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, 2000


                         Commission file number: 0-29651


                           USA Video Interactive Corp.
             (Exact name of registrant as specified in its charter)


          Wyoming                                               06-15763-91
(State or other Jurisdiction of                              (I.R.S. Employer
Incorporation or Organization)                              Identification No.)

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

                                 (800) 625-2200
              (Registrant's Telephone Number, including Area Code)


--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)

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 [ ]

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

As of  November  16,  2000,  there  were  outstanding  81,400,088  shares of the
registrant's common stock, par value $0.001 per share.


<PAGE>

                                    CONTENTS

PART I   FINANCIAL INFORMATION

Item 1.    Financial Statements................................................3

           Independent Accountants' Report

           Consolidated Balance Sheet as at September 30, 2000
           (unaudited) and December 31, 1999.

           Consolidated Statement of Operations for the
           nine months ended September 30, 2000 and 1999 (unaudited)

           Consolidated  Statement of Stockholders Equity (Deficiency)for
           the period ended  December 31, 1998 to September  30, 2000 and
           1999 (unaudited).

           Consolidated Statement of Cash Flows for the nine months ended
           September 30, 2000 and 1999 (unaudited).

           Consolidated  Schedule of General and Administrative  Expenses
           for the nine months ended September 30, 2000 and 1999
           (unaudited).

           Notes to Consolidated Financial Statements (unaudited) for the
           period ended September 30, 2000.

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations..................................14

Item 3.  Quantitative and Qualitative Disclosure About Market Risk............20

PART II  OTHER INFORMATION....................................................22

Item 1.  Legal Proceedings....................................................22

Item 2.  Changes in Securities and Use of Proceeds............................22

Item 3.  Defaults Upon Senior Securities......................................23

Item 4.  Submission of Matters to a Vote of Security Holders..................23

Item 5.  Other Information....................................................23

Item 6.  Exhibits and Reports on Form 8-K.....................................23

         SIGNATURES...........................................................23


                                       2
<PAGE>

PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements

                           USA VIDEO INTERACTIVE CORP.

                        CONSOLIDATED FINANCIAL STATEMENTS

                               September 30, 2000

                                   (Unaudited)

                             (Stated in US Dollars)



                                       3
<PAGE>

TERRY AMISANO LTD.                                               AMISANO  HANSON
KEVIN HANSON, C.A.                                         Chartered Accountants

                         INDEPENDENT ACCOUNTANTS' REPORT

To the Stockholders,
USA Video Interactive Corp.

We have  reviewed  the  accompanying  consolidated  balance  sheet of USA  Video
Interactive  Corp. as of September 30, 2000, and the consolidated  statements of
operations,  stockholders'  equity and cash flows for the nine month period then
ended.  These  financial  statements  are the  responsibility  of the  Company's
management.

We conducted our review in accordance with standards established by the American
Institute  of  Certified  Public  Accountants.  A review  of  interim  financial
information consists principally of applying analytical  procedures to financial
data and making  inquiries of persons  responsible  for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with  generally  accepted  auditing  standards,  the  objective  of which is the
expression of an opinion  regarding the financial  statements  taken as a whole.
Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material  modifications that should
be made to the  accompanying  financial  statements for them to be in conformity
with generally accepted accounting principles.

We previously audited in accordance with generally accepted auditing  standards,
the  Company's  consolidated  balance  sheet as of December 31, 1999  (presented
herein),  and the related consolidated  statements of operations,  stockholders'
equity and cash flows for the year then ended  (not  presented  herein).  In our
report  dated  March 13,  2000 we  expressed  an  unqualified  opinion  on those
consolidated financial statements.  In our opinion, the information set forth in
the accompanying consolidated balance sheet information as of December 31, 1999,
is fairly  stated in all  material  respects  in  relation  to the  consolidated
balance sheet from which it has been derived.  The  comparative  figures for the
nine months  ended  September  30, 1999 were  prepared  by  management  and were
neither audited nor reviewed,  and accordingly,  we do not express an opinion or
any other form of assurance on them.

Vancouver, Canada                                               "AMISANO HANSON"
November 13, 2000                                          Chartered Accountants

Suite 604 - 750 West Pender Street, Vancouver, BC, Canada, V6C 2T7
                                              Telephone:     (604) 689-0188
                                              Facsimile:     (604) 689-9773
                                              E-MAIL:        amishan@telus.net


                                       4
<PAGE>

                           USA VIDEO INTERACTIVE CORP.
                           CONSOLIDATED BALANCE SHEETS
                    September 30, 2000 and December 31, 1999
                                   (Unaudited)
                             (Stated in US Dollars)


                                       ASSETS      September 30,    December 31,
                                                       2000            1999
                                                   ------------    ------------
Current
   Cash and cash equivalents                       $    981,360    $    417,666
   Marketable securities                                 20,700          20,700
   Accounts receivable                                  316,494          17,661
   Inventory                                            145,911            --
   Prepaid expenses                                      21,053          43,841
   Loan receivable                                      100,000            --
                                                   ------------    ------------

                                                      1,585,518         499,868
Deposit on capital asset                                 75,000            --
Capital assets - Note 3                                 544,435         436,417
Patents                                                  62,412          59,066
                                                   ------------    ------------
                                                   $  2,267,365    $    995,351
                                                   ============    ============

                                   LIABILITIES
Current
   Accounts payable                                $    795,851    $    497,163
   Due to related parties                               206,878         188,866
                                                   ------------    ------------

                                                      1,002,729         686,029
                                                   ------------    ------------
                              STOCKHOLDERS' EQUITY
Common stock - Notes 2 and 4                         24,245,148      20,950,152

Deficit                                             (22,980,512)    (20,640,830)
                                                   ------------    ------------
                                                      1,264,636         309,322
                                                   ------------    ------------
                                                   $  2,267,365    $    995,351
                                                   ============    ============

Commitments - Note 2 Subsequent events - Note 4 Contingent Liability - Note 5



APPROVED BY THE DIRECTORS:


 "Anton J. Drescher", Director                        "Edwin Molina", Director
 -------------------                                  --------------
       Anton J. Drescher                                    Edwin Molina


                             SEE ACCOMPANYING NOTES


                                       5
<PAGE>

                           USA VIDEO INTERACTIVE CORP.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
              for the nine months ended September 30, 2000 and 1999
                                   (Unaudited)
                             (Stated in US Dollars)


<TABLE>
<CAPTION>
                                            Three months ended                Nine months ended
                                               September 30,                    September 30,
                                        ----------------------------    ----------------------------
                                            2000            1999            2000            1999
                                        ------------    ------------    ------------    ------------
<S>                                     <C>             <C>             <C>             <C>
Sales                                   $    307,464    $       --      $    546,064    $     10,000
Cost of sales                               (190,544)           --          (343,127)           --
                                        ------------    ------------    ------------    ------------

Gross Profit                                 116,920            --           202,937          10,000

General and Administrative Expenses
 - Schedule I                             (1,056,200)       (409,747)     (2,660,014)       (992,786)
Provision for Doubtful Accounts                 (440)           --            (4,905)           --
Non-operating Income
   Interest income                            11,756           2,248          19,495           2,248
   Foreign exchange gain                       2,051           2,238           2,805          12,221
   Finders fees                                 --              --           100,000            --
                                        ------------    ------------    ------------    ------------
Loss before Other Items                     (925,913)       (405,261)     (2,339,682)       (968,317)
Cumulative effect on prior years of
 changing to a different amortization
 method - Note 3                                --           (27,390)           --           (27,390)
                                        ------------    ------------    ------------    ------------
Net loss                                $   (925,913)   $   (432,651)   $ (2,339,682)   $   (995,707)
                                        ============    ============    ============    ============

Basic loss per share                    $      (0.01)   $      (0.01)   $      (0.03)   $      (0.02)
                                        ============    ============    ============    ============

Weighted average shares outstanding       74,784,088      64,504,867      74,784,088      64,504,867
                                        ============    ============    ============    ============
</TABLE>

                             SEE ACCOMPANYING NOTES


                                       6
<PAGE>

           CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY (DEFICIENCY)
          for the period ended December 31, 1998 to September 30, 2000
                                   (Unaudited)
                             (Stated in US Dollars)


<TABLE>
<CAPTION>
                                                                          Common
                                        Date            Number            Stock
                                     of Issuance       of Shares          Price         Amount            Deficit          Total
                                     -----------       ---------          -----         ------            -------          -----
<S>                               <C>                  <C>                 <C>         <C>              <C>               <C>
Balance December 31, 1998                              58,756,088                      18,722,966       (18,956,362)       (233,396)
Issued for cash:
   Private placement              Feb. 24, 1999         2,000,000          $0.067         133,574                           133,574
   Private placement              Apr. 17, 1999         1,000,000          $0.114         114,293                           114,293
   Private placement              Jun. 28, 1999           500,000          $0.395         197,400                           197,400
   Private placement              Sept. 1, 1999           750,000          $1.00          750,000                           750,000
   Stock purchase warrants        Various               3,820,000          $0.067         255,940                           255,940
   Stock purchase warrants        Jul. 12, 1999            25,000          $0.128           3,190                             3,190
   Stock purchase warrants        Various               1,250,000          $0.294         366,894                           366,894
   Stock purchase options         Various               4,265,000          $0.067         287,755                           287,755
   Stock purchase options         Various                 550,000          $0.095          52,140                            52,140
   Stock purchase options         Various                  66,000          $1.00           66,000                            66,000
Net loss for the year                                                                                    (1,684,468)     (1,684,468)
                                                     ------------                     -----------       -----------      ----------
Balance, December 31, 1999                             72,982,088                      20,950,152       (20,640,830)        309,322
</TABLE>

                             SEE ACCOMPANYING NOTES


                                       7
<PAGE>

                           USA VIDEO INTERACTIVE CORP.
           CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY (DEFICIENCY)
          for the period ended December 31, 1998 to September 30, 2000
                                   (Unaudited)
                             (Stated in US Dollars)


<TABLE>
<CAPTION>
                                                                              Common
                                            Date              Number           Stock
                                         of Issuance         of Shares         Price       Amount         Deficit          Total
                                         -----------         ---------         -----       ------         -------          -----
<S>                                     <C>                  <C>             <C>         <C>            <C>             <C>
Balance, December 31, 1999 (forward)                         72,982,088                  20,950,152     (20,640,830)       309,322
Issued for cash:
   Stock purchase options               Various                 550,000      $0.095          52,140              --         52,140
   Stock purchase options               Various                 453,000      $1.00          453,000              --        453,000
   Stock purchase options               Various               1,065,000      $0.068          71,845              --         71,845
   Stock purchase options               Various                  10,000      $0.47            4,710                          4,710
   Stock purchase warrants              Various               3,675,000      $0.068         247,628              --        247,628
   Stock purchase warrants              Various                 500,000      $0.128          63,921                         63,921
   Stock purchase warrants              Various                 255,000      $0.493         125,252                        125,252
   Stock purchase warrants              Various                  15,000      $1.10           16,500                         16,500
   Private placement                    April 10,2000           190,000      $4.00          760,000              --        760,000
   Private placement                    July 20, 2000         1,000,000      $1.50        1,500,000                      1,500,000
Net loss for the period                                                                                  (2,339,682)    (2,339,682)
                                                             ----------                ------------    ------------    -----------
Balance, September 30, 2000                                  80,695,088                $ 24,245,148    $(22,980,512)   $ 1,264,636
                                                             ==========                ============    ============    ===========
</TABLE>

                             SEE ACCOMPANYING NOTES


                                       8
<PAGE>

                           USA VIDEO INTERACTIVE CORP.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              for the nine months ended September 30, 2000 and 1999
                                   (Unaudited)
                             (Stated in US Dollars)


<TABLE>
<CAPTION>
                                                                       2000           1999
                                                                    -----------    -----------
<S>                                                                 <C>            <C>
Cash flow from operating activities:
Net loss                                                            $(2,339,682)   $  (995,707)
Adjustments to reconcile net loss to net cash used in operations:
   Amortization of capital assets                                       173,717         40,338
   Amortization of patents                                                3,468            787
   Cumulative effect on prior years amortization of changing to a
    different amortization method                                          --           27,390
   Accounts receivable                                                 (298,833)        (2,160)
   Inventory                                                           (145,911)          --
   Prepaid expenses                                                      22,788         17,552
   Loan receivable                                                     (100,000)          --
   Accounts payable                                                     298,688         69,095
   Due to related parties                                                18,012       (113,675)
                                                                    -----------    -----------
Net cash used in operating activities                                (2,367,753)      (956,380)
                                                                    -----------    -----------
Cash flow used in investing activities:
   Purchase of marketable securities                                       --          (81,145)
   Purchases of capital assets                                         (281,735)      (216,659)
   Patent fees                                                           (6,814)       (11,691)
   Deposit                                                              (75,000)       (25,000)
                                                                    -----------    -----------
Net cash used in investing activities                                  (363,549)      (334,495)
                                                                    -----------    -----------
Cash flow provided by financing activity:
   Common stock issued for cash                                       3,294,996      2,025,492
                                                                    -----------    -----------
Net cash provided by financing activity                               3,294,996      2,025,492
                                                                    -----------    -----------
Net increase in cash                                                    563,694        734,617
Cash, beginning of the period                                           417,666          2,618
                                                                    -----------    -----------
Cash and cash equivalents, end of the period                        $   981,360    $   737,235
                                                                    ===========    ===========
</TABLE>

                             SEE ACCOMPANYING NOTES


                                       9
<PAGE>

                            USA VIDEO INTERACTIVE CORP.               Schedule I
          CONSOLIDATED SCHEDULE OF GENERAL AND ADMINISTRATIVE EXPENSES
              for the nine months ended September 30, 2000 and 1999
                                   (Unaudited)
                             (Stated in US Dollars)

<TABLE>
<CAPTION>
                                      Three months ended           Nine months ended
                                        September 30,                September 30,
                                 --------------------------    -------------------------
                                    2000           1999           2000          1999
                                 -----------    -----------    -----------   -----------
<S>                              <C>            <C>            <C>           <C>
Amortization of capital assets   $    61,621    $    18,036    $   173,717   $    40,338
Amortization of patents                1,156            263          3,468           787
Advertising                           21,748          6,811         82,570         6,811
Consulting                            38,467         35,945        141,467        98,952
Filing                                 4,364          2,273         12,184        13,498
Insurance                              3,362          3,305          3,362         3,305
Interest expense                          75          4,204             75         5,053
License fee                               --          7,498             --        17,345
Management fees                        6,600          7,549         18,600        22,500
Membership fees                        2,782         43,206         15,248        43,206
Office and general                   185,522         55,308        504,450       133,207
Printing                              (6,867)        24,989         50,573        59,411
Product development                  232,581         18,547        483,071        47,470
Product marketing                    329,007        101,101        662,637       244,903
Professional fees                     73,742         20,294        212,274        54,088
Public relations                       8,250        (12,879)        13,250        17,580
Rent                                  16,011         14,978         55,938        35,895
Telephone and utilities               30,810         16,343         63,044        48,825
Transfer agent                         3,543          2,484          8,337         7,621
Travel                                37,994         10,713        118,991        41,746
Website expenses                       5,432         28,779         36,758        50,245
                                 -----------    -----------    -----------   -----------
                                 $ 1,056,200    $   409,747    $ 2,660,014   $   992,786
                                 ===========    ===========    ===========   ===========
</TABLE>

                             SEE ACCOMPANYING NOTES


                                       10
<PAGE>

                           USA VIDEO INTERACTIVE CORP.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2000
                                   (Unaudited)
                            (Stated in U.S. Dollars)


Note 1    Interim Reporting

          While the  information  presented  in the  accompanying  interim  nine
          months financial  statements is unaudited  (except for as indicated in
          Independent  Accountants'  Report),  it includes all adjustments which
          are, in the opinion of  management,  necessary  to present  fairly the
          financial  position,  results  of  operations  and cash  flows for the
          interim periods  presented.  All adjustments are of a normal recurring
          nature.  It is suggested  that these interim  financial  statements be
          read in  conjunction  with the  Company's  December  31,  1999  annual
          financial statements.

Note 2    Common Stock - Note 4

          Authorized:

                250,000,000 common stock without par value
                250,000,000 preferred stock without par value

          Commitments:

          Common Stock Purchase Options

          The  following  common  stock  purchase  options were  outstanding  at
          September 30, 2000 entitling the holders thereof the right to purchase
          one common share for each option held:

                          Number of        Exercise Price
                           Options           Per Share          Expiry Date
                           -------           ---------          -----------
          Directors       2,200,000     $ 1.00                    July 16, 2001
                            100,000     $ 2.00                    June 16, 2002
                            150,000     $ 1.00                November 25, 2001
                            300,000     $ 5.00                 February 17,2002
          Employees          55,000     $ 0.067 (CDN$0.10)     October 20, 2000
                            250,000     $ 0.067 (CDN$0.10)     January 31, 2001
                            475,000     $ 1.00                    July 16, 2001
                            381,000     $ 1.00                November 25, 2001
                            750,000     $ 1.00                December 22, 2001
                            600,000     $ 5.00                February 17, 2002
                            425,000     $ 2.00                    June 16, 2002
                             75,000     $ 2.50                    June 30, 2002
                            160,000     $ 3.00                  August 23, 2002
                             30,000     $ 3.25                September 5, 2002
                             10,000     $ 3.35               September 15, 2002
                             85,000     $ 3.35               September 21, 2002
                            625,000     $ 2.00                   April 28, 2005
                          ---------
                          6,671,000
                          =========


                                       11
<PAGE>

USA Video Interactive Corp.
Notes to the Consolidated Financial Statements
September 30, 2000
(Unaudited) - Page 2
(Stated in U.S. Dollars)


Note 2    Common Stock - Note 4 - (cont'd)

          Common Stock Purchase Warrants

          The following  stock purchase  warrants were  outstanding at September
          30, 2000 entitling the holders thereof the right to acquire one common
          share for each warrant held:

             Number                 Exercise Price
          of Warrants                  Per Share               Expiry Date
          -----------                  ---------               -----------
               350,000           $0.067(CDN$0.10)            January 31, 2001
               475,000           $0.128(CDN$0.19)              March 23, 2001
               245,000           $0.493(CDN$0.73)                May 19, 2001
               735,000           $1.10                          July 15, 2001
             1,000,000           $1.50                          July 20, 2001
               190,000           $4.00                       January 26, 2002
             ---------
             2,995,000
             =========


Note 3    Change in Accounting Principle

          Amortization  of capital assets acquired in prior years was previously
          calculated using the graduated  straight-line  method over 7 years for
          all  classes of capital  assets.  The new method  using  straight-line
          amortization over various periods for different classes was adopted to
          recognize  amortization  over a shorter period in order to reflect the
          rapid pace of  technological  change.  This  change  has been  applied
          retroactively  to capital asset  acquisitions  of prior years,  and is
          treated  as a change  in  accounting  principle  due to the  change in
          method of amortization for previously recorded assets.

          The  effect  of  the  change  in  amortization  policy  decreased  the
          amortization  expense and the loss for the nine months ended September
          30, 1999 by $3,230.  The cumulative  effect on prior years of changing
          to a  different  amortization  method of  $27,390 is  included  in the
          statement of operations for the nine months ended  September 30, 1999.
          The corresponding  amount has been reflected in increased  accumulated
          amortization of the capital assets.


                                       12
<PAGE>

USA Video Interactive Corp.
Notes to the Consolidated Financial Statements
September 30, 2000
(Unaudited) - Page 3
(Stated in U.S. Dollars)


Note 4    Subsequent Events

          During  October 2000 the company  received  769,609  common  shares of
          Future  Link  Systems  Inc.  ("FLS")  pursuant  to a  debt  settlement
          agreement  dated July 5, 2000,  between  the company and FLS at a fair
          market  price  of  CDN$0.21  per  share  to  settle   indebtedness  of
          CDN$161,618 (US$108,746). This amount was written-off in prior years.

          On October 18, 2000, the company issued 650,000 common shares pursuant
          to the  exercise of share  purchase  warrants  at  CDN$0.10  per share
          (300,000   shares)  and  CDN$0.19  per  share  (350,000   shares)  for
          CDN$96,500 (US$64,931).

          On October 19, 2000, the company issued 55,000 common shares  pursuant
          to the  exercise of share  purchase  options at CDN$0.10 per share for
          CDN$5,500 (US$3,666).

Note 5    Contingent Liability

          There is a  contingent  liability  in respect  to a default  judgement
          entered  against the  Company's  subsidiary in the State of Texas with
          respect to the lease of  premises  in  Dallas,  Texas in the amount of
          $505,169  ($25,399 included in accounts payable at December 31, 1999).
          The subsidiary  vacated its premises in Dallas,  Texas during the year
          ended  December  31,  1995 and was sued for the total  amount  payable
          under the terms of the lease  through the term of the lease,  ended in
          2002.  Management  of the Company is of the  opinion  that the amounts
          payable under the terms of this judgement is not  determinable at this
          time as the damages may be  substantially  mitigated  by the  landlord
          renting the property to another party.  Any settlement  resulting from
          the  resolution of this  contingency  will be accounted for during the
          period of settlement. The range of possible loss is NIL to $505,169.


                                       13
<PAGE>

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

CAUTIONARY STATEMENT

     This Report on Form 10-Q of USA Video  Interactive  Corp.  (the  "Company")
contains forward-looking statements that are subject to risks and uncertainties,
which could cause actual results to differ  materially  from those  expressed or
implied in the  statements.  Forward-looking  statements  are  statements  about
future  performance  or  results,  and include  any  statements  using the words
"believe,"   "expect,"   "anticipate"  or  similar  words.  All  forward-looking
statements  are only  predictions  or  statements  of current  plans,  which the
Company is constantly reviewing. All forward-looking  statements may differ from
actual  future  results  due to, but not  limited  to,  changes  in the  overall
economy,  the  nature  and  pace  of  technological   changes,  the  number  and
effectiveness  of  competitors  in the  Company's  markets,  success  in overall
strategy,  changes in legal and  regulatory  policy,  the  Company's  ability to
identify  future markets and  successfully  expand  existing ones and the mix of
products  and  services  offered in the  Company's  target  markets.  You should
consider these important  factors in evaluating any statement  contained in this
report  and/or  made  by  the  Company  or on its  behalf.  The  Company  has no
obligation to update or revise forward-looking statements.

     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

     The Company is emerging from the development  stage.  The Company is listed
on the  Canadian  Venture  Exchange  under the  trading  symbol  "US" and on the
NASD-OTC  Bulletin Board under the trading symbol  "USVO".  A development  stage
company is one where  substantial  efforts  are  devoted to  establishing  a new
business but the planned  principal  business has not commenced or has commenced
but has not generated significant  revenues.  This describes the Company through
the end of 1999. However, a shift has occurred and the Company is now focused on
marketing  and selling its products and services in an effort to grow  revenues.
The  Company  is  essentially  "emerging"  from its  development  stage by fully
implementing its principal business.

     The Company  provides  systems and services for  converting  and delivering
digitized  video  with  superior  quality  and ease of use.  These  systems  and
services  allow  businesses  and  individuals to transmit video data through the
Internet  and other local and wide area  networks,  while  maintaining  superior
video  quality at the receiving  end.  Specifically,  the Company's  systems and
services  help  create  and  move   affordable  and  reliable   streaming  media
information to customers'  target audiences through a variety of means including
end-to-end  video  distribution  systems;  value-added  video  services  such as
encoding, hosting, and streaming;  intellectual property licensing;  webcast and
network


                                       14
<PAGE>

productions;  and media distribution  technology solutions ranging from software
design and development to engineering support services.

Key Products and Services

     The Company's key current and proposed technologies are the following:

          Video  Compression  - an array of  compression  techniques  that allow
     large  video  files to be  greatly  reduced in size to allow  customers  to
     optimize use of available bandwidth;

          Store and Forward  Video-on-Demand  ("VoD") - a patented technique for
     transmitting video over switched  (telephone-like)  networks,  allowing the
     user to view the video using VCR-like controls (play,  pause,  stop, etc.);
     and

          A  Wavelet  compression  technique  to  complement  standard  MPEG and
     QuickTime  formats is under  development.  The  Company  has  applied for a
     patent on this technology.

     The  Company's  current   revenue-generating  system  and  service  related
applications  include  high-quality,  end-to-end video distribution systems that
process video content from its source to its display on a remote user's computer
screen or TV. The  Company is  focusing  on the sale of a basic set of  standard
system configurations that can be constructed,  delivered and billed efficiently
and  cost-effectively.   The  Company  anticipates  that  intellectual  property
licensing will provide another  significant revenue stream for the Company as it
seeks to establish its  technology  as a standard  component of the products and
services of major industry players. In addition, the Company is developing other
products and services  including  content  licensing,  management  and encoding,
hosting  for  Web-based  video  delivery,  services to support  webcast  events,
end-to-end  production  services,  and advertising  contained within content and
associated with web hosting and event support.

RESULTS OF OPERATIONS

Sales

     Sales for the  nine-month  period ended  September  30, 2000 were  $546,064
compared to $10,000 during the nine-month period ended September 30, 1999. Sales
for the three months ended September 30, 2000 were $307,464.  The Company had no
sales for the comparable  period in 1999.  Approximately  fifty percent (50%) of
these  sales  were  of  the   Company's   hardware  and  software   systems  and
approximately fifty percent (50%) were of engineering services.

Cost of Goods Sold

     The cost to the  Company  of  goods  sold  during  the  nine  months  ended
September 30, 2000 was $343,127, resulting in a gross profit margin of 37%. Cost
of sales for the three months ended  September 30, 2000 was $190,544,  resulting
in a gross profit margin of 38%.


                                       15
<PAGE>

Net Losses

     To date, the Company has not achieved  profitability  and, in fact, expects
to incur  substantial net losses for the foreseeable  future.  The Company's net
loss for the nine months ended  September 30, 2000,  was  $2,339,682 as compared
with a net loss of $995,707 for the nine months ended  September  30, 1999.  Net
loss for the three months ended  September  30, 2000 was $925,913  compared to a
net loss of $432,651 for the three-month period in 1999.

General and Administrative Expenses

     General  and  Administrative  (Operating)  expenses  consisted  of  product
development, product marketing, amortization of capital assets, consulting fees,
office,  professional  fees and other  expenses to execute the business plan and
for day-to-day operations of the Company.

     General and Administrative expenses for the nine months ended September 30,
2000   increased   $1,667,228   to   $2,660,014   as  compared  to  General  and
Administrative  expenses of $992,786  for the nine months  ended  September  30,
1999. General and  Administrative  expenses for the three months ended September
30,  2000  increased   $646,453  to  $1,056,200  from  $409,747  for  the  1999
three-month period.

     General and  Administrative  expenses  increased  substantially in the nine
months and the three  months  ended  September  30,  2000  compared  to the same
periods in 1999,  due to the need to target  additional  resources in support of
the Company's increased effort to bring products to market.

Product  development  expenses  consisted  primarily of compensation,  hardware,
software and licensing fees.  Product  development  expenses for the nine months
and the three  months  ended  September  30, 2000  increased  1,018% and 1,254%,
respectively, from the comparable periods in 1999, reflecting development of new
technology  and  refinement  and  enhancement  of  product  offerings  to ensure
competitiveness  in the market and support the Company's  overall business plan.
Product  development  expenses are impacted by increased salaries as well as the
timing of the  development  of  products.  The  Company  is  developing  Wavelet
compression techniques for still and moving images, for which it has applied for
a patent.  During the first nine months of 2000, additional staff was engaged to
accelerate  these  efforts.  No assurance  can be given that these  efforts will
result in a competitively marketable product.

     Product  marketing  expenses for the nine months and the three months ended
September 30, 2000,  increased 270% and 325% from the 1999 nine months and three
months,  respectively,  as the  Company  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.  These  expenses  are  expected to increase as the Company
builds its business.

     Office and general expenses  increased 379% and 335% for the nine and three
month periods in 2000, respectively, mainly for administrative support resources
and  the  annual  shareholders  meeting  expenses.  The  Company  also  incurred
increased professional fees


                                       16
<PAGE>

in the nine- and three-month  periods in 2000 as the Company, in connection with
becoming a reporting issuer in the United States,  required  increased levels of
accounting  and legal  services.  Other  increases  in expenses in both the nine
months  and the  three  months  ended  Septebmer  30,  2000  included  rent,  as
headquarters office space was expanded, and travel and promotional expenses, due
to the  necessity  of  attending  trade shows and  meeting  with  suppliers  and
potential  customers.  Amortization  of capital  assets also  increased in 2000,
reflecting the increase in level of depreciable capital assets.

     As the Company  expands its business,  its product  development,  sales and
marketing,  and general and  administrative  expenses will continue to increase.
Product  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 line. Sales and 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 and public relations  expenses also will increase as the
Company invests to grow its business.  General and administrative  expenses will
grow as the Company continues to build its management infrastructure,  including
additional personnel, office space and internal information systems.

Other

     The Company has  experienced  minimal  gains or losses on foreign  currency
translation  since  substantially  all of its sales to date have been billed and
collected  in U.S.  dollars.  The  Company  pays the  expenses  of its  Canadian
operations in Canadian currency.  Foreign currency exchange gain or loss for the
nine months ended September 30, 2000 was $2,805 compared with $12,221 during the
1999  period,  and was $2,051 for the three  months  ended  September  30,  2000
compared to $2,238 for the comparable period in 1999.

LIQUIDITY AND CAPITAL RESOURCES

     At September  30, 2000,  the  Company's  cash  position  was  $981,360,  an
increase of $563,694 from $417,666 at December 31, 1999. The Company's principal
source of cash during the nine months ended  September 30, 2000,  was $3,294,996
that was  generated  from the  issuance  of stock upon  exercise  of options and
warrants and in private  placements (see Consolidated  Statement of Stockholders
Equity). This was offset by $2,367,753 of cash used in operating activities.

     The Company has  historically  satisfied  its capital  needs  primarily  by
issuing  equity  securities.  From  January  1, 2000,  through  the date of this
report,  the  Company  completed  two  private  placements,  resulting  in gross
proceeds to the Company of $2,260,000.

     In the first  offering,  each unit  consisted  of one common  share and one
warrant to acquire an  additional  share at $4.00 per share


                                       17
<PAGE>

by January 26, 2002. On  completion  of the  offering,  a total of 190,000 units
were issued at $4.00 per unit for total proceeds of $760,000.00.

     The second  offering  consisted of 1,000,000  units at $1.50 per unit. Each
unit  consisted  of one (1) common share and one (1) share  purchase  warrant to
purchase  one (1) common  share at $1.50 per share,  exercisable  until July 20,
2002.

     The Company's  independent  accountants,  in their report  accompanying the
Company's  audited  financial  statements at and for the year ended December 31,
1999,  have  expressed  the  opinion  that the  Company  may not be  capable  of
continuing  its  existence as a going  concern.  As of September  30, 2000,  the
Company had  approximately  $981,360 in cash and liquid assets on hand, which is
sufficient  to fund  current  operations  for three to four  months.  Management
currently  plans on raising an  additional  $3.5  million to $4 million  through
private equity offerings, which will be sufficient to finance operations for the
next 12 months. The threat to the Company's  continuation in business as a going
concern will be removed only when  revenues  have reached a level that  sustains
the Company's business operations.

     Management's  current expectation is that, assuming the aforementioned $3.5
million to $4 million in financing is obtained,  continuing  operations  for the
longer-term  will be supported  either  through growth in revenues from sales of
products and services,  or through a return to the equity markets for additional
funding, the level of which management cannot accurately anticipate at this time
due  to  the   unpredictability  of  longer-term  sales  performance.   However,
management  would  expect  such  additional  funding  requirements  to exceed $4
million for the following 12 months.  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

The Company needs substantial additional capital to continue as a going concern.

If the  Company  is unable to raise  additional  capital,  it may not be able to
continue as a going  concern.  At  present,  the  Company  has  sufficient  cash
resources to continue  its  operations  for the next three to four  months.  The
Company will need to raise, by way of equity financing,  from $3.5 million to $4
million to fund operations  over the next 12 months.  There is no assurance that
the Company will be able to continue to raise the funds needed for its business.
The Company will, in all likelihood,  require additional  financing  thereafter.
Failure  to raise  the  necessary  funds  in a timely  fashion  will  limit  the
Company's ability to grow and ultimately sustain its business.

The Company has not produced a profit and cannot be certain that it will produce
a profit or remain profitable if it does generate a profit.

The Company's  auditors  have  expressed  doubt about the  Company's  ability to
continue  as a going  concern.  At  this  time,  the  Company  has not  achieved
profitability  and,  in fact,  expects to incur  substantial  net losses for the
foreseeable  future. The Company's limited operating history  contributes to the
difficulty of predicting its potential to generate a


                                       18
<PAGE>


profit.  The Company  expects to continue to increase  its  marketing  and sales
efforts.  As a result, it will need to generate  significant  additional revenue
and raise substantial additional funds to achieve profitability.

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 stock.

The Company's  quarterly  operating results may in the future vary significantly
depending on factors including the timing of customer  development  projects and
purchase orders, new product announcements and releases by the Company and other
companies,  gain or loss of  significant  customers,  price  discounting  of the
Company's  products,  the  timing of  expenditures,  customer  product  delivery
requirements,  availability  and  cost  of  components  or  labor  and  economic
conditions  generally  and  in  the  electronics  industry   specifically.   Any
unfavorable  change in these or other  factors  could  have a  material  adverse
effect  on the  Company's  operating  results  for a  particular  quarter,  thus
potentially  adversely  affecting  the price of its  common  stock.  Many of the
Company's customers order on an as-needed basis and often delay issuance of firm
purchase orders until their project commencement dates are determined. Quarterly
revenue and operating  results will therefore depend on the volume and timing of
orders received during the quarter, which are difficult to forecast accurately.

The Company faces intense competition that could harm its business.

The Company may not be able to compete  effectively  against intense competition
from a multitude  of  competitors,  which could limit the amount of market share
the Company captures.  Many of the Company's  current and potential  competitors
have longer operating histories, larger customer bases, greater name recognition
and  significantly  greater  financial,  marketing and other  resources than the
Company.  In  addition,  the Company  may not be able to maintain a  competitive
position due to the pace at which the  marketplace  is changing.  The demand for
its  products  and  services  may  rapidly  decline if the  marketplace  for its
products and services changes. The Company's success is dependent on its ability
to adjust to change and meet new demands.

The  industry is subject to rapid  technological  change  that could  render the
Company's technology obsolete and require the Company to continue to develop new
products and services.

The industry is  characterized by extremely rapid  technological  change in both
hardware and software development, frequent new product introductions,  evolving
industry  standards and changing  customer  requirements.  The  introduction  of
products  embodying new technologies and the emergence of new industry standards
can render existing  products  obsolete and  unmarketable.  The Company's future
success will depend upon its ability to enhance its products and services and to
design,  develop and support its future products and services on a timely basis.
These efforts require a high level of expenditures  for research and development
by the Company to address the increasingly sophisticated needs of the customers.
There can be no assurance  that the Company will be successful in developing and
marketing  product  enhancements  or new products that respond to  technological
change or evolving industry standards or changing customer


                                       19
<PAGE>

requirements, that the Company will not experience difficulties that could delay
or prevent the  successful  development,  introduction  and  marketing  of those
products, or that its new products and product enhancements will adequately meet
the  requirements  of the  marketplace,  will be of  acceptable  quality or will
achieve market acceptance.  If the Company is unable, for technological or other
reasons,  to develop and  introduce  products in a timely  manner in response to
changing market  conditions or customer  requirements,  the Company's  business,
operating  results and  financial  condition  will be  materially  and adversely
affected.  Moreover, from time to time, the Company may announce new products or
technologies  that have the potential to replace the Company's  existing product
offerings.

The Company's  future  success is dependent upon its ability to maintain its key
personnel.

The Company depends upon a small number of key persons to implement its business
plan. The Company may not be able to retain its key personnel if it is unable to
adequately  compensate  them,  which could affect its  competitive  position and
business operations.

The Company's marketing plan is subject to unproven assumptions.

The Company's  marketing plan is based upon a number of  assumptions,  which, if
invalid, could result in lower revenues than anticipated. The assumptions of the
marketing plan are as follows:

     o    The appeal of Company's  end-to-end  video  distribution  systems will
          continue to generate client interest;

     o    The overall market for the Company's products and services develops as
          anticipated;

     o    Competition   is  not   suppressed   by  an   overwhelming   technical
          breakthrough by one of the major players in the field; and

     o    The  Company's   technology  continues  to  keep  pace  with  industry
          standards and with the products of its competitors.

The Company may not be able to protect its proprietary technology.

There  can be no  assurance  that  the  Company  will be able  to  maintain  the
confidentiality of any of its proprietary technology, know-how or trade secrets,
or  that  others  will  not  independently  develop   substantially   equivalent
technology.  The  failure or  inability  to protect  these  rights  could have a
material adverse effect on the Company's operations.  Additionally,  the Company
may not receive a favorable ruling on the reinstatement of its lapsed patent for
its Store and Forward VoD.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     We believe our exposure to overall foreign currency risk is immaterial. The
Company  does not manage or  maintain  market  risk  sensitive  instruments  for
trading or other  purposes and is,  therefore,  not subject to multiple  foreign
exchange rate exposures.

     We report our operations in US dollars and our currency exposure,  although
considered by us to be immaterial, is primarily between US and Canadian dollars.
Exposure  to  the   currencies  of  other   countries  is  also   immaterial  as
international  transactions  are  settled in US dollars.  Any future  financings
undertaken by the Company will be


                                       20
<PAGE>

denominated  in US dollars.  As we increase our marketing  efforts,  the related
expenses are primarily in US dollars except for the marketing efforts in Canada.
The Company is not exposed to the effects of interest  rate  fluctuations  as it
does not carry any long-term debt.

     From a quantitative  point of view, the Company has had a foreign  exchange
gains in 1999, 1998 and 1997,  respectively.  In addition,  there is no material
foreign  exchange market risk exposure  because,  although held in Canadian bank
accounts, 90% of the Company's cash deposits are in US dollars.


                                       21
<PAGE>

PART II. OTHER INFORMATION

Item 1.   Legal Proceedings

          USA Video Interactive Corp. v. William Meyer.

          On  September 1, 2000,  the Company  filed an action  against  William
          Meyer, the Company's former Chief Operating Officer,  in United States
          District  Court,  District of  Connecticut.  The  Company's  complaint
          alleges that Mr.  Meyer  breached his  employment  agreement  with the
          Company, and the Company is seeking damages in an undetermined amount,
          but not less than $350,000.00,  plus interest and costs.  Prior to the
          Company filing this action,  upon his  resignation as chief  operating
          officer of the Company, Mr. Meyer demanded payment from the Company of
          the remaining two years of his  employment  agreement in the amount of
          $213,641.00  and options to purchase  250,000 shares of Company common
          stock at $2.00 per share.

          The Company is not a party to any other legal proceeding or litigation
          and none of its property is the subject of a pending legal proceeding.

Item 2.   Changes in Securities and Use of Proceeds

          a)   During the quarter ended  September 30, 2000,  the Company issued
               1,038,000 shares of common stock pursuant to options exercised at
               between  $0.067  and  $1.00  per  share  for  total  proceeds  of
               $445,735.  The sale of the stock  was  exempt  from  registration
               under Rule 701 under the  Securities  Act of 1933. The sales were
               made on exercise of options  granted to officers,  employees  and
               directors  under the Company's  written share option plan, a copy
               of which the Company has provided to its participants.

          b)   During the quarter ended  September 30, 2000,  the Company issued
               3,620,000  shares of common stock pursuant to warrants  exercised
               at  between  $0.067  and $1.10 per  share for total  proceeds  of
               $397,474. The shares acquired were exempt from registration under
               Rule 504 and Rule 506 of  Regulation  D under  Sections  3(b) and
               4(2),  respectively,  of the  Securities Act of 1933. 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
               investors included executive officers,  directors,  and employees
               and there were fewer than five (5) non-accredited  investors. The
               Company  believes  that a portion of these sales were also exempt
               under  Regulation S under the Securities Act of 1933, as


                                       22
<PAGE>

               amended,   due  to  the  foreign   nationality  of  the  relevant
               purchasers.

          c)   In July  2000,  the  Company  completed  an  offering,  which  it
               commenced  in June 2000,  of units.  Each unit  consisted  of one
               share of common  stock and one  warrant to acquire an  additional
               share at $1.50  per share by June,  2002.  On  completion  of the
               offering,  a total of  1,000,000  units were  issued at $1.50 per
               unit for total proceeds of  $1,500,000.00.  The offer and sale of
               the  units  were  exempt  from  registration  under  Rule  506 of
               Regulation D and Section 4(2) of the  Securities Act of 1933. The
               Company   limited  the  manner  of  the   offering  and  provided
               disclosure   regarding  the  offering  and  the  Company  to  the
               investors.  Four  officers  and  directors  of the  Company,  two
               employees  (one   accredited   investor  and  one   nonaccredited
               investor)  of  the  Company,  five  (5)  additional  unaffiliated
               nonaccredited  investors,  and ten (10)  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 of 1933, as amended, due to
               the foreign nationality of the relevant purchasers.

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)  Exhibits

               27. Financial Data Schedule

          (b)  Reports on Form 8-K

               During the  quarter  for which this Report on Form 10-Q is filed,
               the  registrant  filed a report on Form 8-K dated August 11, 2000
               (the "8-K"). Under Item 5 of the 8-K, the registrant reported the
               resignation  of William Meyer as chief  operating  officer of the
               registrant,  demands  made by Mr.  Meyer for salary  and  options
               alleged  to be due  from  the  registrant,  and the  registrant's
               intention to initiate litigation against Mr. Meyer contesting his
               claims.  The  registrant  also  reported  in Item 5 the hiring of
               Robert D.  Smith,  Jr. as the  registrant's  new chief  operating
               officer.


                                       23
<PAGE>

                                    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 20, 2000                   By:  /s/  Anton J. Drescher
       -----------------                       ---------------------------------
                                                Name: Anton J. Drescher
                                                Title: Chief Financial Officer


                                       24