USVO News:

May 15 - USA Video Interactive Corp. Files Quarterly Report with SEC

Sales Rise, Losses Decrease

USA Video Interactive Corp. (OTCBB: USVO) (CDNX: US.V), a company that designs and markets digital watermarking, streaming video and video-on-demand systems, services and source-to-destination digital media delivery solutions to business customers, announced its results of operations for the quarter ended march 31, 2008 compared to the quarter ended march 31, 2007:

Sales

Sales for the three-month period ended March 31, 2008 and March 31, 2007 were $6,000 and $0, respectively. Revenues were generated from Software License Agreement from our Smartmark™ Software.

Cost of Sales

The cost of sales for the three months ended March 31, 2008 and March 31, 2007 were $750 and $0, respectively. Costs are the royalties on our video watermarking license agreement with Digimarc Corporation.

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 three months ending March 31, 2008. We have a contract for our Smartmark™ Software and delivered acceptable release to start billing. Product marketing costs decreased due to management's decision to direct our efforts toward the current customer. Administrative expenses have decreased as a result.

Selling, general and administrative expenses for the three months ended March 31, 2008 decreased $39,163 to $228,625 from $267,788 for the three months ended March 31, 2007. The overall decrease was the result of product marketing costs. Other costs increased for the three months ended March 31, 2008

Product marketing expenses for the three months ended March 31, 2008, decreased to $26,241 from $87,889 for the comparable period in 2007. The decrease was due to management's decision to direct our efforts towards our current customer.

Professional expenses for the three months ended March 31, 2008, increased to $59,714 from $49,294 for the comparable period of 2007. The increased costs in the first quarter of 2008 were due to the patent infringement lawsuit.

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 contractors, compensation, hardware, software, licensing fees, and new product applications for our proprietary MediaSentinel™. Research and development expenses decreased to $29,350 for the three months ended March 31, 2008, from $39,753 for the comparable period in 2007. The decrease was the result of a concentration in one application of research and development efforts for MediaSentinel™.

Non-Cash Compensation Charges

Non-cash compensation charges for the three months ended March 31, 2008 were $37,650, compared to $29,675 for the comparable period in 2007. The amount for the three months ended March 31, 2008 was due to the issuance of stock options to an employee.

Net Losses

To date, we have not achieved profitability and, we expect to incur substantial net losses for at least the remainder of 2008. Our net loss for the three months ended March 31, 2008 was $253,305, compared with a net loss of $308,261 for the three months ended March 31, 2007. The decrease in losses is directly related to the decrease in marketing costs.

Liquidity and Capital Resources

At March 31, 2008, we had a cash position of $8,510, compared to $36,700 at December 31, 2007. We anticipate capital requirements of $500,000 for the continued development of our MediaSentinel™ products, $500,000 for commercialization of our MediaSentinel™ products and $500,000 for costs associated with the infringement lawsuit.

We will require additional financing to fund current operations through fiscal 2008. We have historically satisfied our capital needs primarily by issuing equity securities. We will require an additional $1.25 million to $1.75 million to finance operations through fiscal 2008 and we intend to seek such financing through sales of our equity securities. Subsequent to the three months ended March 31, 2008, we raised an aggregate of $106,575 through the exercise of warrants.

Assuming the aforementioned $1.25 million to $1.75 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.