10-Q

UNITED STATES

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, 2011

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)

#507, 837 West Hastings Street, Vancouver, BC,	V6C 3N6
(Address of principal executive offices)	(ZIP code)

(604) 685-1017

(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 o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of ‘‘accelerated filer and large accelerated filer’’ in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Small reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

At November 11, 2011, there were 191,596,364 shares of the registrant's common stock outstanding.

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PART I.                FINANCIAL INFORMATION

Item 1.                  Financial Statements

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USA VIDEO INTERACTIVE CORP.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

(Unaudited)

(Stated in US Dollars)

 

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USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Stated in US Dollars)

	September 30,	December 31,
	2011	2010
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$           5,766	$           5,254
Accounts receivable	6,000	12,070
Prepaid expenses and other current assets	3,168	2,755
Total current assets	14,934	20,079
Property and Equipment - at cost, net	-	-
Intangible assets. Net	-	-
Deferred Tax Assets, net of valuation allowance
of $9,945,000 and $9,890,000, respectively	-	-
Total Assets	$         14,934	$          20,079
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities:
Accounts payable and accrued expenses	$        205,359	$        224,380
Accounts payable and accrued expenses - related parties	418,840	243,285
Total current liabilities	624,199	467,665
Commitment and Contingencies
Stockholders' Deficiency:
Preferred stock - no par value; authorized 500,000,000 shares,
none issued
Common stock and additional paid-in capital -
no par value; authorized 500,000,000 shares,
issued and outstanding 191,596,364	38,637,690	38,637,690
Accumulated deficit	(39,246,955)	(39,085,276)
Stockholders' deficiency	(609,265)	(447,586)
Total Liabilities and Stockholders' Deficiency	$        14,934	$          20,079

SEE ACCOMPANYING NOTES

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USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES

CONDENSED 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,
	2011	2010	2011	2010
Revenue	9,000	9,070	$      27,000	$      30,070
Expenses:
Cost of sales	1,350	1,360	4,050	4,510
Research and development	-0-	-0-	75,000	3,300
Selling, general and administrative	32,476	62,838	109,629	221,513
Total expenses	33,826	64,198	188,679	229,323
Loss from operations	(24,826)	(55,128)	(161,679)	(199,253)
Other income (expense)
Interest income (expense)		(744)	-	(4,455)
Gain on settlement of accounts payable		109,979	-	109,979
Gain on sale of equipment		1,500	-	1,500
	-	110,735	-	107,024
Net Income ( loss )	(24,826)	55,607	$    (161,679)	$      (92,229)
Net Income ( loss ) per share - basic and diluted	$            (.00)	$            (.00)	$           (.00)	$            (.00)
Weighted-average number of common
shares outstanding - basic and diluted	191,596,364	188,709,291	191,596,364	188,581,309

SEE ACCOMPANYING NOTES

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USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY

(Stated in US Dollars)

(Unaudited)

	Common Stock
			Accumulated	Stockholders'
	Shares	Amount	Deficit	Deficiency
Balance at December 31, 2010	191,596,364	$ 38,637,690	$ (39,085,276)	$      (447,586)
Net loss		-	(161,679)	(161,679)
Balance at September 30, 2011	191,596,364	$ 38,637,690	$ (39,246,955)	$      (609,265)

SEE ACCOMPANYING NOTES

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USA VIDEO INTERACTIVE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Stated in US Dollars)

(Unaudited)

	September 30,	September 30,
For the nine months ended	2011	2010
Cash flows from operating activities:
Net Income (loss)	$      (161,679)	$   (92,229)
Adjustments to reconcile net loss to net cash
used in operating activities:
Gain on settlement of accounts payable	-	109,979
Capital contributions	-	158,039
Changes in operating assets and liabilities:
(Increase) decrease  in accounts receivables	6,070	38,930
(Increase) decrease in prepaid expenses
and other current assets	(413)	906
Increase (decrease) in accounts payable and
accrued expenses	(19,021)	(255,365)
Increase (decrease) in accounts payable and
accrued expenses - related parties	175,555	(22,579)
Net cash provided by operating activities	512	(62,319)
Cash flows from financing activities:
Proceeds from the issuances of common stock
warrants and options	-	67,500
Net  cash provided by financing activities		67,500
	-
Net increase in cash and cash
equivalents	512	5,181
Cash and cash equivalents at beginning of period	5,254	765
Cash and cash equivalents at end of period	$     5,766	$      5,946

SEE ACCOMPANYING NOTES

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USA VIDEO INTERACTIVE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

(Unaudited)

(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, 2010.  Presentation for prior periods has be reclassified to be consistent with current presentation.   This is not considered to be a restatement.

NOTE B – GOING CONCERNS:

The accompanying condensed 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 loss of $161,679 for the nine month period ended September 30, 2011 and, in addition the Company incurred losses of $89,175 and $811,004 for the years ended December 31, 2010 and 2009, respectively. As of September 30, 2011, the Company had an accumulated deficit of $39,246,955 and a working capital deficit of $609,265. 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 Company also has certain lawsuits pending which could result in additional liabilities.  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.

NOTE C – SUBSEQUENT EVENTS:

The Company's outstanding warrants expired October 29, 2011.  As of October 29, 2011, the Company has no outstanding warrants or options.

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

CAUTIONARY STATEMENT

This document includes statements that may constitute forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. We caution readers regarding certain forward-looking statements in this document, press releases, securities filings, and all other documents and communications.  All statements, other than statements of historical fact, including statements regarding industry prospects and future results of operations or financial position, made in this Quarterly Report on Form 10-Q ("Report") are forward looking.  The words "believes," "anticipates," "estimates," "expects," and words of similar import, constitute "forward-looking statements."  While we believe in the veracity of all statements made herein, forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by us, are inherently subject to significant business, economic and competitive uncertainties and contingencies and known and unknown risks.  As a result of such risks, our actual results could differ materially from those expressed in any forward-looking statements made by, or on behalf of, our company.  We will not necessarily update information if any forward-looking statement later turns out to be inaccurate.  Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including risks and uncertainties set forth in our Annual Report on Form 10-K, as well as in other documents we file 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 the financial statements included in this report.

OVERVIEW OF THE COMPANY

We design and market to business customers digital watermarking, 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.  Our systems, services and delivery solutions include digital watermark solutions and 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.

Although we have generated nominal sales for the thrid quarter of 2011, we continue to explore opportunities that will result in new products for new revenue streams, but there can be no assurances that such efforts will be successful.

We held 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.  Our patent expired in February 2010.

We have developed a number of specific products and services based on these technologies. These include MediaSentinel™ and SmartMarks™ a process that watermarks digital video content, StreamHQ™, a collection of source-to-destination media delivery services marketed to businesses; EncodeHQ™, a service that digitizes and compresses analog-source video; hardware server and encoder system applications under the brand name Hurricane Mediacaster™; ZMail™, a service that delivers web and rich media content to targeted audiences; mediaClix™, a service that delivers content similar to Zmail but originating from an existing web presence; and MediaSentinel™, a patent-pending digital watermarking technology to deter digital video piracy.

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We were incorporated on April 18, 1986, as First Commercial Financial Group Inc. in the Province of Alberta, Canada.  In 1989, our 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, we changed our name to USA Video Interactive Corp. and continued our corporate existence to the State of Wyoming.  We have one wholly-owned subsidiary: USVO Inc.  In the last four months of 2010 we dissolved: USA Video (California) Corp., USA Video Corporation, Old Lyme Productions Inc. and USA Video Technology Corporation.  USA Video's executive and corporate offices are located in East Berlin, Connecticut, and our Canadian offices are located in Vancouver, British Columbia.

BUSINESS OBJECTIVES:

We have established the following near-term business objectives:

1. Patent and license new technology developed within the corporate research and development program;

2. Attain industry recognition for the superior architectural, functional, and business differentiators of our MediaSentinel™ architecture;

3. Demonstrate proof of concept on a commercial project with MediaSentinel™ architecture;

4. Establish StreamHQ™as the industry standard in the streaming video and rich media marketplace;

5   Expand StreamHQ™ functionality to provide enhanced support for corporate training and education markets.

CRITICAL ACCOUNTING POLICIES (AND ESTIMATES)

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 ongoing 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.

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We have identified the policies below as critical to our business operations and to the understanding of our financial results. The impact and any associated risks related to these policies on our business operations is discussed throughout management’s discussion and analysis of financial condition and results of operations where such policies affect our reported and expected financial results:

—           Revenue recognition;

—           Impairment or disposal of long-lived assets;

—           Deferred taxes;

—           Accounting for stock-based compensation; and

—           Commitments and contingencies.

 

REVENUE RECOGNITION.  Revenue is recognized for digital water marking based on a contracted usage schedule on a monthly billing cycle.  Software revenue and other services are recognized in accordance with the terms of the specific agreement, which is generally upon delivery and when accepted by customer.  Maintenance, support and service revenue are recognized ratably over the term of the related agreement.  In order to recognize revenue, we must not have any continuing obligations and it must also be probable that we will collect the accounts receivable.

IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS.  Long-lived assets are reviewed in accordance with ASC Topic 360 (formally 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.  

DEFERRED TAXES.  We record a valuation allowance to reduce deferred tax assets when it is more likely than not that some portion of the amount may not be realized.  

ACCOUNTING FOR STOCK-BASED COMPENSATION - ASC Topic 718, Stock Compensation (formerly referred to as SFAS No. 123(R)), the Company estimates the fair value of stock options granted using the Black-Scholes option pricing model.  The fair value for awards that are expected to vest is then amortized on a straight-line basis over the requisite service period of the award, which is generally the option vesting term.  The amount of expense attributed is based on estimated forfeiture rate, which is updated based on actual forfeitures as appropriate.  This option pricing model requires the input of highly subjective assumptions, including the expected volatility of the Company’s common stock, pre-vesting forfeiture rate and an option’s expected life.  The financial statements include amounts that are based on the Company’s best estimates and judgments.

COMMITMENTS AND CONTINGENCIES.- We account for commitments and contingencies in accordance with ASC 440 (Accounting for Commitments) and ASC 450 (Accounting for Contingencies). We record a liability for commitments and contingencies when the amount is both probable and reasonably estimable.

RESULTS OF OPERATIONS

Sales

Sales for the nine-month period ended September 30, 2011 and September 30, 2010 were $27,000 and $30,070, respectively.  Sales for the three-month period ended September 30, 2011 and September 30, 2010 were $9,000 and $9,070, respectively.  Revenues were generated from Software License Agreement from our Smartmark™ Software.  

Cost of Sales

The cost of sales for the nine months ended September 30, 2011 was $4,050 as compared to $4,510 for the comparable period in 2010.  For the three-month period ended September 30, 2011, the cost of sales was $1,350 as compared to $1,360 for the comparable period in 2010.  Costs are the royalties on our video watermarking license agreement.

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Selling, General and Administrative Expenses

Selling, general and administrative expenses, consisting of product marketing expenses, consulting fees, office, professional fees and other expenses to execute our business plan and for our day-to-day operations, decreased in the nine months ending September 30, 2011.  We have a contract for our Smartmark™ Software and delivered acceptable release to start billing and delivered additional server licenses.  Product marketing costs decreased due to management’s decision to direct our efforts toward the current customer in additional divisions and direct marketing to other possible customers.  Consulting and management fees decreased due to a reduction of salaries and fees.  Administrative expenses have decreased as a result.

Selling, general and administrative expenses for the three months ended September 30, 2011 decreased by $30,362 to $32,476 from $62,838 for the three months ended September 30, 2010.  The decrease was the result of expenses incurred related to a reduction in consulting fees, salaries and product marketing expenses.  For the nine months ended September 30, 2010 the costs decreased by $111,884 to $109,629 from $221,513 for the comparable period in 2010.  The decrease was the result of expenses incurred related to a reduction in consulting fees, salaries and product marketing expenses.

.

Consulting fees for the nine months ended September 30, 2011, decreased to $-0- from $9,000 for the comparable period in 2010.  We incurred decreased costs in 2011 due to management’s decision to eliminate their salaries.

Salaries and fees for the ninee months ended September 30, 2011 decreased to $-0- from $14,100 for the comparable period in 2010.  We incurred decreased costs in 2011 due to management and employee reductions.

We have arranged for additional staff and consultants to engage 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 contractor fees, compensation, hardware, software, licensing fees, and new product applications for our proprietary MediaSentinel™.  Research and development expenses increased to $75,000 for the nine months ended September 30, 2011, from $3,300 for the comparable period in 2010 and $-0- for the three months ended September 30, 2011 and 2010.  The increase was the result of a concentration in one application of research and development efforts for MediaSentinel™.

Net Losses

To date, we have not achieved profitability and, we expect to incur substantial net losses for the remainder of 2011.  Our net loss for the nine months ended September 30, 2011 was $161,679, compared with a net loss of $92,229 for the nine months ended September 30 2010.  The increase in losses is directly related to the research and development of MediaSentinel™ products.

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LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2011, we had a cash position of $5,766, compared to $5,254 at December 31, 2010.  We anticipate capital requirements of $700,000 for the continued development of our MediaSentinel™ products and 700,000 for commercialization of our MediaSentinel™ products.

We will require additional financing to fund current operations through fiscal 2011.  We have historically satisfied our capital needs primarily by issuing equity securities.  We will require an additional $0.75 million to $1.25 million to finance operations through fiscal 2012 and we intend to seek such financing through sales of our equity securities.

Assuming the aforementioned $0.75 million to $1.25 million in financing is obtained, we believe that continuing operations for the longer term will be supported through anticipated licensing revenues and through additional sales of our securities.  We have no binding commitments or arrangements for additional financing, and there is no assurance that we will be able to obtain any additional financing on terms acceptable to us, if at all.

OFF-BALANCE SHEET ARRANGEMENTS

We do not maintain any off-balance sheet transactions, arrangements, or obligations that are reasonably likely to have a material effect on our financial condition, results of operations, liquidity, or capital resources.

Item 3.                 Quantitative and Qualitative Disclosures About Market Risk

We believe our exposure to overall foreign currency risk is not material.  We do not manage or maintain market risk sensitive instruments for trading or other purposes and are not exposed to the effects of interest rate fluctuations as we do not carry any long-term debt.

We report our operations in US dollars and our currency exposure, although considered by us as immaterial, is primarily between 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 us will be denominated in US dollars.  As we increase our marketing efforts, the related expenses will be primarily in US dollars.  In addition, 90% of our bank deposits are in US dollars.

Item 4.                 Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e) and 15d-15(e), as of the end of the period covered by this report.

In designing and evaluating our disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

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While we believe our disclosure controls and procedures and our internal control over financial reporting have improved, no system of controls can prevent errors and fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur. Controls can also be circumvented by individual acts of some people, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with its policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Subject to the limitations above, management believes that the consolidated financial statements and other financial information contained in this report, fairly present in all material respects our financial condition, results of operations, and cash flows for the periods presented.

Based on the evaluation of the effectiveness of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) were effective at a reasonable assurance level. There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

PART II.                 OTHER INFORMATION

Item 1.                     Legal Proceedings

Our patent infringement litigation (filed by a our subsidiary that was dissolved in September 2010) against Movielink LLC came to a substantive conclusion on September 8, 2006, when the U.S. Court of Appeals for the Federal Circuit affirmed certain rulings of the U.S. District Court for the District of Delaware granting Movielink summary judgment of non-infringement. A further procedural determination was entered on September 26, 2007, taxing litigation costs against us.

On September 13, 2006, USA Video Technology Corp., our wholly-owned subsidiary, filed suit in the U.S. District Court for the Eastern District of Texas, alleging that its U.S. Patent No. 5,130,792 is infringed by cable technology interests including Time Warner, Inc., Charter Communications, Inc., and Comcast Cable Communications LLC, and seeking statutory compensation and a court injunction against further infringement.  In December 2007, the court issued rulings adverse to our interests: a claim construction ruling interpreting certain terms in the patent's claims, and a related summary judgment of non-infringement.  Defendants then filed motions for costs and attorney fees.  The court denied defendants' motions for attorney fees and granted the motions for costs, so that we now have a remaining liability from this litigation in the amount of approximately $30,000, not counting our own remaining attorney fees and litigation expenses.  Our subsidiary filed notice of appeal from the district court's adverse substantive decisions, but was unable to prosecute the appeal and so it was dismissed.  USA Video Technology Corp has reported $30,000 accounts payable as of December 31, 2009.  .  USA Video Technology Corp was been dissolved and the previous record payable has been written off in 2010.

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Subsequent to the year end the Company and its former subsidiary Old Lyme Production, Inc (dissolved) was served with a notice of claim in the amount of $30,000.  The Company was not party to the contract nor a guarantor.  Management believes this claim is without merit and plans to vigorously defend this claim.

The Company leases its United States and Canada office space under a month to month lease basis.  Rent expense in the United States and Canada amounted to $26,611 and $32,156 for the nine months ended September 30, 2011 and 2010, respectively.

Item 1A.              Risk Factors

A description of the risks associated with our business, financial condition, and results of operations is set forth in Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2010. These factors continue to be meaningful for your evaluation of our company and we urge you to review and consider the risk factors presented in the Form 10-K. There have been no material changes to these risks presented in the Form 10-K.

Item 2.                 Changes in Securities and Use of Proceeds

None.

Item 3.                 Defaults Upon Senior Securities.

None.

Item 4.                 Removed and Reserved.

N/A.

Item 5.                 Other Information.

None.

Item 6.                 Exhibits and Reports on Form 8-K

(a)   Exhibit(s)

31.1 Certification of the Chief Executive Officer Pursuant To Rule 13a-14 Or 15d-14 of the Securities Exchange Act Of 1934,as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2 Certification of the Chief Financial Officer Pursuant To Rule 13a-14 Or 15d-14 of the Securities Exchange Act of 1934,as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C.  Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C.  Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF XBRL Taxonomy Extension Definition Linkbase Document

101.LAB XBRL Taxonomy Extension Label Linkbase Document

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

(b) Reports on Form 8-K

On October 17th, 2011 we announced that we filed a preliminary proxy statement with the SEC whereby we are proposing to call meeting of shareholders in the near future.  Shareholders will be asked to vote on the appointment of directors and auditor, and to approve our 2011 Stock Option Plan.  In addition, shareholders will be asked to vote to approve an alteration of our share capital by way of a reverse stock split by on a one new share for fifteen old shares basis.  We will also be seeking approval to a change of name to “Oculus VisionTech Inc.”..

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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, 2011	By:	/s/ Anton J. Drescher
	Name:	Anton J. Drescher
	Title:	Chief Financial Officer

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EX-31.1

Exhibit 31.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER  PURSUANT TO RULE 13A-14 OR 15D-14 OF THE SECURITIES EXCHANGE ACT OF 1934, 

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

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 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 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 officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and  

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

By: /s/ Edwin Molina

-----------------------------------

Name: Edwin Molina

Title: President and Chief Executive Officer

Date:  November 14, 2011

EX-31.2

Exhibit 31.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER  PURSUANT TO RULE 13A-14 OR 15D-14 OF THE SECURITIES EXCHANGE ACT OF 1934, 

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Anton J. Drescher, certify that:

1.

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

2.

Based on my knowledge, this 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 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 officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and  

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

By: /s/ Anton J. Drescher

------------------------------------

Name: Anton J. Drescher

Title: Secretary and Chief Financial Officer

Date:  November 14, 2011

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of USA Video Interactive Corp. (the “Company”) on Form 10-Q for the period ended September 30, 2011, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Edwin Molina, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002 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, 2011

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of USA Video Interactive Corp. (the “Company”) on Form 10-Q for the period ended September 30, 2011, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Anton J. Drescher, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002 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, 2011

XML

CONDENSED CONSOLIDATED BALANCE SHEETS PARENTHETICALS (USD $)	Sep. 30, 2011	Dec. 31, 2010
StockholdersEquityNumberOfSharesParValueAndOtherDisclosuresAbstract
Deferred Tax Assets, valuation allowance	$ 9,945,000	$ 9,890,000
Preferred Stock, no par value	$ 0	$ 0
Preferred Stock, shares authorized	500,000,000	500,000,000
Common Stock, no par value	$ 0	$ 0
Common stock, shares authorized	500,000,000	500,000,000
Common Stock, shares issued	191,596,364	191,596,364
Common Stock, shares outstanding	191,596,364	191,596,364

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
IncomeStatementAbstract
Revenue	$ 9,000	$ 9,070	$ 27,000	$ 30,070
Expenses:
Cost of sales	1,350	1,360	4,050	4,510
Research and development	0	0	75,000	3,300
Selling, general and administrative	32,476	62,838	109,629	221,513
Total expenses	33,826	64,198	188,679	229,323
Loss from operations	(24,826)	(55,128)	(161,679)	(199,253)
Other income (expense)
Interest income (expense)	0	(744)	0	(4,455)
Gain on settlement of accounts payable	0	109,979	0	109,979
Gain on sale of equipment	0	1,500	0	1,500
Other income (expense)	0	110,735	0	107,024
Net Income ( loss )	$ (24,826)	$ 55,607	$ (161,679)	$ (92,229)
Net Income ( loss ) per share - basic and diluted	$ 0.00	$ 0.00	$ 0.00	$ 0.00
Weighted-average number of common shares outstanding - basic and diluted	191,596,364	188,709,291	191,596,364	188,581,309

XML

Document and Entity Information	9 Months Ended
	Sep. 30, 2011	Nov. 11, 2011
Document and Entity Information
Entity Registrant Name	USA VIDEO INTERACTIVE CORP
Document Type	10-Q
Document Period End Date	Sep. 30, 2011
Amendment Flag	false
Entity Central Index Key	0001107280
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		191,596,364
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q3

XML

GOING CONCERNS

9 Months Ended

Sep. 30, 2011

GOING CONCERNS

GOING CONCERNS

NOTE B – GOING CONCERNS:

The accompanying condensed 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 loss of $161,679 for the nine month period ended September 30, 2011 and, in addition the Company incurred losses of $89,175 and $811,004 for the years ended December 31, 2010 and 2009, respectively. As of September 30, 2011, the Company had an accumulated deficit of $39,246,955 and a working capital deficit of $609,265. 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 Company also has certain lawsuits pending which could result in additional liabilities.  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.

XML

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (USD $)	Common Stock Shares	Common Stock Amount	Accumulated Deficit	Stockholders' Deficiency
BALANCE, at Dec. 31, 2010	191,596,364	38,637,690	(39,085,276)	(447,586)
Net loss	$ 0	$ 0	$ (161,679)	$ (161,679)
BALANCE, at Sep. 30, 2011	191,596,364	38,637,690	(39,246,955)	(609,265)

XML

SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2011

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

NOTE C – SUBSEQUENT EVENTS:

The Company's outstanding warrants expired October 29, 2011.  As of October 29, 2011, the Company has no outstanding warrants or options.

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010
Cash flows from operating activities:
Net Income (loss)	$ (161,679)	$ (92,229)
Adjustments to reconcile net loss to net cash used in operating activities:
Gain on settlement of accounts payable	0	109,979
Capital contributions	0	158,039
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivables	6,070	38,930
(Increase) decrease in prepaid expenses and other current assets	(413)	906
Increase (decrease) in accounts payable and accrued expenses	(19,021)	(255,365)
Increase (decrease) in accounts payable and accrued expenses - related parties	175,555	(22,579)
Net cash provided by operating activities	512	(62,319)
Cash flows from financing activities:
Proceeds from the issuances of common stock warrants and options	0	67,500
Net cash provided by financing activities	0	67,500
Net increase in cash and cash equivalents	512	5,181
Cash and cash equivalents at beginning of period	5,254	765
Cash and cash equivalents at end of period	$ 5,766	$ 5,946

XML

BASIS OF PRESENTATION

9 Months Ended

Sep. 30, 2011

BASIS OF PRESENTATION

BASIS OF PRESENTATION

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, 2010.  Presentation for prior periods has be reclassified to be consistent with current presentation.   This is not considered to be a restatement.

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)	Sep. 30, 2011	Dec. 31, 2010
Current Assets:
Cash and cash equivalents	$ 5,766	$ 5,254
Accounts receivable	6,000	12,070
Prepaid expenses and other current assets	3,168	2,755
Total current assets	14,934	20,079
Property and Equipment - at cost, net	0	0
Intangible assets. Net	0	0
Deferred Tax Assets, net of valuation allowance of $9,945,000 and $9,890,000, respectively	0	0
Total Assets	14,934	20,079
Current Liabilities:
Accounts payable and accrued expenses	205,359	224,380
Accounts payable and accrued expenses - related parties	418,840	243,285
Total current liabilities	624,199	467,665
Stockholders' Deficiency:
Preferred stock - no par value; authorized 500,000,000 shares, none issued	0	0
Common stock and additional paid-in capital - no par value; authorized 500,000,000 shares, issued and outstanding 191,596,364	38,637,690	38,637,690
Accumulated deficit	(39,246,955)	(39,085,276)
Stockholders' deficiency	(609,265)	(447,586)
Total Liabilities and Stockholders' Deficiency	$ 14,934	$ 20,079