UNITED STATES 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 June 30, 2009  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)  8
West Main Street, Niantic, Connecticut
                           06357 (Address
of principal executive offices)
                            (ZIP
code)  (860) 739-8030 (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 1934during 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  [   ]|  Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
See definition of accelerated filer and large accelerated filer in Rule
12b-2 of the Exchange Act. (Check one):  Large accelerated
filer [   ]
                                                     Accelerated
filer [   ] Non-accelerated filer
[   ]
                                                       Small
reporting company [ X ]   Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   [   ]
      No [ X ]  At August 14, 2009,
there were 178,526,364 shares of the registrant's common stock outstanding.  2    PART
I. FINANCIAL
INFORMATION  Item
1. Financial
Statements    3


USA
VIDEO INTERACTIVE CORP.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE
30, 2009  (Unaudited)  (Stated in US Dollars)


4


USA VIDEO INTERACTIVE CORP. AND
SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE
SHEETS (Stated in US
Dollars)  June 30,
December 31,2009
2008(Unaudited)ASSETSCurrent
Assets:Cash
and cash equivalents
$
          525
$        65Accounts
receivable
12,000
-Prepaid
expenses and other current assets
2,167
2,990Total
current assets
14,692
3,055Property
and Equipment - at cost, net
-
-Deferred
Tax Assets, net of valuation allowanceof
$9,766,000 and $9,683,000, respectively
-
-Total
Assets
$        14,692
$         3,055LIABILITIES
AND STOCKHOLDERS' DEFICIENCYCurrent
Liabilities:Accounts
payable and accrued expenses
$       679,331
$       423,973Due
to related parties
160
160Total
current liabilities
679,491
424,133Commitment
and ContingenciesStockholders'
Deficiency:Preferred
stock - no par value; authorized 250,000,000 shares,none
issuedCommon
stock and additional paid-in capital -no
par value; authorized 250,000,000 shares,issued
and outstanding 178,526,363 and170,108,088,
respectively
37,785,544
37,764,019Accumulated
deficit
(38,450,343)
(38,185,097)Stockholders'
deficiency
(664,799)
(421,078)Total
Liabilities and Stockholders' Deficiency
$       14,692
$         3,055   SEE ACCOMPANYING NOTES


5


USA
VIDEO INTERACTIVE CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Stated in US Dollars) (Unaudited)  For the three months ended
For the six months endedJune 30,
June 30,
June 30,
June 30,2009
2008
2009
2008Revenue
$        6,000
$        6,000
$      12,000
$      12,000Expenses:Cost
of sales
4,650
-
4,650
750Research
and development
9,000
22,500
18,000
51,850Selling,
general and   administrative
143,629
218,748
254,570
447,373Depreciation
and amortization
-
830
-
1,661Total
expenses
157,279
242,078
277,220
501,634Loss from
operations
(151,279)
(236,078)
(265,220)
(489,634)Other income
(expense)Interest
income (expense)
(26)
25
(26)
276Gain on
settlement of accounts payable
-
-
-
-Gain on sale of
equipment
-
-
-
-(26)
25
(26)
276Net
loss
$ (151,305)
$ (236,053)
$  (265,246)
$  (489,358)Net loss per
share - basic and diluted
$       (.00)
$       (.00)
$         (.00)
$
        (.00)Weighted-average
number of commonshares
outstanding - basic and diluted
178,526,364
171,998,479
178,526,364
171,146,853       SEE ACCOMPANYING NOTES


6


USA
VIDEO INTERACTIVE CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY (Stated in US Dollars) (Unaudited)   Common Stock andAdditional Paid inCapitalAccumulated
Stockholders'Shares
Amount
Deficit
DeficiencyBalance at
December 31, 2008
178,526,363
$ 37,764,019
$ (38,185,097)
$      (421,078)Issuance of
common stock uponexercise of
warrants
-
-
-
-Issuance of
common stock uponexercise of
stock options
-
-
-
-Noncash
compensation charges

21,525
-
21,525Net loss

-
(265,246)
(265,246)Balance at June
30, 2009
178,526,363
$ 37,785,544
$ (38,450,343)
$      (664,799)        SEE ACCOMPANYING NOTES





7


USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS(Stated in US Dollars)(Unaudited)  For the three months ended
For the six months endedJune 30,
June 30,
June 30,
June 30,2009
2008
2009
2008Cash flows from
operating activities:Net
loss
$    (151,305)
$    (236,053)
$   (265,246)
$   (489,358)Adjustments
to reconcile net loss to net cashused
in operating activities:Depreciation
and amortization
-
830
-
1,661Noncash
compensation charge
21,525
28,125
21,525
65,775Changes
in operating assets and liabilities:Increase
in accounts receivables
(6.000)
-
(12,000)
-Decrease
in prepaid expensesand
other current assets
(634)
(939)
823
(263)Increase
(decrease) in accounts payableand
accrued expenses
133,757
45,178
255,358
170,209Net cash used
in operating activities
(2,657)
(162,859)
460
(251,976)Cash flows from
investing activities:Proceeds
from equipment sales
-
-
-
-Net cash
provided by investing activities
-
-
-
-Cash flows from
financing activities:Proceeds
from the exercise of commonstock
and warrants
-
-
-
-Proceeds
from the issuance of common tock upon exercise of stock options
-
154,910
-
215,837Net cash
provided by financing activities

154,910
-
215,837Net decrease in
cash and cashEquivalents
(2,657)
(7,949)
460
(36,139)Cash and cash
equivalents at beginning of period
3,182
8,510
65
36,700Cash and cash
equivalents at end of period
$
           525
$
           561
$
          525
$        561  SEE ACCOMPANYING NOTES





8   USA
VIDEO INTERACTIVE CORP. NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June
30, 2009 (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, 2008.  NOTE B  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:  The
accompanying condensed consolidated financial statements have been prepared
assuming the Company will continue as a going concern.  As shown in the
financial statements, the Company has incurred losses of $265,246 for the six
month period ended June 30, 2009 and, in addition the Company incurred losses of
$915,918 and $1,784,193 for the years ended December 31, 2008 and 2007,
respectively. As of June 30, 2009, the Company had an accumulated deficit of
$38,450,343 and a working capital deficit of $664,799. These conditions raise
doubt about the Company's ability to continue as a going concern.  The
Company's ability to continue as a going concern is dependent upon its ability
to generate sufficient cash flow to meet its obligations as they come due which
management believes it will be able to do.  To date, the Company has funded
operations primarily through the issuance of common stock and warrants to
outside investors and the Company's management.  The Company believes that
its operations will generate additional funds and that additional funding from
outside investors and the Company's management will continue to be available to
the Company when needed.  The Company also has certain lawsuits pending
which could result in additional liabilities.  The financial statements do
not include any adjustments relating to the recoverability and classification of
recorded assets, or the amounts and classifications of liabilities that might be
necessary in the event the Company cannot continue as a going concern.  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
anti-dilutive.  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 June 30, 2009 and 2008.  NOTE C  COMMON STOCK  No shares of common stock was issued from January 1, 2009 to June
30, 2009    9    NOTE D - CONTINGENT LIABILITY  The
Compays patent infringement litigation against Movielink LLC came to a
substantive conclusion on September 8, 2006, when the U.S. Court of Appeals for
the Federal Circuit affirmed certain rulings of the U.S. District Court for the
District of Delaware granting Movielink summary judgment of non-infringement. A
further procedural determination was entered on September 26, 2007, taxing
litigation costs against the Company  On
September 13, 2006, USA Video Technology Corp., our wholly-owned subsidiary,
filed suit in the U.S. District Court for the Eastern District of Texas,
alleging that its U.S. Patent No. 5,130,792 is infringed by cable technology
interests including Time Warner, Inc., Charter Communications, Inc., and Comcast
Cable Communications LLC, and seeking statutory compensation and a court
injunction against further infringement.  In December 2007, the court
issued rulings adverse to our interests: a claim construction ruling
interpreting certain terms in the patent's claims, and a related summary
judgment of non-infringement.  Defendants then filed motions for costs and
attorney fees.  The court denied defendants' motions for attorney fees and
granted the motions for costs, so that we now have a remaining liability from
this litigation in the amount of approximately $30,000, not counting our own
remaining attorney fees and litigation expenses.  Our subsidiary filed
notice of appeal from the district court's adverse substantive decisions, but
was unable to prosecute the appeal and so it was dismissed.  The Company is party to a default judgment entered against one of
the Company's subsidiaries.  During the year ended December 31, 1995, a
claim was made against the Company for the total amount payable under the terms
of a lease with one of 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 judgment is not estimable or determinable
at this time and may be substantially mitigated by the landlords 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.  The Company leases its United States office space under a
non-cancelable operating lease, expiring in July 2010.  The minimum rental
commitment of this lease is approximately $13,560 annually.  The Company
leases its Canadian office space on a month to month basis.  Rent expense
United States and Canada amounted to $20,367 and $22,704 for the six months
ended June 30, 2009 and 2008, respectively.  NOTE E  SHARE  BASED COMPENSATION  Effective January 1, 2006, the Company adopted
FAS No. 123 (R) utilizing the modified prospective method. FAS No. 123 (R)
requires the recognition of share-based compensation expense in the financial
statements.  Under the modified prospective method, the
provisions of FAS No. 123 (R) apply to all awards granted or modified on or
after the date of adoption. In addition, the unrecognized expense of awards not
yet vested at the date of adoption, determined under the original provisions of
FAS 123, Accounting for Stock Based Compensation, is in net earnings in the
periods after the date of adoption. Stock based compensation consists primarily
of stock options. Stock options are granted to employees at exercise prices
equal to the fair market value of the Companys stock at the dates of grant.
Stock options generally vest over three years and have a term of seven years.
Compensation expense for stock options is recognized on a straight line basis
over the period of the award.     10   The fair value for options issued was estimated at the date of
grant using a Black-Scholes option-pricing model. The risk free rate was derived
from the U.S. Treasury yield curve in effect at the time of the grant. The
volatility factor was determined based on our historical stock prices. The
Black-Scholes option-pricing model was developed for use in estimating the fair
value of traded options that have no vesting restrictions and are fully
transferable. In addition, option-pricing models require the input of highly
subjective assumptions including the expected stock price volatility.  During the six month period ended June 30, 2009 the Company
granted 250,000 options to an employee of the Company to purchase 250,000 shares
at a price of $0.10 to April  2010 and 400,000 options to a consultant of
the Company to purchase 400,000 shares at a price of $0.10 to April 2011. The
Company charged operations for the fair value of these options, approximately
$12,325 and $9,200, respectively, and these amount are included in selling,
general and administrative expenses in the accompany statement of operations.  The fair value of each option grant was estimated at the date of
grant using the Black-Scholes option pricing model with the following
weighted-average assumptions:  Expected
dividend yield
- 0 -Risk-free
interest rate
1.66-1.95%Volatility
181-187%Expected life
(years)
1-2  A summary of the status of the Company's options and changes for
the six months ended June 30, 2009 is presented below:  Number of Shares
Weighted Average Exercise Price
Remaining life
Aggregate
intrinsic ValueOutstanding at
beginning of period
8,000,000
$0.10-$0.14Granted
650,000
$0.10Exercised
-0-
n/aCancelled/expired
250,000
$0.10Outstanding at end of period
8,400,000
$0.10-$0.14
0.43 years
$964,000Options exercisable at end of period
8,400,000  As of June 30, 2009 all options are fully vested.  NOTE  F  INCOME TAXES  Effective January 1, 2007, the Company adopted the provisions of
FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income
Taxes  An Interpretation of FASB Statement No. 109. FIN 48 provides detailed
guidance for the financial statement recognition, measurement and disclosure of
uncertain tax positions recognized in the financial statements in accordance
with SFAS No. 109. Tax positions must meet a more-likely-than-not recognition
threshold at the effective date to be recognized upon the adoption of FIN 48 and
in subsequent periods. Upon the adoption of FIN 48, the Company had no
unrecognized tax benefits. During the second quarter of 2009, the Company
recognized no adjustments for uncertain tax benefits.     11   Income taxes are computed using the asset and liability method of
accounting. Under the asset and liability method, a deferred tax asset or
liability is recognized for estimated future tax effects attributable to
temporary differences and carryforwards. The measurement of deferred income tax
assets is adjusted by a valuation allowance, if necessary, to recognize future
tax benefits only to the extent, based on available evidence, it is more likely
than not such benefits will be realized. The Companys deferred tax assets were
fully reserved at June 30, 2009 and December 31, 2008.  The Company recognizes interest and penalties, if any, related to
uncertain tax positions in selling, general and administrative expenses.
 No interest and penalties related to uncertain tax positions were accrued
at June 30, 2008.  The tax years 2005 through 2008 remain open to examination by the
major taxing jurisdictions in which the Company operates. The Company expects no
material changes to unrecognized tax positions within the next twelve
months.  NOTE  G  SUBSEQUENT EVENTS  July
2009, 3,100,000 stock option expired.      12    Item
2. Management's
Discussion and Analysis of Financial Condition and Results
of Operations  CAUTIONARY
STATEMENT  This
document includes statements that may constitute forward-looking statements made
pursuant to the Safe Harbor provisions of the Private Securities Litigation
Reform Act of 1995. We caution readers regarding certain forward-looking
statements in this document, press releases, securities filings, and all other
documents and communications.  All statements, other than statements of
historical fact, including statements regarding industry prospects and future
results of operations or financial position, made in this Quarterly Report on
Form 10-Q ("Report") are forward looking.  The words
"believes," "anticipates," "estimates," "expects,"
and words of similar import, constitute "forward-looking statements."
 While we believe in the veracity of all statements made herein,
forward-looking statements are necessarily based upon a number of estimates and
assumptions that, while considered reasonable by us, are inherently subject to
significant business, economic and competitive uncertainties and contingencies
and known and unknown risks.  As a result of such risks, our actual results
could differ materially from those expressed in any forward-looking statements
made by, or on behalf of, our company.  We will not necessarily update
information if any forward-looking statement later turns out to be inaccurate.
 Our actual results could differ materially from those anticipated in these
forward-looking statements for many reasons, including risks and uncertainties
set forth in our Annual Report on Form 10-K, as well as in other documents we
file 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 the financial statements included in this report.  OVERVIEW OF THE COMPANY  We
design and market to business customers digital watermarking, streaming video
and video-on-demand systems, services 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.
 Our systems, services and delivery solutions include digital watermark
solutions and video content production, content encoding, media asset
management, media and application hosting, multi-mode content distribution,
transaction data capture and reporting, e-commerce, specialized engineering
services, and Internet streaming hardware.  Although we have generated nominal sales for the initial quarter
of 2009, we continue to explore opportunities that will result in new products
for new revenue streams, but there can be no assurances that such efforts will
be successful.  We hold
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.
 Our patent is expected to expire in February 2010.  It has been cited
by at least 145 subsequent patents.  We hold similar patents in England,
France, Spain, Italy, Germany, Canada, and Japan.  We anticipate actively
engaging in licensing this patent.  Our
Store and Forward Video-on-Demand ("VoD") intellectual property
potentially reaches across the VoD market.  Our patented technique covers
the transmission of video content over networks faster than "real time."
 VoD is the mechanism by which the delivery of compressed video is managed
and, together with compression technology, facilitates the delivery of video to
an end user in a timely and interactive fashion.    13    We have
developed a number of specific products and services based on these
technologies. These include MediaSentinel and SmartMarks a process that
watermarks digital video content, StreamHQ, a collection of
source-to-destination media delivery services marketed to businesses; EncodeHQ,
a service that digitizes and compresses analog-source video; hardware server and
encoder system applications under the brand name Hurricane Mediacaster; ZMail,
a service that delivers web and rich media content to targeted audiences;
mediaClix, a service that delivers content similar to Zmail but originating
from an existing web presence; and MediaSentinel, a patent-pending digital
watermarking technology to deter digital video piracy.  We were
incorporated on April 18, 1986, as First Commercial Financial Group Inc.
in the Province of Alberta, Canada.  In 1989, our 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, we changed our name to USA Video Interactive
Corp. and continued our corporate existence to the State of Wyoming.
 We have five wholly-owned subsidiaries:  USA Video (California)
Corp., USA Video Corp., Old Lyme Productions Inc., USA Video Technologies, Inc.,
and USVO, Inc.  Our executive and corporate offices are located in Niantic,
Connecticut, and our Canadian offices are located in Vancouver, British
Columbia.  BUSINESS OBJECTIVES:  We have established the following near-term business
objectives:  1. Leverage our digital VoD patent for licensing fees and
partnerships in the United States and internationally;  2. Patent and license new technology developed within the corporate
research and development program;  3. Attain industry recognition for the superior architectural,
functional, and business differentiators of our MediaSentinel
architecture;  4. Demonstrate proof of concept on a commercial project with
MediaSentinel architecture;  5. Establish StreamHQas the industry standard in the
streaming video and rich media marketplace;  6. Expand StreamHQ functionality to provide enhanced support for
corporate training and education markets.  CRITICAL
ACCOUNTING POLICIES (AND ESTIMATES)  Our
discussion and analysis of our financial condition and results of operations are
based upon our financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States.  The
preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and liabilities.  On
an ongoing basis, we evaluate these estimates, including those related to
customer programs and incentives, bad debts, inventories, investments,
intangible assets, income taxes, warranty obligations, impairment or disposal of
long-lived assets, contingencies and litigation.  We base our estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the    14   basis
for making judgments about the carrying values of assets and liabilities that
are not readily apparent from other sources.  Actual results may differ
from these estimates under different assumptions or conditions.  We have identified the policies below as
critical to our business operations and to the understanding of our financial
results. The impact and any associated risks related to these policies on our
business operations is discussed throughout managements discussion and analysis
of financial condition and results of operations where such policies affect our
reported and expected financial results:   Revenue
recognition;  Impairment
or disposal of long-lived assets;  Deferred
taxes;  Accounting
for stock-based compensation; and  Commitments
and contingencies.  REVENUE RECOGNITION.  Revenue is recognized for
digital water marking based on a contracted usage schedule on a monthly billing
cycle.  Software revenue and other services are recognized in accordance
with the terms of the specific agreement, which is generally upon delivery and
when accepted by customer.  Maintenance, support and service revenue are
recognized ratably over the term of the related agreement.  In order to
recognize revenue, we must not have any continuing obligations and it must also
be probable that we will collect the accounts receivable.  IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS.
 Long-lived assets are reviewed in accordance with Statement of Financial
Accounting Standard (SFAS) 144.  Impairment or disposal of
long-lived assets losses are recognized in the period the impairment or disposal
occurs.  DEFERRED TAXES.  We record a valuation allowance to
reduce deferred tax assets when it is more likely than not that some portion of
the amount may not be realized.  ACCOUNTING FOR STOCK-BASED
COMPENSATION.In
December 2004, the Financial Accounting Standards Board FASB issued SFAS No. 123 (revised 2004),
Share Based
Payment (SFAS 123(R)). SFAS 123(R) requires all share-based
payments to employees, including grants of employee stock options, to be
recognized in the financial statements based on their fair values. We adopted
SFAS 123(R) on January 1, 2006. SFAS 123(R) permits public companies
to adopt its requirements using either the modified prospective or modified
retrospective transition method. We use the modified prospective transition
method, which requires that compensation cost is recognized for all awards
granted, modified or settled after the effective date as well as for all awards
granted to employees prior to the effective date that remain unvested as of the
effective date.  COMMITMENTS AND CONTINGENCIES.    We account for commitments and contingencies in
accordance with financial accounting standards board Statement No. 5, Accounting
for Contingencies. We record a liability for commitments and contingencies when
the amount is both probable and reasonably estimable.  RESULTS OF OPERATIONS  Sales  Sales
for the six-month period ended June 30, 2009 and June 30, 2008 were $12,000.
 Sales for the three-month period ended June 30, 2009 and June 30, 2008
were $6,000. Revenues were generated from Software License Agreement from our
Smartmark Software.    15    Cost
of Sales  The
cost of sales for the six months ended June 30, 2009 was $4,650 as compared to
$750 for the comparable period in 2008.  For the three-month period ended
June 30, 2008, the cost of sales was $4,650 as compared to $-0- for the
comparable period in 2008.  Costs are the royalties on our video
watermarking license agreement.  Selling, General and Administrative Expenses  Selling, general and administrative expenses, consisting of
product marketing expenses, consulting fees, office, professional fees and other
expenses to execute our business plan and for our day-to-day operations,
decreased in the six months ending June 30, 2009.  We have a contract for
our Smartmark Software and delivered acceptable release to start billing.
 Product marketing costs decreased due to managements decision to direct
our efforts toward the current customer in additional divisions and direct
marketing to other possible customers.  Professional fees decreased due to
the courts adverse ruling in the patent infringement litigation
  Administrative expenses have decreased as a result.  Selling, general and administrative expenses for the three months
ended June 30, 2009 decreased by $75,119 to $143,629 from $218,748 for the three
months ended June 30, 2008.  The decrease was due to management decision to
use direct marketing.  For the six months ended June 30, 2009 the costs
decreased by $192,803 to $254,570 from $447,373 for the comparable period in
2008.  The decrease was the result of expenses incurred related to
professional fees and product marketing expenses.  Product
marketing expense for the three months ended June 30, 2009, decreased to $18,334
from $46,764 for the comparable period in 2008.  The increase was due to
management decision to use direct marketing.  For the six months ended June
30, 2009 these costs decreased to $36,921 from $73,071 for the comparable period
in 2008.  The decrease was due to managements decision to direct our
efforts towards our current customer and direct marketing to other possible
customers  Professional expenses for the three months ended June 30, 2008,
decreased to $4,386 from $11,357 for the comparable period in 2008.  For
the six months ended June 30, 2009 these costs decreased to $6,886 from $71,071
for the comparable period in 2008.  We incurred decreased costs in 2009 due
to the patent infringement lawsuit.  We have
arranged for additional staff and consultants to engage 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
contractor fees, compensation, hardware, software, licensing fees, and new
product applications for our proprietary MediaSentinel.  Research and
development expenses decreased to $18,000 for the six months ended June 30,
2009, from $51,850 for the comparable period in 2008 and to $9,000 for the three
months ended June 30, 2009 from $22,500 for the comparable period in 2008.
 The decrease was the result of a concentration in one application of
research and development efforts for MediaSentinel.     16   Non-Cash Compensation Charges  Non-cash compensation charges for the six months ended June 30,
2009 were $21,525, compared to $65,775 for the comparable period in 2008.
  The amount for the six months ended June 30, 2009 was due to the
issuance of stock options to contractors  Net
Losses  To
date, we have not achieved profitability and, we expect to incur substantial net
losses for the remainder of 2009.  Our net loss for the six months ended
June 30, 2009 was $265,246, compared with a net loss of $489,358 for the six
months ended June 30, 2008.  The decrease in losses is directly related to
the reduction in professional fees, research and development and marketing.  LIQUIDITY AND CAPITAL RESOURCES  At June
30, 2009, we had a cash position of $525, compared to $65 at December 31, 2008.
 We anticipate capital requirements of $700,000 for the continued
development of our MediaSentinel products and 700,000 for commercialization of
our MediaSentinel products.  We will
require additional financing to fund current operations through fiscal 2009.
 We have historically satisfied our capital needs primarily by issuing
equity securities.  We will require an additional $0.75 million to $1.25
million to finance operations through fiscal 2009 and we intend to seek such
financing through sales of our equity securities.  We have not raised any
capital in the six months ended June 30, 2009.  Assuming the aforementioned $0.75 million to $1.25 million in
financing is obtained, we believe that continuing operations for the longer term
will be supported through anticipated licensing revenues and through additional
sales of our securities.  We have no binding commitments or arrangements
for additional financing, and there is no assurance that we will be able to
obtain any additional financing on terms acceptable to us, if at all.  OFF-BALANCE SHEET ARRANGEMENTS  We do
not maintain any off-balance sheet transactions, arrangements, or obligations
that are reasonably likely to have a material effect on our financial condition,
results of operations, liquidity, or capital resources.   Item 3. Quantitative and Qualitative Disclosures About Market
Risk  We
believe our exposure to overall foreign currency risk is not material.  We
do not manage or maintain market risk sensitive instruments for trading or other
purposes and are not exposed to the effects of interest rate fluctuations as we
do not carry any long-term debt.  We
report our operations in US dollars and our currency exposure, although
considered by us as immaterial, is primarily between 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
us will be denominated in US dollars.  As we increase our marketing
efforts, the related expenses will be primarily in US dollars.  In
addition, 90% of our bank deposits are in US dollars.     17   Item 4. Controls and Procedures  Our management, with the participation of our
Chief Executive Officer and Chief Financial Officer, has evaluated the
effectiveness of our disclosure controls and procedures, as defined in Exchange
Act Rule 13a-15(e) and 15d-15(e), as of the end of the period covered by this
report.  In designing and evaluating our disclosure
controls and procedures, management recognized that any controls and procedures,
no matter how well designed and operated, can provide only reasonable assurance
of achieving the desired control objectives.  No system of controls can prevent errors and
fraud. A control system, no matter how well designed and operated, can provide
only reasonable, not absolute, assurance that the control systems objectives
will be met. Further, the design of a control system must reflect the fact that
there are resource constraints, and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within our company have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur. Controls can also
be circumvented by individual acts of some people, by collusion of two or more
people, or by management override of the controls. The design of any system of
controls is based in part upon certain assumptions about the likelihood of
future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions. Over time,
controls may become inadequate because of changes in conditions or deterioration
in the degree of compliance with its policies or procedures. Because of the
inherent limitations in a cost-effective control system, misstatements due to
error or fraud may occur and not be detected.  Subject to the limitations above, management
believes that the consolidated financial statements and other financial
information contained in this report, fairly present in all material respects
our financial condition, results of operations, and cash flows for the periods
presented.  Based on the evaluation of
the effectiveness of our disclosure controls and procedures, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) were not
effective as a result of the weaknesses in the design of our internal control
over financial reporting.  Based
upon their evaluation of our internal controls over financial reporting, our
Chief Executive Officer and Chief Financial Officer have concluded that our
internal controls over financial reporting are ineffective.  The material
weaknesses in our internal controls related to a lack of segregation of duties
due to inadequate staffing within our accounting department and upper
management, the assignment of authority and responsibility, lack of consistent
policies and procedures, inadequate monitoring controls and inadequate
disclosure controls.  There
were no changes in our internal controls that occurred during the period covered
by this report that have materially affected, or are reasonably likely to
materially affect our internal controls over financial
reporting.  We are
committed to improving our financial organization.  As part of this
commitment, we will create a position to segregate duties consistent with
control objectives and will increase our personnel resources and technical
accounting expertise within the accounting function when funds are available to
our company.     18   In
addition, management believes that preparing and implementing sufficient written
policies and checklists will remedy the following material weaknesses (i)
insufficient written policies and procedures for accounting and financial
reporting with respect to the requirements and application of US GAAP and SEC
disclosure requirements; and (ii) ineffective controls over period end financial
close and reporting processes.  Further, management believes that the
hiring of additional personnel who have the technical expertise and knowledge
will result in proper segregation of duties and provide more checks and balances
within the department.  Additional personnel will also provide the cross
training needed to support our company if personnel turn over issues within the
department occur.  We will
continue to monitor and evaluate the effectiveness of our internal controls and
procedures and our internal controls over financial reporting on an ongoing
basis and are committed to taking further action and implementing additional
enhancements or improvements, as necessary and as funds allow.  PART II. OTHER INFORMATION  Item 1. Legal Proceedings  The
Compays patent infringement litigation against Movielink LLC came to a
substantive conclusion on September 8, 2006, when the U.S. Court of Appeals for
the Federal Circuit affirmed certain rulings of the U.S. District Court for the
District of Delaware granting Movielink summary judgment of non-infringement. A
further procedural determination was entered on September 26, 2007, taxing
litigation costs against the Company  On
September 13, 2006, USA Video Technology Corp., our wholly-owned subsidiary,
filed suit in the U.S. District Court for the Eastern District of Texas,
alleging that its U.S. Patent No. 5,130,792 is infringed by cable technology
interests including Time Warner, Inc., Charter Communications, Inc., and Comcast
Cable Communications LLC, and seeking statutory compensation and a court
injunction against further infringement.  In December 2007, the court
issued rulings adverse to our interests: a claim construction ruling
interpreting certain terms in the patent's claims, and a related summary
judgment of non-infringement.  Defendants then filed motions for costs and
attorney fees.  The court denied defendants' motions for attorney fees and
granted the motions for costs, so that we now have a remaining liability from
this litigation in the amount of approximately $30,000, not counting our own
remaining attorney fees and litigation expenses.  Our subsidiary filed
notice of appeal from the district court's adverse substantive decisions, but
was unable to prosecute the appeal and so it was dismissed.  The Company is party to a default judgment entered against one of
the Company's subsidiaries.  During the year ended December 31, 1995, a
claim was made against the Company for the total amount payable under the terms
of a lease with one of 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 judgment is not estimable or determinable
at this time and may be substantially mitigated by the landlords 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.  The Company leases its United States office space under a
non-cancelable operating lease, expiring in July 2010.  The minimum rental
commitment of this lease is approximately $13,560 annually.  The Company
leases its Canadian office space on a month to month basis.  Rent expense
United States and Canada amounted to $20,367 and $22,704 for the six months
ended June 30, 2009 and 2008, respectively.     19   Item 1A.Risk Factors  A description of the risks associated with our
business, financial condition, and results of operations is set forth in Part I,
Item 1A, of our Annual Report on Form 10-K for the fiscal year ended
December 31, 2008. These factors continue to be meaningful for your
evaluation of our company and we urge you to review and consider the risk
factors presented in the Form 10-K. There have been no material changes to these
risks presented in the Form 10-K.  Item 2. Changes in Securities and Use of Proceeds  None.  Item 3. Defaults Upon Senior Securities.  None.  Item 4. Submission of Matters to a Vote of Security Holders.  None.  Item 5. Other Information.  None.  Item 6. Exhibits and Reports on Form 8-K  (a) Exhibit(s)  31.1 Certification of the Chief Executive Officer Pursuant To Rule
13a-14 Or 15d-14 of the Securities Exchange Act Of 1934,as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  31.2 Certification of the Chief Financial Officer Pursuant To Rule
13a-14 Or 15d-14 of the Securities Exchange Act of 1934,as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  32.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C.
 Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002  32.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C.
 Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002  (b) Reports on Form 8-K  (i) On April 29, 2009 we announced that we retained ECON Corporate
Services (InvestorIdeas.com) to provide industry specific services surrounding
the watermarking and anti-piracy sector that include: Exclusive Industry
Articles, Audio Interviews, Internet Marketing, Corporate Strategies, Industry
Research, and Customized Programs.     20   (ii) On May 12, 2009 we announced the launch of a new series of
educational blogs and interviews on anti piracy problems and solutions within
the entertainment industry, spearheaded by Patrick Gregston, USVO Business
Development Director.  (iii) On May 13 we provided a corporate update for 2009, containing
corporate developments, industry development and recent media coverage.  We
announced the launch of a new series of educational blogs and interviews on
antipiracy problems and solutions within the entertainment industry.  (iv) On May 26, 2009 we announced the appointment Mr. Von Johnson to
our Advisory Board.  Mr. Johnson, an entertainment industry veteran and
multi-discipline expert who has worked with some of the industrys premier
companies and organizations, has joined our company to advise and position our
company as the leading industry provider of digital content protection
technologies.  Mr. Johnson will work with the our management team to market
our proprietary anti-piracy technologies, MediaEscort and SmartMarks, and
provide business models and additional markets for their use via digital
watermarking and fingerprinting.  (v) On June 1, 2009 we announced that, based on the recent success of
our proprietary watermarking technologies we are responding to requests to
explore adopting our technologies for fingerprinting of content within
the IPTV and Pay TV markets.  Our watermarking anti-piracy solutions,
MediaEscort and SmartMarks, can be adapted to provide the
after-the-fact and real-time fingerprinting needs of these
markets.  (vi) On June 4, 2009 we announced that Bruce M. Goedde, Jr. was
appointed to our Advisory Board.  Mr. Goedde, a strategy, finance and
business development expert with extensive digital media industry experience,
has been working with a team of specialists to develop key elements of our new
business plan, and shall spearhead the implementation.  (vii) On June 15, 2009 we announced that we were being featured with
DigitalMediaStocks.com, an investor and industry portal for the digital media
sector within Investorideas.com, to provide investors following the digital
media sector and the watermarking industry with informative investor podcasts
that provide insight into the industry and technology trends of today and the
future.       21   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:
 August 14th, 2009 By:
 /s/  Anton J. Drescher -------------------------------- Name:
Anton J. Drescher Title:
 Chief Financial Officer