SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549


                                    FORM 10-K

                        FOR ANNUAL AND TRANSITION REPORTS
                     PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
(Mark One)

|X|  ANNUAL REPORT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
     1934.

     For the fiscal year ended December 31, 2000

                                  OR

|_|  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934.

     For the transition period from _______ to ___________.

                         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 Identification  No.)
 Incorporation of Organization)

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


Registrant's telephone number, included area code:         (800) 625-2200
                                                   -----------------------------

Securities registered pursuant to Section 12(b)                None
  of the Act:                                     ------------------------------

Securities registered pursuant to Section 12(g)     Common Shares, no par value
  of the Act:                                    -------------------------------
                                                           (Title of Class)

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 shorter  period that the  registrant as 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 if disclosure of delinquent  filers  pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of  registrant's  knowledge,  in  definitive  proxy  or  information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |_|

Aggregate   market  value  of  the  voting  stock  of  the  registrant  held  by
non-affiliates  of the  registrant  at March 23, 2001  (computed by reference to
average of the bid and asked price on the NASD OTC Bulletin  Board of the common
shares on such date): $54,274,249.  Number of common shares outstanding at March
23, 2001: 84,325,089.

DOCUMENTS INCORPORATED BY REFERENCE:  NONE


<PAGE>


                                     PART I

Item 1. Business.

     Certain statements contained in this Annual Report on Form 10-K ("Report"),
including,  without  limitation,  statements  containing  the words  "believes,"
"anticipates,"  "estimates," "expects," and words of similar import,  constitute
"forward-looking  statements."  Readers should not place undue reliance on these
forward-looking  statements.  USA Video's actual results could differ materially
from those  anticipated  in these  forward-looking  statements for many reasons,
including risks described in this Report,  including the "Risk Factors"  section
contained  in this Item 1, and the other  documents  USA  Video  files  with the
Securities and Exchange Commission ("SEC").

Introduction

     USA Video  Interactive  Corp.  ("USA Video" or the  "Company")  designs and
markets to  business  customers  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.  The Company's systems,
services  and delivery  solutions  include  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.

     The  Company's   products  and  services  are  based  on  its   proprietary
technologies of Store and Forward  Video-on-Demand  ("VoD") and advanced Wavelet
compression.  USA  Video's  Store and Forward  VoD is a patented  technique  for
transmitting video over switched (telephone-like) networks and allowing the user
to view the video using videocassette recorder (VCR)-like controls (play, pause,
stop,  etc.).  Store and Forward 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.  Video  compression  technology  allows large video files to be greatly
reduced  in size to  optimize  use of  available  bandwidth.  In the  absence of
compression,  video  files  are much too  large to be  efficiently  streamed  or
downloaded.  The Company has  completed  development  of a  still-image  Wavelet
compression  technology  (patent pending) and is nearing completion of a Wavelet
compression technology for full motion applications for which it intends to file
for patent protection.

     USA Video has developed a number of specific products and services based on
these   technologies.    These   include    StreamHQ(TM),    a   collection   of
source-to-destination   media   delivery   services   marketed  to   businesses;
EncodeHQ(TM),  a service that  digitizes  and  compresses  analog-source  video;
hardware server and encoder system  applications under the brand names Hurricane
Mediacaster(TM)  and  WebcasterLive(TM);  and  StreamHQMail(TM),  a service that
delivers client advertisement video content to targeted audiences.

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



                                      - 2 -

<PAGE>




Business Environment

     The cost of bandwidth and  supporting  equipment,  such as cable modems and
other broadband connectivity to homes and businesses, is expected to continue to
decrease over the next several  years,  bringing  expanded use of high bandwidth
applications for video transmission to the general market.

     Until then, improved compression techniques, such as those developed by USA
Video,  allow the use of  existing  bandwidth,  including  telephone  lines,  to
achieve  some of the same  features of  high-bandwidth  connectivity.  Even when
high-bandwidth  applications become available to the general market, the Company
expects  that  compression  technology  will  continue to be  important  for the
following reasons:

          o    Video files are huge (a full-length movie can be many gigabytes);
               therefore,  uncompressed  video  data  would  tax  any  available
               bandwidth configuration well into the foreseeable future.

          o    The combination of more available  bandwidth,  greater  computing
               power,  and aggressive and improved  compression  technology will
               allow the  quality  of video  transmitted  over the  Internet  to
               approach,  and even  equal,  the  current  TV  broadcast  quality
               standard.

          o    The video quality  standard  will  continue to evolve  (e.g.,  to
               high-definition  television and beyond) and will demand even more
               sophisticated compression techniques.

     USA Video  believes  that market  conditions  are  favorable  for continued
acceptance of mainstream  Video on Demand.  In published  highlights of its 14th
annual Communications  Industry Forecast,  industry merchant bank Veronis Suhler
notes that per-person  daily use of all forms of media continues to increase and
is  expected  to pass 10 hours  per day by 2004.  In  addition,  Veronis  Suhler
forecasts that Internet advertising will more than quadruple to $24.4 billion by
2004, surpassing cable, network TV and consumer magazines,  as total advertising
spending  grows  8.6%  yearly  through  2004.  Total U.S.  spending  on media is
expected to reach $663.3 billion by 2003.  The 7.5% combined  annual growth rate
will  make   communications   the  second   fastest-growing   industry   (behind
telecommunications) among the top 12 U.S. industries.

     USA Video  believes  its  source-to-destination  streaming  media  delivery
services  hold  significant  potential  for the  on-line  advertising  and other
industries.  According to  Arbitron/Edison  Media  Research's  Internet VI Study
released on February 7, 2001,  streaming  media usage has  increased in the past
year. As of January 2001, 13 percent of Americans  (more than 30 million people)
use Internet audio or video each month,  compared to 10 percent in January 2000.
More than  one-quarter  (27 percent) of Americans  (more than 61 million people)
have used Internet audio or video while six percent, over 13 million people, use
streaming  media each week,  according  to the  Internet  VI study.  USA Video's
streaming  media  delivery  services  are  designed  to  be  highly  functional,
cost-effective  and  easily  implemented  for  advertisers   targeting  specific
demographic groups.

Strategic Plan

     USA Video's principal,  near term,  strategic  objective is to complete its
transition  from a seller  of  end-to-end  hardware  systems  to a  provider  of
source-to-destination   streaming  media  delivery  services.  To  support  this
transition,  and to grow its StreamHQ(TM) services business, the Company intends
to:


                                      - 3 -

<PAGE>

          o    Continue  research and  development,  including  adding technical
               staff in a phased approach that is consistent with market demands
               and opportunities;

          o    Establish   multiple   marketing   and   distribution   channels,
               particularly  in  the  form  of  alliances  with  third  parties,
               including  some of the Company's  product and service  suppliers;
               and

          o    Expand  inside sales and marketing  teams and graphic  design and
               website  development staff, to support increased direct marketing
               to   various   markets,   including   corporate   communications,
               e-commerce, customer service, entertainment, and education.

     USA Video  believes  that the expected  substantial  increases in bandwidth
capacity,  and  accompanying  decreases in bandwidth  cost,  in the next several
years will  result in a shift in industry  focus from  streaming  technology  to
video  compression  technology,  which will allow  compressed  video files to be
directly  downloaded  to  end-users'  systems.  To position  the Company to take
advantage of this anticipated shift, USA Video has begun to:

          o    Create an  industry-wide  awareness  of USA  Video's  proprietary
               Wavelet  compression  technology through industry trade journals,
               attendance at trade shows, and industry analysts;

          o    Identify potential patent  infringements in order to aggressively
               enforce  its  technology  ownership  rights,   including  through
               licensing arrangements; and

          o    Identify   opportunities  to  license  its  proprietary   Wavelet
               compression  technology to additional  strategic  partners in the
               U.S. and internationally.

Proprietary Technologies

     USA Video's  proprietary  technologies  include (1) Wavelet compression and
(2) Store and Forward Video-on-Demand.

     Wavelet Compression.  Video compression technology allows large video files
to  be  greatly  reduced  in  size,  optimizing  the  use  of  limited  Internet
transmission  and delivery  bandwidth  and  permitting  efficient  streaming and
downloading of video files. Through compression, the visual and audio aspects of
the file are vastly  reduced in size. The file then is sent across the Internet,
and once  received the file is then  decompressed  (returned to its normal size)
and viewed.  This means more media (images and/or sounds) can be sent,  received
and  viewed  in less  time.  Even  with high  bandwidth  connections,  which can
transport   more  data  per  unit  of  time  than  typical  home  dial-up  modem
connections,  compression  facilitates  timely  product  delivery.  USA  Video's
Wavelet  compression  technology  enables  users to  compress  video files using
standard  compression formats while maintaining a high degree of image and sound
quality.  The  Company  has  completed  development  of  a  still-image  Wavelet
compression  technology  (patent pending) and is nearing completion of a Wavelet
compression technology for full motion applications for which it intends to seek
patent protection. USA Video believes its motion Wavelet technology will enhance
the  delivery  of  Internet  video to users of common home modems (56k and 28.8k
bandwidth), as well as reduce storage and download time to high-bandwidth users.

     Store and  Forward  Video-on-Demand  ("VoD").  USA Video has  designed  and
patented this  technology  for the delivery of video  programs on an "on-demand"
basis. This capability allows a user located away from a video source to control
the  viewing of  selected  video over the  Internet  (or other  network  such as
satellite,  wireless, Ethernet or set-top box) using start, stop, pause, forward
and reverse  controls.  Unlike the pay-per-view  model where the video is run to
completion  without  the  possibility  of  pausing  once  it  is  started,  this
technology provides a two-way connection, allowing the user to manage the



                                      - 4 -

<PAGE>

     content delivery.  The patented  technology enables live event broadcast or
recording  and  broadcast  over  the  Internet,   commonly  called   webcasting;
video-streaming  directly from a central  server  facility using the Internet or
other connectivity medium; video-streaming whereby the video is first downloaded
from a central server to any  intermediate  device,  such as an edge server or a
cache server  installed on a local area network ("LAN"),  and then  distributed;
video downloads to any end-user digital storage  devices,  such as digital media
recorders or computer hard drives,  for later access; and TV broadcasts in which
compressed  digital  video  files  are  transferred  to  a  storage  device  for
subsequent viewing.

Products and Services

     USA  Video's  proprietary  Store-and-Forward  VoD and  Wavelet  compression
technologies  are integral to the Company's two principal  types of products and
services.

End-to-end systems

     The Company began marketing its end-to-end systems in 1999. A system, which
is  purchased by the  customer,  enables the customer to encode and stream video
content to its target  audience.  The systems are designed around a set of basic
components.  The  Company  customizes  the  software,  as  well  as  some of the
hardware, to suit a customer's  particular  application as determined by size of
audience, amount of content, mode of viewing (i.e., multicast, a start-to-finish
stream  to which  multiple  users can tune in,  analogous  to  broadcast  TV; or
unicast,  a stream to a single user over a dedicated  connection,  allowing  the
user to view the video  start-to-finish or using VoD controls),  etc. The system
is located at the customer's site and is operated by the customer's  staff. Each
system  consists  of two  major  functional  components,  as well as  peripheral
equipment such as keyboard, mouse and power supply. The first major component is
an encoder (WebCaster Live(TM)),  which receives analog or digital video inputs,
encodes  (i.e.,  digitizes  and  compresses)  the input data,  and  forwards the
encoded output stream to the video server,  which is the second major component.
The video server (Hurricane  Mediacaster(TM)) stores the video received from the
encoder  and  manages  its  delivery  to end users via the  Internet,  intranet,
wireless,  etc.  There can be multiple  encoders and servers in a single system,
depending on the number of end-users accessing the customer's content.

Streaming media delivery services

     In 2000, USA Video identified an emerging market for global media streaming
services,  which the  Company  is  developing  under  the brand  "StreamHQ(TM)".
StreamHQ(TM) allows corporate,  educational,  entertainment,  and other types of
business  or  institutional  customers  to use the  Internet  or an  intranet to
deliver  rich media  content  (e.g.,  video,  music,  etc.) to target  audiences
without having to buy, operate and maintain a hardware system. StreamHQ(TM) is a
customized,  turnkey,  streaming media support service. By offering business and
other customers a complete  source-to-destination service that consolidates web,
streaming, and data management functionalities, StreamHQ(TM) eliminates the need
for customers to deal with multiple service providers.

     The Company is currently  transitioning away from  hardware-based  sales to
its StreamHQ(TM) services-based model and expects to complete the specification,
procurement,  assembly,  test and deployment of the  back-office  infrastructure
necessary to support the offering of these  services  beginning in the second or
third quarter of 2001.

     StreamHQ(TM) services range from source to viewing and include:

          o    content production;

          o    content encoding;

          o    media asset management, including streaming schedules and viewing
               entitlements;


                                      - 5 -

<PAGE>

          o    media and application  hosting,  multi-mode content  distribution
               ("centralized  streaming")  using existing  Internet  services to
               route video to the user;

          o    "edge streaming" through video file transfers to edge servers for
               distribution  via broadband  connectivity;

          o    "inside streaming" that places video files on cache and streaming
               servers located within a corporate or institutional LAN;

          o    transaction data capture and reporting; and

          o    e-commerce.

     In order to  provide  StreamHQ(TM)  customers  with a high level of service
availability  and  reliability,  together with an efficient  and  cost-effective
media streaming process, USA Video has entered into partnering arrangements with
top ranked  providers of data storage  (EMC Corp.) and data  management  (Oracle
Corp.)  and is seeking a  partnership  arrangement  with a Tier 1 Internet  data
center for content distribution.

     Data management consists of capture,  analysis and reporting of statistical
data that enables the content owner to learn how the intended  audience used the
video and how well the video  served its  intended  purpose.  The data  includes
network performance and utilization statistics, including bandwidth utilization,
number of stream sessions,  stream rates, frame rates, video quality and packets
lost;  total  number of times the video was  viewed;  distribution  of users who
viewed  25%,  50%,  75% and  100% of the  video;  information  on times of media
access,  length of time media was  viewed,  and  actions  taken  during  viewing
(pause, stop, rewind,  etc.). Other reports include billing and customer support
reports.  The same data can be used by USA Video to monitor the  performance  of
the StreamHQ(TM)  system.  Future phases of StreamHQ(TM) are expected to include
the  ability to analyze  usage by  geographic  location  and  certain  marketing
information,  including the percentage of users who forwarded the video to other
people and the  percentage of users who received and viewed the forwarded  video
email;  categorization of users including  operating  system,  browser type, and
connection  speed.  Additional  functionality can be customized to meet specific
customer requirements.

     Data  storage  equipment  is used to store video files that are accessed by
end  users,  and to store  the  feedback  information  that is used to  generate
reports  to  content  owners.  Upon  deployment  of its  system,  USA Video will
electronically  send encoded video files from its  operations  center in Mystic,
Connecticut to its equipment at a remotely located,  highly secure Internet Data
Center,  where the Company will lease space. The major piece of equipment at the
data center  will be the  Company's  EMC  Symmetrix  data  storage  system.  The
Symmetrix  will be networked  with a collection of web,  streaming,  management,
application,  and  database  servers,  all of  which  will  perform  specialized
StreamHQ(TM) functions.

     Streaming  is the  distribution  of  digitized  and encoded  content over a
network. The Company's  StreamHQ(TM) services may be employed over the Internet,
intranet systems,  cable television,  and wireless and satellite  communications
systems.  Although  optimally designed for fiber optic cable, which is currently
being  installed  worldwide  and which  provides  large amounts of bandwidth for
video and data transmission,  the Company's  proprietary VoD technology provides
fast, high quality video and audio even over existing telephone lines and common
home  modems.   At  higher   bandwidth   levels,   full  screen,   full  motion,
near-broadcast-quality video and audio can be achieved.

     In  StreamHQ(TM),   content  is  distributed  in  one  of  three  fashions.
Centralized  streaming  uses  existing  Internet  services to route video to the
user.  Edge  streaming is  accomplished  through video file transfers to servers
that are located near the end user for distribution via broadband  connectivity.
Inside  streaming  places video files  directly on cache and  streaming  servers
located within an intranet,  such as that of a school  district or  corporation,
where the files are stored until called on by end users.



                                      - 6 -
<PAGE>

     Each  distribution  method has its applications and tradeoffs,  and clients
can choose which is most  cost-effective  for their specific needs.  Centralized
streaming  is the least  expensive,  but normal  Internet  delays and  bandwidth
constraints  could  impact  speed of  transmission  and  picture  quality.  Edge
streaming  results in improved  video  quality,  at a higher  service cost.  For
high-bandwidth  local area networks,  inside streaming will provide the greatest
quality video, also at a potentially higher service cost.

     The software and equipment  infrastructure necessary to promote USA Video's
StreamHQ(TM)  services are similar to the components of the end-to-end  hardware
systems sold by the Company, although considerably more complex and robust since
they are being designed to reliably support the varied  requirements of numerous
business  customers.  Monitoring  and managing of the system is expected to take
place  at USA  Video's  corporate  headquarters  in  Connecticut.  The  computer
systems,  peripheral devices, and mechanical systems to be used for centralized,
edge or inside  streaming will be collocated at a Tier 1 Internet Data Center to
be selected by the Company. System components include web, streaming,  database,
reporting,  application and management servers,  power management devices,  data
storage systems,  security firewalls,  high-speed network switching, USA Video's
proprietary  software,  and  licenses  for  vendor  software.  The  StreamHQ(TM)
services are scaleable,  in that they may be customized to meet the requirements
of different sized businesses.  Sales of complete StreamHQ(TM) systems (hardware
and software), may be made if customers desire to actually own and operate their
own systems.

Customers and Markets

     To date,  USA Video's sales of end-to-end  hardware  systems have been made
primarily  to customers  in the  entertainment  and  education  markets.  As the
Company  transitions to a services-based  model, it expects to target additional
major industry markets.

     USA Video believes businesses  requiring some or all of the following video
streaming capabilities are potential customers for its StreamHQ(TM) services:

          o    The ability to delivery high quality,  rich media content through
               a variety of infrastructures,  including intranets,  edge servers
               and the Internet;

          o    Customized  and highly  focused data that  provides  business and
               other  customers  with  highly  detailed  information  about  the
               end-user's  "experience" (e.g., length of time viewed,  number of
               times viewed, etc.) with the content;

          o    Use of video in e-commerce;

          o    A bundled array of integrated  media  services.  While many video
               service providers specialize in individual services, StreamHQ(TM)
               consists of a source-to-destination  collection of services, thus
               eliminating the need for multiple providers; and

          o    On-demand access to specialized  content,  including  educational
               video  resources,   corporate  records  and  training  resources,
               government archive retrieval and legislative activities, or other
               specialized areas.

     Upon  completion  of  development  of the  initial  phase  of  StreamHQ(TM)
services, the Company expects to market its services to the following:



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 Target Market Segment                    Business Activity Supported
 ---------------------                    ----------------------------

  Marketing                               Rich media advertising

  Corporate Communications                Customer relations
                                          Employee communications
                                          Investor relations
                                          Public relations

  Customer Service                        Targeted customer support

     As  StreamHQ(TM) is developed to add other levels of  functionality  and to
support additional business  activities,  the Company anticipates  marketing its
media delivery services to the following market segments as follows:

Education - includes  colleges,  universities,  and  elementary and high schools
where  video can be  delivered  to  classrooms  or offices and viewed on desktop
computers or television.  With instant  digital access to enormous  libraries of
content, which may be located on or off site, instructors will be able to create
specialized  video programs that students may access at their  convenience.  The
current, less efficient method of copying, mailing and logging videotapes can be
replaced.  StreamHQ(TM)'s  functionality  through  inside  streaming will enable
education  customers to stream large files without interfering with the ordinary
use of their Internet connections.

Entertainment  - includes  movies,  live and archived  events,  broadcast  news,
weather  and home  consumer  programming  that  can be  accessed  at the  user's
convenience, thus eliminating the time restrictions and limited choices of cable
television and pay-per-view television. StreamHQ(TM)'s meta data and transaction
data  management and reporting  functionalities  can provide content owners with
detailed  information  regarding their  customers'  viewing  habits,  as well as
providing security against unauthorized viewing.

Training - includes  corporate and  motivational  training  procedures and other
instructional materials used in various fields, including medicine, architecture
and design, and construction.  Corporations and government entities will be able
to track and verify that training  materials have been viewed by the appropriate
employees,  while  allowing  employees  to access  training  materials  at their
convenience and at remote locations (e.g., from home).

Corporate  communications - includes  customer  relations,  investor  relations,
public  relations,  internal  communications,  call center  support and targeted
customer  support.  USA Video's media  delivery  services will enable  corporate
customers to stream high visual quality media files for these purposes and other
uses over corporate LAN's without interfering with the business-day  capacity of
the customers' Internet connections.

Advertising  and  E-Commerce  -  will  be  greatly   enhanced  as  high  quality
interactive  video replaces the static banners and other  advertising  currently
deployed on the Internet.  The Company's  potential  e-commerce  markets for its
StreamHQ(TM)  services include  manufacturing,  books, music, videos, travel and
hospitality,  clothing, and others. The Company's  StreamHQ(TM)  technology will
also  enable  advertisers  to more  effectively  direct  their  advertising  and
information resources to targeted audiences.

     USA Video's marketing plan involves partnering with its suppliers to become
their streaming services provider.  This will enable USA Video's partners to add
streaming  capability to products and services offered through their established
sales and distribution  channels.  The Company believes that  partnerships  with
companies in the data storage,  server, and transmission  (bandwidth) industries
are the most  promising  because their  customers  typically  would have use for
enhanced   streaming   services.   The  Company  has  entered  into   partnering
arrangements with EMC Corp. (data storage), Oracle (data management)



                                      - 8 -
<PAGE>

and is seeking a Tier 1 Internet data center to provide distribution (bandwidth)
capacity. USA Video promotes the products of its suppliers whenever possible, in
exchange for suppliers' promotion of USA Video streaming services.

     The Company is developing an in-house  sales force for direct  marketing to
potential  customers,  including owners of the Company's  hardware systems.  The
Company also utilizes trade shows as a way to reach  potential  customers,  both
directly  to  market  representatives  attending  shows  and  through  potential
strategic partners who may be exhibiting at the shows.

Competition

     USA Video competes in the streaming media delivery  market.  This market is
characterized by rapid growth, converging technologies, and frequent upgrades to
new solutions that offer superior advantages. There are numerous vendors in each
product and service  category,  but USA Video  believes  that only a  relatively
small  number  of  competitors   currently   offer  a  package  of  consolidated
"source-to-destination" services for delivering digital media. USA Video expects
that the overall number of competitors  providing  niche product  solutions will
increase due to the market's attractive growth potential. On the other hand, the
Company expects the number of vendors supplying end-to-end  networking solutions
will  not  significantly   increase  for  the  foreseeable  future  due  to  the
technological  difficulties and costs in developing complete systems. The market
is  currently  dominated by a small number of larger  companies  including  Real
Networks,  Microsoft (via its Windows Media Player),  Yahoo, Akamai, and several
others, some of which offer end-to-end streaming media solutions.

     USA Video believes that the principal competitive factors in the markets in
which the Company presently competes and may compete in the future are:

          o    Price;

          o    Product performance;

          o    Time to market;

          o    The ability to tailor end-to-end streaming solutions for specific
               business vertical markets;

          o    The ability to provide value-added  features such as security and
               reliability; and

          o    Market presence.

     Most  of  USA  Video's  current   competitors   have,  and  most  potential
competitors are expected to have,  greater financial,  marketing,  and technical
resources than the Company. The Company also faces competition from customers to
whom it is seeking to license its technology,  and from suppliers of some of its
technology.  The Company must  cooperate and at the same time compete with these
companies.  The  Company's  inability to  effectively  manage these  complicated
relationships  with customers and suppliers could have a material adverse effect
on the Company's business, operating results, and financial condition.

Assembly

     The Company assembles its hardware systems - whether the system is for sale
to a customer or for the purpose of supporting streaming media delivery services
-  from  components  manufactured  by  others.  The  Company's  technical  staff
specifies,  procures, assembles, tests and deploys the various system components
according to a precisely developed set of procedures. The Company also consults,
on an as-needed  basis,  with companies that supply the major  components of its
systems.  USA Video's  in-house  software  development team creates programs and
configures products to meet a wide variety of individual customer requirements.



                                      - 9 -
<PAGE>

Research and Development

     Prior to 1999, USA Video  conducted seven years of research and development
of its  proprietary  VoD  technology.  In 1999,  USA  Video's  focus  shifted to
marketing and sales of its products and services,  with research and development
directed  primarily at supporting  sales and development of Wavelet  compression
technology. In 2000, the Company devoted substantial resources to development of
its  StreamHQ(TM)  services and began  development  of its  proprietary  Wavelet
technology.

     The industry in which USA Video competes is subject to rapid  technological
developments, evolving industry standards, changes in customer requirements, and
frequent new product introductions and enhancements.  As a result, the Company's
success,  in part,  depends upon its  ability,  on a  cost-effective  and timely
basis,  to  continue  to enhance  its  existing  solutions  and to  develop  and
introduce  new  solutions  that improve  performance.  In order to achieve these
objectives, the Company's management and engineering personnel work closely with
customers  to  identify  and respond to  customer  needs,  as well as with other
innovators of inter-networking  products. Despite USA Video's efforts, there can
be no  assurance  that it will be able to  successfully  develop new products to
address  new  customer  requirements  and  technological  changes,  or that such
products will achieve market acceptance.

     In fiscal 2000,  1999,  and 1998,  the Company's  research and  development
expenditures were approximately $620,212, $93,337 and $24,000, respectively.

Intellectual Property

     USA Video's success is dependent, in part, upon its proprietary technology.
The Company  generally relies upon patents,  trademarks and trade secret laws to
establish and maintain its  proprietary  rights in its  technology  products and
services.

     USA  Video  applied  for a U.S.  patent  for  its  Store  and  Forward  VoD
technology on February 1, 1990.  Corresponding  overseas applications were filed
in several  countries in 1992. USA Video was granted U.S.  Patent  #5,130,792 in
July 1992. In June 2000, the U.S. Patent Office reinstated the patent, which had
expired because of an administrative  oversight that led to late payment of fees
due in 1995.

     In 1999,  USA Video was  granted  patents  on its  Store  and  Forward  VoD
technology in five  European  countries:  England,  France,  Germany,  Italy and
Spain. The  technological  characteristics  of the European Patents are based on
the U.S.  Patent,  covering  systems for  transmitting  video programs to remote
locations  over a switched  telephone  network,  and are similar in scope to the
U.S. patent claims. Additional applications are pending in Canada and Japan.

     There can be no assurance that USA Video's  current or future  patents,  if
any, will not be challenged,  invalidated,  or circumvented,  or that any rights
granted  thereunder  will provide  competitive  advantages  to the  Company.  In
addition,  there can be no  assurance  that  patents will be issued from pending
applications,  or that claims allowed on any future patents will be sufficiently
broad to protect USA Video's technology.  In addition,  the laws of some foreign
countries may not permit the protection of USA Video's proprietary rights to the
same extent as do the laws of the United  States.  USA Video  intends to enforce
its  proprietary  rights  through  the use of  licensing  agreements  and,  when
necessary,  litigation.  Although USA Video believes the protection  afforded by
its patents, patent applications, and trademarks has value, the rapidly changing
technology in the video transmission industry makes the Company's future success
dependent  primarily on the  innovative  skills,  technological  expertise,  and
management  abilities  of its  employees  rather  than on patent  and  trademark
protection.


                                      - 10 -
<PAGE>

Employees

     As of March 26, 2001, the Company  employed 22 people,  including its three
senior  executive   officers,   11  technology   personnel,   four  finance  and
administration  personnel,  and four sales and marketing personnel.  The Company
considers the  relationships  with its employees to be good. The Company has not
experienced any work stoppages.

     Competition for technical personnel in the industry that USA Video competes
is intense.  The Company's future success will depend, in part, on its continued
ability to hire, assimilate,  and retain qualified personnel. To date, USA Video
believes it has been successful in recruiting qualified employees,  but there is
no assurance that the Company will continue to do so in the future.

Risk Factors

     Set forth below and  elsewhere  in this Report are risks and  uncertainties
that  could  cause  actual  results  to  differ   materially  from  the  results
contemplated by the forward-looking statements contained in this Report.

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

     USA Video has a very limited operating  history.  The Company has made only
limited  sales of its products and  services  and was in the  development  stage
through December 31, 1999. USA Video's business and prospects must be considered
in light  of the  risks  encountered  by  companies  in their  early  stages  of
development,  particularly companies in new and rapidly evolving markets such as
streaming  media.  Some of these  risks  relate to the  Company's  ability to:

          o    maintain or develop  relationships  with  suppliers and marketing
               partners;

          o    continue to expand its customer base and generate repeat business
               from  existing  customers;

          o    continue  to develop and upgrade  its  technology,  products  and
               services;

          o    provide  superior  customer  service;

          o    respond to  competitive  developments;  and

          o    retain and motivate qualified personnel.

THE COMPANY HAS INCURRED  SUBSTANTIAL  LOSSES; IT EXPECTS TO INCUR LOSSES IN THE
FUTURE, AND MAY NEVER ACHIEVE PROFITABILITY.

     To date, USA Video has not been profitable,  has not generated  significant
revenue from operations, and has incurred substantial losses. For the year ended
December 31, 2000,  USA Video had a net loss of  $4,661,652.  As of December 31,
2000,  the  Company  had an  accumulated  deficit of  $25,302,482  and a working
capital  deficit  of  $404,644.  The  Company  intends  to  continue  to  expend
significant  financial  and  management  resources  on  the  development  of its
proposed products and services,  and other aspects of its business. As a result,
the Company expects operating losses and negative cash flows to increase for the
foreseeable future. Consequently,  USA Video will need to significantly increase
its revenues to achieve and maintain profitability. The Company may be unable to
do so. If USA Video's revenues grow more slowly than anticipated or if operating
expenses increase more than expected,  or are not reduced  sufficiently,  it may
never achieve profitability. Because of factors discussed


                                      - 11 -
<PAGE>

in this  paragraph,  USA  Video's  auditors,  in their  report on the  Company's
financial statements,  have expressed substantial doubt concerning the Company's
ability to continue as a going concern.

IF USA VIDEO IS UNABLE TO OBTAIN SUBSTANTIAL  ADDITIONAL FINANCING IT MAY NOT BE
ABLE TO REMAIN IN BUSINESS.

     USA Video requires  substantial  working capital to fund its business.  The
Company  has had  significant  operating  losses  and  negative  cash  flow from
operations since inception of its current business and expects to continue to do
so for the foreseeable future. The Company's capital requirements will depend on
several  factors,  including  the rate of market  acceptance of its products and
services,  the ability to establish  and expand a client base and the growth and
effectiveness  of its sales and marketing  efforts.  USA Video estimates it will
require from $3.0 to $3.5 million in financing to meet its working capital needs
over the  remainder of 2001 and  substantial  additional  financing  thereafter.
Further,  if capital  requirements vary materially from those currently planned,
the Company may require additional financing. The Company has no arrangements or
commitments  for any  financing.  Financing may not be available  when needed on
terms  favorable to the Company,  or at all. If adequate funds are not available
or are not available on acceptable  terms,  the Company may be unable to further
develop  or  enhance  its  products  and  services,  take  advantage  of  future
opportunities or respond to competitive pressures, or ultimately, to continue in
business.

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

     USA Video's  quarterly and annual operating results are likely to fluctuate
significantly  in the  future  due to a variety  of  factors,  many of which are
outside of its control. Some of these factors include:

          o    its ability to attract and retain customers;

          o    the introduction of new video  transmission  services or products
               by others;

          o    price competition;

          o    the continued  development of and changes in the streaming  media
               market;

          o    its  ability to remain  competitive  in its  product  and service
               offerings;

          o    its ability to attract new personnel; and

          o    U.S. and foreign regulations relating to the Internet.

     As a result of the  factors  listed  above,  and  others,  period-to-period
comparisons of USA Video's operating results may not be meaningful in predicting
its future performance. It is possible that the Company's operating results will
not meet market  expectations  in some future  quarter or quarters,  which would
likely result in a significant decline in its stock price.

THE STREAMING MEDIA BUSINESS IS HIGHLY  COMPETITIVE,  AND USA VIDEO'S FAILURE TO
COMPETE  SUCCESSFULLY  WOULD LIMIT ITS ABILITY TO RETAIN AND INCREASE ITS MARKET
SHARE.

     The  streaming  media  market  is  new,   rapidly  evolving  and  extremely
competitive.  The Company  expects  competition to intensify in the future.  The
Company  competes  with  companies  that  provide all or certain  aspects of the
Company's services, including other streaming media providers, content encoders,
video production companies,  Internet data management companies, and others, and
expects  that  additional  competition  in the future  will be provided by those
types  of  providers  and  others.   The  Company's   current  market  share  is
insignificant.


                                      - 12 -
<PAGE>

     The video  streaming  market is  currently  dominated  by a small number of
larger companies,  including Real Networks, Microsoft, Yahoo, Akamai and several
others,  some of which offer  source-to-destination  streaming media  solutions.
Most of USA Video'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,
larger,  well-established and well-financed  entities may acquire,  invest in or
form joint ventures with online competitors as the use of the Internet and other
online services  increases.  In addition,  new technologies and the expansion of
existing technologies are expected to result in additional competition.

     USA Video  may not be able to  compete  successfully  against  current  and
future  competitors,  and any  inability to do so could  decrease its  revenues,
contribute to the Company not achieving  profitability  and adversely  affect is
ability to establish, maintain and increase its market share.

THE MARKET FOR USA  VIDEO'S  PRODUCTS  AND  SERVICES  IS  RELATIVELY  NEW AND IS
EVOLVING,  AND THE  COMPANY'S  SUCCESS  WILL  DEPEND ON ITS  ABILITY TO ADAPT TO
CHANGING MARKET CONDITIONS.

     USA Video's future  financial  performance will depend in large part on the
growth in demand for its streaming  media services and products.  This market is
new and emerging,  is rapidly evolving, is characterized by an increasing number
of market  entrants  and will be subject to frequent and  continuing  changes in
customer preferences and technology.  As is typical in new and evolving markets,
demand and market acceptance for the Company's  products and services is subject
to a high level of uncertainty. Because the market for the Company's products is
evolving,  it is difficult to assess or predict with any  assurance  the size or
growth  rate,  if  any,  of  this  market.  There  can  be no  assurance  that a
significant  market for the Company's  products  will  develop,  or that it will
develop at an acceptable rate or that new competitors will not enter the market.
In addition, even if a significant market develops for such products,  there can
be no assurance  that the Company's  products will be successful in such market.
If a significant market fails to develop,  develops more slowly than expected or
attracts  new  competitors,  or if USA Video's  products  do not achieve  market
acceptance, the Company's business prospects, financial condition and results of
operations will be materially adversely affected.

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

     USA  Video's  future  success  will  depend in part on its ability to offer
products  and  services  that  incorporate  leading  technology  and address the
increasingly  sophisticated  and varied  needs of its  current  and  prospective
customers.  The  Company's  market is  characterized  by  rapidly  changing  and
unproven  technology,  evolving industry  standards,  changes in customer needs,
emerging competition and frequent new service introductions.  Future advances in
technology may not be beneficial to or compatible with USA Video's business.  In
addition, the Company may not be able to incorporate technological advances into
its products and services in a  cost-effective  and timely  basis.  Keeping pace
with the technological  advances may require  substantial  expenditures and lead
time, particularly with respect to acquiring updated hardware and infrastructure
components of its systems.  The Company may require additional financing to fund
such  acquisitions.  Any such  financing  may not be available  on  commercially
reasonably terms, if at all, when needed.


                                      - 13 -
<PAGE>


USA VIDEO IS DEPENDENT UPON VENDORS AND OTHER THIRD PARTY SERVICE PROVIDERS, AND
WILL BE COMPETING WITH SOME OF THESE COMPANIES.

     USA Video is,  and will  continue  to be  dependent  on  vendors  and other
providers  to supply the  hardware,  software  and  co-location  resources  that
comprise the Company's  products and  services.  The Company has no long-term or
exclusive contracts or arrangements with any of these vendors or providers.  The
Company  cannot be certain  that its  current and  proposed  vendors and service
providers will continue to do business with the Company, or that it will be able
to establish relationships with new vendors and service providers, if necessary.
If the Company is unable to establish  and maintain  satisfactory  relationships
and  arrangements  with these third  parties,  the Company's  business  could be
harmed.  In addition,  USA Video will be dependent  upon its third party vendors
and other suppliers to adequately  test their products  before  release,  and to
provide  support for the products  after  delivery.  The failure of any of these
third  party  providers  to do so could  have a material  adverse  effect on USA
Video's business.

     Further,  USA Video currently competes with, and expects to compete with in
the  future,  providers  of some of its  technology  or system  components.  USA
Video's inability to, at the same time,  effectively  cooperate and compete with
these companies could harm its business.

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

         The markets for USA Video products and services are characterized by:

          o    rapidly changing technology;

          o    evolving industry standards;

          o    frequent new product and service introductions; and

          o    changing customer demands.

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

USA  VIDEO'S  SERVICES  ARE  COMPLEX  AND THE COMPANY MAY NOT BE ABLE TO PREVENT
DEFECTS THAT COULD DECREASE THEIR MARKET ACCEPTANCE, RESULT IN PRODUCT LIABILITY
OR HARM ITS REPUTATION.

     USA Video's  streaming media products  services are complex,  and the steps
the  Company  takes  to  ensure  that  they  are  free  of  errors  or  defects,
particularly  when first  introduced  or when new versions or  enhancements  are
released,  may not be  successful.  USA  Video  cannot  guarantee  that  current
versions  or  enhanced  versions  or its  products  will be free of  significant
software  defects or bugs.  Despite the  Company's  testing,  and testing by its
third-party  vendors  and  providers,  current or future  products  may  contain
serious  defects.  Serious  defects or errors  could result in lost revenue or a
delay in market  acceptance of the Company's  products and could  seriously harm
its  business  and  operating  results.  Errors in its products may be caused by
defects in third-party hardware or software  incorporated into its products.  If
so, the Company may be unable to fix these defects  without the  cooperation  of
these third-party providers.  Because these defects may not be as significant to
these providers as they are to USA Video,  the Company may not receive the rapid
cooperation that it may require.  Errors,  defects or other performance problems
with the Company's products could also harm its customers'  businesses or result
in potential product liability claims. Even if unsuccessful, a product liability
claim brought against USA Video would likely be time-consuming, costly and



                                      - 14 -
<PAGE>

harmful to its  reputation.  Nor can there be any  assurance  that the Company's
product  liability   insurance  coverage  will  be  sufficient  to  satisfy  any
successful claim.

USA  VIDEO'S  BUSINESS  WILL BE  HARMED  IF IT FAILS TO MANAGE  ITS  GROWTH  AND
EXPANSION.

     USA Video must manage its growth  effectively in order to successfully sell
its  products and services and achieve  revenue  growth and  profitability  in a
rapidly  evolving  market.  USA Video has expanded its operations  substantially
since  inception  of its current  business.  The Company  anticipates  continued
expansion  of  its   operations  to  pursue   existing  and   potential   market
opportunities.  USA Video's  rapid growth has placed and will  continue to place
significant  demands  on  its  management  and  operational  resources.   To  be
successful, the Company will need to:

          o    implement additional management information systems;

          o    improve its operational, financial and management controls;

          o    hire, train and retain new employees; and

          o    coordinate its  executive,  engineering,  professional  services,
               accounting,    finance,    marketing,    sales   and   operations
               organizations.

     USA Video's  growth has  resulted,  and any future  growth will result,  in
increased  responsibilities  for  management  personnel,  some of whom have been
employed by the Company for relatively short periods of time.

     In addition,  USA Video may not adequately  anticipate all the demands that
growth may impose on its systems,  procedures and organizational  structure. Any
failure to  anticipate  and respond  adequately  to these  demands or manage its
growth effectively would harm its business.

ANY LOSS OF THE COMPANY'S PERSONNEL OR INABILITY TO ADD NEW PERSONNEL COULD HARM
THE COMPANY'S BUSINESS.

     USA Video's future success depends  significantly on the continued services
and performance of its senior management. The Company's performance also depends
on its ability to retain and motivate its other key  personnel.  The loss of the
services  of any  member  of USA  Video's  senior  management  team or other key
employees  could cause  significant  disruption in the Company's  business.  USA
Video has no long-term employment agreements with senior management and does not
currently maintain any "key person" life insurance. The Company's future success
also  depends on its  ability to  identify,  attract,  hire,  train,  retain and
motivate  other highly  skilled  technical,  managerial,  operations,  sales and
marketing and customer  service  personnel.  Competition  for such  personnel is
intense,  and USA  Video  may not  successfully  attract,  assimilate  or retain
sufficiently  qualified  personnel.  The  failure  to  retain  and  attract  the
necessary personnel could impede the Company's future success.

BECAUSE A SMALL NUMBER OF  CUSTOMERS  ACCOUNT FOR A  SUBSTANTIAL  PORTION OF USA
VIDEO'S REVENUE, IF IT LOSES A MAJOR CUSTOMER, ITS REVENUE COULD SUFFER.

Three customers  accounted for  approximately 82% of USA Video's revenue for the
year ended  December 31, 2000, and one of those  customers  accounted for 44% of
revenues for that year.  The Company  expects a small  number of customers  will
continue to account for a substantial portion of its revenue for the foreseeable
future. USA Video's inability to increase the number of its customers or the



                                      - 15 -
<PAGE>

loss of any one major customer could limit the Company's  ability to maintain or
increase  its  market  share,  or  could  cause  revenue  to  drop  quickly  and
unexpectedly.

USA VIDEO'S BUSINESS MAY SUFFER IF IT CANNOT PROTECT ITS INTELLECTUAL PROPERTY.

     USA Video seeks to protect its proprietary  rights through a combination of
patents,  trade  secret  and  trademark  laws,  confidentiality  procedures  and
contractual provisions with employees and third parties.  Despite its efforts to
protect its proprietary rights, unauthorized parties may attempt to copy aspects
of the  Company's  products or obtain and use  information  that it considers as
proprietary.  Litigation  may be necessary  to enforce USA Video's  intellectual
property rights,  to protect its trade secrets and to determine the validity and
scope of the  proprietary  rights of  others.  Any  litigation  could  result in
substantial  costs and  diversion  of  management  and other  resources  with no
assurance of success and could seriously harm USA Video's business and operating
results.

USA VIDEO'S  PRODUCTS MAY INFRINGE THE  INTELLECTUAL  PROPERTY RIGHTS OF OTHERS,
CAUSE IT TO INCUR SIGNIFICANT COSTS OR PREVENT IT FROM LICENSING ITS PRODUCTS.

     Other  companies,  including  USA Video's  competitors,  may have or obtain
patents or other proprietary rights that would prevent,  limit or interfere with
the Company's  ability to make, use or license its products.  The Company cannot
be  certain  that its  products  do not and will not  infringe  patents or other
proprietary  rights of others.  USA Video may be  subject to legal  proceedings,
including  claims of alleged  infringement  by it of the  intellectual  property
rights of third  parties.  If a  successful  claim of  infringement  is  brought
against  USA  Video  and it fails  to or is  unable  to  license  the  infringed
technology  on  commercially   reasonable  terms,  the  Company's  business  and
operating  results could be  significantly  harmed.  Companies in the technology
market  are   increasingly   bringing  suits  alleging   infringement  of  their
proprietary  rights,  particularly  patent  rights.  Although  USA  Video is not
currently subject to any litigation or claims, any future claims, whether or not
valid,  could result in  substantial  costs and  diversion of resources  with no
assurance of success. Intellectual property litigation or claims could force USA
Video to do one or more of the following:

          o    cease selling,  incorporating  or using products or services that
               incorporate the challenged intellectual property;

          o    obtain a license  from the holder of the  infringed  intellectual
               property   right,   which   license  may  not  be   available  on
               commercially reasonable terms, or at all; or

          o    redesign it products or services.

         If USA Video is forced to take any of these actions, its business could
be substantially harmed.

USA VIDEO'S INFRASTRUCTURE AND SYSTEMS ARE SUSCEPTIBLE TO NATURAL DISASTERS AND
OTHER UNEXPECTED EVENTS, AND THE OCCURRENCE OF ANY OF THESE EVENTS COULD AFFECT
ITS ABILITY TO OPERATE ITS BUSINESS.

USA Video's video streaming  services will be provided,  in large part, from its
offices located in  southeastern  Connecticut.  A major  equipment  failure or a
natural disaster  affecting this location could impair the Company's  ability to
operate its business,  which could also  severely  disrupt its  operations.  USA
Video currently does not have a formal disaster  recovery plan or an alternative
provider  of  services.  Additionally,  the  Company  currently  does not  carry
business  interruption  insurance  to  compensate  it for any losses that it may
sustain.



                                      - 16 -
<PAGE>

USA VIDEO'S SHARE OWNERSHIP IS CONCENTRATED IN CERTAIN SHAREHOLDERS, WHICH COULD
MAKE MORE DIFFICULT OR PREVENT A CHANGE IN CONTROL OR OTHER TRANSACTIONS.

     The interest of management  could conflict with the interest of USA Video's
other  shareholders.  USA Video's  executive  officers,  directors and principal
shareholders beneficially own, assuming the exercise of all options and warrants
held by them, an aggregate of 18.58% of the Company's outstanding common shares.
As a result,  these  shareholders  will be able to exercise greater control over
all matters requiring  shareholder  approval than other shareholders,  including
the election of directors and approval of  significant  corporate  transactions.
This could have the effect of delaying or  preventing a change of control of USA
Video,  and make some  transactions  more  difficult or  impossible  without the
support of these shareholders, including proxy contests, mergers, tender offers,
and  open-market   share  purchase   programs  that  could  give  the  Company's
shareholders  the  opportunity  to  realize a premium  over the  then-prevailing
market price for the common shares,  which in turn could reduce the market price
of the Company's shares.

USA VIDEO'S  SUCCESS  DEPENDS ON THE CONTINUED  GROWTH IN DEMAND FOR  E-BUSINESS
APPLICATIONS.

     USA Video's primary business  strategy involves the development of products
and services that enable users to transmit video over the Internet. As a result,
its future sales and any future profits will be substantially dependent upon the
widespread acceptance and use of the Internet as an effective medium of business
by consumers and  businesses.  To be successful,  consumers and businesses  that
historically  have used traditional  means of commerce to transact business must
continue to accept and utilize the Internet as a medium for conducting  business
and exchanging information.  Consumers and businesses may reject the Internet as
a viable  commercial  medium  for a number  of  reasons,  including  potentially
inadequate network  infrastructure,  slow development of enabling  technologies,
insufficient commercial support and privacy concerns. In addition, delays in the
development  or  adoption  of new  standards  and  protocols  required to handle
increased levels of Internet activity or increased  government  regulation could
cause the Internet to lose its viability as a commercial  medium.  If the demand
for  e-business  applications  does not grow or grows more slowly than expected,
demand for USA Video's  products and  services  would be reduced and its revenue
would suffer.

GOVERNMENT  REGULATION AND LEGAL  UNCERTAINTIES  COULD ADD ADDITIONAL  COSTS AND
RISKS TO DOING BUSINESS ON THE INTERNET AND COULD HARM THE COMPANY'S BUSINESS.

     USA Video is not currently subject to direct regulation by any governmental
agency,  other than  regulations  applicable  to  businesses  generally,  export
control laws and laws or regulations directly applicable to electronic commerce.
However,  due to the  increasing  popularity  and  use  of the  Internet,  it is
possible  that a number of laws and  regulations  may be adopted with respect to
the  Internet  covering  issues  such  as:  user  privacy,   pricing,   content,
copyrights,  distribution,  and  characteristics  and  quality of  products  and
services.

     Furthermore,  the growth  and  development  of the  market  for  electronic
commerce may prompt calls for more stringent  consumer  protection laws that may
impose additional  burdens on those companies  conducting  business online.  The
adoption  of  additional  laws or  regulations  may  decrease  the growth of the
Internet or other online services, which could, in turn, decrease the demand for
the Company's products and services and increase its cost of doing business.


                                      - 17 -
<PAGE>

     The applicability to the Internet of existing laws governing issues such as
property  ownership,  copyrights,  encryption  and other  intellectual  property
issues,  taxation,  libel,  export or import  matters,  obscenity  and  personal
privacy is  uncertain.  The vast majority of such laws were adopted prior to the
advent of the  Internet  and  related  technologies.  As a  result,  they do not
contemplate   or  address  the  unique   issues  of  the  Internet  and  related
technologies.  Changes to such laws intended to address these issues,  including
some  recently  proposed  changes,  could  create  uncertainty  in the  Internet
marketplace. Such uncertainty could reduce demand for the Company's products and
services  or  increase  the cost of doing  business  due to  increased  costs of
litigation or increased service delivery costs.

THE COMPANY'S SHARE PRICE HAS BEEN AND COULD BE HIGHLY VOLATILE, WHICH COULD
RESULT IN SUBSTANTIAL LOSSES TO INVESTORS.

     The trading price of the Company's  common shares has been and is likely to
continue  to be highly  volatile  and could be subject to wide  fluctuations  in
response to a number of factors  including:  variations  in quarterly  operating
results;  new  products or services  offered by the Company or its  competitors;
conditions or trends in the Internet and online commerce industries;  changes in
the economic  performance  and/or market valuations of other Internet and online
service  companies;  and other  events or factors,  many of which are beyond the
Company's control. In addition,  the stock market in general, and the market for
Internet-related and technology companies in particular, has experienced extreme
price and volume  fluctuations,  including  large  price drops in 2000 and 2001,
that have often been unrelated or disproportionate to the operating  performance
of such  companies.  These broad  market and  industry  factors  may  materially
adversely affect the market price of the Company's common shares,  regardless of
the Company's actual operating  performance.  In the past,  following periods of
volatility   in  the  market  price  of  a  company's   securities,   securities
class-action  litigation has often been instituted against such companies.  Such
litigation, if instituted,  could result in substantial costs and a diversion of
management's attention and resources.

ANTI-TAKEOVER PROVISIONS IN USA VIDEO'S CHARTER DOCUMENTS COULD PREVENT OR DELAY
A CHANGE IN CONTROL OF THE COMPANY.

     USA  Video's  Articles  of  Continuance  and bylaws  contain  anti-takeover
provisions  that could  discourage,  delay or even prevent an acquisition of the
Company at a premium price or at all. Any of these  provisions might prevent the
market  price of the USA Video  common  shares  from  increasing  in response to
takeover attempts, and could prevent the Company's shareholders from realizing a
premium over the then-prevailing market price for the common shares.

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

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

LIMITED   LIABILITY  OF  EXECUTIVE   OFFICERS  AND  DIRECTORS   MAY   DISCOURAGE
SHAREHOLDERS FROM BRINGING A LAWSUIT AGAINST THEM.

     USA Video's bylaws contain provisions that limit the liability of directors
for monetary damages and provide for  indemnification of officers and directors.
These  provisions may discourage  shareholders  from bringing a lawsuit  against
officers and directors for breaches of fiduciary duty and may also


                                      - 18 -
<PAGE>

reduce the likelihood of derivative  litigation  against  officers and directors
even though such action,  if  successful,  might  otherwise  have  benefited the
shareholders.  In  addition,  a  shareholder's  investment  in USA  Video may be
adversely  affected to the extent  that costs of  settlement  and damage  awards
against   officers  or  directors  are  paid  by  USA  Video   pursuant  to  the
indemnification provisions of the bylaws.

REQUIREMENTS  OF THE SEC WITH REGARD TO LOW-PRICED  "PENNY STOCKS" MAY ADVERSELY
AFFECT THE ABILITY OF SHAREHOLDERS TO SELL THEIR SHARES IN THE SECONDARY MARKET.

     "Penny  stocks" are  low-priced,  and  usually  highly  speculative,  stock
selling at less than $5.00 per share. USA Video's securities are subject to Rule
15g-9 under the Securities  Exchange Act of 1934, which imposes additional sales
practice  requirements  on  broker-dealers  who sell such  securities to persons
other than  established  customers and  "accredited  investors"  (generally,  an
individual  with a net  worth  in  excess  of  $1,000,000  or an  annual  income
exceeding  $200,000,   or  $300,000  together  with  his  or  her  spouse).  For
transactions  covered  by  this  rule,  a  broker-dealer  must  make  a  special
suitability  determination  for the purchaser and have received the  purchaser's
written  consent to the  transaction  prior to sale.  The rule also requires the
delivery,  prior to the transaction,  of a risk disclosure  document mandated by
the SEC relating to the penny stock market. The broker-dealer must also disclose
the commissions  payable for the transaction,  current quotations for the stock,
and,  if  applicable,  the fact that it is the sole  market  maker in the stock.
Consequently,  the rule may adversely  affect the ability of  broker-dealers  to
sell USA Video's securities and may adversely affect the ability of shareholders
to sell their shares in the secondary market.

USA  VIDEO  DOES  NOT  ANTICIPATE   PAYING  DIVIDENDS  TO  SHAREHOLDERS  IN  THE
FORESEEABLE FUTURE.

     USA Video has not paid dividends on its common shares and intends,  for the
foreseeable  future,  to invest any earnings in the further  development  of its
business.  Accordingly,  shareholders should not expect to receive any dividends
on their shares.

Item 2. Properties.

     USA Video  headquarters  and  executive  offices  are  located  in  Mystic,
Connecticut.  USA Video  leases  1,547  square  feet for an annual  base rent of
$18,108.  The lease expired in 2000, and the Company  occupies the facility on a
month-to-month basis.

     USA Video leases an additional 1,116 square feet of office space in Mystic,
Connecticut  at an annual base rent of $20,400.  The lease expired in 2000,  and
the Company occupies the facility on a month-to-month basis.

     USA Video also leases 800 square feet of office space located in Vancouver,
British Columbia, on a month-to-month basis at a monthly rent of $1,780.

     USA Video believes that it will require additional space to accommodate its
expanding  operations.  The Company is currently seeking to lease new facilities
in the  southeastern  Connecticut area in which to consolidate the activities of
its two  present  offices in Mystic,  Connecticut.  The  Company  believes  that
adequate space is available in this area at commercially reasonable rates.


                                      - 19 -

<PAGE>


Item 3. Legal Proceedings.

     USA Video  Interactive  Corp. v. William  Meyer.  On September 1, 2000, the
Company  instituted 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 seeks damages in an undetermined  amount, but not less than
$350,000,  plus interests and costs. Mr. Meyer has filed a counterclaim  against
the Company  alleging breach of his employment  agreement and other claims,  and
seeking  damages in an  undetermined  amount,  but not less than  $200,000.  The
Company and Mr.  Meyer have reached a settlement  in  principle,  subject to the
execution of a written settlement  agreement,  pursuant to which all claims will
be dismissed  without the payment of any damages,  and the parties will exchange
mutual releases.

     USA Video is not a party to any other material pending legal proceedings.

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

     No matter was submitted to a vote of the Company's  security holders during
the fourth quarter of the fiscal year covered by this report.


                                     PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.

     There is a limited public market for the common shares of the Company.  The
common shares trade on the Canadian  Venture  Exchange  (under the symbol "US"),
and on the NASD OTC Bulletin Board (under the symbol  "USVO").  From May 3, 2000
through  August 28,  2000,  the common  shares  were  traded in the pink  sheets
published by the National Quotation Bureau.

     The  following  table  shows the high and low  sales  prices  (in  Canadian
dollars) of the common shares as reported by the Canadian  Venture  Exchange for
the periods indicated.

<TABLE>
<CAPTION>

                            Canadian Venture Exchange
                                  (Symbol "US")

            Quarter                            High                  Low
            -------                            ----                  ---
                                               ($CAN)                ($CAN)

            <S>                                <C>                    <C>
            First Quarter 1999                   .80                    .07
            Second Quarter 1999                 1.83                    .25
            Third Quarter 1999                  1.69                   1.02
            Fourth Quarter 1999                 1.65                    .90
            First Quarter 2000                 15.00                   1.25
            Second Quarter 2000                 6.90                   2.06
            Third Quarter 2000                  5.20                   3.52
            Fourth Quarter 2000                 4.25                    .72

</TABLE>


     The  following  table shows the high and low prices of the common shares on
the NASD OTC  Bulletin  Board (and in the pink sheets for the period May 3, 2000
to August 28,  2000).  The following  quotations  reflect  inter-dealer  prices,
without  retail  mark-up,  mark-down  or  commission  and  may  not  necessarily
represent actual transactions:



                                      - 20 -

<PAGE>


<TABLE>
<CAPTION>

                         OTC Bulletin Board/Pink Sheets
                                 (Symbol "USVO")

            Period                               High                  Low
            ------                               ----                  ---
                                                 ($US)                 ($US)

            <S>                                  <C>                   <C>
            First Quarter 1999                     .83                   .45
            Second Quarter 1999                   1.28                   .26
            Third Quarter 1999                    1.20                   .25
            Fourth Quarter 1999                   1.094                  .60
            First Quarter 2000                   10.25                   .85
            Second Quarter 2000                   4.969                 1.315
            Third Quarter 2000                    4.35                  2.06
            Fourth Quarter 2000                   2.844                  .375
</TABLE>

     As of March 23, 2001, there were 84,325,089 common shares outstanding, held
by 1,418 shareholders of record.

     To date,  the Company has not paid any  dividends on its common  shares and
does not expect to declare or pay any  dividends  on such  common  shares in the
foreseeable  future.  Payment of any dividends will depend upon future earnings,
if any, the  financial  condition of the  Company,  and other  factors as deemed
relevant by the Company's Board of Directors.

     All sales of  securities  made by USA Video during the year ended  December
31, 2000 that were not  registered  under the Securities Act have been disclosed
in USA Video's  reports on Form 10-Q for the periods ended March 30, 2000,  June
30,  2000 and  September  30,  2000.  The  sales did not  involve  the use of an
underwriter  and no commissions  were paid in connection with the sale of any of
these securities.

Item 6. Selected Financial Data.

     The following  table  presents  selected  historical  financial  data.  The
consolidated statement of operations data for the years ended December 31, 1998,
1999 and 2000,  and the balance  sheet data as of December 31, 1999 and 2000 are
derived from USA Video's consolidated financial statements included elsewhere in
this  report,  which have been  audited by  Amisano  Hanson  (1998 and 1999) and
Goldstein Golub Kessler LLP (2000) independent auditors.  The selected financial
data  should be read in  conjunction  with USA  Video's  consolidated  financial
statements,  including  the  related  notes,  and  the  information  in  Item 7,
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations."

<TABLE>
<CAPTION>

                                                                  December 31,

           Item                    2000               1999               1998              1997                1996

<S>                            <C>                <C>                <C>                <C>                <C>
Revenue                        $   638,592        $    20,500                 --                 --                 --

Loss                           ($4,661,652)       ($1,684,468)       ($  981,598)       ($  678,156)       ($  658,983)

Loss per share                 ($      .06)       ($      .03)       ($     0.02)       ($      .02)       ($     0.03)

Total assets                   $ 1,744,071        $   995,351        $   435,232        $   418,354        $   470,553

Long-term obligations                   --                 --                 --                 --                 --

Cash dividends per share                --                 --                 --                 --                 --

</TABLE>


                                      - 21 -
<PAGE>

Item 7. Management's Discussion and Analysis of Financial Conditions and Results
        of Operation.

Overview of the Company

     USA Video was a development-stage  company from January 1, 1992 to December
31, 1999,  during  which time it engaged  primarily  in the  development  of its
end-to-end   hardware  systems  and  proprietary   Video-on-Demand  and  Wavelet
compression technologies,  and had very limited sales. In 2000, the Company made
the first substantial sales of its end-to-end  systems,  and invested heavily in
further development of its StreamHQ(TM)  streaming media services.  USA Video is
transitioning  its business  from  hardware  sales to the providing of streaming
media services and expects that the design and development of the first phase of
its  StreamHQ(TM)  services will be completed during the second or third quarter
of 2001. The development of StreamHQ(TM)  has involved  technology  development,
hardware  and  software  selection  and  integration,  and  the  cultivation  of
partnerships with suppliers and providers of services. The continued development
and  expansion of the  Company's  business  will require  ongoing  investment in
back-office systems, affiliations with network service providers and others, and
increasing technical and sales/marketing staffs.

     As more fully discussed below, in this Management's  Discussion  section of
this Report,  the Company has not been  profitable,  and has not had significant
revenues. USA Video cannot predict its revenue levels for the next 12 months, or
thereafter,  nor  when,  or if,  its  operations  will  become  profitable.  The
Company's  expenses  will  continue  to  increase  as it  further  develops  its
technology  and  StreamHQ(TM)  services,  and  increases its marketing and sales
efforts. USA Video will require additional financing,  both for the remainder of
fiscal 2001 and  thereafter,  to  continue  to operate and expand its  business.
There is no assurance  that such  financing  will be  available on  commercially
reasonable terms, if at all.

Results of Operations

Revenues

     Revenues  for the  year  ended  December  31,  2000  ("fiscal  2000")  were
$638,592,  compared  with $20,500 for the year ended  December 31, 1999 ("fiscal
1999").  The  Company  had no  revenues  for the year ended  December  31,  1998
("fiscal 1998").  Approximately  fifty percent (50%) of revenues for fiscal 2000
were derived  from sales of the  Company's  hardware  and  software  systems and
approximately  fifty percent (50%) were from provision of engineering  services.
The Company had three major  customers who, in the aggregate,  accounted for 82%
of total revenues in fiscal 2000, and one customer who accounted for all revenue
in fiscal 1999.

Expenses

     Total expenses for fiscal 2000 were  $5,291,663,  compared with  $1,598,826
for fiscal 1999 and $615,817 for fiscal 1998. For fiscal 2000, cost of sales was
$393,496, as compared with $19,119 for fiscal 1999.

     Research and development  costs for fiscal 2000 were $620,212,  as compared
to $93,337 for fiscal 1999 and $24,000 for 1998. The increase in fiscal 2000 was
due primarily to development work on the Company's new services-based multi-mode
rich  media  streaming   solution,   StreamHQ(TM),   which  required   increased
expenditures for manpower, equipment and software.

     Selling,  general and  administrative  expenses were  $2,599,591 for fiscal
2000, as compared with $1,372,928 for fiscal 1999, and $550,836 for fiscal 1998.


                                      - 22 -

<PAGE>

Selling,  general and administrative  expenses consisted of marketing  expenses,
consulting fees,  office,  professional  fees, and other expenses to execute the
Company's  business  plan  and  for  day-to-day   operations.   The  substantial
year-to-year  increases  resulted from the Company's  increased efforts to bring
products to market. The primary components of the increases were:

          o    a $496,743  increase in fiscal 2000,  and a $212,590  increase in
               fiscal  1999,  in  marketing  expenses,   as  the  Company  hired
               additional staff and engaged in marketing  activities 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;

          o    increases of $326,098  (fiscal  2000) and $239,644  (fiscal 1999)
               for administrative  wages and salaries and other office expenses;
               and

          o    a $221,231  increase in professional  fees in fiscal 2000, as the
               Company,  in connection  with becoming a reporting  issuer in the
               United States,  required increased levels of accounting and legal
               services.

     Additional expenses included  depreciation and amortization of $224,581 for
fiscal  2000,  compared to $113,362 for fiscal 1999 and $40,981 for fiscal 1998,
as the Company added  machinery and equipment  necessary for the  development of
new products and services.  Non-cash  compensation  charges for fiscal 2000 were
$1,453,783, due mostly to issuance of common shares and common share warrants to
the Company's  officers,  directors  and employees at a price or exercise  price
below the market price of the common shares at the time of issuance. Because the
rules of the Canadian  Venture  Exchange  require  that the  offering  price for
privately  placed  securities  of listed  companies  be set when the offering is
first  announced  rather than upon closing,  the sale price of the common shares
and the exercise price of the warrants were below the market price of the common
shares on the date of issuance.

     Other increases in expenses included rent, as headquarters office space was
expanded,  and travel and promotional expenses incurred in attending trade shows
and meeting with suppliers and potential customers.

     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 and brand awareness.  Advertising and
public relations  expenses also will increase as the Company grows its business.
General and  administrative  expenses will increase as the Company  continues to
build its management  infrastructure,  including  additional  personnel,  office
space and internal information systems.

Net Losses

     To date,  the Company has not achieved  profitability  and expects to incur
substantial losses for the foreseeable future. The Company's net loss for fiscal
2000 was $4,661,652, compared with a net loss of $1,684,468 for fiscal 1999, and
$981,598 for fiscal 1998.

Liquidity and Capital Resources

     At December 31, 2000, the Company's cash position was $231,197,  a decrease
of $186,469 from December 31, 1999. The Company had a working capital deficit of
$404,644 and an accumulated deficit of $25,302,482 at December 31, 2000.


                                      - 23 -

<PAGE>

     The Company's  principal  source of cash during fiscal 2000 was proceeds of
$3,362,136  received  upon  exercise of options and  warrants  and from  private
placements of its equity securities.  This was offset by $2,858,616 of cash used
in operating activities and $689,989 for purchase of equipment.

     The Company has  historically  satisfied  its capital  needs  primarily  by
issuing  equity  securities  to its officers,  directors,  employees and a small
group of investors, and from short-term bridge loans from members of management.
During fiscal 2000, the Company completed two private  placements,  resulting in
gross proceeds to the Company of $2,260,000.

     In the first offering,  the Company sold 190,000 units,  each consisting of
one common  share and one  warrant to acquire an  additional  share at $4.00 per
share by January 26, 2002, at $4.00 per unit, for total proceeds of $760,000. In
the second offering, the Company sold 1,000,000 units at $1.50 per unit for $1.5
million in  proceeds.  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  also  received  proceeds of  $1,102,136  from the  exercise of
outstanding options and warrants in fiscal 2000.

     The Company's  independent  accountants,  in their report  accompanying the
Company's  audited  financial  statements at and for the year ended December 31,
2000, have stated that there are substantial  doubts about the Company's ability
to  continue  as a going  concern.  As of  December  31,  2000,  the Company had
$231,197 in cash.  In March 2001,  the Company  received  proceeds of $1,350,000
from a  private  placement  of  common  shares  and  warrants,  which  funds are
sufficient to fund current operations through mid-year. The Company will require
an additional $3.0 million to $3.5 million to finance operations for the rest of
fiscal  2001 and intends to obtain such  financing  through  sales of its equity
securities.  The threat to the Company's  ability to continue as a going concern
will be  removed  only when  revenues  have  reached a level that  sustains  the
Company's business operations.

     Assuming  the  aforementioned  $3.0 million to $3.5 million in financing is
obtained,  continuing  operations for the longer-term will be supported  through
anticipated  growth in revenues and through  additional  sales of the  Company's
securities.  Although longer-term financing requirements may vary depending upon
the  Company's  sales  performance,  management  expects  that the Company  will
require  additional  financing  of $5.0 million to $6.0 million for fiscal 2002.
The Company has no binding commitments or arrangements for additional financing,
and there is no assurance that  management will be able to obtain any additional
financing on terms acceptable to the Company, if at all.

Item 7A. Quantitative and Qualitative Disclosure About Market Risk.

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

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



                                      - 24 -
<PAGE>

Item 8. Financial Statements and Supplementary Data.

     The financial statements and supplementary  financial  information required
to be filed  under this item are  presented  on pages F-1  through  F-18 of this
Report and are incorporated herein by reference.

Item 9.  Changes  in  and  Disagreements  with  Accountants  on  Accounting  and
         Financial Disclosure.

     In a current  report on Form 8-K dated February 2, 2001, USA Video reported
that on  February 2, 2001,  it engaged  Goldstein  Golub  Kessler LLP to replace
Amisano Hanson as the Company's  auditors.  There have been no  transactions  or
events required to be reported pursuant to Item 304 (b) of Regulation S-K.

                                    PART III

Item 10. Directors and Executive Officers of the Registrant.

     The  following  table sets  forth the name,  age,  position,  and period of
service in his present  position of each director and  executive  officer of USA
Video:
<TABLE>
<CAPTION>

          Name                Age                      Position                     Period of Service

<S>                           <C>   <C>                                                  <C>
Edwin Molina                  45    Director, Chief Executive Officer and President      Since 1998

Anton J. Drescher (1)         44    Director, Chief Financial Officer and Secretary      Since 1994

Anthony J. Castagno (1)       51    Director and Executive Vice President                Since 2000

Robert D. Smith Jr.           50    Chief Operating Officer                              Since 2000

Kent Norton                   41    Chief Information/Chief Technical Officer            Since 2000

Matthew W. Kinnaman           40    Vice President, Strategic Innovation                 Since 2000

</TABLE>

(1) Member of the Audit Committee

     Anton  Drescher,  Edwin  Molina,  Anthony  Castagno,  and Daniel Sciro were
elected  directors of USA Video in June 2000.  Mr. Sciro  resigned as an officer
and director on February 12, 2000, and as of March 23, 2001, a successor had not
been  appointed.  Each  director  will serve  until the next  annual  meeting of
shareholders and his successor is elected and qualified.

Executive Officers and Directors of the Company:

Edwin Molina - President, Chief Executive Officer and Director

     Mr. Molina served as a Senior  Administrator  with USA Video from June 1992
to June 30, 1998, when he was appointed President, Chief Executive Officer and a
director.  Mr.  Molina  was also a Senior  Administrator  with  Adnet USA LLC, a
private  California company involved in Internet  advertising,  from May 1996 to
June 1998.

Anton J. Drescher - Chief Financial Officer, Secretary and Director

     Mr. Drescher has been Chief  Financial  Officer of USA Video since December
1994.  He has also been a  director  and  Secretary/  Treasurer  of Future  Link
Systems Inc. a public company listed on the Canadian Venture Exchange, which was
involved in the development of compression  technology since 1997.  Director and
Secretary/Treasurer of IQuest Networks Inc. (formerly Interlink Systems Inc. and
Glassmaster  Industries,  Inc.), a public company listed on The Canadian Venture
Exchange ("CDNX")


                                      - 25 -
<PAGE>

involved in digital  audio  distribution  since  1996;  President  of  Westpoint
Management  Consultants Limited, a private company engaged in tax and accounting
consulting for business reorganizations since 1979; President of Harbour Pacific
Capital Corp., a private British Columbia company involved in regulatory filings
for businesses in Canada,  since 1998; and, since 1991, a director and President
of  International  Tower Hill Mines Limited,  a public British  Columbia company
listed on the CDNX and involved in mineral exploration.  Mr. Drescher has been a
Certified Management Accountant since 1981.

Anthony J. Castagno - Executive Vice President and Director

     Mr. Castagno joined USA Video in 1999 as a Vice President.  In April, 2000,
he was  appointed  Executive  Vice  President and in June,  2000,  was elected a
Director of USA Video.  Mr.  Castagno is also  President  of The Rowe Group,  an
independent  consulting  firm  specializing  in  marketing,  investor  and media
relations,  which he founded in 1997.  Prior to  founding  The Rowe  Group,  Mr.
Castagno headed a three-state  public  relations and marketing  organization for
approximately  17 years for Northeast  Utilities,  a large public utility in the
northeastern U.S.

Robert D. Smith, Jr. - Chief Operating Officer

     Mr. Smith joined USA Video in August 2000 as Chief Operating  Officer.  Mr.
Smith  was  formerly  a  vice   president  at  Sonalysts   Inc.,  of  Waterford,
Connecticut,  where,  for 22 years,  he  helped  build  the  company  into a $50
million, nearly 500-person international  e-business,  multimedia,  software and
engineering  corporation.  Mr. Smith  graduated with  distinction  from the U.S.
Naval  Academy,  where he was a  Trident  Scholar  and  earned a B.S.  degree in
oceanography  and  engineering.  He served in a variety of officer  positions in
thenuclear  submarine  Navy prior to leaving  active duty.  Concurrent  with his
employment at Sonalysts, Inc. he continued to serve in the Naval Reserve, having
recently retired with the rank of Captain.

Kent Norton - Chief Information/Chief Technical Officer

     Mr. Norton joined USA Video in May 2000 as Chief Information  Officer,  and
in addition,  was appointed  Chief  Technical  Officer in September  2000.  From
January 2000 to June 2000, Mr. Norton was Director of Technology and Information
Systems with beenz.com, which was creating a universal, incentive-based currency
for on-line merchants.  Mr. Norton was employed by Computer Sciences Corporation
from 1996 to January 2000,  and from 1991 to 1994. His last position at Computer
Sciences Corporation was senior manager, where he was responsible for the design
of a global  technical  support  infrastructure  for the company's  "help desks"
around  the  world.  From  1994 to 1996,  Mr.  Norton  held a senior  technology
position with  Sonalysts,  Inc. Mr. Norton holds a Bachelor of Science degree in
Civil & Structural Engineering from the University of Cincinnati.

Matthew W. Kinnaman - Vice President, Strategic Innovation

     Mr.  Kinnaman  joined USA Video in May 2000 as Vice  President of Strategic
Innovation.  From April 1998 to March 2000, Mr.  Kinnaman was employed at Gilder
Technology  Group,  which,  with Forbes Magazine,  co-publishes  George Gilder's
investment strategy  newsletter,  the Gilder Technology Report.  While at Gilder
Technology Group, Mr. Kinnaman was Editorial  Director of Conferences,  Director
of Research and  Communication,  Director of Business  Development and Associate
Editor.  From  1990 to 1998,  Mr.  Kinnaman  was  Director  of  Development  and
ProgramDirector for New England Keswich,  Inc., a  non-denominational  Christian
camp.

     There  is no  family  relationship  among  any of the  Company's  executive
officers and directors.



                                      - 26 -
<PAGE>

Section 16(a) Beneficial Ownership Reporting Compliance

     Section 16 of the  Securities  Exchange Act of 1934,  as amended  ("Section
16"), requires that reports of beneficial ownership of capital stock and changes
in such  ownership be filed with the  Securities  and Exchange  Commission  (the
"SEC") by Section 16 "reporting persons," including directors, certain officers,
and holders of more than 10% of the  outstanding  common shares.  The Company is
required to disclose in this Annual  Report on Form 10-K each  reporting  person
whom it knows to have failed to file any required  reports under Section 16 on a
timely basis during the fiscal year ended December 31, 2000.

     To the Company's knowledge,  based solely on a review of copies of Forms 3,
4 and 5 furnished to it and written  representations  that no other reports were
required,  during the  fiscal  year  ended  December  31,  2000,  the  Company's
officers,  directors and 10% shareholders complied with all Section 16(a) filing
requirements applicable to them except as follows:

1.   Mr. Molina failed to file a Form 4 with respect to: (i) his  disposition of
     15,000  common  shares  in  eight   transactions  in  May  2000;  (ii)  his
     disposition of 35,000 common shares in 11 transactions in June 2000;  (iii)
     his  acquisition  from the Company of 200,000 common shares and of warrants
     to purchase  200,000 common shares in August 2000;  (iv) his disposition of
     10,000 common shares in two  transactions,  and his  acquisition of 875,000
     common shares upon the exercise of warrants, in September 2000; and (v) his
     acquisition  of 650,000  common  shares  upon the  exercise  of warrants in
     October 2000. Mr. Molina failed to file a timely Form 5 with respect to the
     transactions  described above. Mr. Molina filed a Form 5 in March 2001 with
     respect to such transactions.

2.   Mr. Smith  failed to file a timely Form 3 with respect to his  ownership of
     securities  of the  Company in August  2000,  upon  becoming  an  executive
     officer.  Mr.  Smith  failed to file a timely  Form 5 with  respect  to his
     acquisition in December 2000, of options to purchase  200,000 common shares
     at $1.00 per share.  Mr.  Smith  filed a Form 3 and a Form 5 in March 2001,
     and an amended Form 5 in March 2001, with respect to his initial  ownership
     and the acquisition transaction.

3.   Mr.  Norton  failed  to  file a  timely  Form 5 with  respect  to:  (i) his
     acquisition in September  2000 of options to purchase  25,000 common shares
     at $3.35 per share;  (ii) his  acquisition  in December  2000 of options to
     purchase 100,000 common shares at $1.00 per share; and (iii) the repricing,
     in December 2000 of options to purchase 100,000 common shares from $2.00 to
     $1.00 per  share.  In  addition,  Mr.  Norton  failed to file a Form 4 with
     respect  to his  acquisition  in  September  2000 of 25,000  common  shares
     pursuant to the exercise of a previously  granted stock option.  Mr. Norton
     filed a Form 5 and an amended  Form 5 in March  2001 with  respect to these
     transactions.

4.   Mr.  Kinnaman  failed to file a Form 4 with respect to: (i) his acquisition
     by gift of 10,000 common shares in May 2000; (ii) his sales of 2,000 common
     shares in one transaction in June 2000; and (iii) his sales of 8,000 common
     shares in two  transactions  in  September  2000,  and a timely Form 5 with
     respect to the  repricing in December  2000 of options to purchase  100,000
     common shares from $2.00 to $1.00 per share. Mr. Kinnaman filed a Form 5 in
     March 2001 with respect to these transactions.

Item 11. Executive Compensation.

     The following table sets forth  compensation  awarded to, earned by or paid
to USA Video's Chief  Executive  Officer (CEO),  and to other persons serving as
executive officers of the Company as of December 31, 2000, whose salary and


                                      - 27 -
<PAGE>

bonus  for such year  exceeded  $100,000  (collectively,  the  "Named  Executive
Officers") for the last three completed fiscal years.

<TABLE>
<CAPTION>
                                                                                  Long-Term Compensation
                                                                 --------------------------------------------------
                          Summary Compensation Table                       Awards                    Payouts
                             Annual Compensation                 ---------------------------  ---------------------
    Name and    ------------------------------------------------    Restricted   Securities
    Principal                                       Other Annual     Stock        Underlying     LTIP     All Other
    Position    Year     Salary         Bonus       Compensation     Award(s)     Options/SARs  Payouts  Compensation
    ----------  ------ ------------   ------------  ------------   ------------  -------------  -------  ------------
                           $              $              $              $              $           $           $
                      ------------------------------------------------------------------------------------------------

<S>                    <C>                          <C>                           <C>
Molina,         2000   $ 128,361         -0-        $ 500,000(4)       -0-              -0-       -0-         -0-
Edwin           1999   $ 120,999(1)      -0-        $ 200,665(5)       -0-        1,200,000       -0-         -0-
(CEO)           1998   $  60,500(1)      -0-        $   3,172(6)       -0-        1,300,000       -0-         -0-

Drescher        2000   $ 120,000(2)      -0-        $ 500,000(7)       -0-          200,000       -0-         -0-
Anton,          1999   $ 120,000(2)      -0-        $ 159,665(8)       -0-        1,000,000       -0-         -0-
(CFO)           1998   $  77,270(2)      -0-        $   3,172(9)       -0-        1,000,000       -0-         -0-

Castagno,       2000   $ 125,722         -0-        $ 125,000(10)      -0-        1,100,000       -0-         -0-
Anthony (EVP)   1999   $ 120,000(3)      -0-        $ 194,300(11)      -0-          250,000       -0-         -0-
</TABLE>


(1)  Represents  consulting  fees  paid to Mr.  Molina  for his  services  as an
     executive officer of the company.

(2)  Represents  consulting  fees paid to Mr.  Drescher  through Harbour Pacific
     Capital Corp., a consulting  firm  wholly-owned by him, for his services as
     an executive officer of the Company.

(3)  Represents  consulting  fees paid to Mr.  Castagno  for his  services as an
     executive officer of the Company.

(4)  In July 2000,  Mr. Molina  purchased  200,000 units (each  comprised of one
     common  share and one  warrant  to acquire  one  common  share at $1.50 per
     share) at $1.50 per unit.  This  compensation  resulted from the difference
     between the $1.50 purchase  price and the $1.50 warrant  exercise price and
     the fair market price of $2.75 of the common shares on the date of issuance
     of the units.

(5)  From February  through May, 1999, Mr. Molina exercised stock options for an
     aggregate  of  800,000  shares at an  exercise  price of $.067  per  share,
     resulting in compensation of $200,665.

(6)  From May through December,  1998, Mr. Molina exercised stock options for an
     aggregate of 750,000 common shares at an exercise price of $.067 per share,
     resulting in compensation of $4,177.

(7)  In July 2000, Mr. Drescher  purchased  200,000 units (each comprised of one
     common  share and one  warrant  to acquire  one  common  share at $1.50 per
     share) at $1.50 per unit.  This  compensation  resulted from the difference
     between the $1.50 purchase  price and the $1.50 warrant  exercise price and
     the fair market price of $2.75 of the common shares on the date of issuance
     of the units.

(8)  From February  through June 1999, Mr. Drescher  exercised stock options for
     an aggregate of 1,000,000  common shares at an exercise  price of $.067 per
     share,  resulting  in  compensation  of  $147,800.  In 1999,  Mr.  Drescher
     received interest totalling $12,965 on loans made to USA Video.


                                      - 28 -
<PAGE>


(9)  In January 1998, Mr.  Drescher  exercised  stock options for 500,000 common
     shares at an exercise price of $.067 per share,  resulting in  compensation
     of $10,050.  In 1998, Mr. Drescher received  interest  totalling $24,379 on
     loans made to USA Video.

(10) In July 2000, Mr.  Castagno  purchased  50,000 units (each comprised of one
     common  share and one  warrant  to acquire  one  common  share at $1.50 per
     share) at $1.50 per unit.  This  compensation  resulted from the difference
     between the $1.50 purchase  price and the $1.50 warrant  exercise price and
     the fair market price of $2.75 of the common shares on the date of issuance
     of the units.

(11) In July 1999,  Mr.  Castagno  exercised  stock  options for 250,000  common
     shares at an exercise price of $.067 per share,  resulting in  compensation
     of $194,300.

         The following table sets forth certain information concerning grants of
stock options to the Named Executive Officers during the year ended December 31,
2000.

<TABLE>
<CAPTION>

                      OPTION/SAR GRANTS IN LAST FISCAL YEAR

                                                                                       Potential Realizable Value at
                                                                                       Assumed Annual Rate of Stock
                                Individual Grants                                   Price Appreciation for Option Term
                                --------------------------------------------------------------------------------------
                     Number of     % of Total               Market
                     Securities   Options/SARs              Price on
                     Underlying    Granted to    Exercise   Date of
                   Options/ SARs  Employees in    Price      Grant     Expiration      0%         5%        10%
                     Granted      Fiscal Year(1) ($/Share) ($/Share)     Date         ($)         ($)       ($)
                   -----------------------------------------------------------------------------------------------
<S>                <C>           <C>             <C>        <C>                    <C>         <C>        <C>
Molina, Edwin          -0-          -0-             -0-        -0-          -0-         -0-         -0-        -0-
Drescher, Anton    200,000         4.59%         $ 1.00     $  .83     12/12/02         -0-         -0-        -0-
Castagno,          300,000          -0-          $ 5.00     $ 5.56      2/17/02    $168,000    $200,970   $236,280
Anthony            100,000        25.23%         $ 2.00     $ 2.10      6/16/02    $ 10,000    $ 16,275   $ 23,100
                   700,000          -0-          $ 1.00     $  .83     12/12/02         -0-         -0-        -0-
</TABLE>

(1)  A total of 4,360,000 stock options were granted to employees in 2000.

     The following table sets forth certain information  concerning exercises of
stock options by the Named Executive Officers during the year ended December 31,
2000 and stock options held at year end.

     Aggregated  Option / SAR  Exercises in Last Fiscal Year and FY-End Option /
SAR Values
<TABLE>
<CAPTION>
                                                                  Number of Securities       Value of Unexercised
                                                                 Underlying Unexercised          In-the-Money
                                                                     Options / SARs             Options / SARs
                                                                     at FY-End (#)              At FY-End ($)-
--------------------------------------------------------------------------------------------------------------------
                         Shares Acquired on    Value Realized         Exercisable/               Exercisable/
Name                        Exercise (#)            ($)              Unexercisable             Unexercisable(1)
--------------------------------------------------------------------------------------------------------------------
<S>                             <C>                 <C>              <C>                          <C>
Molina, Edwin                   -0-                 -0-              1,200,000 / 0                N/A(2) / $0

Drescher, Anton                 -0-                 -0-              1,200,000 / 0                N/A(3) / $0

Castagno, Anthony               -0-                 -0-              1,100,000 / 0                N/A(4) / $0

</TABLE>

(1)  On  December  31,  2000,  the average of the high and low bid prices of the
     common  shares on the OTC BB was $.46 (the  "December  31,  2000 OTC BB bid
     price").

(2)  Mr. Molina's 1,200,000  options,  with an exercise price of $1.00, were not
     in the money based on the December 31, 2000 OTC BB bid price.

(3)  Mr. Drescher's 1,200,000 options, with an exercise price of $1.00, were not
     in the money based on the December 31, 2000 OTC BB bid price.


                                      - 29 -
<PAGE>

(4)  Mr.  Castagno's  1,100,000  options  with an exercise  prices of (300,000 @
     $5.00,  100,000 @ $2.00 and 700,000 @ $1.00) were not in the money based on
     the December 31, 2000 OTC BB bid price.

Compensation of Directors

         Directors receive no compensation for their service as such.

Employment Contracts

     USA Video does not have an employment contract with Mr. Molina or any other
Named  Executive  Officer.   The  Company  has  no  obligation  to  provide  any
compensation to Mr. Molina or any other Named Executive  Officer in the event of
his  resignation,  retirement  or  termination,  or a change in  control  of the
Company, or a change in any Named Executive Officers' responsibilities following
a change in control.

     USA Video may in the future create  retirement,  pension,  profit  sharing,
insurance and medical  reimbursement  plans covering its Executive  Officers and
Directors.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

     The  following  table  sets  forth as of March  23,  2001,  the  number  of
outstanding  common  shares of USA Video  beneficially  owned by (i) each person
known to USA Video to beneficially  own more than 5% of its  outstanding  common
shares,  (ii) each director,  (iii) each Named Executive  Officer,  and (iv) all
officers and directors as a group.

<TABLE>
<CAPTION>
         Name                                              Shares Owned         Percentage of Class
----------------------------------------------------------------------------------------------------
<S>                                                       <C>                         <C>
Edwin Molina                                               5,957,924 (1)              6.91%

Anton J. Drescher                                          6,786,885 (2)              7.87%

Anthony J. Castagno                                        2,716,700 (3)              3.18%

All Executive Officers & Directors
 as a Group [six persons]                                 16,736,509 (4)             18.58%

</TABLE>

(1)  Includes  1,200,000 shares underlying options and 660,000 shares underlying
     warrants that are currently  exercisable.  Mr. Molina's address is 70 Essex
     Street, Mystic, Connecticut.

(2)  Includes  1,200,000 shares underlying options and 730,000 shares underlying
     warrants that are currently exercisable. Mr. Drescher's address is 70 Essex
     Street, Mystic, Connecticut.

(3)  Includes  1,100,000 shares underlying options and 100,000 shares underlying
     warrants. Mr. Castagno's address is 70 Essex Street, Mystic, Connecticut.

(4)  Includes   4,225,000  shares   underlying   options  and  1,530,000  shares
     underlying warrants.

Item 13. Certain Relationships and Related Transactions.

     In 2000, the Company paid  consulting  fees of $120,000 to Harbour  Pacific
Capital Corp., a company  controlled by Anton J. Drescher,  in  consideration of
Mr. Drescher's services as an executive officer of the Company.

          In April 2000, the Company issued  190,000 units,  each  consisting of
     one common  share and one warrant to  purchase a common  share at $4.00 per
     share,  for a purchase  price of $4.00 per unit, to the following  officers
     and directors of


                                      - 30 -
<PAGE>

the Company:  Edwin Molina (50,000  units);  Anton J. Drescher  (30,000  units);
Daniel Sciro (a former officer and director)  (60,000 units);  and Ronald Patton
(a former officer) (30,000 units).

     In July 2000, USA Video  completed a private  placement of 1,000,000  units
(each  unit  consisting  of one common  share and one  warrant  to  purchase  an
additional common share at $1.50 per share) for $1.50 per unit, of which 430,031
units were sold to outside  investors  and 569,699  units were sold to officers,
directors, and employees of the Company and their affiliates.  Because the rules
of the Canadian  Venture  Exchange require that the offering price for privately
placed  securities  of  listed  companies  be set  when  the  offering  is first
announced rather than upon closing, the sale price of the units and the exercise
price of the warrants  were below the market price of $2.75 of the common shares
on the date of issuance. Units were sold to the following officers and directors
of the Company,  and their affiliates,  in the amounts  indicated:  Edwin Molina
(200,000 units); Anton J. Drescher (200,000 units);  Anthony J. Castagno (50,000
units);  Daniel Sciro (a former officer and director) (10,000 units);  and Linda
Drescher (the wife of Anton Drescher) (32,699 units).

     In March 2001, USA Video  completed a private  placement of 2,500,000 units
(each  unit  consisting  of one common  share and one  warrant  to  purchase  an
additional common share at $.66 per share) for $.54 per unit, of which 1,585,000
units were sold to outside  investors  and 915,000  units were sold to officers,
directors,  and  employees  of the  Company.  Because the rules of the  Canadian
Venture Exchange require that the offering price for privately placed securities
of listed companies be set when the offering is first announced rather than upon
closing, the sale price of the units and the exercise price of the warrants were
below the  market  price of $.84 of the common  shares on the date of  issuance.
Units were sold to the following  officers and directors of the Company,  in the
amounts  indicated:  Edwin Molina (250,000  units);  Anton J. Drescher  (400,000
units); Anthony J. Castagno (50,000 units); and Robert Smith (40,000 units).

                                     PART IV

Item 14. Exhibits, Financial Statements to Shareholders and Reports on Form 8-K.

(a)(1)   Financial Statements
         Independent Auditors' Reports
         Consolidated Balance Sheets
         Consolidated Statements of Operations
         Consolidated Statements of Comprehensive Operations
         Consolidated Statements of Stockholders' Equity
         Consolidated Statements of Cash Flows
         Notes to Consolidated Financial Statements

(a)(2)   All  schedules  are omitted  because  they are not  applicable  or the
         required information is shown in the financial statements or the notes
         thereto included in this Report.

(b)      Reports on Form 8-K

     The registrant did not file any reports on Form 8-K during the last quarter
of the  fiscal  year  covered  by this  Report.

c)  Exhibits

3.1  Articles of Continuance  (Wyoming) filed February 16, 1995 (incorporated by
     reference from Exhibit 3.1 to the registrant's Form 10).

3.2  Articles of Amendment  (Alberta)  filed  January 3, 1995  (incorporated  by
     reference from Exhibit 3.2 to the registrant's Form 10).

3.3  Articles  of  Amendment  (Alberta)  filed June 28,  1993  (incorporated  by
     reference from Exhibit 3.3 to the registrant's Form 10).




                                      - 31 -
<PAGE>


3.4  Articles  of  Amendment  (Alberta)  filed  April 6, 1992  (incorporated  by
     reference from Exhibit 3.3 to the registrant's Form 10).

3.5  Articles of Amendment  (Alberta) filed September 1, 1989  (incorporated  by
     reference from Exhibit 3.5 to the registrant's Form 10).

3.6  Articles of Incorporation  (Alberta) filed April 18, 1986  (incorporated by
     reference from Exhibit 3.6 to the registrant's Form 10).

3.7  Bylaws (incorporated by reference from Exhibit 3.7 to the registrant's Form
     10).

4.3  Share  Option  Plan  (incorporated  by  reference  from  Exhibit 4.3 to the
     registrant's Form 10).

10.4 Alliance  Partner  Agreement  dated  November  11,  1999,   between  Exodus
     Communications, Inc. and registrant (incorporated by reference from Exhibit
     10.4 to the registrant's Form 10).

21.  Subsidiaries  of the  registrant:

     Name                                        State of Incorporation
     ------                                      ----------------------

     USA Video  (California) Corporation               Nevada
     USA Video                                         Texas
     USA Video Productions Inc.                        Wyoming
     USA Video Technologies, Inc.                      Wyoming







                                      - 32 -
<PAGE>



                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) 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.


                                   By:  /s/ Edwin Molina
                                       --------------------------------
Date: March 30, 2001                    Edwin Molina
                                        Chief Executive Officer


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.

        Signature                      Title                       Date
-----------------------   ----------------------------------    ---------

/s/ Edwin Molina          Chief Executive Officer, Director      March 30, 2001
-----------------------
Edwin Molina

/s/ Anton J. Drescher     Chief Financial Officer, (principal    March 30, 2001
-----------------------
Anton J. Drescher         financial officer and principal
                          accounting officer), Director

/s/ Anthony J. Castagno   Director                               March 30, 2001
-----------------------
Anthony J. Castagno


                                      - 33 -
<PAGE>




                                    USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES


                                      INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------



Independent Auditor's Reports                                          F-2 - F-3


Consolidated Financial Statements:

   Balance Sheets                                                        F-4
   Statements of Operations                                              F-5
   Statements of Comprehensive Operations                                F-6
   Statements of Stockholders' Equity                                    F-7
   Statements of Cash Flows                                              F-8
   Notes to Consolidated Financial Statements                         F-9 - F-18



                                                                             F-1
<PAGE>



INDEPENDENT AUDITOR'S REPORT



To the Board of Directors
USA Video Interactive Corp.


We have  audited  the  accompanying  consolidated  balance  sheet  of USA  Video
Interactive  Corp.  and  Subsidiaries  as of December 31, 2000,  and the related
consolidated statements of operations,  comprehensive operations,  stockholders'
equity,  and cash flows for the year then ended.  These  consolidated  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audit.

We conducted our audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in  all  material  respects,   the  financial  position  of  USA  Video
Interactive  Corp. and  Subsidiaries  as of December 31, 2000 and the results of
their operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 2 to the
financial statements, the Company has suffered recurring losses from operations,
has not  generated  significant  revenue from  operations  and has a net working
capital deficiency that raise substantial doubt about its ability to continue as
a going concern.  Management's plan in regard to these matters is also described
in Note 2. The financial  statements do not include any  adjustments  that might
result from the outcome of this uncertainty.




GOLDSTEIN GOLUB KESSLER LLP
New York, New York

February 19, 2001


                                                                             F-2

<PAGE>


INDEPENDENT AUDITOR'S REPORT




To the Stockholders
USA Video Interactive Corp.


We have  audited  the  accompanying  consolidated  balance  sheet  of USA  Video
Interactive  Corp.  as of December 31, 1999 and the  consolidated  statements of
operations,  stockholders'  equity,  and cash flows for each of the years in the
two-year period ended December 31, 1999. These consolidated financial statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an  opinion  on these  consolidated  financial  statements  based on our
audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  these consolidated  financial statements present fairly, in all
material respects,  the consolidated financial position of USA Video Interactive
Corp. as at December 31, 1999 and the  consolidated  results of  operations  and
cash flows for each of the years in the two-year  period ended December 31, 1999
in conformity with accounting principles generally accepted in the United States
of America.

The  accompanying  consolidated  financial  statements  referred  to above  were
prepared  assuming  that  the  company  will  continue  as a going  concern.  As
discussed in Note 1 to the original December 31, 1999 financial  statements,  as
originally  prepared during 2000, the company was in the development  stage, and
had no  established  source of revenue and was dependent on its ability to raise
capital from shareholders or other sources to sustain operations. These factors,
along with other  matters as set forth in Note 1 to the  original  December  31,
1999 financial  statements,  raised  substantial doubt that the company would be
able to continue as a going  concern.  The financial  statements did not include
any adjustments that might result from the outcome of this uncertainty.


AMISANO HANSON
Chartered Accountants
Vancouver, Canada

March 13, 2000



                                                                             F-3
<PAGE>


                                    USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES

                                                     CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

December 31,                                                                     2000            1999
-----------------------------------------------------------------------------------------------------
<S>                                                                      <C>             <C>
ASSETS

Current Assets:
Cash and cash equivalents                                                $    231,197    $    417,666
Marketable securities - related parties                                       202,826          20,700
Accounts receivable, net of allowance for doubtful accounts of $7,000         122,813          13,298
Inventory                                                                     145,911              --
Prepaid expenses and other current assets                                      99,368          48,204
-----------------------------------------------------------------------------------------------------
Total current assets                                                          802,115         499,868

Property and Equipment - at cost, net of accumulated
  depreciation of $194,871 and $174,650, respectively                         873,544         436,417

Other Assets, net of accumulated amortization of $22,170
 and $18,329, respectively                                                     68,412          59,066

Deferred Tax Assets, net of valuation allowance
  of $6,168,000 and $7,310,000, respectively                                       --              --
-----------------------------------------------------------------------------------------------------
Total Assets                                                             $  1,744,071    $    995,351
=====================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Accounts payable and accrued expenses                                    $  1,110,033    $    485,571
Accounts payable and accrued expenses - related parties                        20,830          11,592
Due to related parties                                                         75,896         188,866
-----------------------------------------------------------------------------------------------------
Total current liabilities                                                   1,206,759         686,029
-----------------------------------------------------------------------------------------------------

Commitments and Contingencies

Stockholders' Equity:
Preferred stock - no par value; authorized 250,000,000 shares,
 none issued
Common stock - no par value; authorized 250,000,000 shares,
 issued and outstanding 81,700,088 and 72,982,088 shares, respectively     25,766,071      20,950,152
Accumulated other comprehensive income                                         73,723              --
Accumulated deficit                                                       (25,302,482)    (20,640,830)
-----------------------------------------------------------------------------------------------------
Stockholders' equity                                                          537,312         309,322
-----------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity                               $  1,744,071    $    995,351
=====================================================================================================

</TABLE>

The  accompanying  notes  and  independent  auditor's  report  should be read in
conjunction with the consolidated financial statements.


                                                                             F-4

<PAGE>


                                    USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES

                                           CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

Year ended December 31,                                                2000             1999            1998
-------------------------------------------------------------------------------------------------------------
<S>                                                              <C>             <C>             <C>
Revenue                                                          $    638,592    $     20,500              --
-------------------------------------------------------------------------------------------------------------
Expenses:
Cost of sales                                                         393,496          19,199              --
Research and development (includes $ - 0 -, $82,500                   620,212          93,337    $     24,000
 and $24,000 to related parties)
Selling, general and administrative (includes $37,758,              2,599,591       1,372,928         550,836
 $479,480 and $310,620 to related parties)
Depreciation and amortization                                         224,581         113,362          40,981
Noncash compensation charges                                        1,453,783              --              --
-------------------------------------------------------------------------------------------------------------
Total expenses                                                      5,291,663       1,598,826         615,817
-------------------------------------------------------------------------------------------------------------
Loss from operations                                               (4,653,071)     (1,578,326)       (615,817)
-------------------------------------------------------------------------------------------------------------

Other expense, net (includes $- 0 -, $164,393 and
 $257,653 to related parties):
  Interest income (expense) (net of interest
    income of $26,231, $11,715 and $- 0 -, respectively)               26,231          (1,250)        (24,665)
  Other                                                               (34,812)        (77,502)       (341,116)
-------------------------------------------------------------------------------------------------------------
                                                                       (8,581)        (78,752)       (365,781)
-------------------------------------------------------------------------------------------------------------
Net loss before cumulative effect of accounting change             (4,661,652)     (1,657,078)       (981,598)

Cumulative effect of accounting change                                     --         (27,390)             --
-------------------------------------------------------------------------------------------------------------
Net loss                                                         $ (4,661,652)   $ (1,684,468)   $   (981,598)
=============================================================================================================

Earnings per share - basic and diluted:
  Loss per common share before cumulative effect of
   accounting change                                             $       (.06)   $       (.03)   $       (.02)
  Cumulative effect of accounting change                                   --              --              --
-------------------------------------------------------------------------------------------------------------
Net loss per share - basic and diluted                           $       (.06)   $       (.03)   $       (.02)
=============================================================================================================
Weighted-average number of common
 shares outstanding - basic and diluted                            76,700,723      66,766,504      50,457,546
=============================================================================================================

</TABLE>

The  accompanying  notes  and  independent  auditor's  report  should be read in
conjunction with the consolidated financial statements.


                                                                             F-5
<PAGE>


                                    USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES

                             CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS

<TABLE>
<CAPTION>


Year ended December 31,                          2000           1999          1998
------------------------------------------------------------------------------------
<S>                                          <C>            <C>            <C>
Net loss                                     $(4,661,652)   $(1,684,468)   $(981,598)

Other comprehensive income:
  Change in unrealized gain on investments        73,723             --           --

------------------------------------------------------------------------------------
Comprehensive loss                           $(4,587,929)   $(1,684,468)   $(981,598)
====================================================================================

</TABLE>


The  accompanying  notes  and  independent  auditor's  report  should be read in
conjunction with the consolidated financial statements.



                                                                             F-6
<PAGE>


                                    USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES

                                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                      Common Stock                        Accumulated
                                                                            Common           Other
                                                                             Stock       Comprehensive  Accumulated   Stockholders'
                                                  Shares        Amount   Subscriptions       Income       Deficit         Equity
------------------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>          <C>            <C>            <C>             <C>             <C>
Balance at December 31, 1997               43,801,088   $ 17,631,628   $    113,708              --    $(17,974,764)   $   (229,428)
Issuance of common stock and                       --             --             --              --              --              --
 common stock warrants for cash             6,000,000        404,449             --              --              --         404,449
Issuance of common stock upon                      --             --             --              --              --
  exercise of options                       3,450,000        232,558        (37,873)             --              --         194,685
Issuance of common stock upon                      --             --             --              --              --
  exercise of warrants                      5,505,000        454,331        (75,835)             --              --         378,496
Net loss                                           --             --             --              --        (981,598)       (981,598)
-----------------------------------------------------------------------------------------------------------------------------------

Balance at December 31, 1998               58,756,088     18,722,966             --              --     (18,956,362)       (233,396)
Issuance of common stock and
 common stock warrants for cash             4,250,000      1,195,267             --              --              --       1,195,267
Issuance of common stock upon                      --             --             --              --
  exercise of options                       4,881,000        405,895             --              --              --         405,895
Issuance of common stock upon                      --             --             --              --
  exercise of warrants                      5,095,000        626,024             --              --              --         626,024
Net loss                                           --             --                                     (1,684,468)     (1,684,468)
-----------------------------------------------------------------------------------------------------------------------------------

Balance at December 31, 1999               72,982,088     20,950,152             --              --     (20,640,830)        309,322
Issuance of common stock and                       --             --             --              --
 common stock warrants for cash             1,190,000      2,260,000             --              --              --       2,260,000
Issuance of common stock upon                      --             --             --              --
 exercise of options                        2,383,000        602,074             --              --              --         602,074
Issuance of common stock upon                      --             --             --
 exercise of warrants                       5,145,000        500,062             --              --              --         500,062
Noncash compensation charges                       --      1,453,783             --              --              --       1,453,783
Change in unrealized gains                         --             --             --              --              --              --
 on investments                                    --             --             --    $     73,723              --          73,723
Net loss                                           --             --             --              --      (4,661,652)     (4,661,652)
-----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2000               81,700,088   $ 25,766,071        $ - 0 -    $     73,723    $(25,302,482)   $    537,312
===================================================================================================================================
</TABLE>


The  accompanying  notes  and  independent  auditor's  report  should be read in
conjunction with the consolidated financial statements.


                                                                             F-7
<PAGE>


                                    USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES

                                           CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------------------
Year ended December 31,                                                     2000           1999           1998
--------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>            <C>            <C>
Cash flows from operating activities:
Net loss                                                             $(4,661,652)   $(1,684,468)   $  (981,598)
Adjustments to reconcile net loss to net cash
 used in operating activities:
 Depreciation and amortization                                           224,581        113,362         40,981
 Noncash compensation charge                                           1,453,783             --             --
 Foreign exchange                                                             --          1,657        (38,773)
 Loss on sale of investments - related parties                                --         35,788            688
 Gain on disposal of property and equipment                                   --             --            (77)
 Gain on write-off of accounts payable                                        --        (73,926)            --
 Bad debt recovery                                                      (108,403)            --             --
 Write-down of investments in securities                                      --        102,465        128,312
 Loss on equity method investment                                             --             --         16,434
 Write-down of advances - related party                                       --         14,375        113,779
 Write-down of advances - other                                               --          7,000         16,852
 Write-down of property and equipment                                     33,122             --         13,653
 Cumulative effect on prior years' amortization of changing
  to a different amortization method                                          --         27,390             --
 Changes in operating assets and liabilities:
  (Increase) decrease in accounts receivable                            (109,515)         3,388          7,681
  Increase in accounts receivable - related parties                           --             --         (4,604)
  Increase in inventories                                               (145,911)            --             --
  (Increase) decrease in prepaid expenses and other current assets       (51,164)        28,065        (30,084)
  Increase in other assets                                               (14,187)       (33,737)        (5,759)
  Increase in accounts payable and accrued expenses                      624,462         72,588         32,095
  Increase in accounts payable and accrued expenses -
   related parties                                                         9,238             --          3,703
  Increase (decrease) in due to related parties                         (112,970)        14,838        (15,182)

--------------------------------------------------------------------------------------------------------------
     Net cash used in operating activities                            (2,858,616)    (1,371,215)      (701,899)
--------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
 Proceeds on sale of investments - related parties                            --          4,867         26,045
 Purchases of marketable securities - related party                           --        (88,700)       (58,520)
 Advances - related party                                                     --        (14,375)      (113,779)
 Advances - other                                                             --         (7,000)            --
 Proceeds on sale of property and equipment                                   --             --            674
 Purchases of property and equipment                                    (689,989)      (335,715)      (151,284)
--------------------------------------------------------------------------------------------------------------
     Net cash used in investing activities                              (689,989)      (440,923)      (296,864)
--------------------------------------------------------------------------------------------------------------

Cash flows from financing activity - proceeds from the                 3,362,136      2,227,186        977,630
 issuance of common stock
--------------------------------------------------------------------------------------------------------------

Net increase (decrease) in cash and cash equivalents                    (186,469)       415,048        (21,133)
Cash and cash equivalents at beginning of year                           417,666          2,618         23,751
--------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year                             $   231,197    $   417,666    $     2,618
--------------------------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
  Cash paid during the year for interest                             $    12,965    $        --    $        --
==============================================================================================================
Supplemental schedule of noncash investing activity:
Marketable securities received for settlement of amounts
 previously written off as bad debt                                  $   108,403    $        --    $        --
==============================================================================================================
</TABLE>

The  accompanying  notes  and  independent  auditor's  report  should be read in
conjunction with the consolidated financial statements.


                                                                             F-8
<PAGE>


                                    USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES

                                     NOTES TO CONSOLIDATED  FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

1. BUSINESS:                  USA Video  Interactive  Corp. (the "Company") is a
                              designer   of   high-tech    Internet    streaming
                              video-on-demand  systems,  services and solutions.
                              At December 31, 2000 and for the three-year period
                              then  ended,  substantially  all of the  Company's
                              assets and  substantially  all its  operations are
                              located and conducted in the United States.

2. SUMMARY OF SIGNIFICANT     The accompanying consolidated financial statements
   ACCOUNTING POLICIES:       have  been  prepared  assuming  the  Company  will
                              continue  as a  going  concern.  As  shown  in the
                              financial  statements,  the Company  has  incurred
                              losses of $4,661,652,  $1,684,468 and $981,598 for
                              the years ended December 31, 2000,  1999 and 1998,
                              respectively.  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 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.

                              The accompanying consolidated financial statements
                              include the accounts of the Company and its wholly
                              owned subsidiaries.  All intercompany accounts and
                              transactions have been eliminated.

                              The  Company was  originally  formed in April 1986
                              and was in the development  stage through December
                              31,  1999.  The year 2000 is the first year during
                              which it is considered an operating company.

                              The  Company   maintains   cash  in  bank  deposit
                              accounts  which,  at times,  may exceed  federally
                              insured  limits.  The Company has not  experienced
                              any losses on these accounts.

                              The   preparation   of  financial   statements  in
                              conformity  with accounting  principles  generally
                              accepted in the United States of America  requires
                              management to make estimates and assumptions  that
                              affect   the   reported   amounts  of  assets  and
                              liabilities  and  disclosure of contingent  assets
                              and  liabilities  at the  date  of  the  financial
                              statements and the reported amounts of revenue and
                              expenses  during  the  reporting  period.   Actual
                              results could differ from those estimates.

                              The   Company    considers   all   highly   liquid
                              investments  with  original  maturities  of  three
                              months or less to be cash equivalents.

                              The  Company has  classified  its  investments  in
                              marketable    securities   as   available-for-sale
                              securities.  These  securities are carried at fair
                              value with any unrealized gain or loss recorded as
                              a  component  of  stockholders'  equity.  The fair
                              value  of  marketable  securities  was  determined
                              based  on  the  quoted  market  prices  for  those
                              instruments.  At December 31, 2000, the marketable
                              securities consisted of common stock.


                                                                             F-9
<PAGE>


                                    USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES

                                     NOTES TO CONSOLIDATED  FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

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

                              Property   and   equipment   is  stated  at  cost.
                              Maintenance  and repairs are expensed as incurred.
                              When property is retired or otherwise disposed of,
                              the cost and related accumulated  depreciation are
                              removed from the accounts and any  resulting  gain
                              or loss is recognized in operations.  Depreciation
                              is computed on the  straight-line  method over the
                              estimated  useful  lives of the assets.  Leasehold
                              improvements  are  amortized  over  the  estimated
                              useful lives of the  improvements  or the terms of
                              the related lease, whichever is shorter.

                              Depreciation  of property and  equipment  acquired
                              prior to 1999 was previously  calculated  using an
                              accelerated  depreciation  method over 7 years for
                              all asset classes. During 1999 the Company adopted
                              the  straight-line  method for all  classes  using
                              varying  estimated  useful  lives to  reflect  the
                              rapid pace of technological change. The cumulative
                              effect on years  prior to 1999 is  included in the
                              statement  of   operations   for  the  year  ended
                              December  31,  1999 and is  treated as a change in
                              accounting principle.

                              Other  assets   consist  of  patents  and  patents
                              pending  owned by the  Company  for the  Store and
                              Forward  Video  System.  The  patents  and patents
                              pending  are   recorded  at  cost  and  are  being
                              amortized on a straight-line basis over 17 years.

                              At each balance sheet date, the Company  evaluates
                              the period of amortization  of intangible  assets.
                              The  factors  used in  evaluating  the  period  of
                              amortization   include:   (i)  current   operating
                              results,  (ii) projected future operating results,
                              and (iii) other  material  factors that affect the
                              continuity of the business.

                              Revenue from hardware  product sales is recognized
                              when   the   product   has   been    shipped   and
                              collectibility  is  reasonably  assured.   Revenue
                              recognized  from these sales is net of  applicable
                              provisions for refunds,  discounts and allowances.
                              Engineering services sales are recognized upon the
                              service having been provided.

                              Revenue from software sales is recognized when the
                              product has been delivered.  Revenue from multiple
                              element   contracts   (hardware,    software   and
                              engineering) is allocated to the various  elements
                              based on fair value.  Revenue from these contracts
                              is deferred  until the  earlier of when  objective
                              evidence of fair value does exist or all  elements
                              of the  contract  have been  delivered.  Discounts
                              will be applied to each element on a proportionate
                              basis.   No  portion  of  the   revenue   will  be
                              recognized if the portion of the revenue allocable
                              to  delivered  elements is subject to  forfeiture,
                              refund   or  other   concession   if  any  of  the
                              undelivered elements are not delivered.

                              Research  and  development  costs are  expensed as
                              incurred.

                              Advertising  costs  are  expensed  when  incurred.
                              Advertising  expense for the years ended  December
                              31,  2000 and 1999 was  approximately  $97,000 and
                              $47,000, respectively.

                              Income taxes are accounted for under the liability
                              method. Under this method, deferred tax assets and
                              liabilities  are recorded  based on the  temporary
                              differences  between the  financial  statement and
                              the tax bases of assets  and  liabilities  and for
                              operating  loss  carryforwards  measured using the
                              enacted tax


                                                                            F-10
<PAGE>


                                    USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES

                                     NOTES TO CONSOLIDATED  FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                              rates  in  effect   for  the  year  in  which  the
                              differences  are expected to reverse.  The Company
                              periodically  evaluates the reliability of its net
                              deferred   tax  assets  and  records  a  valuation
                              allowance  if,  based on the  weight of  available
                              evidence,  it is more likely than not that some or
                              all  of  the  deferred  tax  assets  will  not  be
                              realized.

                              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 December 31, 2000 and 1999.

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

                              Management  does not  believe  that  any  recently
                              issued,   but   not  yet   effective,   accounting
                              standards  if  currently   adopted  would  have  a
                              material  effect  on  the  accompanying  financial
                              statements.

                              For  comparability,  certain 1999 and 1998 amounts
                              have  been  reclassified,  where  appropriate,  to
                              conform to the  financial  statement  presentation
                              used in 2000.


3. INVESTMENT IN JOINT        The Company had a 50% interest in Adnet USA,  LLC,
   VENTURE:                   a joint  venture.  The Company  accounted  for its
                              investment  in the joint  venture using the equity
                              method of accounting for investments. During 1999,
                              the Company and its partner  agreed to abandon the
                              joint  venture.  The Company's  share of the joint
                              venture  losses   amounted  to  $174,144   through
                              December 31, 1998.


4. MAJOR  CUSTOMERS:          During the year ended  December  31,  2000,  three
                              customers accounted for approximately 26%, 44% and
                              12% of total  revenue,  and  during the year ended
                              December 31, 1999, one customer accounted for 100%
                              of total revenue.  Accounts receivable at December
                              31, 2000 from these  customers were  approximately
                              0%, 23% and 61%,  respectively,  of total accounts
                              receivable.


5. MARKETABLE SECURITIES:     Marketable securities consist of the following:

<TABLE>
<CAPTION>

                              December 31,                                2000      1999
                              ----------------------------------------------------------
                              <S>                                     <C>        <C>
                              Available-for-sale equity securities:
                                Cost                                  $129,103   $20,700
                                Unrealized gains,                       73,723        --
                              ----------------------------------------------------------

                                                                      $202,826   $20,700
                              ==========================================================
</TABLE>


                                                                            F-11
<PAGE>


                                    USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


6. PREPAID  EXPENSES AND      The investments in marketable  securities are with
   OTHER CURRENT ASSETS:      companies  that have a board member who is a board
                              member of the Company.

                              Prepaid  expenses and other current assets consist
                              of the following:

<TABLE>
<CAPTION>

                              December 31,                                             2000      1999
                              -----------------------------------------------------------------------
                              <S>                                                   <C>       <C>
                              Refundable security deposits                          $75,000        --
                              Other (none in excess of 5% of current liabilities)    24,368   $48,204
                              -----------------------------------------------------------------------
                                                                                    $99,368   $48,204
                              =======================================================================


</TABLE>



7. PROPERTY AND               Property and equipment,  at cost,  consists of the
   EQUIPMENt:                 following:

<TABLE>
<CAPTION>

                                                                                       Estimated
                              December 31,                          2000       1999  Useful Life
                              ------------------------------------------------------------------
                              <S>                             <C>          <C>           <C>
                              Office equipment                $  120,974   $ 87,868      5 years
                              Computer equipment                 918,058    336,676      3 years
                              Video server equipment                  --    170,916      3 years
                              Leasehold improvements              29,383     15,607      5 years
                              ------------------------------------------------------------------
                                                               1,068,415    611,067
                              Less accumulated depreciation      194,871    174,650
                              ------------------------------------------------------------------
                                                              $  873,544   $436,417
                              ==================================================================

</TABLE>


                              Depreciation and amortization  expense amounted to
                              $219,740, $108,869 and $38,473 for the years ended
                              December 31, 2000, 1999 and 1998, respectively.


8. ACCOUNTS                   Accounts  payable and accrued  expenses consist of
   PAYABLE AND                the following:
   ACCRUED
   EXPENSES:
<TABLE>
<CAPTION>
                              December 31,                                         2000       1999
                              --------------------------------------------------------------------
                              <S>                                            <C>          <C>
                              Accounts payable                               $  209,988   $232,900
                              Accrued professional fees                          60,580         --
                              Accrued payroll and related tax withholdings      411,795    209,041
                              Amounts due for purchased computer equipment      427,670     43,630
                              --------------------------------------------------------------------
                                                                             $1,110,033   $485,571
                              ====================================================================

</TABLE>


9. COMMITMENTS AND            The  Company   leases  its  office  and  warehouse
   CONTINGENCIES:             facilities under various leasing  agreements.  The
                              leases  expired  during  the  prior  year  and the
                              Company  opted not to renew the leases and instead
                              opted to rent the  facilities on a  month-to-month
                              basis.  Rent expense amounted to $73,521,  $41,212
                              and $33,214 for the years ended December 31, 2000,
                              1999 and 1998, respectively.


                                                                            F-12
<PAGE>


                                    USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


                              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
                              to the Company for the total amount  payable under
                              the terms of the 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  landlords  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.


10. STOCKHOLDERS' EQUITY:     On  September   30,  1998,   the  Company   issued
                              6,000,000  units to  investors  at $.07 per  unit.
                              Each unit  consisted  of one share of common stock
                              and one warrant to purchase an additional share of
                              common stock at $0.07 per share.

                              From  January 1, 1998 to December  31,  1998,  the
                              Company  issued  3,450,000  shares of common stock
                              upon the  exercising  of options  with an exercise
                              price of $.07 per common share.

                              From  January 1, 1998 to December  31,  1998,  the
                              Company  issued  5,505,000  shares of common stock
                              upon the  exercising  of  warrants  with  exercise
                              prices ranging from $.07 to $.11 per common share.

                              On February 24, 1999, the Company issued 2,000,000
                              units to  investors  at $.07 per  unit.  Each unit
                              consisted  of one  share of  common  stock and one
                              warrant to purchase an additional  share of common
                              stock at $0.07 per share.

                              On April 17, 1999,  the Company  issued  1,000,000
                              units to  investors  at $.11 per  unit.  Each unit
                              consisted  of one  share of  common  stock and one
                              warrant to purchase an additional  share of common
                              stock at $0.11 per share.

                              On June 28, 1999, the Company issued 500,000 units
                              to investors at $.40 per unit. Each unit consisted
                              of one share of common  stock and one  warrant  to
                              purchase an  additional  share of common  stock at
                              $0.40 per share.

                              On September 1, 1999,  the Company  issued 750,000
                              units to  investors  at $1.00 per unit.  Each unit
                              consisted  of one  share of  common  stock and one
                              warrant to purchase an additional  share of common
                              stock at $1.10 per share.

                              From  January 1, 1999 to December  31,  1999,  the
                              Company  issued  4,881,000  shares of common stock
                              upon  the  exercising  of  options  with  exercise
                              prices  ranging  from  $.07 to  $1.00  per  common
                              share.

                              From  January 1, 1999 to December  31,  1999,  the
                              Company  issued  5,095,000  shares of common stock
                              upon the  exercising  of  warrants  with  exercise
                              prices ranging from $.07 to $.29 per common share.

                              On April 10,  2000,  the  Company  issued  190,000
                              units to  officers  of the  Company  at $4.00  per
                              unit.  Each unit  consisted of one share of common
                              stock and one warrant to  purchase  an  additional
                              share of common stock at $4.00 per share.


                                                                            F-13
<PAGE>


                                    USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


                              On July 20, 2000, the Company issued 430,301 units
                              to  investors   at  $1.50  per  unit.   Each  unit
                              consisted  of one  share of  common  stock and one
                              warrant to purchase an additional  share of common
                              stock at $1.50 per share.

                              On July 20, 2000, the Company issued 569,699 units
                              to  employees   at  $1.50  per  unit.   Each  unit
                              consisted  of one  share of  common  stock and one
                              warrant to purchase an additional  share of common
                              stock at $1.50  per  share.  The  Company  charged
                              operations for approximately $712,000 representing
                              the  differential  between  the fair value and the
                              purchase   price  of  the  common  stock  and  for
                              approximately     $712,000     representing    the
                              differential   between   the  fair  value  of  the
                              underlying  common stock and the exercise price of
                              the warrants.

                              From  January 1, 2000 to December  31,  2000,  the
                              Company  issued  2,383,000  shares of common stock
                              upon  the  exercising  of  options  with  exercise
                              prices  ranging  from  $.06 to  $1.00  per  common
                              share.

                              From  January 1, 2000 to December  31,  2000,  the
                              Company  issued  5,145,000  shares of common stock
                              upon the  exercising  of  warrants  with  exercise
                              prices ranging from $.06 to $.49 per common share.


11. STOCK OPTIONS and         The  Company  has a stock  option plan under which
    STOCK WARRANTS:           options to purchase  shares of common stock may be
                              granted to certain officers, directors and service
                              providers.

                              A summary of the status of the  Company's  options
                              and changes during the years is presented below:

<TABLE>
<CAPTION>

                              Year ended December 31,          2000                   1999                  1998
                              ---------------------------------------------------------------------------------------------
                                                                    Weighted-              Weighted-              Weighted-
                                                                     average                average                average
                                                          Number    Exercise     Number    Exercise   Number of   Exercise
                                                         of Shares    Price     of Shares    Price    of Shares     Price
                              ---------------------------------------------------------------------------------------------
                              <S>                       <C>           <C>       <C>           <C>      <C>           <C>
                              Outstanding at
                              beginning of year         6,329,000     $0.81     4,335,000     $ 0.07   2,775,000     $ 0.07
                              Granted                   4,360,000     $2.27     7,375,000     $ 0.64   5,010,000     $ 0.07
                              Exercised                (2,383,000)    $0.25    (4,881,000)    $ 0.08  (3,450,000)    $ 0.07
                              Canceled                 (1,349,000)    $2.13      (500,000)    $ 0.07          --         --
                              ---------------------------------------------------------------------------------------------
                              Outstanding at
                              end of year               6,957,000     $0.69     6,329,000     $ 0.81   4,335,000     $ 0.07
                              =============================================================================================
                              Options exercis-
                              able at year-end          6,957,000               6,329,000              4,335,000
                              =============================================================================================
                              Weighted-average
                              fair value of options
                              granted during the
                              period                                  $1.05                   $ 0.51                  $0.05
                              =============================================================================================

</TABLE>


                                                                            F-14
<PAGE>


                                    USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


                              The following table summarizes  information  about
                              fixed stock  options  outstanding  at December 31,
                              2000:

<TABLE>
<CAPTION>

                                                        Options Outstanding           Options Exercisable
                                               ------------------------------------ -----------------------
                                                             Weighted-
                                                              average     Weighted-               Weighted-
                                                             Remaining     average                 average
                                 Range of        Number     Contractual   Exercise    Number      Exercise
                              Exercise Prices  Outstanding     Life         Price   Exercisable     Price
                              ---------------------------------------------------------------------------

                              <S>              <C>              <C>         <C>      <C>            <C>
                              $1.00 - 1.99     5,097,000        1.1         $1.00    5,097,000      $1.00
                              $2.00 - 2.99       975,000        1.4         $2.04      975,000      $2.04
                              $3.00 - 3.99       285,000        1.7         $3.14      285,000      $3.14
                              $4.00 - 5.00       600,000        1.1         $5.00      600,000      $5.00
                              ---------------------------------------------------------------------------
                              $1.00 - $5.00    6,957,000                             6,957,000
                              ===========================================================================

</TABLE>

                              The  Company  has elected to apply APB Opinion No.
                              25, Accounting for Stock Issued to Employees,  and
                              related  interpretations  in  accounting  for  its
                              stock options and has adopted the  disclosure-only
                              provisions  of Statement  of Financial  Accounting
                              Standards   ("SFAS")  No.  123,   Accounting   for
                              Stock-Based  Compensation.   If  the  Company  had
                              elected to  recognize  compensation  cost based on
                              the fair value of the options granted at the grant
                              date as  prescribed by SFAS No. 123, the Company's
                              net loss and net loss  per  common  share  for the
                              years ended December 31, 2000, 1999 and 1998 would
                              have been as follows:

<TABLE>
<CAPTION>

                              Year ended December 31,                              2000           1999           1998
                              ---------------------------------------------------------------------------------------
                              <S>                                          <C>            <C>            <C>
                              Net loss:
                                As reported                                $(4,661,652)   $(1,684,468)   $  (981,598)
                              =======================================================================================
                                Pro forma                                  $(9,425,070)   $(5,420,133)   $(1,193,652)
                              =======================================================================================

                              Loss per common share - basic and diluted:
                                As reported                                $     (0.06)   $     (0.03)   $     (0.02)
                              =======================================================================================
                                Pro forma                                  $     (0.12)   $     (0.08)   $     (0.02)
                              =======================================================================================

</TABLE>


                                                                            F-15
<PAGE>


                                    USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


                              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:

<TABLE>
<CAPTION>

                              Year ended December 31,    2000    1999    1998
                              -----------------------------------------------
                              <S>                       <C>     <C>     <C>
                              Expected dividend yield   - 0 -   - 0 -   - 0 -
                              Risk-free interest rate   6.37%   5.46%   5.36%
                              Volatility                1.43%   2.50%   1.95%
                              Expected life (years)        2       1       1
                              -----------------------------------------------

</TABLE>

                              Warrants to purchase shares of common stock are as
                              follows:

<TABLE>
<CAPTION>

                              ------------------------------------------------------------------------------------------------------
                              Year ended December 31,      2000                         1999                       1998
                              ------------------------------------------------------------------------------------------------------
                                                                    Range                      Range                     Range
                                                     Number          of           Number        of           Number       of
                                                       of          Exercise         of       Exercise          of       Exercise
                                                    Warrants        Price        Warrants      Price        Warrants     Price
                              ------------------------------------------------------------------------------------------------------
                              <S>                  <C>         <C>      <C>     <C>        <C>     <C>      <C>        <C>     <C>
                              Outstanding at
                               beginning of year   6,250,000   $ 0.07 - $1.10   7,095,000  $0.07 - $1.10    6,600,000  $0.07 - $1.10

                              Issued               1,190,000   $ 1.50 - $4.00   4,250,000  $0.07 - $1.00    6,000,000  $ .07 -    -

                              Exercised           (5,145,000)  $ 0.07 - $1.28  (5,095,000) $0.07 -$ 0.29   (5,505,000) $ .07 - $ .17
                              ------------------------------------------------------------------------------------------------------
                                Outstanding at
                                 end of year       2,295,000   $ 0.13 - $4.00   6,250,000  $0.07 - $1.10    7,095,000  $0.07 - $1.10
                              ======================================================================================================
</TABLE>


12. INCOME TAXES:             As of December 31, 2000,  the Company had deferred
                              tax assets resulting  primarily from net operating
                              loss  carryforwards of  approximately  $18,000,000
                              which  are  available  to  offset  future  taxable
                              income,  if any,  through 2020. As  utilization of
                              the  net  operating  loss   carryforwards  is  not
                              assured,  a  100%  valuation  allowance  has  been
                              provided.

                              The  components of the net deferred tax assets are
                              as follows:

<TABLE>
<CAPTION>

                              December 31,                                2000           1999
                              ---------------------------------------------------------------
                              <S>                                  <C>            <C>
                              Deferred tax assets:
                                Net operating loss carryforwards   $ 6,157,000    $ 7,250,000
                                Allowance for doubtful accounts         36,000             --
                                Unrealized gains on investments        (25,000)            --
                                Depreciation and amortization               --         60,000
                                Valuation allowance                 (6,168,000)    (7,310,000)
                              ---------------------------------------------------------------
                                      Net deferred tax assets           $- 0 -         $- 0 -
                              ===============================================================

</TABLE>


                                                                            F-16
<PAGE>


                                    USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


                              The  reconciliation  of the  effective  income tax
                              rate to the federal statutory rate are as follows:

<TABLE>
<CAPTION>

                              Year ended December 31,                 2000    1999
                              -------------------------------------------------------
                              <S>                                     <C>      <C>
                              Federal statutory tax rate              34%      50%
                              Valuation allowance on net operating
                               carryforwards                         (34%)    (50%)
                              -------------------------------------------------------
                                      Effective income tax rate      - 0 - %  - 0 - %
                              =======================================================

</TABLE>



13. RELATED PARTY             Account  payable  and  accrued  expenses - related
    TRANSACTIONS:             parties  at  December  31,  2000 and 1999  include
                              expenses  incurred  by the  Company's  officers on
                              behalf of the  Company and amounts due for product
                              marketing   services   provided   by   an   entity
                              controlled by one of the Company's officers.

                              Due to related  parties at  December  31, 2000 and
                              1999  of  $75,896  and   $188,866,   respectively,
                              primarily consist,  of advances made from officers
                              of the Company  that accrue  interest at 1.25% per
                              month and amounts due to  directors  for  services
                              which  are  noninterest-bearing  and  are  due  on
                              demand.  The  estimated  fair value of the amounts
                              payable  approximates the carrying amount based on
                              rates available for similar loans.

                              Included in research and development  expenses for
                              the years  ended  December  31,  1999 and 1998 are
                              $82,500 and $24,000  paid to an entity  controlled
                              by an officer of the Company.

                              Included  in selling,  general and  administrative
                              expenses  for the years ended  December  31, 2000,
                              1999 and 1998 are $37,758,  $479,480 and $310,620,
                              respectively,   of  expenses  incurred  consisting
                              primarily of product  marketing  expenses,  office
                              expenses and professional services provided to the
                              Company  by  entities   owned  or   controlled  by
                              officers and directors of the Company.

                              Included  in other  expenses  for the years  ended
                              December  31,  1999  and  1998  are  $164,393  and
                              $257,653,  respectively,  of expenses  incurred in
                              connection with transactions involving investments
                              in related  entities,  write-off  of  advances  to
                              related  parties  and  interest  expense  paid  to
                              related parties.


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

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


                                                                            F-17
<PAGE>


                                    USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


 15. VALUATION AND
     QUALIFYING ACCOUNTS:

<TABLE>
<CAPTION>

                                                                   Allowance for
                                                               Doubtful Accounts
                              --------------------------------------------------
                              <S>                                         <C>
                              Year ended December 31, 1998                    --
                              Additions                                   $7,000
                              Deductions                                      --
                              --------------------------------------------------
                              Year ended December 31, 1999                 7,000
                              Additions                                       --
                              Deductions                                      --
                              --------------------------------------------------
                              Year ended December 31, 2000                $7,000
                              ==================================================

</TABLE>

16.  QUARTERLY
     FINANCIAL
     INFORMATION
     (UNAUDITED):
                              THE FOLLOWING TABLE SUMMARIZES  SELECTED QUARTERLY
                              DATA FOR THE YEARS  ENDED  DECEMBER  31,  2000 AND
                              1999

<TABLE>
<CAPTION>

                                                   FIRST       SECOND        THIRD         FORTH         FULL
                                                  QUARTER     QUARTER       QUARTER       QUARTER        YEAR
<S>                                              <C>         <C>         <C>           <C>           <C>
                              2000
                              REVENUE             163,600      75,000       307,464        92,528       638,592

                              EXPENSES           (686,754)   (965,615)   (1,233,377)   (2,414,498)   (5,300,244)

                              NET LOSS BEFORE
                                    CUMULATIVE
                                CHANGE IN
                                    ACCOUNTING   (523,154)   (890,615)     (925,913)   (2,321,970)   (4,661,652)

                              NET LOSS           (523,154)   (890,615)     (925,913)   (2,321,980)   (4,661,652)

                              NET LOSS PER
                                    COMMON
                                SHARE - BASIC
                                 AND DILUTED        (0.01)      (0.01)        (0.01)        (0.03)        (0.06)

                              1999
                              REVENUE                   0      10,000             0        10,500        20,500

                              EXPENSES           (198,342)   (374,714)     (405,264)     (699,258)   (1,677,578)

                              NET LOSS BEFORE
                                    CUMULATIVE
                                CHANGE IN
                                    ACCOUNTING   (198,342)   (364,714)     (405,264)     (688,758)   (1,657,078)

                              NET LOSS           (225,732)   (364,714)     (405,264)     (688,758)   (1,684,468)

                              NET LOSS PER
                                    COMMON
                                SHARE - BASIC
                                  AND DILUTED       (0.00)      (0.01)        (0.01)        (0.01)        (0.03)

</TABLE>

                                                                            F-18

<PAGE>



                                  EXHIBIT INDEX

Exhibit No.    Description
-----------    -----------

3.1            Articles  of  Continuance   (Wyoming)  filed  February  16,  1995
               (incorporated  by reference from Exhibit 3.1 to the  registrant's
               Form 10).

3.2            Articles   of   Amendment   (Alberta)   filed   January  3,  1995
               (incorporated  by reference from Exhibit 3.2 to the  registrant's
               Form 10).

3.3            Articles of Amendment (Alberta) filed June 28, 1993 (incorporated
               by reference from Exhibit 3.3 to the  registrant's  Form 10). 3.4
               Articles of Amendment (Alberta) filed April 6, 1992 (incorporated
               by reference from Exhibit

3.4            to the registrant's Form 10). 3.5 Articles of Amendment (Alberta)
               filed September 1, 1989  (incorporated  by reference from Exhibit
               3.5 to the registrant's Form 10).

3.6            Articles  of   Incorporation   (Alberta)  filed  April  18,  1986
               (incorporated  by reference from Exhibit 3.6 to the  registrant's
               Form 10).

3.7            Bylaws  (incorporated  by  reference  from  Exhibit  3.7  to  the
               registrant's Form 10).

4.3            Share Option Plan  (incorporated by reference from Exhibit 4.3 to
               the registrant's Form 10).

10.4           Alliance  Partner  Agreement  dated  November 11,  1999,  between
               Exodus  Communications,  Inc.  and  registrant  (incorporated  by
               reference from Exhibit 10.4 to the registrant's Form 10).

21.            Subsidiaries of the registrant:

               Name                                    State of Incorporation
               ------                                  ----------------------

               USA Video  (California) Corporation            Nevada
               USA Video                                      Texas
               USA Video Productions Inc.                     Wyoming
               USA Video Technologies, Inc.                   Wyoming