10QSB

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

[X] Quarterly Report Pursuant to Section 13 or 15(D) of the
Securities Exchange Act of 1934

For the quarterly period ended September 30, 2000

OR

[  ] Transition Report Pursuant to Section 13 or 15(D) of the
Securities Exchange Act of 1934

Commission File Number 0-22848

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

Delaware
(State of incorporation)

84-1178691
(IRS Employer Identification No.)

750 Lexington Avenue, 20th Floor
New York, NY 10022
(Address of principal executive offices, including zip code)

(212) 750-7766
(Registrant's Telephone Number, including area code)

Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past ninety days. Yes [X]     No [  ]

As of of October 18, 2000, there were outstanding 9,528,277 shares of the Registrant’s Common Stock ($0.01value per share).

Transitional Small Business Disclosure Format. Yes [  ]     No [X]

U.S. WIRELESS DATA, INC.
TABLE OF CONTENTS

Part I — FINANCIAL INFORMATION                 Page

  ITEM 1. Financial Statements

        Balance Sheets as of
                 September 30 and June 30, 2000.......................... ........................... 3

        Statements of Operations for the three months ended
                 September 30, 2000 and 1999............................. ............................. 4

        Statements of Cash Flows for the three months ended
                 September 30, 2000 and 1999............................. .............................. 5

        Notes to Financial Statements... .............................................................. 6-8

  ITEM 2. Management's Discussion and Analysis of Financial Condition and
    Results of Operations.................................. ................................................. 8-11

Part II — OTHER INFORMATION

  ITEM 4. Submission of Matters to a Vote of Security Holders................ 11-13

  ITEM 6. Exhibits and Reports on Form 8-K .......................... ...................... 13

Page 2

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

                                                                          September 30, 2000   June 30, 2000
ASSETS                                                                    ------------------   -------------
- ------

Current assets:
     Cash and cash equivalents ..........................................   $  36,680,000    $  39,231,000
     Accounts receivable, net of allowance for doubtful accounts of
         $75,000 at September 30, 2000 and June 30, 2000 ................         218,000          126,000
     Notes receivable ...................................................          82,000           79,000
     Other receivable ...................................................         176,000             --
     Inventory, net .....................................................          39,000           45,000
     Other current assets ...............................................         222,000          150,000
                                                                            -------------    -------------
         Total current assets ...........................................      37,417,000       39,631,000
Restricted cash .........................................................         576,000          459,000
Property and equipment, net .............................................       2,116,000        1,055,000
Other assets ............................................................         103,000          111,000
                                                                            -------------    -------------

Total assets ............................................................   $  40,212,000    $  41,256,000
                                                                            =============    =============
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Accounts payable ...................................................   $   1,684,000    $   1,014,000
     Accrued liabilities ................................................       1,073,000          498,000
                                                                            -------------    -------------
         Total current liabilities ......................................       2,757,000        1,512,000
Deferred rent ...........................................................         157,000           52,000
Deposit due to sub-lessor ...............................................         107,000             --
                                                                            -------------    -------------
Total liabilities .......................................................       3,021,000        1,564,000
                                                                            -------------    -------------

Commitments and contingencies

Stockholders' equity:
     Preferred stock, no par value, 25,000,000 and 15,000,000 shares
        authorized at September 30, 2000 and June 30, 2000, respectively:
            Series C convertible, at $.01 stated value, liquidation value
                 $10.00 per share, aggregating $55,866,000, 8,450,000
                  shares authorized, 5,586,600 issued and outstanding ...          56,000           56,000
     Common stock, no par value, at $1.00 stated value, 200,000,000
        and 40,000,000 shares authorized at September 30, 2000
        and June 30, 2000, respectively; 9,528,277 and 8,099,187
        shares issued and outstanding at September 30, 2000 and
        June 30, 2000, respectively .....................................       9,528,000        8,099,000
     Additional paid-in capital .........................................     119,781,000      120,783,000
     Accumulated deficit ................................................     (92,174,000)     (89,246,000)
                                                                            -------------    -------------
         Total stockholders' equity .....................................      37,191,000       39,692,000
                                                                            -------------    -------------
Total liabilities and stockholders' equity ..............................   $  40,212,000    $  41,256,000
                                                                            =============    =============

The above statement gives retroactive effect to a one-for-four reverse stock split effectuated on October 18, 2000

The accompanying notes are an integral part of the financial statements

Page 3

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

                                                        For the three months ended September 30,
                                                        ----------------------------------------
                                                                  2000            1999
                                                                  ----            ----
Net revenues:
    Synapse, recurring ...................................   $   101,000    $    15,000
    Synapse, non-recurring ...............................        39,000         30,000
                                                             -----------    -----------
    Total Synapse ........................................       140,000         45,000
    Equipment related ....................................        11,000         99,000
                                                             -----------    -----------
                                                                 151,000        144,000
                                                             -----------    -----------

Cost of revenues:
    Carrier charges ......................................        98,000         87,000
    Equipment charges ....................................         8,000         87,000
                                                             -----------    -----------
                                                                 106,000        174,000
                                                             -----------    -----------

Gross profit (loss) ......................................        45,000        (30,000)
                                                             -----------    -----------
Operating expenses:
    Selling, general and administrative ..................     3,260,000      1,118,000
    Research and development .............................       350,000        191,000
                                                             -----------    -----------
       Total operating expenses ..........................     3,610,000      1,309,000
                                                             -----------    -----------
       Loss from operations ..............................    (3,565,000)    (1,339,000)

Interest expense .........................................          --         (221,000)
Interest income ..........................................       627,000           --
Other income, net ........................................        10,000        128,000
                                                             -----------    -----------

Net loss .................................................    (2,928,000)    (1,432,000)

Preferred stock dividends ................................          --         (850,000)
                                                             -----------    -----------

Net loss available to common stockholders ................   $(2,928,000)   $(2,282,000)
                                                             ===========    ===========

Basic and diluted net loss per share, (after provision for
   preferred stock dividends) ............................   $     (0.35)   $     (0.48)
                                                             ===========    ===========

Weighted average common shares outstanding - basic/diluted     8,335,000      4,750,000
                                                             ===========    ===========

The above statement gives retroactive effect to a one-for-four reverse stock split effectuated on October 18, 2000

The accompanying notes are an integral part of the financial statements

Page 4

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

                                                             For the three months ended September 30,
                                                             ----------------------------------------
                                                                         2000           1999
                                                                         ----           ----

CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss ...................................................   $ (2,928,000)   $ (1,432,000)
    Adjustments to reconcile net loss to net cash used in
     operating activities:
        Depreciation and amortization ..........................         88,000          37,000
        Deferred rent ..........................................        105,000            --
        Non-cash consulting services and other .................        370,000         352,000
        Loss on asset disposal .................................          5,000            --
        Gain on sale of merchant portfolio .....................           --          (124,000)
        Non-cash interest expense ..............................           --            27,000
        Changes in current assets and liabilities:
           Accounts receivable .................................        (92,000)         95,000
           Notes receivable ....................................         (2,000)           --
           Other receivable ....................................       (176,000)           --
           Inventory ...........................................          5,000          73,000
           Other current assets ................................        (72,000)        (16,000)
           Accounts payable ....................................        672,000        (156,000)
           Accrued liabilities .................................        574,000         396,000
                                                                   ------------    ------------
           Net cash used in operating activities ...............     (1,451,000)       (748,000)
                                                                   ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
        Purchase of fixed assets ...............................     (1,155,000)        (29,000)
        Proceeds from sale of merchant portfolio ...............           --           450,000
        Restricted cash ........................................       (117,000)           --
        (Increase) decrease in other assets ....................          8,000         (25,000)
        Increase in deposits ...................................        107,000            --
                                                                   ------------    ------------
           Net cash (used in) provided from investing activities     (1,157,000)        396,000
                                                                   ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
        Proceeds from issuance of common stock .................           --           100,000
        Principal payment on borrowings ........................           --           (25,000)
        Proceeds from exercises of warrants ....................         57,000            --
                                                                   ------------    ------------
           Net cash provided from financing activities .........         57,000          75,000
                                                                   ------------    ------------

Net decrease in cash and cash equivalents ......................     (2,551,000)       (277,000)

Cash and cash equivalents, beginning of period .................     39,231,000         425,000
                                                                   ------------    ------------

Cash and cash equivalents, end of period .......................   $ 36,680,000    $    148,000
                                                                   ------------    ------------

The accompanying notes are an integral part of the financial statements

Page 5

U.S. WIRELESS DATA, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

Note 1 - BASIS OF PRESENTATION

        The accompanying financial statements included herein have been prepared by U.S. Wireless Data, Inc. (The "Company" or "USWD"), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain amounts in the financial statements of the prior period have been reclassified to conform to the current period presentation for comparative purposes. The financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Rule 310 of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

        The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the fiscal year. For further information, refer to the financial statements and accompanying footnotes included in the Company's Form 10-KSB for the year ended June 30, 2000.

        Please note that the Common stock and per share prices in the financial statements and related notes have been retroactively adjusted to give effect to the 1 for 4 reverse stock split that was effectuated on October 18, 2000.

Note 2 - THE COMPANY

        The Company was incorporated in the state of Colorado on July 30, 1991 and was reincorporated in the state of Delaware on October 6, 2000 pursuant to a resolution passed by the Board of Directors and adopted by the Company's Shareholders at the 1999 Annual Shareholders meeting held on September 7, 2000. Effective October 6, 2000, with the Company's reincorporation in the state of Delaware, the par value of the Common and Preferred stock has changed from no par value to $0.01 par value per share. The Company's goal is to be the premier provider of wireless transaction services. The Company's business strategy is focused on our recently developed proprietary technology that brings together three large, rapidly growing industries -transaction processing, wireless data transport and the Internet - to enable wireless transaction processing. The Company's Synapse service ("SYNAPSE")(SM) (formerly Wireless Express Payment Service or WEPS) provides a gateway between all of the parties to a wireless point of sale ("POS") transaction. By providing a seamless interface between a merchant's POS terminals, wireless carriers and card processors, credit, debit and other card transactions can be processed in most instances as fast as cash, without the cost and inconvenience of being tethered to a telephone line. In addition, SYNAPSE's Internet-based tools offer on-line, real-time transaction monitoring, remote diagnostics and automated terminal activation.

Note 3 - INVENTORY

                                                     September 30,     June 30,
                                                         2000           2000
                                                     ------------      --------
       Inventory consists of:
            Raw material .............................. $  177,000   $  177,000
          Finished goods ..............................    354,000      360,000
          Lower of cost or market reserve .............   (492,000)    (492,000)
                                                         ---------    ---------
                                                         $  39,000    $  45,000
                                                         =========    =========

The Company has established a reserve against finished goods and raw materials to reflect the estimated net realizable value of the inventory as of September 30, 2000 and June 30, 2000.

Page 6

Note 4 - NET LOSS PER SHARE

        Earnings (loss) per common share (EPS) is computed using Statement of Financial Accounting Standards (SFAS) No. 128, “Earnings per Share.” SFAS No. 128 establishes standards for the computation, presentation, and disclosure of earnings per share. Basic per share amounts are computed by dividing the net loss available to common stockholders by the weighted average number of common shares outstanding during the year. Diluted per share amounts incorporate the incremental shares issuable upon the assumed exercise of the Company’s stock options and warrants and assumed conversion of convertible securities. During fiscal 2001 and 2000, such incremental amounts have been excluded from the calculation since their effect would be anti-dilutive. Such stock options, warrants and conversions could potentially dilute earnings per share in the future.

Note 5 - STOCKHOLDERS' EQUITY

        On September 15, 2000, ComVest Capital Management LLC exercised its warrants for 1,429,090 shares of Common stock at an exercise price of $0.04 per share.

        For the first quarter of fiscal 2001, $370,000 was charged to compensation expense for options issued to four Board Members that were granted on March 29, 2000.

        For the quarter ended September 30, 2000, 966,500 stock options were issued to employees with the exercise price equal to the closing stock price on the date of grant.

Note 6 - SUBSEQUENT EVENTS

        On October 6, 2000, the Company reincorporated in Delaware from Colorado.

        On October 18, 2000, the Company effectuated a one-for-four reverse stock split of the Company's outstanding Common stock.

        On October 30, 2000, the Company entered into an agreement (the "Agreement") to acquire substantially all of the assets, subject to certain liabilities, of CellGate Technologies LLC, a Delaware limited liability company ("CellGate"). CellGate is the leading manufacturer of integrated wireless IP (Internet Protocol) modem adapters and a provider of wireless IP services for transaction processing. The modem adapters offer a cost-efficient means for merchants to convert their credit card terminals from landline to wireless data transmission and the contemplated acquisition is designed to accelerate the Company's expansion into the fixed POS wireless market. The assets to be acquired include an exclusive (except as to AT&T Wireless and its affiliates) license to the AT&T Wireless technology that makes the conversion of a transaction from landline to wireless possible for traditional dial-up point of sale terminals and other dial-up devices.

        The acquisition will be made for One Million Dollars ($1,000,000) and Five Hundred Sixty-Two Thousand Five Hundred (562,500) shares of the Company's Common stock. The Company has agreed, subject to certain conditions, to pay additional consideration to CellGate, if the average Closing Price (as defined in the Agreement) of the Company's Common stock for the Twenty (20) consecutive trading days ending with the trading day immediately preceding the one-year anniversary of the closing date is less than $16.00 per share as adjusted for any stock splits, stock dividends or similar events. Such additional consideration shall be an amount equal to: (i) the number of the shares which have not previously been sold or transferred, subject to certain exceptions, multiplied by (ii) the amount, if any, not to exceed $10.00, by which such average Closing Price (as defined in the "Agreement") is less than $16.00. No less than 50% of such amount shall be paid in cash, and the balance shall be paid, at the Company's option, in cash or shares of Common stock having a value, based on such average Closing Price provided that such average Closing Price for such purposes shall not be less than $6.00 per share, the option, prior to the anniversary of the closing. The Company is not required to pay the additional consideration as to any shares remaining with CellGate and its members if, (i) for a period of at least Twenty (20) consecutive trading days the average price of the Common stock is $16.00 per share, (ii) the average weekly trading volume for such period is at least 140,000 shares, and (iii) the shares issued to CellGate are registered for resale under the Securities Act of 1933 and are free of the lock-up (described in the Agreement), to purchase all or a portion of the remaining shares at a price of $32.00 per share, payable in cash. Consummation of the acquisition is subject to certain conditions, including receipt of certain third party consents.

Page 7

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Special Note Regarding Forward-Looking Statements

        The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and the notes thereto appearing elsewhere in this Form 10-QSB. All statements contained herein that are not historical facts, including but not limited to, statements regarding our current business strategy and our plans for future development and operations, are based upon current expectations. These statements are forward-looking in nature and involve a number of risks and uncertainties. Generally, the words “anticipates,” “believes,” “estimates,” “expects” and similar expressions as they relate to us and our management are intended to identify forward looking statements. Actual results may differ materially. Among the factors that could cause actual results to differ materially are those set forth in our Annual Report on Form 10-KSB under the caption “Risk Factors.” We wish to caution readers not to place undue reliance on any such forward-looking statements, which statements speak only as of the date made.

OVERVIEW

        During fiscal 2000, we repositioned ourself as a facilitator of wireless transaction and data services. We are a device-neutral, wireless carrier-neutral, merchant acquirer and front-end processor neutral enabler of wireless transaction processing services through our SYNAPSE service. SYNAPSE provides a gateway between all of the parties within a wireless point-of-sale (“POS”) transaction. By providing a seamless interface between a merchant’s POS terminals, wireless carriers and transaction processors, credit, debit and other card transactions can be processed almost as fast as cash, without the cost and inconvenience of being tethered to a telephone line. In addition, SYNAPSE’S Internet-based tools offer online, real-time transaction monitoring and reporting, remote diagnostics and automated terminal activation.

        We provide merchant acquirers, Independent Sales Organizations (“ISOs”) and payment processors with a wireless transaction management service that can be utilized at both conventional and emerging merchant segments, permits the retrieval of on-line/real-time transactional reports and diagnostics via the Internet and simplifies the customer service and application development effort.

        In late March and May 2000, we raised an aggregate of $55.8 million of gross proceeds in a private placement.

RESULTS OF OPERATION - FISCAL 2001 COMPARED TO FISCAL 2000

Revenue

        Revenue from services of $140,000 for the first quarter of fiscal 2001 increased 200% from $45,000 generated during first quarter of fiscal 2000 as we continued the implementation of our new business model. We have phased out our direct offering of wireless credit card processing services and terminals to merchants in fiscal 1999 and are now marketing SYNAPSE to merchant acquirers, ISOs and front-end processors. We currently have over 100 "Clients" (merchant acquirers, payment processors or independent service organizations) under contract for SYNAPSE. Revenue from SYNAPSE should continue increasing as the number of active terminals increase from growth in the number of clients and merchants. We are also working to increase the number of SYNAPSE certified devices and obtaining communications connectivity to, and integration with, additional payment processors.

        Revenues from equipment sales decreased to $1,000 in the first quarter of fiscal 2001 from $99,000 in the first quarter of fiscal 2000 as we completed the transition from one-time product sales to a recurring revenue model based on the SYNAPSE service. For the first quarter of fiscal 2001, total revenues increased to $151,000 from $144,000 in the same quarter of the prior fiscal year.

Page 8

Gross Profit

        We recorded a gross profit of $45,000 in the first quarter of fiscal 2001 compared to a gross loss of $30,000 in the first quarter of fiscal 2000. Cost of services include the initial setup and ongoing communications costs associated with terminals connected through SYNAPSE. With the transition to SYNAPSE, the spread in revenue and associated cost is impacted by the initialization of new terminals, the quantity of active terminals, transaction volume and the associated rates we bill our clients for such services versus our charges from the various carrier networks. We expect the gross profit margins to improve substantially in fiscal 2001 versus fiscal 2000 as SYNAPSE revenues increase and become the primary revenue stream.

Operating Expenses

        A number of expenses increased as we began to use the proceeds of our $55.8 million private placement to ramp up in support of our SYNAPSE launch. During most of fiscal 2000, capital constraints prevented us from making significant expenditures.

        As part of the implementation of our new business model, our personnel increased from 23 at the end of September 1999 to 58 by the end of September 2000.

        Selling, general and administrative expense was $3,567,000 in the first quarter of fiscal 2001,versus $1,118,000 in fiscal 2000. Compensation and other costs have increased due to the growth of our staff. Marketing and promotions have also increased.

        Research and development expenses increased to $350,000 in the first quarter of fiscal 2001 from $191,000 in the first quarter of fiscal 2000. This increase was due primarily to an increase in the number of employees and full time consultants that are focused on the implementation and development of SYNAPSE.

Interest and Other

        Interest expense of $221,000 for the first quarter or fiscal 2000 includes interest on 6% Debentures, a note payable and $187,000 accrued for late effective registration penalties on the 6% Debentures and series B Preferred Stock. A portion of these penalties and interest were waived. The 6% Debenture, Series B Preferred Stock and note payable had all been paid off by the end of fiscal 2000.

        Interest income amounted to $627,000 for the first quarter of fiscal 2001 versus negligible amounts for the first quarter of fiscal 2000. Prior to March 2000, the Company had substantial liquidity problems. Our receipt of the net cash from the three closings of the $55.8 million private placement beginning in March 2000 provides us with a large cash balance from which we earn interest and other investment income.

        Other income of $128,000 for the first quarter of fiscal 2000 included a $124,000 gain on the July 1999 sale of a portion of our merchant credit card portfolio to PMT Services Inc., a wholly owned subsidiary of Nova Corporation. The transaction resulted in a cash payment to us of $450,000. The sale included approximately 450 installed TRANZ Enabler point-of-sale devices owned by us and deployed with certain merchants. Other income of $10,000 in the first quarter of fiscal 2001 included rental income of $21,000 offset by taxes of $11,000.

Preferred Stock Dividends

        Preferred Stock Dividends for the first quarter of fiscal 2000 includes $778,000 to accrete the value of the Series B preferred stock up to its redemption value by the date at which mandatory redemption is available to the holders. The balance of the preferred stock dividend amount represents Series A and Series B Preferred Stock dividends that were accrued but not paid in the first quarter of fiscal 2000. There were no dividends declared or paid on the Series C Preferred Stock, the only class of Preferred Stock currently outstanding during the first quarter of fiscal 2001.

Page 9

FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY

        The funds from the private placement free management from the daily struggles of operating with little to no liquidity and provide a long-term solution to our cash needs. Our “Burn Rate”, which excludes capital expenditures and other noncash charges and is adjusted for one time items, approximated $735,000 for the month of September 2000. The monthly Burn Rate in the future could be affected by a number of factors, including revenues from SYNAPSE and changes in rates charged by our carriers for wireless airtime and the impact of any acquisitions.

        During the implementation of our new business plan, we expect expenses to continue to exceed revenues, at least during the initial phases of the plan. Interest income provided from the available cash balance will help to reduce monthly deficits. Our unrestricted cash position of $36.7 million as of September 30, 2000, provides, in management’s opinion, the financial resources to pursue our business plan and fund monthly deficits. Our currently anticipated capital equipment expenditures for technology infrastructure are not extensive.

        U.S. Wireless Data, Inc. (the “Company”) has entered into an agreement (the “Agreement”) to acquire substantially all of the assets, subject to certain liabilities, of CellGate Technologies LLC, a Delaware limited liability company (“CellGate”). CellGate is the leading manufacturer of integrated wireless IP (Internet Protocol) modem adapters and a provider of wireless IP services for transaction processing. The modem adapters offer a turnkey, cost-efficient means for merchants to convert their credit card terminals from landline to wireless data transmission without any other hardware or software modification, and the contemplated acquisition is designed to accelerate the Company’s expansion into the fixed wireless market. The assets to be acquired include an exclusive (except as to AT&T Wireless and its affiliates) license to the AT&T Wireless technology that makes the conversion from landline to wireless transaction possible for traditional dial-up point of sale terminals and other dial-up devices.

        CellGate estimates that there are over 4 million terminals that could conceivably be converted from landline technology to a fixed wireless solution. By using the CellGate adapter, merchants can eliminate the monthly costs of phone lines for terminals and improve the speed of their transactions (wireless transactions take about 2-5 seconds, as compared to landline transactions that take about 10-20 seconds). This solution also is expected to open up the market to merchants that could not previously take credit cards because of speed issues, such as quick service restaurants, which potentially represent hundreds of millions of transactions. In addition to faster and, in many cases, less expensive transaction costs, merchants have access to detailed transaction reporting and analysis via U.S. Wireless Data’s Synapse^(sm) platform.

        The acquisition will be made for One Million Dollars ($1,000,000) and Five Hundred Sixty-Two Thousand Five Hundred (562,500) shares of the Company’s Common Stock. The Company has agreed, subject to certain conditions, to pay additional consideration to CellGate, if the average Closing Price (as defined in the Agreement) of the Company’s Common Stock for the Twenty (20) consecutive trading days ending with the trading day immediately preceding the one-year anniversary of the closing date is less than $16.00 per share as adjusted for any stock splits, stock dividends or similar events. Such additional consideration shall be an amount equal to: (i) the number of the shares which have not previously been sold or transferred, subject to certain exceptions, multiplied by (ii) the amount, if any, not to exceed $10.00, by which such average Closing Price (as defined in the “Agreement”) is less than $16.00. No less than 50% of such amount shall be paid in cash, and the balance shall be paid, at the Company’s option, in cash or shares of Common Stock having a value, based on such average Closing Price provided that such average Closing Price for such purposes shall not be less than $6.00 per share, the option, prior to the anniversary of the closing. The Company is not required to pay the additional consideration as to any shares remaining with CellGate and its members if, (i) for a period of at least Twenty (20) consecutive trading days the average price of the Common Stock is $16.00 per share, (ii) the average weekly trading value for such period is at least 140,000 shares, and (iii) the shares issued to CellGate are registered for resale under the Securities Act of 1933 and are free of the lock-up (as described in the Agreement), to purchase all or a portion of the remaining shares at a price of $32.00 per share, payable in cash. Consummation of the acquisition is subject to certain conditions, including receipt of certain third party consents.

        In connection, as discussed above, we have entered into an agreement to acquire substantially all the assets of Cellgate Technologies, LLC, and if the acquisition is consummated, the Burn Rate would likely increase based on Cellgate’s recent current monthly burn rate of approximately $350,000.

        Prior to March 2000, we faced significant challenges due to our then current financial condition and lack of liquidity. We have incurred recurring losses from operations and have an accumulated deficit of approximately $92.2 million at September 30, 2000.

Seasonal Variation of Business

        We anticipate that the recurring revenue generated under SYNAPSE agreements with merchant acquirers and credit card processors will be relatively immune to seasonal variations, although we expect that transaction related revenue will reflect seasonal variations paralleling consumer spending patterns, generally increasing somewhat during the Christmas holiday season. 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.

Page 10

Part II OTHER INFORMATION

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

        Our 1999 Annual Meeting of Shareholders was held at the New York Marriott East Side, 525 Lexington Avenue, New York, New York 10017 at 2:00 p.m., Eastern time, on September 7, 2000. The following matters were voted upon at the Annual Meeting of Shareholders:

Election of a Board of Directors for One Year Terms.

        Name                                 NUMBER OF COMMON SHARES VOTED
        ----                                 -----------------------------

                                             For               Against          Abstain
                                             ---               -------          -------
        Dean M. Leavitt                      18,920,747          --             105,035
        Alvin C. Rice                        18,932,197          --              92,585
        Chester N. Winter                    18,932,197          --              92,585
        Amy L. Newmark                       18,899,874          --             125,908
        Michael S. Falk                      18,932,597          --              93,185

        Name                                 NUMBER OF SERIES C PREFERRED VOTED
        ----                                 ----------------------------------

                                             For               Against          Abstain
                                             ---               -------          -------
        Barry A. Kaplan                      3,173,000          --               --
        Edwin Cooperman                      3,173,000          --               --

The Amendment of the Articles of Incorporation to Increase our Authorized Share Capital.

For                                  Against                             Abstain
18,511,111                       397,060                               77,611

Number of Series C Preferred Shares Voted

For                                  Against                             Abstain
3,153,000

The Change of Domicile from Colorado to Delaware.

Number of Common Shares Voted

For                                  Against                             Abstain                              Not Voted
18,913,968                        75,240                                 36,574                                 9,554,213

Number of Series C Preferred Shares Voted

For                                  Against                             Abstain
3,163,000

The Adoption of our 2000 Stock Option Plan

Number of Common Shares Voted

For                                  Against                             Abstain                              Not Voted
18,499,033                       429,632                               97,117                                  9,554,213

Number of Series C Preferred Shares Voted

For                                  Against                             Abstain
3,068,000

Page 11

The approval of the one-for-four reverse stock split.

Number of Common Shares Voted

For                                  Against                             Abstain
27,771,911                       727,066                               81,018

Number of Series C Preferred Shares Voted

For                                  Against                             Abstain
3,123,000

The Ratification of M.R. Weiser & Co. LLP as our Independent Auditors and Public Accountants.

Number of Common Shares Voted

For                                  Against                             Abstain
28,477,147                        62,069                               40,799

Number of Series C Preferred Shares Voted

For                                  Against                             Abstain
3,133,000

        The change in domicile was effective as of October 6, 2000 and the reverse stock split was effectuated on October 18, 2000.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

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

        3.1 Certificate of Incorporation filed by the Company with the Delaware Secretary of State on August 3, 2000.

        3.2 Amended Certificate of Incorporation filed by U.S. Wireless Data, Inc. with the Secretary of the State of Delaware.

        27.1 Financial Data Schedule.

        b) Reports on Form 8-K

        On September 8, 2000, the Company filed a report on Form 8-K reporting the change in location of our principal executive offices.

        On September 19, 2000, the Company filed a report on Form 8-K reporting the results of our Shareholders meeting held on September 7, 2000 and the amendment of certain warrants.

        On November 6, 2000, the Company filed a report on Form 8-K reporting the Acquisition Agreement with Cellgate Technologies, LLC.

Page 12

SIGNATURES

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

                                                                             U.S. WIRELESS DATA, INC.

Dated         November 14, 2000                           By: /s/ Dean M. Leavitt     
                                                                               Dean M. Leavitt
                                                                               Chief Executive Officer

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

Signatures                                                                            Title                                                                       Date

/s/ Dean M. Leavitt
Dean M. Leavitt                                                                 Chief Executive Officer and Chairman     November 14, 2000
                                                                                             of the Board of the Company
                                                                                             (Principal Executive Officer)

/s/ Peter J. Adamski                                                   
Peter J. Adamski                                                                   Senior Vice President, Chief Financial     November 14, 2000
                                                                                             Officer and Treasurer
                                                                                             (Principal Financial Officer)

/s/ Kelly McLaughlin
Kelly McLaughlin                                                               Controller                                                      November 14, 2000
                                                                                              (Principal Accounting Officer)

/s/ Edwin M. Cooperman
Edwin M. Cooperman                                                      Director                                                            November 14, 2000

/s/ Michael S. Falk
Michael S. Falk                                                                   Director                                                           November 14, 2000

/s/ Barry A. Kaplan
Barry A. Kaplan                                                                 Director                                                           November 14, 2000

/s/ Amy L. Newmark
Amy L. Newmark                                                               Director                                                           November 14, 2000

/s/ Alvin C. Rice
Alvin C. Rice                                                                      Director                                                           November 14, 2000

/s/ Chester N. Winter
Chester N. Winter                                                              Director                                                           November 14, 2000

Page 13

EX-3.1

Exhibit 3.1

CERTIFICATE OF INCORPORATION

OF

U.S. WIRELESS DATA, INC.

        The undersigned, a natural person at least eighteen years of age, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware (the “DGCL”), does hereby certify as follows:

ARTICLE FIRST

        The name of the corporation is U.S. Wireless Data, Inc.

ARTICLE SECOND

        The address, including street, number, city and county of the Corporation’s initial registered office in the State of Delaware is 9 East Loockerman Street, in the City of Dover, County of Kent, Delaware 19901 and the name of the initial registered agent therein and in charge thereof, upon whom process against the Corporation may be served is National Registered Agents, Inc.

ARTICLE THIRD

        The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the DGCL.

ARTICLE FOURTH

        The aggregate number of shares which the Corporation shall have authority to issue is 225,000,000 shares of which 200,000,000 shares, par value of $.01 per share, shall be designated “Common Stock” and 25,000,000 shares, par value of $.01 per share, shall be designated “Preferred Stock.”

        Authority is hereby expressly granted to the Board of Directors of the Corporation (or a committee thereof designated by the Board of Directors pursuant to the by-laws of the Corporation, as amended from time to time (the “By-Laws”)) to issue the Preferred Stock from time to time as Preferred Stock of any series and to declare and pay dividends thereon in accordance with the terms thereof and, in connection with the creation of each such series, to fix by the resolution or resolutions providing for the issue of shares thereof, the number of shares of such series, and the designations, powers, preferences, and rights (including voting rights), and the qualifications, limitations, and restrictions of such series, to the fullest extent now or hereafter permitted by the laws of the State of Delaware.

        Of the Preferred Stock, Eight Million Four Hundred Fifty Thousand (8,450,000) shares are hereby designated as Series C Convertible Preferred Stock (hereinafter referred to as the “Series C Preferred Stock”). The Series C Preferred Stock shall have the following designations, preferences and other rights:

1. Voting Rights.

        1.1 Except as otherwise provided below or as required by law, the holders of Series C Preferred Stock will be entitled to notice of any meeting of shareholders of the Corporation or any action to be taken by shareholders without a meeting, and shall be entitled to one vote per share of Common Stock issuable upon conversion of the Series C Preferred Stock as of the record date for any such vote on all matters submitted to a vote of stockholders of the Company, and the holders of Series C Preferred Stock will vote as a single class with the holders of Common Stock on all matters, except as otherwise required under applicable law.

        1.2 Except as otherwise required by law or provided by the Articles of Incorporation, a majority of the shares entitled to vote, represented in person or by proxy, will constitute a quorum at a meeting of shareholders; provided, that, for action upon any matter as to which holders of shares are entitled to vote as a class, a majority of the shares of such class, represented in person or by proxy, will constitute a quorum.

        1.3 The holders of the Series C Preferred Stock will be entitled, voting as a separate class, to elect two directors and the holders of Common Stock will be entitled to elect the balance of the directors.

        1.4 Any director elected solely by the holders of the Series C Preferred Stock or of the Common Stock, as the case may be, may be removed, either with or without cause, by, and only by, the affirmative vote of the holders of a majority of a quorum of the shares of the Series C Preferred Stock or a majority of a quorum of the shares of the Common Stock, as the case may be, either at a special meeting of such shareholders duly called for that purpose or pursuant to a written consent of shareholders, and any vacancy thereby created or otherwise resulting may be filled by, and only by, the holders of the Series C Preferred Stock or the Common Stock, as the case may be.

2. Dividends. If any dividend is declared on the Common Stock, the holders of the Series C Preferred Stock will be entitled to receive dividends pari passu out of legally available funds as if each such share of Series C Preferred Stock had been converted to Common Stock. No dividend shall be paid on the Common Stock at a rate greater than the rate at which dividends are paid on the Series C Preferred Stock (based on the number of shares of Common Stock into which the Series C Preferred Stock is convertible on the date the dividend is declared). Dividends on the Series C Preferred Stock will be noncumulative.

3. Liquidation Preference.

        3.1 In the event of the liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, the holders of the Series C Preferred Stock will be entitled to receive out of the assets of the Corporation, for each share of Series C Preferred Stock then held by them, first, prior and in preference to any distribution to the holders of the Common Stock or any subsequently issued series of preferred stock, an amount equal to $10.00 per share plus any accrued and unpaid dividends (“Liquidation Value,” as appropriately adjusted for stock splits and combinations). If upon the occurrence of such event, the assets and funds available for distribution among the holders of the Preferred Stock are insufficient to permit the payment to such holders of the full preferential amount provided above, then the entire assets and funds of the Corporation legally available for distribution to the holders of Series C Preferred Stock will be distributed ratably among the holders of Series C Preferred Stock in proportion to the shares of the Series C Preferred Stock held by each such holder weighted by the respective Liquidation Value. After payment has been made to the holders of the Series C Preferred Stock of the full amounts to which they will be entitled as aforesaid, any remaining assets will be distributed to the holders of the Corporation’s other equity securities.

        3.2 A liquidation, dissolution or winding up for the purposes of this Section 3 includes a (i) merger or consolidation of the Corporation with or into any other corporation or corporations where the shareholders of the Corporation immediately prior to such event do not retain more than a 50% voting power and interest in the successor entity and (ii) sale of all or substantially all of the assets of the Corporation (collectively, a “Merger or Sale”).

        3.3 No later than 20 days before the consummation of any Merger or Sale, the Corporation shall deliver a notice to each holder of Series C Preferred Stock setting forth the principal terms of such Merger or Sale. Such notice shall include a description of the amounts that would be paid to holders of Series C Preferred Stock under this Section 3 and of the consideration that such holders would receive if they exercised their rights under Section 4 to have shares of Series C Preferred Stock converted into Common Stock.

        3.4 No later than ten days after delivery of the notice, each holder of Series C Preferred Stock may deliver an election to the Corporation notifying the Corporation that the holder desires that such holder’s shares of Series C Preferred Stock be converted into shares of Common Stock and, if no such notice is delivered, such holder shall receive such amounts as are provided for under this Section 3.

        3.5 Each holder of an outstanding share of Series C Preferred Stock shall be deemed to have consented to distributions made by the Corporation in connection with the repurchase at cost (or such other price as may be agreed to by the Corporation’s Board of Directors) of shares of Common Stock issued to or held by officers, directors or employees of, or consultants to, the Corporation or its subsidiaries upon termination of their employment or services pursuant to agreements (whether now existing or hereafter entered into) providing for the right of said repurchase between the Corporation and such persons.

4. Conversion Rights.

         4.1 Right to Convert. Notwithstanding any other term or provision contained herein, no shares of Series C Preferred Stock shall become convertible into Common Stock under any circumstances until the shareholders of the Corporation shall have approved an amendment to the Corporation’s Articles of Incorporation increasing the number of authorized shares of Common Stock to a number that is sufficient (given all other Common Stock share reservations) to allow for due and proper reservation of a sufficient number of shares of Common Stock to allow for the conversion of the Series C Preferred Stock.

        (a) Optional Conversion. Each share of Series C Preferred Stock will be convertible, at the option of the holder thereof, at the office of the Corporation or any transfer agent for the Series C Preferred Stock, into a number of shares of Common Stock as determined in accordance with Section 4.3 hereof.

        (b) Automatic Conversion of Series C Preferred Stock. Each share of Series C Preferred Stock will automatically convert into a number of shares of Common Stock as determined in accordance with Section 4.3 hereof:

        (i) immediately upon the closing of the sale pursuant to a registration statement under the Securities Act of 1933, as amended, for a public offering (other than a registration on Form S-8, Form S-4 or comparable forms) of the Corporation’s securities which results in gross proceeds to the Corporation of not less than $30,000,000; or

        (ii) commencing three months after the Initial Closing of the Series C Preferred Stock, if the average closing bid price of the Common Stock exceeds 300% of the Conversion Price for 20 consecutive trading days.

         4.2 Mechanics of Conversion. Upon conversion, the holder of Series C Preferred Stock will surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any transfer agent for the Series C Preferred Stock, and such holder will give written notice to the Corporation stating the name or names in which such holder wishes the certificate or certificates for shares of Common Stock to be issued; provided, however, that the Corporation shall not be required to issue the shares of Common Stock in a name other than that of the holder of the Series C Preferred Stock being converted unless it can do so in conformance with applicable laws. The Corporation, as soon as practicable thereafter, will issue and deliver at such office to such holder of Series C Preferred Stock or to such holder’s nominee or nominees, a certificate or certificates for the number of shares of Common Stock to which such holder will be entitled as aforesaid. Any conversion will be deemed to have been made immediately prior to the close of business on the date of the event of conversion, in the event of automatic conversion hereunder, or, in the event of voluntary conversion, immediately prior to the close of business on the date when the Corporation receives a holder’s certificate or certificates for Series C Preferred Stock and any other documents or instruments required hereunder or by applicable law, and the person or persons entitled to receive the shares of Common Stock issuable upon conversion will be treated for all purposes as the record holder or holders of such shares of Common Stock on such date.

         4.3 Conversion Rate. Each share of Series C Preferred Stock will be convertible into the number of shares of Common Stock determined by dividing (i) the Liquidation Value of the Series C Preferred Stock by (ii) $1.50 (as such conversion price may be adjusted, the “Conversion Price”).

         4.4 Adjustment for Reorganization, Reclassification, Consolidation, Merger or Sale. If any capital reorganization or reclassification of the Corporation, or any consolidation or merger of the Corporation with another person, or the sale, transfer or lease of all or substantially all of its assets to another person shall be effected in such a way that holders of shares of Common Stock shall be entitled to receive stock, securities or assets with respect to or in exchange for their shares, then provision shall be made, in accordance with this Section 4.4, whereby the holder of Series C Preferred Stock shall thereafter have the right to purchase and receive such securities or assets as would have been issued and payable with respect to or in exchange for the aggregate shares of Common Stock immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby if conversion of the Series C Preferred Stock had occurred immediately prior to such reorganization, reclassification, consolidation, merger or sale. The Corporation will not effect any such consolidation, merger, sale, transfer or lease unless prior to the consummation thereof the successor entity (if other than the Corporation) resulting from such consolidation or merger or the entity purchasing or leasing such assets shall assume by written instrument the obligation to deliver to such holder of Series C Preferred Stock such securities or assets as, in accordance with the foregoing provisions, such holder of Series C Preferred Stock may be entitled to purchase. The provisions of this Section 4.4 shall similarly apply to successive consolidations, mergers, exchanges, sales, transfers or leases.

         4.5 Adjustment for Stock Dividends and Securities Distributions. If, at any time or from time to time after March 10, 2000, the Corporation shall distribute to the holders of shares of Common Stock (i) securities, (ii) property, other than cash, or (iii) cash, without fair payment therefor, then, and in each such case, the holder of Series C Preferred Stock, upon the conversion of Series C Preferred Stock, shall be entitled to receive such securities, property and cash which the holder of Series C Preferred Stock would hold on the date of such conversion if, on the date thereof, the holder of Series C Preferred Stock had been the holder of record of the shares of Common Stock issued upon such conversion and, during the period from March 10, 2000 to and including the date of such conversion, had retained such shares of Common Stock and the securities, property and cash receivable by the holder of Series C Preferred Stock during such period, subject, however, to the holder of Series C Preferred Stock agreeing to any conditions to such distribution as were required of all other holders of shares of Common Stock in connection with such distribution. If the securities to be distributed by the Corporation involve rights, warrants, options or any other form of convertible securities and the right to exercise or convert such securities would expire in accordance with its terms prior to the conversion of the Series C Preferred Stock, then the terms of such securities shall provide that such exercise or convertibility right shall remain in effect until thirty (30) days after the date the holder of Series C Preferred Stock receives such securities pursuant to the exercise hereof.

         4.6 Other Adjustments. In addition to those adjustments set forth in Sections 4.4 and 4.5, but without duplication of the adjustments to be made under such Sections, if the Company:

        (a) pays a dividend or makes a distribution on its Common Stock in shares of its Common Stock;

        (b) subdivides its outstanding shares of Common Stock into a greater number of shares;

        (c) combines its outstanding shares of Common Stock into a smaller number of shares;

        (d) makes a distribution on its Common Stock in shares of its capital stock other than Common Stock; and/or

        (e) issues, by reclassification of its Common Stock, any shares of its capital stock; then the number and kind of shares of Common Stock issued upon conversion of the Series C Preferred Stock shall be adjusted so that the holder of Series C Preferred Stock upon conversion shall be entitled to receive the kind and number of shares of Common Stock or other securities of the Corporation that the holder of Series C Preferred Stock would have owned or have been entitled to receive after the happening of any of the events described above had the Series C Preferred Stock been converted immediately prior to the happening of such event or any record date with respect thereto. An adjustment made pursuant to this Section 4.6 shall become effective immediately after the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or issuance. If, as a result of an adjustment made pursuant to this Section 4.6, the holder of Series C Preferred Stock thereafter surrendered for conversion shall become entitled to receive shares of two or more classes of capital stock or shares of Common Stock and any other class of capital stock of the Corporation, the Board of Directors (whose determination shall be conclusive and shall be described in a written notice to all holders of Series C Preferred Stock promptly after such adjustment) shall determine the allocation of the adjusted Conversion Price between or among shares of such classes of capital stock or shares of Common Stock and such other class of capital stock. The adjustment to the number of shares of Common Stock issuable upon the conversion of Series C Preferred Stock described in this Section 4.6 shall be made each time any event listed in paragraphs (a) through (e) of this Section 4.6 occurs.

        Simultaneously with all adjustments to the number and/or kind of securities, property and cash to be issued in connection with the conversion of the Series C Preferred Stock, the Conversion Price will also be appropriately and proportionately adjusted.

         4.7 Adjustment for Sale of Shares. In the event the Corporation at any time issues additional Common Stock, preferred stock, options, warrants or convertible securities after the Original Issue Date, other than securities currently outstanding as of March 10, 2000 or issued upon the conversion or exercise of any securities outstanding as of March 10, 2000, at a purchase price less than the then applicable Conversion Price for the Series C Preferred Stock, then and in each such case, the Conversion Price for the Series C Preferred Stock will be automatically reduced to such lower purchase price and the number of shares issuable upon conversion of the Preferred Shares shall be increased proportionately; provided, however, that no adjustment to the Conversion Price or the number of shares shall be made pursuant to this Section 4.7 in the event (i) the Company grants options to employees, consultants, officers or directors of the Company pursuant to contracts or plans approved by the Board of Directors of the Company, (ii) of the issuance of securities to a “strategic partner” as determined by the Board of Directors of the Company, (iii) of the issuance of securities pursuant to a strategic acquisition as determined by the Board of Directors or (iv) of the issuance of up to an aggregate of 100,000 shares (as appropriately adjusted for stock splits, stock dividends and similar adjustments after the date hereof) of Common Stock (or convertible preferred stock, options, warrants or other securities convertible into or exercisable for Common Stock) at a purchase price less than the Conversion Price and not otherwise excepted pursuant to (i), (ii) or (iii) above.

        (a) For the purpose of making any adjustment in the Conversion Price as provided in this Section 4.7, the consideration received by the Corporation for any issue or sale of Common Stock will be computed:

        (i) to the extent it consists of cash, as the amount of cash received by the Corporation before deduction of any offering expenses payable by the Corporation and any underwriting or similar commissions, compensation, or concessions paid or allowed by the Corporation in connection with such issue or sale;

        (ii) to the extent it consists of property other than cash, at the fair market value of that property as determined in good faith by the Corporation's Board of Directors; and

        (iii) if Common Stock is issued or sold together with other stock or securities or other assets of the Corporation for a consideration which covers both, as the portion of the consideration so received that may be reasonably determined in good faith by the Corporation's Board of Directors to be allocable to such Common Stock.

        (b) If the Corporation (i) grants or sells any rights or options to subscribe for, purchase, or otherwise acquire shares of Common Stock, or (ii) issues or sells any security convertible into shares of Common Stock, then, in each case, the price per share of Common Stock issuable on the exercise of the rights or options or the conversion of the securities will be determined by dividing (x) the total amount, if any, received or receivable by the Corporation as consideration for the granting or sale of the rights or options or the issue or sale of the convertible securities, plus the minimum aggregate amount of additional consideration payable to the Corporation on exercise or conversion of the securities, by (y) the maximum number of shares of Common Stock issuable on the exercise of conversion. Such granting or issue or sale will be considered to be an issue or sale for cash of the maximum number of shares of Common Stock issuable on exercise or conversion at the price per share determined under this Section 4.7, and the Conversion Price for the Series C Preferred Stock will be adjusted as above provided to reflect (on the basis of that determination) the issue or sale. No further adjustment of the Conversion Price for the Series C Preferred Stock will be made as a result of the actual issuance of shares of Common Stock on the exercise of any such rights or options or the conversion of any such convertible securities.

        (c) Upon the redemption or repurchase of any such securities or the expiration or termination of the right to convert into, exchange for, or exercise with respect to, Common Stock, the Conversion Price for the Series C Preferred Stock will be readjusted to such price as would have been obtained had the adjustment made upon their issuance been made upon the basis of the issuance of only the number of such securities as were actually converted into, exchanged for, or exercised with respect to, Common Stock. If the purchase price or conversion or exchange rate provided for in any such security changes at any time, then, upon such change becoming effective, the Conversion Price for the Series C Preferred Stock then in effect will be readjusted to such price as would have been obtained had the adjustment made upon the issuance of such securities been made upon the basis of (i) the issuance of only the number of shares of Common Stock theretofore actually delivered upon the conversion, exchange or exercise of such securities, and the total consideration received therefor, and (ii) the granting or issuance, at the time of such change, of any such securities then still outstanding for the consideration, if any, received by the Company therefor and to be received on the basis of such changed price or rate.

         4.8 Other Action Affecting Shares. If the Corporation takes any action affecting its share of Common Stock after March 10, 2000, that would be covered in Sections 4.4, 4.5 or 4.6 but for the manner in which such action is taken or structured, other than an action described in Sections 4.4, 4.5 or 4.6, which would in any way diminish the value of the Series C Preferred Stock, then the Conversion Price shall be adjusted in such manner as the Board of Directors of the Corporation shall in good faith determine to be equitable under the circumstances.

         4.9 Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Rate pursuant to this Section 6, the Corporation at its expense promptly will compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Series C Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation, upon the written request at any time of any holder of Series C Preferred Stock, will furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments and readjustments, (ii) the Conversion Rate for the Series C Preferred Stock at the time in effect, and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of the Series C Preferred Stock held by such holder.

         4.10 Fractional Shares Upon Conversion. No fractional shares of Common Stock will be issued upon conversion of Series C Preferred Stock. If the conversion would result in any fractional share, the Corporation shall, in lieu of issuing any fractional share, pay the holder an amount in cash equal to such fraction of the then effective Conversion Price as promptly as funds legally are available therefor.

5. Modifications and Waivers. The terms of the Series C Preferred Stock may be amended, modified or waived by agreement of the Corporation, Commonwealth Associates, L.P. (“Commonwealth”) and a committee to be designated by Commonwealth whose members hold in the aggregate not less than 20% of the outstanding Series C Preferred Stock (the “Committee”); provided, however, that no such amendment, modification or waiver which would decrease the number of shares of Common Stock issuable upon the Conversion of the Series C Preferred Stock, or increase the Conversion Price therefor (other than as a result of the waiver or modification of any anti-dilution provisions) may be made without the approval of the holders of at least 50% of the outstanding Series C Preferred Stock.

6. Notices of Record Date. In the event of any taking by the Corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, the Corporation will mail to each holder of Series C Preferred Stock at least ten days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or rights, and the amount and character of such dividend, distribution or right, but failure to give such notice shall not affect the validity of the action taken as to which the notice should have been given.

7. Reservation of Stock Issuable Upon Conversion. From and after the date the Company’s shareholders approve the amendment to its Articles of Incorporation increasing the number of authorized shares of Common Stock, the Corporation at all times will reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the conversion of the shares of Series C Preferred Stock such number of its shares of Common Stock as from time to time will be sufficient to effect the conversion of all then outstanding shares of Series C Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock is not sufficient to effect the conversion of all then outstanding shares of Series C Preferred Stock, in addition to such other remedies as may be available to the holders of Series C Preferred Stock for such failure, the Corporation will take such corporate action as, in the opinion of its counsel, may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as will be sufficient for such purpose.

8. Notices. Any notices required by this Certificate to be given to the holders of shareholders or the Corporation must be in writing and will be deemed given upon personal delivery, one day after deposit with a reputable overnight courier service for overnight delivery or after transmission by facsimile telecopier with confirmation of successful transmission, or five days after deposit in the United States mail, by registered or certified mail postage prepaid, or upon actual receipt if given by any other method, addressed to each holder of such record at his address appearing on the books of the Corporation.

9. Covenants. In addition to any other rights provided by law, so long as any shares of Series C Preferred Stock are outstanding, the Corporation, without first obtaining the written consent of Commonwealth and the Committee as set forth in Section 5 above, will not:

        (a) increase the authorized number of shares of Preferred Stock; or

        (b) authorize or issue shares of any class or series of stock having any preference or priority senior to the Series C Preferred Stock as to dividends, rights on liquidation or redemption.

ARTICLE FIFTH

        The name and mailing address of the incorporator are Ralph A. Blessey, Mintz Levin Cohn Ferris Glovsky and Popeo, P.C. 666 Third Avenue, New York, New York 10017. The powers of the incorporator are to terminate upon the filing of this Certificate of Incorporation.

.

ARTICLE SIXTH

        Election of directors need not be by written ballot.

ARTICLE SEVENTH

        The Board of Directors is authorized to adopt, amend, or repeal By-Laws of the Corporation except as and to the extent provided in the By-Laws. Any By-Law made by the Board of Directors under the powers conferred hereby may be amended or repealed by the Board of Directors or the stockholders in the manner provided in the By-Laws.

ARTICLE EIGHTH

        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 (whether or not by or in the right of the Corporation) by reason of the fact that he is or was a director, officer, incorporator, employee, or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, incorporator, employee, partner, trustee, or agent of another corporation, partnership, joint venture, trust, or other enterprise (including an employee benefit plan), shall be entitled to be indemnified by the Corporation to the full extent then permitted by law against expenses (including counsel fees) and disbursements, judgments, fines (including excise taxes assessed on a person with respect to an employee benefit plan), and amounts paid in settlement incurred by him in connection with such action, suit, or proceeding. Such right of indemnification shall inure whether or not the claim asserted is based on matters which antedate the adoption of this Article EIGHTH. Such right of indemnification shall continue as to a person who has ceased to be a director, officer, incorporator, employee, partner, trustee, or agent and shall inure to the benefit of the heirs and personal representatives of such a person. The indemnification provided by this Article EIGHTH shall not be deemed exclusive of any other rights which may be provided now or in the future under any provision currently in effect or hereafter adopted of the By-Laws by any agreement, by vote of stockholders, by resolution of disinterested directors, by provision of law, or otherwise.

ARTICLE NINTH

        No director of the Corporation shall be liable to the Corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director, provided that this provision does not eliminate the liability of the director (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of Title 8 of the Delaware Code, or (iv) for any transaction from which the director derived an improper personal benefit. For purposes of the prior sentence, the term “damages” shall, to the extent permitted by law, include, without limitation, any judgment, fine, amount paid in settlement, penalty, punitive damages, excise or other tax assessed with respect to an employee benefit plan, or expense of any nature (including, without limitation, counsel fees and disbursements). Each person who serves as a director of the Corporation while this Article NINTH is in effect shall be deemed to be doing so in reliance on the provisions of this Article NINTH, and neither the amendment or repeal of this Article NINTH, nor the adoption of any provision of this Certificate of Incorporation inconsistent with this Article NINTH, shall apply to or have any effect on the liability or alleged liability of any director or the Corporation for, arising out of, based upon, or in connection with any acts or omissions of such director occurring prior to such amendment, repeal, or adoption of an inconsistent provision. The provisions of this Article NINTH are cumulative and shall be in addition to and independent of any and all other limitations on or eliminations of the liabilities of directors of the Corporation, as such, whether such limitations or eliminations arise under or are created by any law, rule, regulation, by-law, agreement, vote of stockholders or disinterested directors, or otherwise.

ARTICLE TENTH

        Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation.

(SIGNATURE PAGE FOLLOWS)

        IN WITNESS WHEREOF, I, being the sole incorporator hereinbefore named, hereby sign this Certificate of Incorporation pursuant to the General Corporation Law of the State of Delaware as of this 3^rd day of August, 2000.

__________

        Ralph A. Blessey,
Sole Incorporator

EX-3.2

CERTIFICATE OF AMENDMENT

TO

CERTIFICATE OF INCORPORATION

OF

U.S. WIRELESS DATA, INC.

        U.S. Wireless Data, Inc. (the "Corporation"), a Delaware corporation, hereby certifies as follows:

        1. The date of filing of the Corporation’s Certificate of Incorporation (the “Certificate”) with the Secretary of State of Delaware was August 3, 2000 under the name U.S Wireless Data, Inc.

        The Certificate is hereby amended by adding to ARTICLE FOURTH thereof the following:

“3. Upon the filing of this Certificate of Amendment to effectuate a one-for-four reverse stock split, every four outstanding shares of the Corporation’s Common Stock, par value $.01 per share, is hereby converted into one (1) share of the Corporation’s Common Stock, par value $.01 per share. No fractional shares shall be issued upon such stock split; any shareholder otherwise entitled to receive a fractional share, shall receive an amount in cash equal to the value of such fractional share, based on the then current market price of the Common Stock following the reverse stock split.”

        3. This Certificate of Amendment has been duly adopted in accordance with Sections 228 and 242 of the General Corporation Law of the State of Delaware.

        IN WITNESS WHEREOF, the undersigned officer of U.S. Wireless Data, Inc. has executed this Certificate of Amendment to the Certificate of Incorporation this 6th day of October 2000.

                                                                             U.S. WIRELESS DATA, INC.

                                                                             By: /s/ Dean M. Leavitt     
                                                                               Name: Dean M. Leavitt
                                                                               Title: Chairman and CEO

EX-27

 

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