SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549



                                    FORM 10-Q


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

                  For the quarterly period ended September 30, 2001


                         Commission file number: 0-29651


                           USA VIDEO INTERACTIVE CORP.
             (Exact name of registrant as specified in its charter)


                WYOMING                                 06-1576391
     (State or Other Jurisdiction of       (I.R.S. Employer Identification No.)
     Incorporation or Organization)


      70 Essex Street, Mystic, Connecticut                 06355
     (Address of principal executive offices)            (ZIP code)


                                 (860) 572-1560
              (Registrant's Telephone Number, including Area Code)


Indicate by check mark whether the registrant (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 90 days.

Yes  |X|       No  |_|

At November 9, 2001, there were 88,445,088 shares of the registrant's common
stock outstanding.


PART I. FINANCIAL INFORMATION

Item 1.    Financial Statements


<PAGE>
                           USA VIDEO INTERACTIVE CORP.
                                AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                               SEPTEMBER 30, 2001

                                   (UNAUDITED)

                              (Stated in US Dollars)
                               --------------------


<PAGE>
<TABLE>
<CAPTION>
                               USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES
                                       CONSOLIDATED BALANCE SHEETS
                                          (STATED IN US DOLLARS)
=========================================================================================================

                                                                           SEPTEMBER 30,    DECEMBER 31,
                                                                               2001             2000
                                                                            (UNAUDITED)
---------------------------------------------------------------------------------------------------------
<S>                                                                       <C>              <C>
ASSETS

Current Assets:
  Cash and cash equivalents                                               $      113,075   $     231,197
  Marketable securities - related parties                                         84,495         202,826
  Accounts receivable, net of allowance for doubtful accounts of $7,000            8,981         122,813
  Inventory                                                                      145,911         145,911
  Prepaid expenses and other current assets                                       36,220          99,368
---------------------------------------------------------------------------------------------------------

     TOTAL CURRENT ASSETS                                                        388,682         802,115

Property and Equipment - at cost, net of accumulated
  depreciation of $443,812 and $194,871, respectively                          1,105,507         873,544

Other Assets, net of accumulated amortization of $25,659
  and $22,170, respectively                                                       49,947          68,412

Deferred Tax Assets, net of valuation allowance
  of $6,995,000 and $6,168,000, respectively                                           -               -

---------------------------------------------------------------------------------------------------------
     TOTAL ASSETS                                                         $    1,544,136   $   1,744,071
=========================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
  Accounts payable and accrued expenses                                   $      960,317   $   1,110,033
  Accounts payable and accrued expenses - related parties                              -          20,830
  Due to related parties                                                          81,063          75,896
---------------------------------------------------------------------------------------------------------
     TOTAL CURRENT LIABILITIES                                                 1,041,380       1,206,759
---------------------------------------------------------------------------------------------------------

Commitments and Contingencies

Stockholders' Equity:
  Preferred stock - no par value; authorized 250,000,000 shares,
   none issued
  Common stock - no par value; authorized 250,000,000 shares,
   issued and outstanding 88,445,088 and  81,700,088 shares, respectively     28,821,721      25,766,071
  Accumulated other comprehensive income (loss)                                  (44,608)         73,723
  Accumulated deficit                                                        (28,274,357)    (25,302,482)
---------------------------------------------------------------------------------------------------------

     STOCKHOLDERS' EQUITY                                                        502,756         537,312
---------------------------------------------------------------------------------------------------------

     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                           $    1,544,136   $   1,744,071
=========================================================================================================
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                                USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES
                                    CONSOLIDATED STATEMENTS OF OPERATIONS
                                           (STATED IN US DOLLARS)
                                                 (UNAUDITED)

============================================================================================================

                                             FOR THE THREE MONTHS ENDED        FOR THE NINE MONTHS ENDED
                                           SEPTEMBER 30,    SEPTEMBER 30,    SEPTEMBER 30,    SEPTEMBER 30,
                                               2001             2000             2001             2000
                                          ---------------  ---------------  ---------------  ---------------
<S>                                       <C>              <C>              <C>              <C>
Revenue                                   $       67,626   $      307,464   $      101,861   $      546,064
------------------------------------------------------------------------------------------------------------

Expenses:
  Cost of sales                                   36,036          190,544           56,602          343,127
  Research and development                       232,695          232,581          672,304          483,071
  Selling, general and administrative            440,254          761,282        1,501,250        2,004,663
  Depreciation and amortization                  104,645           62,777          276,622          177,185
  Noncash compensation charges                     9,750                -          575,347                -
------------------------------------------------------------------------------------------------------------
Total expenses                                   823,380        1,247,184        3,082,125        3,008,046
------------------------------------------------------------------------------------------------------------
Loss from operations                            (755,754)        (939,720)      (2,980,264)      (2,461,982)
------------------------------------------------------------------------------------------------------------

Other income (expense)
  Interest income                                     98           11,756            5,132           19,495
  Other                                            1,657            2,051            3,257          102,805
------------------------------------------------------------------------------------------------------------
                                                   1,755           13,807            8,389          122,300
------------------------------------------------------------------------------------------------------------

Net loss                                  $     (753,999)  $     (925,913)  $   (2,971,875)  $   (2,339,682)
============================================================================================================

Net loss per share - basic and diluted    $         (.01)  $         (.01)  $         (.04)  $         (.03)
============================================================================================================
Weighted-average number of common
 shares outstanding - basic and diluted       84,533,977       74,784,088       83,719,069       74,784,088
============================================================================================================
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                                 USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES
                              CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
                                            (STATED IN US DOLLARS)
                                                  (UNAUDITED)

=============================================================================================================
                                              FOR THE THREE MONTHS ENDED         FOR THE NINE MONTHS ENDED
                                             SEPTEMBER 30,    SEPTEMBER 30,    SEPTEMBER 30,    SEPTEMBER 30,
                                                 2001             2000             2001             2000
                                            ---------------  ---------------  ---------------  ---------------
<S>                                         <C>              <C>              <C>              <C>
Net loss                                    $     (753,999)  $     (925,913)  $   (2,971,875)  $   (2,339,682)

Other comprehensive income:
  Change in unrealized gain on investments         (20,535)               -         (118,331)               -
--------------------------------------------------------------------------------------------------------------
Comprehensive loss                          $     (774,534)  $     (925,913)  $   (3,090,206)  $   (2,339,682)
==============================================================================================================
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                                    USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES
                                  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                               (STATED IN US DOLLARS)
==========================================================================================================
                                                    (UNAUDITED)

                                         COMMON STOCK           ACCUMULATED
                                                                   OTHER
                                                               COMPREHENSIVE    ACCUMULATED  STOCKHOLDERS'
                                    SHARES         AMOUNT          LOSS           DEFICIT       EQUITY
----------------------------------------------------------------------------------------------------------
<S>                              <C>            <C>           <C>              <C>            <C>
Balance at December 31, 2000        81,700,088  $ 25,766,071  $       73,723   $(25,302,482)  $   537,312
Issuance of common stock and
 common stock warrants for cash      6,500,000     2,407,391               -              -     2,407,391
Issuance of common stock upon
 exercise of warrants                  245,000        72,912               -              -        72,912
Noncash compensation charges                 -       575,347               -              -       575,347
Change in unrealized gains
 on investments                              -             -        (118,331)             -      (118,331)
Net loss                                     -             -               -     (2,971,875)   (2,971,875)
----------------------------------------------------------------------------------------------------------
Balance at September 30, 2001       88,445,088  $ 28,821,721  $      (44,608)  $(28,274,357)  $   502,756
==========================================================================================================
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                           USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES
                              CONSOLIDATED STATEMENTS OF CASH FLOWS
                                      (STATED IN US DOLLARS)

=================================================================================================

NINE MONTHS ENDED SEPTEMBER 30,                                            2001          2000
---------------------------------------------------------------------  ------------  ------------
<S>                                                                    <C>           <C>
                                             (UNAUDITED)
Cash flows from operating activities:
  Net loss                                                             $(2,971,875)  $(2,339,682)
  Adjustments to reconcile net loss to net cash
   used in operating activities:
    Depreciation and amortization                                          276,622       177,185
    Noncash compensation charge                                            575,347             -
    Changes in operating assets and liabilities:
     (Increase)  Decrease in accounts receivable                           113,832      (298,833)
     (Increase) in loan receivable                                               -      (100,000)
      Decrease in prepaid expenses and other current assets                 63,148      (123,123)
      Increase in other assets                                                   -
      Increase in accounts payable and accrued expenses                   (149,716)      298,688
      Decrease in accounts payable and accrued expenses
         related parties                                                   (20,830)            -
      Increase in due to related parties                                     5,167        18,012
---------------------------------------------------------------------  ------------  ------------
        NET CASH USED IN OPERATING ACTIVITIES                           (2,108,305)   (2,367,753)
---------------------------------------------------------------------  ------------  ------------

Cash flows from investing activities:
  Purchases of property and equipment, net                                (486,120)     (281,735)
  Patent fees                                                               (4,000)       (6,814)
  Deposit                                                                        -       (75,000)
---------------------------------------------------------------------  ------------  ------------
        NET CASH USED IN INVESTING ACTIVITIES                             (490,120)     (363,549)
---------------------------------------------------------------------  ------------  ------------

Cash flows from financing activities:
  Proceeds from the issuance of common stock                             2,407,391     3,294,996
  Proceeds from the issuance of common stock upon exercise of
    warrants                                                                72,912             -

  Loans from related parties                                                     -             -
---------------------------------------------------------------------  ------------  ------------
        NET CASH PROVIDED BY FINANCING ACTIVITIES                        2,480,303     3,294,996
---------------------------------------------------------------------  ------------  ------------

Net increase (decrease) in cash and cash equivalents                      (118,122)      563,694

Cash and cash equivalents at beginning of period                           231,197       417,666
---------------------------------------------------------------------  ------------  ------------
Cash and cash equivalents at end of period                             $   113,075   $   981,360
=====================================================================  ============  ============
</TABLE>


<PAGE>
                  USA VIDEO INTERACTIVE CORP. AND SIBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                SEPTEMBER 30, 2001
                                   (UNAUDITED)
                             (STATED IN US DOLLARS)
                              --------------------


NOTE  A  -  BASIS  OF  PRESENTATION

The  accompanying unaudited consolidated financial statements have been prepared
in  accordance  with  generally  accepted  accounting  principles  for  interim
financial  information  and  with  the  instructions  to  Form  10-Q  and  Rule
10-01(a)(5)  of  Regulation  S-X.  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  the management, all
adjustments  (consisting  of normal recurring accruals) considered necessary for
fair  presentation  have been included.  The results for the interim periods are
not  necessarily  indicative  of  the results that may be attained for an entire
year  or  any  future  periods.  For further information, refer to the Financial
Statements and footnotes thereto in the Company's annual report on Form 10-K for
the  fiscal  year  ended  December  31,  2000.

NOTE  B  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES:

Basic  loss  per  common  share  ("EPS")  is computed as net loss divided by the
weighted-average  number of common shares outstanding during the period. Diluted
EPS  includes  the impact of common stock potentially issuable upon the exercise
of  options  and  warrants.  Potential  common  stock has been excluded from the
computation  of  diluted  net  loss  per  share  as  their  inclusion  would  be
antidilutive.

Inventory,  which consists of computer equipment, is stated at the lower of cost
or  market  using  the  specific-identification  method.

The assets and liabilities  of the Company's foreign subsidiaries are translated
into  U.S.  dollars  at  current  exchange  rates,  and revenue and expenses are
translated  at  average  rates  of  exchange  prevailing  during the period. The
aggregate  effect of translation adjustments is immaterial at September 30, 2001
and  2000.

NOTE  C  -  COMMON  STOCK

On  March  12, 2001, the Company issued 1,585,000 units to investors at $.54 per
unit.  Each  unit  consisted  of  one  share  of common stock and one warrant to
purchase  an  additional  share  of  common  stock  at  $.66  per  share.

On  March  12,  2001,  the Company issued 915,000 units to employees at $.54 per
unit.  Each  unit  consisted  of  one  share  of common stock and one warrant to
purchase  an  additional  share  of  common stock at $.66 per share. The Company
charged  operations  for  approximately  $278,000  representing the differential
between  the  fair  value  and  the  purchase  price of the common stock and for
approximately  $168,000  representing the differential between the fair value of
the  underlying  common  stock  and  the  exercise  price  of  the  warrants.

From  January  1,  2001  to  September  30, 2001, the Company issued 125,000 and
120,000 shares of common stock upon the exercise of warrants with exercise price
of  $.125  and  $.476  per  common  share,  respectively.


<PAGE>
                  USA VIDEO INTERACTIVE CORP. AND SIBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                SEPTEMBER 30, 2001
                                   (UNAUDITED)
                             (STATED IN US DOLLARS)
                              --------------------


NOTE  C  -  COMMON  STOCK  (CONTINUED)

On  September  28, 2001, the Company issued 3,512,500 units to investors at $.27
per  unit.  Each  unit consisted of one share of common stock and one warrant to
purchase  an  additional  share  of  common  stock  at  $.35  per  share.

On September 28, 2001, the Company issued 487,500 units to employees at $.27 per
unit.  Each  unit  consisted  of  one  share  of common stock and one warrant to
purchase  an  additional  share  of  common stock at $.35 per share. The Company
charged  operations  for  approximately  $9,750  representing  the  differential
between  the  fair  value  and  the  purchase  price  of  the  common  stock.


NOTE  D  -  CONTINGENT  LIABILTIY

The Company is party to a default judgement entered against one of the Company's
subsidiaries.  During  the year ended December 31, 1995, a claim was made to the
Company  for  the  total  amount  payable  under the terms of the lease with the
Company's  subsidiaries  for  office  space  in  Dallas Texas through 2002.  The
Company's  management  is of the opinion that the amount payable under the terms
of  this  judgement  is  not  estimable  or determinable at this time and may be
substantially  mitigated  by the landlord renting the property to another party.
The  range  of  possible  loss  is  from  $-0-  to  approximately $500,000.  Any
settlement  resulting  from the resolution of this contingency will be accounted
for in the period of settlement when such amounts are estimable or determinable.


<PAGE>
Item 2.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations

CAUTIONARY STATEMENT

Certain statements contained in this Quarterly Report on Form 10-Q ("Report"),
including, without limitation, statements containing the words
"believes,""anticipates," "estimates," "expects," and words of similar import,
constitute "forward-looking statements." Readers should not place undue reliance
on these forward-looking statements. USA Video's actual results could differ
materially from those anticipated in these forward-looking statements for many
reasons, including risks and uncertainties set forth in USA Video Interactive
Corp.'s Annual Report on Form 10-K, the most important of which are summarized
below under Factors Which May Affect Future Results of Operations, as well as in
other documents USA Video files with the Securities and Exchange Commission
("SEC").

The following information has not been audited.  You should read this
information in conjunction with the unaudited financial statements and related
notes to financial statements included in this report.

OVERVIEW OF THE COMPANY

USA Video Interactive Corp. ("USVO" or the "Company") designs and markets to
business customers streaming video and video-on-demand services, systems, and
source-to-destination digital media delivery solutions that allow live or
recorded digitized and compressed video to be transmitted through Internet,
intranet, satellite, or wireless connectivity.  The Company's systems, services,
and delivery solutions include video content production, content encoding, media
asset management, media and application hosting, content distribution,
specialized engineering services, and Internet streaming hardware.  Key areas of
market focus are advertising, education, training, and entertainment for
corporations, institutions, and consumers.

USVO holds the patent for Store-and-Forward Video-on-Demand (#5,130,792), filed
in 1990 and issued by the United States Patent and Trademark Office on July 14,
1992.  It has been cited by at least 145 subsequent patents.  USVO holds similar
patents in England, France, Spain, Italy, Germany, and Canada, and has a patent
pending in Japan.  USVO is actively engaged in licensing this patent.

MARKETS AND PRODUCTS:
As an outgrowth of its video streaming systems business and specialized
engineering services, USVO has identified emerging markets for global media
streaming services and has developed a unique solution to provide a wide range
of business customers with value-added streaming media support services.  With
this services-based approach, called StreamHQ(TM), customers can leverage USVO's
infrastructure and technical expertise, while focusing on their own core
business competencies.

StreamHQ(TM) facilitates the transmission of digitized and compressed video to
the user's desktop via multiple streaming modes that take advantage of the
available connectivity.  While competitive services take a "one-size-fits-all"
streaming approach, StreamHQ(TM) brings unique value propositions to individual
vertical markets with functionality designed specifically for those markets.
Beyond quality streaming, USVO's overriding goal has been to give customers
media asset management tools and information that provide a basis for them to
calculate their return on investment in streaming media expenditures.

StreamHQ(TM) encompasses a range of end-to-end services from source to viewing,
including content production, content encoding, asset management and protection,
media and application hosting, multi-mode content distribution, and transaction
data capture and reporting.

USVO has tailored an initial deployment product, Zmail, which uses StreamHQ(TM)
to deliver rich media emails.  Zmail leverages the diverse functional
capabilities of this architecture to provide a value-added service to
advertisers, as well as other business applications, such as corporate
communications, consumer notices, product recalls, and customer support.

Clicking on a link within a Zmail accesses a customized web page with an
embedded, non-proprietary streaming player (e.g., Windows Media, QuickTime).
The user can customize his or her viewing experience and access any of the web
page links for additional information, guidance, or e-commerce.  Zmail
functionality monitors all media player transactions, as well as web
click-throughs, and aggregates the data across multiple users to provide
web-based campaign reports to the customer.


<PAGE>
TECHNOLOGY APPROACH:
USVO is approaching the global media streaming services market with a Tier 1
media-streaming infrastructure that the Company has attempted to differentiate
from competitive products and services in terms of architectural, functional,
and business  features.  Leveraging some of the industry's most prominent
providers for data storage, networking, and data management, StreamHQ(TM)
strives to compete based on service availability,  an efficient streaming
process, redundancy and fail-over features, and continuity in the event of power
outages.

USVO has created a modular system that can be scaled to meet the requirements of
a growing clientele.  StreamHQ(TM) can also be rapidly replicated to provide a
streaming utility in multiple Internet Data Centers around the world.

StreamHQ(TM) functionality is software driven, allowing USVO to create future
system enhancements based on the needs of the marketplace.  Additionally, USVO
can customize the baseline features of StreamHQ(TM) and plans to expand the
system features to support the specialized needs of additional types of
customers.

RESEARCH AND DEVELOPMENT:
USVO has ongoing research and development (R&D) efforts that are aimed at
improving the efficiency and security of media delivery to clients.  Among these
R&D efforts is the ongoing development of wavelet-based video compression
techniques that allow high-quality video files to be streamed at low bit rates,
thereby optimizing the use of available bandwidth.  USVO also has a proprietary
still-image wavelet compression technology.  Part of USVO's R&D effort is the
development of technology that will help protect the intellectual property of
content owners.

BUSINESS OBJECTIVES:
USVO has established the following near-term business objectives:
1.   Establish StreamHQ(TM) as the industry standard in the streaming video and
     rich media marketplace;
2.   Generate services- and systems-based revenues in accordance with the
     corporate business plan;
3.   Attain industry recognition for the superior architectural, functional, and
     business differentiators of the StreamHQ(TM) architecture;
4.   Leverage USVO's digital video patent for licensing fees and partnerships in
     the United States and internationally;
5.   Develop at least one client per year for a complete StreamHQ(TM) system,
     including intellectual property licensing and operational support;
6.   Expand StreamHQ(TM) functionality to provide enhanced support for corporate
     training and education markets; and
7.   Patent and license new technology developed within the corporate R&D
     program.

MARKET PERSPECTIVE:
With its StreamHQ(TM) service offering, USVO's goals are:  1) to become a
market-leading streaming media service provider; 2) to establish itself as a
leader in streaming technology innovation; 3) to capture revenue and market
share from services and products in advertising, corporate communications,
education, entertainment, and other markets.  Numerous published reports
estimate the current value of these markets as in excess of 20 billion dollars.
As a secondary objective, USVO intends to leverage its broad video-on-demand
patent by licensing it to other companies.

The Company was incorporated on April 18, 1986, as First Commercial Financial
Group Inc. in the Province of Alberta, Canada.  In 1989,its name was changed to
Micron Metals Canada Corp., which purchased 100% of the outstanding shares of
USA Video Inc., a Texas corporation, in order to focus on the digital media
business.  In 1995, the Company changed its name to USA Video Interactive Corp.
and continued its corporate existence to the State of Wyoming. The Company has
four wholly-owned subsidiaries:  USA Video (California) Corp., USA Video Corp.,
USA Video Productions Inc., and USA Video Technologies, Inc. USA Video's
executive and corporate offices are located in Mystic, Connecticut, and its
Canadian offices are located in Vancouver, British Columbia.

RESULTS OF OPERATIONS

Sales

Sales for the nine-month period ended September 30, 2001 were $101,861, compared
to revenue of $546,064 for the nine-month period ended September 30, 2000.


<PAGE>
Sales for the three-month period ended September 30, 2001 were $67,626 compared
to $307,464 three-month period ended September 30, 2000. The decline in revenue,
which began in the fourth quarter of 2000 and is continuing, is attributable to
the continuing decline in demand throughout the technology sector, as well the
Company decreased the marketing of its hardware products in connection with the
shift in focus of its core business. Starting in the fourth quarter of 2000 and
continuing during the first nine months of 2001, the Company concentrated its
managerial and technical efforts on the remaining critical stages of developing
and refining its new streaming rich media services.

These services are intended to become the Company's core business in place of
its hardware-based systems for video encoding, decoding and streaming; the
market for which has diminished significantly in the last nine to 12 months. The
Company believes the market declined for a number reasons, the most important of
which is that customers no longer can afford to invest in expensive hardware
systems of this type. As a result, profit margins on the Company's hardware
systems have continued to decline, as the Company has lowered prices in the face
of declining demand. A change in focus was necessary to capture the market for
affordable streaming media services.

The change in focus required shifting technical and managerial resources from
sales of the old line of products to service-based offerings. Additionally, the
Company was required to make a significant investment in a centralized computer
hardware and software infrastructure that will be used to provide the new
services, as well as hiring a core sales team on which to build a growing sales
organization for the future.

Cost of Sales

The cost of sales for the nine months ended September 30, 2001 was $56,602, as
compared to $343,127 for the comparable period of 2000.  For the three-month
period ended September 30, 2001, the cost of sales was $36,036 as compared to
$190,544 for the comparable period 2000. The decrease in cost of sales is
directly attributable to the decline in sales.

Selling, General and Administrative Expenses

Selling, General and Administrative expenses consisted of product marketing
expenses, consulting fees, office, professional fees and other expenses to
execute the business plan and for day-to-day operations of the Company.

Selling, General and Administrative expenses for the three months ended
September 30, 2001 decreased $321,028 to $440,254 from $761,282 for the three
months ended September 30, 2000.  The nine months ended September 30, 2001 these
cost decreased by $503,413 to $1,501,250 from $2,004,663 for the comparable
period.

Product marketing expenses for the nine months ended September 30, 2001,
decreased to $489,458 from $662,637 for the comparable period of 2000 and
decreased to $175,366 for the three months ended September 30, 2001 from
$329,007 for the comparable period in 2000, as the Company reduced its marketing
efforts for its old, hardware-based systems. The Company expects product
marketing expenses to increase significantly during the remainder of 2001 as new
products are launched. The Company has hired additional staff and engaged in
marketing activities in an effort to identify and assess appropriate market
segments, develop business arrangements with prospective partners, create
awareness of new products and services, and communicate to the industry and
potential customers. Other components of Selling, General and Administrative
expense did not change significantly.

Research and Development Expenses

Research and development expenses consisted primarily of compensation, hardware,
software, licensing fees, and new product applications for the Company's
proprietary StreamHQ(TM). Research and development expenses increased by 39% to
$672,304 for the nine months ended September 30, 2001, from $483,071 for the
comparable period in 2000.  For the three months ended September 30, 2001,
research and development expenses were approximately the same as the comparable
three-month period in 2000 - $232,695 in 2001 versus $232,581 in 2000.  This
parity reflects the development of  the StreamHQ(TM) and other technologies
underlying the shift in the Company's business to a services-based model.

As the Company expands its business, its product development, product marketing,
and other general and administrative expenses will continue to increase. Product
development expenses, which include research and development expenses, will
increase as the Company adds engineering personnel to its technology and Web
development teams, and as its new technologies are integrated into its product


<PAGE>
line. Product marketing expenses will increase as the Company adds business
development, sales, and marketing personnel to build business relationships,
sell advertising time and build brand awareness. Advertising also will increase
as the Company invests to grow its business. Other general and administrative
expenses will grow as the Company continues to build its management
infrastructure, including additional personnel, office space and internal
information systems.

Non-Cash Compensation Charges

Non-cash compensation charges for the nine months ended September 30, 2001
reflected charges in the third and first quarter of 2001 of $575,347. Of this
amount, $9,750 and $462,097, respectively, was due to the issuance of common
shares and common share warrants to the Company's officers, directors and
employees at a price or exercise price below the market price of the common
shares at the time of issuance. Because the rules of the Canadian Venture
Exchange require that the offering price for privately placed securities of
listed companies be set when the offering is first announced, rather than upon
closing, and the market price of the common shares increased between
announcement of the offering and closing, the sale price of the common shares
and the exercise price of the warrants were below the market price of the common
shares on the date of issuance. In addition, the Company issued options to
purchase 150,000 common shares to consultants, resulting in a $97,500 charge.
The Company also incurred a charge of $6,000 for the issuance of employee stock
options.

Net Losses

To date, the Company has not achieved profitability and, in fact, for the
immediate future, expects to continue to incur substantial net losses.  The
Company's net loss for the nine months ended September 30, 2001 was $2,971,875
as compared with a net loss of $2,339,682 for the nine months ended September
30, 2000 and for the three months ended September 30, 2001 was $753,999 as
compared to $925,913 for the comparable period.


LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2001, the Company's had a cash position of $113,075, compared
to $231,197 at December 31, 2000. The Company's principal sources of cash during
the nine months ended September 30, 2001, were proceeds of $2,407,391 from the
issuance of stock from private placements and $72,912 from the exercise of
outstanding warrants. This was substantially offset by $2,108,305 of cash used
in operating activities.

The Company will require additional financing to fund current operations through
the fourth quarter of 2001. The Company has historically satisfied its capital
needs primarily by issuing equity securities. The Company will require an
additional $1.0 million to $1.5 million to finance operations for the rest of
fiscal 2001 and intends to seek such financing through sales of its equity
securities.

Assuming the aforementioned $1.0 million to $1.5 million in financing is
obtained, the Company believes that continuing operations for the longer term
will be supported through anticipated growth in revenues and through additional
sales of the Company's securities. Although longer-term financing requirements
may vary depending upon the Company's sales performance, management expects that
the Company will require additional financing of $5.0 million to $6.0 million
for fiscal 2002. The Company has no binding commitments or arrangements for
additional financing, and there is no assurance that management will be able to
obtain any additional financing on terms acceptable to the Company, if at all.

FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS

Certain risks and uncertainties could cause actual results to differ materially
from the results contemplated by the forward-looking statements contained in
this Report. Risks and uncertainties have been set forth in the Company's Annual
Report on Form 10-K, as well as in other documents the Company files with the
SEC. These risk factors include the following:

THE COMPANY'S LIMITED OPERATING HISTORY MAKES IT DIFFICULT TO EVALUATE ITS
BUSINESS AND PROSPECTS.

The Company's business and prospects must be considered in light of the risks
encountered by companies in their early stages of development, particularly
companies in new and rapidly evolving markets such as streaming media.


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IF THE COMPANY IS UNABLE TO OBTAIN SUBSTANTIAL ADDITIONAL FINANCING IN THE NEXT
FEW MONTHS IT MAY NOT BE ABLE TO MAINTAIN OPERATIONS AT CURRENT LEVELS.

The Company requires substantial additional financing to maintain operations at
current levels beyond the third quarter of 2001. Financing may not be available
when needed on terms favorable to the Company, or at all. If adequate funds are
not available or are not available on acceptable terms, the Company may be
unable to further develop or enhance its products and services, take advantage
of future opportunities or respond to competitive pressures, or ultimately, to
continue in business.

CONTINUATION OF THE CURRENT SLUMP IN THE TECHNOLOGY SECTOR WILL ADVERSELY AFFECT
DEMAND FOR THE COMPANY'S PRODUCTS AND SERVICES.

The Company's sales have been adversely affected by the ongoing slump in the
technology industry segment and the continuation of these market conditions can
be expected to result in depressed demand for the Company's products and
services.

THE COMPANY'S OPERATING RESULTS IN FUTURE PERIODS ARE EXPECTED TO BE SUBJECT TO
SIGNIFICANT FLUCTUATIONS, WHICH WOULD LIKELY AFFECT THE TRADING PRICE OF ITS
COMMON SHARES.

Factors that could cause such fluctuations include the Company's ability to
attract and retain customers; the introduction of new video transmission
services or products by others; price competition; the continued development of
and changes in the streaming media market; its ability to remain competitive in
its product and service offerings; its ability to attract new personnel; and
potential U.S. and foreign regulation of the Internet.

THE COMPANY IS SUBJECT TO RAPID TECHNOLOGICAL CHANGE, WHICH COULD RENDER THE
COMPANY'S PRODUCTS AND SERVICES OBSOLETE.

Keeping pace with the technological advances may require substantial
expenditures and lead time, particularly with respect to acquiring updated
hardware and infrastructure components of its systems. The Company may require
additional financing to fund such acquisitions. Any such financing may not be
available on commercially reasonably terms, if at all, when needed.

IF THE COMPANY DOES NOT CONTINUOUSLY IMPROVE ITS TECHNOLOGY IN A TIMELY MANNER,
ITS PRODUCTS COULD BE RENDERED OBSOLETE.

These changes and developments may render the Company's products and
technologies obsolete in the future. As a result, the Company's success depends
on its ability to develop or adapt products and services or to acquire new
products and services that can compete successfully. There can be no assurance
that the Company will be successful in these efforts.

THE COMPANY INTENDS TO ISSUE ADDITIONAL EQUITY SECURITIES, WHICH MAY DILUTE THE
INTERESTS OF CURRENT SHAREHOLDERS OR CARRY RIGHTS OR PREFERENCES SENIOR TO THE
COMMON SHARES.

Accordingly, existing shareholders may experience additional dilution of their
percentage ownership interest in the Company. In addition, the new equity
securities may have rights, preferences or privileges senior to those of
existing holders of the Company's common shares.


Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company believes its exposure to overall foreign currency risk is not
material. The Company does not manage or maintain market risk sensitive
instruments for trading or other purposes and is not exposed to the effects of
interest rate fluctuations as it does not carry any long-term debt.

The Company reports its operations in US dollars and its currency exposure,
although considered by the Company as immaterial, is primarily between the US
and Canadian dollars. Exposure to other currency risks is also not material as
international transactions are settled in US dollars. Any future financing
undertaken by the Company will be denominated in US dollars. As the Company
increases its marketing efforts, the related expenses will be primarily in US
dollars. In addition, 90% of the Company's bank deposits are in US dollars.


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PART II. OTHER INFORMATION

Item 1.   Legal Proceedings

The Company is not a party to any other material pending legal proceedings.

Item 2.   Changes in Securities and Use of Proceeds

During the quarter ended September 30, 2001, 25,000 common shares were issued
pursuant to warrants exercised for total proceeds of $12,053. The issuance of
the shares was exempt from registration under Rules 504 and 506 of Regulation D
under the Securities Act of 1933 ("Securities Act"). The Company has made
publicly available financial and disclosure information with its filings to the
Canadian Venture Exchange, and provided disclosure regarding the offering and
the Company to the investors. The Company limited the manner of the offering.
The purchaser was a non-affiliated investor.

During the quarter ended September 30, 2001, the Company completed  an
offering,  which  it commenced  in August 2001,  of units.  Each unit consisted
of one  share of common  stock and one  warrant to acquire an  additional share
at $0.35 per share ($0.53 CN) by September 2003.  On  completion  of the
offering,  a total of  4,000,000  units were  issued at $0.27 per unit ($0.42
CN) for total proceeds of  $1,074,131.34 (adjusted for exchange rate conversions
for sales to Canadian purchasers).

The offer and sale of the  units  were  exempt  from  registration  under  Rule
506 of Regulation D of the  Securities Act. The Company   limited  the  manner
of  the   offering  and  provided disclosure   regarding  the  offering  and
the  Company  to  the investors.  Two officers  and  directors  of the  Company,
five employees  (two   accredited   investors  and  three   nonaccredited
investors)  of  the  Company,  two  (2)  additional  unaffiliated nonaccredited
investors,  and fifteen (15)  additional  unaffiliated accredited  investors
purchased  the  securities.   The Company believes that a portion of these sales
were also exempt under Regulation S under the Securities Act, as the sales were
made in offshore transactions to non-U.S. persons.


Item 3.   Defaults Upon Senior Securities.  None.

Item 4.   Submission of Matters to a Vote of Security Holders.

No matter was submitted to a vote of the Company's security holders during the
third quarter of 2001.


Item 5.   Other Information.  None.

Item 6.   Exhibits and Reports on Form 8-K

          (a)  Exhibits

               None.

          (b)  Reports on Form 8-K

               None.


SIGNATURE


     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                     USA Video Interactive Corp.

Dated: November 9, 2001              By:  /s/  Anton J. Drescher
                                     --------------------------------
                                     Name: Anton J. Drescher
                                     Title:  Chief Financial Officer


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