SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2002

Commission file number: 0-29651

USA VIDEO INTERACTIVE CORP.
(Exact name of registrant as specified in its charter)

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

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

1-800-321-8564
(Registrant's Telephone Number, including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes |X| No |_|

At October 14, 2002, there were 101,745,089 shares of the registrant's common
stock outstanding.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

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

CAUTIONARY STATEMENT

Certain statements contained in this Quarterly Report on Form 10-Q ("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 and uncertainties set forth in USA Video Interactive Corp.'s
Annual Report on Form 10-K, the most important of which are summarized below
under Factors Which May Affect Future Results of Operations, as well as in other
documents USA Video files with the Securities and Exchange Commission
("SEC").

The following information has not been audited. You should read this
information in conjunction with the unaudited financial statements and related
notes to financial statements included in this report.

OVERVIEW OF THE COMPANY

USA Video Interactive Corp. ("USA Video" or the "Company") designs and markets
to business customers streaming video and video-on-demand systems, services and
source-to-destination digital media delivery solutions that allow live or
recorded digitized and compressed video to be transmitted through Internet,
intranet, satellite or wireless connectivity. The Company's systems, services
and delivery solutions include video content production, content encoding, media
asset management, media and application hosting, multi-mode content
distribution, transaction data capture and reporting, e-commerce, specialized
engineering services, and Internet streaming hardware.

USVO holds the patent for Store-and-Forward Video-on-Demand (#5,130,792), filed
in 1990 and issued by the United States Patent and Trademark Office on July 14,
1992. It has been cited by at least 145 subsequent patents. USVO holds similar
patents in England, France, Spain, Italy, Germany, and Canada, and has a patent
pending in Japan. USVO anticipates actively engaging in licensing this patent.

MARKETS AND PRODUCTS:
As an outgrowth of its video streaming systems business and specialized
engineering services, USVO has identified emerging markets for global media
streaming applications and has developed a unique solution to provide a wide
range of business customers with value-added streaming media solutions. With
this approach, called StreamHQ , customers can leverage USVO's infrastructure
and technical expertise, while focusing on their own core business competencies.

StreamHQ facilitates the transmission of digitized and compressed video to the
user's desktop via multiple streaming modes that take advantage of the available
connectivity. While competitive services take a "one-size-fits-all" streaming
approach, StreamHQ brings unique value propositions to individual vertical
markets with functionality designed specifically for those markets. Beyond
quality streaming, USVO's overriding goal has been to give customers media asset
management tools and information that provide a basis for them to achieve a
return on investment in streaming media expenditures.

StreamHQ encompasses an end-to-end process from source to viewing, including
content encoding, asset management and protection, media and application
hosting, multi-mode content distribution, and transaction data capture and
reporting.

TECHNOLOGY APPROACH:
USVO is approaching the global media streaming services market with a Tier 1
media-streaming infrastructure that the Company has attempted to differentiate
from competitive products and services in terms of architectural, functional,
and business features. Leveraging some of the industry's most prominent
providers for data storage, networking, and data management, StreamHQ strives
to compete based on service availability, an efficient streaming process,
redundancy and fail-over features, and continuity in the event of power outages.

USVO has created a modular system that can be scaled to meet the requirements of
a growing clientele. StreamHQ can also be rapidly replicated to provide a
streaming utility in multiple Internet Data Centers or within corporate
Intranets around the world.

StreamHQ functionality is software driven, allowing USVO to create future
system enhancements based on the needs of the marketplace. Additionally, USVO
can customize the baseline features of StreamHQ and plans to expand the system
features to support the specialized needs of additional types of customers.

RESEARCH AND DEVELOPMENT:
USVO has ongoing research and development (R&D) efforts that are aimed at
improving the efficiency and security of media delivery to clients. Among these
R&D efforts is the ongoing development of technology that will help protect the
intellectual property of content owners. USVO also has a proprietary wavelet
compression technology.

BUSINESS OBJECTIVES:
USVO has established the following near-term business objectives:
1. Establish StreamHQ as the industry standard in the streaming video and rich
media marketplace;
2. Generate services- and systems-based revenues in accordance with the
corporate business plan;
3. Attain industry recognition for the superior architectural, functional, and
business differentiators of the StreamHQ architecture;
4. Leverage USVO's digital video patent for licensing fees and partnerships in
the United States and internationally;
5. Develop at least one client per year for a complete StreamHQ system,
including intellectual property licensing and operational support;
6. Expand StreamHQ functionality to provide enhanced support for corporate
training and education markets; and
7. Patent and license new technology developed within the corporate R&D
program.

MARKET PERSPECTIVE:
With its StreamHQ offering, USVO's goals are: 1) to become a market-leading
streaming media solutions provider; 2) to establish itself as a leader in
streaming technology innovation; 3) to capture revenue and market share from
services and products in web and content delivery systems markets. Numerous
published reports estimate the current value of these markets as in excess of 20
billion dollars. As a secondary objective, USVO intends to leverage its broad
video-on-demand patent and other intellectual properties by licensing them to
other companies.

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 to the State of Wyoming. The Company has
five wholly-owned subsidiaries: USA Video (California) Corp., USA Video Corp.,
USA Video Productions Inc., USA Video Technologies, Inc., and USVO, Inc. USA
Video's executive and corporate offices are located in Mystic, Connecticut, and
its Canadian offices are located in Vancouver, British Columbia.

CRITICAL ACCOUNTING POLICIES

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

We consider the following accounting policies to be both those most important to
the portrayal of our financial condition and the require the most subjective
judgment:

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

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

Accounting for marketable securities. We classify our investments in marketable
securities as "available for sale." We carry these investments at fair value,
based on quoted market prices, and unrealized gains and losses are included in
accumulated other comprehensive income (loss), which is reflected upon the sale
of our marketable securities in our statements of operations.

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

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

RESULTS OF OPERATIONS

Sales

Sales for the nine-month period ended September 30, 2002 were $146,701, compared
to revenue of $101,861 for the nine-month period ended September 30, 2001.
Sales for the three-month period ended September 30, 2002 were $57,125 compared
to $67,626 three-month period ended September 30, 2001. The increase in revenue
for the nine month period ended September 30, 2002 is attributable to software
engineering services and service maintenance contracts on previous installed
systems.

Starting in the fourth quarter of 2000 and continuing during the next 30 months,
the Company concentrated its managerial and technical efforts on the remaining
critical stages of developing and refining its new web and content delivery
infrastructure (StreamHQ ).

Services and/or systems based on this infrastructure are intended to become the
Company's core business in place of its custom-built systems for video encoding,
decoding and streaming, the market for which has diminished significantly in the
last 21 to 24 months. The Company believes the market declined for a number
reasons, the most important of which is that customers no longer can afford to
invest in single-purpose hardware systems of this type. As a result, profit
margins on the Company's media systems have continued to decline, and the
Company has lowered prices in the face of declining demand. A change in focus
was necessary to capture the market for a more diverse multi-purpose
infrastructure.

This change in focus required shifting technical and managerial resources from
sales of the old line of products to systems/services offerings based on the new
infrastructure. Additionally, the Company was required to make a significant
investment in the computer hardware and development of the software
functionality that are at the core of this infrastructure.

Recently, due to the change in capital markets, funding for an internal sales
and marketing team was unable to be maintained. Therefore, the Company has
focused on partnering relationships with other companies to complete the
execution of it StreamHQ -based business plan.

Cost of Sales

The cost of sales for the nine months ended September 30, 2002 was $96,205, as
compared to $56,602 for the comparable period of 2001. For the three-month
period ended September 30, 2002, the cost of sales was $38,663 as compared to
$36,036 for the comparable period 2001. The increase in cost of sales is
directly attributable to the increase in sales.

Selling, General and Administrative Expenses

Selling, General and Administrative expenses consisted of product marketing
expenses, consulting fees, office, professional fees and other expenses to
execute the business plan and for day-to-day operations of the Company. Due to
market conditions, Management has implemented consolidation procedures to reduce
the daily cost of Selling, General and Administrative expenses.

Selling, General and Administrative expenses for the three months ended
September 30, 2002 decreased $315,869 to $124,385 from $440,254 for the three
months ended September 30, 2001. For the nine months ended September 30, 2002
these costs decreased by $725,934 to $775,316 from $1,501,250 for the comparable
period. The reduction was due to consolidation efforts of management.

Professional expense for the three months ended September 30, 2002, decreased to
$8,414 from $38,161 for the comparable period of 2001. For the nine months ended
September 30, 2002 these costs decreased to $80,218 from $213,295 for the
comparable period. The Company utilized its staff to perform tasks previously
outsourced.

Product marketing expenses for the three months ended September 30, 2002,
decreased to $6,199 from $175,366 for the comparable period of 2001. For the
nine months ended September 30, 2002 these costs decreased to $99,336 from
$489,458 for the comparable period. The reduction was due to consolidation
efforts of management.

Administrative/Office expenses for the three months ended September 30, 2002,
decreased to $34,499 from $162,027 for the comparable period of 2001. For the
nine months ended September 30, 2002 these costs decreased to $219,918 from
$351,405 for the comparable period. The reduction was due to consolidation
efforts of management.

The Company has arranged for additional staff/consultants to engaged in
marketing activities in an effort to identify and assess appropriate market
segments, develop business arrangements with prospective partners, create
awareness of new products and services, and communicate to the industry and
potential customers. Other components of Selling, General and Administrative
expense did not change significantly.

Research and Development Expenses

Research and development expenses consisted primarily of compensation, hardware,
software, licensing fees, and new product applications for the Company's
proprietary StreamHQ . Research and development expenses decreased by 59% to
$273,839 for the nine months ended September 30, 2002, from $672,304 for the
comparable period in 2001 and by 84% to $38,258 for the three months ended
September 30, 2002 from $232,695 for the comparable period in 2001. The
reduction was due to consolidation efforts of management.

As the Company consolidates its business, its product development, product
marketing, and other general and administrative expenses will continue to
decrease.

Non-Cash Compensation Charges

Non-cash compensation charges for the nine months ended September 30, 2002
reflected charges in the first quarter of 2002 of $12,718, the second
quarter of 2002 of $19,077 and the third quarter of 2002 of $19,077 was due
to the amortization of a portion of the options issued to consultants. In
July 2002, $38,154 was vested. Non-cash compensation charges for the nine
months ended September 30, 2001 reflected charges in the third and first
quarter of 2001 of $575,347. Of this amount, $9,750 and $462,097,
respectively, was due to the 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 TSX 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, and the
market price of the common shares increased between announcement of the
offering and 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. In addition, the Company issued options to
purchase 150,000 common shares to consultants, resulting in a $97,500 charge.
The Company also incurred a charge of $6,000 for the issuance of employee stock
options.

Other Expense

The Company sold the stock of related registered companies for the nine months
ended September 30, 2002 for a loss of $93,319. As of December 31, 2001, the
Company reported change in unrealized loss on investments for $86,487.

Impairment Loss on Long-Lived Assets

As the result of the Company's inability to raise revenues in accordance with
the corporate business plan, the company continued operating at a loss for the
nine month period ended September 30, 2002. As a result, the Company commenced
an impairment review of its long-lived assets in accordance with Statement of
Financial Accounting Standard ("SFAS")144 "Accounting of the Impairment or
Disposal of Long-Lived Assets". As an result of this impairment review, the
Company recorded an impairment loss of approximately $350,000 during the three
month period ended September 30, 2002, to reduce the carrying value of these
assets to its estimated fair value.

Net Losses

To date, the Company has not achieved profitability and, in fact, expects to
incur substantial net losses for at least the remainder of 2002. The Company's
net loss for the nine months ended September 30, 2002 was $1,882,873 as compared
with a net loss of $2,971,875 for the nine months ended September 30, 2001 and
for the three months ended September 30, 2002 was $641,336 as compared to
$753,999 for the comparable period.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2002, the Company had a cash position of $53,652, compared
to $104,238 at December 31, 2001.

The Company will require additional financing to fund current operations through
the remained of 2002. The Company has historically satisfied its capital needs
primarily by issuing equity securities. The Company will require an additional
$1.5 million to $2.0 million to finance operations through fiscal 2003 and
intends to seek such financing through sales of its equity securities.

Assuming the aforementioned $1.5 million to $2.0 million in financing is
obtained, the Company believes that 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 $1.5 million to $2.0 million
through 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.

FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS

Certain risks and uncertainties could cause actual results to differ materially
from the results contemplated by the forward-looking statements contained in
this Report. Risks and uncertainties have been set forth in the Company's Annual
Report on Form 10-K, as well as in other documents the Company files with the
SEC. These risk factors include the following:

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

The Company'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.

IF THE COMPANY IS UNABLE TO OBTAIN SUBSTANTIAL ADDITIONAL FINANCING IN THE NEXT
FEW MONTHS IT MAY NOT BE ABLE TO MAINTAIN OPERATIONS AT CURRENT LEVELS.

The Company requires substantial additional financing to maintain operations at
current levels beyond the second quarter of 2002. 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.

CONTINUATION OF THE CURRENT SLUMP IN THE TECHNOLOGY SECTOR WILL ADVERSELY AFFECT
DEMAND FOR THE COMPANY'S PRODUCTS AND SERVICES.

The Company's sales have been adversely affected by the ongoing slump in the
technology industry segment and the continuation of these market conditions can
be expected to result in depressed demand for the Company's products and
services.

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.

Factors that could cause such fluctuations include the Company's ability to
attract and retain customers; the introduction of new video transmission
services or products by others; price competition; the continued development of
and changes in the streaming media market; its ability to remain competitive in
its product and service offerings; its ability to attract new personnel; and
potential U.S. and foreign regulation of the Internet.

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

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.

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

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 develop or adapt products and services or to acquire new
products and services that can compete successfully. There can be no assurance
that the Company will be successful in these efforts.

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

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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company believes its exposure to overall foreign currency risk is not
material. The Company 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.

The Company reports its operations in US dollars and its currency exposure,
although considered by the Company 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 the Company will be denominated in US dollars. As the Company
increases its marketing efforts, the related expenses will be primarily in US
dollars. In addition, 90% of the Company's bank deposits are in US dollars.

Item 4. Controls and Procedures

Based on their evaluation of the effectiveness of the Company's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this quarterly report, the undersigned officers of the Company have concluded
that such disclosure controls and procedures are adequate. There were no
significant changes in internal controls or in other factors that could
significantly affect internal controls, including any corrective actions with
regard to significant deficiencies and material weaknesses, subsequent to the

date of the most recent evaluation by the undersigned officers of the Company of
the design and operation of internal controls which could adversely affect the
Company's ability to record, process, summarize and report financial data.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company is not a party to any other material pending legal proceedings.

Item 2. Changes in Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities.

None.

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

None.

Item 5. Other Information.

None.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibit(s)

Exhibit 1 - Certification of Chief Executive Officer and Chief
Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted
Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K

(i) On September 27, 2002, the Registrant announced that four
employees of its wholly owned subsidiary USVO Inc. have
filed a complaint with the Connecticut Department of Labor
with respect to outstanding wages. The Registrant has been
in contact with the Connecticut Department of Labor. The
Registrant intends to satisfy this obligation forthwith.

(ii) Amendment - On September 27, 2002, the Registrant announced
that four employees of its wholly owned subsidiary USVO Inc.
have filed a complaint with the Connecticut Department of
Labor with respect to outstanding wages. The Registrant has
been in contact with the Connecticut Department of Labor and
intends to satisfy this obligation forthwith.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

USA Video Interactive Corp.

Dated: November 14, 2002 By: /s/ Anton J. Drescher
--------------------------------
Name: Anton J. Drescher
Title: Chief Financial Officer

Exhibit 1

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

SECTION 906 CERTIFICATION BY EDWIN MOLINA

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

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

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

By: /s/ Edwin Molina
-----------------------------------
Name: Edwin Molina
Title: President and Chief Executive
Officer
Date: November 14, 2002

SECTION 906 CERTIFICATION BY ANTON J. DRESCHER

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

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

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

By: /s/ Anton J. Drescher
------------------------------------
Name: Anton J. Drescher
Title: Secretary and Chief Financial
Officer
Date: November 14, 2002

CERTIFICATIONS

I, Edwin Molina, certify that:

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

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

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

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

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

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

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

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

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

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

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

By: /s/ Edwin Molina
-----------------------------------
Name: Edwin Molina
Title: President and Chief Executive
Officer
Date: November 14, 2002

I, Anton J. Drescher, certify that:

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

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

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

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

By: /s/ Anton J. Drescher
------------------------------------
Name: Anton J. Drescher
Title: Secretary and Chief Financial
Officer
Date: November 14, 2002

USA VIDEO INTERACTIVE CORP.

CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2002

(UNAUDITED)

(STATED IN US DOLLARS)
--------------------

USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(STATED IN US DOLLARS)

SEPTEMBER 30, DECEMBER 31,
2002 2001
--------------- --------------

(UNAUDITED)

ASSETS

Current Assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . $ 53,652 $ 104,238
Marketable securities - related parties. . . . . . . . . . . . . . . . . - 42,616
Accounts receivable, net of allowance for doubtful accounts $-0- . . . . 1,400 30,900
Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 12,000
Prepaid expenses and other current assets. . . . . . . . . . . . . . . . 10,805 21,613
--------------- --------------

TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,857 211,367

Property and Equipment - at cost, net of accumulated
depreciation of $505,529 and $573,015, respectively. . . . . . . . . . . . 354,957 1,100,339

Other Assets, net of accumulated amortization of $10,508
and $8,016, respectively. . . . . . . . . . . . . . . . . . . . . . . . . . 67,980 70,472

Deferred Tax Assets, net of valuation allowance
of $7,749,000 and $7,215,000, respectively . . . . . . . . . . . . . . . . - -
--------------- --------------

TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 488,794 $ 1,382,178
=============== ==============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

Current Liabilities:
Accounts payable and accrued expenses. . . . . . . . . . . . . . . . . . $ 1,149,739 $ 948,417
Due to related parties . . . . . . . . . . . . . . . . . . . . . . . . . 55,006 91,480
--------------- --------------

TOTAL CURRENT LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . 1,204,745 1,039,897
--------------- --------------

Commitments and Contingencies

Stockholders' Equity (Deficiency):
Preferred stock - no par value; authorized 250,000,000 shares,
none issued
Common stock - no par value; authorized 250,000,000 shares,
issued and outstanding 101,745,088 and 91,745,088 shares, respectively. 30,230,225 29,492,071
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . - (86,487)
Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . (30,946,176) (29,063,303)
--------------- --------------

STOCKHOLDERS' EQUITY (DEFICIENCY). . . . . . . . . . . . . . . . . . (715,951) 342,281
--------------- --------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY). . . . . . . $ 488,794 $ 1,382,178
=============== ==============

SEE ACCOMPANYING NOTES

USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(STATED IN US DOLLARS)
(UNAUDITED)

FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2002 2001 2002 2001
--------------- --------------- --------------- ---------------

Revenue . . . . . . . . . . . . . . . . . . . $ 57,125 $ 67,626 $ 146,701 $ 101,861
--------------- --------------- --------------- ---------------

Expenses:
Cost of sales . . . . . . . . . . . . 38,663 36,036 96,205 56,602
Research and development. . . . . . . 38,258 232,695 273,839 672,304
Selling, general and administrative . 124,385 440,254 775,316 1,501,250
Depreciation and amortization . . . . 132,624 104,645 397,874 276,622
Impairment loss on long-lived assets. 350,000 - 350,000 -
Noncash compensation charges. . . . . 19,077 9,750 50,872 575,347
--------------- --------------- --------------- ---------------

Total expenses. . . . . . . . . . . . . . . . 703,007 823,380 1,944,106 3,082,125
--------------- --------------- --------------- ---------------
Loss from operations. . . . . . . . . . . . . (645,882) (755,754) (1,797,405) (2,980,264)
--------------- --------------- --------------- ---------------

Other income (expense)
Interest income. . . . . . . . . . 22 98 143 5,132
Other. . . . . . . . . . . . . . . 4,524 1,657 (85,611) 3,257
--------------- --------------- --------------- ---------------

4,546 1,755 (85,468) 8,389
--------------- --------------- --------------- ---------------

Net loss. . . . . . . . . . . . . . . . . . . $ (641,336) $ (753,999) $ (1,882,873) $ (2,971,875)
=============== =============== =============== ===============

Net loss per share - basic and diluted. . . . $ (.01) $ (.01) $ (.02) $ (.04)
=============== =============== =============== ===============
Weighted-average number of common
shares outstanding - basic and diluted . . . 101,745,089 84,533,997 95,224,942 83,719,069
=============== =============== =============== ===============

SEE ACCOMPANYING NOTES

USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
(STATED IN US DOLLARS)
(UNAUDITED)

FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2002 2001 2002 2001
--------------- --------------- --------------- ---------------

Net loss . . . . . . . . . . . . . . . . . . $ (641,336) $ (753,999) $ (1,882,873) $ (2,971,875)

Other comprehensive income:
Change in unrealized loss on marketable
securities - (20,535) 86,487 (118,331)
--------------- --------------- --------------- ---------------

Comprehensive loss . . . . . . . . . . . . . $ (641,336) $ (774,534) $ (1,796,386) $ (3,090,206)
- =============== =============== =============== ===============

SEE ACCOMPANYING NOTES

USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
(STATED IN US DOLLARS)

(UNAUDITED)

COMMON STOCK ACCUMULATED
OTHER
COMPREHENSIVE ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT LOSS DEFICIT EQUITY (DEFICIENCY)

Balance at December 31, 2001. . . . . . 91,745,088 $29,492,071 $ (86,487) $(29,063,303) $ 342,281
Issuance of common stock and
common stock warrants for cash . . . . 10,000,000 700,000 - - 700,000
Noncash compensation charges. . . . . . - 38,154 - - 38,154
Change in unrealized loss on marketable
securities. . . . . . . . . . . . . . - - 86,487 - 86,487
Net loss. . . . . . . . . . . . . . . . - - - (1,882,873) (1,882,873)
---------- ----------- -------------- -------------- ---------------------

Balance at September 30, 2002 . . . . . 101,745,088 $30,230,225 $ - $(30,946,176) $ (715,951)
=========== =========== =============== ============= =====================

SEE ACCOMPANYING NOTES

USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(STATED IN US DOLLARS)
(UNAUDITED)

FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2002 2001 2002 2001
--------------- --------------- --------------- ---------------

Cash flows from operating activities:
Net loss. . . . . . . . . . . . . . . . . . . . . $ (641,336) $ (753,999) $ (1,882,873) $ (2,971,875)
Adjustments to reconcile net loss to net cash
used in operating activities:
Bad debts . . . . . . . . . . . . . . . . . . . 17,753 - 17,753 -
Depreciation and amortization . . . . . . . . . 132,625 104,645 397,874 276,622
Impairment loss on long-lived assets. . . . . . 350,000 - 350,000 -
Noncash compensation charge . . . . . . . . . . 19,077 9,750 50,872 575,347
Realized loss on sale of marketable securities -
related parties. . . . . . . . . . . . . . . - - 93,319 -
Changes in operating assets and liabilities:
Decrease in accounts receivable. . . . . . . 3,518 11,079 11,747 113,832
Decrease in inventory. . . . . . . . . . . . 36,322 - 12,000 -
(Increase) decrease in prepaid expenses and
other current assets. . . . . . . . . . . . 2,317 (19,189) 10,808 63,148
Increase (decrease) in accounts payable and
accrued expenses . . . . . . . . . . . . . 28,370 (34,130) 188,604 (149,716)
Decrease in accounts payable and accrued
expenses - related parties . . . . . . . . . - - - (20,830)
Increase (decrease) in due to related parties. . (20,206) (337,097) (36,474) 5,167
--------------- --------------- --------------- ---------------

NET CASH USED IN OPERATING ACTIVITIES . . . . . . . . (71,560) (1,018,941) (786,370) (2,108,305)
--------------- --------------- --------------- ---------------

Cash flows from investing activities:
Purchases of property and equipment, net . . . . . - (63,628) - (486,120)
Patent fees (4,000)
Proceed from sale of marketable securities -
related parties . . . . . . . . . . . . . . . . - - 35,784 -
--------------- --------------- --------------- ---------------

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES . - (63,628) 35,784 (490,120)
--------------- --------------- --------------- ---------------

Cash flows from financing activities:
Proceeds from the issuance of common stock . . . . - 1,074,131 700,000 2,407,391
Proceeds from the issuance of common stock
upon exercise of warrants . . . . . . . . . . . - 12,053 - 72,912
--------------- --------------- --------------- ---------------
NET CASH PROVIDED BY FINANCING ACTIVITIES . . . . . . - 1,086,184 700,000 2,480,303
--------------- --------------- --------------- ---------------

Net increase (decrease) in cash and cash
equivalents . . . . . . . . . . . . . . . . . . . . (71,560) 3,615 (50,586) (118,122)

Cash and cash equivalents at beginning of period. . . 125,212 109,460 104,238 231,197
--------------- --------------- --------------- ---------------

Cash and cash equivalents at end of period. . . . . . $ 53,652 $ 113,075 $ 53,652 $ 113,075
=============== =============== =============== ===============

SEE ACCOMPANYING NOTES

USA VIDEO INTERACTIVE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(UNADITED)
(STATED IN US DOLLARS)
--------------------

NOTE A - BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule
10-01(a)(5) of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of the management, all
adjustments (consisting of normal recurring accruals) considered necessary for
fair presentation have been included. The results for the interim periods are
not necessarily indicative of the results that may be attained for an entire
year or any future periods. For further information, refer to the Financial
Statements and footnotes thereto in the Company's annual report on Form 10-K for
the fiscal year ended December 31, 2001.

NOTE B - 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 $1,882,873 for the nine month
period ended September 30, 2002 and $3,684,340, $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.

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.

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

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 September 30, 2002
and 2001.

USA VIDEO INTERACTIVE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(UNADITED)
(STATED IN US DOLLARS)
--------------------

NOTE C - COMMON STOCK

On June 28, 2002, the Company issued 7,085,000 units to investors at $.07 per
unit. Each unit consisted of one share of common stock and one warrant to
purchase an additional share of common stock at $.085 per share.

On June 28, 2002, the Company issued 2,915,000 units to employees at $.07 per
unit. Each unit consisted of one share of common stock and one warrant to
purchase an additional share of common stock at $.085 per share.

NOTE D - STOCKHOLDERS' EQUITY (DEFICIENCY)

During January 2002 the Company issued 925,000 options to purchase common stock
to certain service providers 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 grant. In accordance with the provisions of Statement of
Financial Accounting Standards ("SFAS") 123, the Company has charged to
operations for the nine-month and three-month periods ended September 30, 2002,
respectively, approximately $51,000 and $19,000 which is based on the fair value
of the stock options as services are provided. At September 30, 2002 since part
of such options have not yet vested, $13,000 is included in accounts payable and
accrued expenses in the accompanying consolidated balance sheet.

NOTE E - CONTINGENT LIABILTIY

The Company is party to a default judgement 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 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 judgement is not estimable or determinable at this time and may be
substantially mitigated by the landlord 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.

NOTE F - IMPAIRMENT OF LONG-LIVED ASSETS

As the result of the Company's inability to raise revenues in accordance with
the corporate business plan, the company continued operating at a loss for the
nine month period ended September 30, 2002. As a result, the Company commenced
an impairment review of its long-lived assets in accordance with Statement of
Financial Accounting Standard ('SFAS") 144 "Accounting of the Impairment or
Disposal of Long-Lived Assets". As a result of this impairment review, the
Company recorded an impairment loss of approximately $350,000 during the three
month period ended September 30, 2002, to reduce the carrying value of these
assets to its estimated fair value.