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, 2001

                                       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)

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

Registrant's  telephone  number,  included  area  code:     (860)  526-1560

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

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

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.     |  |

Aggregate  market  value  of  the  voting  stock  of  the  registrant  held  by
non-affiliates  of  the  registrant  at March 26, 2002 (computed by reference to
average  of the bid and asked price on the NASD OTC Bulletin Board of the common
shares  on  such  date):   $21,596,067.  Number  of common shares outstanding at
March  26,  2002:  91,745,088.

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  VoD  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  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
four  wholly-owned  subsidiaries: USA Video (California) Corp., USA Video Corp.,
USA  Video  Productions  Inc.,  and  USA  Video  Technologies,  Inc. USA Video's
executive  and  corporate  offices  are  located in Mystic, Connecticut, and its
Canadian  offices  are  located  in  Vancouver,  British  Columbia.


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<PAGE>
BUSINESS  ENVIRONMENT

The  cost  of bandwidth and supporting equipment, such as cable modems and other
broadband  connectivity  to  homes  and  businesses,  is expected to continue to
decrease  over  the  next several years, bringing expanded use of high bandwidth
applications  for  video  transmission  to  the  general  market.  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  TV  and  consumer  magazines,  as total advertising
spending  grows  8.6%  yearly  through  2004.  Total  U.S.  spending on media is
expected  to  reach $663.3 billion by 2003. The 7.5% combined annual growth rate
will  make  communications  the  second  fastest-growing  industry  (behind
telecommunications)  among  the  top  12  U.S.  industries.

USA  Video  believes its source-to-destination streaming media delivery services
hold  significant  potential  for  the on-line advertising and other industries.
According  to  Arbitron/Edison  Media  Research's  Internet VI Study released on
February  7,  2001,  streaming media usage has increased in the past year. As of
January  2001, 13% 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's  principal,  near  term,  strategic  objective  is  to  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,  the  Company  intends  to:

-    Continue  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;

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

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

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

With  regard  to  its  patent,  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 itself to take advantage of this anticipated shift, USA
Video  is  placing  increased emphasis on aggressively protecting its technology
ownership  rights,  including  licensing  arrangements  and  other  forms  of
enforcement.

PROPRIETARY  TECHNOLOGIES

USA  Video's  proprietary  technologies  include  its  (1)  StreamHQ(TM)
infrastructure,  software, and service delivery processes; (2) Store and Forward

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VoD  patent,  and  (3)  Digital  fingerprinting  piracy  deterrence  technology.

The ability for 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.

USA Video's Store and Forward VoD Patent (#5,130,792) 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 technology is
to deter digital video piracy once a user has been authorized to view the 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  digital  rights  management  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.

PRODUCTS  AND  SERVICES

Streaming  media  delivery  services

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

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

-    content  production;

-    content  encoding;

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

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

-    "edge  streaming"  through  video  file transfers to a content distribution
     network  ("CDN");

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

-    transaction  data  capture  and  reporting.


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<PAGE>
In  order  to  provide  StreamHQ(TM)  customers  with  a  high  level of service
availability  and  reliability,  together  with  an efficient and cost-effective
media streaming process, USA Video has entered into arrangements with top ranked
providers of data storage (EMC Corp.), a Tier 1 Internet data center (AT&T), and
a  CDN (Speedera Networks). Furthermore, redundancy, fail over, and security are
important  system  design  components  that  provide  added  value  to  clients.

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.). The same data can be used by USA Video to monitor the performance
of  the  StreamHQ(TM)  system  and  delivery  network.  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.

The  StreamHQ(TM)  infrastructure is hosted at AT&T's midtown-Manhattan Internet
data  center  ("IDC").  USA Video publishes content and monitors operations from
its  operations center in Mystic, Connecticut, allowing services to be delivered
and  maintenance  to  be  performed  without  excessive  travel  requirements.
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 currently selling
products  that  provide  such a return on the customer's investment.  Zmail 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  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, 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.

Many  of  USVO's  competitors are burdened with huge infrastructures for content
delivery  and,  with the recent economic downturn, are having difficulty finding
customers  to utilize it.  On the other hand, USA Video has taken a very austere
approach  to  system deployment, focusing exclusively on the head-end portion of
the  rich media delivery architecture.  Also, as a highly modular infrastructure
that  uses  appliance-like,  functionally  specific  components, StreamHQ(TM) is
highly  scalable.  The system has been initially scaled to accommodate a day-one
client  base,  in  terms  of  storage,  streaming,  web, database, and bandwidth
components.  As this client base increases, StreamHQ(TM) can be scaled with ease
and  efficiency by simply adding one or more functional components.  To minimize
the  amount  of system support that is required, USA Video has built redundancy,
fail-over,  and  security  into  the StreamHQ(TM) infrastructure to facilitate a
straightforward  maintenance  approach.

Media  distribution  systems

As  a  unique  system  and  service that integrates web, database, and streaming
components  within  a  single  homogeneous system, the proprietary architecture,
software,  and  processes  for  delivering  service  represent  significant
intellectual  property  for USA Video.  StreamHQ(TM), as a system and collection
of  intellectual  property, can offer the same advantages to other corporations,
infrastructure providers, or managed Internet service providers.  The meticulous
documentation  of  every  step  in  building  the  system  allows  the  entire
infrastructure,  with  all  its capabilities, to be replicated expeditiously and
with  precision.  USA  Video  is  actively  seeking qualified customers, such as
Fortune 500 companies, governments, and educational institutions, as clients for

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custom  StreamHQ(TM)  systems.  Such  sales would include hardware and assembly,
software  customization,  licensing  of  intellectual  property, deployment, and
ongoing  support.

CUSTOMERS  AND  MARKETS

USA Video's customer and market focus is the business-to-business sector, rather
than  the consumer sector, because of the financial wherewithal of businesses to
purchase  value-added StreamHQ(TM) services and/or systems.  USA Video has first
targeted  corporations  and  institutions  that can derive a marketing advantage
from the Zmail or mediaClix(TM) service, specifically companies that can benefit
from  a  strong  call  to  action  embedded  in  an  engaging rich media and web
presentation  directed  at  a target audience.  Such a call to action can be to:

o     Attend  a  movie,
o     Register  for  a  conference,
o     Contribute  to  a  non-profit  organization,
o     Buy  a  product,
o     Sign  up  for  premium  services,  or
o     Vote  for  a  particular  outcome  in  an  election.

Correspondingly,  USA  Video's  customers  for  these  services  have  included:

o     Film  companies,
o     Event  promoters,
o     Ministries,
o     Travel  companies,
o     Sports  entertainment  centers,  and
o     Political  candidates.

USA  Video's  customers  for  these  services  can  also  be  any  business  or
organization  that  is  dissatisfied  with response rates from traditional email
campaigns  or  who  have  no  idea what the response rate is.  Additionally, any
client who wants to increase brand or product awareness in a more cost effective
manner  than  television advertising would be an appropriate candidate for these
services.

The  Company  is  currently  expanding  the email component of these services to
provide  a  comprehensive  on-line  marketing  management  capability  so  that
customers  will consider USA Video their sole source for meeting email marketing
requirements.  This  system  will  deliver  an  integrated  set  of services for
gathering  email  addresses,  initiating,  monitoring, and reporting on multiple
campaigns,  and  managing  and  building  client  email  lists.

As  USA Video expands the customer base in the advertising and marketing sector,
the Company is expanding its products and capabilities to market its services in
the  following  additional  business  areas:


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

     Corporate  Communications                     Customer  relations
                                                   Employee  communications
                                                   Investor  relations
                                                   Public  relations

     Customer  Service                             Targeted  customer  support

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


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

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

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

USA Video's marketing plan involves partnering with major solutions and services
providers  in  the industry in order to augment the offerings of these companies
with  USA  Video's unique services and solutions and to leverage their sales and
distribution  channels.

The  Company  is  expanding  its  in-house  and external sales forces for direct
marketing  to  potential  customers.  The Company relies primarily on electronic
on-line  marketing  collateral,  not-cost media exposure, customer testimonials,
and  its own Zmail campaigns to increase awareness of its services and products.

COMPETITION

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

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

o    Price;

o    Product  performance;

o    Time  to  market;

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


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

o    Market  presence.

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

ASSEMBLY

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

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  digital
fingerprinting  technology  for  piracy  deterrence.

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

In  fiscal  2001,  2000,  and1999,  the  Company's  research  and  development
expenditures  were  approximately $999,000, $620,000,and  $93,000, respectively.

INTELLECTUAL  PROPERTY

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

USA  Video applied for a U.S. patent for its Store and Forward VoD technology on
February  1,  1990.  Corresponding  overseas  applications were filed in several
countries in 1992. USA Video was granted U.S. Patent #5,130,792 in July 1992. In
June  2000,  the  U.S.  Patent  Office  reinstated the patent, which had expired

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<PAGE>
because  of  an administrative oversight that led to late payment of fees due in
1995.

On February 10, 1999, USA Video was granted patents on its Store and Forward VoD
technology  in  five  European  countries:  England,  France, Germany, Italy and
Spain.  The  technological  characteristics of the European Patents are based on
the  U.S.  Patent,  covering  systems  for transmitting video programs to remote
locations  over  a  switched  telephone network, and are similar in scope to the
U.S.  patent  claims.

On  June  12,  2000  USA Video was granted a patent by the Canadian Intellectual
Property  office - Canadian Patent No. 2,064,111 Video Communication System. The
technological  characteristics  of  the  Canadian  patent  covering  systems for
transmitting  video programs from a first location to remote locations providing
for  communication  of the programs over selected commercial telephone networks.
An  additional  patent  application  is  pending  in  Japan.

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.

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.

EMPLOYEES

As  of  March  26,  2002,  the Company employed twenty people, including its two
senior  executive  officers,  eight  technology  personnel,  three  finance  and
administration  personnel,  and seven sales and marketing personnel. The Company
considers  the  relationships with its employees to be good. The Company has not
experienced  any  work  stoppages.

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

RISK  FACTORS

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

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

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

o    maintain  or  develop  relationships with suppliers and marketing partners;

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

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

o    provide  superior  customer  service;


                                       10
<PAGE>
o    respond  to  competitive  developments;  and

o    retain  and  motivate  qualified  personnel.

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

To  date,  USA  Video  has  not  been  profitable, has not generated significant
revenue from operations, and has incurred substantial losses. For the year ended
December  31,  2001,  USA Video had a net loss of $3,760,821. As of December 31,
2001,  the  Company  had  an  accumulated  deficit  of $29,063,303 and a working
capital  deficit  of  $828,530.  The  Company  intends  to  continue  to  expend
significant  financial  and  management  resources  on  the  development  of its
proposed  products and services, and other aspects of its business. As a result,
the Company expects operating losses and negative cash flows to increase for the
foreseeable  future. Consequently, USA Video will need to significantly increase
its revenues to achieve and maintain profitability. The Company may be unable to
do so. If USA Video's revenues grow more slowly than anticipated or if operating
expenses  increase  more  than expected, or are not reduced sufficiently, it may
never achieve profitability. Because of factors discussed in this paragraph, USA
Video's  auditors,  in  their report on the Company's financial statements, have
expressed  substantial  doubt  concerning the Company's ability to continue as a
going  concern.

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

USA Video requires substantial working capital to fund its business. The Company
has  had  significant  operating  losses  and negative cash flow from operations
since inception of its current business and expects to continue to do so for the
foreseeable  future.  The  Company's capital requirements will depend on several
factors,  including  the rate of market acceptance of its products and services,
the  ability  to  establish  and  expand  a  client  base  and  the  growth  and
effectiveness  of  its  sales and marketing efforts. USA Video estimates it will
require from $3.0 to $3.5 million in financing to meet its working capital needs
over  the  remainder  of  2002  and substantial additional financing thereafter.
Further,  if  capital requirements vary materially from those currently planned,
the Company may require additional financing. The Company has no arrangements or
commitments  for  any  financing.  Financing may not be available when needed on
terms  favorable  to the Company, or at all. If adequate funds are not available
or  are  not available on acceptable terms, the Company may be unable to further
develop  or  enhance  its  products  and  services,  take  advantage  of  future
opportunities or respond to competitive pressures, or ultimately, to continue in
business.

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

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

o    its  ability  to  attract  and  retain  customers;

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

o    price  competition;

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

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

o    its  ability  to  attract  new  personnel;  and


                                       11
<PAGE>
o    U.S.  and  foreign  regulations  relating  to  the  Internet.

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

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

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

The  video  streaming  market is currently dominated by a small number of larger
companies, including Real Networks, Microsoft, Yahoo, Akamai and several others,
some of which offer source-to-destination streaming media solutions. Most of USA
Video's  current  and  potential  competitors  have  longer operating histories,
larger  customer  bases,  greater  name  recognition  and  significantly greater
financial,  marketing and other resources than the Company. In addition, larger,
well-established and well-financed entities may acquire, invest in or form joint
ventures  with  online  competitors  as the use of the Internet and other online
services  increases. In addition, new technologies and the expansion of existing
technologies  are  expected  to  result  in  additional  competition.

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

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

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

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

USA  Video's future success will depend in part on its ability to offer products
and  services  that  incorporate leading technology and address the increasingly
sophisticated  and  varied  needs  of its current and prospective customers. The
Company's  market  is characterized by rapidly changing and unproven technology,
evolving industry standards, changes in customer needs, emerging competition and

                                       12
<PAGE>
frequent  new  service  introductions.  Future advances in technology may not be
beneficial  to or compatible with USA Video's business. In addition, the Company
may  not  be  able  to  incorporate technological advances into its products and
services  in  a  cost-effective  and  timely  basis.  Keeping  pace  with  the
technological  advances  may  require  substantial  expenditures  and lead time,
particularly  with  respect  to  acquiring  updated  hardware and infrastructure
components  of its systems. The Company may require additional financing to fund
such  acquisitions.  Any  such  financing  may  not be available on commercially
reasonably  terms,  if  at  all,  when  needed.

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

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

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

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

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

o    rapidly  changing  technology;

o    evolving  industry  standards;

o    frequent  new  product  and  service  introductions;  and

o    changing  customer  demands.

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

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

USA  Video's  streaming  media  products services are complex, and the steps the
Company  takes  to  ensure that they are free of errors or defects, particularly
when first introduced or when new versions or enhancements are released, may not
be  successful.  USA  Video  cannot  guarantee that current versions or enhanced
versions  or  its products will be free of significant software defects or bugs.
Despite  the  Company's  testing,  and  testing  by  its third-party vendors and
providers,  current  or  future  products  may  contain serious defects. Serious
defects  or  errors could result in lost revenue or a delay in market acceptance
of  the  Company's  products and could seriously harm its business and operating
results. Errors in its products may be caused by defects in third-party hardware

                                       13
<PAGE>
or  software incorporated into its products. If so, the Company may be unable to
fix  these  defects  without  the  cooperation  of  these third-party providers.
Because  these  defects may not be as significant to these providers as they are
to  USA  Video,  the  Company  may not receive the rapid cooperation that it may
require.  Errors,  defects  or  other  performance  problems  with the Company's
products  could  also  harm  its  customers'  businesses  or result in potential
product  liability  claims.  Even  if  unsuccessful,  a  product liability claim
brought  against USA Video would likely be time-consuming, costly and harmful to
its  reputation.  Nor  can  there  be  any  assurance that the Company's product
liability insurance coverage will be sufficient to satisfy any successful claim.

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

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

o    implement  additional  management  information  systems;

o    improve  its  operational,  financial  and  management  controls;

o    hire,  train  and  retain  new  employees;  and

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

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

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

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

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


                                       14
<PAGE>
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.

One customer accounted for approximately 61% of USA Video's revenue for the year
ended  December  31,  2001. 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.

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

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

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

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

o    redesign  it  products  or  services.

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

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

USA  Video's  video streaming services will be provided, in large part, from its
offices  located  in  southeastern  Connecticut.  A major equipment failure or a
natural  disaster  affecting this location could impair the Company's ability to

                                       15
<PAGE>
operate  its  business,  which  could  also severely disrupt its operations. USA
Video  currently does not have a formal disaster recovery plan or an alternative
provider  of  services.  Additionally,  the  Company  currently  does  not carry
business  interruption  insurance  to  compensate  it for any losses that it may
sustain.

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

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

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

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

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

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

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

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

                                       16
<PAGE>
advent  of  the  Internet  and  related  technologies.  As a result, they do not
contemplate  or  address  the  unique  issues  of  the  Internet  and  related
technologies.  Changes  to such laws intended to address these issues, including
some  recently  proposed  changes,  could  create  uncertainty  in  the Internet
marketplace. Such uncertainty could reduce demand for the Company's products and
services  or  increase  the  cost  of  doing  business due to increased costs of
litigation  or  increased  service  delivery  costs.

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

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

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

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

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

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

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

USA  Video's bylaws contain provisions that limit the liability of directors for
monetary  damages  and  provide  for  indemnification of officers and directors.
These  provisions  may  discourage  shareholders from bringing a lawsuit against
officers  and  directors  for breaches of fiduciary duty and may also reduce the
likelihood  of  derivative litigation against officers and directors even though
such  action, if successful, might otherwise have benefited the shareholders. In
addition,  a  shareholder's investment in USA Video may be adversely affected to
the  extent  that  costs  of  settlement  and  damage awards against officers or
directors  are  paid  by USA Video pursuant to the indemnification provisions of
the  bylaws.


                                       17
<PAGE>
REQUIREMENTS  OF  THE SEC WITH REGARD TO LOW-PRICED "PENNY STOCKS" MAY ADVERSELY
AFFECT THE ABILITY OF SHAREHOLDERS TO SELL THEIR SHARES IN THE SECONDARY MARKET.

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

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

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

ITEM  2.  PROPERTIES.

USA Video headquarters and executive offices are located in Mystic, Connecticut.
USA Video leases 1,116 square feet for an annual base rent of $20,400. The lease
expired  in  2000,  and  the  Company  occupies the facility on a month-to-month
basis.

USA  Video  leases  an  additional  1,547 square feet of office space in Mystic,
Connecticut  at  an  annual base rent of $18,108. The lease expired in 2000, and
the  Company  occupies  the  facility  on  a  month-to-month  basis.

USA  Video  also  leases  600  square  feet  of  office space located in Mystic,
Connecticut,  on  a  month-to-month  basis  at  a  monthly  rent  of  $800.

USA  Video  also  leases  147  square  feet  of  office space located in Mystic,
Connecticut,  on  a  month-to-month  basis  at  a  monthly  rent  of  $320.

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

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

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.


                                       18
<PAGE>
PART  II

ITEM  5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

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

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

                Canadian  Venture  Exchange
                      (Symbol  "US")

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

First  Quarter  2000                 15.00                   1.25
Second  Quarter  2000                 6.90                   2.06
Third  Quarter  2000                  5.20                   3.52
Fourth  Quarter  2000                 4.25                   0.72
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

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

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

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

First  Quarter  2000                   10.25                  0.85
Second  Quarter  2000                   4.969                 1.315
Third  Quarter  2000                    4.35                  2.06
Fourth  Quarter  2000                   2.844                 0.375
First  Quarter  2001                    7.74                  0.47
Second  Quarter  2001                   0.77                  0.38
Third  Quarter  2001                    0.60                  0.22
Fourth  Quarter  2001                   0.4125                0.21

                                       19
<PAGE>
As  of  March 26, 2002, there were 91,745,088 common shares outstanding, held by
1,270  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,
2001  that  were  not registered under the Securities Act have been disclosed in
USA  Video's reports on Form 10-Q for the periods ended March 30, 2001, June 30,
2001 and September 30, 2001. The sales did not involve the use of an underwriter
and  no  commissions  were  paid  in  connection  with  the sale of any of these
securities.

ITEM  6.  SELECTED  FINANCIAL  DATA.

The  following  table  presents  selected  historical  financial  data.  The
consolidated statement of operations data for the years ended December 31, 1999,
2000  and  2001, and the balance sheet data as of December 31, 2000 and 2001 are
derived from USA Video's consolidated financial statements included elsewhere in
this  report,  which  have  been  audited by Amisano Hanson (1999) and Goldstein
Golub  Kessler LLP (2000 and 2001), 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                    2001               2000               1999              1998                1997
<S>                     <C>                 <C>               <C>               <C>                 <C>


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

Net loss            ($3,760,821)       ($4,661,652)       ($1,684,468)       ($981,598)        ($678,156)

Loss per share            ($.04)             ($.06)             ($.03)           ($.02)           ($0.02)

Total assets         $1,382,178          $1,744,071           $995,351         $435,232          $418,354

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

As  more  fully discussed below, in this Management's Discussion section of this
Report,  the  Company  has  not  been  profitable,  and  has not had significant

                                       20
<PAGE>
revenues. USA Video cannot predict its revenue levels for the next 12 months, or
thereafter,  nor  when,  or  if,  its  operations  will  become  profitable. The
Company's  expenses  will  continue  to  increase  as  it  further  develops its
technology  and  StreamHQ(TM)  services,  and  increases its marketing and sales
efforts.  USA Video will require additional financing, both for the remainder of
fiscal  2001  and  thereafter,  to  continue to operate and expand its business.
There  is  no  assurance  that  such financing will be available on commercially
reasonable  terms,  if  at  all.

RESULTS  OF  OPERATIONS

REVENUES

Revenues  for  the  year  ended December 31, 2001 ("fiscal 2001") were $124,006,
compared with $638,592 for the year ended December 31, 2000 ("fiscal 2000"). The
Company  had  revenues  of $20,500 for the year ended December 31, 1999 ("fiscal
1999").  Approximately  forty  percent  (40%)  of  revenues for fiscal 2001 were
derived  from  sales  of  the  Company's  hardware  and  software  systems  and
approximately  sixty  percent (60%) were from provision of engineering services.
The  Company  had  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, and one customer who accounted for all revenue
in  fiscal  1999.

EXPENSES

Total  expenses  for  fiscal  2001 were $3,892,845, compared with $5,291,663 for
fiscal  2000  and $1,598,826 for fiscal 1999. For fiscal 2001, cost of sales was
$66,770,  as compared with $393,496 for fiscal 2000 and $19,199 for fiscal 1999.

Research  and  development  costs  for fiscal 2001 were $999,058, as compared to
$620,212  for  fiscal 2000 and $93,337 for 1999. The increase in fiscal 2001 and
2000  was  due primarily to development work on the Company's new services-based
multi-mode  rich  media  streaming  solution,  StreamHQ(TM),  which  required
increased  expenditures  for  manpower,  equipment  and  software.

Selling, general and administrative expenses were $1,833,440 for fiscal 2001, as
compared  with  $2,599,591  for  fiscal  2000,  and  $1,372,928 for fiscal 1999.

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  Company's  focus  on  developing products (StreamHQ(TM)). The primary
components  of  the  decreases  from  fiscal  2000  to  fiscal  2001  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 (fiscal 2001) for administrative wages and salaries and
other  office  expenses;  and

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

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 2000 to
fiscal  1999  were:

o a $496,743 increase in fiscal 2000, and a $212,590 increase in fiscal 1999, in
marketing  expenses,  as  the  Company  hired  additional  staff  and engaged in
marketing activities to identify and assess appropriate market segments, develop

                                       21
<PAGE>
business  arrangements  with  prospective  partners,  create  awareness  of  new
products  and services, and communicate to the industry and potential customers;

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

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

Additional  expenses  included  depreciation  and  amortization  of $407,880 for
fiscal  2001, compared to $224,581 for fiscal 2000 and $113,362 for fiscal 1999,
as  the  Company  added machinery and equipment necessary for the development of
new  products and services. Non-cash compensation charges for fiscal 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 at
a  price  or  exercise  price below the market price of the common shares at the
time  of  issuance.  Because  the rules of the Canadian Venture Exchange require
that  the  offering price for privately placed securities of listed companies be
set  when  the  offering  is  first announced rather than upon closing, the sale
price of the common shares and the exercise price of the warrants were below the
market  price  of  the  common  shares  on  the  date  of  issuance.

Other  decreases  in  expenses  included  printing,  as  materials were produced
in-house,  and  website  related  expenses  were  performed  by  in-house staff.

With  the  release  of  StreamHQ(TM)  the  Company will expand its business, its
product  development,  sales  and  marketing,  and  general  and  administrative
expenses  will  continue to increase. Product development expenses will increase
as  the Company adds engineering personnel to its technology and Web development
teams,  and  as its new technologies are integrated into its product line. Sales
and  marketing  expenses will increase as the Company adds business development,
sales,  and  marketing  personnel  to  build  business  relationships  and brand
awareness.  Advertising  and public relations expenses also will increase as the
Company grows its business. General and administrative expenses will increase as
the  Company  continues  to  build  its  management  infrastructure,  including
additional  personnel,  office  space  and  internal  information  systems.

NET  LOSSES

To  date,  the  Company  has  not  achieved  profitability  and expects to incur
substantial losses for the foreseeable future. The Company's net loss for fiscal
2001 was $3,760,821, compared with a net loss of $4,661,652 for fiscal 2000, and
$1,657,078  for  fiscal  1999.

LIQUIDITY  AND  CAPITAL  RESOURCES

At  December  31,  2001, the Company's cash position was $104,238, a decrease of
$126,959  from  December  31, 2000. The Company had a working capital deficit of
$828,530  and  an  accumulated  deficit  of  $29,063,303  at  December 31, 2001.

The  Company's  principal  source  of  cash  during  fiscal 2001 was proceeds of
$3,140,303 received upon exercise of warrants and from private placements of its
equity  securities.  This  was  offset  by  $2,707,658 of cash used in operating
activities  and  $559,604  for  purchase  of  equipment.

The  Company  has  historically satisfied its capital needs primarily by issuing
equity  securities  to  its  officers, directors, employees and a small group of
investors,  and  from short-term bridge loans from members of management. During
fiscal  2001, the Company completed three private placements, resulting in gross
proceeds  to  the  Company  of  $3,067,391.

In  the first offering, the Company sold 2,500,000 units, each consisting of one
common  share  and one warrant to acquire an additional share at $0.66 per share
by  March  12, 2003, at $0.54 per unit, for total proceeds of $1,333,260. In the
second  offering,  the  Company  sold  4,000,000  units  at  $0.27  per unit for
$1,074,131  in proceeds. Each unit consisted of one (1) common share and one (1)

                                       22
<PAGE>
share  purchase  warrant  to  purchase  one (1) common share at $0.35 per share,
exercisable  until  September 28, 2003.  In the third offering, the Company sold
3,300,000  units, each consisting of one common share and one warrant to acquire
an  additional share at $0.26 per share by December 31, 2003, at $0.20 per unit,
for  total  proceeds  of  $660,000.

The  Company  also received proceeds of $72,912 from the exercise of outstanding
warrants  in  fiscal  2001.

The  Company's  independent  accountants,  in  their  report  accompanying  the
Company's  audited  financial  statements at and for the year ended December 31,
2001, have stated that there is substantial doubt about the Company's ability to
continue  as  a going concern. As of December 31, 2001, the Company had $104,238
in  cash. The Company will require an additional $3.0 million to $3.5 million to
finance  operations  for  the  fiscal  2002 and intends to obtain such financing
through  sales  of its equity securities. The threat to the Company's ability to
continue  as  a  going concern will be removed only when revenues have reached a
level  that  sustains  the  Company's  business  operations.

Assuming  the  aforementioned  $3.0  million  to  $3.5  million  in financing is
obtained,  continuing  operations  for the longer-term will be supported through
anticipated  growth  in  revenues  and through additional sales of the Company's
securities.  Although longer-term financing requirements may vary depending upon
the  Company's  sales  performance,  management  expects  that  the Company will
require  additional  financing  of $5.0 million to $6.0 million for fiscal 2003.
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.

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

                                    PART III

ITEM  10.  DIRECTORS  AND  EXECUTIVE  OFFICERS  OF  THE  REGISTRANT.

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


                                       23
<PAGE>
<TABLE>
<CAPTION>

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


Edwin Molina                  46    Director, Chief Executive Officer and President      Since 1998

Anton J. Drescher (1)         45    Director, Chief Financial Officer and Secretary      Since 1994

Robert D. Smith Jr. (1)       51    Director and Chief Operating Officer                 Since 2000

Kent Norton                   42    Chief Information/Chief Technical Officer            Since 2000

Matthew W. Kinnaman (2)       41    Vice President, Strategic Innovation                 Since 2000

Daniel E. Kinnaman            45     Senior Vice President, Sales and Marketing          Since 2001

</TABLE>
(1)     Member  of  the  Audit  Committee
(2)     Resigned  as  an  officer  effective  December  31,  2001


Anton Drescher, Edwin Molina, and Anthony Castagno were elected directors of USA
Video  in  June 2001. Mr. Castagno resigned as an officer and director on August
31,  2001,  and  Robert D. Smith was appointed director to replace Mr. Castagno.
Each  director  will serve until the next annual meeting of shareholders and his
successor  is  elected  and  qualified.

EXECUTIVE  OFFICERS  AND  DIRECTORS  OF  THE  COMPANY:

EDWIN  MOLINA  -  PRESIDENT,  CHIEF  EXECUTIVE  OFFICER  AND  DIRECTOR

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

ANTON  J.  DRESCHER  -  CHIEF  FINANCIAL  OFFICER,  SECRETARY  AND  DIRECTOR

Mr.  Drescher has been Chief Financial Officer of USA Video since December 1994.
He has also been a director and Secretary/ Treasurer of Cal-Star, Inc. (formerly
Future  Link  Systems  Inc.)  a  public  company  listed on the Canadian Venture
Exchange,  which  has  been  designated  as  an  inactive  issuer;  Director and
Secretary/Treasurer of IQuest Networks Inc. (formerly Interlink Systems Inc. and
Glassmaster  Industries,  Inc.), a public company listed on The Canadian Venture
Exchange  ("CDNX")  involved in digital audio distribution since 1996; President
of  Westpoint  Management  Consultants Limited, a private company engaged in tax
and  accounting consulting for business reorganizations since 1979; President of
Harbour  Pacific  Capital  Corp., a private British Columbia company involved in
regulatory  filings  for  businesses  in  Canada, since 1998; and, since 1991, a
director  and  President  of  International  Tower  Hill Mines Limited, a public
British Columbia company listed on the CDNX and involved in mineral exploration.
Mr.  Drescher  has  been  a  Certified  Management  Accountant  since  1981.

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.


                                       24
<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.

MATTHEW  W.  KINNAMAN  -  VICE  PRESIDENT,  STRATEGIC  INNOVATION

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

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

Mr.  Kinniman joined USA Video in October 2001 as Senior Vice President of Sales
and  Marketing.  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.

Mathew  W.  Kinnaman and Daniel Kinnaman are brothers. There are no other family
relationship  among  any  of  the  Company's  executive  officers and directors.

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,  2001,  the Company's
officers,  directors and 10% shareholders complied with all Section 16(a) filing
requirements  applicable  to  them  except  as  follows:

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

                                       25
<PAGE>

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

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

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

ITEM  11.  EXECUTIVE  COMPENSATION.

The following table sets forth compensation awarded to, earned by or paid to USA
Video's Chief Executive Officer (CEO), and to other persons serving as executive
officers of the Company as of December 31, 2001, whose salary and bonus for such
year  exceeded  $100,000  (collectively, the "Named Executive Officers") for the
last  three  completed  fiscal  years.

<TABLE>
<CAPTION>


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


Molina,         2001   $124,910         -0-        $125,000(4)       -0-              -0-       -0-         -0-
Edwin           2000   $128,361         -0-        $500,000(5)       -0-              -0-       -0-         -0-
(CEO)           1999   $120,999(1)      -0-        $200,665(6)       -0-        1,200,000       -0-         -0-

Drescher        2001   $120,000(2)      -0-        $200,000(7)       -0-          200,000       -0-         -0-
Anton,          2000   $120,000(2)      -0-        $500,000(8)       -0-          200,000       -0-         -0-
(CFO)           1999   $120,000(2)      -0-        $159,665(9)       -0-        1,000,000       -0-         -0-

Castagno,       2001   $82,496    v     -0-        $25,000(10)       -0-        1,100,000       -0-         -0-
Anthony (EVP)   2000   $125,722         -0-        $125,000(11)      -0-        1,100,000       -0-         -0-
                1999   $120,000(3)      -0-        $194,300(12)      -0-          250,000       -0-         -0-

Smith,          2001   $89,412     v    -0-        $22,900(13-15)    -0-              -0-       -0-         -0-

</TABLE>


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


                                       26
<PAGE>
(2)  Represents  consulting  fees  paid  to Mr. Drescher through Harbour Pacific
     Capital  Corp.,  a consulting firm wholly-owned by him, for his services as
     an  executive  officer  of  the  Company.

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

(4)  In  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.

(5)  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.

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

(7)  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.

(8)  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.

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

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

(10) In  March  2001, Mr. Castagno purchased 50,000 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.

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

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

(13) 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.


                                       27
<PAGE>
(14) 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.

(15) 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
     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.

The  following  table  sets forth certain information concerning grants of stock
options to the Named Executive Officers during the year ended December 31, 2001.

<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-
Castagno, Anthony      -0-              -0-            -0-        -0-         -0-         -0-         -0-      -0-
Smith, Robert          -0-              -0-            -0-        -0-         -0-         -0-         -0-      -0-

</TABLE>

(1)  A  total of 250,000 stock options were granted to employees and consultants
     in  2001.

The following table sets forth certain information concerning exercises of stock
options  by the Named Executive Officers during the year ended December 31, 2001
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-                200,000 / 0                N/A(2) / $0

Castagno, Anthony               -0-                 -0-              1,100,000 / 0                N/A(3) / $0

Smith, Robert                   -0-                 -0-                325,000 / 0                N/A(4) / $0

</TABLE>

(1)  On  December  31,  2001,  the average of the high and low bid prices of the
     common  shares  on  the OTC BB was $0.22 (the "December 31, 2001 OTC BB bid
     price").

(2)  Mr.  Drescher's  200,000 options, with an exercise price of $1.00, were not
     in  the  money  based  on  the  December  31,  2001  OTC  BB  bid  price.


                                       28
<PAGE>
(3)  Mr.  Castagno's  1,100,000  options  with  an exercise prices of (300,000 @
     $5.00,  100,000 @ $2.00 and 700,000 @ $1.00) were not in the money based on
     the  December  31,  2001  OTC  BB  bid  price.

(4)  Mr. Smith's 325,000 options with an exercise prices of (125,000 @ $2.00 and
     200,000  @  $1.00) were not in the money based on the December 31, 2001 OTC
     BB  bid  price.

COMPENSATION  OF  DIRECTORS

Directors  receive  no  compensation  for  their  service  as  such.

EMPLOYMENT  CONTRACTS

The  Company entered into Management Agreements with the following directors and
officers  as  of August 7th, 2001 for a term of one year from January 1, 2001 to
December 31, 2001.  All of the Agreements were subsequently renewed for one year
terms.

o    Edwin  Molina  -  President  and  Chief  Executive  Officer
o    Robert  D.  Smith,  Jr.  -  Chief  Operating  Officer
o    Kent  Norton  -  Chief  Information  Officer  and  Chief  Technical Officer
o    Matt  Kinnaman  -  Vice-President,  Strategic  Innovation
o    Harbour  Pacific  Capital  Corp.  -  financial  services (owned by Anton J.
     Drescher)

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

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



ITEM  12.  SECURITY  OWNERSHIP  OF  CERTAIN  BENEFICIAL  OWNERS  AND MANAGEMENT.

The  following  table sets forth as of March 26, 2001, the number of outstanding
common  shares  of  USA Video beneficially owned by (i) each person known to USA
Video  to  beneficially  own more than 5% of its outstanding common shares, (ii)
each  director,  (iii)  each  Named Executive Officer, and (iv) all officers and
directors  as  a  group.

<TABLE>
<CAPTION>

Name                                              Shares Owned         Percentage of Class
------------------------------------------------------------------------------------------
<S>                                                  <C>                      <C>

Edwin Molina                                       4,824,424 (1)              5.18%

Anton J. Drescher                                  5,681,855 (2)              6.09%

Robert D. Smith                                    1,595,000 (3)              1.72%

All Executive Officers & Directors
 as a Group [six persons]                         14,616,279 (4)             15.00%

</TABLE>

(1)  Includes  900,000  shares  underlying options and 450,000 shares underlying
     warrants  that  are currently exercisable. Mr. Molina's address is 70 Essex
     Street,  Mystic,  Connecticut.

(2)  Includes  950,000  shares  underlying options and 600,000 shares underlying
     warrants that are currently exercisable. Mr. Drescher's address is 70 Essex
     Street,  Mystic,  Connecticut.

(3)  Includes  825,000  shares  underlying options and 185,000 shares underlying
     warrants.  Mr.  Smith's  address  is  70 Essex Street, Mystic, Connecticut.

(4)  Includes  4,050,000  shares  underlying  options  and  1,642,500  shares
     underlying  warrants.

ITEM  13.  CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS.

In 2001, the Company paid consulting fees of $120,000 to Harbour Pacific Capital
Corp.,  a  company  controlled  by  Anton  J.  Drescher, in consideration of Mr.
Drescher's  services  as  an  executive  officer  of  the  Company.


                                       29
<PAGE>
In  March 2001, USA Video completed a private placement of 2,500,000 units (each
unit  consisting  of  one common share and one warrant to purchase an additional
common share at $.66 per share) for $.54 per unit, of which 1,585,000 units were
sold  to  outside  investors and 915,000 units were sold to officers, directors,
and employees of the Company. Because the rules of the Canadian Venture Exchange
require  that  the  offering  price  for  privately  placed securities of listed
companies  be set when the offering is first announced rather than upon closing,
the  sale  price  of the units and the exercise price of the warrants were below
the  market  price  of  $.84 of the common shares on the date of issuance. Units
were sold to the following officers and directors of the Company, in the amounts
indicated:  Edwin  Molina  (250,000  units);  Anton J. Drescher (400,000 units);
Anthony  J.  Castagno  (50,000  units);  and  Robert  Smith  (40,000  units).

In  September  2001,  USA Video completed a private placement of 4,000,000 units
(each  unit  consisting  of  one  common  share  and  one warrant to purchase an
additional  common  share  at  $0.35  per  share)  for  $0.27 per unit, of which
3,512,500  units  were  sold to outside investors and 487,500 units were sold to
officers,  directors, and employees of the Company and their affiliates. Because
the  rules  of the Canadian Venture Exchange require that the offering price for
privately  placed  securities  of  listed  companies be set when the offering is
first  announced  rather  than upon closing, the sale price of the units and the
exercise  price  of  the  warrants  were  below the market price of $0.29 of the
common shares on the date of issuance. Units were sold to the following officers
and  directors  of  the Company, and their affiliates, in the amounts indicated:
Robert  Smith  (45,000  units);  and  Daniel  Kinnaman  (200,000  units).

In  December  2001,  USA  Video completed a private placement of 3,300,000 units
(each  unit  consisting  of  one  common  share  and  one warrant to purchase an
additional  common  share  at  $0.26  per  share)  for  $0.20 per unit, of which
2,782,500  units  were  sold to outside investors and 517,500 units were sold to
officers,  directors,  and  employees  of  the Company. Because the rules of the
Canadian  Venture  Exchange require that the offering price for privately placed
securities  of  listed  companies  be  set  when the offering is first announced
rather  than upon closing, the sale price of the units and the exercise price of
the  warrants  were  below the market price of $0.22 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: Robert Smith (100,000 units); Kent Norton
(75,000  units);  Daniel  Kinnaman  (70,000 units); and Matthew Kinnaman (62,500
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 October 12, 2001 the registrant filed a report on Form 8-K wherein
          the registrant reported that its StreamHQ(TM) suite of rich media
          delivery services had satisfactorily completed operational beta
          testing and that the StreamHQ(TM) architecture was fully ready to
          support client services.

     (ii) On October 12, 2001, the registrant filed a report on Form 8-K wherein
          the  registrant  reported  that  the  registrant was been approved for
          listing  on  the Frankfurt Stock Exchange and began trading on October
          3,  2001  under  the  symbol  USF.


                                       30
<PAGE>
     (iii) On October 30, 2001, the registrant filed a report on Form 8-K
          wherein the registrant reported that The Fleet Center, New England's
          premier sports arena, has signed a contract with the registrant to use
          the registrant's Zmail solution as part of its current promotional
          campaigns.

     (iv) On November 5, 2001, the registrant filed a report on Form 8-K wherein
          the registrant reported that the Anthony Robbins Companies had elected
          to use Zmail from the registrant for an upcoming promotional campaign.

     (v)  On  December  10,  2001,  the  registrant  filed  a report on Form 8-K
          wherein  the  registrant  reported  -  that  the  registrant  and  CEO
          Solutions,  Inc., the nation's premier business opportunity consulting
          firm,  had  formed  a  strategic  sales  and  marketing  partnership.

     (vi) On  December  11,  2001,  the  registrant  filed  a report on Form 8-K
          wherein the registrant reported that Gilder Publishing, LLC, publisher
          of  the Gilder Technology Report, the Digital Power Report, the Gilder
          Biotech  Report,  and  Dynamic Silicon, had selected the registrant to
          promote  the  upcoming  Storewidth  Conference  with  the registrant's
          Zmail.

     (vii)  On  December  11,  2001,  the  registrant filed a report on Form 8-K
          wherein  the  registrant  reported  that  Phenomedia  AG
          (www.phenomedia-usa.com),  a  leading  company  in  the  interactive
          entertainment  market,  has  signed  a contract with the registrant to
          stream  four promotional videos showing footage from the up-coming New
          Line  Cinema  hit  film  The  Lord  of  the  Rings.

     (viii)  On  December  12,  2001,  the registrant filed a report on Form 8-K
          wherein  the registrant reported that EMC Corporation (NYSE: EMC), the
          world  leader  in information storage, recognized the registrant as an
          EMC  Proven(TM)  E-Infostructure(TM)  certified  company.

     (ix) On  December  21,  2001,  the  registrant  filed  a report on Form 8-K
          wherein  the registrant reported that it had joined the AT&T Ecosystem
          for  Media  program,  a network services platform with a comprehensive
          co-marketing  and  distribution  program  that  enables  companies  to
          create,  manage  and  deliver  digital  media  applications.

c)  Exhibits

None.
                                   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,  2002                 Edwin  Molina
                                        Chief  Executive  Officer





                                       31
<PAGE>
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, 2001
-----------------------
Edwin  Molina

/s/  Anton J. Drescher     Chief Financial Officer, (principal    March 26, 2001
-----------------------    financial officer and principal
Anton  J.  Drescher        accounting officer), Director

/s/  Anthony J. Castagno   Director                               March 26, 2001
-----------------------
Anthony  J.  Castagno


<PAGE>



                           USA VIDEO INTERACTIVE CORP.
                                AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2001


<PAGE>


                                    USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES


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


INDEPENDENT  AUDITOR'S  REPORTS                                      F-2  -  F-3


CONSOLIDATED  FINANCIAL  STATEMENTS:

   Balance  Sheets                                                           F-4
   Statements  of  Operations                                                F-5
   Statements  of  Comprehensive  Operations                                 F-6
   Statements  of  Stockholders'  Equity                                     F-7
   Statements  of  Cash  Flows                                               F-8
   Notes  to  Consolidated  Financial  Statements                   F-9  -  F-19



<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, 2001 and 2000, and the
related  consolidated  statements  of  operations,  comprehensive  operations,
stockholders'  equity,  and  cash  flows  for  the  years  then  ended.  These
consolidated  financial  statements  are  the  responsibility  of  the Company's
management.  Our  responsibility  is to express an opinion on these consolidated
financial  statements  based  on  our  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  provides  a
reasonable  basis  for  our  opinion.

In  our opinion, the consolidated financial statements referred to above present
fairly,  in  all  material  respects,  the  financial  position  of  USA  Video
Interactive  Corp.  and  Subsidiaries  as  of December 31, 2001 and 2000 and the
results  of  their  operations  and their cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.

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




GOLDSTEIN  GOLUB  KESSLER  LLP
New  York,  New  York

January  31,  2002

<PAGE>
INDEPENDENT  AUDITOR'S  REPORT



To  the  Stockholders,
USA  Video  Interactive  Corp.

We  have  audited  the  accompanying  consolidated  statement  of  operations,
comprehensive  operations,  stockholders'  equity  and  cash  flows of USA Video
Interactive  Corp. and subsidiaries for the year ended December 31, 1999.  These
consolidated  financial  statements  are  the  responsibility  of  the Company's
management.  Our  responsibility  is to express an opinion on these consolidated
financial  statements  based  on  our  audit.

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

In  our  opinion,  these  consolidated  financial  statements  referred to above
present  fairly,  in  all  material  respects, the consolidated results of their
operations  and  their  cash  flows  for  the  year  ended  December 31, 1999 in
conformity with accounting principles generally accepted in the United States of
America.

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



AMISANO  HANSON
Chartered  Accountants
Vancouver,  Canada
March  13,  2000

<PAGE>
<TABLE>
<CAPTION>

                  USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS

DECEMBER 31,                                                                                2001           2000

<S>                                                                                  <C>            <C>
ASSETS

Current Assets:
Cash and cash equivalents                                                            $    104,238   $    231,197
Marketable securities - related parties                                                    42,616        202,826
Accounts receivable, net of allowance for doubtful accounts of $-0-
 and $7,000, respectively                                                                  30,900        122,813
Inventory                                                                                  12,000        145,911
Prepaid expenses and other current assets                                                  21,613         99,368
                                                                                     -------------  -------------

TOTAL CURRENT ASSETS                                                                      211,367        802,115

Property and Equipment - at cost, net of accumulated depreciation of $573,015
 and $194,871, respectively                                                             1,100,339        873,544

Other Assets, net of accumulated amortization of $8,016 and $22,170, respectively          70,472         68,412

Deferred Tax Assets, net of valuation allowance of $7,215,000 and
 $6,168,000, respectively                                                                       -              -
                                                                                     -------------  -------------

TOTAL ASSETS                                                                         $  1,382,178   $  1,744,071
                                                                                     =============  =============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Accounts payable and accrued expenses                                                $    948,417   $  1,110,033
Accounts payable and accrued expenses - related parties                                         -         20,830
Due to related parties                                                                     91,480         75,896
                                                                                     -------------  -------------

TOTAL CURRENT LIABILITIES                                                               1,039,897      1,206,759
                                                                                     -------------  -------------

Commitments and Contingencies

Stockholders' Equity:
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 91,745,088 and 81,700,088 shares, respectively         29,492,071     25,766,071
Accumulated other comprehensive income (loss)                                             (86,487)        73,723
Accumulated deficit                                                                   (29,063,303)   (25,302,482)
                                                                                     -------------  -------------

STOCKHOLDERS' EQUITY                                                                      342,281        537,312
                                                                                     -------------  -------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                           $  1,382,178   $  1,744,071
                                                                                     =============  =============

</TABLE>

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

<PAGE>
<TABLE>
<CAPTION>

                  USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

YEAR ENDED DECEMBER 31,                                       2001          2000          1999
--------------------------------------------------------  ------------  ------------  ------------
<S>                                                       <C>           <C>           <C>
Revenue                                                   $   124,006   $   638,592   $    20,500
                                                          ------------  ------------  ------------

Expenses:
Cost of sales                                                  66,770       393,496        19,199
Research and development (includes $-0-, $- 0 -, and          999,058       620,212        93,337
 $82,500, respectively, to related parties)
Selling, general and administrative (includes $-0-,         1,833,440     2,599,591     1,372,928
 $37,758 and $479,480, respectively, to related parties)
Depreciation and amortization                                 407,880       224,581       113,362
Noncash compensation charges                                  585,697     1,453,783             -
                                                          ------------  ------------  ------------

Total expenses                                              3,892,845     5,291,663     1,598,826
                                                          ------------  ------------  ------------
Loss from operations                                       (3,768,839)   (4,653,071)   (1,578,326)
                                                          ------------  ------------  ------------

Other income (expense), net (includes $- 0 -, $-0- and
 $164,393, respectively, to related parties):
  Interest income (expense) (net of interest
    income of $5,173, $26,231and $11,715, respectively)         4,903        26,231        (1,250)
  Other                                                         3,115       (34,812)      (77,502)
                                                          ------------  ------------  ------------

                                                                8,018        (8,581)      (78,752)
                                                          ------------  ------------  ------------

Net loss before cumulative effect of accounting change     (3,760,821)   (4,661,652)   (1,657,078)

Cumulative effect of accounting change                              -             -       (27,390)
                                                          ------------  ------------  ------------

Net loss                                                  $(3,760,821)  $(4,661,652)  $(1,684,468)
                                                          ============  ============  ============

Earnings per share - basic and diluted:
  Loss per common share before cumulative effect of
   accounting change                                      $      (.04)  $      (.06)  $      (.03)
  Cumulative effect of accounting change                            -             -             -
                                                          ------------  ------------  ------------

Net loss per share - basic and diluted                    $      (.04)  $      (.06)  $      (.03)
                                                          ============  ============  ============
Weighted-average number of common
 shares outstanding - basic and diluted                    84,946,199    76,700,723    66,766,504
                                                          ============  ============  ============
</TABLE>

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

<PAGE>
<TABLE>
<CAPTION>

                  USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES
              CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS


YEAR ENDED DECEMBER 31,                                2001          2000          1999
-------------------------------------------------  ------------  ------------  ------------
<S>                                                <C>           <C>           <C>
Net loss                                           $(3,760,821)  $(4,661,652)  $(1,684,468)

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

Comprehensive loss                                 $(3,921,031)  $(4,587,929)  $(1,684,468)
                                                   ============  ============  ============

</TABLE>

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

<PAGE>

<TABLE>
<CAPTION>

                  USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


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

<S>                                <C>         <C>          <C>             <C>             <C>            <C>
Balance at January 1, 1999         58,756,088  $18,722,966              -               -   $(18,956,362)  $  (233,396)
Issuance of common stock and
 common stock warrants for cash     4,250,000    1,195,267              -               -              -     1,195,267
Issuance of common stock upon
  exercise of options               4,881,000      405,895              -               -              -       405,895
Issuance of common stock upon
  exercise of warrants              5,095,000      626,024              -               -              -       626,024
Net loss                                    -            -              -               -   (1,684,468)     (1,684,468)
                                   ----------  -----------  --------------  --------------  -----------     -----------

Balance at December 31, 1999       72,982,088   20,950,152              -               -    (20,640,830)      309,322
Issuance of common stock and
 common stock warrants for cash     1,190,000    2,260,000              -               -              -     2,260,000
Issuance of common stock upon
 exercise of options                2,383,000      602,074              -               -              -       602,074
Issuance of common stock upon
 exercise of warrants               5,145,000      500,062              -               -              -       500,062
Noncash compensation charges                -    1,453,783              -               -              -     1,453,783
Change in unrealized gains (loss)           -            -
 on investments                             -            -              -   $      73,723              -        73,723
Net loss                                    -            -              -               -     (4,661,652)   (4,661,652)
                                   ----------  -----------  --------------  --------------  -------------  ------------

Balance at December 31, 2000       81,700,088   25,766,071              -          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
 exercise of warrants                 245,000       72,912              -               -              -        72,912
Noncash compensation charges                -      585,697              -               -              -       585,697
Change in unrealized gains (loss)
 on investments                             -            -              -        (160,210)             -      (160,210)
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
                                   ==========  ===========  ==============  ==============  =============  ============

</TABLE>

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

<PAGE>
<TABLE>
<CAPTION>
                  USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

YEAR ENDED DECEMBER 31,                                                          2001          2000          1999
---------------------------------------------------------------------------  ------------  ------------  ------------

<S>                                                                          <C>           <C>           <C>
Cash flows from operating activities:
Net loss                                                                     $(3,760,821)  $(4,661,652)  $(1,684,468)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization                                                    407,880       224,581       113,362
Noncash compensation charge                                                      585,697     1,453,783             -
Foreign exchange                                                                       -             -         1,657
Loss on sale of investments - related parties                                          -             -        35,788
Loss on disposal of property and equipment                                        18,299             -             -
Gain on write-off of accounts payable                                                  -             -       (73,926)
Bad debt recovery                                                                      -      (108,403)            -
Write-down of investments in securities                                                -             -       102,465
Allowance for doubtful accounts                                                   (7,000)            -             -
Write-down of advances - related party                                                 -             -        14,375
Write-down of advances - other                                                         -             -         7,000
Write-down of property and equipment                                                   -        33,122
Write-down of inventory                                                           76,481
Cumulative effect on prior years' amortization of changing
 to a different amortization method                                                    -             -        27,390
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable                                        98,913      (109,515)        3,388
Increase in inventory                                                            (12,000)     (145,911)            -
(Increase) decrease in prepaid expenses and other current assets                  77,755       (51,164)       28,065
Increase in other assets                                                         (26,000)      (14,187)      (33,737)
(Decrease) increase in accounts payable and accrued expenses                    (161,616)      624,462        72,588
(Decrease) increase in accounts payable and accrued expenses -
 related parties                                                                 (20,830)        9,238             -
Increase (decrease) in due to related parties                                     15,584      (112,970)       14,838
                                                                             ------------  ------------  ------------

NET CASH USED IN OPERATING ACTIVITIES                                         (2,707,658)   (2,858,616)   (1,371,215)
                                                                             ------------  ------------  ------------

Cash flows from investing activities:
Proceeds on sale of investments - related parties                                      -             -         4,867
Purchases of marketable securities - related party                                     -             -       (88,700)
Advances - related party                                                               -             -       (14,375)
Advances - other                                                                       -             -        (7,000)
Purchases of property and equipment                                             (559,604)     (689,989)     (335,715)
                                                                             ------------  ------------  ------------

NET CASH USED IN INVESTING ACTIVITIES                                           (559,604)     (689,989)     (440,923)
                                                                             ------------  ------------  ------------

Cash flows from financing activity - proceeds from the issuance of
 common stock                                                                  3,140,303     3,362,136     2,227,186
                                                                             ------------  ------------  ------------

Net increase (decrease) in cash and cash equivalents                            (126,959)     (186,469)      415,048

Cash and cash equivalents at beginning of year                                   231,197       417,666         2,618
                                                                             ------------  ------------  ------------

Cash and cash equivalents at end of year                                     $   104,238   $   231,197   $   417,666
                                                                             ============  ============  ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during the year for interest                                       $         -   $    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.

<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, 2001 and for the three-year period then ended,
     substantially  all  of  the  Company's  assets  and  substantially  all its
     operations  are  located  and  conducted  in  the  United  States.


2.   SUMMARY  OF  SIGNIFICANT ACCOUNTING POLICIES: The accompanying consolidated
     financial  statements have been prepared assuming the Company will continue
     as  a  going concern. As shown in the financial statements, the Company has
     incurred  losses  of  $3,760,821,  $4,661,652  and $1,684,468 for the years
     ended  December  31,  2001,  2000  and 1999, respectively. These conditions
     raise doubt about the Company's ability to continue as a going concern. The
     Company's  ability  to  continue  as  a going concern is dependent upon its
     ability  to  generate  sufficient cash flow to meet its obligations as they
     come  due,  which  management  believes it will be able to do. To date, the
     Company  has  funded  operations  primarily  through the issuance of common
     stock  and  warrants to outside investors and the Company's management. The
     Company  believes  that  its  operations will generate additional funds and
     that additional funding from outside investors and the Company's management
     will  continue  to  be  available to the Company when needed. The financial
     statements  do  not  include any adjustments relating to the recoverability
     and  classification  of recorded assets, or the amounts and classifications
     of  liabilities  that  might  be  necessary in the event the Company cannot
     continue  as  a  going  concern.

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

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

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

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

     The  Company  has  classified  its  investments in marketable securities as
     available-for-sale  securities.  These securities are carried at fair value
     with  any  unrealized gain or loss recorded as a component of stockholders'
     equity. The fair value of marketable securities was determined based on the
     quoted  market  prices  for  those  instruments.  At December 31, 2001, the
     marketable  securities  consisted  of  common  stock.

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


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

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

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

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

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

     Revenue  from  software  sales  is  recognized  when  the  product has been
     delivered.  Revenue from multiple element contracts (hardware, software and
     engineering)  is  allocated to the various elements based on fair value. 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, 2000 and 1999 was approximately $16,000,
     $97,000  and  $47,000,  respectively.

     Income  taxes  are  accounted  for  under  the liability method. Under this
     method,  deferred  tax  assets  and  liabilities  are recorded based on the
     temporary  differences between the financial statement and the tax bases of
     assets  and liabilities and for operating loss carryforwards measured using
     the  enacted  tax rates in effect for the year in which the differences are
     expected  to reverse. The Company periodically evaluates the reliability of
     its  net deferred tax assets and records a valuation allowance if, based on
     the  weight  of available evidence, it is more likely than not that some or
     all  of  the  deferred  tax  assets  will  not  be  realized.


<PAGE>
     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,  2001  and  2000.

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

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


3.   MAJOR  CUSTOMERS:  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  and  during  the year ended December 31, 1999, one
     customer  accounted  for  100%  of  total  revenue.


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

     December  31,                                        2001             2000
     --------------------------------------------------------------------------
     Available-for-sale  equity  securities:
      Cost                                              $129,103        $129,103
      Unrealized gains (losses)                          (86,487)         73,723
                                                        ---------       --------
                                                        $ 42,616        $202,826
                                                        =========       ========


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

     December  31,                                        2001              2000
     --------------------------------------------------------------------------
     Refundable  security  deposits                     $  -   0         $75,000
     Other (none in excess of 5% of current assets)       21,613          24,368
                                                       ---------        --------
                                                         $21,613         $99,368
                                                        =========       ========


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

<TABLE>
<CAPTION>

                                                         Estimated
December 31,                      2001        2000     Useful Life
-----------------------------  ----------  ----------  -----------
<S>                            <C>         <C>         <C>

Office equipment               $  139,200  $  120,974      5 years
Computer equipment              1,504,771     918,058      3 years
Leasehold improvements             29,383      29,383      5 years
                               ----------  ----------  -----------
                                1,673,354   1,068,415
Less accumulated depreciation     573,015     194,871
                                ----------  ---------
                               $1,100,339  $  873,544
                               ==========  ==========
</TABLE>


     Depreciation  and  amortization  expense amounted to $383,940, $219,740 and
     $108,869  for  the  years  ended  December  31,  2001,  2000  and  1999,
     respectively.


7.   ACCOUNTS  PAYABLE AND ACCRUED Accounts payable and accrued expenses consist
     of  the  following:

<TABLE>
<CAPTION>

December 31                                       2001        2000
------------------------------------------     -------     -------
<S>                                           <C>       <C>

Accounts payable                              $189,702  $  209,988
Accrued professional fees                       77,164      60,580
Accrued payroll and related tax withholdings   455,374     411,795
Amounts due for purchased computer equipment   226,177     427,670
--------------------------------------------  --------  ----------
                                              $948,417  $1,110,033
                                              ========  ==========

</TABLE>

8.   COMMITMENTS  AND CONTINGENCIES: The Company leases its office and warehouse
     facilities  under various leasing agreements. The leases expired during the
     prior  year and the Company opted not to renew the leases and instead opted
     to  rent the facilities on a month-to-month basis. Rent expense amounted to
     $79,481,  $73,521  and  $41,212 for the years ended December 31, 2001, 2000
     and  1999,  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.


<PAGE>

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

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

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

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

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

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

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

     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.


<PAGE>
     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.

     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.


10.  STOCK OPTIONS AND STOCK WARRANTS: The Company has a stock option plan under
     which  options to purchase shares of common stock may be granted to certain
     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"). As of December 31, 2001, no stock
     options  have  been  granted  under  the  2001 Plan. The Company's previous
     option  plan  will  remain  in  effect  until all granted stock options are
     exercised,  expired  or  canceled.


<PAGE>

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

<TABLE>
<CAPTION>


Year ended December 31,        2001                   2000                    1999
-----------------------  ------------  ----------  ------------
<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         6,957,000   $0.69       6,329,000   $0.81      4,335,000   $0.07
Granted                      250,000   $1.00       4,360,000   $2.27      7,375,000   $0.64
Exercised                        -0-   $0.00      (2,383,000)  $0.25     (4,881,000)  $0.08
Canceled/expired          (3,647,000)  $1.11      (1,349,000)  $2.13       (500,000)  $0.07
-----------------------  ------------  ------    ------------  ------    -----------  -----
OUTSTANDING AT
 END OF YEAR               3,560,000   $2.18       6,957,000   $0.69       6,329,000  $0.81
                         ===========   =====       =========   =====       =========  =====
Options exercis-
 able at year-end          3,560,000               6,957,000               6,329,000
                         ============              ==========              ==========
Weighted-average fair
 value of options
 granted during the
 year                                  $0.75                   $1.05                  $0.51
                                       ======                  ======                 =====
</TABLE>

     The  following  table  summarizes  information  about  fixed  stock options
     outstanding  at  December  31,  2001:

<TABLE>
<CAPTION>


               Options Outstanding                        Options Exercisable
               -------------------                        -------------------
                                 Weighted
                                  average       Weighted              Weighted
Range of                         Remaining       average               average
Exercise             Number     Contractual     Exercise     Number    Exercise
Prices             Outstanding    Price          Price    Exercisable   Price
------------      ------------   ----------   ---------  ---------    ---------
<S>               <C>             <C>           <C>        <C>          <C>
1.00 - $1.99      2,395,000       0.9           $1.00      2,395,000   $1.00
2.00 - $2.99        580,000       0.4           $2.06        580,000   $2.06
3.00 - $3.99        285,000       0.7           $3.14        285,000   $3.14
4.00 - $5.00        300,000       0.1           $5.00        300,000   $5.00
-------------     -----------  -------------------  ---------  -----------  ---------
1.00 - $5.00      3,560,000                                3,560,000
=============     =========                                ==========
</TABLE>

     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, 2001, 2000 and
     1999  would  have  been  as  follows:

<PAGE>
<TABLE>
<CAPTION>


Year ended
 December 31,                2001          2000          1999
-----------------------  ------------  ------------  ------------
<S>                      <C>           <C>           <C>
Net loss:
  As reported            $(3,760,821)  $(4,661,652)  $(1,684,468)
-----------------------  ------------  ------------  ------------
  Pro forma              $(3,835,821)  $(9,425,070)  $(5,420,133)
=======================  ============  ============  ============
Loss per common share -
 basic and diluted:
  As reported            $     (0.04)  $     (0.06)  $     (0.03)
=======================  ============  ============  ============
  Pro forma              $     (0.05)  $     (0.12)  $     (0.08)
=======================  ============  ============  ============
</TABLE>


     The  fair  value  of  each  option grant was estimated at the date of grant
     using  the  Black-Scholes  option  pricing  model  with  the  following
     weighted-average  assumptions:

<TABLE>
<CAPTION>


Year ended December 31,    2001    2000    1999
------------------------  ------  ------  ------
<S>                       <C>     <C>     <C>

Expected dividend yield   - 0 -   - 0 -   - 0 -
Risk-free interest rate     4.8%   6.37%   5.46%
Volatility                 1.43%   1.43%   2.50%
Expected life (years)         2       2       1
</TABLE>

     Certain  options  were  granted  to key employees and consultants at option
     prices  below  market  price.  In  accordance  with  APB  Opinion  No.  25,
     compensation  expense has been recorded based on the difference between the
     option  price  and  the  market  price on the date of the option. The total
     amount  of  such  compensation  for  2001  was  approximately  $104,000.

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

Year ended December 31,     2001                     2000                      1999

                                    Range                      Range                       Range
                     Number          of          Number          of          Number          of
                       of         Exercise         of         Exercise         of         Exercise
                    Warrants        Price       Warrants        Price       Warrants        Price
<S>                <C>          <C>            <C>          <C>            <C>          <C>

Outstanding at
beginning of year   2,295,000   $0.13 - $4.00   6,250,000   $0.07 - $1.10   7,095,000   $0.07 - $1.10
Issued              9,800,000   $0.26 - $0.80   1,190,000   $1.50 - $4.00   4,250,000   $0.07 - $1.00
Exercised            (245,000)  $        0.30  (5,145,000)  $0.07 - $1.28  (5,095,000)  $0.07 - $0.29
Expired              (860,000)  $0.58 - $1.10         -0-            0.00         -0-   $        0.00
OUTSTANDING AT
END OF YEAR        10,990,000   $0.26 - $4.00   2,295,000   $0.13 - $4.00   6,250,000   $0.07 - $1.10
-----------------  ===========  =============  ===========  =============  ===========  =============
</TABLE>


11.  INCOME  TAXES: As of December 31, 2001, the Company had deferred tax assets
     resulting  primarily from net operating loss carryforwards of approximately
     $21,000,000,  which  are available to offset future taxable income, if any,
     through 2021. 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,                            2001          2000
--------------                          -----        -----
<S>                                 <C>           <C>
Deferred tax assets:
  Net operating loss carryforwards  $ 7,211,000   $ 6,157,000
  Allowance for doubtful accounts        34,000        36,000
  Unrealized gains (losses) on
  investments                           (30,000)      (25,000)
  Depreciation and amortization               -             -
  Valuation allowance                (7,215,000)   (6,168,000)
----------------------------------  ------------  ------------
NET DEFERRED TAX ASSETS             $       -0-   $       -0-
==================================  ============  ============
</TABLE>


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

<TABLE>
<CAPTION>


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

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


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

     Due  to  related  parties  at  December  31,  2001  and 2000 of $91,480 and
     $75,896,  respectively, primarily consist of advances made from officers of
     the  Company  that  accrue  interest  at 1.25% per month and amounts due to
     directors for services which are noninterest-bearing and are due on demand.
     The  estimated  fair value of the amounts payable approximates the carrying
     amount  based  on  rates  available  for  similar  loans.

     Included  in  research and development expenses for the year ended December
     31,  1999  was  $82,500  paid  to an entity controlled by an officer of the
     Company.

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

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

13.   SUBSEQUENT  EVENTS: In  January  2002,  the Company issued 5,700,000 stock
     options to certain officers, employees and consultants of the Company under
     the 2001 Plan. The stock options are exercisable at a price of $0.50 (U.S.)
     per  share  for  a  term  of  two  years  from  the  date  of  granting.

14.  VALUATION  AND  QUALIFYING  ACCOUNTS:

<TABLE>
<CAPTION>


                         Allowance for
                      Doubtful Accounts
<S>                              <C>
Year ended December 31, 1999     $7,000
Additions                             -
Deductions                            -
-------------------------------  ------
Year ended December 31, 2000      7,000
Additions                             -
Deductions                        7,000
-------------------------------  ------
Year ended December 31, 2001     $    -
===============================  ======
</TABLE>


<PAGE>
15.  QUARTERLY FINANCIAL INFORMATION (UNAUDITED): The following table summarizes
     selected  quarterly  data  for  the years ended December 31, 2001 and 2000:

<TABLE>
<CAPTION>


                   First        Second       Third         Fourth         Full
                  Quarter      Quarter      Quarter       Quarter         Year
                ------------  ----------  ------------  ------------  ------------
<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)
2000:
------
Revenue         $   163,600   $  75,000   $   307,464   $    92,528   $   638,592
Expenses           (686,754)   (965,615)   (1,233,377)   (2,405,917)   (5,291,663)
Net loss           (523,154)   (890,615)     (925,913)   (2,321,970)   (4,661,652)
Net loss per
 common share:
  Basic and
   diluted      $     (0.01)  $   (0.01)  $     (0.01)  $     (0.03)  $     (0.06)
--------------  ------------  ----------  ------------  ------------  ------------
</TABLE>