UNITED STATES
                       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, 2002

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

  83  Halls  Road,  Old  Lyme,  Connecticut                         06371
(Address  of  principal  executive  offices)                    (ZIP  Code)


Registrant's  telephone  number,  included  area  code:         (860)  434-5535
                                                       ------------------------

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  |_|

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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.  |_|

Indicate  by  check  mark  whether  the  registrant  is an accelerated filer (as
defined  in  Rule  12b-2  of  the  Act).  Yes  |_|  No  |X|

Aggregate  market  value  of  the  voting  stock  of  the  registrant  held  by
non-affiliates  of  the  registrant  at March 26, 2003 (computed by reference to
average  of the bid and asked price on the NASD OTC Bulletin Board of the common
shares  on  such date): $9,052,083. Number of common shares outstanding at March
24,  2003:  106,495,089.

DOCUMENTS  INCORPORATED  BY  REFERENCE:  NONE

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 rich media
delivery  infrastructure  and software and its Store and Forward Video-on-Demand
("VOD") patent.  These technologies, together with video compression technology,
facilitate  the  delivery  of  video  to an end user in a timely and interactive
fashion.

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 name Hurricane
Mediacaster(TM);  ZMail(TM),  a service that delivers web and rich media content
to  targeted  audiences,  and  mediaClix(TM),  a  service  that delivers content
similar  to  Zmail(TM)  but  originating  from  an  existing  web  presence.

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
five  wholly-owned  subsidiaries:  USA  Video  (California)  Corp.,  USA  Video

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Corporation,  USA  Video  Productions Inc., USA Video Technology Corporation and
USVO  Inc.  USA Video's executive and corporate offices are located in Old Lyme,
Connecticut,  and  its  Canadian  offices  are  located  in  Vancouver,  British
Columbia.

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.  Meanwhile,
compression  technologies  continue  to  improve,  allowing  delivery  of higher
quality  content  using  existing  connectivity.

USA Video believes that market conditions are favorable for continued acceptance
of  mainstream  VOD  services.  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  television  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 had increased in the previous year. As
of  January  2001,  13%  of Americans (more than 30 million people) use Internet
audio  or  video  each  month,  compared  to  10  %  in  January 2000. More than
one-quarter  (27%) of Americans (more than 61 million people) have used Internet
audio  or video while 6%, 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  believes  that  the  expected  substantial  increases  in  bandwidth
capacity,  accompanying  decreases  in  bandwidth  cost,  increases  in consumer
computer  and  video  appliance  storage capacity, and the proliferation of fast
video  file  transfer techniques will result in an industry focus on downloading
as  an alternative to streaming as a content delivery mechanism. To position the
Company  to  take advantage of this anticipated shift, USA Video has focused its
immediate  plans  on  aggressively  protecting  its technology ownership rights,
including  pursuing  licensing  arrangements  and  other  forms  of enforcement.

USA  Video  discontinued  the  sale  of  select  services  from  its  prototype
StreamHQ(TM)  after customers' satisfaction and proof of concept. The Company no
longer  sells  its  individual  functions  of StreamHQ(TM). USA Video intends to
continue  to  develop  and  expand  its  StreamHQ(TM)  services  business, while
pursuing  opportunities  to sell replicated StreamHQ(TM) systems to corporations
and  organizations  that prefer systems solutions to services solutions. To this
end,  USA  Video's  future  plans  include:

-    Continuing  StreamHQ(TM)  functionality  development,  particularly  the
     automation  of  processes  and client account management, which allows more
     efficient  delivery  of services and expansion of the services client base;

-    Scaling  the StreamHQ(TM) infrastructure in modular fashion as necessary to
     support  an  increasing  number  and  size  of  Zmail(TM) and mediaClix(TM)
     campaigns;

-    Eventually  establishing  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

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-    Ultimately  expanding and enabling the organic sales and marketing team, to
     support  increased  direct  marketing  to  various  markets,  including
     advertising, corporate communications, customer service, entertainment, and
     education.

PROPRIETARY  TECHNOLOGIES

USA  Video's  proprietary  technologies  include  its  (1)  VOD patent, and  (2)
Digital  fingerprinting  piracy  deterrence  technology;  and  (3)  StreamHQ(TM)
infrastructure,  software,  and  service  delivery  processes.

-    USA  Video's  VOD  Patent (#5,130,792) (the "Patent") explicitly covers the
     rich  media delivery model that is becoming more widely accepted as a means
     of  delivering content for education, training, and entertainment; that is,
     faster-than-real-time  download to computer and set-top box hard drives for
     subsequent  content  viewing  without  quality  limitations  resulting from
     insufficient  or variable bandwidth. The impact of this Patent becomes more
     significant  as  content  owners and those that facilitate content delivery
     adopt  this  model.

-    The  objective  of  USA  Video's  patent-pending  Digital Fingerprinting, a
     Digital  Rights  Management  ("DRM")  technology, is to deter digital video
     piracy  once a user has been authorized to view a video. This is one of the
     major  concerns  preventing  content  owners  from committing more of their
     content  to the digital medium. Digital fingerprinting augments traditional
     DRM  techniques,  which  primarily  focus  on  encrypted video delivery and
     authorization to view. The digital fingerprint is rendered at the player as
     part  of an authorized video stream and contains sufficient data to track a
     specific  streaming  event  should  the content be pirated and distributed.

-    The  ability  of  StreamHQ(TM)  to  deliver  services  to  clients  with
     market-specific  value  propositions  stems  from  its  scalable,
     streaming-enabled  web  infrastructure,  the  software  functionality  that
     resides  on  this  infrastructure  (such as innovative asset management and
     user  transaction  data capture and reporting), and the processes developed
     for delivering media campaigns to clients. By delivering features unique to
     individual  markets,  such  as  advertising,  corporate  communications and
     customer service, StreamHQ(TM) services are differentiated from the generic
     services  delivered  by  competitors.

PRODUCTS  AND  SERVICES

USA  Video's  principal  products  and  services  are its proprietary rich media
delivery  infrastructure  and  software  and  the  Patent.  These  technologies,
together  with video compression technology, facilitate the delivery of video to
end  users  in  a  timely  and  interactive  fashion.

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 name
     Hurricane  Mediacaster(TM);

-    Zmail(TM),  a  service that delivers web and rich media content to targeted
     audiences;

-    mediaClix(TM),  a  service  that delivers content similar to Zmail(TM), but
     originating  from  an  existing  web  presence;

-    Digital Fingerprinting, a Digital Rights Management ("DRM") technology used
     to  deter  piracy  of  digital  content.

USA Video proposes to grant licenses to use its patented VOD technology on terms
comparable  to  the "reasonable royalty" provided for by U.S. patent laws.  Upon
successfully  licensing  its  patent,  USA  Video  could earn per-use royalties,

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meaning  that  each  time  a  licensed  event  occurs (e.g. each time a consumer
receives  a  VOD  transmission) a specified royalty will be paid to the Company.
Upon  suitable  negotiated terms, USA Video may also consider bulk-fee licensing
agreements,  either  apart  from  or  in  addition  to  per-use  royalties.

When  USA  Video's  patent-pending  DRM  technology  matures into an enforceable
patent,  USA  Video intends to pursue a similar strategy as that it will use for
its  VOD  technology  with  regard  to the rights related to the DRM technology.

USA  Video's  future plans include the marketing and selling of its StreamHQ(TM)
systems,  whereby  a  customer  would  purchase  an  entire system, comprised of
hardware  assembled  by  USA  Video  and software developed and installed by USA
Video. After sale and delivery of the system to a customer, USA Video's services
to  the  customer  would  then  include  updates  of  software  and  service and
maintenance of hardware, as necessary, for additional compensation. The services
of  Zmail(TM)  and  mediaClix(TM)  are  available to a customer only through the
purchase  of  a  StreamHQ(TM)  system.

As  a  cost  cutting  measure,  USA  Video  terminated  the  operation  of  its
StreamHQ(TM)  infrastructure,  which  provided  individual  functionality  of
StreamHQ(TM)  for  small customers, as this service was no longer cost effective
or  deemed  necessary  at  this  time.

STATUS  OF  PRODUCTS  AND  SERVICES

With  regard  to its international VOD patent rights, USA Video has been closely
monitoring  advances  in  this  wide-ranging  industry over recent years and has
commenced  taking  the  necessary  steps  to  translate  this  progress  into  a
sustainable  stream  of royalty revenue.  What USA Video originally demonstrated
to  be  technologically  feasible in the early 1990s has now become commercially
feasible  as  well,  with  the  continually  increasing availability of consumer
broadband  access  and  steadily  improving  data  compression  technologies.

In  view  of these developments, USA Video is taking aggressive steps to advance
its  patent-protected  intellectual  property  rights,  which  include  its
patent-pending DRM technology.  These steps include active licensing initiatives
and,  potentially,  litigation  when  necessary  as  a final resort if companies
infringing  on USA Video's patent rights refuse to negotiate in good faith.  USA
Video  has  retained  leading  national  legal  counsel  to advance these patent
enforcement  initiatives.

Although  it is currently focused on protecting its technology ownership rights,
including  licensing arrangements and other forms of enforcement, USA Video will
continue  to  offer  its  other  products  and services, which are all existing,
functional,  and  available.

USA Video has identified an emerging market for global media streaming services,
which the Company developed under the brand "StreamHQ(TM) ". StreamHQ(TM) allows
corporate,  education,  entertainment,  and  other  types  of  business  or
institutional customers to use the Internet or an intranet to deliver rich media
content  to  target  audiences  by purchasing a StreamHQ(TM) system. By offering
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.

A key service differentiator is user transaction data management, which consists
of capture, analysis, and reporting of statistical data that enables the content
owner  to obtain important feedback on the effectiveness of campaigns. This data
includes  network  performance  and  utilization statistics, including bandwidth
utilization,  number  of  streaming sessions, streaming rates, video quality and
packets  lost; total number of times the video was viewed; distribution of users
who  viewed various portions of the video; information on times of media access,
length  of time media was viewed, and actions taken during viewing (pause, stop,
rewind,  etc.).  Additional StreamHQ(TM) features include the ability to analyze
usage  by  location;  the  percentage  of users who forwarded the video to other
people;  the  percentage  of  users  who received and viewed the forwarded video
email;  and  categorization  of  users  by  operating  system, browser type, and
connection  speed.  Additional  functionality can be customized to meet specific
customer  requirements.

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Aside  from  quality  streaming, USA Video's overriding goal in its StreamHQ(TM)
development  and  deployment  has  been to give customers media asset management
features, tools, and information that provide accountability for their streaming
expenditures.  To  that  end, the Company has developed and is offering for sale
products that provide such a return on the customer's investment. Zmail(TM) is a
rich media email tool that allows businesses, institutions, and organizations to
communicate  multi-media  messages to targeted audiences via the Internet and to
receive  prompt,  valuable  feedback on the effectiveness of their communication
campaigns. Zmail(TM) is an opt-in communication method, whereby the recipient is
directed  to a web-landing page containing an embedded media player and links to
amplifying information about the media subject. All user actions within the page
are  captured, aggregated, and provided to the customer as intuitive statistical
and  trend reports. Similar to Zmail(TM), mediaClix(TM) offers a similar landing
page and media content; however, access is from a client's existing web presence
rather  than an opt-in email. Hurricane Mediacaster(TM) is a hardware server and
encoder  system developed by USA Video. An additional encoding service available
for  customers  is  EncodeHQ(TM),  a  service  that  digitizes  and  compresses
analog-source  video.

CUSTOMERS  AND  MARKETS

The  principal  market  for  the  Company's services is the business-to-business
sector,  rather  than the individual consumer sector.  USA Video's patent rights
potentially  have  broad  application  to  the  VOD  marketplace.  USA  Video
anticipates  that  it  will  conduct  licensing  negotiations  with:

-    companies  involved  in  providing  and promoting VOD content, such as film
     content,  video advertisements, online gaming video and subscription video;

-    companies  providing  network  and  other physical infrastructure to enable
     various  VOD  applications;

-    companies  providing  VOD-enabling  software,  including  advanced  data
     compression  schemes;  and

-    companies providing VOD-enabling hardware, including consumer hardware such
     as  digital  video  recording  devices.

The  market  for DRM will to some extent overlap the market for VOD, but the two
are  not  identical.  For  example,  DRM  technology  may  be  required  by
copyright-owning  content  providers  who  have concerns about the potential for
digital  piracy  of  their  material; whereas hardware manufacturers may be less
concerned  about  such  issues.  Nevertheless,  protocols may develop which will
require  participants  in  the  video industry to embrace some form of DRM.  USA
Video  will  follow those developments closely, and, if necessary, take steps to
promote  and  protect  its  DRM  technology.

Additionally,  companies within the business-to-business sector, rather than the
individual  consumer,  generally  possess  the greater financial wherewithal and
purpose for purchasing StreamHQ(TM) systems. The Company's focus is on companies
that  can benefit from an engaging rich media and web presentation directed at a
target  audience.  The Company's customers for these services have included film
companies,  event  promoters, ministries, travel companies, sports entertainment
centers  and  political  candidates.

USA  Video's  customers  for  StreamHQ(TM)  systems  may  also  be businesses or
organizations  that  are dissatisfied with response rates from traditional email
campaigns,  or  who  have  in the past been unable to track the response rate to
such  traditional  email  campaigns.  Additionally,  any business that wishes to
increase  brand  or  product  awareness  in  a  more  cost effective manner than
television  advertising  would  be an appropriate candidate for the StreamHQ(TM)
services.

SOURCES  AND  AVAILABILITY  OF  RAW  MATERIALS

USA Video assembles its hardware systems from components manufactured by others.
The Company specifies, procures, assembles, tests and deploys the various system
components  according  to  a precisely developed set of procedures.  The Company
consults  on  an as-needed basis, with companies that supply the major materials
needed  to  build  its systems.  Systems are programmed and configured to meet a
wide  variety  of  individual  customer  requirements.

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USA  Video  procures  the  materials  and hardware to assemble systems and their
components  from  various  companies, as needed, and in sufficient quantities to
preclude  any  danger  of significant sourcing problems in the immediate future.
There  are  no  seasonal  limitations  on  the  Company's  operations.

COMPETITIVE  CONDITIONS

The  streaming  media  market is new, rapidly evolving and extremely competitive
and  the  Company  expects  that  competition will intensify in the future.  USA
Video  competes  with other 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.  The  Company's  current  market  share  is insignificant.

Other  companies  may also claim to own intellectual property rights relating to
the  VOD  technology  space.  For example, USA Video is aware of another company
which  claims  to  own what could potentially be considered competing VOD patent
rights.  In  this case, however, the U.S. Patent and Trademark Office issued the
competitor's  first  such  patent  after  USA Video's key VOD Patent was issued.
Management  believes  that  USA  Video's  VOD technology is superior in that USA
Video's  VOD  technology  has chronological priority over certain patents rights
that  have  been procured by such company; that is, USA Video owns patent rights
that  are  "prior  art"  to  the  other  company's  under  U.S.  patent  law.

Real  Networks, Microsoft, and other companies large and small are active in the
field of DRM technologies.  The video streaming market is currently dominated by
a  small  number  of larger companies, including Real Networks, Microsoft, Yahoo
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  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.  Further, USA Video currently competes with,
and  expects  to compete with in the future, providers of some of its technology
or  system  components.  Competition  is  expected  in  all  areas  of business,
including  pricing,  service,  product performance, and the Company's ability to
keep  up with rapidly improving technology, changing market conditions, evolving
industry  standards  and  changing  customer  demands.

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 still and motion
Wavelet technology, which has been completed as mathematical processes. In 2001,
the  Company redirected the Wavelet development effort toward the invention of a
content  protection  technology  that  is grounded in similar science as Wavelet
compression.  The  result  is  the  Company's  patent pending DRM technology for
piracy  deterrence.  During  2002,  as  a  result  of  cost  cutting  measures
necessitated  by the state of the market, the Company cut back on its marketing,
sales  and technical staff. Should the need arise, the Company intends to retain
a  number  of  those  employees  as  consultants,  if  they  are  available.

In  fiscal  2001  and  2000, the Company's research and development expenditures
were approximately $999,000 and $620,000, respectively.  During fiscal 2002, the
Company's  research  and  development  expenditures  were  $277,000.

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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 VOD technology on February 1, 1990.
Corresponding  overseas  applications  were  filed in several countries in 1992.
USA  Video  was granted the US 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 VOD technology in five European
countries:  England,  France,  Germany,  Italy  and Spain. In 2001 and 2002, USA
Video  was  granted  a  patent  in  Canada  and  a  patent  is pending in Japan,
respectively,  on  its VOD technology.  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.

On  June  19,  2001, United States Patent Application No. 09/884,787, Method and
Apparatus  for  Digitally  Fingerprinting  Videos, was officially filed with the
U.S.  Patent  and  Trademark  Office.

EMPLOYEES

As of March 26, 2003, the Company employed four people, including its two senior
executive  officers, one technology and one administrative employee. The Company
considers  the  relationships  with  its  employees  to  be  good.

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  contract  or  hire,  assimilate, and retain qualified personnel. To
date,  USA  Video  believes  it  has  been  successful  in  recruiting qualified
contractors  or  employees,  but  there  is  no  assurance that the Company will
continue  to  do  so  in  the  future.

CRITICAL  ACCOUNTING  POLICIES

USA  Video's  discussion  and analysis of its financial condition and results of
operations  are based upon its financial statements, which have been prepared in
accordance  with  accounting principles generally accepted in the United States.
The  preparation  of  these  financial  statements  requires the Company to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues  and  expenses,  and  related  disclosure  of  contingent  assets  and
liabilities.  On  an  on-going  basis,  USA  Video  evaluates  these  estimates,
including  those  related  to  customer  programs  and  incentives,  bad  debts,
inventories, investments, intangible assets, income taxes, warranty obligations,
impairment  or disposal of long-lived assets, contingencies and litigation.  USA
Video  bases  its  estimates  on  historical  experience  and  on  various other
assumptions  that  are  believed  to  be reasonable under the circumstances, the
results  of  which form the basis for making judgments about the carrying values
of  assets  and  liabilities  that  are not readily apparent from other sources.
Actual  results  may  differ from these estimates under different assumptions or
conditions.

USA  Video  considers  the  following  accounting policies to be both those most
important  to the portrayal of its financial condition and that require the most
subjective  judgment:

          -    Revenue  recognition;
          -    Accounting  for  marketable  securities;
          -    Impairment  or  disposal  of  long-lived  assets;
          -    Inventory  valuation  and  related  reserves; and
          -    Deferred taxes.

                                        9
<PAGE>

REVENUE  RECOGNITION.  Software  revenue  and  other  services are recognized in
accordance  with  the  terms  of the specific agreement, which is generally upon
delivery.  Maintenance,  support and service revenue are recognized ratably over
the  term  of  the  related  agreement.

ACCOUNTING FOR MARKETABLE SECURITIES.  The Company classifies its investments in
marketable  securities  as  "available  for  sale."  The  Company  carries these
investments  at  fair value, based on quoted market prices, and unrealized gains
and  losses are included in accumulated other comprehensive income (loss), which
is  reflected  upon  the  sale of its marketable securities in the statements of
operations.

IMPAIRMENT  OR DISPOSAL OF LONG-LIVED ASSETS.  Long-lived assets are reviewed in
accordance  with  Statement  of  Financial  Accounting  Standard  ("SFAS")  144.
Impairment  or disposal of long-lived assets losses are recognized in the period
the  impairment  or  disposal  occurs.  Long-lived  assets  are reduced to their
estimated  fair  value.

INVENTORY  VALUATION  AND RELATED RESERVES.  Inventories are valued at the lower
of  cost  or  market  on a first-in, first-out basis.  USA Video uses a standard
cost  system  for  purposes  of  determining cost; the standards are adjusted as
necessary  to  ensure they approximate actual costs.  The Company writes down or
reserves for estimated obsolete or excess inventory based upon assumptions about
future  demand  and  market  conditions.  USA  Video  compares current inventory
levels  on  a product basis to its current sales forecast in order to assess its
inventory reserve balance.  The sales forecasts are based on economic conditions
and  trends  (both  current  and  projected),  anticipated  customer  demand and
acceptance  of  the  products,  current  products,  expected future products and
various  other assumptions.  If actual market conditions are less favorable than
those  projected  by  management,  additional  write-downs  may  be  required.

DEFERRED  TAXES.  We  record a valuation allowance to reduce deferred tax assets
when  it  is  more  likely  than  not that some portion of the amount may not be
realized.  During 2002, we determined that it was no longer more likely than not
that  we  would  be able to realize all or part of our net deferred tax asset in
the  future,  and  an  adjustment  to  provide a valuation allowance against the
deferred  tax  asset  that  was  charged  to  income.

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 very
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:

-    maintain  or  develop  relationships with suppliers and marketing partners;

-    establish  a  customer  base;

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

-    provide  superior  customer  service;

-    respond  to  competitive  developments;  and

-    retain  and  motivate  qualified  personnel.

                                       10
<PAGE>

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,  2002,  USA Video had a net loss of $2,113,138. As of December 31,
2002,  the  Company  had  an  accumulated  deficit  of $31,176,441 and a working
capital  deficit  of  $1,074,998.  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 generate significant
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 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  approximately  $1  Million  to  $1.5  Million  in financing to meet its
working  capital  needs  over  the  remainder of 2003 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:

-     its  ability  to  attract  and  retain  customers;

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

-     price  competition;

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

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

-     its  ability  to  attract  new  personnel;  and

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

As  a  result  of  the  factors  listed  above,  and  others,  period-to-period

                                       11
<PAGE>

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.

The  video  streaming  market is currently dominated by a small number of larger
companies, including Real Networks, Microsoft, Yahoo 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,

                                       12
<PAGE>

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.

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:

-    rapidly  changing  technology;

-    evolving  industry  standards;

-    frequent  new  product  and  service  introductions;  and

-    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 co-operation that it may
require.  Errors,  defects  or  other  performance  problems  with the Company's

                                       13
<PAGE>

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 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.

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  36%, 32% and 12% of USA Video's
revenue for the year ended December 31, 2002. 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  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.

NO  ASSURANCE  THAT  USA  VIDEO'S  PATENTS  WON'T  BE CHALLENGED, INVALIDATED OR
CIRCUMVENTED

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.

                                       14
<PAGE>

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:

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

-    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

-    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  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

                                       15
<PAGE>

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.

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 2002, 2001 and
2000,  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 reduce the
likelihood  of  derivative litigation against officers and directors even though
such  action, if successful, might otherwise have benefited the shareholders. In

                                       16
<PAGE>

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  Old  Lyme,
Connecticut.  USA  Video  leases  1,250  square  feet for an annual base rent of
$13,992.  The  lease  expires  November  30,  2003.

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.

ITEM  3.  LEGAL  PROCEEDINGS.

USA  Video  is  not  a  party  to  any  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 TSX Venture Exchange, Inc. formerly Canada Venture
Exchange  (under the symbol "US"), and on the NASD OTC Bulletin Board (under the
symbol  "USVO").

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

                                       17
<PAGE>

                              TSX Venture Exchange
                                  (Symbol "US")

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

First  Quarter  2001               2.60                   0.70
Second  Quarter  2001              1.19                   0.62
Third  Quarter  2001               0.85                   0.35
Fourth  Quarter  2001              0.67                   0.33
First  Quarter  2002               0.87                   0.36
Second  Quarter  2002              0.45                   0.10
Third  Quarter  2002               0.18                   0.10
Fourth  Quarter  2002              0.12                   0.06

The  following  table  shows the high and low prices of the common shares on the
NASD  OTC  Bulletin Board. The following quotations reflect inter-dealer prices,
without  retail  mark-up,  mark-down  or  commission  and  may  not  necessarily
represent  actual  transactions:

                               OTC Bulletin Board
                                (Symbol "USVO")

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

First  Quarter  2001                 1.74                  0.47
Second  Quarter  2001                0.77                  0.38
Third  Quarter  2001                 0.60                  0.22
Fourth  Quarter  2001                0.4125                0.21
First  Quarter  2002                 0.55                  0.22
Second  Quarter  2002                0.28                  0.066
Third  Quarter  2002                 0.13                  0.06
Fourth  Quarter  2002                0.08                  0.041

As  of March 26, 2003, there were 106,495,089 common shares outstanding, held by
1,434  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,
2002  that  were  not registered under the Securities Act have been disclosed in
USA  Video's  report on Form 10-Q for the period ended June 30, 2002 and in this
Form  10-K  for the year ended December 31, 2002.  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.

                                       18
<PAGE>

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, 2000,
2001  and  2002, and the balance sheet data as of December 31, 2001 and 2002 are
derived from USA Video's consolidated financial statements included elsewhere in
this  report, which have been audited by Goldstein Golub Kessler LLP 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                    2002               2001               2000              1999                1998
<S>                     <C>                 <C>               <C>               <C>                 <C>

Revenue                 $156,976          $124,006           $638,592          $20,500               --

Net loss              (2,113,138)      ($3,760,821)       ($4,661,652)     ($1,684,468)       ($981,598)

Loss per share           ($0.02)           ($0.04)            ($0.06)          ($0.03)          ($0.02)

Total assets         $   317,144        $1,382,178         $1,744,071         $995,351         $435,232

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

Cash dividends per share      --                --                 --               --               --
</TABLE>

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 system. Due to current
market conditions, management has implemented consolidation procedures to reduce
the  expense  of  operations.

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 decrease as it consolidates selling, general
and  administrative  expenses. USA Video will require additional financing, both
for  the  remainder  of  fiscal  2003 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, 2002 ("fiscal 2002") were $156,976,
compared with $124,006 for the year ended December 31, 2001 ("fiscal 2001"). The
Company  had  revenues of $638,592 for the year ended December 31, 2000 ("fiscal
2000"). Approximately 27% of revenues for fiscal 2001 were derived from sales of
the  Company's  hardware  and  software  systems and approximately 57% were from

                                       19
<PAGE>

provision of engineering services. The Company had three major customers who, in
the  aggregate,  accounted  for  80%  of  total  revenues in 2002, and one major
customer who accounted for 61% of total revenues in fiscal 2001, and three major
customers  who,  in the aggregate, accounted for 82% of total revenues in fiscal
2000.

EXPENSES

Total  expenses  for  fiscal  2002 were $2,156,764, compared with $3,892,845 for
fiscal  2001  and $5,291,663 for fiscal 2000. For fiscal 2002, cost of sales was
$88,377,  as compared with $66,770 for fiscal 2001 and $393,496 for fiscal 2000.

Research  and  development  costs  for fiscal 2002 were $277,149, as compared to
$999,058  for fiscal 2001 and $620,212 for 2000. The decrease in fiscal 2002 and
2001  was  due  primarily  to  consolidation  efforts  of  management.

Selling,  general  and administrative expenses were $859,736 for fiscal 2002, as
compared  with  $1,833,440  for  fiscal  2001,  and  $2,599,591 for fiscal 2000.

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 decreases resulted
from  the  consolidation  efforts  of  management. The primary components of the
decreases  from  fiscal  2001  to  fiscal  2002  were:

-    a  $480,496  decrease  in  fiscal 2002 in marketing expenses as the Company
     terminated  the  day-to-day  operation  of it's StreamHQ(TM) services which
     resulted in the termination of marketing staff and programs for the sale of
     functions  of  StreamHQ(TM)  at  the  start  of  the  second  quarter;

-    a  decrease of $154,018 (fiscal 2002) for administrative wages and salaries
     and  other  office expenses due to consolidation efforts of management; and

-    a  $153,102  decrease  in  professional fees in fiscal 2001, as the Company
     utilized  its  staff  to  perform  tasks  previously  outsourced.

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 fiscal 2001 to
fiscal  2000  were:

-    a  $284,911  decrease  in fiscal 2001 in marketing expenses, as the Company
     revamped  marketing  objectives and strategies to isolate on the release of
     StreamHQ(TM)  late  in  the third quarter. The marketing staff continues 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;

-    a  decrease  of  $236,458  from  fiscal  2001  for administrative wages and
     salaries  and  other  office  expenses;  and

-    an $81,203 decrease in advertising in fiscal 2001, as the Company, replaced
     media  advertising  with  an  increased  sales  force.

Additional  expenses  included  depreciation  and  amortization  of $439,516 for
fiscal  2002, compared to $407,880 for fiscal 2001 and $224,581 for fiscal 2000,
as  the  Company  added machinery and equipment necessary for the development of
new  products  and  services. Non-cash compensation charges for fiscal 2002 were
$38,154,  2001  were  $  585,697  and 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 and at a price or exercise price below the market price
of  the  common shares at the time of issuance and stock options to contractors.
Because  the  rules  of  the  TSX  require that the offering price for privately
placed  securities  of  listed  companies  be  set  when  the  offering is first

                                       20
<PAGE>

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  decreases  in expenses included rent, utilities and telephone, travel and
promotion,  insurance  and  public  relations  due  to  consolidation efforts of
management.

Impairment  Loss  on Long-Lived Assets are the result of the Company's inability
to  raise  revenues  in accordance with the corporate business plan, the Company
continued  operating  at  a  loss  for  the  year ended December 31, 2002.  As a
result,  the  Company commenced an impairment review of its long-lived assets in
accordance  with  Statement  of  Financial  Accounting  Standard  ("SFAS")144
"Accounting of the Impairment or Disposal of Long-Lived Assets".  As a result of
this impairment review, the Company recorded an impairment loss of approximately
$453,832  during  the  six  month  period ended December 31, 2002, to reduce the
carrying  value  of  these  assets  to  its  estimated  fair  value.

The Company sold the stock of related registered companies for a loss of $93,319
in  2002. For the year ended December 31, 2002, the Company reported a change in
unrealized  loss  on  investments  for  $86,487.

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
2002 was $2,113,138, compared with a net loss of $3,760,821 for fiscal 2001, and
$4,661,652  for  fiscal  2000.

LIQUIDITY  AND  CAPITAL  RESOURCES

At  December  31,  2002,  the Company's cash position was $48,708, a decrease of
$55,530  from  December  31,  2001. The Company had a working capital deficit of
$1,074,998  and  an  accumulated  deficit  of  $31,176,441 at December 31, 2002.

The  Company's  principal  source  of  cash  during  fiscal 2002 was proceeds of
$827,681  received from private placements of equity securities and $35,784 from
proceeds  from the sale of investments. This was offset by $918,995 of cash used
in  operating  activities.

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  2002,  the  Company completed two private placements, resulting in gross
proceeds  to  the  Company  of  $827,681.

In the first offering completed in June 2002, the Company sold 10,000,000 units,
each consisting of one common share and one share purchase warrant to acquire an
additional  share  at  $0.085  per  share by June 28, 2004, at a price $0.07 per
unit,  for  total  proceeds  of  $700,000.  Each  unit consisted of one share of
common  stock and one warrant to acquire an additional share at $0.085 per share
($0.13  CN)  by  June  2004.

In  the  second  offering  completed  on  December  31,  2002,  the Company sold
2,000,000  units  at  a price of $0.064 per unit for total proceeds of $128,000.
Each  unit  consisted  of  one  common  share  and one share purchase warrant to
purchase  one  additional  common  share  at $0.064 per share, exercisable until
December  31,  2004.  The  offer  and  sale  of  the  units  were  exempt  from
registration  under  Rule 506 of Regulation D of the Securities Act. The Company
limited  the  manner  of  the  offering  and  provided  disclosure regarding the
offering  and  the  Company to the investors.  Two officers and directors of the
Company,  six  additional  unaffiliated  non-accredited  investors,  and  seven
additional  unaffiliated  accredited  investors  purchased the securities.   The
Company believes that a portion of these sales were also exempt under Regulation
S  under  the Securities Act, as the sales were made in offshore transactions to
non-U.S.  persons.

Subsequent to the year end, the Company completed on February 25, 2003 a private
placement  of  2,750,000 units at a price of $0.0657 per unit for total proceeds
of  $180,675.  Each  unit  consisted  of one common share and one share purchase

                                       21
<PAGE>

warrant  to  purchase  one  additional  common  share  at  $0.0657  per  share,
exercisable until February 25, 2005. The offer and sale of the units were exempt
from  registration  under  Rule  506  of Regulation D of the Securities Act. The
Company limited the manner of the offering and provided disclosure regarding the
offering  and  the  Company  to the investors. Two officers and directors of the
Company, one employee of the Company, two additional unaffiliated non-accredited
investors,  and eight additional unaffiliated accredited investors purchased the
securities.  The Company believes that a portion of these sales were also exempt
under  Regulation S under the Securities Act, as the sales were made in offshore
transactions  to  non-U.S.  persons.

The  Company's  independent  accountants,  in  their  report  accompanying  the
Company's  audited  financial  statements at and for the year ended December 31,
2002, have stated that there is substantial doubt about the Company's ability to
continue as a going concern. As of December 31, 2002, the Company had $48,708 in
cash.  The  Company  will  require an additional $1.0 million to $1.5 million to
finance  operations  for  the  fiscal  2003 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  $1.0  million  to  $1.5  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 $2.0 million to $3.0 million for fiscal 2004.
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 maintained in U.S.
dollars.

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-19 of this Report and
are  incorporated  herein  by  reference.

ITEM  9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING AND
          FINANCIAL  DISCLOSURE.

None

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:

                                       22
<PAGE>

<TABLE>
<CAPTION>

Name                Age                      Position                             Period of Service
<S>                           <C>   <C>                                                  <C>

Edwin Molina                  47    Director, Chief Executive Officer and President      Since 1998

Anton J. Drescher (1)         46    Director, Chief Financial Officer and Secretary      Since 1994

Robert D. Smith Jr. (1)       52    Director and Chief Operating Officer                 Since 2000

Kent Norton                   43    Chief Information/Chief Technical Officer            Since 2000

Daniel E. Kinnaman (2)        46    Senior Vice President, Sales and Marketing           Since 2001
</TABLE>

(1)     Member  of  the  Audit  Committee
(2)     Resigned  as  an  officer  effective  May  17,  2002

Anton  Drescher, Edwin Molina, and Robert D. Smith were elected directors of USA
Video  in  June  2002.

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 Cal-Star, Inc. (formerly
Future  Link Systems Inc.) a public company listed for trading on the TSX, which
company was previously involved in the development of compression technology and
is now deemed an inactive company by the TSX; a director and Secretary/Treasurer
of  iQuest  Networks  Inc.  (formerly  "Interlink Systems Inc." and "Glassmaster
Industries,  Inc."),  a  public  company  listed on the TSX, 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 TSX and involved in mineral exploration, since February 2003, a director
and  Secretary of StorageFlow Systems Corp., a public company listed on the TSX,
which  company  is involved in electronic data storage.  Mr. Drescher has been a
Certified  Management  Accountant  since  1981.

ROBERT  D.  SMITH,  JR.  -  CHIEF  OPERATING  OFFICER  AND  DIRECTOR

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 the nuclear
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.

                                       23
<PAGE>

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.

DANIEL  E.  KINNAMAN  -  SENIOR  VICE  PRESIDENT,  SALES  AND  MARKETING

Mr.  Kinnaman joined USA Video in October 2001 as Senior Vice President of Sales
and  Marketing  and resigned as an officer as of May 17, 2002.  Mr. Kinnaman was
the  Executive  Vice  President and Group Publisher for Professional Media Group
LLC.  In this position, he was responsible for the publication of two nationally
circulated  technology  and  education  magazines  and  directed the advertising
sales,  editorial content, and overall business direction of these publications.
For  the  past fifteen years, Mr. Kinnaman has been a prominent speaker, writer,
and independent advisor specializing in the business and education opportunities
presented  by emerging computer and networking technologies. He was instrumental
in  guiding  the  marketing  strategy of Compaq Computer Corporation's education
Division  during  a  three-year  period  during  which the division's sales grew
considerably.  Mr. Kinnaman holds a Bachelor of Science degree in Marketing from
The  University  of  Connecticut  and  a  Master  of  Arts in Education from The
University  of  Connecticut.

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,  2001.

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,  2002,  the Company's
officers,  directors and 10% shareholders complied with all Section 16(a) filing
requirements  applicable  to  them  except  as  follows:

None

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, 2002, whose salary and bonus for such
year  exceeded  $100,000  (collectively, the "Named Executive Officers") for the
last  three  completed  fiscal  years.

                                       24
<PAGE>

<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>            <C>          <C>             <C>          <C>           <C>         <C>

Molina,         2002   $84 415          -0-        $     -0-         -0-          900,000(9)    -0-         -0-
Edwin           2001   $124,910         -0-        $125,000(2)       -0-               -0-      -0-         -0-
(CEO)           2000   $128,361         -0-        $500,000(3)       -0-               -0-      -0-         -0-

Drescher        2002   $81,311(1)       -0-        $     -0-         -0-          750,000(9)    -0-         -0-
Anton,          2001   $120,000(1)      -0-        $200,000(4)       -0-               -0-      -0-         -0-
(CFO)           2000   $120,000(1)      -0-        $500,000(5)       -0-          200,000(10)   -0-         -0-

Smith,          2002   $27,139          -0-        $     -0-         -0-          500,000(11)   -0-         -0-
Robert          2001   $89,412          -0-        $ 22,900(6-8)     -0-               -0-      -0-         -0-
(COO)
</TABLE>

(1)  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.

(2)  In  March  2001,  Mr. Molina purchased 250,000 units (each comprised of one
     common  share  and  one  warrant  to  acquire one common share at $0.66 per
     share)  at  $0.54  per unit. This compensation resulted from the difference
     between  the  $0.54 purchase price and the $0.66 warrant exercise price and
     the fair market price of $0.84 of the common shares on the date of issuance
     of  the  units.

(3)  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.

(4)  In  March 2001, Mr. Drescher purchased 400,000 units (each comprised of one
     common  share  and  one  warrant  to  acquire one common share at $0.66 per
     share)  at  $0.54  per unit. This compensation resulted from the difference
     between  the  $0.54 purchase price and the $0.66 warrant exercise price and
     the fair market price of $0.84 of the common shares on the date of issuance
     of  the  units.

(5)  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.

(6)  In  March  2001,  Mr.  Smith  purchased 40,000 units (each comprised of one
     common  share  and  one  warrant  to  acquire one common share at $0.66 per
     share)  at  $0.54  per unit. This compensation resulted from the difference
     between  the  $0.54 purchase price and the $0.66 warrant exercise price and
     the fair market price of $0.84 of the common shares on the date of issuance
     of  the  units.

(7)  In  September 2001, Mr. Smith purchased 45,000 units (each comprised of one
     common  share  and  one  warrant  to  acquire one common share at $0.35 per
     share)  at  $0.27  per unit. This compensation resulted from the difference
     between  the $0.27 purchase price and the fair market price of $0.29 of the
     common  shares  on  the  date  of  issuance  of  the  units.

(8)  In  December 2001, Mr. Smith purchased 100,000 units (each comprised of one
     common  share  and  one  warrant  to  acquire one common share at $0.26 per

                                       25
<PAGE>

     share)  at  $0.20  per unit. This compensation resulted from the difference
     between  the $0.20 purchase price and the fair market price of $0.22 of the
     common  shares  on  the  date  of  issuance  of  the  units.

(9)  In December 2002, Mr. Molina cancelled 900,000 stock options granted to him
     in  February  2002.

(10) In  December  2002, Mr. Drescher cancelled 750,000 stock options granted to
     him  in February 2002 and cancelled 200,000 stock options granted to him in
     December  2000.

(11) In  December 2002, Mr. Smith cancelled 500,000 stock options granted to him
     in  February  2002.

The  following  table  sets forth certain information concerning grants of stock
options to the Named Executive Officers during the year ended December 31, 2002.

<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>      <C>


Molina, Edwin          -0-              -0-            -0-       -0-          -0-         -0-         -0-      -0-
Drescher, Anton        -0-              -0-            -0-       -0-          -0-         -0-         -0-      -0-
Smith, Robert          -0-              -0-            -0-       -0-          -0-         -0-         -0-      -0-
</TABLE>

(1)  A  total  of  5,605,000  stock  options  were  granted  to  employees  and
     consultants  in  2002.

The following table sets forth certain information concerning exercises of stock
options  by the Named Executive Officers during the year ended December 31, 2002
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-                    0 / 0                N/A    / $0

Drescher, Anton                 -0-                 -0-                    0 / 0                N/A    / $0

Smith, Robert                   -0-                 -0-                    0 / 0                N/A    / $0
</TABLE>

(1)  On  December  31,  2002,  the average of the high and low bid prices of the
     common  shares  on  the  OTC  BB  was  $0.07.

                                       26
<PAGE>

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 and the 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 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 26, 2003, 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                                         6,924,424 (1)            6.52%

Anton J. Drescher                                    7,581,885 (2)            7.14%

Robert D. Smith                                      1,160,000 (3)            1.09%

All Executive Officers & Directors
 as a Group [four persons]                          15,841,309 (4)           14.91%
</TABLE>

(1)  Includes  1,725,000  common  shares  underlying warrants that are currently
     exercisable.  Mr. Molina's address is 83 Halls Road, Old Lyme, Connecticut.

(2)  Includes  1,725,000  common  shares  underlying warrants that are currently
     exercisable.  Mr.  Drescher's  address  is  83  Halls  Road,  Old  Lyme,
     Connecticut.

(3)  Includes  360,000  shares  underlying  warrants.  Mr. Smith's address is 83
     Halls  Road,  Old  Lyme,  Connecticut.

(4)  Includes  75,000  common  shares  underlying  warrants.

ITEM  13.  CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS.

In  2002, the Company paid consulting fees of $81,311 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  June 2002, USA Video completed a private placement of 10,000,000 units (each
unit  consisting  of  one common share and one warrant to purchase an additional
common  share  at  $0.085  per  share)  at  a  price of $0.07 per unit, of which

                                       27
<PAGE>

7,085,000  units were sold to outside investors and 2,915,000 units were sold to
officers,  directors, and employees of the Company. Because the rules of the TSX
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 $0.075 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 (1,200,000 units), Anton J. Drescher (1,200,000 units)
and  Robert  Smith  (215,000  units).

In  December  2002,  USA  Video completed a private placement of 2,000,000 units
(each  unit  consisting  of  one  common  share  and  one warrant to purchase an
additional  common  share at $0.064 per share) at a price of $0.064 per unit, of
which 1,450,000 units were sold to outside investors and 550,000 units were sold
to  officers,  directors, and employees of the Company. Because the rules of the
TSX  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 above
the  market  price of $0.053 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 (275,000 units) and Anton J. Drescher (275,000 units).

In  February  2003,  USA  Video completed a private placement of 2,750,000 units
(each  unit  consisting  of  one  common  share  and  one warrant to purchase an
additional common share at $0.0657 per share) at a price of $0.0657 per unit, of
which 2,200,000 units were sold to outside investors and 550,000 units were sold
to  officers,  directors, and employees of the Company. Because the rules of the
TSX  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 $0.075 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) and Anton J. Drescher (250,000 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

     During  the  last  quarter  of  the fiscal year covered by this Report, the
     registrant  filed  the  filing  reports  on  Form  8-K:

     (i)  On November 25, 2002 the registrant filed a report on Form 8-K wherein
          the registrant provided an update on its status and the market for its
          services,  explaining  why  the registrant's business had taken such a
          dramatic  downturn,  due  to  the  nature  of  the  market,  and  the
          registrant's  reactions  to the downturn, such as aggressively cutting
          back  on  expenses, which resulted in the regrettable staff reduction;
          as well as the registrant's future plans, which entail maintaining the
          VOD Patent and retention of counsel to represent it aggressively, with
          a  focus on licensing the VOD Patent and other intellectual properties
          such  as  the  patent-pending  DRM  and  motion  wavelet  compression
          technologies.

                                       28
<PAGE>

     (ii) On December 3, 2002, the registrant filed a report on Form 8-K wherein
          the  registrant  reported  that  it  had  relocated its corporate head
          office  to  83  Halls  Road,  Old  Lyme,  Connecticut,  06371-1469.

     (iii)  On March 11, 2003, the registrant filed a report on Form 8-K wherein
          the  registrant reported that had entered into an agreement with Engle
          Group  LLC  to  undertake investor and media relations services and to
          assist  the  registrant  in  developing  and  implementing a strategic
          communications  plan,  at  remuneration  of  US$2,500 per month and to
          advise  that the registrant and Maurice Loverso had mutually agreed to
          terminate  the  consulting  agreement  and  that  Mr. Loverso would no
          longer  be  providing  investor  relations services to the registrant.

(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).

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  Corporation                            Texas
     USA  Video  Productions  Inc.                      Wyoming
     USA  Video  Technology  Corporation                Wyoming
     USVO,  Inc.                                        Connecticut



                                       29
<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  26,  2003                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 26, 2003
-----------------------
Edwin  Molina

/s/  Anton J. Drescher     Chief Financial Officer, (principal    March 26, 2003
-----------------------    financial  officer  and  principal
Anton  J.  Drescher        accounting  officer),  Director

/s/  Robert D. Smith       Director                               March 26, 2003
-----------------------
Robert  D.  Smith


                                       30
<PAGE>

                                                                       Exhibit 1

      CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
                                   PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

SECTION  906  CERTIFICATION  BY  EDWIN  MOLINA

Pursuant  to the requirements of Section 906 of the Sarbanes-Oxley Act of  2002,
Edwin  Molina,  hereby  certifies  that:

1.   This report fully complies with the requirements of Sections 13(a) or 15(d)
     of  the  1934  Act,  and

2.   The  information  contained in this report fairly presents, in all material
     respects, the registrant's financial condition and results of operations of
     the  registrant.

                                By:  /s/  Edwin  Molina
                                   -----------------------------------
                                   Name:  Edwin  Molina
                                   Title: President  and  Chief  Executive
                                          Officer
                                   Date:  March  26,  2003


SECTION  906  CERTIFICATION  BY  ANTON  J.  DRESCHER

Pursuant  to the requirements of Section 906 of the Sarbanes-Oxley Act of  2002,
Anton  J.  Drescher,  hereby  certifies  that:

1.   This report fully complies with the requirements of Sections 13(a) or 15(d)
     of  the  1934  Act,  and

2.   The  information  contained in this report fairly presents, in all material
     respects, the registrant's financial condition and results of operations of
     the  registrant.

                                By:  /s/  Anton  J.  Drescher
                                   ------------------------------------
                                   Name:  Anton  J.  Drescher
                                   Title: Secretary  and  Chief  Financial
                                          Officer
                                   Date:  March  26,  2003




                                       31
<PAGE>
                                 CERTIFICATIONS

I,  Edwin  Molina,  certify  that:

1.   I  have  reviewed  this annual report on Form 10-K of USA Video Interactive
     Corp;

2.   Based  on  my  knowledge,  this  annual  report does not contain any untrue
     statement  of a material fact or omit to state a material fact necessary to
     make  the  statements  made, in light of the circumstances under which such
     statements  were made, not misleading with respect to the period covered by
     this  annual  report;

3.   Based  on  my  knowledge,  the  financial  statements,  and other financial
     information  included in this annual report, fairly present in all material
     respects  the  financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The  registrant's  other  certifying  officers  and  I  are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in  Exchange  Act  Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   designed  such  disclosure  controls  and  procedures  to  ensure that
          material  information  relating  to  the  registrant,  including  its
          consolidated  subsidiaries, is made known to us by others within those
          entitles,  particularly  during the period in which this annual report
          is  being  prepared;

     b)   evaluated  the  effectiveness  of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this  annual  report  (the  "Evaluation  Date");  and

     c)   presented  in  this  annual  report  our  conclusions  about  the
          effectiveness  of  the disclosure controls and procedures based on our
          evaluation  as  of  the  Evaluation  Date;

5.   The  registrant's  other certifying officers and I have disclosed, based on
     our  most  recent  evaluation,  to  the registrant's auditors and the audit
     committee  of  registrant's  board  of directors (or persons performing the
     equivalent  function):

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which  could  adversely  affect  the registrant's ability to
          record,  process,  summarize  and  report  financial  data  and  have
          identified  for  the  registrant's auditors any material weaknesses in
          internal  controls;  and

     b)   any  fraud, whether or not material, that involves management or other
          employees  who  have  a  significant role in the registrant's internal
          controls;  and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     annual  report  whether  or  not there were significant changes in internal
     controls  or  in  other  factors  that  could significantly affect internal
     controls  subsequent  to  the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.


                                By:  /s/  Edwin  Molina
                                   -----------------------------------
                                   Name:  Edwin  Molina
                                   Title: President  and  Chief  Executive
                                          Officer
                                   Date:  March  26,  2003



                                       32
<PAGE>

I,  Anton  J.  Drescher,  certify  that:

1.   I  have  reviewed  this annual report on Form 10-K of USA Video Interactive
     Corp;

2.   Based  on  my  knowledge,  this  annual  report does not contain any untrue
     statement  of a material fact or omit to state a material fact necessary to
     make  the  statements  made, in light of the circumstances under which such
     statements  were made, not misleading with respect to the period covered by
     this  annual  report;

3.   Based  on  my  knowledge,  the  financial  statements,  and other financial
     information  included in this annual report, fairly present in all material
     respects  the  financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The  registrant's  other  certifying  officers  and  I  are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in  Exchange  Act  Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   designed  such  disclosure  controls  and  procedures  to  ensure that
          material  information  relating  to  the  registrant,  including  its
          consolidated  subsidiaries, is made known to us by others within those
          entitles,  particularly  during the period in which this annual report
          is  being  prepared;

     b)   evaluated  the  effectiveness  of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this  annual  report  (the  "Evaluation  Date");  and

     c)   presented  in  this  annual  report  our  conclusions  about  the
          effectiveness  of  the disclosure controls and procedures based on our
          evaluation  as  of  the  Evaluation  Date;

5.   The  registrant's  other certifying officers and I have disclosed, based on
     our  most  recent  evaluation,  to  the registrant's auditors and the audit
     committee  of  registrant's  board  of directors (or persons performing the
     equivalent  function):

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which  could  adversely  affect  the registrant's ability to
          record,  process,  summarize  and  report  financial  data  and  have
          identified  for  the  registrant's auditors any material weaknesses in
          internal  controls;  and

     b)   any  fraud, whether or not material, that involves management or other
          employees  who  have  a  significant role in the registrant's internal
          controls;  and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     annual  report  whether  or  not there were significant changes in internal
     controls  or  in  other  factors  that  could significantly affect internal
     controls  subsequent  to  the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.



                                By:  /s/  Anton  J.  Drescher
                                   ------------------------------------
                                   Name:  Anton  J.  Drescher
                                   Title: Secretary  and  Chief  Financial
                                          Officer
                                   Date:  March  26,  2003
<PAGE>
USA  VIDEO  INTERACTIVE  CORP.
 AND  SUBSIDIARIES

CONSOLIDATED  FINANCIAL  STATEMENTS

DECEMBER  31,  2002


                                      F-1
<PAGE>


                                    USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES


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



INDEPENDENT  AUDITOR'S  REPORT                                               F-2


CONSOLIDATED  FINANCIAL  STATEMENTS:

   Balance  Sheets                                                           F-3
   Statements  of  Operations                                                F-4
   Statements  of  Comprehensive  Operations                                 F-5
   Statements  of  Stockholders'  Equity  (Deficiency)                       F-6
   Statements  of  Cash  Flows                                               F-7
   Notes  to  Consolidated  Financial  Statements                   F-8  -  F-19



                                      F-2
<PAGE>
INDEPENDENT  AUDITOR'S  REPORT




To  the  Board  of  Directors
USA  Video  Interactive  Corp.


We  have  audited  the  accompanying  consolidated  balance  sheets of USA Video
Interactive  Corp.  and  Subsidiaries  as of December 31, 2002 and 2001, and the
related  consolidated  statements  of  operations,  comprehensive  operations,
stockholders' equity (deficiency), and cash flows for each of the three years in
the period ended December 31, 2002.  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, 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, 2002 and 2001 and the
results  of their operations and their cash flows for each of the three years in
the  period  ended  December  31,  2002 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  and a stockholders' 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  3,  2003

                                      F-3
<PAGE>
                                    USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES

                                                     CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

DECEMBER 31,                                                                              2002           2001

<S>                                                                                  <C>            <C>
ASSETS

Current Assets:
     Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . .  $     48,708   $    104,238
     Marketable securities - related parties. . . . . . . . . . . . . . . . . . . .             -         42,616
     Accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         1,400         30,900
     Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             -         12,000
     Prepaid expenses and other current assets. . . . . . . . . . . . . . . . . . .        10,573         21,613
                                                                                     -------------  -------------

        TOTAL CURRENT ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . .        60,681        211,367

Property and Equipment - at cost, net of accumulated depreciation of $- 0 -
 and $573,015, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . .       211,314      1,100,339

Other Assets, net of accumulated amortization of $11,339 and $8,016, respectively .        45,149         70,472

Deferred Tax Assets, net of valuation allowance of $7,950,000 and
 $7,215,000, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             -              -
                                                                                     -------------  -------------


        TOTAL ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $    317,144   $  1,382,178
                                                                                     =============  =============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

Current Liabilities:
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . .  $  1,082,499   $    948,417
Due to related parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        53,180         91,480
                                                                                     -------------  -------------

        TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . .     1,135,679      1,039,897
                                                                                     -------------  -------------


Commitments and Contingencies

Stockholders' Equity (Deficiency):
Preferred stock - no par value; authorized 250,000,000 shares, none issued
Common stock and additional paid-in capital - no par value; authorized 250,000,000
 shares, issued and outstanding 103,745,088 and 91,745,088 shares, respectively . .    30,357,906     29,492,071
Accumulated other comprehensive loss. . . . . . . . . . . . . . . . . . . . . . . .             -        (86,487)
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   (31,176,441)   (29,063,303)
                                                                                     -------------  -------------

        STOCKHOLDERS' EQUITY (DEFICIENCY) . . . . . . . . . . . . . . . . . . . . .      (818,535)       342,281
                                                                                     -------------  -------------

        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) . . . . . . . . . .  $    317,144   $  1,382,178
                                                                                     =============  =============

</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,                                                     2002          2001          2000

<S>                                                                     <C>           <C>           <C>
Revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $   156,976   $   124,006   $   638,592
                                                                        ------------  ------------  ------------

Expenses:
     Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . .       88,377        66,770       393,496
     Research and development. . . . . . . . . . . . . . . . . . . . .      277,149       999,058       620,212
     Selling, general and administrative (includes $37,758 to related.      859,736     1,833,440     2,599,591
      parties in 2000)
     Depreciation and amortization . . . . . . . . . . . . . . . . . .      439,516       407,880       224,581
     Impairment loss on long-lived assets. . . . . . . . . . . . . . .      453,832
     Noncash compensation charges. . . . . . . . . . . . . . . . . . .       38,154       585,697     1,453,783
                                                                        ------------  ------------  ------------

Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .    2,156,764     3,892,845     5,291,663
                                                                        ------------  ------------  ------------
Loss from operations . . . . . . . . . . . . . . . . . . . . . . . . .   (1,999,788)   (3,768,839)   (4,653,071)
                                                                        ------------  ------------  ------------

Other income (expense), net:
       Interest income (expense) (net of interest
        income of $149, $5,173 and $26,231, respectively). . . . . . .      (20,031)        4,903        26,231
       Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      (93,319)        3,115       (34,812)
                                                                        ------------  ------------  ------------

                                                                           (113,350)        8,018        (8,581)
                                                                        ------------  ------------  ------------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $(2,113,138)  $(3,760,821)  $(4,661,652)
                                                                        ============  ============  ============

Net loss per share - basic and diluted . . . . . . . . . . . . . . . .  $      (.02)  $      (.04)  $      (.06)
                                                                        ============  ============  ============
Weighted-average number of common shares outstanding - basic
 and diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   96,873,855    84,946,199    76,700,723
                                                                        ============  ============  ============
</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,                                2002          2001          2000
<S>                                                <C>           <C>           <C>

Net loss. . . . . . . . . . . . . . . . . . . . .  $(2,113,138)  $(3,760,821)  $(4,661,652)

Other comprehensive income (loss):
  Change in unrealized gain (loss) on investments       86,487      (160,210)       73,723
                                                   ------------  ------------  ------------

Comprehensive loss. . . . . . . . . . . . . . . .  $(2,026,651)  $(3,921,031)  $(4,587,929)
                                                   ============  ============  ============

</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 (DEFICIENCY)
<TABLE>
<CAPTION>


                                                                        ACCUMULATED
                                            COMMON STOCK AND           OTHER                          STOCKHOLDERS'
                                       ADDITIONAL   PAID-IN CAPITAL    COMPREHENSIVE    ACCUMULATED       EQUITY
                                         SHARES          AMOUNT        INCOME (LOSS)      DEFICIT      (DEFICIENCY)

<S>                                   <C>           <C>               <C>              <C>            <C>
Balance at January 1, 2000 . . . . .    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. . . .     2,383,000           602,074               -              -          602,074
 exercise of options
Issuance of common stock upon. . . .     5,145,000           500,062               -              -          500,062
 exercise of warrants
Noncash compensation charges . . . .             -         1,453,783               -              -        1,453,783
Change in unrealized gains (loss). .             -                 -  $       73,723              -           73,723
 on investments
Net loss . . . . . . . . . . . . . .             -                 -               -     (4,661,652)      (4,661,652)
                                      ------------  ----------------  ---------------  -------------  ---------------

Balance at December 31, 2000 . . . .    81,700,088        25,766,071          73,723    (25,302,482)         537,312
Issuance of common stock and common
 stock warrants for cash . . . . . .     9,800,000         3,067,391               -              -        3,067,391
Issuance of common stock upon. . . .       245,000            72,912               -              -           72,912
 exercise of warrants
Noncash compensation charges . . . .             -           585,697               -              -          585,697
Change in unrealized gains . . . . .             -                 -        (160,210)             -         (160,210)
 (loss) on investments
Net loss . . . . . . . . . . . . . .             -                 -               -     (3,760,821)      (3,760,821)
                                      ------------  ----------------  ---------------  -------------  ---------------

Balance at December 31, 2001 . . . .    91,745,088        29,492,071         (86,487)   (29,063,303)         342,281
Issuance of common stock and common
  stock warrants for cash. . . . . .    12,000,000           827,681               -              -          827,681
Noncash compensation charges . . . .             -            38,154               -              -           38,154
Change in unrealized gains . . . . .             -                 -          86,487              -           86,487
  (loss) on investments
Net loss . . . . . . . . . . . . . .             -                 -               -     (2,113,138)      (2,113,138)
                                      ------------  ----------------  ---------------  -------------  ---------------

Balance at December 31, 2002 . . . .   103,745,088  $     30,357,906  $        - 0 -   $(31,176,441)  $     (818,535)
                                      ============  ================  ===============  =============  ===============

</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,                                                      2002          2001          2000

<S>                                                                      <C>           <C>           <C>
Cash flows from operating activities:
   Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $(2,113,138)  $(3,760,821)  $(4,661,652)
   Adjustments to reconcile net loss to net cash used in operating
    activities:
     Depreciation and amortization. . . . . . . . . . . . . . . . . . .      439,516       407,880       224,581
     Impairment loss on long-lived assets . . . . . . . . . . . . . . .      452,833             -        33,122
     Noncash compensation charge. . . . . . . . . . . . . . . . . . . .       38,154       585,697     1,453,783
     Loss on sale of investments - related parties. . . . . . . . . . .       93,319             -             -
     Loss on disposal of property and equipment . . . . . . . . . . . .            -        18,299             -
     Bad debts (recovery) . . . . . . . . . . . . . . . . . . . . . . .       17,753        (7,000)     (108,403)
     Write-down of inventory                                                                76,481
     Changes in operating assets and liabilities:
       (Increase) decrease in accounts receivable . . . . . . . . . . .       11,747        98,913      (109,515)
       (Increase) decrease in inventory . . . . . . . . . . . . . . . .       12,000       (12,000)     (145,911)
       (Increase) decrease in prepaid expenses. . . . . . . . . . . . .       33,039        77,755       (51,164)
        and other current assets
       Increase in other assets . . . . . . . . . . . . . . . . . . . .            -       (26,000)      (14,187)
       (Decrease) increase in accounts payable. . . . . . . . . . . . .      134,082      (161,616)      624,462
        and accrued expenses
      (Decrease) increase in accounts payable and
        accrued expenses - related parties. . . . . . . . . . . . . . .            -       (20,830)        9,238
(Decrease) increase in due to related parties . . . . . . . . . . . . .      (38,300)       15,584      (112,970)
                                                                         ------------  ------------  ------------

          NET CASH USED IN OPERATING ACTIVITIES . . . . . . . . . . . .     (918,995)   (2,707,658)   (2,858,616)
                                                                         ------------  ------------  ------------

Cash flows from investing activities:
    Proceeds from sale of investments - related parties . . . . . . . .       35,784             -             -
    Purchases of property and equipment . . . . . . . . . . . . . . . .            -      (559,604)     (689,989)
                                                                         ------------  ------------  ------------

          NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES . . . . .       35,784      (559,604)     (689,989)
                                                                         ------------  ------------  ------------

Cash flows from financing activity - proceeds from the
 issuance of common stock and warrants. . . . . . . . . . . . . . . . .      827,681     3,140,303     3,362,136
                                                                         ------------  ------------  ------------


Net decrease in cash and cash equivalents . . . . . . . . . . . . . . .      (55,530)     (126,959)     (186,469)

Cash and cash equivalents at beginning of year. . . . . . . . . . . . .      104,238       231,197       417,666
                                                                         ------------  ------------  ------------

Cash and cash equivalents at end of year. . . . . . . . . . . . . . . .  $    48,708   $   104,238   $   231,197
                                                                         ============  ============  ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

    Cash paid during the year for interest. . . . . . . . . . . . . . .  $    20,180   $         -   $    12,965
                                                                         ============  ============  ============

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES:

    Marketable securities received for settlement of amounts
     previously written off as bad debt . . . . . . . . . . . . . . . .  $         -   $         -   $   108,403
                                                                         ============  ============  ============

    Inventory originally purchased for resale reclassified to property
     and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . .  $         -   $    69,430   $         -
                                                                         ============  ============  ============

</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, 2002 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    The accompanying consolidated financial statements have been
     SIGNIFICANT    prepared  assuming  the  Company  will  continue  as a going
     ACCOUNTING     concern.  As  shown in the financial statements, the Company
     POLICIES:      has incurred losses of $2,113,138, $3,760,821 and $4,661,652
                    for  the  years  ended  December  31,  2002,  2001 and 2000,
                    respectively. In addition, the Company has a working capital
                    deficiency  of  approximately $1,075,000 and a stockholders'
                    deficiency  of  approximately $819,000 at December 31, 2002.
                    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  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  had  classified  its investments in marketable
                    securities  as  available-for-sale  securities.  These
                    securities  were  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, 2001, 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.

                    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.

                    The  Company tests the carrying amount of long-lived assets,
                    including  intangible  assets, whenever events or changes in
                    circumstances  indicate  that the carrying amount may not be
                    recoverable,  based  on the undiscounted cash flows expected
                    from  the  use  and  eventual  disposition  of  the  asset.

                    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. If objective evidence
                    of fair value is not available, 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.

                    Research  and  development  costs  are expensed as incurred.

                    Advertising  costs  are  expensed when incurred. Advertising
                    expense  for  the years ended December 31, 2001 and 2000 was
                    approximately  $16,000  and  $97,000,  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 rates in effect for the year in which
                    the  differences  are  expected  to  reverse.  The  Company
                    periodically evaluates the realizability 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,  2002  and  2001.

                                      F-10
<PAGE>

                                    USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                    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.

                    The  Company  has  elected  to  apply  APB  Opinion  No. 25,
                    Accounting  for  Stock Issued to Employees ("APB Opinion No.
                    25"),  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, 2002, 2001 and
                    2000  would  have  been  as  follows:

<TABLE>
<CAPTION>

Year ended December 31,                 2002          2001          2000
-----------------------             ------------  ------------  ------------
<S>                                 <C>           <C>           <C>

Net loss:
  As reported . . . . . . . . . .  $(2,113,138)  $(3,760,821)  $(4,661,652)
                                   ============  ============  ============

Add:  Stock-based compen-
 sation expense included in
 reported net loss. . . . . . . .       38,154             -             -
                                   ------------  ------------  ------------

Deduct: Total stock-based
 compensation expense
 determined under fair value
 based method for all awards. . . .   (378,338)      (75,000)   (4,763,418)
                                   ------------  ------------  ------------

Pro forma . . . . . . . . . .   .  $(2,453,322)  $(3,835,821)  $(9,425,070)
                                   ============  ============  ============

Loss per common share -
 basic and diluted:
As reported . . . . . . . . . . .  $     (0.02)  $     (0.04)  $     (0.06)
                                   ============  ============  ============
Pro forma . . . . . . . . . . . .  $     (0.03)  $     (0.05)  $     (0.12)
                                   ============  ============  ============

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:

Year ended December 31, . .  .          2002          2001          2000
-----------------------         ------------  ------------  ------------

Expected dividend yield . . . . .        - 0 -         - 0 -         - 0 -
Risk-free interest rate . . . . .         3.03%         4.80%         6.37%
Volatility. . . . . . . . . . . .         1.37%         1.43%         1.43%
Expected life (years) . . . . . .            2             2             2
                                   ------------  ------------  ------------
</TABLE>

                                      F-11
<PAGE>

                                    USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                    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.

3.   MAJOR          During  the  year  ended  December 31, 2002, three customers
     CUSTOMERS:     accounted  for  approximately  36%,  32%  and  12%  of total
                    revenue.  During  the  year  ended  December  31,  2001, one
                    customer  accounted  for approximately 61% of total revenue.
                    During  the  year  ended  December 31, 2000, three customers
                    accounted  for  approximately  26%,  44%  and  12%  of total
                    revenue.

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

<TABLE>
<CAPTION>

December 31,                             2001
-------------------------------------  ---------
<S>                                    <C>

Available-for-sale equity securities:
  Cost. . . . . . . . . . . . . . . .  $129,103
  Unrealized loss . . . . . . . . . .   (86,487)
                                       ---------
                                       $ 42,616
                                       =========
</TABLE>

                    The investments in marketable securities were with companies
                    that  have  a  board  member  who  is  a board member of the
                    Company.

                    Included in other in the accompanying consolidated statement
                    of operations for the year ended December 31, 2002 is a loss
                    of  $93,319  on  the  disposition  of  the  securities.

5.   PREPAID        Prepaid  expenses  and  other  current assets consist of the
     EXPENSES  AND  following:
     OTHER  CURRENT
     ASSETS:
<TABLE>
<CAPTION>

December 31,                                     2002     2001
----------------------------------------------  -------  -------
<S>                                             <C>      <C>

Refundable security deposits . . . . . . . . .  $ 5,398  $   -0-
Other (none in excess of 5% of current assets)    5,175   21,613
                                                -------  -------
                                                $10,573  $21,613
                                                =======  =======
</TABLE>

                                      F-12
<PAGE>

                                    USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6.   PROPERTY  AND  Property  and equipment, at cost, consists of the following:
     EQUIPMENT:

<TABLE>
<CAPTION>

                                                      Estimated
December 31,                     2002       2001     Useful Life
<S>                            <C>       <C>         <C>

Office equipment. . . . . . .  $ 16,069  $  139,200      5 years
Computer equipment. . . . . .   195,245   1,504,771      3 years
Leasehold improvements. . . .         -      29,383      5 years
                               --------  ----------  -----------
                                211,314   1,673,354

Less accumulated depreciation         -     573,015
                               --------  ----------
                               $211,314  $1,100,339
                               ========  ==========
</TABLE>

                    Depreciation  and amortization expense amounted to $435,193,
                    $383,940 and $219,740 for the years ended December 31, 2002,
                    2001  and  2000,  respectively.

                    During  the  year  ended  December  31,  2002,  the  Company
                    recorded  impairment  losses  of approximately $454,000 (see
                    Note  13).

                    As the result of the Company's inability to raise revenue in
                    accordance  with  the  corporate  business plan, the Company
                    continued  operating  at  a loss for the year ended December
                    31,  2002.  As a result, the Company commenced an impairment
                    review  of its long-lived assets in accordance with SFAS No.
                    144, Accounting for the Impairment or Disposal of Long-Lived
                    Assets.  As  a result of this impairment review, the Company
                    recorded  impairment  losses  of  approximately  $453,000 to
                    reduce  the  carrying value of these assets to its estimated
                    fair  value.  Approximately $350,000 was recorded during the
                    third quarter and approximately $103,000 was recorded during
                    the  fourth  quarter.

                    At  December  31, 2002, as a result of the Company recording
                    an  impairment  loss, the cost of the property and equipment
                    has  been  adjusted to reflect the new carrying amount. This
                    new cost will be depreciated over the remaining useful lives
                    of  the  assets.

                                      F-13
<PAGE>

                                    USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.   OTHER          Other  assets  consist of the following amortized intangible
     ASSETS:        assets:

<TABLE>
<CAPTION>

                                    Gross
                                  Carrying    Accumulated
                                   Amount     Amortization
<S>                               <C>        <C>

Patents. . . . . . . . . . . . .  $  56,488  $     (11,339)
                                  =========  ==============

AGGREGATE AMORTIZATION EXPENSE:
--------------------------------
For year ended December 31, 2002             $       3,323

ESTIMATED AMORTIZATION EXPENSE:
--------------------------------
For year ended December 31,
--------------------------------
2003                                         $       3,323
2004                                                 3,323
2005                                                 3,323
2006                                                 3,323
2007                                                 3,323
</TABLE>

8.   ACCOUNTS       Accounts  payable  and  accrued  expenses  consist  of  the
     PAYABLE  AND   following:
     ACCRUED
     EXPENSES:
<TABLE>
<CAPTION>


December 31,                                     2002       2001
<S>                                           <C>         <C>

Accounts payable . . . . . . . . . . . . . .  $  260,454  $189,702
Accrued professional fees. . . . . . . . . .      93,062    77,164
Accrued payroll and related tax withholdings     564,413   455,374
Amounts due for purchased computer equipment     164,570   226,177
                                              ----------  --------
                                              $1,082,499  $948,417
                                              ==========  ========
</TABLE>

9.   COMMITMENTS    The  Company  leases  its office space under a noncancelable
     AND            operating  lease  expiring  in  November  2003.  The minimum
     CONTINGENCIES: rental  commitment  of  this lease is approximately $14,000.
                    Rent  expense  amounted  to $56,535, $79,481 and $73,521 for
                    the  years  ended  December  31,  2002,  2001  and  2000,
                    respectively.

                    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.

                                      F-14
<PAGE>

                                    USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10.  STOCKHOLDERS'  On  April  10,  2000,  the  Company  issued 190,000 units to
     EQUITY:        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.

                    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.

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

                    On  March  12,  2001,  the  Company  issued 915,000 units to
                    employees at $.54 per unit. Each unit consisted of one share
                    of  common  stock  and one warrant to purchase an additional
                    share of common stock at $.66 per share. The Company charged
                    operations  for  approximately  $294,000  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.

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

                    On  September  28, 2001, the Company issued 487,500 units to
                    employees at $.27 per unit. Each unit consisted of one share
                    of  common  stock  and one warrant to purchase an additional
                    share of common stock at $.35 per share. The Company charged
                    operations  for  approximately  $10,000  representing  the
                    differential  between  the fair value and the purchase price
                    of  the  common  stock.

                    On  December 31, 2001, the Company issued 2,782,500 units to
                    investors at $.20 per unit. Each unit consisted of one share
                    of  common  stock  and one warrant to purchase an additional
                    share  of  common  stock  at  $.26  per  share.

                                      F-15
<PAGE>

                                    USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                    On  December  31,  2001, the Company issued 517,500 units to
                    employees at $.20 per unit. Each unit consisted of one share
                    of  common  stock  and one warrant to purchase an additional
                    share of common stock at $.26 per share. The Company charged
                    operations  for  approximately  $10,000  representing  the
                    differential  between  the fair value and the purchase price
                    of  the  common  stock.

                    From  January  1,  2001  to  December  31, 2001, the Company
                    issued 245,000 shares of common stock upon the exercising of
                    warrants  with exercise prices ranging from $.12 to $.49 per
                    common  share.

                    On  June  28,  2002,  the  Company issued 7,085,000 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  $.085  per  share.

                    On  June  28,  2002,  the  Company issued 2,915,000 units to
                    employees 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  $.085  per  share.

                    On  December 31, 2002, the Company issued 1,275,000 units to
                    investors  at  $.064  per  unit.  Each unit consisted of one
                    share  of  common  stock  and  one  warrant  to  purchase an
                    additional  share  of  common  stock  at  $.064  per  share.

                    On  December  31,  2002, the Company issued 725,000 units to
                    employees  at  $.064  per  unit.  Each unit consisted of one
                    share  of  common  stock  and  one  warrant  to  purchase an
                    additional  share  of  common  stock  at  $.064  per  share.

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

                    In  June  2001,  the Company adopted a new Stock Option Plan
                    (the  "2001 Plan"). The 2001 Plan authorizes the issuance of
                    up  to  8,400,000 of the Company's common shares, subject to
                    adjustment  under  certain  circumstances.  The  Company  is
                    listed  on  the  Canadian  Venture  Exchange ("CDNX") and is
                    subject  to  a limitation on the number of options a company
                    may  have.  The  2001 Plan provides for the issuance of both
                    incentive  stock  options  and nonqualified options as those
                    terms  are  defined in the Internal Revenue Code of 1986, as
                    amended  (the  "Code").  The  Company's previous option plan
                    will  remain  in  effect until all granted stock options are
                    exercised,  expired  or  canceled.

                                      F-16
<PAGE>

                                    USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

<TABLE>
<CAPTION>

Year ended December 31,      2002                     2001                      2000
<S>                       <C>          <C>         <C>          <C>         <C>           <C>

                                       Weighted-                Weighted-                 Weighted-
                                       average                  average                   average
                           Number       Exercise    Number       Exercise    Number of     Exercise
                          of Shares    Price       of Shares    Price       of Shares     Price

Outstanding at
 beginning of year . . .   3,560,000   $     2.18   6,957,000   $     0.69    6,329,000   $      0.81
Granted. . . . . . . . .   5,605,000   $     0.50     250,000   $     1.00    4,360,000   $      2.27
Exercised. . . . . . . .         -0-   $     0.00         -0-   $     0.00   (2,383,000)  $      0.25
Canceled/expired . . . .  (9,140,000)  $     1.15  (3,647,000)  $     1.11   (1,349,000)  $      2.13
                          -----------  ----------  -----------  ----------  ------------  ------------
   OUTSTANDING AT
    END OF YEAR. . . . .      25,000   $     0.50   3,560,000   $     2.18    6,957,000   $      0.69
                          ===========  ==========  ===========  ==========  ============  ============


Options exercisable
 at year-end . . . . . .      25,000                3,560,000                 6,957,000
                          ===========              ===========              ============

Weighted-average fair
 value of options
 granted during the
 Year                                  $     0.17               $     0.75                $      1.05
                                       ==========               ==========                ============
</TABLE>

                    In  October  and  December  2002,  the  Company  cancelled
                    substantially  all  the  outstanding  options.

                    The following table summarizes information about fixed stock
                    options  outstanding  at  December  31,  2002:

<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>

$0.50.  . . . .       25,000    1.1 years  $     0.50       25,000  $    0.50
================  ===========  ===========  ==========  ===========  =========
</TABLE>

                    In  January  2002,  the  Company  issued  925,000 options to
                    nonemployee  consultants,  having  a  fair  value  of
                    approximately  $153,000,  determined using the Black-Scholes
                    option  pricing  model.  The  options  were  subsequently
                    cancelled.  The  fair  value  of  the  options which vested,
                    amounting  to  approximately  $38,000,  was  recorded  as
                    compensation  expense.

                                      F-17
<PAGE>

                                    USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                    Warrants  to purchase shares of common stock are as follows:
<TABLE>
<CAPTION>

Year ended December 31,     2002                          2001                        2000
<S>                      <C>          <C>              <C>          <C>            <C>          <C>

                                      Range                         Range                       Range
                         Number       of               Number       of             Number       of
                         of           Exercise         of           Exercise       of           Exercise
                         Warrants     Price            Warrants     Price          Warrants     Price

Outstanding at
 beginning of year. . .  10,990,000   $  0.26 - $4.00   2,295,000   $0.13 - $4.00   6,250,000   $0.07 - $1.10

Issued. . . . . . . . .  12,000,000   $0.064 - $0.085   9,800,000   $0.26 - $0.80   1,190,000   $1.50 - $4.00
Exercised . . . . . . .         -0-   $          0.00    (245,000)  $        0.30  (5,145,000)  $0.07 - $1.28
Expired . . . . . . . .  (1,190,000)  $  1.50 - $4.00    (860,000)  $  0.58-$1.10         -0-   $        0.00
     OUTSTANDING AT
        END OF YEAR . .  21,800,000   $  0.064- $0.80  10,990,000   $0.26 - $4.00   2,295,000   $0.13 - $4.00
                         ===========  ===============  ===========  =============  ===========  =============
</TABLE>

12.  INCOME         As of December 31, 2002, the Company had deferred tax assets
     TAXES:         resulting primarily from net operating loss carryforwards of
                    approximately  $23,000,000,  which  are  available to offset
                    future  taxable income, if any, through 2022. 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,                                    2002          2001
<S>                                         <C>           <C>

Deferred tax assets:
  Net operating loss carryforwards . . . .  $ 7,916,000   $ 7,211,000
  Allowance for doubtful accounts. . . . .       34,000        34,000
  Unrealized gains (losses) on investments            -       (30,000)
  Valuation allowance. . . . . . . . . . .   (7,950,000)   (7,215,000)
                                            ------------  ------------
        NET DEFERRED TAX ASSETS. . . . . .  $     - 0 -   $     - 0 -
                                            ============  ============
</TABLE>

                    The  reconciliation  of the effective income tax rate to the
                    federal  statutory  rate  is  as  follows:
<TABLE>
<CAPTION>

Year ended December 31,                2002    2001
<S>                                   <C>     <C>

Federal statutory tax rate . . . . .   34  %    34 %
Valuation allowance on net operating
 Carryforwards . . . . . . . . . . .    (34)    (34)
                                      ------  ------
        EFFECTIVE INCOME TAX RATE. .  - 0 -%  - 0 -%
                                      ======  ======
</TABLE>

                                      F-18
<PAGE>

                                    USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13.  RELATED  PARTY Due  to  related  parties  at  December 31, 2002 and 2001 of
     TRANSACTIONS:  $53,180  and  $91,480,  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 selling, general and administrative expenses for
                    the  year  ended  December  31, 2000 was $37,758 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.

14.  VALUATION  AND
     QUALIFYING
     ACCOUNTS:
<TABLE>
<CAPTION>

                                Allowance for
                              Doubtful Accounts
<S>                           <C>

Balance at December 31, 2000  $            7,000
Additions. . . . . . . . . .                   -
Deductions . . . . . . . . .               7,000
                              ------------------
Balance at December 31, 2001                   -
Additions. . . . . . . . . .                   -
Deductions . . . . . . . . .                   -
                              ------------------
Balance at December 31, 2002  $            - 0 -
                              ==================
</TABLE>

15.  QUARTERLY      The  following  table summarizes selected quarterly data for
     FINANCIAL      the  years  ended  December  31,  2002  and  2001:
     INFORMATION
     (UNAUDITED):
<TABLE>
<CAPTION>

                  First       Second      Third       Fourth        Full
                 Quarter     Quarter     Quarter     Quarter        Year
<S>             <C>         <C>         <C>         <C>         <C>

2002:
-----

Revenue. . . .  $  26,253   $  63,323   $  57,125   $  10,275   $   156,976
Expenses . . .   (703,100)   (534,815)   (703,007)   (255,904)   (2,196,826)
Net loss . . .   (676,780)   (564,757)   (641,336)   (230,265)   (2,113,138)

Net loss per
 common share:
  Basic and
   diluted . .  $   (0.01)  $   (0.01)  $   (0.01)  $   (0.00)  $     (0.02)
                ----------  ----------  ----------  ----------  ------------
</TABLE>
                                                                     (continued)

                                      F-19
<PAGE>

                                    USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

                                First       Second      Third        Forth
                               Quarter     Quarter     Quarter      Quarter
<S>             <C>           <C>         <C>         <C>         <C>

2001:
-------

Revenue. . . .  $     1,060   $  33,175   $  67,626   $  22,145   $   124,006
Expenses . . .   (1,304,608)   (954,137)   (823,380)   (810,720)   (3,892,845)
Net loss . . .   (1,298,068)   (919,808)   (753,999)   (788,946)   (3,760,821)
                ------------  ----------  ----------  ----------  ------------

Net loss per
 common share:
  Basic and
   diluted . .  $     (0.02)  $   (0.01)  $   (0.01)  $   (0.01)  $     (0.04)
                ------------  ----------  ----------  ----------  ------------
</TABLE>

16.  SUBSEQUENT     In  February  2003,  the  Company  issued 2,200,000 units to
     EVENTS:        investors  at  $.0657  per  unit. Each unit consisted of one
                    share  of  common  stock  and  one  warrant  to  purchase an
                    additional  share  of  common  stock  at  $.0657  per share.

                    In  February  2003,  the  Company  issued  550,000  units to
                    employees  at  $.0657  per  unit. Each unit consisted of one
                    share  of  common  stock  and  one  warrant  to  purchase an
                    additional  share  of  common  stock  at  $.0657  per share.