  incurred in
effecting the transaction.  The agreement is for a term of three years,  subject
to one year  automatic  renewals if not terminated at least 90 days prior to the
end of the original or any renewal  term.  The  agreement can also be terminated
early for certain specified causes.                                             

Marketing and Distribution  Arrangements for the                                
Company's  Products and Related Services                                        
----------------------------------------                                        

POS-50(R)                                                                       

         The  POS-50(R)  can be purchased or leased  through a variety of ISO's,
cellular  companies or the Company  directly.  The Company has no  agreements in
which the reseller or distributor is obligated to purchase any specific quantity
of product from the Company.                                                    

     The Company's  most  successful  distributor  to date has been  Cardservice
International, Inc. ("CSI") of Agoura Hills, California. CSI currently processes
in excess of $4 billion in credit and debit card  transactions for approximately
90,000 merchants. POS-50(R) sales to CSI accounted for approximately 53% and 25%
of the  Company's  total  revenue  in fiscal  1997 and 1996,  respectively,  and
approximately 17% of the Company's revenue for the nine month period ended March
31,  1998.  Sales  through  CSI are  expected  to diminish as a percent of total
revenue as the  Company  shifts  from an  emphasis  on selling  boxes to selling
processing services.  See "Certain  Transactions - Transactions with Cardservice
International, Inc."                                                            

     In addition to CSI,  the Company has entered into  distribution  agreements
with  several  other  ISO's to sell and  provide  help desk  services  for their
POS-50(R) customers.  ISO's usually use a commission-only sales force to call on
merchants to offer their credit card processing services and terminal equipment.
Presently,  ISO's  sell or  lease  nearly  80% of all  stand-alone  credit  card
terminals used in the marketplace.                                              

     The Company also sells its POS-50(R)  units  directly to merchants  with or
without  credit card  processing  services.  The pricing  structure  the Company
offers on the units is  considerably  more  favorable when purchased with credit
card processing  than without due to recurring  revenue the Company expects from
transaction processing fees and discount rate margins.                          

TRANZ Enabler and POS-500 Sales and Marketing Plan                              

         Starting in fiscal year 1998,  the Company is continuing to implement a
new sales and  marketing  strategy  for its  CDPD-based  products  and  bankcard
processing  services.  The  Company  has  determined  that it will  only sell or
provide  these  products  to  merchants  that  sign up for  bankcard  processing
services  with  the                                                             

-45-

424B1
48th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 48th
Company.  This  approach  is the  fundamental  basis of the                     
Company's current sales and marketing strategy.  The Company will no longer just
sell a "box" without the ability to earn recurring revenue from each transaction
originated by its customers.                                                    

         The Company  intends to market its  products  and  bankcard  processing
services  through joint  marketing and  operating  agreements  with its cellular
alliances and through its own direct sales organization.  Presently, the Company
is focused on launching  the TRANZ Enabler and its bankcard  processing  program
with NOVA through a joint  marketing  effort with GTE Wireless's  commercial and
major  account sales  representatives.  In  furtherance  of that  roll-out,  the
Company has  established  an  extensive  sales and service  support  staff.  The
Company has also recently entered into a similar joint marketing  agreement with
Bell  Atlantic  Mobile,  along  with a new  merchant  acquiring  agreement  with
National Bank of Commerce  ("NBC").  The Company will  concentrate on developing
distribution of its products with associated  processing services in conjunction
with these (and perhaps other) CDPD carrier partners, and through its own direct
sales force to major accounts.  CDPD carrier  partners provide an opportunity to
leverage large sales organizations in the distribution of the Company's products
and  services to a large number of  merchants,  although to date the Company has
signed only one  agreement to jointly  market its  products and services  with a
CDPD carrier.                                                                   

         In  furtherance  of this  approach,  the Company  has entered  into the
following agreements:                                                           

     Agreement with GTE Wireless.  On August 1, 1997, the Company entered into a
CDPD  Service and  Equipment  Agreement  (the "GTE  Agreement")  with GTE Mobile
Communications Service Corporation,  on its behalf and on behalf of GTE Mobilnet
Incorporated   and  Contel  Cellular  Inc.  and  their   respective   affiliates
(collectively  "GTE  Wireless") by which the Company has agreed to purchase CDPD
services in the markets  served by GTE  Wireless  and GTE Wireless has agreed to
market CDPD-based  processing  services to merchants in its service  territories
using the Company's TRANZ Enabler  hardware,  a USWD provided  credit/debit card
transaction  payment  service and GTE  Wireless's  CDPD data  network (the "USWD
Solution").  The  initial  term of the GTE  Agreement  is for a two year  period
ending  August 1,  1999.  The GTE  Agreement  contains  provisions  by which GTE
Wireless  has  agreed to  exclusively  market  and sell the "USWD  Solution"  to
merchants seeking to convert their land-line based dial-up phone service to CDPD
service while  continuing to use their VeriFone  TRANZ 330 or 380 equipment.  In
return,  USWD has agreed to exclusively  use GTE Wireless's CDPD services in all
of GTE Wireless's  markets,  except in the case of customers referred to USWD by
an alternative CDPD service provider. The Company has agreed to pay GTE Wireless
a fixed  activation  fee for each CDPD  address it requests be  activated on GTE
Wireless's  network  and a fixed fee for each  merchant  referred to the Company
through GTE Wireless's marketing efforts. The Company was also required to put a
sales support staff in place to service the GTE Wireless  representatives in the
field.  The Company has implemented its  obligations  and has  approximately  28
support  personnel trained and available to provide the services required of the
Company  under the  agreement.  The GTE  Agreement  also requires the Company to
generate  minimum CDPD service billings to GTE Wireless from merchants signed up
for GTE  Wireless's  CDPD service  through the Company.  The minimum  amount due
escalates  over the term of the GTE  Agreement  from  $20,000  during  the first
quarter to $2.75 Million by the eighth  quarter.  GTE Wireless  agreed to adjust
the commencement date for these obligations so that the start date for the first
quarter will be February 1, 1998.  However,  the Company has failed to meet even
the renegotiated  minimum purchase obligations to GTE Wireless to date, although
GTE  Wireless  has  acknowledged  that its  failure  to  perform  certain of its
obligations  under  the  agreement  has  contributed  to  this  problem  and has
therefore not demanded payment and expressed a willingness to renegotiate  these
terms of the  agreement.  To  date,  placements  under  the  agreement  have not
materialized  as the Company had expected,  although  activity  levels have just
recently  begun to  improve  as quotas  have been  implemented  on the GTE sales
representatives  as part of their  compensation  plans and they have become more
familiar  with the  Company's  wireless  solution.  The  Company's  expenses  in
implementing  this agreement have far exceeded the revenues  generated under the
agreement  to date.  See  "Management's  Discussion  and  Analysis of  Financial
Condition and Results of Operations - Results of Operations" and "Risk Factors -
Risks  Involving the Company and Its Business - CDPD Resale  Containing  Minimum
Purchase Obligations."                                                          

-46-

424B1
49th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 49th
     Agreements  with Bell  Atlantic  Mobile.  The Company has entered  into two
agreements with Cellco Partnership,  doing business as Bell Atlantic Mobile. The
first, a CDPD airtime reseller  agreement was entered into as of August 14, 1997
and allows the Company to resell Bell Atlantic  Mobile's CDPD service in markets
served by Bell Atlantic Mobile.  The agreement is for a term of three years with
automatic one year renewals unless terminated by 60 days notice prior to the end
of a term.  The Company does not have any minimum  purchase  obligations to Bell
Atlantic Mobile under this CDPD airtime agreement. The Company also entered into
a Joint CDPD Sales and Marketing Agreement with Bell Atlantic Mobile as of March
23, 1998, which provides for joint sales and promotion of the Company's products
and processing  solutions in Bell Atlantic Mobile markets.  Under the agreement,
the Company is required to provide Bell Atlantic  Mobile and approved  merchants
with the following significant products and services:  all sales,  marketing and
technical  support  necessary  to enable  Bell  Atlantic  Mobile to include  the
Company's  products in its proposals to  merchants;  reasonable  sales  training
material  for  each  Bell  Atlantic  Mobile  sales  representative  who  will be
marketing to retail merchants; a minimum of one USWD representative  residing in
the  applicable   Bell  Atlantic   Mobile   region(s)  to  coordinate  all  USWD
responsibilities  for the program;  a fully operational  demonstration  unit for
each Bell Atlantic Mobile sales representative  selling the Company's solutions;
a fully  configured  merchant  system  within  a  period  of ten  business  days
following the approval of the merchant  application by the credit card processor
used by the Company,  with certain  exceptions where the quantity of hardware is
greater than 25 units per  occurrence;  and terminal units installed in merchant
locations of the qualified and approved  merchants  within sixteen business days
from the time the completed application and applicable merchant application fees
are  delivered  to  the  USWD  representative,  with  certain  exceptions  where
additional  information or paperwork is required from the merchant.  The Company
is also  required to indemnify and hold Bell  Atlantic  Mobile  harmless for any
claims  liabilities,  costs, fees,  penalties or fines arising out of failure to
file reports or fulfill any registration or audit  obligations or which might be
asserted in any actions by any person based upon a claim  against Bell  Atlantic
Mobile of  violation of any rules,  regulations,  laws,  ordinances  or charters
related to banking or credit  card  processing.  With  certain  exceptions,  the
Company is obligated to use Bell Atlantic Mobile CDPD Service exclusively within
certain  defined  "Bell  Atlantic  Mobile  Market  Areas"  whenever  it places a
solution  through Company agents or employees.  The agreement runs for two years
from March 23, 1998; however, the agreement is terminable by either party on "30
days prior written notice,".  . . "with or without cause." The Company also must
pay Bell  Atlantic  Mobile an  activation  fee for each unit placed  through the
efforts  of Bell  Atlantic  Mobile  under  the  agreement,  plus a  monthly  fee
commencing  with the thirteenth  month after  activation for each merchant which
has met certain minimum processing volume criteria.  Following a training phase,
placements  of the  Company's  products in Bell  Atlantic  Mobile  service areas
commenced in June 1998.                                                         

     Agreement with Ameritech Mobile Communications,  Inc. On July 16, 1998, the
Company and Ameritech Mobile  Communications,  Inc.  ("Ameritech"),  executed an
exclusive  Joint  Marketing and Operating  Agreement which had been agreed to in
principal several weeks earlier. Pursuant to the agreement, Ameritech has agreed
to use its good faith efforts to market exclusively the Company's TRANZ Enablers
and credit card processing services,  together with an Ameritech CDPD IP address
(the "USWD  Solution")  in Ameritech  CDPD  markets in Chicago and  Springfield,
Illinois,  St.  Louis,  Missouri,  Cincinnati,  Dayton  and  Columbus,  Ohio and
Detroit,  Michigan to merchants who currently use VeriFone TRANZ 330, 380 or 460
credit card authorization  terminals.  The Company is obligated to use Ameritech
CDPD service exclusively in all of the designated Ameritech CDPD markets, except
for unsolicited orders for the Company's products or services from a merchant or
another CDPD service  provider.  The Company must  maintain at least one service
support  person  in each  Ameritech  designated  CDPD  market.  The  Company  is
obligated  to  train  the  Ameritech  sales   representatives   and  to  provide
appropriate   promotional   materials,   timely  process  merchant  applications
submitted by Ameritech  sales  representatives,  timely place the USWD  Solution
with  merchants  whose  applications  have been  approved by the Company and its
designated  processing  entity,  train  the  merchants  in the  use of the  USWD
Solution  and provide  support  services to  merchants  enrolled to use the USWD
Solution.  The Company is required to provide a TRANZ Enabler to the merchant at
no additional charge beyond the application fee, deploy a fully configured TRANZ
Enabler with the merchant  within ten business  days  following  approval of the

-47-

424B1
50th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 50th
application  by the  processing  company  (for  merchants  where the quantity of
hardware is 25 units or less) and to schedule  timely  deployment with merchants
who require  greater than 25 units.  USWD is to pay Ameritech a one time fee for
each IP address  activated per  merchant.  The agreement has a term of two years
and renews  automatically  for an  additional  two years.  The  agreement may be
terminated by either party at any time upon 90 days written  notice to the other
party.  There are no minimum CDPD airtime  purchase  obligations  to the Company
under the agreement.                                                            

     Other CDPD Cellular  Service Resale  Agreements.  As described  below,  the
Company has entered into a resale  agreement to resell CDPD service  provided by
AT&T Wireless Data, Inc. ("AT&T Wireless").  The Company intends to use the CDPD
service it will  purchase  in  combination  with the  provision  of  transaction
processing  services to merchants who want to utilize the Company's  products to
satisfy  their  hardware  needs.  The Company also intends to enter into a joint
marketing  agreement  with  AT&T  Wireless  which is  similar  to the  marketing
agreements  it has entered  into with GTE  Wireless  and Bell  Atlantic  Mobile,
although  no  assurance  can be given that the  Company  will be  successful  in
entering into such an agreement with AT&T Wireless or others.  See "Risk Factors
- Risks Involving the Company and Its Business."                                

         Agreement  with AT&T  Wireless.  The Company  entered into an agreement
with  AT&T  Wireless  as  of  April  30,  1997  to  sell  AT&T   Wireless'  CDPD
communications  service 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  with  AT&T  Wireless  over  the term of the
agreement,  or pay AT&T Wireless for such  addresses even if the Company has not
resold the numbers to  merchants.  The Company is obligated to have 1,000 active
numbers by the one year  anniversary  of the  agreement,  3,000  active  numbers
within 18 months and 4,500 active  numbers  within three years of April 1, 1997.
Each  active  number  carries a minimum  charge of $4.50 per month to USWD.  The
Company  has  been  meeting  its IP  address  targets  under  the  agreement.  A
significant  number  of units  have been  placed  under  the  Unicard  Agreement
described below, utilizing AT&T Wireless CDPD service.                          

         Agreement with Unicard Systems, Inc. On September 18, 1997, the Company
entered into an agreement with Unicard Systems,  Inc., of Dallas, Texas pursuant
to which the  Company is  developing  terminal  application  software  that will
perform both the Unicard  enrollment  process as well as deliver wireless credit
card transaction processing to Unicard's customers.  Unicard Systems will become
a registered  agent of the Company and has placed an initial order for 400 TRANZ
Enabler units.  Unicard  Systems is a Dallas based service  provider to over 500
restaurants  and  nightclubs in Texas.  Those  merchants  use Unicard's  card to
verify the right of purchasers of alcoholic  beverages in their  establishments.
The  agreement  with  Unicard  demonstrates  the  flexibility  of the  Company's
products to be adapted to specific,  dedicated applications beyond simple credit
and debit card  processing  services.  Through the end of June 1998  Unicard has
taken delivery of approximately 400 TRANZ Enablers.                             

     Agreement  with  GoldCan  Recycling,  Inc. As of September  29,  1997,  the
Company entered into a letter of intent to supply GoldCan  Recycling,  Inc. with
TRANZ  Enabler  units for wireless  monitoring of its state of the art automated
aluminum  recycling/redemption  centers. This is the first application of USWD's
TRANZ Enabler technology outside the credit  card/point-of-sale  industry.  USWD
will receive a monthly equipment and wireless service fee on every TRANZ Enabler
placed by GoldCan.  This  agreement  further  demonstrates  the potential of the
Company's  technology for uses in nontraditional  markets.  Although the Company
has successfully tested its technology for use on this application,  no purchase
order had been executed by GoldCan as of June 30, 1998,  and no assurance can be
given that GoldCan will choose to proceed to implement  the  Company's  wireless
solution.                                                                       
-48-

424B1
51st Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 51st
Manufacturing and Deployment Arrangements                                       
-----------------------------------------                                       

Third Party Manufacturing Relationships                                         

         The Company utilizes high quality,  third party  manufacturers to build
its  products.   Uniform  Industrial  Corporation   manufactures  the  Company's
POS-50(R)   product.   Wellex   Corporation,   a  Freemont,   California   based
manufacturer, builds the TRANZ Enabler product line, and Finite Technologies, of
Pueblo, Colorado manufacturers the POS-500 CDPD-based terminal line.            

         The Company recently entered an agreement with Wellex Corporation which
includes specific build schedules and operating terms for the manufacture of the
TRANZ Enabler. The Company's engineering team develops a detailed  manufacturing
manual for each of its product lines and manages the manufacturing  process with
each respective manufacturer.                                                   

     With the exception of certain claims which are presently  being  arbitrated
between the Company and Novatel, Inc. (formerly Novatel  Communications,  Ltd.),
the  Company  has  not  experienced  any  significant  problems  concerning  its
manufacturing  relationships,  quality  control,  product  returns  or  warranty
coverage. See "Business - Legal Proceedings - Dispute with Supplier."           

Inventory Financing                                                             

         The  Company's  business  plan calls for third party  financing  of all
merchant  placements  of TRANZ  Enablers.  The Company does not  presently  have
adequate  capital to fund  inventory in the  quantities  that it expects will be
needed to  supply  demand  if and when  placements  through,  for  example,  GTE
Wireless or other wireless carriers begin to be significant. See "Risk Factors -
Risks Relating to the Company and Its Business" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Financial Condition,
Capital Resources and Liquidity."                                               

     Agreement  with GTE  Leasing  Corporation.  To  finance  a  portion  of its
inventory  requirements  the Company entered into a Loan and Security  Agreement
with GTE Leasing  Corporation  as of April 2, 1998, to fund the  manufacture  of
TRANZ  Enabler  units by Wellex  which are or will be  deployed  through the GTE
Wireless  joint  marketing  agreement.  The agreement with GTE Leasing is in the
form of a revolving credit facility in the maximum amount of $1,200,000.  If the
agreement becomes operative, GTE Leasing will pay the Company a fixed amount for
each TRANZ  Enabler  unit  manufactured  by Wellex for  placement  under the GTE
Wireless joint marketing agreement.  At approximately $400 per unit, the Company
has the ability to finance up to 3,000 TRANZ Enabler units at any one time under
this agreement. The Company expects that repayment of the amounts financed under
the credit  facility  will be made from the recurring  revenue  generated by the
units placed under the GTE Wireless  joint  marketing  agreement.  However,  the
Company is  primarily  obligated  to repay all  amounts  owing  under the credit
facility, irrespective of whether processing revenues are sufficient to pay such
amounts.  To secure  payment  under the  agreement  the  Company has granted GTE
Leasing a security interest in the units and the processing  revenues from those
units.  The  agreement  is  terminable  on certain  defined  events of  default,
including the failure to pay any installment within ten days of its due date and
for other events of default which remain unremedied for ten days after notice is
given to the Company by GTE  Leasing.  The Company  also  entered into a Notice,
Consent and Agreement between itself,  NOVA Information  Systems,  Inc. ("NOVA")
and GTE Leasing  which  acknowledges  the  obligation of NOVA to pay GTE Leasing
directly  from  amounts  owed to the  Company by NOVA for  amounts  owing by the
Company to GTE Leasing under the credit facility.  However,  GTE Leasing and GTE
Wireless  are now  requiring  that prior to allowing the Company to draw funding
under the agreement, the Company must obtain the written consent of RegionsBank,
NOVA's  acquiring bank, that it will honor the Company's  revenue  assignment to
GTE Leasing and pay over  directly  amounts owed to the Company in the event the
Company defaults on its obligations to pay GTE Leasing and/or GTE Wireless.  The
Company is actively  negotiating  with all  parties to obtain  this  consent    

-49-

424B1
52nd Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 52nd
and expects that it will be able to do so;  however,  no assurance  can be given
that this consent will be obtained  thereby allowing the Company to draw funding
under its agreement with GTE Leasing.                                           

         Third-party  financing of the TRANZ Enabler units is a required element
of the  Company's  business  model and the Company will seek  similar  financing
arrangements  for  units  distributed  through  other  marketing  channels.  The
inability to fund  inventory  needs from outside  sources  could have a material
adverse impact on the Company. See "Risk Factors - Risks Relating to the Company
and Its  Business"  and  "Management's  Discussion  and  Analysis  of  Financial
Condition and Results of Operations - Financial Condition, Capital Resources and
Liquidity."                                                                     

Equipment Deployment and Servicing                                              

     Until  recently,  the Company was doing its own  equipment  deployment  and
servicing.  However,  as of January 26, 1998, it entered into an agreement  with
TASQ Technology,  Inc., of Rocklin,  California  ("TASQ"),  to provide 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 the Company's wireless  solutions.  Under
this  agreement,  the  Company  pays TASQ  fixed fees for the  various  products
provided and services rendered by TASQ to the Company's  customers,  on a 30-day
billed basis.  TASQ charges  inventory  storage and handling fees for equipment,
accessories  and supplies  purchased from persons other than TASQ. The agreement
is for an initial term of twelve  months from  January 26, 1998,  and renews for
successive  terms of the same  duration  unless  either party  provides  written
notice of  termination at least 3 months prior to the end of a term. The Company
believes that this relationship will ultimately result in savings to the Company
over what it would cost to  provide  these  services  by its own  personnel.  In
addition,  TASQ has a reputation for highly  efficient,  quality with service in
the industry  and the Company  hopes that this  relationship  will insure a high
level of satisfaction in the Company's customers.                               

Customers                                                                       
---------                                                                       

         Cardservice International,  Inc. ("CSI"), has been the Company's single
largest  customer,  with sales to CSI representing  approximately 25% and 53% of
the  Company's  POS-50(R)  revenues for the fiscal years ended June 30, 1996 and
1997, respectively,  and approximately 17% of the Company's revenue for the nine
month  periods  ended March 31, 1998.  It is,  however,  expected  that CSI will
become a much  less  significant  factor in  revenue  under  the  Company's  new
business plan,  although sales of POS-50(R) terminals may continue to be made to
CSI.                                                                            

         The Company's remaining revenue to date has been comprised primarily of
sales of its products to a variety of ISO's and direct sales to merchants.      

         As noted  above,  the Company has  developed a new sales and  marketing
plan for its CDPD based products. If successfully  implemented,  joint marketing
and  distribution  agreements  with major  cellular  carriers  will  provide the
Company with a much broader  reach to merchant  end-users.  No assurance  can be
given,  however,  that the  Company  will be  successful  in  implementing  this
business  strategy.  See "Risk  Factors - Risks  Relating to the Company and Its
Business."                                                                      

Patents, Trademarks and Other Proprietary Protection                            
----------------------------------------------------                            

Patents                                                                         

         The  Company  was  granted a design  patent on  certain  aspects of the
POS-50(R) product in June, 1994. The Company expects to file additional  patents
as it determines appropriate.                                                   

-50-

424B1
53rd Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 53rd
Trademarks                                                                      

         The  Company's  name and  POS-50(R)  are  registered  trademarks of the
Company.  The Company  identifies  its mark in all its  marketing  material  and
advertising   campaigns.   The  Company  may  register  future  product  related
trademarks as appropriate and resources are available to do so.                 

Other Proprietary Protection                                                    

         Proprietary  technology  involved  in  the  primary  components  of the
Company's products,  including the cellular and CDPD transceiver and printer, is
owned or licensed by the respective  component supplier.  The Company does claim
proprietary  rights with  respect to the  integration  and use in the  Company's
products.  The Company also claims  proprietary rights on certain aspects of its
application  software  as it relates  to CDPD  point-of-sale  functionality  and
diagnostic  features.  The Company may pursue additional  intellectual  property
protection on its hardware and software products as appropriate and it resources
are available.                                                                  

Competition                                                                     
-----------                                                                     

         Currently,  the Company believes it has no direct POS-50(R)  competitor
that  is   manufacturing  an  integrated,   battery  powered,   circuit-switched
cellular-based terminal and printer product. However, the company has identified
several non-integrated cellular based solutions that compete with the POS-50(R),
but are not as elegant or functional.  These non-integrated solutions range from
a few hundred dollars to a few thousand dollars  depending upon the distribution
channels and the type and number of components.                                 

         The Company has identified several potential competitors  attempting to
develop CDPD-based terminals and solutions.  Hypercom, a Phoenix-based  terminal
manufacturer,  has publicly  announced their CDPD-based  terminal  product.  The
Company  perceives this product as direct  hardware  competition to the POS-500.
With the  fundamental  decision to enter the  recurring  revenue  business,  the
Company believes that it may be able to develop supplier  relationships with its
perceived   competitors  which  will  essentially   minimize   potential  direct
competition.  See  "Risk  Factors  -  Risks  Relating  to the  Company  and  Its
Business."                                                                      

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  incorporate  either a  circuit-switched  cellular or CDPD  transceiver
manufactured by suppliers that comply with the appropriate FCC  requirements and
have been issued an FCC identification number.                                  

         The Company 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 testing conducted at an independent certified test site.    

         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.             

-51-

424B1
54th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 54th
Research and Development                                                        
------------------------                                                        

         A substantial  portion of the Company's early  activities were involved
in the engineering and development of the initial  POS-50(R)  terminal  product.
The Company  completed  development of POS-50(R) in early 1993.  During the last
two fiscal years,  ending June 30, 1996 and 1997, the Company expended  $458,407
and  $406,522  respectively,  on research  and product  development  activities.
During  the first  nine  months of the  fiscal  1998  year,  the  Company  spent
approximately $251,000 on research and development.                             

         The  Company  employs  four  people  who are  engaged in  research  and
development. Current efforts are focused on CDPD-based products and on POS-50(R)
enhancement,  including  bringing a new  manufacturer  on line,  cost reduction,
product efficiency and reliability,  customization and software development. The
Company expects to add personnel to its R&D staff as the financial  condition of
the  Company  improves  and/or  development   contracts  are  obtained.   It  is
anticipated that the Company will spend  approximately  $350,000 on research and
development during the current fiscal year, based on present staffing levels and
projects  currently under way,  including  development  activities  related to a
hand-held transaction processing unit.                                          

Employees                                                                       
---------                                                                       

     As of August 31,  1996,  the Company had reduced its staff to 11  full-time
employees  including its officers,  sales and marketing staff,  product research
and development  team,  technical and customer support staff and  administrative
staff. Due to continuing financial pressure, headcount remained at approximately
this level and was at 8 full-time employees at June 30, 1997 and 11 employees on
August 31, 1997.                                                                

     During the first  quarter of fiscal  1998,  the company  added  several key
management  positions and has aggressively  built a national sales and marketing
organization to fulfill its  obligations  under the GTE Wireless Joint Marketing
and Operating  Agreement.  This  agreement  requires a specific ratio of Company
support personnel within each GTE Wireless CDPD marketing region. From September
through  early  November,  the Company  added  approximately  43 sales and sales
support personnel. The Company has also expanded its operations, human resources
and administrative staff and as of June 30, 1998 had approximately 60 employees,
including five executive officers. See "Management" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."                 

Seasonal Variations of Business                                                 
-------------------------------                                                 

     The Company's  merchant  acquiring and transaction  processing  business is
relatively  immune to seasonal  variations,  although  the Company  expects that
transaction  processing  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.                 

Backlog                                                                         
-------                                                                         

     The Company had a backlog of orders as of September  1997 of  approximately
200 TRANZ  Enablers  units due  primarily  to the lead time  required to ramp up
production from its third party suppliers and a lack of adequate capital to fund
inventory  purchases from the Company.  From December 1997 through January 1998,
the  Company  had a backlog  of  POS-50(R)  units,  again due to a lack of prior
capital and the lead time required by its third party  manufacturers to commence
production once capital to fund the purchases became  available.  As of June 30,
1998 there is no order backlog due to product unavailability.                   

     The Company's  financial  condition has precluded it from obtaining  credit
from its  manufacturers  and  adequate  capital  will be  required  to assure an
uninterrupted  production of inventory as needed. The Company is                

-52-

424B1
55th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 55th
hopeful that it will be able to obtain  adequate  third party  financing for its
TRANZ Enabler inventory needs.  However,  despite the agreement with GTE Leasing
(under  which the Company has not yet been able to draw  funding),  no assurance
can be given that this will be the case.  See "Risk Factors - Risks  Relating to
the Company and Its  Business"  and  "Management's  Discussion  and  Analysis of
Financial  Condition  and Results of Operations - Financial  Condition,  Capital
Resources and Liquidity."                                                       

Impact of Environmental Laws                                                    
----------------------------                                                    

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

Properties                                                                      
----------                                                                      

         The Company now occupies  approximately 4,500 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  leased this space in
September 1997, at an initial rate of $9,942 per month commencing  October 1997,
and continuing  for a term of 5 years.  The monthly rent will progress to a rate
of $11,640 in year five.                                                        

         On  October  23,  1996,  the  Company  closed  its  Boulder  office and
consolidated operations in Colorado Springs, Colorado, where it presently leases
approximately  1,200 square feet of office and  laboratory  space  pursuant to a
lease which extends  through July of 1998. The rent for this space is $1,200 per
month.                                                                          

         A customer  service and POS-50(R)  deployment  office was open in Wheat
Ridge, Colorado from November 1996 through December 1997. The Company maintained
this space until it relocated its principal operations to California.           

Legal Proceedings                                                               
-----------------                                                               

Securities Class Actions Settlements                                            

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

         To resolve cross-claims asserted by the underwriters in the litigation,
the Company agreed to issue to RAS  Securities  Corporation,  H.J.  Meyers & Co,
Inc.,  Sands & Co.  Ltd.  and R.J.  Steichen & Co. a total of 600,000  shares of
Common Stock upon the  effective  date of the  Settlement  Agreement,  which was
April 26, 1997. The shares issued under this  settlement  become  saleable under
SEC Rule 144  commencing  on April 26, 1998.  The Company has agreed to register
such shares upon demand of holders of not less than 25% of the shares,  although
a substantial  number of the shares have been sold under Rule 144 as of June 30,
1998,  and the  Company  does  not  anticipate  that it will be  called  upon to
register the shares. See "Risk Factors - Risks                                  

-53-

424B1
56th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 56th
Relating to the Company's  Securities - Market  Overhang;  Registration  Rights;
Possible Effect on Market for the Company's Common Stock."                      

         Further, on September 17, 1997 the Company agreed to entry of a consent
judgment  against  it and in  favor of Don  Walford,  the  sole  shareholder  of
underwriter Walford Securities,  Inc., in the amount of $60,000,  payable over a
three year period.                                                              

Settlement with Consultant                                                      

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

Settlement of Claims of Certain Noteholders                                     

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

         Rather than incur the expense and risks of litigation,  the Company has
settled the complaining  Noteholders'  claims by agreeing to issue 1.4 times the
number of shares  originally  issuable as  principal  and interest on the Demand
Notes purchased by the complaining Noteholders (plus an additional 11,000 shares
to one Noteholder who purchased $50,000 of the Demand Notes),  and providing the
Noteholders with certain guarantees as to the amount for which the shares can be
resold and a "put"  which  allows the  Noteholders  to  require  the  Company to
repurchase any  restricted  shares  remaining  unsold at the end of the one year
period after the shares  become  saleable  under SEC Rule 144. The shares issued
upon conversion of the Demand Notes are "restricted securities" as defined under
SEC Rule 144,  but will become  saleable  pursuant to Rule 144 one year from the
date the  converted  Demand Note was  purchased  by the  Noteholder.  A total of
525,800 shares                                                                  

-54-

424B1
57th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 57th
have been issued to the complaining  Noteholders upon conversion of their Demand
Notes which are subject to the guarantee and put  agreements.  The holder of the
other $50,000  Demand Note has been given the enhanced  conversion  rate (of 1.4
times the number of shares originally issuable) and received 154,000 shares upon
conversion  of his Demand Note;  the shares are not entitled to the guarantee or
put.                                                                            

         The guarantee  provision of the settlement  agreements allow the former
Noteholders  to recover the  difference  between the  guarantee  price (which is
$3.00  per  share as to  360,800  of the  shares  and  $4.29 per share as to the
remaining  165,000  shares  issued upon  conversion of the Demand Notes) and the
gross amount the Noteholder receives upon a sale of the shares. The guarantee is
operative  at any time  during the one year  period  commencing  on the date the
shares become  saleable  under SEC Rule 144. The Company is obligated to pay the
amount  due  within   thirty  days  of  receiving  a  demand,   accompanied   by
documentation  confirming  the sale.  Through June 30, 1998, no claims have been
submitted  to the  Company  under  the  guarantee  provision  of the  settlement
agreements.  Under the "put" provision of the settlement  agreement,  the former
Noteholders will have a five day period commencing on the date one year from the
date the shares become  saleable  under SEC Rule 144 (or the first  business day
thereafter  if such day is a day on which the stock  markets are closed)  during
which the former Noteholders may "put" any restricted shares remaining unsold by
them at the time back to the  Company.  Upon  exercise  of the put,  the Company
which must either (1)  purchase the shares for the put price (which is $3.00 per
share for  360,800 of the shares and $4.29 per share for  165,000 of the shares)
or (2) require  the  shareholder  to sell the shares  into the market,  with the
Company  making up the  difference  between  the put price and the gross  amount
received  by the  shareholder  upon such sale,  within 15 days after  receipt of
written notice and documentation  confirming the sale. See "Risk Factors - Risks
Relating to the  Company's  Securities  Market  Overhang;  Registration  Rights;
Possible Effect on Market for the Company's Common Stock."                      

         On July 2, 1997,  the  Company  also  issued a  promissory  note in the
amount of $16,825 to one of the investors  who purchased the Demand Notes.  This
note was due and  payable  in full as of July 30,  1997 and bore  interest  at a
default rate of 18% per annum if not paid when due. In return for the investor's
agreement  not to  require  the  Company  to pay the note when it came due,  the
investor claims that a  representative  of the Company promised that the Company
would treat the note the same as the other Demand Notes and convert it to Common
Stock on the same  terms.  At the same  time as it  settled  the  claims of this
investor  arising out of the Demand  Notes,  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
are not entitled to the guarantee or put described above.                       

Dispute with Supplier                                                           

         In April of 1995,  the Company  entered into an agreement  with Novatel
Communications Ltd. (now called Novatel,  Inc.) to supply it with modems for its
CDPD products.  Novatel.  Inc.  asserted a claim against the Company for payment
for  product it  tendered to the  Company  under that  agreement.  The claim was
asserted  in October  1996 for  $59,632.  Although  the  Company  has  accrued a
liability  in the amount of this  claim,  it  asserted  that  Novatel  delivered
defective  product  which has  caused  damages  to the  Company in excess of the
amount being claimed by Novatel.  The Company therefore  disputed the claim. The
Company  and  Novatel  agreed to  arbitrate  the  dispute  under an  arbitration
provision  of the  agreement;  however,  prior to  commencing  arbitration,  the
Company and Novatel  agreed to settle the dispute.  The Company will pay Novatel
$50,000 over the sixty day period commencing June 30, 1998.                     

-55-

424B1
58th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 58th
 DOCUMENTS FILED AS EXHIBITS

         References made in this Prospectus to material contracts, agreements or
other  documents  are  summaries  only and are  qualified  in their  entirety by
reference to the complete  copy of the document  which is filed as an Exhibit to
the  Registration  Statement of which this Prospectus is a part.  Copies of such
documents  can be  obtained  from the  United  States  Securities  and  Exchange
Commission or from the Company by a written  request  addressed to the attention
of the Corporate Secretary. See "Available Information."                        

-56-

424B1
59th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 59th
MANAGEMENT

Directors and Executive Officers                                                

                                                                [Download Table]

         The  following  table  sets  forth  information  with  respect  to  the
directors and executive officers of the Company.                                

Directors                                                                       

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

                                                                                
     Evon A. Kelly         57      Chief Executive Officer       August 1997    
                                   of the Company                               

     Rod L. Stambaugh      38      President of the Company      August 1991    

     Richard S. Barton     49      CEO and President of          December 1997  
                                   ADATOM, Inc.                                 

     Caesar Berger         51      Vice President - Cardservice  December 1995  
                                   International, Inc.                          

     Chester N. Winter     67      General Partner of Colorado   February 1994  
                                   Incubator Fund, L.P.                         

     Alvin C. Rice         74      Senior Associate -            June 1, 1998   
                                   entrenet Group, LLC                          

     Roger L. Peirce       56      Self Employed Business        July 22, 1998  
                                   Consultant                                   


Business Experience of Directors                                                

     Evon A. Kelly. Until joining the Company in August of 1997, and since 1991,
Mr.  Kelly was  president  of Kelly  Learning  Alliance,  a  consulting  firm he
founded,  which  addresses areas in human resource  development,  organizational
development and sales dynamics.  Kelly Learning  Alliance  clients have included
Motorola, Xerox Corp. and NEC Corp. From 1988 to 1991, Mr. Kelly was Senior Vice
President  of sales  and  operations  at  Wilson  Learning  Corp.,  where he was
responsible for developing and implementing sales and marketing strategies. From
1986 to 1988,  Mr. Kelly was a regional vice  president of store  operations for
Federated  Department  Stores Inc., where he supervised over 1,500 employees and
was  responsible for profit and loss  performance.  From 1973 to 1983, Mr. Kelly
held  several  key  positions  with  Xerox  Corp.,  including  manager of supply
business  center  where he  directed a national  sales force of 400.  Mr.  Kelly
received his bachelor's degree in liberal arts from Boston College.             

     Rod L. Stambaugh.  Mr. Stambaugh  served as Chief Executive  Officer of the
Company from October 1996 until August 1997,  when Mr. Kelly joined the Company.
He was Vice  President in charge of marketing and business  development  for the
Company 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 the Company  and has devoted his full  business  time to the Company
since August 1991. He co-founded U.S.  Wireless,  Inc., a  nonaffiliated  retail
cellular  phone  center,  at which he worked full time from January 1990 through
July 1991. Mr.  Stambaugh  served on the Company's  Board of Directors from July
1991 through                                                                    
-57-

424B1
60th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 60th
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.                                               

     Richard S. Barton.  Mr.  Barton is Chairman,  Chief  Executive  Officer and
President  of ADATOM,  Inc., a California  corporation  which  markets and sells
retail and shopping solutions,  including electronic  catalogues and stores. See
"Certain  Transactions  - Transactions  with ADATOM,  Inc." He completed a Sloan
Fellowship at Stanford  University in Palo Alto,  California from September 1995
through  September 1996. From October 1993 through August 1995, Mr. Barton was a
corporate  vice  president  and  president  of  Xerox'  United  States  Customer
Operations.  From 1991 until  October  1993 Mr.  Barton was  President  of Xerox
Canada, Inc. Mr. Barton joined Xerox in 1971 as a sales  representative and held
various  positions in addition to those  described  above,  including  executive
assistant  to the  President,  Chairman  and CEO from 1985  through  1987,  Vice
President,  Marketing  Operations for Xerox' United States  Marketing Group from
1987 through 1989 and Vice  President,  North American  Systems Sales for Xerox'
Integrated  Systems  Operations  from 1989  through  1991.  Mr.  Barton  holds a
Master's Degree in Business Management from Stanford University. Mr. Barton also
serves on the boards of Avon Products,  Inc., a publicly traded company, and the
United States Chamber of Commerce.                                              

     Caesar  Berger.  Mr.  Berger  is a senior  Vice  President  of  Cardservice
International, Inc. where he is responsible for the Technology Group. Mr. Berger
joined  Cardservice  International  in August of 1994. Prior to that, Mr. Berger
served for more than ten years as  President,  and was the founder of,  Computer
Based Controls, Inc. a wholly-owned subsidiary of Electronic Clearing House Inc.
Mr.  Berger was a principal on the American  Express  Money Order  project which
resulted  in the  deployment  of  over  17,000  of the  Money  Order  dispensers
operating today in over 10,000 retail locations nationwide. Mr. Berger graduated
in 1970 from Lvov Polytech  Institute with the  equivalent of an M.S.  degree in
Electronics and Computer Science.                                               

     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., an energy
services company that merged with EUA-Cogenics,  a subsidiary of Eastern Utility
Associates,  a publicly traded utility company.  From March, 1989 until October,
1992 he was Chairman and Chief Executive Officer of Clinical Diagnostics,  Inc.,
a home health care product  distributor that merged with Polymedica,  a publicly
held medical  product  distribution  company.  Mr. Winter has served in numerous
executive management positions with other companies, including Vice President of
Sinco  International  Investments,  Inc.  from 1986  through  July,  1992,  Vice
Chairman of Genro  Corporation,  a holding  company with  interests in financial
services,  hotels, computer services and real estate, from October, 1982 through
September,  1986. Mr. Winter has also consulted with and served on the boards of
directors of numerous  technology and growth  companies over the last ten years.
He has consulting experience in seven countries with the International Executive
Service Corps and the South-North Development Initiative. 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  affiliated with entrenet Group,  LLC,
as a senior associate. He has been with entrenet since January 1998. He became a
director  of the  Company 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.  He served as Chairman and  President of Imperial Bank from 1979
until 1984. In his 25 years with Bank of America from 1947 until 1979, he served
in various  capacities  including head of the  International  Banking  Division,
Senior  Credit  Officer and Vice  Chairman.  In the latter  capacity,  he was in
charge of the Bank's worldwide  commercial  banking business.  Mr. Rice has also
served as a Director of Memorex Corporation,  Fairchild Camera & Instrument Co.,
and the                                                                         
-58-

424B1
61st Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 61st
Montreal  Trust  Company.  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.  See "Certain  Transactions  -  Transactions  with entrenet
Group, LLC."                                                                    

     Roger L. Peirce. On July 22, 1998, the Company appointed Roger L. Peirce to
serve as a director of the Company.  Mr.  Peirce has been in the credit card and
electronic  commerce  industry for 17 years. He was with First Data  Corporation
("FDC"),  the largest credit card processing company in the United States,  from
January,  1994 until June,  1998,  where he served most recently as president of
FDC's Merchant Services Organization.  Prior to joining FDC, Mr. Peirce spent 13
years at VISA, commencing in 1981 as manager of software development.  He worked
at VISA in various  capacities and in 1989, became its Chief Operating  Officer.
In 1991,  Mr. Peirce moved from VISA USA to VISA  International  and  thereafter
served on all five VISA Regional  Boards.  Since 1963 until  joining  VISA,  Mr.
Peirce  worked for IBM,  where his final  position was that of national  account
manager for VISA.  While at IBM, he managed all IBM  resources for several large
development  contracts to build VISA's global  systems.  Mr. Peirce attended San
Jose State University where he earned a B.A. in Mathematics in 1963.            

Committees                                                                      

     The Company has an audit committee which consists of Messrs. Barton, Berger
and Winter.  During the fiscal  year ended June 30,  1997 and until  February 6,
1998, the audit committee consisted of Messrs. Berger and Alan Roberts, a former
director  of the  Company.  The audit  committee  recommends  engagement  of the
Company's   independent   accountants,   approves  services  performed  by  such
accountants,  and reviews  and  evaluates  the  Company's  accounting  system of
internal  controls.  The audit  committee  did not meet during fiscal year 1997;
however,  these issues were  discussed  by the full board.  The Company does not
have standing nominating or compensation  committees.  The functions which these
committees would perform are performed by the Board as a whole.                 

     The  Company's  Board of Directors  met once during  fiscal year 1997.  All
directors attended the meeting.  Board actions were conducted  primarily through
consultation  among  management  and directors  followed by consent  resolutions
adopted by all members of the Board of Directors.                               

Other Significant Executive Officers                                            

     Other  significant  executive  officers  of the  Company  who are not  also
directors are:                                                                  

                                                                [Download Table]

      Name               Age  Position with the Company      Officer Since 
      ----               ---  -------------------------      ------------- 
                                                                           
Robert E. Robichaud      45   Chief Financial and Accounting September 1997
                              Officer, Treasurer and                       
                              Assistant Secretary                          

Clyde F. Casciato        43   Vice President, Sales          August 1997   

Raymond J. Mueller       57   Vice President, Operations     December 1997 

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                                                                           

-59-

424B1
62nd Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 62nd
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. Prior to 1985, Mr. Robichaud held several financial  positions with Mohawk
Data Services Corp.  since 1978. Mr.  Robichaud  received a bachelors  degree in
economics from Fairfield  University in 1976 and an M.B.A. from Rutgers Graduate
School of Business in 1978.                                                     

     Clyde F.  Casciato.  Since 1989, Mr.  Casciato has held several  management
positions at AT&T Wireless  Services,  the wireless business unit of AT&T Corp.,
including  Director of Sales and  Marketing,  District  Manager  -Major/National
Accounts and most recently,  Western U.S. Regional  Sales/Distribution Manager -
Wireless  Data.  Mr.  Casciato  played a key role in helping to  establish  AT&T
Wireless Services as the market leader in the emerging wireless data (packet and
circuit  switched)  business  segment.  From  1984 to 1989,  he held  key  sales
management  positions at Xerox Corp. including Major Account Manager and Program
Sales Manager.                                                                  

     Raymond J. Mueller.  Mr.  Mueller served as Director of Sales and Marketing
for Nicor, Inc., a pneumatic tool company,  from 1995 until joining the Company.
From 1993 until joining the Company,  Mr. Mueller was an independent  consultant
in  the  areas  of  strategic  planning,  team  building,   decision-making  and
compensation matters.  Prior to that, he was Director of Sales and Marketing for
Wilson  Learning  Corp.  from 1989  through  1993.  Prior to 1993,  he served as
Manager of Corporate  Compensation  and  Director of Human  resources at Borden,
Inc.,  Manager of Compensation at Avon Products,  Inc. and Manager of Employment
at  Bristol  Meyers.  He holds a  Bachelors  Degree  in  Economics  from  Xavier
University.                                                                     

Executive Compensation                                                          

     The following table shows all the  compensation  paid by the Company to its
Chief Executive  Officer (the "Named Executive  Officer") during the fiscal year
ended June 30, 1997. Mr. Stambaugh,  the Company's CEO at June 30, 1997, did not
serve as CEO for the  Company  during the fiscal  years  ended June 30, 1996 and
1995.  No other  executive  office of the Company  received  total  compensation
during the fiscal year ended June 30, 1997 in excess of $100,000.               

                                                        [Enlarge/Download Table]

                           Summary Compensation Table                                                                        

=============================================================================================================================
                                                 Annual Compensation              Long Term Compensation                     
-----------------------------------------------------------------------------------------------------------------------------
                                                                     Other       Restricted                                  
                                                                    Annual         Stock        Securities      All Other    
   Name and Principal        Fiscal       Salary       Bonus        Compen-        Awards       Underlying      Compensa-    
        Position              Year         ($)          ($)       sation ($)        ($)        Options (#)       tion ($)    
-----------------------------------------------------------------------------------------------------------------------------
                                                                                                                             
Rod L. Stambaugh,             1997       $79,881        $-0-          (2)           $-0-           -0-             $-0-      
Chief Executive                                                                                                              
Officer(1)                                                                                                                   
=============================================================================================================================
<FN>                                                                                                                         
     (1) Mr. Stambaugh commenced service as CEO as of October 23, 1996.  Mr. Stambaugh succeeded Mr.                         
         Michael Brisnehan, who resigned as CEO at that time.                                                                
     (2) No amounts are shown under "Other" as the aggregate incremental cost to                                             
         the Company of personal  benefits provided to the executive officer did                                             
         not exceed 10% of his annual salary and bonus during the year.                                                      
</FN>                                                                                                                        

-60-

424B1
63rd Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 63rd
Option Grants in Fiscal Year Ending June 30, 1997                               

     As reflected in the following  table,  no options were granted to the Named
Executive  Officer during the fiscal year ended June 30, 1997. Also 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 the Company's Common Stock.         

                                                        [Enlarge/Download Table]

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

=========================================================================================================================
                                                                                                       Value of          
                                                                   Number of Securities          Unexercised In-the-     
                               Shares                             Underlying Unexercised           Money Options at      
                             Acquired on         Value            Options at FY-End (#)               FY-End ($)         
          Name              Exercise (#)      Realized ($)           Vested/Unvested           Vested/Unexercisable(1)   
-------------------------------------------------------------------------------------------------------------------------
                                                                                                                         
Rod L. Stambaugh                 -0-              $-0-                133,400/21,600                $20,010/$3,240       
=========================================================================================================================
<FN>                                                                                                                     
(1)  Based on the average traded price of the underlying shares of Common Stock of $.28 per share at June 30,            
     1997, less the per share exercise price of the options.                                                             
</FN>                                                                                                                    

Director Compensation                                                           

     Directors  who are not  employees  of the Company  receive an annual  stock
option to purchase  20,000  shares of the Company'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.  This is the only  arrangement  for
compensation  of directors.  A total of 20,000 stock options were granted to one
non-employee  director  during the  fiscal  year  ended  June 30,  1997,  and an
additional  40,000  options  are  issuable  to two  non-employee  directors  for
services  rendered during fiscal year 1997.  20,000 options have been or will be
issued to each non-employee  director (presently four people) during fiscal year
1998.                                                                           

Proposed Executive Bonus Plan                                                   

     Management   of  the   Company  is  in  the   process  of   formulating   a
performance-based  bonus  plan  for the  Company's  executive  officers  and key
personnel,  which may include  provisions for cash bonus compensation as well as
stock based  compensation under the Company's 1992 Stock Option Plan. Other than
certain contingent bonus compensation that has been offered to certain executive
officers of the Company as described  below, 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.                                                

Employment Agreements and Change In Control Provisions                          

     Evon A. Kelly.  The Company  presently has an employment  arrangement  with
Evon A. Kelly, its current CEO, pursuant to which Mr. Kelly receives $150,000 in
cash   compensation   per  year,  plus  up  to  $150,000  in  additional   bonus
compensation,  with criteria to be reviewed by the Board of Directors. Mr. Kelly
has also been  granted a  non-qualified  stock  option to purchase up to 600,000
shares of the Company'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 the  Company.  All
options  must be  exercised  within 10 years of the date of grant.  All  options
immediately vest and become exercisable upon a                                  

-61-

424B1
64th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 64th
change in control of the Company.  The Company 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.  The Company 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.                                               

     Rod L. Stambaugh. The Company 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,  although the Company has no present  commitment to grant any
bonus or  options to Mr.  Stambaugh  at this time.  It is  anticipated  that Mr.
Stambaugh will be entitled to participate  in any  performance-based  bonus plan
approved by the Board of Directors.                                             

     Other Executive Officers. The Company also has employment arrangements with
Robert E.  Robichaud,  Clyde F. Casciato and Raymond J. Mueller.  Mr.  Robichaud
receives a salary of  $125,000  per year and may be  entitled  to a  performance
bonus of up to $25,000 for fiscal  year 1998,  based on the  performance  of the
Company.  He was granted options to purchase up to 50,000 shares of Common Stock
at $3.95 per share under the  Company'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.  Mr.  Casciato  receives  a salary of $80,000  per year,  and may be
entitled  to a bonus of $30,000  for fiscal  year 1998,  based on the  Company's
performance.  Mr.  Mueller  receives  a salary of  $100,000  per year and may be
entitled  to a bonus of $25,000  for fiscal  year 1998,  based on the  Company's
performance.  Messrs. Casciato and Mueller have been granted stock options under
the Company's 1992 Stock Option Plan to purchase  50,000 shares of Common Stock,
exercisable at $3.53 per share (for Mr. Casciato's  options) and $6.34 per share
(for Mr. Mueller's  options).  The options have the same vesting schedule as Mr.
Robichaud's  options.  Mr.  Casciato's  date of hire was  August 25,  1997;  Mr.
Mueller was hired on November 24,  1997.  These  executive  officers may also be
granted  up to an  additional  50,000  options  based on the  attainment  by the
Company of certain performance goals under the terms of the executive bonus plan
as finally  approved by the Board of  Directors.  Pursuant  to the Amended  1992
Stock Option Plan, all options granted to these individuals immediately vest and
become  exercisable  upon a  merger,  acquisition,  sale of all  assets or other
change in control of the Company.                                               

Stock Option Plan                                                               

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

     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  number  of shares  underlying  options
available to the Plan was increased to 2,680,000 from 880,000 on August 6, 1997,
by the Board of Directors.  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 the Company
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 10% at            

-62-

424B1
65th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 65th
the time of grant and 3% per month  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 the time of grant and 25% at each six month
anniversary  thereafter.  See also "Management - Director  Compensation," above.
Information  regarding  presently  outstanding options is set forth in the table
below. See "Options Presently Outstanding Under the Plan," 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 the Company, 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 the Company's  assets,  or other transaction which results in the replacement
of the Company'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 all of the 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 the Company.                          

Federal Income Tax Consequences.                                      

     Incentive Stock Options.  The Company  anticipates that all options granted
under the Plan and treated by the Company 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,  the Company  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. The Company 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.           

-63-

424B1
66th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 66th
Form S-8 Registration of Shares of Common Stock                                 
Issuable Pursuant to Options Under the Plan                                     

     The Company  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. The Company 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.                                                                 

Options Presently Outstanding Under the Plan                                    

     As of May 31, 1998 there were a total of 607,781 options  outstanding under
the Plan,  330,531  of which  were  vested at that  date.  Of the total  options
outstanding at May 31, 1998, 237,781 were held by directors (one of whom is also
an officer of the Company),  157,781 of which were vested,  150,000 were held by
other executive officers,  49,500 of which were vested, and 220,000 were held by
employees  or  consultants  of the Company,  123,250 of which were  vested.  The
weighted average exercise price of all options  outstanding under the Plan as of
May 31, 1998, was $3.38.  No additional  options have been issued by the Company
either  under or outside  the Plan from May 31,  1998  through  the date of this
Prospectus. See also "Management - Executive Compensation - Stock Option Plan." 

-64-

424B1
67th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 67th
 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 Preferred  Stock as of May
31, 1998, by (i) each Director and Director appointee,  (ii) the Named Executive
Officer and the current Chief Executive  Officer,  (iii) 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 (iv) 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
May 31, 1998 upon the exercise of warrants,  options or other rights exercisable
for, or convertible  into,  Common Stock. As of May 31, 1998, there were a total
of 12,039,665  shares of Common Stock and 3,060,000 shares of Series A 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 450,  Emeryville,  CA
94608.                                                                          

                                                        [Enlarge/Download Table]

                         Certain Holders of Common Stock                                       

                                                                      Shares of Common Stock   
                                                                      ----------------------   
                                                                      Beneficially Owned (1)   
                                                                      ----------------------   
                                                                          Number        Percent
                                                                            of             of  
Name of Beneficial Owner                                                  Shares         Class 
------------------------                                                  ------         ----- 
                                                                                               
Rod L. Stambaugh.................................................       432,500 (2)       3.5% 
Evon A. Kelly....................................................       258,000 (3)       2.1% 
Richard S. Barton................................................         5,000 (4)         *  
Caesar Berger....................................................        10,000 (4)         *  
Chester N. Winter................................................        90,281 (5)       0.7% 

Alvin C. Rice....................................................           -0-             0% 
Roger L. Peirce                                                             -0-             0% 

John M. Liviakis.................................................     4,110,000 (6)       34.0%
  2420 "K" Street, Suite 220                                                                   
  Sacramento, CA 95816                                                                         
Robert B. Prag...................................................     1,560,000 (7)       12.5%
  2420 "K" Street, Suite 220                                                                   
  Sacramento, CA 95816                                                                         
Liviakis Group...................................................     5,385,000 (8)       43.1%
  2420 "K" Street, Suite 220                                                                   
  Sacramento, CA 95816                                                                         
entrenet Group, LLC..............................................       619,185 (9)        5.1%
  1304 Southpoint Boulevard, Suite 220                                                         
  Petaluma, CA 94954                                                                           
All directors and executive officers as a group (9 persons)......      971,965 (10)        7.7%

------------------                                                                             
<FN>                                                                                           
 *    Represents less than 1% of outstanding shares.                                           

                                      -65-                                                     

424B1
68th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 68th
(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 May 31, 1998, are deemed  outstanding.  Such               
      shares,  however,  are not deemed outstanding for the purpose of computing               
      the percentage ownership of any other person.                                            
(2)   Includes  75,000 shares  underlying a total of 75,000  options  previously               
      exercised by Mr. Stambaugh but for which a share  certificate had not been               
      issued as of May 31,  1998 and 80,000  shares  underlying  80,000  options               
      exercisable within 60 days of May 31, 1998.                                              
(3)  Includes shares underlying a total of 258,000 options exercisable within 60               
     days of May 31, 1998.                                                                     
(4)  Represents shares underlying options  exercisable at May 31, 1998 or within               
     60 days of May 31, 1998.                                                                  
(5)  Includes shares underlying a total of 77,781 options  exercisable within 60               
     days of May 31, 1998.                                                                     
(6)  The information  shown is based upon Schedule 13D/A (Amendment No. 2) dated               
     November  26,  1997 filed on behalf of Liviakis  Financial  Communications,               
     Inc.  ("LFC"),  John M.  Liviakis,  Renee A.  Liviakis  and  Robert B. Prag               
     (collectively  the "Liviakis  Group") and information  known to the Company               
     based  on its  consulting  agreement  with  LFC and the  number  of  shares               
     issuable to LFC under that agreement. John M. and Renee A. Liviakis are the               
     owners of LFC and Robert B. Prag is an executive officer of LFC. The number               
     of shares shown includes a total of 3,825,000  shares of Common Stock owned               
     by Mr.  Liviakis as an  individual,  plus  285,000  shares of Common  Stock               
     issuable to LFC and Mr.Robert B. Prag (as described in footnote (7) to this               
     table)  pursuant  to a  consulting  agreement  between  the Company and LFC               
     effective  as of July 25,  1997,  under which the Company was  obligated to               
     issue 255,000 of the shares as of May 31, 1998 and 30,000 additional shares               
     of Common Stock within 60 days of May 31, 1998.  The number of shares shown               
     does not include a total of 290,000  shares of Common Stock issuable to LFC               
     (217,500  shares) and Mr. Prag  (72,500  shares)  pursuant to a  consulting               
     agreement  entered  into  between the Company and LFC as of June 30,  1998,               
     which  is  to  become   effective  as  of  August  1,  1998.  See  "Certain               
     Transactions - Transactions with Liviakis Financial  Communications,  Inc."               
     and "Selling Security Holders."                                                           
(7)  The information  shown is based upon Schedule 13D/A (Amendment No. 2) dated               
     November  26, 1997 filed on behalf of the  Liviakis  Group and  information               
     known to the Company  based on its  consulting  agreement  with LFC and the               
     number of shares issuable to LFC under that agreement. Robert B. Prag is an               
     executive  officer of LFC. The number of shares  shown  includes a total of               
     875,000  shares  of  Common  Stock  and  400,000  shares  of  Common  Stock               
     underlying  warrants  owned  by Mr.  Prag as an  individual,  plus the full               
     285,000 shares of Common Stock issuable to LFC and Mr. Prag as described in               
     footnote  (6) to this table  which are  reported in the  Schedule  13D/A as               
     being  subject to shared voting and  dispositive  power between John M. and               
     Renee A. Liviakis,  Robert B. Prag and LFC. The number of shares shown does               
     not  include a total of  290,000  shares of Common  Stock  issuable  to LFC               
     (217,500  shares) and Mr. Prag  (72,500  shares)  pursuant to a  consulting               
     agreement  entered  into  between the Company and LFC as of June 30,  1998,               
     which  is  to  become   effective  as  of  August  1,  1998.  See  "Certain               
     Transactions - Transactions with Liviakis Financial  Communications,  Inc."               
     and "Selling Security Holders."                                                           
(8)  The information  shown is based upon Schedule 13D/A (Amendment No. 2) dated               
     November  26,  1997 filed on behalf of the  Liviakis  Group.  The number of               
     shares shown  includes all shares of Common Stock included in footnotes (6)               
     and  (7) to this  table  as to  which  any  person  in the  Liviakis  Group               
     exercises  sole or shared  voting and  disposition  power,  except that the               
     285,000 shares issuable to LFC under the consulting  agreement are included               
     only once in the share number shown despite being  included in both Messrs.               
     Liviakis' and Prag's share  ownership  figures.  The number of shares shown               
     does not include a total of 290,000  shares of Common Stock issuable to LFC               
     (217,500  shares) and Mr. Prag  (72,500  shares)  pursuant to a  consulting               
     agreement  entered  into  between the Company and LFC as of June 30,  1998,               

                                      -66-                                                     

424B1
69th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 69th
     which  is  to  become   effective  as  of  August  1,  1998.  See  "Certain               
     Transactions - Transactions with Liviakis Financial  Communications,  Inc."               
     and "Selling Security Holders."                                                           
(9)  Includes  328,750 shares which were issued upon conversion of a convertible               
     promissory  note issued as a consulting fee to entrenet as of May 20, 1998.               
     Also  includes  280,000  shares  which  were  issued  to  entrenet  (or its               
     designated  assignees) as a finder's fee (which became payable as of August               
     6, 1997).  165,200 of these  280,000  shares have been  assigned to certain               
     individual members of entrenet; the shares were issued as of April 3, 1998.               
     Also  includes  10,435  shares of Common  Stock  underlying  a Common Stock               
     Purchase  Warrant  issued  to  entrenet  as of  March  12,  1998,  which is               
     presently  exercisable.  See  "Certain  Transactions  -  Transactions  with               
     entrenet Group, LLC" and "Selling Security Holders."                                      
(10) Includes  all shares  underlying  options  and  warrants  as  described  in               
     footnotes (2) - (5) of this table,  plus 58,500 shares  underlying  options               
     issued to three additional  executive officers which are exercisable within               
     60 days of May 31, 1998.  See  "Management - Executive  Compensation."  The               
     number of shares also includes  117,684  shares that remained  subject to a               
     shareholder  voting  agreement  and a call option as of June 15, 1998.  The               
     voting agreement and call option were granted to the Company by Mr. Richard               
     P. Draper, the owner of such shares, in October 1995. Under this agreement,               
     the Company was granted authority to vote such shares in its discretion and               
     to purchase  such shares from Mr. Draper at $.25 per share until October 5,               
     1998. As of March 12, 1998, the Company  entered into an agreement with Mr.               
     Draper pursuant to which it paid Mr. Draper's assignee $25,000 and released               
     its voting and call option  rights as to 30,000 of the shares in return for               
     Mr.  Draper's  consent to allow the Company to assign its call option as to               
     the remaining  367,684  shares to a third party.  As of June 30, 1998,  the               
     Company had assigned options to purchase all 367,684 shares of Common Stock               
     under  this  agreement.   See  "Management's  Discussion  and  Analysis  of               
     Financial  Condition  and  Results of  Operations  -  Financial  Condition,               
     Capital Resources and Liquidity - Sale of Call Options as to Certain Shares               
     of Common Stock" and "Certain  Transactions  -  Transactions  with RBB Bank               
     Aktiengesellschaft."                                                                      
</FN>                                                                                          

-67-

424B1
70th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 70th
                                                        [Enlarge/Download Table]

                   Certain Holders of Series A Preferred Stock                                        

                                                                        Shares of Series A Preferred  
                                                                        ----------------------------  
                                                                        Stock Beneficially Owned (1)  
                                                                        ----------------------------  
                                                                           Number              Percent
                                                                             of                  of   
Name of Beneficial Owner                                                   Shares               Class 
------------------------                                                   ------               ----- 
                                                                                                      
Rod L. Stambaugh.......................................................      -0-                 0%   
Evon A. Kelly..........................................................      -0-                 0%   
Richard S. Barton......................................................      -0-                 0%   
Caesar Berger..........................................................      -0-                 0%   
Chester N. Winter......................................................      -0-                 0%   
Alvin C. Rice..........................................................      -0-                 0%   

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

All directors and executive officers as a group (9 persons)............                               
                                                                             -0-                 0%   

RBB Bank Aktiengesellschaft (2)........................................                               
Burgring 16                                                                                           
8010 Graz Austria                                                         1,600,000             52.3% 
The Endeavor Capital Fund..............................................                               
14/14 Divrei Chaim Street                                                                             
Jerusalem  94479 Israel                                                   1,000,000             32.7% 
CNCA - SCT Brunoy......................................................                               
Sub A/C BGP                                                                                           
30 Rue des Vallies                                                                                    
91300 Brunoy  France                                                       200,000              6.5%  
<FN>                                                                                                  
------------------                                                                                    

(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 shares of Series A  Preferred  Stock  which are subject to options,                      
      warrants or rights held by any person.                                                          
(2)   RBB Bank  Aktiengesellschaft  is the record owner of the shares. RBB holds                      
      the shares as agent for 30  individuals  who share  voting and  investment                      
      power  over the  shares.  The  Company  has been  advised  that no  single                      
      individual  in the  group  owns 5% or  more  of the  shares  of  Series  A                      
      Preferred Stock. See "Selling Security Holders."                                                
</FN>                                                                                                 

-68-

424B1
71st Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 71st
CERTAIN TRANSACTIONS

Transactions with Cardservice International, Inc.                               
-------------------------------------------------                               

      Mr.  Caesar  Berger,  a  director  of the  Company,  is also an officer of
Cardservice International, Inc. See "Management." CSI has been involved with the
Company in what is primarily a customer - vendor relationship, and CSI purchased
approximately  $698,000  and  $398,000 in product from the Company in the fiscal
years ended June 30, 1997, and 1996, respectively.  In fiscal 1996, CSI advanced
the Company  $162,500 for the purchase of raw  materials in exchange for 142,544
shares of Common  Stock,  plus the  royalty  right  described  in the  following
paragraph.  The  Company  valued the shares at 150% of the then  current  market
price for purposes of the transaction.  CSI was granted  registration  rights on
the underlying shares. In 1995, CSI was granted warrants exercisable for 100,000
shares of Common  Stock at $.10 per share,  which it  exercised  as of April 26,
1996.  Rather than exercise its  registration  rights,  CSI has sold shares from
time to time under SEC Rule 144 and as of January 31, 1998,  CSI had sold all of
the shares of Common Stock it acquired  through  exercise of the warrants and as
partial consideration for the loan.                                             

      In conjunction with the $162,500 loan, the Company obligated itself to pay
royalties  to CSI on future non- CSI sales of POS-50(R)  product  built with the
inventory  purchased  by CSI,  in the amount of $150 per unit on the first 1,000
units and $100 per unit on any  additional  units.  The  Company  accrued  total
royalties to CSI of $56,750  since the  inception of this  agreement and through
the nine months ended March 31, 1998, all of which have been paid.              

     Management of the Company believes that the transactions with CSI described
above  were on terms at least as  favorable  as could  have been  obtained  from
unaffiliated parties and all transactions with CSI were ratified by at least two
independent directors.                                                          

Transactions with Liviakis Financial Communications, Inc. ("LFC") and Affiliates
of LFC                                                                          

     In July of 1997,  the Company  entered  into a  Consulting  Agreement  with
Liviakis Financial  Communications,  Inc. ("LFC") pursuant to which LFC provides
the Company  with  financial  and  business  consulting  and public and investor
relations services.  The Company is obligated to pay Liviakis 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 are  issuable  to LFC and 25% are
issuable to Mr.  Robert B. Prag,  an  executive  officer of LFC. The Company has
agreed to register the 300,000  shares of Common  Stock  issuable to LFC and Mr.
Prag and those shares are included in the  registration  statement of which this
Prospectus is a part. See "Selling Security Holders." Pursuant to the Consulting
Agreement,  the  Company  must  also  pay LFC cash  equal  to 2.5% of the  gross
proceeds  received  in any direct  financing  located for the Company by LFC. In
connection  with  the  closing  of the  sale  of  $3,060,000  of 8%  Convertible
Debentures the Company paid LFC $76,500,  and in conjunction with the closing of
the sale of the  $2,000,000 of 6% Convertible  Subordinated  Debentures Due July
21, 2000, the Company will pay LFC $50,000,  as its finder's fee for locating JW
Charles Securities,  Inc., the finder used by the Company in the offering of the
8% Convertible Debentures and the 6% Convertible  Subordinated  Debentures.  See
"Business - History of the Company - Recent Significant  Securities Issuances `-
Private Offering of 8% Adjustable Rate Convertible  Subordinated  Debentures Due
December  31,  1999' and `-  Private  Offering  of 6%  Convertible  Subordinated
Debentures Due July 21, 2000.'"                                                 

      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 (the  "Liviakis  Warrants") to two  affiliates of
LFC,  Messrs.  John Liviakis and Robert B. Prag, in August 1997, for $500,000 in
cash. Pursuant to this transaction, Messrs. Liviakis and Prag became significant
shareholders of the Company.  See "Security Ownership of Principal  Shareholders
and Management." The Common Stock issued (and issuable pursuant to              

-69-

424B1
72nd Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 72nd
the Consulting  Agreement and upon exercise of the Liviakis Warrants) to LFC and
Messrs.  Liviakis and Prag carries  registration rights (which include the right
to register any other  shares of the Company  which they may possess at the time
of any registration in which they have a right to include  shares),  including a
one-time demand registration right and unlimited "piggyback" registrations, with
the costs thereof to be borne by the Company.  The registration rights expire at
the earlier of three years from August 4, 1997 or at such time as all shares may
be sold without  restriction under SEC Rule 144. The shares of Common Stock that
LFC and  Messrs.  Liviakis  and Prag can  acquire by  exercise  of the  Liviakis
Warrants  and  under  the  consulting   agreement  are  being  included  in  the
registration  statement  of  which  this  Prospectus  is  a  part.  However,  in
connection  with the purchase of the Company's 8% Convertible  Debentures by the
investors in that offering,  LFC and Messrs.  Liviakis and Prag agreed that they
will not commence  sales any of their shares in the Company prior to February 1,
1999. On May 12, 1998,  1,200,000 shares of Common Stock were issued to Mr. John
Liviakis  upon  exercise of his Common  Stock  purchase  warrants.  See "Selling
Security Holders."                                                              

      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.  To properly  ascribe a fair value to the  Consulting  Agreement,  the
Company  obtained an independent  valuation of the Company's share price from an
accredited valuation firm. Based on the fair market value of the Common Stock as
determined  by  the  valuation,   the  total  of  all  shares  issuable  in  the
transactions,  and the cash  proceeds  received,  the  Consulting  Agreement was
valued  at  $1,390,000  and  recorded  as  prepaid  consulting  services  with a
corresponding increase in equity. The consulting services will be amortized on a
straight-line  basis over the term of the Consulting  Agreement (one year) as an
element of operating expense, within selling, general and administrative expense
in the statement of operations, commencing with the July 25, 1997 effective date
of the agreement.                                                               

      Pursuant  to  the   agreement  by  which  they   purchased  the  Company's
securities,  Messrs.  Liviakis  and Prag were  granted  the right to approve the
appointment  of a Chief  Executive  Officer,  Chief  Financial  Officer and Vice
President  of Sales,  which they have done.  They also have the right to approve
the  nominations  of up to two  non-employee  directors.  They have approved the
appointment  of Richard  S.  Barton as a director  of the  Company  but have not
exercised  their  rights  regarding  another  director  as of the  date  of this
Prospectus.                                                                     

      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.  See "Business - History of the Company - Recent  Significant
Securities Issuances - Private Offering of 8% Adjustable Rate Convertible       
Subordinated Debentures Due December 31, 1999."                                 

      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 and Mr.
Prag are to receive  290,000  shares of Common  Stock  which are  issuable  as a
signing bonus upon execution of the New LFC Agreement, 75% to LFC and 25% to Mr.
Prag.  In  conjunction  with the entry of the New LFC  Agreement LFC and Messrs.
Liviakis and Prag agreed to a further lock-up of their Company shares,  pursuant
to which they will not be able to sell their Company  shares before  February 1,
1999, even though certain of those shares are being included in the Registration
Statement of which this Prospectus is a part. The 290,000 shares issuable to LFC
and Mr.  Prag under the New LFC  Agreement  carry  registration  rights that are
identical to those  covering  the prior shares  issued or issuable to them under
their original subscription agreements and the Original LFC Agreement,  although
they have agreed that the shares  issuable  under the New LFC Agreement will not
be included in the  registration  statement of which this  Prospectus is a part.
The Company will bear the expenses of registering the shares. LFC is entitled to
a finder's fee of 2.5% of the gross proceeds of any                             

-70-

424B1
73rd Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 73rd
financing that it introduces to the Company. In addition, the Company has agreed
to expand its Board of Directors  to include two  additional  outside  directors
which are  acceptable  to LFC.  See  "Business - History of the Company - Recent
Significant Securities Issuances," "Security Ownership of Principal Shareholders
and Management" and "Selling Security Holders."                                 

     Management of the Company believes that the  transactions  with LFC and its
affiliates  described  above were on terms at least as  favorable  as could have
been  obtained  from  unaffiliated  parties  and all  transactions  with LFC and
Messrs.  Liviakis  and Prag  have  been  ratified  by at least  two  independent
directors.                                                                      

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.  Principal  and interest are  convertible
into Common Stock of the Company over the year ending June 2, 1998,  at $.50 per
share.  See "Security  Ownership of Principal  Shareholders  and Management." 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  was sold by the  Company  in any  such  financing.  Entrenet
located  LFC and was  therefore  entitled  to a finder's  fee for that  $500,000
financing.  A difference  then  developed  between the Company and entrenet over
interpretation  of  the  provisions  specifying  the  consideration  payable  to
entrenet as its finder's fee for locating  LFC. The matter was finally  resolved
by the Company and entrenet  agreeing  that the Company  would issue  entrenet a
total of 280,000 shares of its Common Stock at such time as the Company obtained
shareholder  approval for an increase in authorized Common Stock to no less than
40,000,000  shares.  This occurred on February 6, 1998. The Company also granted
entrenet  "piggyback  registration  rights"  covering all shares of Common Stock
issuable to it under the  debenture  and as payment of the finder's  fee,  which
entitle entrenet to have their shares included in any registration  filed by the
Company.  Those shares are included in the registration  statement of which this
Prospectus is a part. See "Selling Security Holders."                           

      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
is for six months from March 12, 1998 and renews for  additional six month terms
unless at least 60 days notice is given to terminate the agreement  prior to the
end of a term.  For its advisory  services  under the  agreement,  entrenet will
receive a fee of $60,000,  payable in the form of a promissory  note bearing 10%
interest,  due on or before the earlier of March 11, 1999, or the receipt by the
Company of aggregate gross proceeds from financings of $2,000,000.  In addition,
entrenet  received a Common Stock Purchase  Warrant to purchase 10,435 shares at
$5.75 per share,  exercisable until March 11, 2003. The shares issuable pursuant
to the warrant carry piggyback registration rights that entitle entrenet to have
the shares  registered  at any time the Company  effects a  registration  of its
securities  under the Securities  Act of 1933, as amended,  subject to exclusion
for registrations on ineligible forms. See "Description of Securities - entrenet
Warrant." Upon the consummation of any financing transaction entered into by the
Company during the term of the agreement  (with the exception of financings from
certain  identified,  excluded  sources) or for two years after termination with
respect to any  financing  obtained  from a source  introduced to the Company by
entrenet, entrenet is entitled to receive cash compensation as follows: for debt
financings,  2% of the total amount of the financing,  payable in cash or in the
form of a 10% note due in one year; for equity financings, 7% of the total gross
financing  proceeds  (payable in cash),  unless  there is a licensed  investment
banker entitled to receive compensation as a result of the transaction, in which
case the amount  payable to entrenet is reduced to 2 1/2% of the gross  proceeds
(payable in cash), plus a five year Common Stock purchase warrant which entitles
entrenet  to purchase  that number of shares of Common  Stock equal in value (as
determined  by a defined fair market  price) to the full amount of  compensation
payable to entrenet  in cash,  at a per share  exercise  price equal to the then
current  market  value  of the  Common  Stock  (as  defined);  for  mergers  and
acquisitions, 5% of the total consideration                                     

-71-

424B1
74th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 74th
paid or  received  in the  transaction  (payable  in  cash),  unless  there is a
licensed  investment banker entitled to receive  compensation as a result of the
transaction,  in which case the  amount  payable  to  entrenet  is reduced to 3%
(payable in cash) of such consideration,  plus a five year Common Stock purchase
warrant  which  entitles  entrenet to  purchase  that number of shares of Common
Stock equal in value (as  determined by a defined fair market price) to the full
amount of  compensation  payable to  entrenet in cash,  at a per share  exercise
price equal to the then current  market value of the Common Stock (as  defined).
If entrenet assists the Company in locating an executive-level  candidate who is
hired by the  Company,  entrenet  is  entitled  to  receive  a fee  equal to 30%
(payable in cash) of the candidate's total first year compensation.             

     Management  of the Company  believes  that the  transactions  with entrenet
described  above were on terms at least as favorable as could have been obtained
from unaffiliated  parties and all transactions with entrenet have been ratified
by at least two independent directors.                                          

Transactions with ADATOM, Inc.                                                  
------------------------------                                                  

      The Company  purchased  office  furniture  and  computer  equipment in the
approximate amount of $200,000 through ADATOM,  Inc., a company owned by Richard
S.  Barton,  who is a director  of the  Company.  Mr.  Barton  also serves as an
executive  officer of ADATOM.  See  "Management."  ADATOM is in the  business of
selling such furniture and equipment and the Company offered to purchase through
ADATOM if it was able to meet  quotes  obtained by the  Company  from  competing
independent  suppliers of the same furniture and  equipment.  ADATOM was able to
meet such quotes.  Management of the Company  believes that the terms upon which
it has  purchased  items from ADATOM are at least as  favorable as it could have
obtained from independent, unaffiliated parties. The Company may make additional
purchases from ADATOM in the future, subject to the same conditions.            

Transactions with RBB Bank Aktiengesellschaft                                   
---------------------------------------------                                   

      As of March 12,  1998,  the Company  entered  into an  agreement  with Mr.
Richard  P.  Draper,  and his  assignee  of  397,684  shares  of  Common  Stock,
Tillicombe International,  LDC ("Tillicombe") by which Mr. Draper and Tillicombe
agreed to allow the  Company  to assign its  rights in a call  option  which the
Company had on those  shares (the "Call  Option") to a third party in return for
payment to  Tillicombe  of $25,000 and the release of the  Company's  voting and
rights in the Call  Option as to 30,000 of those  shares.  The  Company  thereby
acquired  the right to assign  the Call  Option as to  367,684  of  Tillicombe's
shares.  the Company  acquired the Call Option in October 1995,  in  conjunction
with the dissolution of a subsidiary,  Direct Data,  Inc., which the Company had
acquired  in  1994,  in  which  Mr.  Draper  was a  principal  shareholder.  See
"Description  of  Securities  - Company's  Option To Purchase  Certain  Shares."
Through June 15, 1998,  the Company sold and assigned the Call Option on 250,000
of such shares to RBB Bank  Aktiengesellschaft,  the agent which owns  1,600,000
shares  of the  Company's  Series  A  Preferred  Stock.  See  "Selling  Security
Holders." RBB Bank purchased the Call Option in five  increments of 50,000 share
options  each,  and paid the Company  85% of the average  last sale price of the
underlying  shares over the five days prior to the date of  acquiring  each Call
Option,  less  the  Call  Option  exercise  price  of $.25  per  share.  In each
transaction, RBB Bank paid the acquisition price for the Call Option, as well as
the exercise  price to Tillicombe  prior to taking  delivery of the shares.  The
Company realized a total of  approximately  $997,402 from the sale of these Call
Options to RBB Bank.                                                            

     On June 26, 1998, the Company issued a $250,000 promissory note to RBB Bank
Aktiengesellschaft which was payable in full on or before September 9, 1998. The
loan was intended as a short-term bridge loan and was required to be repaid from
the proceeds of any aggregate equity placements done by the Company which amount
to at least  $1,000,000  (from which  aggregate  proceeds any additional  bridge
financings  received between the date of the note and such equity financings are
excluded). The note was secured by certain assets of the Company,  including all
accounts  receivable  (excluding  certain  receivables  pledged  or which may be
pledged in connection with inventory financing), all inventory (excluding       

-72-

424B1
75th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 75th
Tranz  Enablers  securing  amounts  owing to inventory  financiers,  and certain
specified inventory  previously pledged to Omron Systems),  all fixed assets and
all deposit  accounts and intangible  assets of the Company.  In connection with
the  issuance of the Note,  the Company  also  granted RBB Bank a right of first
refusal to fund any such  additional  bridge  financings  needed by the Company.
This right must be  exercised  within one day of RBB Bank being  notified of the
terms of any such additional  bridge  financing.  In conjunction with this loan,
the Company 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.  The  warrant  has  antidilution  provisions  that  protect the holders
against  dilution in the event of certain  transactions.  The  warrant  also has
"piggyback"  registration  rights  entitling the holders to have the  underlying
shares  registered  in  any  registration  done  by  the  Company,   other  than
registrations on ineligible  forms and the Registration  Statement of which this
Prospectus forms a part. The expenses of such registrations  (other than selling
expenses) are to be borne by the Company. This loan was repaid from the proceeds
of the sale of the Company's 6% Convertible Subordinated Debentures Due July 21,
2000. See  "Description  of Securities `- RBB Bank  Promissory  Note' and `- RBB
Bank Common Stock Purchase Warrant.'"                                           

     As of July 10, 1998,  the Company  reached  agreement with RBB Bank for its
participation in the purchase of $1,000,000 minimum and up to $4,000,000 maximum
of 6%  convertible  debentures  of the Company,  payable in full two years after
issuance,  if not  converted to Common Stock before that date. On July 22, 1998,
RBB Bank  purchased  $1,000,000  of the  Company's 6%  Convertible  Subordinated
Debentures Due July 21, 2000 on July 22, 1998. See "Description of Securities `-
6%  Convertible  Subordinated  Debentures  Due July 21, 2000 and  `Common  Stock
Purchase Warrants - Common Stock Purchase Warrants Expiring July 21, 2001.'"    

     Management  believes that the  transactions  with RBB Bank described  above
were  on  terms  at  least  as  favorable  as  could  have  been  obtained  from
unaffiliated parties and all transactions with RBB Bank have been ratified by at
least two independent directors.                                                

-73-

424B1
76th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 76th
 DESCRIPTION OF SECURITIES

Authorized Capital                                                              
------------------                                                              

      The authorized  capital stock of the Company consists of 40,000,000 shares
of no par value common stock (the "Common  Stock") and  15,000,000  shares of no
par value  preferred stock (the "Preferred  Stock"),  4,000,000  shares of which
have been  designated as Series A Cumulative  Convertible  redeemable  Preferred
Stock (the "Series A Preferred Stock").  Because only 3,060,000 of the 4,000,000
shares of Series A  preferred  Stock  were  sold are  outstanding,  the Board of
Directors will likely remove 940,000 shares of the Series A Preferred Stock from
the designation  and reinstate it as authorized and available for  redesignation
and issuance.                                                                   

Common Stock                                                                    
------------                                                                    

      The Common Stock has  attributes  typical of common stock.  Each share has
one vote on all matters submitted to shareholders and is entitled to participate
pro rata in all  distributions  made on the Common  Stock  after  payment of all
preferences on any other class having superior rights.  Cumulative voting in the
election of directors is not allowed and the Common Stock is not entitled to any
preemptive  rights to purchase or subscribe  for any  securities to be issued by
the Company.                                                                    

Transfer Agent for Common Stock                                                 
-------------------------------                                                 

     The  transfer  agent  and  registrar  for  the  Common  Stock  is  American
Securities  Transfer & Trust, Inc.  ("AST").  AST's operations center address is
938 Quail Street,  Suite 101,  Lakewood,  Colorado  80215-5340 and its telephone
number is (303) 234-5300.                                                       

Certain Effects Of Authorized But Unissued Stock                                
------------------------------------------------                                

      As of  June  30,  1998,  there  are  22,351,166  shares  of  Common  Stock
(including  the  reservation  of a total of  1,017,241  shares of  Common  Stock
estimated to be issuable  upon  conversion  of, and as dividends  on,  3,060,000
shares of Series A Preferred  Stock,  based on a projected market price of $4.00
per  share  for the  Common  Stock  at the time of  conversion  and  payment  of
dividends)  and  11,940,000  shares of  Preferred  Stock  available  for  future
issuance  without further  shareholder  approval  (subject to reservation of any
additional  shares  of Common  Stock as may be  necessary  to honor:  conversion
rights of, or dividends  payable on, the Series A Preferred  Stock if the market
price  of the  underlying  Common  Stock  is  less  than  $4.00  per  share;  or
antidilution   provisions  of  any  outstanding   options,   warrants  or  other
convertible  securities).  These additional shares may be utilized for a variety
of corporate  purposes  including  future  private or public  offerings to raise
additional   capital,   to  pay  Company  debts  or  to   facilitate   corporate
acquisitions.                                                                   

      One of the effects of the  existence  of unissued  and  unreserved  Common
Stock  and  Preferred  Stock may be to enable  the Board of  Directors  to issue
shares to persons  friendly  to  current  management  which  could  render  more
difficult or discourage an attempt to obtain  control of the Company by means of
a merger,  tender offer,  proxy contest or  otherwise,  and thereby  protect the
continuity of the Company's  management.  Such  additional  shares also could be
used to dilute the stock  ownership of persons  seeking to obtain control of the
Company.                                                                        

      With respect to  authorized  and unissued  Preferred  Stock,  the Board of
Directors may determine the rights, preferences,  privileges and restrictions of
the unissued  Preferred  Stock without any further action by  shareholders.  The
purpose of  authorizing  the Board of  Directors  to  determine  such rights and
preferences  is to  eliminate  delays  associated  with a  shareholder  vote  on
specific issuances. The Board of Directors may issue Preferred Stock with voting
and  conversion  rights  which could  adversely  affect the voting  power of the
holders of Common Stock, and which could, among other things, have the effect of
delaying,  deferring or preventing a change in control of the Company.  However,
any issuance of preferred stock with voting rights could have the               

-74-

424B1
77th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 77th
effect of reducing the Company's  ability to use it                             
NOLs prior to  expiration.  See "Risk Factors - Risks  Relating to the Company's
Securities - Possible Loss of NOLs."                                            

      The Company does not currently have any plans to issue  additional  shares
of Common Stock or  Preferred  Stock other than shares of Common Stock which may
be issued as dividends  on, or in conversion  of, the Series A Preferred  Stock,
and upon the exercise of options,  warrants  and other  present  commitments  to
issue  Common  Stock which have been  granted to date or which may be granted in
the future to the Company's employees, nonemployee directors and consultants.   

Certain Anti-Takeover Provisions of Colorado Law                                
------------------------------------------------                                

      Under  Section  7-106-205 of the Colorado  Business  Corporation  Act, the
Board of Directors of a Colorado corporation may issue rights, options, warrants
or other convertible  securities  (hereafter  "rights") entitling the holders of
the rights to purchase,  receive or acquire shares or fractions of shares of the
corporation  or assets or debts or other  obligations of the  corporation,  upon
such  terms as are  determined  by the Board of  Directors,  but  subject to the
fiduciary  duties of directors to the  shareholders of the  corporation.  In the
absence of fraud,  the  judgment of the Board of Directors  in  determining  the
adequacy  of the  consideration  received by the  corporation  for the rights is
conclusive. The Board of Directors is free to structure the issuance or exercise
of the rights in a manner  which may  exclude  "significant  shareholders"  from
being  entitled to receive  such  rights or to exercise  such rights or in a way
which may impose  conditions  on the  exercise of such rights which is different
for "significant  shareholders" as compared to other  shareholders.  The statute
defines  "significant  shareholder"  as being any person owning,  or offering to
acquire,  directly or indirectly,  a number or  percentage,  as specified by the
Board of Directors, of the outstanding voting shares of the corporation,  or any
transferee of such person.  By structuring  and issuing rights of this type, the
Board of Directors  could  effectively  prevent a takeover of the corporation by
persons  deemed  hostile  to  management.  Nothing  presently  contained  in the
Articles of  Incorporation  of the Company  prohibits the Board from using these
types of rights in this manner.                                                 

Preferred Stock                                                                 
---------------                                                                 

      The Company is authorized to issue a total of 15,000,000  shares of no par
value preferred stock (the "Preferred  Stock") which is commonly known as "blank
check"  Preferred  Stock. The term "blank check" Preferred Stock refers to stock
for  which  the  designations,   preferences,   conversion  rights,  cumulative,
relative,  participating,  optional or other rights,  including  voting  rights,
qualifications,  limitations or restrictions thereof are determined by the board
of directors of a company.  The Board of  Directors  may  designate a series and
issue shares of Preferred  Stock for a variety of corporate  purposes  including
future private or public offerings to raise additional  capital,  to pay Company
debts  or to  facilitate  corporate  acquisitions,  conversions  of  convertible
securities,  employee benefit plans,  stock splits effected in the form of stock
dividends,  and other general corporate  purposes.  This can be done without any
additional shareholder approval, except as might be required by applicable stock
exchange rules. The Company is not presently subject to any stock exchange rules
which  would  require  the  Board to  secure  shareholder  approval  for such an
issuance of Preferred Stock.                                                    

     There are  presently  4,000,000  shares of Preferred  Stock which have been
designated as Series A Cumulative  Convertible  Redeemable  Preferred Stock (the
"Series A Preferred  Stock").  A total of 3,060,000 shares of Series A Preferred
Stock are issued and  outstanding.  Such  shares  were  issued as of February 9,
1998,  upon  designation  of the  Series A  Preferred  Stock,  in  exchange  for
$3,060,000 of the Company's 8%  Convertible  Debentures.  The Board of Directors
will  likely  dedesignate  the  remaining  940,000  shares of Series A Preferred
Stock,  and those  940,000  shares will return to the status of  authorized  and
unissued shares of Preferred  Stock.  See  "Description of Securities - Series A
Preferred Stock," below.                                                        
-75-

424B1
78th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 78th
Description  of  "Blank  Check"   Preferred   Stock,   Including   Anti-Takeover
Implications                                                                    

      The Board of Directors may  authorize  the  issuance,  at any time or from
time to time, of one or more series of Preferred  Stock,  and would at that time
determine all  designations,  relative rights,  preferences,  and limitations of
such stock including but not limited to the following: designation of series and
numbers of shares;  dividend rights;  rights upon liquidation or distribution of
assets of the Company;  conversion or exchange  rights;  redemption  provisions;
sinking fund provisions; and voting rights.                                     

      One of the primary  purposes of  authorizing  directors to  designate  and
issue  shares  of  Preferred  Stock is to  eliminate  delays  associated  with a
shareholder  vote on specific  issuances.  The Board of Directors may,  however,
subject to their duties to existing  shareholders,  issue  Preferred  Stock with
voting and conversion  rights which could  adversely  affect the voting power of
the holders of Common  Stock,  and which  could,  among other  things,  have the
effect of delaying,  deferring or preventing a change in control of the Company.
The Board of Directors is required to make any  determination to issue shares of
Preferred  Stock  based  on  its  judgment  as to  the  best  interests  of  the
shareholders and the Company; however, the Board of Directors could issue shares
of Preferred Stock that could,  depending on the terms of such series, make more
difficult an attempt to obtain  control of the Company by merger,  tender offer,
proxy contest or other means.                                                   

      While the Company may consider  effecting an equity  offering of Preferred
Stock or  otherwise  issuing  such stock in the future for  purposes  of raising
additional  capital or for  acquisitions,  the Company,  other than the Series A
Preferred Stock that was immediately  designated upon authorization of Preferred
Stock by the Company's  shareholders,  has no agreements or understandings as of
the date hereof with any third party to effect any such offering or acquisition,
or to purchase any shares offered in connection  therewith,  or to vote any such
shares,  and no assurances  are given that any offering will in fact be effected
or that an  acquisition  pursuant  to which such  shares  may be issued  will be
proposed and consummated. Therefore, the terms of any Preferred Stock that might
be designated and issued in the future by the Board of Directors (other then the
Series A Preferred  Stock  described  herein) cannot be stated or estimated with
respect to any or all of the securities authorized.                             

Series A Preferred Stock                                                        
------------------------                                                        

      The Company's Articles of Incorporation were amended by director action as
of February 9, 1998, to designate  4,000,000 shares of Preferred Stock as Series
A Cumulative  Convertible  Redeemable  Preferred  Stock (the "Series A Preferred
Stock"),  following  shareholder  authorization  of up to  15,000,000  shares of
Preferred Stock on February 6, 1998.                                            

      $3,060,000 of the Company's 8% Convertible Debentures,  which were sold as
of December 10, 1997,  automatically converted into 3,060,000 shares of Series A
Preferred  Stock upon the  authorization  of the Series A Preferred Stock by the
Company.  At the time of the offering of the 8%  debentures  the Company was not
authorized to issue Preferred Stock; consequently,  the Company elected to issue
the 8% Convertible Debentures, subject to the condition that upon approval of an
adequate number of shares of Preferred Stock by shareholders, the 8% Convertible
Debentures would  automatically  convert into shares of Series A Preferred Stock
at the rate of one  share of  Series A  Preferred  Stock  for each  dollar of 8%
Convertible  Debentures  owned by an  investor at the time.  The 8%  Convertible
Debentures  therefore had essentially  identical terms as the Series A Preferred
Stock  into  which they  converted,  insofar  as the right to  receive  interest
(dividends on the Series A Preferred  Stock),  conversion  rights,  registration
rights  relating  to shares of  Common  Stock  issuable  upon  conversion  or as
interest on the 8% Convertible Debentures,  and the Company's redemption rights.
Therefore,  no description of the 8% Convertible Debentures has been included in
this section as none of the 8% Convertible  Debentures remains outstanding as of
the date of this Prospectus.                                                    

-76-

424B1
79th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 79th
      The Series A Preferred Stock is convertible into shares of Common Stock at
the option of the holders  and  dividends  on the Series A  Preferred  Stock are
payable in shares of Common  Stock,  as  described  below.  The shares of Common
Stock  issuable upon  conversion of, and as dividends on, the Series A Preferred
Stock,  are  being  registered  in the  registration  statement  of  which  this
Prospectus is a part. See "Selling Security Holders."                           

  The Series A Preferred Stock has the following rights and preferences.

Face Value                                                                      

      For all  calculations for which a value of the Series A Preferred Stock is
needed,  such as dividend payments and conversion ratios, the Series A Preferred
Stock has a designated  face value of $1.00 per share,  which was the equivalent
purchase price of the Series A Preferred Stock.                                 

Conversion into Common Stock                                                    

     The Series A  Preferred  Stock is  convertible  at the option of the Holder
into shares of Common Stock  effective  upon the earlier of (i) a declaration of
effectiveness by the SEC of a registration  statement  covering the Common Stock
into which the Series A  Preferred  Stock is  convertible  or (ii) 150 days from
December 10, 1997. The Series A Preferred Stock will be convertible  into Common
Stock based on the face value of the Preferred  Stock being  converted at a rate
(the  "Conversion  Price")  equal to the lesser of (i) $6.00 per share of Common
Stock or (ii) 80% 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.
Subject  to  certain  penalties  for  failure  to  obtain   effectiveness  of  a
registration  statement  covering  the  shares of  Common  Stock  issuable  upon
conversion of, and as dividends payable on, the Series A Preferred Stock, within
150 days of December 10, 1997 (which is May 11, 1998), the Conversion Price will
in no case be less than  $4.00 per share of Common  Stock for the first 270 days
following December 10, 1997 (the "Minimum Conversion Price"). After such 270 day
period,  the  Minimum  Conversion  Price is  eliminated.  If the Company has not
obtained effectiveness of a registration statement covering the shares of Common
Stock  issuable upon  conversion  of, and as dividends  payable on, the Series A
Preferred  Stock by May 11, 1998,  the Conversion  Price (or Minimum  Conversion
Price,  if then in effect) for the Series A Preferred Stock is discounted by two
percent (2%) off the then-existing  Conversion Prices. An additional two percent
discount  applies  for each  thirty day period  (or  fraction  of any thirty day
period)  during which the  registration  statement is not  effective  after such
150th day and such  discount will apply  thereafter to determine the  Conversion
Price or Minimum Conversion Price applicable to the Series A Preferred Stock. As
of the date of this Prospectus,  a discount of an additional six percent (6%) is
applicable to the Conversion Prices; therefore the Conversion Price is presently
the  lesser  of $6.00  per  share or 74% of the  Market  Price  and the  Minimum
Conversion  Price is $3.76 per share. No fractional  shares of Common Stock will
be issued upon  conversion  of the Series A Preferred  Stock;  rather,  a holder
entitled to a  fractional  share may receive  the next  higher  whole  number of
shares of Series A Preferred Stock if the fractional  share to which such Holder
is  otherwise  entitled is equal to 0.5 or greater,  or the next lower number of
whole shares if the fractional share to which such Holder is otherwise  entitled
is less than 0.5. Instead of applying the rounding formula,  the Company, at its
election,  may pay cash in lieu of any fractional share otherwise  issuable upon
conversion of the Series A Preferred  Stock. The Company is obligated to deliver
share  certificates  to the holders of the Series A Preferred Stock within eight
business days of the date it receives a properly submitted conversion notice and
is subject to an  escalating  penalty  (based on the face amount of the Series A
Preferred  Stock being  converted)  of for each day beyond such eight day period
that delivery of share certificates is late.                                    

      The shares of Common  Stock into  which the  Series A  Preferred  Stock is
convertible  and which are issuable as dividends on the Series A Preferred Stock
are hereafter referred to as the "D/PS Common Stock."                           

-77-

424B1
80th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 80th
Dividends                                                                       

      Holders of the Series A Preferred Stock are entitled to receive cumulative
quarterly dividends,  when, as and if declared by the Board of Directors, out of
the  funds of the  Company  legally  available  therefor,  at the  option of the
holder, initially at a per annum rate of 8% per share. The dividend rate will be
reduced  to 4% per  annum  upon  initial  effectiveness  of an SEC  registration
statement  covering the shares of Common Stock into which the Series A Preferred
Stock is convertible.  Dividends are payable as of the record dates of March 31,
June 30, September 30 and December 31 of each year, commencing on the first such
date  following the date of original  issuance of the Series A Preferred  Stock.
Dividends on the Series A Preferred  Stock will be  cumulative  from the date of
original  issuance,  and will be payable to holders of record as they  appear on
the stock books of the Company on such record  dates.  Payment dates shall be no
more  than 15 days  after the  record  dates.  Any  unpaid  dividends  will bear
interest at the same rate as the  dividend  rate then in effect for the Series A
Preferred  Stock.  The accrued  interest on the 8% Convertible  Debentures which
converted into shares of Series A Preferred  Stock on February 9, 1998, is to be
paid at the same time as the next dividend on the Series A Preferred Stock.     

      Unless the full amount of  cumulative  dividends on the Series A Preferred
Stock have been paid or sufficient  funds set aside therefor,  dividends may not
be paid or declared and set aside for payment and other  distribution may not be
made on the Common Stock or any other stock of the Company ranking junior to the
Series A Preferred Stock as to dividends.                                       

      Under Colorado law, dividends or distributions to shareholders may be made
only under certain circumstances.  Dividends or distributions may not be paid in
cash or property of the Company if after giving effect to such  distribution the
corporation  (1) would not be able to pay its  debts as they  become  due in the
ordinary  course or (2) the  corporation's  total  assets would be less than its
total  liabilities plus the amount that would be needed, if the corporation were
to be dissolved  at the time of the  distribution,  to satisfy the  preferential
rights upon dissolution of shareholders whose  preferential  rights are superior
to those receiving the  distribution.  The Company's ability to pay dividends in
the future may  therefore  depend  upon its  financial  results,  liquidity  and
financial condition.                                                            

Registration Rights of Holders of Series A Preferred Stock                      

     The Company  entered into an agreement  with the purchasers of the Series A
Preferred Stock to file a registration  statement with the SEC covering the D/PS
Common Stock within 90 days of December 10, 1997 (which was March 10, 1998). The
Company  agreed  to  use  its  best  efforts  to  obtain  effectiveness  of  the
registration  statement.  If the  Company was unable to do so within 150 days of
December 10, 1997 (which was May 11,  1998),  the  Conversion  Price (or Minimum
Conversion  Price,  if then in  effect)  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 or  Minimum  Conversion  Price
applicable  to the  Series  A  Preferred  Stock.  The  Company  did not file the
registration  statement by March 10, 1998, nor obtain its  effectiveness  by May
11, 1998 and as a result,  as of the date of this  Prospectus,  a discount of an
additional  six percent (6%) is applicable to the Conversion  Prices;  therefore
the  Conversion  Price is presently  the lesser of $6.00 per share or 74% of the
Market Price and the Minimum Conversion Price is $3.76 per share. The Company 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 the Company,  except for selling expenses,  commissions or counsel fees
incurred by or on behalf of the holders of Series A Preferred Stock.            

      The Company has also  granted the holders of the Series A Preferred  Stock
the right to be included in an unlimited number of "piggyback  registrations" if
and when the Company  registers  any  securities  for its own                   

-78-

424B1
81st Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 81st
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.                                                         

      The  Company  and the  holders of the Series A  Preferred  Stock have also
agreed to indemnify each other for certain  liabilities to which they may become
subject  in  connection  with the sale of the shares of Common  Stock  under any
registrations.  See "Commission  Position on Indemnification  for Securities Act
Liabilities."                                                                   

Liquidation Rights                                                              

      In the event of any voluntary or involuntary  liquidation,  dissolution or
winding up of the Company,  before any distribution of assets is made to holders
of Common Stock or any other stock of the Company  ranking  junior to the shares
of Series A Preferred  Stock upon  liquidation,  dissolution  or winding up, the
holders of Series A Preferred  Stock shall receive a  liquidation  preference of
$1.00  per share and  shall be  entitled  to  receive  all  accrued  and  unpaid
dividends  through  the date of  distribution.  If,  upon  such a  voluntary  or
involuntary liquidation, dissolution or winding up of the Company, the assets of
the  Company are  insufficient  to pay in full the  amounts  described  above as
payable with respect to the Series A Preferred  Stock, the holders of the Series
A Preferred Stock will share ratably in any such  distributions of assets of the
Company first in proportion to their respective  liquidation  preferences  until
such  preferences  are paid in full, and then in proportion to their  respective
amounts of accrued but unpaid  dividends.  After payment of any such liquidation
preference and accrued dividends, the shares of Series A Preferred Stock are not
entitled  to any  further  participation  in any  distribution  of assets by the
Company.                                                                        

      A  consolidation  or  merger  of  the  Company  with  or  into  any  other
corporation will not be deemed to be a liquidation, dissolution or winding up of
the  Company,  provided  it is  approved by a majority of the Series A Preferred
Stock.                                                                          

Optional Redemption                                                             

      The Series A Preferred  Stock is subject to redemption in whole or in part
at the  election  of the  Company  upon not less  than 30 nor more than 60 days'
notice  by mail,  at any time up to 270 days  following  December  10,  1997 if,
during such  period,  the closing bid price of the Common  Stock for at least 20
trading  days in any  consecutive  30 trading  day period is less than $4.00 per
share. To redeem the Series A Preferred  Stock, the Company must pay 118% of the
principal amount being redeemed, together with accrued but unpaid interest owing
to the date of redemption.  If the 20 day period falls wholly within the last 60
days of the 270 day period,  then the Company  will have a full 60 days from the
end of the 270 day period within which to redeem the Series A Preferred Stock.  

      The Company may also redeem any Series A Preferred Stock outstanding after
36 months from  December 10, 1997 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 are to be
redeemed,  the  shares  to be  redeemed  shall  be pro  rata  among  all  shares
outstanding.  On and after  the date  fixed for  redemption,  provided  that the
redemption  price  (including any accrued and unpaid  dividends to but excluding
the date fixed for  redemption)  has been duly paid or provided  for,  dividends
shall cease to accrue on the Series A  Preferred  Stock  called for  redemption,
such shares  shall no longer be deemed to be  outstanding  and all rights of the
holders of such shares as  shareholders  of the Company shall cease,  except the
right to receive  the monies  payable  upon such  redemption,  without  interest
thereon, upon surrender of the certificates evidencing such shares.             

-79-

424B1
82nd Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 82nd
Voting Rights                                                                   

      The  holders of the Series A  Preferred  Stock will have no voting  rights
except as described  below or as required by law. In  exercising  any such vote,
each outstanding share of Series A Preferred Stock will be entitled to one vote,
excluding  shares held by the Company or any  affiliate  of the  Company,  which
shares shall have no voting rights.                                             

      As long as any Series A Preferred  Stock is  outstanding,  the Company may
not,  without  the  affirmative  vote or consent of the  holders of at least 50%
(unless a higher  percentage  shall then be required by  applicable  law) of the
outstanding  shares of Series A Preferred Stock amend or repeal any provision of
the Company's  Articles of  Incorporation  (including the Designation) or Bylaws
which would have the effect of altering,  changing or amending the  preferences,
rights,  privileges,  or powers of, or the restrictions provided for the benefit
of, the Series A Preferred Stock.                                               

Right of First Refusal on Subsequent Financings                                 

     The holders of the Series A Preferred  Stock have a right of first  refusal
to purchase any equity securities  offered privately by the Company.  This right
continues  until the share of Common  Stock  underlying  the Series A  Preferred
Stock have been registered with the SEC for public sale.                        

Transfer Agent and Registrar for Series A Preferred Stock                       

     The Company acts as transfer agent and registrar for the Series A Preferred
Stock, which is not publicly traded.                                            

6% Convertible Subordinated Debentures Due July 21, 2000                        
--------------------------------------------------------                        

     The Company  completed  an offering of  $2,000,000  principal  amount of 6%
Convertible  Subordinated  Debentures due July 21, 2000 (the "6% Debentures") on
July 27, 1998.                                                                  

     The 6%  Debentures  are payable in full two years after the date of initial
issuance,  which  was  July 22,  1998  (the  "Initial  Issuance  Date"),  if not
converted to Common Stock before that date.  The 6%  Debentures  pay interest in
cash at the rate of six percent (6%) per annum,  payable quarterly in arrears at
each of March 31, June 31, September 31 and December 31 (with the first interest
payment due on or before January 15, 1999 for the entire period from the date of
issuance of the 6% Debentures through December 31, 1998).                       

     The 6% Debentures are convertible into shares of Common Stock at the option
of the  holders at the lesser of: 80% of the  average  closing  bid price of the
Common Stock over the five trading days prior to conversion;  or $4.25 per share
(the "Fixed Conversion  Price").  Fifty percent of the 6% Debentures held by any
holder  become  convertible  on the  earlier of  effective  registration  of the
underlying  shares with the SEC or 120 days after the Initial Issuance Date. The
remaining 50% of the 6% Debentures become convertible 150 days after the Initial
Issuance Date. Subject to certain adjustments described below, the 6% Debentures
cannot be converted below a "floor" price,  which is $2.125 per share. The floor
is eliminated  180 days after the Initial  Issuance  Date. If the Company issues
any other  security  convertible  into shares of Common Stock within 180 days of
the  Initial  Issuance  Date  with  a  floor  price  less  than  that  of the 6%
Debentures,  the  Debenture  floor price is reduced to that lesser  amount.  Any
conversion   restrictions   (both  time  and  price)  are  eliminated  upon  the
announcement  of a  consolidation,  merger or other business  combination of the
Company in which the Company is not the surviving entity.                       

     Once the underlying  Common Stock has been  registered  with the SEC for at
least 90 days and the Common  Stock has traded at or above $8.50 for at least 20
consecutive  trading  days  (based on the  average                              

-80-

424B1
83rd Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 83rd
closing bid price over such period),  the Company can require  conversion of the
6% Debentures,  subject to certain  restrictions  if the stock is suspended from
trading or the registration of the underlying Common Stock is suspended.        

     The  Company  may redeem  the 6%  Debentures  at any time from the  Initial
Issuance  Date to 120 days  thereafter  if the Common Stock is trading above the
floor  price,  on the  following  basis:  to day 60 at 105% of face  value  plus
accrued  interest;  from day 61 to day 90 at 112.5% of face value  plus  accrued
interest;  and  from  day 91 to day  120 at  120% of  face  value  plus  accrued
interest.  At the time of any such  redemption,  the  Company  must  also  issue
additional  Common Stock purchase warrants for 50,000 shares of Common Stock per
$1,000,000 of redeemed 6% Debentures, exercisable for three years at the closing
bid price on the day prior to redemption.                                       

     Any 6%  Debentures  that have not been  converted to Common Stock as of the
maturity date, or upon a merger,  consolidation  or other sale of the Company or
its assets in which the Company is not the  surviving  entity,  are to either be
converted  into Common Stock at the  conversion  price then in effect or, at the
option of the holders, must be redeemed by the Company.                         

Registration Rights of the 6% Debentures                                        

     The  Company  has agreed  that it will file to  register  the Common  Stock
underlying the 6% Debentures with the SEC within 75 days of the Initial Issuance
Date and that it will respond to initial SEC comments  within 15 days of receipt
and any  subsequent  SEC  comments  within 10 days of receipt.  In the event the
registration  is not  effective  with the SEC  within 120  calendar  days of the
Initial  Issuance  Date, the Company must 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.  In the event the registration is
not effective by the 150th day after the Initial  Issuance Date, the Company can
be required by the  holders to redeem the 6%  Debentures  at 120% of face value,
plus accrued interest to the date of redemption. The Company is obligated to pay
all registration  expenses incurred in registering the shares for the holders of
the 6% Debentures.                                                              

Common Stock Purchase Warrants                                                  
------------------------------                                                  

      The Company  presently has the following  common stock  purchase  warrants
outstanding:                                                                    

Liviakis Warrants                                                               

      In August 1997,  for total  consideration  of  $500,000,  the Company sold
3,500,000  shares of Common  Stock and  warrants to two  affiliates  of Liviakis
Financial  Communications,  Inc.,  Messrs.  John  Liviakis and Robert Prag.  The
warrants entitle the holders to purchase up to 1,600,000 shares of the Company's
Common Stock at $.01 per share commencing January 15, 1998 and through August 4,
2002.  The warrant  shares (as well as the  3,500,000  shares  issued to Messrs.
Liviakis and Prag,  the 300,000 shares  issuable under the consulting  agreement
effective  as of July 25,  1997  between  the  Company  and  Liviakis  Financial
Communications,  Inc. and any other shares of Common Stock that Messrs. Liviakis
or Prag own or have the  right  to  acquire)  carry  registration  rights  which
entitle the holders of a majority of the shares to have such shares  included in
any appropriate registration statement filed by the Company under the Securities
Act of 1933 for three years from August 4, 1998 (the "piggyback  rights") plus a
one time right to have any shares owned or acquirable  by such majority  holders
registered upon demand.  The Company must keep the  registration  statement open
for two  years at its  expense.  The  Liviakis  Warrants  also  contain  certain
antidilution  provisions  which protect the holders against  issuances of Common
Stock at prices less than current market. Messrs.  Liviakis and Prag have waived
these  antidilution  rights as to issuances of Common Stock  dividends  upon the
shares of Series A Preferred Stock. On May 12, 1998,  1,200,000 shares of Common
Stock were  issued to Mr.                                                       
-81-

424B1
84th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 84th
John  Liviakis  upon  exercise  of his  Common  Stock                           
purchase  warrants.  See  "Security  Ownership  of  Principal  Shareholders  and
Management,"  "Certain  Transactions  -  Transactions  with  Liviakis  Financial
Communications,  Inc.  ("LFC") and  Affiliates of LFC" and "Risk Factors - Risks
Relating to the  Offering  and the  Company's  Securities  - Offering to Benefit
Certain   Existing   Shareholders   and  Other  Persons  Holding  the  Company's
Securities" and "Selling Security Holders."                                     

Underwriters' Warrants                                                          

      In  connection  with its initial  public  offering  which was completed in
December 1993, the Company issued warrants to the  underwriters of that offering
exercisable  to  purchase  up to 165,000  shares of Common  Stock at $12.325 per
share,  through  December  1, 1998 (the  "Underwriters'  Warrants").  The shares
underlying the Underwriters Warrants (the "U/W Shares") have registration rights
exercisable  through  December 1, 1999, that require the Company to register the
stock for public resale,  two times only, on demand of the holders of a majority
of the Underwriters'  Warrants and/or the U/W Shares.  The first registration is
at the expense of the Company, while the second is at the expense of the holders
of the Underwriter's  Warrants or U/W Shares.  In addition,  an U/W Shares carry
rights  to be  included  in an  unlimited  number of  "piggyback  registrations"
through December 1, 2000, subject to certain restrictions if the offering(s) are
underwritten and the underwriter objects to inclusion of the U/W Shares.  Should
the  Company  refuse to register  the U/W Shares on demand,  or fail to file the
demand registration statement within 75 days after demand is made (90 days under
certain  circumstances) the Company is obligated to buy back the U/W Shares at a
price equal to fair market value (as defined in the warrant  agreement) less the
exercise price of the Underwriters' Warrants.                                   

      The  Underwriters'  Warrants  also  contain  anti-dilution  provisions  to
protect the holders  against  dilution in the event the Company issues shares of
Common Stock at less than market value (as defined in the Underwriters'  Warrant
Agreement).  Adjustments  will be required to be made to the exercise  price and
number of shares issuable upon exercise of the Underwriters'  Warrants each time
Common  Stock is issued at a discount to market  pursuant to  conversion  of the
Series A Preferred Stock.                                                       

Former Management Warrants                                                      

      Prior to going  public,  the Company  issued three  warrants to purchase a
total of 250,000 shares of Common Stock.  The warrants were issued to one former
officer/director  (two, 50,000 share warrants) (the "Directors's  Warrants") and
one former officer (one 150,000 share warrant) (the "Officer's  Warrants").  All
of these warrants are  exercisable at $4.00 per share.  The Director's  Warrants
were originally  exercisable  through April 12, 1998;  however,  the Company has
agreed  to extend  the  expiration  date of the  Directors'  Warrants  until the
earlier  of six  months  from the  effective  date of a  registration  statement
including the shares underlying the 50,000 shares warrant which has registration
rights or April 12,  1999.  The  Officer's  Warrant  expires in April 2003.  The
Company is obligated to register 50,000 shares  underlying one of the Director's
Warrants on demand of the holder two times only, with the first  registration at
Company  expense  and the second  registration  at the  expense  of the  warrant
holder.  The Company  received a demand for registration of the 50,000 shares in
November 1997 and is including the shares underlying that Directors'  Warrant in
the  Registration  Statement of which this Prospectus is a part. The expenses of
this  registration  are  being  borne  by the  Company.  See  "Selling  Security
Holders."  The other 50,000 share  Director's  Warrant had  registration  rights
which were satisfied by the Company by inclusion of the underlying shares in the
Company's initial public offering  registration and does not have any additional
registration   rights.  The  150,000  share  Officer's  Warrant  does  not  have
registration rights.                                                            

Direct Data Warrants                                                            

      The Company  issued  warrants to purchase a total 29,548  shares of Common
Stock to the former shareholders of Direct Data, Inc., exercisable at $2.625 per
share. Of those warrants, 8,947 have been                                       

-82-

424B1
85th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 85th
exercised,  5,752 have expired,  and the  remaining  14,849 expire as of May 31,
1998.  The shares  underlying  the  warrants  have  demand  registration  rights
exercisable  two  times  only,  by which  the  holders  can  demand  to have the
underlying  shares  registered,  at the  Company's  expense.  Should the Company
become eligible to use Form S-3, the holders have an unlimited  number of demand
registrations  available under a Form S-3  registration,  provided the aggregate
dollar amount of securities being  registered for the holders exceeds  $500,000.
In addition, the holders of the warrants have an unlimited number of "piggyback"
rights to have the shares  underlying the warrants  included in any registration
undertaken  by  the  Company,  subject  to  certain  limitations  applicable  to
underwritten  offerings.  The shares underlying the warrants are included in the
registration statement of which this Prospectus is a part. See "Selling Security
Holders."                                                                       

Finder's Warrants                                                               

     In connection with the private offering of 8% Convertible Debentures closed
on December 10, 1997, the Company  issued a Common Stock purchase  warrant to JW
Charles Securities,  Inc., of Boca Raton,  Florida ("JW Charles") as part of the
finder's  fee  paid to JW  Charles  for  services  rendered  to the  Company  in
connection in the offering. The warrant is exercisable to purchase 50,000 shares
of Common Stock at $6.525 per share at any time commencing on December 10, 1997,
and  continuing  until  December 9, 2000. The warrant also provides for cashless
exercise.  The warrant  also  contains  antidilution  protection  to protect the
holder against  certain  issuances of Common Stock or securities  convertible or
exchangeable  for  Common  Stock at less than  market  value (as  defined in the
warrant),  although  the  antidilution  provisions  do not apply to issuances of
shares of Common Stock upon conversion of Series A Preferred  Stock,  options or
warrants  outstanding  as of December 10, 1997 or any options issued or issuable
under the Company's 1992 Stock Option Plan. The holders of the warrant also have
registration rights entitling them to a one time demand registration at any time
during the  exercise  period at the expense of the  Company  (subject to certain
relief if  financial  statements  are  required to be included  other than those
normally  prepared  by the  Company  in the  course  of its  ordinary  reporting
obligations  under  federal  securities  laws),  plus  an  unlimited  number  of
"piggyback" registration rights which entitle the holders to have the underlying
shares  included  in any  registration  undertaken  by the  Company,  subject to
certain  limitations in the event of an underwritten  offering or as required by
prior outstanding  registration rights granted by the Company.  The registration
rights  terminate  entirely  at such time as the  underlying  shares may be sold
under SEC Rule 144 without any volume restrictions within 90 days of the date of
issuance of such shares.  The 50,000 shares  underlying the warrant are included
in the  registration  statement of which this Prospectus is a part. See "Selling
Security Holders."                                                              

     In  connection  with the private  offering of 6%  Convertible  Subordinated
Debentures Due July 21, 2000,  which was completed on July 22, 1998, the Company
issued a Common Stock purchase warrant to JW Charles as part of the finder's fee
paid to JW Charles for  services  rendered to the Company in  connection  in the
offering.  The warrant is exercisable to purchase  60,000 shares of Common Stock
at $4.50 per share at any time commencing on July 22, 1998, and continuing until
July 21, 2001. The warrant also provides for cashless exercise. The warrant also
contains antidilution protection to protect the holder against certain issuances
of Common Stock or securities  convertible or  exchangeable  for Common Stock at
less than market value (as defined in the  warrant),  although the  antidilution
provisions  do not apply to issuances of shares of Common Stock upon  conversion
of Series A Preferred Stock, the 6% Debentures,  options or warrants outstanding
as of July 22, 1998, or any options  issued or issuable under the Company's 1992
Stock Option  Plan.  The holders of the warrant  also have  registration  rights
entitling them to have the underlying  Common Stock  registered at the same time
as the stock underlying the 6% Debentures,  at the expense of the Company,  plus
an unlimited number of "piggyback" registration rights which entitle the holders
to have the underlying  shares  included in any  registration  undertaken by the
Company, subject to certain limitations in the event of an underwritten offering
or as required by prior outstanding  registration rights granted by the Company;
provided  that such  registration  rights do not include the holders to have the
underlying  shares  registered  in the  registration  statement  of  which  this
Prospectus is a part. The registration rights terminate entirely at such time as
the                                                                             
-83-

424B1
86th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 86th
underlying shares may be sold under SEC Rule 144 without any volume restrictions
within 90 days of the date of issuance of such shares.                          

entrenet Warrant                                                                

      As of March 12, 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 as of March 11,  2003.  The warrant has  antidilution
provisions  that  protect the holders  against  dilution in the event of certain
transactions. The warrant also has "piggyback" registration rights entitling the
holders to have the underlying shares registered in any registration done by the
Company,  other than  registrations  on  ineligible  forms with expenses of such
registrations to be borne by the Company. The holders of the warrant have agreed
to waive their  registration  rights with respect to the inclusion of the shares
in the  Registration  Statement  of  which  this  Prospectus  forms a part.  See
"Certain Transactions - Transactions with entrenet Group, LLC."                 

RBB Bank Common Stock Purchase Warrant                                          

     As of June 26, 1998, the Company issued a Common Stock purchase  warrant to
RBB Bank  Aktiengesellschaft 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 the  Company.  The  warrant has
antidilution  provisions that protect the holders against  dilution in the event
of certain  transactions.  The warrant also has "piggyback"  registration rights
entitling  the  holders  to  have  the  underlying   shares  registered  in  any
registration done by the Company,  other than registrations on ineligible forms,
and the  Registration  Statement  of which  this  Prospectus  forms a part.  The
expenses  of  such  registrations  are to be  borne  by the  Company.  See  "RBB
Promissory  Note," below in this section,  "Certain  Transactions - Transactions
with RBB Bank Aktiengesellschaft" and "Selling Security Holders."               

Common Stock Purchase Warrants Expiring July 21, 2001                           

     In  conjunction  with  the  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 to purchase 100,000 shares of Common Stock,
exercisable at $4.25 per share. The warrants  provide for cashless  exercise and
contain antidilution protection to protect the holders against certain issuances
of Common Stock or securities  convertible or  exchangeable  for Common Stock at
less than market value (as defined in the  warrant),  although the  antidilution
provisions  do not apply to issuances of shares of Common Stock upon  conversion
of the 6%  Debentures,  any Series A  Preferred  Stock  owned by a holder of the
Warrants,  options or warrants  outstanding  as of July 22, 1998, or any options
issued or issuable  under the Company's  1992 Stock Option Plan.  The holders of
the warrant also have  registration  rights entitling them to have the shares of
Common Stock  underlying  the warrants  registered at the same time as the stock
underlying the 6% Debentures,  at the expense of the Company,  plus an unlimited
number of "piggyback"  registration rights which entitle the holders to have the
underlying  shares  included  in any  registration  undertaken  by the  Company,
subject to certain  limitations in the event of an  underwritten  offering or as
required  by prior  outstanding  registration  rights  granted  by the  Company;
provided  that such  registration  rights do not include the holders to have the
underlying  shares  registered  in the  registration  statement  of  which  this
Prospectus is a part. The registration rights terminate entirely at such time as
the  underlying  shares  may be sold  under  SEC Rule  144  without  any  volume
restrictions within 90 days of the date of issuance of such shares.             

Convertible Demand Notes                                                        
------------------------                                                        

      From April - June, 1997 the Company issued  promissory  notes in the total
principal  amount of  $185,000  (the  "Demand  Notes").  These notes bore simple
interest of 10% per annum and were  convertible  to Common                      
Stock of the  Company  commencing  on November  1, 1997.  Principal  and accrued
interest owing on the notes                                                     

-84-

424B1
87th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 87th
was  convertible  at $.35 per share (as to  $75,000  of the  notes) and $.50 per
share (as to  $110,000  of the  notes).  The notes  were  payable  in the fourth
quarter of 1998, if not previously  converted to Common Stock.  The notes became
the  subject of a dispute  between  the  Company  and holders of $135,000 of the
notes.  In April 1998, the Company and the complaining  noteholders  settled the
dispute  by the  Company  agreeing  to issue  1.4  times  the  number  of shares
originally issuable on conversion of the notes (plus an additional 11,000 shares
to one  Noteholder  who  purchased  $50,000 of the Demand Notes) and provide the
noteholders  with a guarantee and "put" option as to any shares remaining unsold
at the end of the one year period  commencing  on the dates the shares issued on
conversion of the notes became saleable under SEC Rule 144. On July 2, 1997, the
Company  issued  a  promissory  note  in the  amount  of  $16,825  to one of the
investors who purchased the Demand Notes.  This note was due and payable in full
as of July 30, 1997 and bore  interest at a default rate of 18% per annum if not
paid when due. The Note was not paid when due;  rather,  the  investor  claims a
representative of the Company promised her that the note would be converted into
a Demand  Note.  At the same time as it  settled  the  claims  of this  investor
arising out of the Demand Notes, 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.  See  "Business - Legal  Proceedings  -  Settlement  of Claims of
Certain  Noteholders"  and "Risk  Factors - Risks  Involving the Company and Its
Business - Settlement of Claims of Certain Holders of Convertible Demand Notes."

PARAGRAPH DELETED HERE                                                          

RBB Bank Promissory Note                                                        

     On June 26, 1998, the Company issued a $250,000 promissory note to RBB Bank
Aktiengesellschaft which was payable in full on or before September 9, 1998. The
loan was repaid in full, with interest of $1,537,  as of July 22, 1998. The note
evidenced a short-term bridge loan and was required to be paid from the proceeds
of any aggregate equity  placements done by the Company which amount to at least
$1,000,000 (from which aggregate  proceeds any additional  bridge financings are
excluded). The note was secured by certain assets of the Company,  including all
accounts  receivable  (excluding  certain  receivables  pledged  or which may be
pledged in connection with inventory financing),  all inventory (excluding Tranz
Enablers  securing amounts owing to inventory  financiers and certain  specified
inventory previously pledged to Omron Systems), all fixed assets and all deposit
accounts and intangible  assets of the Company.  In connection with the issuance
of the Note,  the Company also granted RBB Bank a right of first refusal to fund
any  additional  bridge  financing  needed by the  Company.  This  right must be
exercised  within  one day of RBB Bank being  notified  of the terms of any such
additional bridge financing. See "RBB Bank Common Stock Purchase Warrant," above
in this  section  under  "Certain  Transactions  -  Transactions  with  RBB Bank
Aktiengesellschaft" and "Selling Security Holders."                             

Possible Future Application of California General                               
Corporation Law to the Company and Its Shareholders                             
---------------------------------------------------                             

      Under Section 2115 of the  California  General  Corporation  Law,  foreign
corporations  that exceed an average of fifty percent for "the property  factor,
the  payroll  factor and sales  factor"  for its  latest  full  income  year (as
computed  under the same methods as are used in computing  franchise tax payable
in  California)  and  which  have  more  than  one-half  of  the   corporation's
outstanding  voting securities (as determined  pursuant to Section 2115) held of
record by persons  having  addresses in  California,  become  subject to certain
specified chapters and sections of the California  General  Corporation Law upon
the first day of the first income year of the corporation commencing on or after
the 135th day of the latest income year during which the  above-described  tests
have  been met or during  which a final  order  has been  entered  by a court of
competent  jurisdiction  declaring  that those tests have been met.  The Company
believes that it presently exceeds the shareholder address test and is likely to
have                                                                            
exceeded  the other test as of the 135th day of its fiscal  year ending June 30,
1999. The Chapters and Sections of the California  General  Corporation Law that
apply to a foreign  corporation  that exceeds these  thresholds  are:  Chapter 1
(general provisions and definitions),  to the extent applicable to the following
provisions;  Section 301 (annual election of directors); Section 303 (removal of
directors   without   cause);   Section  304  (removal  of  directors  by  court
proceedings);  Section 305, subdivision (c) (filling of director vacancies where
less than a majority in office elected by shareholders);Section  309 (directors'
standard of care);  Section 316 (excluding  paragraph (3) of subdivision (a) and
Paragraph  (3)  of  subdivision   (f))                                          

-85-

424B1
88th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 88th
(liability   of   directors   for   unlawful    distributions);    Section   317
(indemnification  of  directors,  officers,  and  others);  Sections 500 to 505,
inclusive  (limitations  on  corporation  distributions  in cash  or  property);
Section 506  (liability  of  shareholder  who receives  unlawful  distribution);
Section 600,  subdivisions  (b) and (c)  (requirement  for annual  shareholders'
meeting and remedy of same not timely held); Sections 708, subdivisions (a), (b)
and (c)  (shareholders  right to cumulate  votes at any election of  directors);
Section 702  (supermajority  vote  requirement);  Section 1001,  subdivision (d)
(limitations on sale of assets);  Section 1101 (provisions following subdivision
(e))  (limitations  on mergers);  Chapter 12  (commencing  after  Section  1200)
(reorganizations);  Chapter 13  (commencing  after  Section  1300)  (dissenters'
rights);  Sections 1500 and 1501 (records and reports);  Section 1508 (action by
Attorney  General);  and Chapter 16  (commencing  after Section 1600) (rights of
inspection).   Application  of  these  provisions  of  the  California   General
Corporation  Law to the  Company  may  give  greater  or  lesser  protection  to
shareholders  in certain  instances  than is  available  to  shareholders  under
Colorado  law,  the  Company's  State of  incorporation.  Compliance  with these
provisions  of  California  law may be more or less  onerous to the Company than
compliance with analogous provisions of Colorado law.                           

-86-

424B1
89th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 89th
SELLING SECURITY HOLDERS

         This Prospectus  relates to the resale of up to 7,240,356 shares of the
Company's  Common Stock by the Selling  Security Holders named below. The shares
being  offered by the  Selling  Security  Holders  were or will be  acquired  in
transactions as follows:                                                        

                                                        [Enlarge/Download Table]

==========================================================================================================================    
                                 Number of Shares                                                                             
     Name of Selling              of Common Stock                   Transaction by which Shares Purchased or                  
     Security Holder                 Owned or                        Purchasable by Selling Security Holder                   
                                    Acquirable                                                                                
--------------------------------------------------------------------------------------------------------------------------    
                                                                                                                              
RAS Securities                     66,000 Shares         Shares underlying Underwriters' Warrant issued as of                 
Corporation                                              December 2, 1993, in connection with the Company's                   
                                                         Initial public offering, exercisable at $12.325 per share.           
                                                         See "Description of Securities - Common Stock Purchase               
                                                         Warrants - Underwriters' Warrants."                                  
--------------------------------------------------------------------------------------------------------------------------    
Robert A. Schneider                16,500 Shares         Shares underlying Underwriters' Warrant issued as of                 
                                                         December 2, 1993, in connection with the Company's                   
                                                         Initial public offering, exercisable at $12.325 per share, which     
                                                         have been assigned to Mr. Schneider, a principal of RAS Securities   
                                                         Corporation. See "Description of Securities - Common Stock Purchase  
                                                         Warrants - Underwriters' Warrants."                                  
--------------------------------------------------------------------------------------------------------------------------    
James B. Walters                   50,000 Shares         Shares underlying common stock purchase warrant issued               
                                                         as of April 12, 1993, exercisable at $4.00 per share. See            
                                                         "Description of Securities - Common Stock Purchase                   
                                                         Warrants - Director's Warrants."                                     
--------------------------------------------------------------------------------------------------------------------------    
Former Shareholders                18,796 Shares         Shares issued or issuable upon exercise of common stock              
of Direct Data, Inc.                                     purchase warrants issued as consideration in the                     
                                                         acquisition of Direct Data, Inc., as of September 29,                
                                                         1994, exercisable at $2.625 per share. The warrants                  
                                                         and/or shares are owned by the following individuals in              
                                                         the following amounts: Peter Roehl - 3,947 Shares; K.M.              
                                                         Lawlis and M.W. Lawlis, as Trustees for the K.M. Lawlis              
                                                         1990 Revocable Trust -  8,459 Shares; Henry Nichols -                
                                                         warrants to purchase 3,759 Shares; and Alan B. Roberts               
                                                         (a former director officer and  Director of the Company) -           
                                                         warrants to purchase 2,631 Shares. See "Description of               
                                                         Securities - Common Stock Purchase Warrants - Direct Data            
                                                         Warrants."                                                           

                                      -87-                                                                                    

424B1
90th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 90th
==========================================================================================================================    
                                 Number of Shares                                                                             
     Name of Selling              of Common Stock                   Transaction by which Shares Purchased or                  
     Security Holder                 Owned or                        Purchasable by Selling Security Holder                   
                                    Acquirable                                                                                
--------------------------------------------------------------------------------------------------------------------------    

--------------------------------------------------------------------------------------------------------------------------    
entrenet Group, LLC               608,750 Shares         328,750 Shares issued upon conversion of a $150,000                  
and Affiliates                                           Convertible Promissory Note issued as consulting fees as             
                                                         of June 3, 1997; 280,000 Shares issued in payment of a               
                                                         finder's fee owing under the consulting agreement dated              
                                                         June 3, 1997. 165,200 of the 280,000 finder's fee Shares             
                                                         have been assigned to various members of entrenet,                   
                                                         consisting of five persons, as follows: Alternative                  
                                                         Technologies International, Inc. - 74,200 Shares; J.A.               
                                                         Billington & Associates, Inc. - 49,000 Shares; KBK                   
                                                         Enterprises, Inc. - 14,000 Shares; Timothy Jaeger -                  
                                                         14,000 Shares; and Eugene McCord - 14,000 Shares.  See               
                                                         "Certain Transactions - Transactions with entrenet Group,            
                                                         LLC."                                                                
--------------------------------------------------------------------------------------------------------------------------    
Liviakis Financial                225,000 Shares         Shares issued or issuable under a Consulting Agreement               
Communications,                                          effective as of July 25, 1997 between the Company and                
Inc.                                                     LFC; although the shares are being included in this                  
("LFC")                                                  registration statement, they cannot be sold before February 1,       
                                                         1999. See "Certain Transactions - Transactions with                  
                                                         Liviakis Financial Communications, Inc. ("LFC") and                  
                                                         Affiliates of LFC."                                                  
--------------------------------------------------------------------------------------------------------------------------    
John M. Liviakis                 3,825,000 Shares        3,825,000 Shares, of which 2,625,000 of the Shares                   
                                                         (together with 1,200,000 Common Stock purchase                       
                                                         warrants) were issued under a Subscription Agreement                 
                                                         dated as of August 4, 1997 for total consideration of                
                                                         $375,000; 1,200,000 Shares were issued upon exercise of              
                                                         the Common Stock purchase warrants for $.01 per share;               
                                                         although the Shares are being included in this registration          
                                                         statement, they cannot be sold before February 1, 1999.              
                                                         See "Certain Transactions - Transactions with Liviakis               
                                                         Financial Communications, Inc. ("LFC") and Affiliates of             
                                                         LFC."                                                                
--------------------------------------------------------------------------------------------------------------------------    
Robert B. Prag                    Up to 1,350,000        875,000 Shares owned outright and 400,000 Shares                     
                                      Shares             underlying Common Stock purchase warrants exercisable                
                                                         at $01 per share; the Shares and the warrants were issued            
                                                         under a Subscription Agreement dated as of August 4,                 
                                                         1997 for total consideration of $125,000; and 75,000                 
                                                         Shares issued or issuable under a Consulting Agreement               
                                                         between the Company and LFC effective as of July 25,                 
                                                         1997; although the shares are being                                  
                                                         included in  this registration statement,                            
                                                         they cannot be sold  before  February 1, 1999.                       
                                                         See   "Certain Transactions -                                        
                                                         Transactions   with Liviakis Financial                               
                                                         Communications,    Inc. ("LFC") and Affiliates of LFC."              

                                      -88-                                                                                    

424B1
91st Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 91st
==========================================================================================================================    
                                 Number of Shares                                                                             
     Name of Selling              of Common Stock                   Transaction by which Shares Purchased or                  
     Security Holder                 Owned or                        Purchasable by Selling Security Holder                   
                                    Acquirable                                                                                
--------------------------------------------------------------------------------------------------------------------------    
Brefo S.A.                      Up to 16,836 Shares      15,625 Shares estimated to be issuable upon conversion of            
                                                         50,000 shares of Series A Preferred Stock; 997 Shares of             
                                                         Common Stock estimated to be issuable as dividends on                
                                                         the 50,000 shares of Series A Preferred Stock from April             
                                                         1, 1998 through December 31, 1999; and 214 Shares of                 
                                                         Common Stock previously issued as interest on $50,000 of             
                                                         8% Convertible Debentures (prior to conversion into                  
                                                         shares of Series A Preferred Stock) and as dividends on              
                                                         the shares of Series A Preferred Stock, through March 31,            
                                                         1998.  See Footnote (1) to this table, immediately                   
                                                         following.  See also, "Description of Securities - Preferred         
                                                         Stock - Series A Preferred Stock."                                   
--------------------------------------------------------------------------------------------------------------------------    
CNCA - SCT Brunoy               Up to 67,340 Shares      62,500 Shares estimated to be issuable upon conversion of            
Sub A/C BGP                                              200,000 shares of Series A Preferred Stock; 3,986 Shares             
                                                         of Common Stock estimated to be issuable as dividends on             
                                                         the 200,000 shares of Series A Preferred Stock from April            
                                                         1, 1998 through December 31, 1999; and 854 Shares of                 
                                                         Common Stock previously issued as interest on $200,000               
                                                         of 8% Convertible Debentures (prior to conversion into               
                                                         shares of Series A Preferred Stock) and as dividends on              
                                                         the shares of Series A Preferred Stock, through March 31,            
                                                         1998. See Footnote (1) to this table, immediately                    
                                                         following.   See also, "Description of Securities -                  
                                                         Preferred Stock - Series A Preferred Stock."                         
--------------------------------------------------------------------------------------------------------------------------    
Inversiones Wella,              Up to 16,836 Shares      15,625 Shares estimated to be issuable upon conversion of            
S.A.                                                     50,000 shares of Series A Preferred Stock; 997 Shares of             
                                                         Common Stock estimated to be issuable as dividends on                
                                                         the 50,000 shares of Series A Preferred Stock from April             
                                                         1, 1998 through December 31, 1999; and 214 Shares of                 
                                                         Common Stock previously issued as interest on $50,000 of             
                                                         8% Convertible Debentures (prior to conversion into                  
                                                         shares of Series A Preferred Stock) and as dividends on              
                                                         the shares of Series A Preferred Stock, through March 31,            
                                                         1998. See Footnote (1) to this table, immediately                    
                                                         following.  See also, "Description of Securities - Preferred         
                                                         Stock - Series A Preferred Stock."                                   

                                      -89-                                                                                    

424B1
92nd Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 92nd
==========================================================================================================================    
                                 Number of Shares                                                                             
     Name of Selling              of Common Stock                   Transaction by which Shares Purchased or                  
     Security Holder                 Owned or                        Purchasable by Selling Security Holder                   
                                    Acquirable                                                                                
--------------------------------------------------------------------------------------------------------------------------    
The Endeavor                   Up to 336,702 Shares      312,500 Shares estimated to be issuable upon conversion              
Capital Fund                                             of 1,000,000 shares of Series A Preferred Stock; 19,932              
                                                         Shares of Common Stock estimated to be issuable as                   
                                                         dividends on the 1,000,000 shares of Series A Preferred              
                                                         Stock from April 1, 1998 through December 31, 1999;                  
                                                         and 4,270 Shares of Common Stock previously issued as                
                                                         interest on $1,000,000 of 8% Convertible Debentures                  
                                                         (prior to conversion into shares of Series A Preferred               
                                                         Stock) and as dividends on the shares of Series A                    
                                                         Preferred Stock, through March 31, 1998. See Footnote                
                                                         (1) to this table, immediately following. See also,                  
                                                         "Description of Securities - Preferred Stock - Series A              
                                                         Preferred Stock."                                                    
--------------------------------------------------------------------------------------------------------------------------    
RBB Bank                      Up to 538,723  Shares      500,000  Shares  estimated  to be issuable  upon                     
                                                         conversion  Aktiengesellschaft,  as of  1,600,000  shares of Series A
                                                         Preferred Stock; 31,890 agent Shares of Common Stock estimated to be 
                                                         issuable as dividends on the 1,600,000 shares of Series A Preferred  
                                                         Stock from April 1, 1998 through December 31, 1999;                  
                                                         and 6,833 Shares of Common Stock previously issued as                
                                                         interest on $1,600,000 of 8% Convertible Debentures                  
                                                         (prior to conversion into shares of Series A Preferred               
                                                         Stock) and as dividends on the shares of Series A                    
                                                         Preferred Stock, through March 31, 1998. See Footnote                
                                                         (1) to this table, immediately following. See also,                  
                                                         "Description of Securities - Preferred Stock - Series A              
                                                         Preferred Stock."                                                    
--------------------------------------------------------------------------------------------------------------------------    
Reg-S                           Up to 33,670 Shares      31,250 Shares estimated to be issuable upon conversion of            
Intercontinental                                         100,000 shares of Series A Preferred Stock; 1,993 Shares             
Investment, Ltd.                                         of Common Stock estimated to be issuable as dividends on             
                                                         the 100,000 shares of Series A Preferred Stock from April            
                                                         1, 1998 through December 31, 1999; and 427 Shares of                 
                                                         Common Stock previously issued as interest on $100,000               
                                                         of 8% Convertible Debentures (prior to conversion into               
                                                         shares of Series A Preferred Stock) and as dividends on              
                                                         the shares of Series A Preferred Stock, through March 31,            
                                                         1998. See Footnote (1) to this table, immediately                    
                                                         following.   See also, "Description of Securities -                  
                                                         Preferred Stock - Series A Preferred Stock."                         

                                      -90-                                                                                    

424B1
93rd Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 93rd
==========================================================================================================================    
                                 Number of Shares                                                                             
     Name of Selling              of Common Stock                   Transaction by which Shares Purchased or                  
     Security Holder                 Owned or                        Purchasable by Selling Security Holder                   
                                    Acquirable                                                                                
--------------------------------------------------------------------------------------------------------------------------    
L. Gene Tanner                  Up to 20,203 Shares      18,750 Shares estimated to be issuable upon conversion of            
                                                         60,000 shares of Series A Preferred Stock; 1,196 Shares              
                                                         of Common Stock estimated to be issuable as dividends on             
                                                         the 60,000 shares of Series A Preferred Stock from April             
                                                         1, 1998 through December 31, 1999; and 257 Shares of                 
                                                         Common Stock previously issued as interest on $60,000 of             
                                                         8% Convertible Debentures (prior to conversion into                  
                                                         shares of Series A Preferred Stock) and as dividends on              
                                                         the shares of Series A Preferred Stock, through March 31,            
                                                         1998.  See Footnote (1) to this table, immediately                   
                                                         following.   See also, "Description of Securities -                  
                                                         Preferred Stock - Series A Preferred Stock."                         
--------------------------------------------------------------------------------------------------------------------------    
JW Charles                         50,000 Shares         Shares underlying common stock purchase warrant issued               
Securities, Inc.                                         as of December 10, 1997, exercisable at $6.525 per share             
                                                         as a portion of a finder's fee paid to JW Charles                    
                                                         Securities, Inc. in conjunction with the private offering of         
                                                         the Company's 8% Convertible Debentures.  See                        
                                                         "Description of Securities - Common Stock Purchase                   
                                                         Warrants -  Finder's Warrant."                                       
==========================================================================================================================    
<FN>                                                                                                                          
------------------                                                                                                            

(1)   The number of Shares  estimated to be issuable upon  conversion of, and as                                              
      dividends  on, the  Series A  Preferred  Stock is based on a  hypothetical                                              
      market  price of $4.00 per share for the  underlying  Common  Stock at the                                              
      time of conversion  and at each dividend  payment date. The choice of this                                              
      hypothetical  market  price is based on  recent  prices  of the  Company's                                              
      Common Stock and the "floor" price that is applicable to conversion of the                                              
      Series  A  Preferred  Stock  for 270  days  from  December  10,  1997.  No                                              
      implication should be drawn from the use of this hypothetical market price                                              
      for this  purpose  as to what  value the  Company  ascribes  to its Common                                              
      Stock.                                                                                                                  
</FN>                                                                                                                         

      The shares of Common  Stock  offered by this  Prospectus  may be sold from
time to time by the Selling Security Holders or by pledgees, donees, transferees
or other successors in interest.  Such sales may be made in the over-the-counter
market, or otherwise at prices and at terms then prevailing or at prices related
to the then current market price, or in negotiated transactions.  The shares may
be sold by one or more of the  following:  (a) a block trade in which the broker
or dealer so engaged  will  attempt to sell the shares as agent but may position
and resell a portion of the block as principal to  facilitate  the  transaction;
(b)  purchases by a broker or dealer as  principal  and resale by such broker or
dealer for its account pursuant to this Prospectus;  and (c) ordinary  brokerage
transactions  and  transactions  in which the  broker  solicits  purchasers.  In
effecting sales,  brokers or dealers engaged by the Selling Security Holders may
arrange for other  brokers or dealers to  participate.  Brokers or dealers  will
receive commissions or discounts from the Selling Security Holders in amounts to
be  negotiated  immediately  prior to the sale.  Such brokers or dealers and any
other participating brokers or dealers may be deemed to be "underwriters" within
the  meaning  of the  Act in  connection  with  such  sales.  In  addition,  any
securities  covered by this  Prospectus  which qualify for sale pursuant to Rule
144 may be sold under Rule 144 rather than pursuant to this Prospectus.         

      Upon the Company  being  notified by any of the Selling  Security  Holders
that any material arrangement has been entered into with a broker-dealer for the
sale  of  shares  through  a  block  trade,   special  offering,   or           

-91-

424B1
94th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 94th
secondary  distribution  or a  purchase  by a broker or dealer,  a  supplemental
prospectus  will be filed,  if required,  pursuant to Rule 424(b) under the Act,
disclosing (i) the name of the participating  broker-dealer(s),  (ii) the number
of shares  involved,  (iii) the price at which such shares  were sold,  (iv) the
commissions paid or discounts or concessions  allowed to such  broker-dealer(s),
where  applicable,   (v)  that  such   broker-dealer(s)   did  not  conduct  any
investigation  to verify the information set out or incorporated by reference in
this Prospectus and (vi) other facts material to the transaction.               

      The  following  table  sets  forth  the  names  and  certain   information
concerning the Selling Security Holders.                                        

                                                        [Enlarge/Download Table]

================================================================================================================================
                                                    Number of Shares                            Number of                       
                                                        Owned or                                  Shares      Percentage of     
                                                    Acquirable Prior         Number of         Owned After     Class After      
       Selling Security Holder                       to Offering (1)       Shares Offered        Offering       Offering        
================================================================================================================================
                                                                                                                                
RAS Securities Corporation                              66,000                66,000                -0-            -0-          
================================================================================================================================
Robert A. Schneider                                     16,500                16,500                -0-            -0-          
================================================================================================================================
James B. Walters                                       100,000 (2)            50,000             50,000             *           
================================================================================================================================
Peter Roehl                                              3,947                 3,947                -0-            -0-          
================================================================================================================================
K.M. Lawlis and M.W. Lawlis, as Trustees                 8,459                 8,459                -0-            -0-          
for the K.M. Lawlis 1990 Revocable Trust                                                                                        
================================================================================================================================
Henry Nichols                                            3,759                 3,759                -0-            -0-          
================================================================================================================================
Alan B. Roberts                                          2,631                 2,631                -0-            -0-          
================================================================================================================================
entrenet Group, LLC                                    453,985 (3)           443,550            10,435 (3)          *           
================================================================================================================================
Alternative Technologies International, Inc.            74,200                74,200                -0-            -0-          
================================================================================================================================
J.A. Billington & Associates, Inc.                      49,000                49,000                -0-            -0-          
================================================================================================================================
KBK Enterprises, Inc.                                   14,000                14,000                -0-            -0-          
================================================================================================================================
Timothy Jaeger                                          14,000                14,000                -0-            -0-          
================================================================================================================================
Eugene McCord                                           14,000                14,000                -0-            -0-          
================================================================================================================================
Liviakis Financial Communications, Inc.                442,500 (4)(5)        225,000 (6)       217,500 (5)          *           
================================================================================================================================
John M. Liviakis                                     3,825,000 (4)         3,825,000 (6)            -0-            -0-          
================================================================================================================================
Robert B. Prag                                       1,422,500 (4)(7)      1,350,000 (6)        72,500 (7)         -0-          
================================================================================================================================
Brefo S.A.                                              16,836                16,836                -0-            -0-          
================================================================================================================================
CNCA - SCT Brunoy Sub A/C BGP                           67,340                67,340                -0-            -0-          
================================================================================================================================
Inversiones Wella, S.A.                                 16,836                16,836                -0-            -0-          
================================================================================================================================
The Endeavor Capital Fund                              336,702               336,702                -0-            -0-          
==============================================================================================================================  
                                      -92-                                                                                      

424B1
95th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 95th
================================================================================================================================
                                                    Number of Shares                            Number of                       
                                                        Owned or                                  Shares      Percentage of     
                                                    Acquirable Prior         Number of         Owned After     Class After      
       Selling Security Holder                       to Offering (1)       Shares Offered        Offering       Offering        

================================================================================================================================
RBB Bank Aktiengesellschaft                            608,723(8)            538,723            70,000(8)           *           
================================================================================================================================
Reg-S Intercontinental Investment, Ltd.                 33,670                33,670                -0-            -0-          
================================================================================================================================
L. Gene Tanner                                          20,203                20,203                -0-            -0-          
================================================================================================================================
J. W Charles Securities, Inc.                          110,000(9)             50,000            60,000(9)           *           
================================================================================================================================
<FN>                                                                                                                            
-------------------                                                                                                             
*     Less than 1%.                                                                                                             

(1)  Represents shares owned or acquirable as described in the table immediately                                                
     preceding this table and/or as described in the footnotes to this table.                                                   
(2)  Represents  100,000  shares  underlying an immediately  exercisable  common                                                
     stock purchase warrants exercisable at $4.00 per share.                                                                    
(3)  Includes 10,435 shares underlying an immediately  exercisable  common stock                                                
     purchase warrants exercisable at $5.75 per share. See "Certain Transactions                                                
     - Transactions with entrenet Group, LLC."                                                                                  
(4)  Does not include shares that the Selling  Security  Holder may be deemed to                                                
     own indirectly as a "beneficial  owner" as described in the section of this                                                
     Prospectus  entitled  "Security  Ownership  of Principal  Shareholders  and                                                
     Management."  See  "Certain   Transactions  -  Transactions  with  Liviakis                                                
     Financial Communications, Inc. ("LFC") and Affiliates of LFC."                                                             
(5)  Includes 217,500 shares issuable to LFC pursuant to a consulting  agreement                                                
     entered into between LFC and the Company as of June 30, 1998,  effective as                                                
     of August 1, 1998. See "Certain  Transactions - Transactions  with Liviakis                                                
     Financial Communications, Inc. ("LFC") and Affiliates of LFC."                                                             
(6)  These shares are not saleable by the named  Selling  Security  Holder until                                                
     February 1, 1999.  See "Certain  Transactions  Transactions  with  Liviakis                                                
     Financial Communications, Inc. ("LFC") and Affiliates of LFC."                                                             
(7)  Includes  72,500  shares  issuable  to Mr. Prag  pursuant  to a  consulting                                                
     agreement  entered  into  between LFC and the Company as of June 30,  1998,                                                
     effective as of August 1, 1998.  See "Certain  Transactions  - Transactions                                                
     with Liviakis  Financial  Communications,  Inc.  ("LFC") and  Affiliates of                                                
     LFC."                                                                                                                      
(8)  Includes 70,000 shares  underlying two Common Stock purchase  warrants that                                                
     are presently  exercisable.  See "Certain  Transactions - Transactions with                                                
     RBB  Bank  Aktiengesellschaft."  Does not  include  any  shares  underlying                                                
     $1,000,000 of 6%  Convertible  Subordinated  Debentures  Due July 21, 2000,                                                
     presently owned by RBB Bank. See "Certain  Transactions - Transactions with                                                
     RBB  Bank  Aktiengesellschaft"  and  "Description  of  Securities  - `-  6%                                                
     Convertible  Subordinated Debentures Due July 21, 2000' and `- Common Stock                                                
     Purchase Warrants - RBB Bank Common Stock Purchase  Warrants' and `- Common                                                
     Stock Purchase  Warrants - Common Stock Purchase Warrants Expiring July 21,                                                
     2001.'"                                                                                                                    
(9)  Includes  60,000 shares of Common Stock  underlying a Common Stock Purchase                                                
     Warrant exercisable to purchase 60,000 shares at $4.50 per share until July                                                
     21, 2001.                                                                                                                  

</FN>                                                                                                                           

      The  Company  has  agreed to  indemnify  certain of the  Selling  Security
Holders against certain liabilities,  including liabilities under the Securities
Act of 1933, as amended (the  "Securities  Act"),  or contribute to payment that
the Selling  Security  Holders may be required to make in respect  thereof.  See
"Commission Position on Indemnification for Securities Act Liabilities."        

-93-

424B1
96th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 96th
 LEGAL MATTERS

      The  validity of the Common Stock  offered  hereby will be passed upon for
the Company by Ireland, Stapleton, Pryor & Pascoe, P.C., Denver, Colorado.      

 CHANGE IN ACCOUNTANTS

 The Company has not changed accountants in the last two fiscal years.

COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES AND RELATED MATTERS

Colorado  Business  Corporation  Act  Provisions  and the Company's  Articles of
Incorporation and Bylaws                                                        

      Sections 7-109-102 through 7-109-110 of the Colorado Business  Corporation
Act (the "CBCA")  permit  indemnification  of  directors,  officers,  employees,
fiduciaries and agents of corporations  under certain  conditions and subject to
certain  limitations,  including  for  liabilities  to which such persons  might
become  subject under the  Securities  Act of 1933, as amended (the  "Securities
Act").                                                                          

      The  Company's  Articles of  Incorporation  do not contain any  provisions
which would limit the availability of such indemnification to the fullest extent
available  under the  above-referenced  statute.  The Company's  amended Bylaws,
which  parallel the CBCA  sections  referred to above,  provide that the Company
shall  indemnify  any person who was or is a party or is threatened to be made a
party to any  threatened,  pending,  or completed  action,  suit or  proceeding,
whether civil, criminal,  administrative or investigative, and whether formal or
informal, by reason of the fact that he is or was a director, officer, employee,
fiduciary  or agent of the  Corporation,  or is or was serving at the request of
the Corporation as a director, officer, partner, trustee, employee, fiduciary or
agent of any  foreign or  domestic  profit or  nonprofit  corporation  or of any
partnership,   joint  venture,   trust,   profit  or  nonprofit   unincorporated
association,  limited liability company, or other enterprise or employee benefit
plan (a "Proper Person").  The Company is required to indemnify Proper Person(s)
against reasonably  incurred expenses  (including  attorneys' fees),  judgments,
penalties,  fines (including any excise tax assessed with respect to an employee
benefit  plan) and  amounts  paid in  settlement  reasonably  incurred by him in
connection  with  such  action,  suit or  proceeding  if it is  determined  by a
majority of a quorum of the Board of Directors  consisting  of Directors who are
not  parties  to the  proceeding,  or,  if a  quorum  of such  Directors  is not
available, a committee of the Board consisting of at least two Directors who are
not parties to the  proceeding or, if a proper  committee  cannot be seated or a
majority of the Board or the committee desire,  an independent  counsel selected
by a majority  of the full  Board,  or a vote of  shareholders,  that the proper
Person conducted  himself or herself in good faith and that he or she reasonably
believed (i) in the case of conduct in his official  capacity  with the Company,
that his or her  conduct was in the  Company's  best  interests,  or (ii) in all
other cases (except  criminal  cases),  that his or her conduct was at least not
opposed to the Company's  best  interests,  or (iii) in the case of any criminal
proceeding, that he or she had no reasonable cause to believe his or her conduct
was unlawful. A Proper Person will be deemed to be acting in his or her official
capacity while acting as a director, officer, employee or agent on behalf of the
Company and not while acting on the Company's  behalf for some other  entity.  A
Proper  Person may apply to the court  conducting  the  proceeding or to another
court of competent  jurisdiction for an order requiring the Company to indemnify
such   person  if  the  court   determines   that  the  person  is  entitled  to
indemnification  under  Colorado  law and has met the  criteria set forth in the
Company's Bylaws.                                                               

         No  indemnification is available to a person with respect to any claim,
issue or  matter  in  connection  with a  proceeding  by or in the  right of the
Company in which the person was adjudged  liable to the Company or in connection
with any  proceeding  charging  that the  person  derived an  improper  personal
benefit, whether or not involving action in an official capacity, in which he or
she was adjudged liable on the basis that he or she derived an improper personal
benefit. Further,  indemnification in connection with a proceeding brought by or
in the  right of the  Company  is  limited  to  reasonable  expenses,  including
attorneys' fees, incurred in connection with the proceeding.                    

-94-

424B1
97th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 97th
      To the extent that the provisions of a Colorado  corporation's Articles of
Incorporation or Bylaws provide for  indemnification to a greater extent than is
available  under the CBCA,  such  provisions  are void.  The  Company  believes,
however, that the indemnification provisions contained in its Bylaws are no more
liberal than those set forth in the CBCA.                                       

Indemnification of Selling Security Holders                                     

      The registration  rights  agreements  entered into between the Company and
certain of the Selling Security Holders contain provisions  providing for mutual
indemnification  against certain liabilities,  including liabilities which might
arise under the Securities Act. In general, the Company is required to indemnify
such persons,  to the full extent permitted by law, against any losses,  claims,
damages,  liabilities  and expenses  resulting from any untrue or alleged untrue
statement  of a material  fact  contained in any  registration  statement or any
prospectus or any omission or alleged  omission to state therein a material fact
necessary to make the statements  therein,  in light of the circumstances  under
which they were made, not  misleading,  except insofar as the same are caused by
or contained in any  information  with  respect to the Selling  Security  Holder
furnished to the Company by the Selling Security Holder expressly for use in the
registration statement or prospectus.  The Company, its officers,  directors and
controlling  persons is entitled to  indemnification  on a reciprocal  basis for
information contained in the registration  statement or any prospectus which was
provided to it for use therein by a Selling Security Holder.                    

Commission Position on Indemnification for Securities Act Liabilities           

      Insofar as  indemnification  for liabilities  arising under the Securities
Act may be  permitted to  directors,  officers  and  controlling  persons of the
Company,  the Company has been advised that in the opinion of the Securities and
Exchange  Commission such  indemnification is against public policy as expressed
in the  Securities  Act and is,  therefore,  unenforceable.  In the event that a
claim for  indemnification  against such liabilities  (other than the payment by
the Company of expenses  incurred or paid by a director,  officer or controlling
person  of the  Company  in  the  successful  defense  of any  action,  suit  or
proceeding)  is  asserted by such  director,  officer or  controlling  person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel  the matter has been  settled by  controlling  precedent,
submit  to a  court  of  appropriate  jurisdiction  the  question  whether  such
indemnification  by it is against  public policy as expressed in the  Securities
Act and will be governed by the final adjudication of such issue.               

 EXPERTS

     The financial statements of the Company as of June 30, 1997 and for each of
the two years in the period ended June 30, 1997 included in this Prospectus have
been so  included  in reliance  on the report  (which  contains  an  explanatory
paragraph  relating to the  Company's  ability to continue as a going concern as
described in Note 1 to the  financial  statements  for the period ended June 30,
1997)  of  PricewaterhouseCoopers  LLP,  independent  accountants,  given on the
authority of said firm as experts in auditing and accounting.                   

-95-

424B1
98th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 98th
                                                        [Enlarge/Download Table]

                            U.S. WIRELESS DATA, INC.                                     

                          INDEX TO FINANCIAL STATEMENTS                                  

                                                                                    Page 

                                                                                         
Report of Independent Accountants.....................................................F-2

Balance Sheet - as of June 30, 1997...................................................F-3

Statement of Operations - for the fiscal years ended                                     
         June 30, 1997 and June 30, 1996..............................................F-4

Statement of Cash Flows - for the fiscal years ended                                     
         June 30, 1997 and June 30, 1996..............................................F-5

Statement of Changes in Stockholders' Equity (Deficit) - for the period from             
         July 1, 1995 through June 30, 1997...........................................F-6

Notes to Financial Statements.........................................................F-7

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

Unaudited Financial Statements - for the period ended March 31, 1998                     

         Balance Sheets --                                                               
         March 31, 1998; June 30, 1997...............................................F-16

         Statements of Operations --                                                     
         Three Months and Nine Months Ended March 31, 1998 and 1997..................F-17

         Statements of Cash Flows --                                                     
         Nine Months Ended March 31, 1998 and 1997...................................F-18

         Notes to Financial Statements...............................................F-19

 F-1

424B1
99th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 99th
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
statement of operations,  of changes in  stockholders'  equity  (deficit) and of
cash flows present fairly, in all material  respects,  the financial position of
U.S.  Wireless Data,  Inc. (the  "Company") at June 30, 1997, and the results of
its  operations and its cash flows for each of the two years in the period ended
June 30, 1997, 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 audits.  We conducted our audits of these  statements in accordance  with
generally accepted auditing standards which require that we plan and perform the
audits 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 audits  provide a reasonable  basis for the opinion  expressed
above.                                                                          

         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 significant recurring losses from
operations and has an accumulated  deficit of $16,960,853 that raise substantial
doubt about the Company's  ability to continue as a going concern.  Management's
plans in regard to this matter are  described  in Note 1.  Additionally,  due to
matters  concerning the Company's ability to continue as a going concern,  there
is also  significant  uncertainty  surrounding  the net realizable  value of the
Company's  inventory  balances  at June 30,  1997  (see Note 2).  The  financial
statements do not include any adjustments  that might result from the outcome of
these uncertainties.                                                            

PRICE WATERHOUSE LLP                                                            

Boulder, Colorado                                                               
October 13, 1997                                                                

 F-2

424B1
100th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 100th
U.S. WIRELESS DATA, INC.

                                                                [Download Table]

                                  BALANCE SHEET                                 
                               As of June 30, 1997                              

                                     ASSETS                                     

                                                                                
Current assets:                                                                 
   Cash and cash equivalents ....................................  $      6,083 
   Accounts receivable, net of allowance                                        
     for doubtful accounts of $15,903 ...........................       120,531 
   Inventory, net ...............................................       208,867 
   Other current assets .........................................       113,859 
                                                                   ------------ 
        Total current assets ....................................       449,340 

Property and equipment, net .....................................        40,445 
Other assets ....................................................        11,495 
                                                                   ------------ 
Total assets ....................................................  $    501,280 
                                                                   ============ 

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                 

Current liabilities:                                                            
   Accounts payable .............................................  $    354,213 
   Accrued liabilities ..........................................       125,587 
   Notes payable ................................................       737,866 
                                                                   ------------ 
        Total current liabilities ...............................     1,217,666 

Long Term Debt ..................................................        45,000 
                                                                   ------------ 
Total liabilities ...............................................     1,262,666 
                                                                   ------------ 
Commitments and contingencies (Notes 9 and 11)                                  

Stockholders' equity (deficit):                                                 
   Common stock, no par value,                                                  
      12,000,000 shares authorized,                                             
      5,613,952 shares issued and outstanding, stated value $1.00     5,613,952 
   Common stock subscribed ......................................             0 
   Additional paid-in capital ...................................    10,613,465 
   Accumulated deficit ..........................................   (16,960,853)
   Notes Receivable from Shareholder ............................       (27,950)
                                                                   ------------ 
                Total stockholders' equity (deficit) ............      (761,386)
                                                                   ------------ 
Total liabilities and stockholders' equity (deficit) ............  $    501,280 
                                                                   ============ 

The accompanying notes are an integral part of these financial statements.

 F-3

424B1
101st Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 101st
                                                        [Enlarge/Download Table]

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

                                                                Fiscal Year Ended     

                                                              June 30,      June 30,  
                                                                1997         1996     
                                                                ----         ----     
                                                                                      
Revenue .................................................  $ 1,315,542    $ 1,582,553 
Cost of goods sold ......................................      809,447      2,886,432 
                                                           -----------    ----------- 

Gross margin (deficit) ..................................      506,095     (1,303,879)
                                                           -----------    ----------- 

Operating Expenses:                                                                   
    Selling, general and administrative .................      812,687      1,365,235 
    Research and development ............................      406,522        458,407 
                                                           -----------    ----------- 
                                                             1,219,209      1,823,642 
                                                           -----------    ----------- 

Loss from operations ....................................     (713,114)    (3,127,521)

Interest income .........................................           94            685 
Interest expense ........................................      (32,637)       (33,621)
Other income ............................................       44,873         (4,506)
Litigation settlement ...................................     (163,600)             0 
                                                              --------     -----------

Loss from continuing operations .........................     (864,384)    (3,164,963)
                                                           -----------    ----------- 

Loss from discontinued operation ........................            0       (309,206)
                                                           -----------    ----------- 

Loss before extraordinary item ..........................     (864,384)    (3,474,169)

Extraordinary gains on restructuring of payables and debt            0      3,431,823 
                                                           -----------    ----------- 

Net loss ................................................  $  (864,384)   $   (42,346)
                                                           ===========    =========== 

Earnings (loss) per share:                                                            
    From continuing operations ..........................  $      (.17)   $      (.72)
    From discontinued operation .........................            0           (.07)
    From restructuring of payables and debt .............            0            .78 
                                                            ----------    ----------- 
    Net loss per share ..................................  $      (.17)   $      (.01)
                                                           ===========    =========== 

Weighted average common shares outstanding ..............    4,986,767      4,418,618 
                                                           ===========    =========== 

The accompanying notes are an integral part of these financial statements.

 F-4

424B1
102nd Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 102nd
U.S. WIRELESS DATA, INC.

                                                        [Enlarge/Download Table]

                             STATEMENT OF CASH FLOWS                                                             

                                                                                            Fiscal Year Ended    

                                                                                      June 30,       June 30,    
                                                                                        1997          1996       
                                                                                        ----          ----       
                                                                                                                 
CASH FLOWS FROM OPERATING ACTIVITIES:                                                                            
   Net loss ....................................................................  $  (864,384)   $   (42,346)    
   Adjustments to reconcile net income to net cash used in operating activities:                                 
        Gain on restructuring of payables and debt .............................         --       (3,431,823)    
        Loss due to market decline of inventory ................................         --        1,525,026     
        Depreciation and amortization ..........................................       56,958        107,525     
        Stock issued for services ..............................................         --            3,880     
        Lawsuit settlement .....................................................      163,600           --       
        Consulting services ....................................................       50,000           --       
        Loss on disposal of asset ..............................................         (441)          --       
        Debt relieved by product sales .........................................      (32,400)          --       
   Changes in assets and liabilities:                                                                            
        Accounts receivable ....................................................      (78,768)       197,293     
        Inventory ..............................................................      412,369      1,702,058     
        Other current assets ...................................................       21,847         93,048     
        Accounts payable .......................................................      136,581        (46,764)    
        Accrued liabilities ....................................................     (102,010)      (686,707)    
                                                                                  -----------      ---------     
   Net cash used in operating activities .......................................     (236,648)      (578,810)    
                                                                                                               --
CASH FLOWS FROM INVESTING ACTIVITIES:                                                                            
   Purchases of equipment and furniture ........................................         --           (3,000)    
   Proceeds from sale of equipment .............................................          499         23,296     
   (Increase) decrease in other assets .........................................       11,261           (565)    
                                                                                  -----------    -----------     
      Net cash provided by (used in) investing activities ......................       11,760         19,731     
CASH FLOWS FROM FINANCING ACTIVITIES:                                                                            
   Proceeds from issuance of debt ..............................................      185,000        292,678     
   Net proceeds from issuance of stock .........................................        5,621         12,650     
                                                                                  -----------    -----------     
      Net cash provided by (used in) financing activities ......................      190,621        305,328     
(DECREASE) IN CASH .............................................................      (34,267)      (253,751)    
CASH, Beginning of period ......................................................       40,350        294,101     
                                                                                  -----------    -----------     
CASH, End of period ............................................................  $     6,083    $    40,350     
                                                                                  ===========    ===========     
Supplemental disclosures of cash flow information:                                                               
   Cash paid during the year for interest ......................................  $    13,833    $    33,621     
                                                                                  ===========    ===========     
Supplemental schedule of non-cash investing and financing activities:                                            
   Debt relieved with sale of inventory ........................................  $    32,400    $      --       
                                                                                  ===========    ===========     
   Inventory purchased with stock ..............................................  $      --      $   162,500     
                                                                                  ===========    ===========     
   Issuance of debt for services/lawsuit settlement ............................  $   210,000    $    --         
                                                                                  ===========    ===========     
   Stock issued for services/lawsuit settlement ................................  $   109,046    $     3,880     
                                                                                  ===========    ===========     
   Note executed for stock issuance ............................................  $    27,950    $    --         
                                                                                  ===========    ===========     
   Non cash extinguishment of debt and payables                                                                  
      Fair value of assets transferred .........................................  $      --      $ 1,031,868     
      Payables and debt extinguished ...........................................         --        4,463,691     
                                                                                  -----------    -----------     
      Gains on restructuring of payables and debt ..............................  $      --      $ 3,431,823     
                                                                                  ===========    ===========     

The accompanying notes are an integral part of these financial statements.

 F-5

424B1
103rd Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 103rd
U.S. WIRELESS DATA, INC.

                                                        [Enlarge/Download Table]

             STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)                                                                 

                                                              COMMON                COMMON                    NOTE                  
                                                              STOCK                 STOCK       PAID IN    RECEIVABLE      ACCUM.   
                                                       SHARES        AMOUNT       SUBSCRIBED    CAPITAL    SHAREHOLDER    DEFICIT   
                                                       ------        ------       ----------    -------    -----------    -------   
                                                                                                                                    
BALANCES, June 30, 1995 ............................  4,390,910  $  4,390,910  $       --   $ 11,514,859   $   --      $(16,054,123)

Shares issued for services at $.10 - .46 per share       18,123        18,123                    (14,243)                           
Stock options exercised at $.215 per share .......        9,300         9,300                     (7,300)                           
Warrant exercised at $.10 per share ..............      100,000       100,000                    (90,000)                           
Director stock option exercised at $.13 per share         5,000         5,000                     (4,350)                           
Stock subscription ...............................                                 142,544        19,956                            
Net loss .........................................                                                                          (42,346)
                                                      ------------------------------------------------------------------------------

BALANCES, June 30, 1996 ............................  4,523,333  $  4,523,333  $   142,544  $ 11,418,922   $   --      $(16,096,469)

Shares issued for services at $.15 per share .....      102,975       102,975                    (87,529)                           
Stock issued in connection with class lawsuit ....      600,000       600,000                   (506,400)                           
Stock options exercised at $.13-.215 per share ...      245,100       245,100                   (211,530)                           
Stock subscription issued ........................      142,544       142,544     (142,544)                                         
Note receivable on stock option plan .............                                                          (27,950)                
Net loss .........................................                                                                         (864,384)
Rounding .........................................                                                     2                            

                                                      ==============================================================================
BALANCES, June 30, 1997 ............................  5,613,952  $  5,613,952  $       --   $ 10,613,465   $(27,950)   $(16,960,853)
                                                      ==============================================================================

The accompanying notes are an integral part of these financial statements.

 F-6

424B1
104th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 104th
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") was  incorporated in the State of
     Colorado on July 30, 1991. It designs, develops and manufactures a wireless
     credit card  authorization and check  verification  terminal utilizing both
     analog and  digital  cellular  network  architectures.  The  Company  began
     generating its first significant revenue from product sales in fiscal 1995.
     Prior to fiscal 1995, the Company was in the development stage. The Company
     is  now  in a  transition  from  only a "box  maker"  orientation  to  also
     providing  products and services  which  generate  recurring  revenue.  The
     recurring revenue component is expected to become the dominant component of
the Company's business.                                               

Financial Condition                                                             

     The Company has  incurred an  accumulated  deficit of  approximately  $17.0
     million since inception and has incurred  additional  losses  subsequent to
     the year ended June 30, 1997. In order to continue as a going concern,  the
     Company  has  transitioned  to a  recurring  revenue  focus,  is working on
     programs to increase revenue levels and product margins; is negotiating new
  distribution agreements and seeking additional debt or equity financing.

     Subsequent to June 30, 1997,  the Company has  strengthened  the management
     team, signed several significant distribution agreements which are expected
     to build a recurring revenue base, started the expansion of the sales force
     and expanded its contract  manufacturing  relationships.  The current sales
     volume  is  inadequate  to fund  the  infrastructure  growth  and  business
     transition.  As a  result,  and as part of its  continuing  effort  to find
     working  capital funding in order to continue  operations,  the Company has
     entered into certain consulting agreements designed to facilitate financing
     relationships  with third  parties.  While  management  is confident it can
     accomplish  this  objective,  there is no  guarantee  that this  additional
funding will occur in the required time frame.                        

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

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 and 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.        

Inventories                                                                     

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

F-7 

424B1
105th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 105th
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.                                    

Revenue Recognition and Major Customers                                         

     Direct sales are  recognized  upon shipment of products to  customers.  The
     Company  also  leases  products  to  customers  with an option to buy.  The
     leasing arrangements are accounted for as sales-type leases.  During fiscal
     1997, Cardservice International, Inc. ("CSI") accounted for 53% of revenue.
     During fiscal 1996,  two  customers,  CSI and Superior  Bankcard  Services,
accounted for 25% and 11% of revenue, respectively.                   

Research and Development Costs                                                  

Research and development costs are expensed as incurred.              

Net Loss Per Share                                                              

     Net loss per  share is based on the  weighted  average  number of shares of
     common stock  outstanding  during each respective  period.  Shares issuable
     upon the  conversion of stock options and warrants were not included in the
calculation since their effect was anti-dilutive.                     

Fair Value of Financial Instruments                                             

     The carrying value of assets and liabilities  reported on the balance sheet
is a reasonable estimate of their fair value.                         

Recent Pronouncements                                                           

     In February,  1997 the Financial  Accounting  Standards Board (FASB) issued
     Statement of Financial  Accounting  Standard (SFAS) No. 128,  "Earnings per
     Share".  SFAS No. 128, which is effective for periods ending after December
     15, 1997, requires changes in the computation, presentation, and disclosure
     of earnings  per share.  All prior  period  earnings per share data must be
     restated to conform with the  provisions  of SFAS No. 128. The Company will
     adopt SFAS No. 128 during the fourth  quarter of fiscal 1998,  but does not
     expect  the new  accounting  standard  to  have a  material  impact  on the
Company's reported loss per share.                                    

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

     In June 1997, the FASB issued SFAS No. 131,  "Disclosures about Segments of
     an Enterprise  and Related  Information."  SFAS No. 131, which is effective
     for fiscal  years  beginning  after  December  15,  1997,  establishes  new
     disclosure   requirements  for  operating  segments,   including  products,
     services,  geographic  areas, and major  customers.  The Company will adopt
     SFAS No. 131 for the 1999 fiscal year.  The Company does not expect the new
     accounting  standard to have a material  impact on the  Company's  reported
financial results.                                                    
 F-8

424B1
106th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 106th
Reclassifications                                                               

    Certain reclassifications have been made in prior year to conform to current
year presentation.                                                              

NOTE 2.  INVENTORY                                                              

                                                                [Download Table]

                                                   June 30,
                                                     1997  

                                                     ----  
Inventory consists of:                                     
                                                           
       Raw material                     $          111,299 
       Finished goods                              208,095 
       Spare parts and accessories                   1,895 
       Lower of cost or market reserve            (112,422)
                                        -------------------
                                        $          208,867 
                                        ===================

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,
1997, based on current selling prices.                                          

NOTE 3.  PROPERTY AND EQUIPMENT                                                 

                                                                [Download Table]


                                                                      June 30, 
                                                                        1997   
                                                                        ----   
Property and equipment consists of:                                            
                                                                               
      Equipment and furniture                            $             295,020 
      Tooling                                                          124,267 
      Less:  accumulated depreciation and amortization                (378,842)
                                                         --------------------- 
                                                        $               40,445 
                                                        ====================== 

NOTE 4.  ACCRUED LIABILITIES                                                    

                                                                [Download Table]

                                                  June 30,
                                                    1997  
                                                    ----  
Accrued liabilities consists of:                          
                                                          
       Accrued wages/commissions                   38,115 
       Relocation expense                          30,300 
       Accrued revenue and royalty                 44,888 
       Litigation Settlement                       10,000 
       Other                                        2,284 
                                    --------------------- 
                                    $             125,587 
                                    ===================== 

F-9 

424B1
107th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 107th
NOTE 5.  NOTES PAYABLE                                                          

                                                                [Download Table]

Notes payable consist of the following:                                  

                                                                 June 30,
                                                                   1997  
                                                                   ----  
     Current Portion:                                                    
                                                                         
             Note payable - supplier                $             387,866
             Notes payable - investors                            185,000
             Note payable - entrenet                              150,000
             Note payable - lawsuit settlement                     15,000
                                                    ---------------------
                                                                $ 737,866
                                                    =====================

     Long-term portion of Note payable                                   
           - lawsuit settlement                     $              45,000
                                                    =====================

Note Payable - Supplier                                               
     The note  payable  to a supplier  is  currently  in  default.  The  Company
     continues to accrue monthly interest payments.  As of October 13, 1997, the
     supplier  had not called the note.  The note  bears  interest  at 8% and is
     fully  collateralized  with certain inventory.  The Company is currently in
     discussion  with the vendor  regarding  payment of the note and the accrued
interest.                                                             

Notes Payable - Investors                                             
     During the fourth quarter of fiscal 1997, the Company executed demand notes
     with  certain  investors.  The notes bear  interest at 10% annually and are
     convertible  to common  stock on or after  November 1, 1997 at a conversion
     price of $.35 per share ($75,000 of Notes) and $.50 per share  ($110,000 of
     Notes) for any or all outstanding  principal and accrued  interest.  If not
converted, the notes are due in the fourth quarter of fiscal 1998.    

Note Payable - entrenet                                               
     During June 1997, the Company executed a convertible  debenture in exchange
     for  consulting  services  to be  rendered  during  fiscal 1997 and 1998 by
     entrenet  Group,  LLC. The debenture  bears interest at 10% annually and is
     convertible  to common stock at a conversion  price of $0.50 per share.  If
not converted, the debenture is due June 3, 1998.                     

Note Payable - Lawsuit Settlement                                     
     As part of the class action lawsuit settlement, the Company executed a 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. See additional  discussion of
the lawsuit settlement in Note 11. - Litigation.                      

NOTE 6.  STOCKHOLDERS' EQUITY                                                   

Stock Options                                                                   

     In September 1992, the Company adopted an incentive stock option plan and a
     non-qualified  stock  option  plan  covering  600,000  shares of the Common
     Stock. In October 1994, the Shareholders approved an amendment to the stock
     option  plan  increasing  the number of  available  shares to  880,000.  In
     December 1995, the  Shareholders  approved an amendment to the stock option
     plan making certain clarifications to the plan and providing for the annual
grant of an option for 20,000 shares to non-employee directors.       

F-10

424B1
108th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 108th
     Stock  options have been  granted  under the option 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 option plan
    generally must be exercised no later than 10 years from the date of grant.

         The  following  table  summarizes   information   about  stock  options
outstanding at June 30, 1997:                                                   

                                                        [Enlarge/Download Table]

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

                                                                                      
 $0.00 - $0.13      8.4       $0.13       262,849           $0.13             233,449 
 $0.14 - $0.22      8.4       $0.21       166,800           $0.21             128,400 
                                          -------                             ------- 
                                          429,649                             361,849 
                                        =========                             ======= 

Stock  option  transactions  for the years  ended June 30, 1997 and 1996 were as
follows:                                                                        

                                                                [Download Table]

                                         Options Outstanding     
                                 --------------------------------
                                                 Weighted Average
                                  Number of      Exercise Price  
                                  Shares         Per Share       
                                  -------------------------------
                                                                 
Balance at June 30, 1995           462,500       $3.67           
Granted                            827,849       $0.16           
Exercised                        (  14,300)      $0.19           
Terminated                        (482,500)      $3.65           
                                   -------                       
Balance at June 30, 1996           793,549       $0.16           
Granted                             20,000       $0.16           
Exercised                         (245,100)      $0.14           
Terminated                        (138,800)      $0.22           
                                   -------                       
Balance at June 30, 1997           429,649       $0.16           
                                   =======                       

Exercisable at June 30, 1997       361,849       $0.18           
                                  ========                       

Notes Receivable from Stockholder                                               

     In connection with the resignation of the Company's former CEO, the Company
     received a promissory  note during October 1996 to fund the exercise of the
     former CEO's stock options pursuant to the Company's Stock Option Plan. The
     note evidences a three-year  non-recourse loan which accrues interest at 6%
per annum.                                                            

SFAS No. 123                                                                    

     The Company applies APB No. 25 in accounting for its Stock Option Plan, and
     no compensation  expense has been recognized in the financial statements as
all options had been granted at the fair market value of the          

F-11

424B1
109th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 109th
     underlying  common stock. Had  compensation  expense for the Company's 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:          

                                                                [Download Table]

                                              June 30,      
                                          1997        1996  
                                       ---------------------
                                                            
Net loss                   As reported ($864,382)  ($42,346)
                           Pro forma   ( 876,142)  ( 58,562)

Net loss per common share  As reported  $(0.17)      $(0.01)
                           Pro forma    $(0.18)      $(0.01)

     In accordance  with the guidance  under SFAS No. 123, fair values are based
     on minimum values.  The weighted  average fair value of option is estimated
     as $0.03 and $0.05 for options  granted  during  fiscal year 1997 and 1996,
     respectively,   using  the  Black-Scholes  option-pricing  model  with  the
     following  weighted-average  assumptions  used for grants  during the years
     ended June 30, 1997 and 1996:  dividend yield of zero;  expected volatility
     of 162% and 101%,  respectively;  risk-free interest rate of 6.4% and 5.5%,
     respectively;  and an expected term of 3.5 years.  The risk-free rates used
     in the calculation  represent the average U.S. Government Security interest
     rates on the stock option grant date with maturities  equal to the expected
     term of the options granted.  The effect of actual  forfeitures is included
     in the computation of compensation  cost for options granted during each of
the respective years.                                                 

Stock Warrants                                                                  

     In fiscal 1993, the Company issued warrants to one officer and one director
     of the Company to purchase an aggregate  of 250,000  shares of common stock
     at $4.00 per share.  As of June 30, 1997,  all of these warrants were fully
     vested and had the following terms:  100,000 expire April 12, 1998; 150,000
     expire May 1, 2003. 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  expire on
December 2, 1998.                                                     

     In fiscal 1994, in  conjunction  with the  acquisition  of Direct Data, the
     Company  issued  warrants  to four  former  shareholders  of Direct Data to
     purchase 29,548 shares of common stock at $2.625 per share which were fully
     vested at the date of issuance.  In October 1994, warrants for the purchase
     of 5,000 shares of common stock were exercised and 5,752 warrants  expired.
The remaining 18,796 warrants expire May 31, 1998.                    

     In October 1995, as partial  consideration  for entering into a development
     contract,  the Company  issued  warrants to a customer to purchase  100,000
     shares of common stock at $0.10 per share.  This  warrant was  subsequently
exercised during fiscal year 1996.                                    

NOTE 7.  INCOME TAXES                                                           

     At June 30, 1997,  the Company had net  operating  loss  carryforwards  for
     federal   income  tax  purposes  of   approximately   $11,700,000.   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.           

F-12

424B1
110th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 110th
     Deferred  income  taxes  reflect  the net tax  effects  of:  (a)  temporary
     differences  between the  carrying  amounts of assets and  liabilities  for
     financial  reporting purposes and the amounts used for income tax purposes,
     and (b)  operating  loss and tax credit  carryforwards.  The tax effects of
   significant items comprising the Company's deferred taxes are as follows:

                                                                [Download Table]

                                                               June 30,            

                                                        1997                  1996 
                                                        ----                  ---- 
                                                                                   
            Deferred tax assets                                                    
    Net operating loss carry-forwards         $    4,388,000       $     3,880,000 
    Depreciation                                 (     3,000)          (    12,000)
    Inventory reserves                                31,000               195,000 
    Allowance for bad debts                            6,000                35,000 
    Other                                             28,000                28,000 
                                           -----------------    ------------------ 
                                             $     4,450,000      $      4,126,000 
    Valuation allowance                          ( 4,450,000)          ( 4,126,000)
                                           -----------------      ---------------- 
Net deferred tax asset                 $                  --      $             -- 
                                       =====================      ================ 

     Deferred  tax assets  have been  reduced to zero by a  valuation  allowance
     based on current  evidence which  indicates that it is not considered  more
     likely than not that these  benefits will be realized.  During fiscal 1997,
     the valuation  allowance  increased by $324,000 primarily due to additional
     losses for which no tax benefit  was  recorded.  During  fiscal  1996,  the
     valuation   allowance   decreased  by  $1,090,000   primarily  due  to  the
dissolution of Direct Data.                                           

     The difference between the zero provision for income taxes and the expected
     amount determined by applying the federal statutory rate to the loss before
     income  taxes  results  primarily  from a reduction of net  operating  loss
     carryforwards  due to an increase in the  valuation  allowance for the year
     ended June 30, 1997 and due to the  dissolution of Direct Data for the year
ended June 30, 1996.                                                  

NOTE 8.  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 1997.                                     

NOTE 9.  COMMITMENTS AND CONTINGENCIES                                          

Lease Commitments                                                     

     The Company  leases its office  facilities  under various  operating  lease
     arrangements.  Most of the leases  contain  certain  provisions  for rental
     adjustments.  In addition,  the leases  require the Company to pay property
     taxes, insurance and normal maintenance costs. Future minimum rentals under
     these  arrangements  are $18,105 in 1998.  Rent expense was $73,550  during
     fiscal 1997 and sublease income of $16,680 was received during fiscal 1997.

     In  September  1997,  the  Company  executed  a lease for  office  space in
     Emeryville,  California.  Rental  payments  commence  October 1, 1997 at an
     initial  rental  rate of $9,942  per  month for a term of 5 years.  In year
five, the rental rate increases to $11,640 per month.                 

F-13

424B1
111th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 111th
NOTE 10.  EXTRAORDINARY GAINS AND DISCONTINUED OPERATION                        

     During the year ended June 30, 1996, the Company recognized $3.4 million in
gains related to the restructuring of debt and payables as follows:   

                                                        [Enlarge/Download Table]
                                                                                     
Release of guarantee of bank debt by former officer of Direct Data  $         593,132
Release of liability for inventory by supplier                              1,099,412
Liabilities of dissolved Direct Data subsidiary                             1,739,279
                                                                    -----------------
                                                                    $       3,431,823
                                                                    =================

     The release of  guarantee  of bank debt by a former  officer of Direct Data
     ("the  Officer")  occurred  as a result of the  September  1995  demand for
     payment by a financial  institution creditor of a $1.3 million loan made to
     Direct Data.  The loan was  guaranteed by the Officer who paid the loan and
     became a security holder of Direct Data's assets in early October 1995. The
     Company was  obligated to remove the Officer from his guarantee of the bank
     loan, and in consideration  for release of such liability,  surrendered the
     assets of Direct  Data to the  Officer  on  October  5,  1995.  The  excess
     carrying  value of the debt over the book value  (which  approximated  fair
     value) of the assets  surrendered  in  satisfaction  of the  obligation was
     $593,132.  In connection  with this  transaction,  the Officer  granted the
     Company an option to  repurchase  397,684  shares of Company stock from the
     Officer  at a price of $.25 per  share,  as well as the  right to vote such
shares.                                                               

     During its fiscal  year  1995,  the  Company  entered an  agreement  with a
     supplier, whereby the Company became liable for the purchase of certain raw
     materials  the supplier  procured for  manufacturing  of Company  products.
     During  1996,  the Company and the supplier  agreed that the Company  would
     settle the  liability of $1.4 million for  consideration  of  approximately
     $325,000, and that the Company or its designee would take possession of the
     raw  materials.  Accordingly,  the  Company has  recognized  a gain of $1.1
     million as a result of restructuring the liability during fiscal year 1996.

     During  October  1995,  the  Company   dissolved   Direct  Data.  Upon  the
     dissolution of Direct Data,  approximately  $1.7 million of unsecured trade
     debt remained unpaid and the creditors were notified that Direct Data would
     be unable to pay its remaining obligations.  The Company believes it has no
     liability for future claims  arising from the unpaid  obligations of Direct
     Data;  therefore,  such  unpaid  obligations  have been  recognized  by the
     Company as a gain from restructuring of liabilities of the dissolved Direct
Data subsidiary during fiscal 1996.                                   

     Management believes Direct Data represented a separate and material line of
     business from the Company.  The pretax loss on disposal has been  accounted
     for as a loss  from  discontinued  operations  and  prior  years  financial
     statements have been  reclassified to reflect the  disposition.  Revenue of
Direct Data for the year ended June 30, 1996 was $657,667.            

NOTE 11.  LITIGATION                                                            

     In  September  of 1996,  the Company  agreed to terms to settle  securities
     fraud litigation,  pending since 1994, which was brought in relation to the
     Company's initial public offering of December 1993. The parties'  agreement
     (the "Settlement  Agreement") was filed in the United States District Court
     for the District of Colorado on January 15, 1997 in  consolidated  Case N0.
     94-Z-2258,  Appel,  et al. v. Caldwell,  et al. By its order  approving the
     settlement, the court certified a plaintiffs' settlement class and provided
     the mechanism for payment of claims. The Company contributed directly or by
     indemnification  a  total  of  $10,000  to the  total  settlement  fund  of
     $2,150,000.  The remaining  portion of the  settlement  was  contributed by
     certain   underwriters  of  the  Company's   initial  public  offering  and
     securities counsel. No objections to the Settlement Agreement were made. No
     potential class member opted-out of the settlement and all are bound by the
release granted the Company. All claims against the Company in those  
F-14

424B1
112th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 112th
     consolidated cases were dismissed by final federal court order on September
     4, 1997. No appeal was filed.  Similar state court claims were dismissed by
Colorado district court order dated October 9, 1997.                  

     To resolve  cross-claims  asserted by underwriters in the litigation,  U.S.
     Wireless Data, Inc. agreed to transfer to RAS Securities Corporation,  H.J.
     Meyers & Co,  Inc.,  Sands & Co.  Ltd.  and R.J.  Steichen & Co. a total of
     600,000 U.S.  Wireless Data,  Inc. common shares upon the effective date of
     the  Settlement  Agreement.  The Company has agreed to register such shares
     upon demand not sooner than April 26, 1998.  Further, on September 17, 1997
     the Company agreed to entry of a consent  judgment  against it and in favor
     of Don Walford,  the sole  shareholder of underwriter  Walford  Securities,
Inc., in the amount of $60,000, payable over a three year period.     

     The total charge  recognized  during fiscal 1997 consists of the following:
     $93,600  for the value of the  common  shares  issued  based  upon the fair
     market value of the  Company's  common stock on the date the  commitment of
     such  shares was made;  $10,000  for actual  cash to be paid by the Company
     pursuant  to the  settlement  with  stockholders;  and $60,000 for the note
payable executed with Don Walford as discussed above.                 

NOTE 12.  RELATED PARTIES                                                       

     A director  of the  Company is also an  officer  of the  Company's  largest
     customer,  Cardservice International,  Inc. ("CSI"). Additionally, CSI owns
     approximately 5% of the Company's  outstanding  common stock as of June 30,
     1997. Sales to CSI approximated  $698,000 and $398,000 in fiscal years 1997
and 1996, respectively.                                               

     During fiscal 1996,  CSI advanced the Company  $162,500 for the purchase of
     raw  materials  in  exchange  for  142,544  shares of common  stock  issued
     subsequent  to June 30, 1996 at 150% of then current fair market value plus
     registration  rights  after  one  year on all  stock  owned  by  CSI.  This
     transaction  increased CSI's ownership to from 2% to 5%. Additionally,  the
     Company  will make  royalty  payments to CSI on future  sales of  POS-50(R)
     product built with the raw materials  purchased using the amounts  advanced
     from CSI. As of June 30, 1997,  no units were built using the raw materials
referred to above.                                                    

NOTE 13. SUBSEQUENT EVENTS                                                      

     In August  1997,  the Company  received  $500,000  for the  issuance of 3.5
     million  unregistered  shares of common  stock and 1.6 million  warrants to
     purchase  common  stock at an  exercise  price of  $0.01  per  share to two
     officers of  Liviakis  Financial  Communications,  Inc.  ("Liviakis").  The
warrants are exercisable from January 15, 1998 through August 4, 2002.

     Additionally,  in July 1997,  the  Company  executed a one year  consulting
     agreement  with  Liviakis  for  consulting  services to be rendered  during
     fiscal 1998 and 1999.  Fees related to the agreement are payable in cash of
     $10,000 and stock,  the issuance of 300,000 shares of common stock to occur
     at various times during the consulting  agreement,  commencing November 15,
1997.                                                                 

     The Liviakis  securities  carry  future  registration  rights,  including a
one-time demand registration, with fees to be paid by the Company.    

     On August 4, 1997,  the Company  retained Evon A. Kelly as chief  executive
     officer.  As  part  of Mr.  Kelly's  compensation  package,  the  Board  of
     Directors issued 600,000 shares of non-qualified  stock options exercisable
at $1.00 per share.                                                   

     On  September  4, 1997 and  October  9,  1997,  respectively,  the  Company
     received  notice  that the federal and state  courts  dismissed  all claims
     against the Company related to the class action shareholder  lawsuits filed
in 1994. See additional discussion in Note 11. - Litigation.          

     In September  1997, the Company  entered into a lease  agreement for office
     space in California. See additional discussion in Note 9. - Commitments and
Contingencies.                                                        
F-15

424B1
113th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 113th
                                                        [Enlarge/Download Table]

                            U.S. WIRELESS DATA, INC.                                              
                                  BALANCE SHEET                                                   
                                   (Unaudited)                                                    

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

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

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

                  LIABILITIES AND STOCKHOLDERS' EQUITY                                            

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

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

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

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

Total liabilities and stockholders' equity (deficit)                $  2,341,932    $    501,280  
                                                                    ============    ============  

 Accompanying Notes are an integral part of the Financial Statements

F-16

424B1
114th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 114th
                                                        [Enlarge/Download Table]

                            U.S. WIRELESS DATA, INC.                                                   
                            STATEMENTS OF OPERATIONS                                                   
                                   (Unaudited)                                                         

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

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

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

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

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

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

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

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

 Accompanying Notes are an integral part of the Financial Statements

F-17

424B1
115th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 115th
                                                        [Enlarge/Download Table]

                            U.S. WIRELESS DATA, INC.                                     

                            STATEMENTS OF CASH FLOWS                                     
                                   (Unaudited)                                           

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

   Changes in assets and liabilities:                                                    
          (Increase) decrease in:                                                        
               Accounts receivable ........................        46,543         18,210 
               Inventory ..................................      (671,085)       168,300 
               Processing units - deployed ................      (383,100)             0 
               Other current assets .......................      (152,411)        34,627 
          Increase (decrease) in:                                                        
               Accounts payable ...........................       911,215        102,071 
               Accrued liabilities ........................        52,262        (90,297)
               Notes Payable ..............................             0        (22,800)
                                                              -----------    ----------- 
               Net cash used in operating activities ......    (3,160,570)       (37,124)

CASH FLOWS FROM INVESTING ACTIVITIES:                                                    
     (Purchase) of Property, plant, and equipment .........      (291,445)           500 
     (Increase) in other assets ...........................       (56,176)             0 
                                                              -----------    ----------- 
               Net cash used in investing activities ......      (347,621)           500 

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

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

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

CASH, End of period .......................................   $    64,640    $     3,726 
                                                              ===========    =========== 

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

 Accompanying Notes are an integral part of the Financial Statements

    F-18

424B1
116th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 116th
U.S. WIRELESS DATA, INC.
 NOTES TO FINANCIAL STATEMENTS
 (Unaudited)

Note 1 -- ACCOUNTING PRINCIPLES                                                 

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

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

Note 2 -- FINANCIAL CONDITION AND LIQUIDITY                                     

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

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

Note 3 -- NET LOSS PER SHARE                                                    

      Earnings  (loss) per common  share (EPS) is computed  using  Statement  of
      Financial  Accounting  Standard (SFAS) No. 128, "Earnings per Share". SFAS
      No. 128,  establishes  standards for the  computation,  presentation,  and
      disclosure  of earnings  per share.  Basic and diluted net loss per common
      share are computed by dividing the net loss by the weighted average number
      of  common  shares  outstanding  at the  end of the  period.  Diluted  EPS
      excludes exercisable stock options and warrants from the calculation since
      their effect would be anti-dilutive. Such stock options and warrants could
      potentially dilute earnings or losses per share in the future. EPS for the
      three and nine month  periods  ended March 31, 1997 have been  restated to
conform with SFAS No.128.                                           
F-19

424B1
117th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 117th
Note 4 -- FINANCINGS                                                            

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

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

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

F-20

424B1
118th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 118th
Note 5 -- LIVIAKIS FINANCIAL COMMUNICATIONS INC. ("LFC") - CONSULTING           

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

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

Note 6 - ACCOUNTING FOR PROCESSING UNITS DEPLOYED                               

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

7 -- LITIGATION                                                                 

Securities Class Actions Settlements                              

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

F-21

424B1
119th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 119th
       To resolve  cross-claims  asserted by the underwriters in the litigation,
       the Company agreed to issue to RAS Securities Corporation,  H.J. Meyers &
       Co,  Inc.,  Sands & Co. Ltd.  and R.J.  Steichen & Co. a total of 600,000
       shares  of  Common  Stock  upon  the  effective  date  of the  Settlement
       Agreement,  which  was April 25,  1997.  The  shares  issued  under  this
       settlement  become  saleable  under SEC Rule 144  commencing on April 26,
       1998.  The  Company  has agreed to  register  such  shares upon demand of
       holders of not less than 25% of the  shares,  not  sooner  than April 26,
       1998.  Further,  on September  17, 1997 the Company  agreed to entry of a
       consent  judgment  against  it and in  favor  of Don  Walford,  the  sole
       shareholder of  underwriter  Walford  Securities,  Inc., in the amount of
       $60,000,  payable over a three year period.  The total charge  recognized
       during  fiscal 1997 consists of the  following:  $93,600 for the value of
       the  common  shares  issued  based  upon  the  fair  market  value of the
       Company's  Common  Stock on the date the  commitment  of such  shares was
       made;  $10,000 for actual cash to be paid by the Company  pursuant to the
       settlement with  stockholders;  and $60,000 for the note payable executed
with Don Walford as discussed above.                              

Settlement with Consultant                                        

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

Settlement of Claims of Certain Noteholders                       

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

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

F-22

424B1
120th Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 120th
     guarantees  as to the amount for which the shares can be resold and a "put"
     which  allows the  Noteholders  to require  the Company to  repurchase  any
     restricted  shares remaining unsold at the end of the one year period after
     the shares  become  saleable  under SEC Rule 144. The shares  issuable upon
     conversion of the Demand Notes will be  "restricted  securities" as defined
     under SEC Rule 144, but will become saleable  pursuant to Rule 144 one year
     from the date the converted Demand Note was purchased by the Noteholder.  A
     total of  525,800  shares  have been or will be  issued to the  complaining
     Noteholders  upon  conversion  of their  notes which will be subject to the
     guarantee and put  agreements.  The holder of the other $50,000 Demand Note
     will be given the  enhanced  conversion  rate (of 1.4  times the  number of
     shares originally issuable) and will receive 154,000 shares upon conversion
of his Demand Note but will not be given the guarantee or put.        

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

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

Note 8 -- RECENT ACCOUNTING PRONOUNCEMENTS                                      

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

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

F-23

424B1
Last Page of 121
TOC
1st
Previous
Next
↓Bottom
Just 121st
No dealer,  salesperson  or other  individual  has been             
authorized   to  give  any   information   or  to  make  any                  
representations   other   than  those   contained   in  this                  
Prospectus  in  connection  with  the  offer  made  by  this                  
Prospectus  and,  if  given  or made,  such  information  or                  
representations  must  not be  relied  upon as  having  been                  
authorized  by  the  Company  or  the   Underwriters.   This                  
Prospectus  does  not  constitute  an  offer  to sell or the                  
solicitation  of an offer to buy any  securities  offered by                  
this Prospectus,  nor does it constitute an offer to sell or                  
a solicitation of an offer to buy the Preferred Stock by any                  
person  in any  jurisdiction  in  which  such  an  offer  or                  
solicitation is not  authorized,  or in which the individual                  
making such offer or solicitation is not qualified to do so,                  
or to any  individual to whom it is unlawful to make such an                  
offer  or   solicitation.   Neither  the  delivery  of  this                  
Prospectus  nor any sale  made  hereunder  shall,  under any                  
circumstances,  create any implication  that the information                  
contained herein is correct as of any time subsequent to the                  
date  hereof or that there has been no change in the affairs                  
of the Company since that date.                                               

TABLE OF CONTENTS                             
                                        Page
Available Information...................................... 3                   
Prospectus Summary......................................... 4                   
Risk Factors............................................... 9                   
Use of Proceeds........................................... 21                   
Dividend Policy........................................... 21                   
Market For the Company's Common Stock                                           
and Related Matters..................................... 22                 
Capitalization............................................ 23                   
Management's Discussion and Analysis of                                         
Financial Condition and Results of Operations .......... 24                 
Business.................................................. 34                   
Documents Filed as Exhibits............................... 56                   
Management................................................ 57                   
Security Ownership of Principal                                                 
Shareholders and Management............................. 65                 
Certain Transactions...................................... 69                   
Description of Securities................................. 74                   
Selling Security Holders.................................. 87                   
Legal Matters............................................. 94                   
Change in Accountants..................................... 94                   
Commission Position on Indemnification for                                      
Securities Act Liabilities and Related Matters.......... 94                 
Experts................................................... 95                   
Index to Financial Statements............................ F-1                   

7,240,356 Shares                                        

U.S. WIRELESS DATA, INC.                                        

Common Stock                                        

August 7, 1998                                          

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘424B1’ Filing		Date		First		Last			Other Filings
		5/1/03		109
		3/11/03		29		86
		9/1/02		1
		8/4/02		83		117
		9/9/01		29		86
		7/21/01		29		95
		12/9/00		85
		12/1/00		84
		9/17/00		107
		7/21/00		11		95
		12/31/99		4		93			10QSB,  NT 10-Q
		12/1/99		84
		9/17/99		107
		8/1/99		48
		7/1/99		22					POS AM
		6/30/99		22		87			10KSB,  NT 10-K,  SB-2
		4/12/99		84
		3/15/99		29		72
		3/11/99		29		73
		2/1/99		4		95
		1/15/99		82
		12/31/98		82					10QSB
		12/2/98		109
		12/1/98		84
		10/31/98		18
		10/5/98		33		117
		9/17/98		107
		9/15/98
Filed on:		9/14/98							8-K
		9/9/98		2		87
		9/8/98		20
		9/1/98		2
		8/22/98		1
		8/21/98		1					8-K
		8/7/98		1		121
		8/4/98		83
		8/1/98		29		95
		7/31/98		20		118			8-K
		7/27/98		29		82
		7/22/98		1		87
		7/21/98		29
		7/16/98		7		49			8-K,  SB-2/A
		7/10/98		75
		7/2/98		17
		6/30/98		22		95			10KSB,  NT 10-K
		6/26/98		29		87
		6/19/98		15		34
		6/15/98		69		74
		6/10/98		33
		6/3/98		4		107
		6/2/98		73
		6/1/98		59		60
		5/31/98		1		109
		5/30/98		11
		5/20/98		69					8-K,  NT 10-Q/A
		5/12/98		72		83
		5/11/98		20		80
		4/26/98		55		119
		4/12/98		84		109
		4/11/98		17		119
		4/3/98		27		69
		4/2/98		27		51
		4/1/98		4		119
		3/31/98		3		118			10QSB,  10QSB/A,  NT 10-Q,  NT 10-Q/A
		3/23/98		7		49
		3/17/98		107
		3/12/98		25		117
		3/10/98		20		80
		3/9/98		7		46
		2/9/98		4		117
		2/6/98		24		117
		2/1/98		15		48
		1/31/98		71
		1/26/98		52		119
		1/15/98		83		117
		12/31/97		10		116			10QSB,  10QSB/A,  NT 10-Q,  NTN 10K
		12/15/97		24		120
		12/10/97		10		117
		11/30/97		72
		11/26/97		68					SC 13D/A
		11/24/97		64
		11/15/97		112
		11/14/97		38		119			8-K,  NT 10-Q
		11/3/97		38		119
		11/1/97		17		119
		10/13/97		99		107
		10/10/97		18					DEF 14A
		10/9/97		55		118
		10/1/97		110
		9/29/97		50
		9/18/97		50
		9/17/97		56		119
		9/5/97		64
		9/4/97		55		118
		8/31/97		54
		8/25/97		64
		8/14/97		49
		8/6/97		25		69
		8/4/97		25		112
		8/1/97		7		48
		7/30/97		57		120
		7/25/97		9		118
		7/2/97		25		120
		6/30/97		10		116			10-K,  10KSB/A,  DEF 14A,  NT 10-K,  PRE 14A
		6/3/97		90
		4/30/97		50
		4/26/97		55
		4/25/97		119
		4/1/97		15		119
		3/31/97		10		116			10QSB
		2/27/97		62
		1/15/97		55		118
		1/1/97		46
		11/15/96		18
		10/23/96		55		62			8-K
		8/31/96		54
		6/30/96		11		112			10KSB,  NT 10-K
		4/26/96		71
		10/19/95		33		40
		10/5/95		111
		7/1/95		98
		6/30/95		62		103
		9/29/94		89
		12/2/93		89
		4/12/93		89
									List all Filings