UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB
                                   -----------
(Mark One)
[X]      QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
         ACT OF 1934 For the quarterly period ended March 31, 2001

[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the
         transition period from _________________ to _________________

                        Commission file number 333-42162

                                VHS NETWORK, INC.
        -----------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)

         FLORIDA                                      65-0656668
--------------------------------            ---------------------------------
(State or other  jurisdiction of            (IRS Employer Identification No.)
incorporation or organization)


                               301-5170 Dixie Road
                      Mississauga, Ontario, Canada L4W 1E3
                    (Address of principal executive offices)
                                 (905) 238-9398
                    (Issuer's telephone number) Copies of all
                               communications to:
                              Stewart & Associates
                      1 First Canadian Place, P.O. Box 160
                         Suite 700, 100 King Street West
                            Toronto, Ontario, Canada
                               Tel: (416) 368-7881
                               Fax: (416) 368-7805

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: May 11, 2001 19,560,268

<PAGE>

                         PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.

                        Consolidated Financial Statements
                   For the three months ended March 31, 2001,
                      and the year ended December 31, 2000

                     VHS NETWORK, INC.CONSOLIDATEDFINANCIAL
                      STATEMENTSFor the three months ended
                       March 31, 2001, and the year ended
                                December 31, 2000



                                 C O N T E N T S
                                 ---------------

 Consolidated Balance Sheets........................................3
Consolidated Statements of Operations...............................4
Consolidated Statements of Shareholders' Equity.....................5
Consolidated Statements of Cash Flows...............................6
Notes to Financial Statements......................................7-17

                                       2
<PAGE>

                                VHS NETWORK, INC.

                           Consolidated Balance Sheets
                March 31, 2001 (unaudited) and December 31, 2000

<TABLE>
<CAPTION>

                                                                              March 31,                December 31,
                                                                                2001                       2000
                                                                             -----------               -----------
                                     ASSETS
                                     ------
<S>                                                                          <C>                       <C>
     Cash                                                                    $     6,936               $    25,205
     Inventory                                                                   143,803                   111,999
                                                                             -----------               -----------
             Total current assets                                                150,739                   137,204
                                                                             -----------               -----------
     Property and Equipment
         Furniture and Equipment                                                  18,940                    18,940
         Accumulated Depreciation                                                 (3,470)                   (1,892)
                                                                             -----------               -----------
             Total property and equipment                                         15,470                    17,048
                                                                             -----------               -----------
     Intangible assets, net                                                       16,330                    18,330
                                                                             -----------               -----------
     Other Assets
         Other receivables                                                         1,198                       761
         Prepaids and deposits                                                    67,774                    67,774
                                                                             -----------               -----------
             Total other assets                                                   68,972                    68,535
                                                                             -----------               -----------
                     Total assets                                            $   251,511               $   241,117
                                                                             ===========               ===========
                                  LIABILITIES
                                  -----------
                                                                                                       -----------
     Accounts payable                                                        $    50,006               $    60,650
     Accrued expenses                                                               --                        --
                                                                             -----------               -----------
             Total current liabilities                                            50,006                    60,650
                                                                             -----------               -----------
     Management fees payable, related party                                      225,000                   150,000
     Notes payable, related party                                                213,320                   182,027
     Reserve for loss contingencies                                              350,000                   350,000
                                                                             -----------               -----------
             Total long-term liabilities                                         788,320                   682,027
                                                                             -----------               -----------
                 Total liabilities                                               838,326                   742,677
                                                                             -----------               -----------
     Commitments and contingencies (note 6)
SHAREHOLDERS' EQUITY
     Common stock: $0.001 par value per
         share; 100,000,000 shares
         authorized; 19,560,268 and
         19,560,268 issued and outstanding,
         respectively                                                             19,559                    19,559
     Preferred stock: 25,000,000 shares authorized;
         none issued or outstanding                                                 --                        --
     Additional paid-in-capital                                                3,544,408                 3,544,408
     Accumulated deficit                                                      (4,150,782)               (4,065,527)
                                                                             -----------               -----------
                 Total shareholders' equity                                     (586,815)                 (501,560)
                                                                             -----------               -----------
                     Total liabilities and shareholders' equity              $   251,511               $   241,117
                                                                             ===========               ===========
</TABLE>

              The accompanying notes are an integral part of these
                              financial statements.

                                      - 3 -
<PAGE>

<TABLE>
<CAPTION>
                                VHS NETWORK, INC.

                      Consolidated Statements of Operations
         for the three months ended March 31, 2001 and 2000 (unaudited)
                      and the year ended December 31, 2000

                                                            Three months             Three months                  Year
                                                              ended                     ended                      ended
                                                             March 31,                 March 31,               December 31,
                                                              2001                      2000                       2000
                                                          ------------              ------------              ------------
<S>                                                       <C>                       <C>                       <C>
 Income:
     Sales                                                $    146,884              $       --                $       --
     Cost of goods sold                                       (127,909)                     --                        --
                                                          ------------              ------------              ------------
             Gross margin                                       18,975                      --                        --
                                                          ------------              ------------              ------------
Operating Expenses:
     Agency fees                                                 1,332                    38,679                    52,557
     Consulting fees                                               462                      --                      45,640
     General and administrative                                  6,464                    10,827                    32,251
     Management fees                                            75,000                    45,000                   270,000
     Professional fees                                          10,822                     8,043                   150,973
     Office expense - China                                      4,580                      --                      44,017
     Depreciation and amortization                               3,578                       473                     7,562
     Inventory allowance                                          --                        --                      28,000
     Other                                                         102                       747                    23,743
     Non-recurring acquisition expense                            --                        --                     216,515
                                                          ------------              ------------              ------------
             Total operating expenses                          102,340                   103,769                   871,258
                                                          ------------              ------------              ------------
     Loss from operations                                      (83,365)                 (103,769)                 (871,258)
Other Income and (expense):
     Interest (income)                                            --                          98                     9,516
     Interest expense                                             --                         (56)                     (568)
     Exchange (gain)/loss                                       (1,890)                     --                        (189)
                                                          ------------              ------------              ------------
             Total other income and (expense)                   (1,890)                       42                     8,759
                                                          ------------              ------------              ------------
                 Net loss before taxes                         (85,255)                 (103,727)                 (862,499)
                                                          ------------              ------------              ------------
                 Income taxes                                     --                        --                        --
                                                          ------------              ------------              ------------
                 Net loss                                 $    (85,255)             $   (103,727)             $   (862,499)
                                                          ============              ============              ============
Net loss per common share - Basic                         $     (0.004)             $     (0.009)             $     (0.044)
                                                          ============              ============              ============
Weighted average number of
   common shares - Basic                                    19,560,268                11,915,352                19,469,192
                                                          ============              ============              ============
Net loss per common share - Diluted                       $     (0.004)             $     (0.009)             $     (0.044)
                                                          ============              ============              ============
Weighted average number of
     common shares - Diluted                                19,560,268                11,915,352                19,469,192
                                                          ============              ============              ============
</TABLE>



              The accompanying notes are an integral part of these
                              financial statements.

                                      - 4 -
<PAGE>

<TABLE>
<CAPTION>
                                VHS NETWORK, INC.

          Consolidated Statements of Shareholders' Equity for the three
        months ended March 31, 2001 and the year ended December 31, 2000

                                              Common               Preferred
                                              Stock                  Stock
                                   ------------------------- ----------------------    Additional   Accumulated
                                       Shares       Amount      Shares     Amount   paid-in-capital   Deficit         Total
                                   -----------   ----------- ---------- -----------   -----------   -----------    -----------
<S>                                 <C>           <C>         <C>         <C>         <C>           <C>            <C>
 Balance December 31, 1999          10,929,435    $   10,929       --     $    --     $ 1,231,170    $(3,203,028)  $(1,960,929)
                                   -----------   ----------- ---------- -----------   -----------   -----------    -----------
Sale of common stock                 2,633,333         2,633       --          --       1,057,367          --        1,060,000
Conversion of note
     payables, related party         2,500,000         2,500       --          --         863,368          --          865,868
Common stock issued for services        57,500            57       --          --          25,693          --           25,750
Common stock issued for expenses        25,000            25       --          --         22,725          --           22,750
Acquisition of
     China e-mall Corp.              2,100,000         2,100       --          --          21,900          --           24,000
Acquisition of Exodus
     Acquisition Corp.                 500,000           500       --          --        124,500          --          125,000
Conversion of debt
     into common stock                  10,000            10       --          --          21,990          --           22,000
Exercise of warrants                   250,000           250       --          --         104,750          --          105,000
Conversion of wages
     payable to officers
     into common stock                 555,000           555       --          --          70,945          --           71,500
Net loss for the period                   --            --         --          --            --        (862,499)      (862,499)
                                   -----------   ----------- ---------- -----------   -----------   -----------    -----------
Balance December 31, 2000           19,560,268   $    19,559       --   $      --     $ 3,544,408   $(4,065,527)   $  (501,560)
                                   -----------   ----------- ---------- -----------   -----------   -----------    -----------
Net loss for the period                   --            --         --          --            --         (85,255)       (85,255)
                                   -----------   ----------- ---------- -----------   -----------   -----------    -----------
Balance March 31, 2001              19,560,268   $    19,559       --   $      --     $ 3,544,408   $(4,150,782)   $  (586,815)
                                   -----------   ----------- ---------- -----------   -----------   -----------    -----------
</TABLE>

              The accompanying notes are an integral part of these
                              financial statements.

                                      - 5 -
<PAGE>

<TABLE>
<CAPTION>

                                VHS NETWORK, INC.
           Consolidated Statements of Cash Flows for the three months
                    ended March 31, 2001 and 2000 (unaudited)
                      and the year ended December 31, 2000
                            Three Months Three Months

                                                                           Ended         Ended       Year Ended
                                                                         March 31,      March 31,    December 31,
                                                                           2001           2000          2000
                                                                       -----------    -----------    -----------
<S>                                                                    <C>            <C>            <C>
     Net income (loss)                                                 $   (85,255)   $  (103,727)   $  (862,499)
     Adjustments to reconcile net income (loss) to net cash
       provided by (used for) operating activities:
         Issuance of common stock for services                                --              750         25,750
         Issuance of common stock for expenses                                --             --           22,750
         Acquisition of Exodus Corporation                                    --             --          125,000
         Inventory valuation allowance                                        --             --           28,000
         Amortization of intangible assets                                   2,000           --            5,670
         Depreciation                                                        1,578            473          1,892
                                                                       $   (81,677)   $  (102,504)   $  (653,437)
Cash flow from operating activities:
     Changes in assets and liabilities
         Receivables                                                   $      (437)   $      --      $      (761)
         Inventory                                                         (31,804)          --             --
         Prepaid and deposits                                                 --          (18,514)          --
         Accounts payable                                                  (10,644)       (10,174)        (4,217)
         Accrued expenses                                                     --          (10,380)       (15,000)
             Cash flow used in operating activities                    $  (124,562)   $  (141,572)   $  (673,415)
Cash flow from investing activities:
     Purchase of furniture and equipment                               $      --      $   (18,940)   $   (18,940)
             Net cash used in investing activities                     $      --      $   (18,940)   $   (18,940)
Cash flow from financing activities:
     Management fees payable, related party                            $    75,000    $    45,000    $   150,000
     Payments on notes payable, related party                                 --             --         (597,973)
     Proceeds from notes payable, related party                             31,293           --             --
     Proceeds from exercise of warrants                                       --             --          105,000
     Proceeds from sale of stock                                              --          950,000      1,060,000
             Net cash generated by financing activities                $   106,293    $   995,000    $   717,027
                                                                       -----------    -----------    -----------
             (Decrease) Increase in cash and cash equivalents              (18,269)       834,488         24,672
             Balance at beginning of year                                   25,205            533            533
             Balance at end of year                                    $     6,936    $   835,021    $    25,205
Supplementary disclosure:
     Cash paid for interest                                            $      --      $        56    $       568
     Cash paid for taxes                                               $      --      $      --      $     --
     Conversion of payables into common Stock                          $      --      $      --      $    93,500
     Common stock issued for acquisitions                              $      --      $      --      $   149,000
     Conversion of notes payable into common stock                     $      --      $   865,868    $   865,868
     Common stock issued for services and expenses                     $      --      $       750    $    48,500

</TABLE>

              The accompanying notes are an integral part of these
                              financial statements.

                                      - 6 -




<PAGE>



                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                 March 31, 2001


1        NATURE OF OPERATIONS

         Company History

         VHS Network,  Inc. (the  "Company" or "VHSN") was  incorporated  in the
         State of  Florida on  December  18,  1995 as Ronden  Vending  Corp.  On
         December 24, 1996, the Company  incorporated a wholly owned  subsidiary
         called  Ronden  Acquisition,   Inc.  a  Florida   corporation.   Ronden
         Acquisition,  Inc.  then  merged  with Video  Home  Shopping,  Inc.  (a
         Tennessee corporation),  and Ronden Acquisition, Inc. was the surviving
         Florida Corporation.  In 1996, Video Home Shopping,  Inc. was a network
         marketing  and  distribution  company  which  offered  a wide  range of
         products and  services to  consumers  through the medium of video tape,
         however,  after the merger the Company decided not to continue with the
         network  marketing and distribution  operations of Video Home Shopping,
         Inc. of Tennessee.

         On January 9, 1997,  articles  of merger  were filed for the Company as
         the  surviving  corporation  of a merger  between  the  Company and its
         wholly owned subsidiary Ronden  Acquisitions,  Inc. This step completed
         the forward triangular merger between Video Home Shopping, Inc., Ronden
         Acquisition, Inc. and the Company.

         On January 9, 1997, articles of amendment were filed to change the name
         of the Company from Ronden Vending Corp. to VHS Network,  Inc. On April
         9, 1997, the Company  incorporated  VHS  Acquisition,  Inc. as a wholly
         owned subsidiary.

         In  April  1997,  the  Company  was  restructured  by way of a  reverse
         take-over involving its wholly owned subsidiary, VHS Acquisition,  Inc.
         a Florida  company,  and VHS  Network  Inc.,  a Manitoba  and  Canadian
         controlled private corporation.

         On April 12,  2000,  the Company  acquired all the  outstanding  common
         shares of China eMall  Corporation,  an Ontario private  company.  This
         represents a 100% voting interest in China eMall Corporation.

                                     - 7 -

<PAGE>


                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                 March 31, 2001


1.       NATURE OF OPERATIONS (continued)

         Operations

         The Company is continuing to reposition itself to identify technologies
         and market  opportunities  in the United  States,  Canada and abroad in
         Internet and  electronic  commerce  interactive  media,  and  SmartCARD
         loyalty marketing. The Company will operate and/or develop two lines of
         business as follows:

         China  eMall   Corporation   ("China  eMall"):   Through  its  acquired
         subsidiary,  China eMall Corporation,  an Ontario,  Canada corporation,
         the Company  provides  Internet  marketing and information  services to
         facilitate trade between Chinese and western businesses.  The Company's
         primary  focus will be to establish an on-line  presence to  facilitate
         the export of Chinese products.  Through its  multi-functional  portal,
         Chinese suppliers can post their products and services in a format that
         is easy for searching,  quoting and tracking,  and that gives a western
         buyer access to multiple  suppliers for the best quality and price, and
         direct communication.  Realizing the difference in business culture and
         financial  systems,  China eMall will allocate a substantial  amount of
         resources in assisting in the communications, export/import processing,
         financial transaction and product services. China eMall's business will
         make use of  Internet  technology  to speed up the export  process  and
         broaden the sales  channels for Chinese  goods and  services,  and more
         importantly, bring customers into direct contact with Chinese producers
         who can  constantly  upgrade their products to meet  customers'  needs.
         China eMall has an agreement with Wangfujing  Department  Store Ltd., a
         large Chinese retailer, as its prime product supplier.

         SmartCARD: The Company is developing computer chip-based plastic access
         cards that utilize proprietary SmartCARD technology,  which is licensed
         from Groupmark Canada Limited, a related party. This technology enables
         the cards to be used for identification purposes and as debit or charge
         cards. The Company intends to focus its marketing  efforts on companies
         that wish to distribute  these cards to their customers as a reward for
         their loyalty.  Groupmark Canada Limited owns the registered  trademark
         "SmartCARD"  in Canada  and has a  pending  application  in the  United
         States.  Groupmark  Canada has granted the Company a license to use the
         trademark  "SmartCARD." Pursuant to the terms of the license agreement,
         the  Company  will pay to  Groupmark  a  royalty  of 5% of net sales of
         products using the SmartCARD trademark and technology.

                                     - 8-

<PAGE>


                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                 March 31, 2001


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         These consolidated financial statements are prepared in accordance with
         accounting  principles  generally  accepted in the United  States.  The
         following is a summary of the significant  accounting policies followed
         in the preparation of these consolidated financial statements.


         Principles of Consolidation

         The  consolidated  financial  statements  include  the  accounts of the
         Company and all of its subsidiary companies.  Intercompany accounts and
         transactions have been eliminated on consolidation.

         These consolidated financial statements reflect all adjustments,  which
         are, in the opinion of management, necessary for a fair presentation of
         the results for the interim periods.


         Cash and Cash Equivalents

         Cash and cash  equivalents  consist of cash on hand and cash  deposited
         with  financial  institutions,  including  money market  accounts,  and
         commercial paper purchased with an original maturity of three months or
         less.


         Concentration of Cash

         The Company at times  maintains  cash balances in accounts that are not
         fully federally  insured.  Uninsured  balances as of March 31, 2001 and
         December 31, 2000 were $7,743 and $25,205, respectively.


         Inventories

         Inventories  are  stated  at the  lower of cost  (first  in,  first out
method) or market.

                                     - 9 -


<PAGE>



                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                 March 31, 2001

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         Property and Equipment

         Property  and  equipment  are  stated at cost or, in the case of leased
         assets  under  capital  leases,  at the present  value of future  lease
         payments at inception of the lease.  Major improvements that materially
         extend the useful life of property  are  capitalized.  Depreciation  is
         calculated on a straight-line  basis over the estimated useful lives of
         the various  assets,  which range from three to seven years.  Leasehold
         improvements  and leased assets under capital leases are amortized over
         the life of the asset or the period of the  respective  lease using the
         straight-line  method,  whichever  is the  shortest.  Expenditures  for
         repairs and maintenance are charged to expense as incurred.

         Depreciation  expense for the three-month  period ending March 31, 2001
         was $1,578 and for the year ended December 31, 2000 was $1,892.


         Stock-based Compensation

         The Company  accounts for its  stock-based  compensation  plan based on
         Accounting  Principles  Board ("APB")  Opinion No. 25. In October 1995,
         the Financial  Accounting Standards Board ("FASB") issued SFAS No. 123,
         "Accounting for Stock-Based  Compensation."  The Company has determined
         that it will not change to the fair value  method and will  continue to
         use APB Opinion No. 25 for  measurement  and recognition of any expense
         related to employee stock based transactions.


         Income Taxes

         The Company  accounts for income taxes in accordance with SFAS No. 109,
         "Accounting  for Income  Taxes".  Income taxes are provided for the tax
         effects  of  transactions   reported  in  the  consolidated   financial
         statements and consist of deferred taxes related to differences between
         the basis of assets  and  liabilities  for  financial  and  income  tax
         reporting. The deferred tax assets and liabilities represent the future
         tax  return  consequences  of those  differences,  which will be either
         taxable or deductible  when the assets and liabilities are recovered or
         settled.  Deferred taxes are also recognized for operating  losses that
         are available to offset future taxable income.


                                     - 10 -

<PAGE>



                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                 March 31, 2001

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         Foreign Currency Translation

         Transactions  are  translated  into  the  functional  currency  at  the
         exchange rates in effect at the time the transactions  occur.  Exchange
         gains and losses arising on  translation  are included in the operating
         results for the year.


         Revenue

         Sales are recorded for products  upon  shipment of product to customers
         and transfer of title under standard commercial terms.


         Comprehensive Income

         In 1999,  the Company  adopted SFAS No. 130,  "Reporting  Comprehensive
         Income."  SFAS  No.  130   establishes   standards  for  reporting  and
         presentation of  comprehensive  income and its components in a full set
         of  financial  statements.  Comprehensive  income is  presented  in the
         consolidated  statements  of  shareholders'  equity  and  comprehensive
         income,  and consists of net income and  unrealized  gains  (losses) on
         available for sale marketable securities;  foreign currency translation
         adjustments  and  changes  in market  value of futures  contracts  that
         qualify as a hedge;  and  negative  equity  adjustments  recognized  in
         accordance  with  SFAS  87.  SFAS  No.  130  requires  only  additional
         disclosures  in the  consolidated  financial  statements  and  does not
         affect the Company's  financial position or results of operations.  The
         elements of comprehensive income for the three-month period ended March
         31, 2001 and 2000, and the year ended December 31, 2000 are de minimis.


         Income (loss) per common share

         Income  (loss) per common  share is  computed on the  weighted  average
         number of common or common and  common  equivalent  shares  outstanding
         during each year. Basic  Earnings-per-Share  ("EPS") is computed as net
         income  (loss)  applicable  to  common  stockholders'  divided  by  the
         weighted  average number of common shares  outstanding  for the period.
         Diluted  EPS  reflects  the  potential  dilution  that could occur from
         common shares  issuable  through  stock  options,  warrants,  and other
         convertible  securities when the effect would be dilutive.  The Company
         had no dilutive securities.

                                     - 11 -

<PAGE>


                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                 March 31, 2001


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         Long-lived assets

         In accordance with Statement of Financial Accounting Standards ("SFAS")
         No. 121,  the  Company  reviews the  carrying  value of its  long-lived
         assets and identifiable  intangibles for possible  impairment  whenever
         events or changes in  circumstances  indicate  the  carrying  amount of
         assets to be held and used may not be recoverable.


         Use of Estimates

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


         Advertising Costs

         The  Company   expenses   advertising   costs  as  they  are  incurred.
         Advertising costs for the three month period ending March 31, 2001 were
         $615 and for the year  ending  December  31,  2000  were  $45,390.  The
         Company  did not incur any  advertising  costs  during the three  month
         period ending March 31, 2000.

         Segments of an Enterprise and Related Information

         The Company  follows SFAS No. 131,  "Disclosures  about  Segments of an
         Enterprise  and  Related  Information."  SFAS No. 131  requires  that a
         public business enterprise report financial and descriptive information
         about its  reportable  operating  segments  on the  basis  that is used
         internally  for  evaluating  segment  performance  and  deciding how to
         allocate resources to segments. Currently, the Company operates in only
         one segment.


                                     - 12 -

<PAGE>



                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                 March 31, 2001

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         Intangibles

         Intangible   assets  are   recorded  at  cost.   Capitalized   web-site
         development  costs  associated  with the  purchase  of China  eMall are
         amortized on a straight-line basis over a period of 3 years.


         Recently Issued Accounting Pronouncements

         In June 1998, the FASB issued SFAS No. 133,  "Accounting for Derivative
         Instruments and Hedging  Activities." SFAS No. 133 requires recognition
         of all derivative financial instruments as either assets or liabilities
         in consolidated  balance sheets at fair value and determines the method
         (s) of gain/loss  recognition.  The FASB issued SFAS No. 137, "Deferral
         of the Effective  Date of FASB Statement No. 133" in June 1999 to defer
         the effective date of SFAS No. 133 to fiscal years beginning after June
         15, 2000. The Company does not have derivative instruments and does not
         conduct hedging activities.


3.       INVENTORIES

         On April 29, 1998, the Company  acquired  approximately  32,000 sets of
         printed art reproductions.  Each set consists of four full-color prints
         from "The  Andover  Series" by artist Jim  Perleberg.  Each image has a
         title narrative  printed in the margin and is re-signed,  in the plate,
         by the artist.  The  management of the Company has evaluated the market
         value of the prints and determined  that the market value of the prints
         is not below their  acquisition cost. The prints are by a noted artist,
         and the original  Andover Series S/N Limited Edition  lithographs  were
         fully sold.

         The Company  acquired  these sets of prints in exchange  for  1,399,992
         shares of its common  stock  valued at  $139,999.  The Company  will be
         offering  these  prints  for sale  through  its own web site and  other
         Internet web sites.

         The Company has  recorded a valuation  allowance  of $28,000 in 2000 to
         reflect the fair value of the inventory.

         The Company has inventory of patio furniture valued at $31,804.


                                     - 13 -

<PAGE>



                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                 March 31, 2001

4.       INCOME TAXES

         No  provision  for federal and state  taxes has been  recorded  for the
         three months  period ended March 31, 2001 and 2000,  and the year ended
         December 31, 2000,  since the Company incurred net operating losses for
         these periods.


5.       RELATED PARTY TRANSACTIONS

         Groupmark Canada Limited

         In 1997, the Company entered into a management  service  agreement with
         Groupmark Canada Limited ("Groupmark"), of which the Chairman and Chief
         Executive  Officer of the Company is the sole  shareholder.  Under this
         agreement,   Groupmark  provides  the  Company  all  management,  daily
         administrative  functions,  financial and business  advisory  services.
         Groupmark  was  also   contracted   to  assist  in  the   technological
         development  of  the  "SmartCARD."  Contractually,  charges  for  these
         services  are not to exceed  $56,000  per month.  For the three  months
         ending March 31, 2001 and 2000, the Company incurred management fees of
         $75,000 and $45,000, respectively.

         Amounts due Groupmark pursuant to this management service agreement and
         other  borrowings  as of March  31,  2001  and  December  31,  2000 are
         $438,320 and $332,027, respectively. Groupmark has the option to accept
         payment by way of the  Company's  common  stock at fair market value in
         lieu of cash.

         Transactions with Corporate Officers and Directors


         Dr.  Gang Chai,  a member of the Board of  Directors  and the  original
         founder of China e-Mall, is a majority  shareholder in McVicar Minerals
         Corporation.  McVicar Minerals provided services to the Company through
         a consulting agreement.  The Company paid McVicar Minerals Corp. $4,000
         during the three month period ended March 31, 2001.
                                     - 14 -

<PAGE>




                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                 March 31, 2001


6.       COMMITMENTS AND CONTINGENCIES

         Legal

         The Company is not currently  aware of any legal  proceedings or claims
         that the Company believes will have,  individually or in the aggregate,
         a  material  adverse  effect on the  Company's  financial  position  or
         results of operations.


         Video Home Shopping, Inc., a Tennessee Corporation

         In December  1996,  the  Company  was merged with Video Home  Shopping,
         Inc.,  a  Tennessee  corporation.  Subsequent  to the  merger,  the new
         management  of the Company  decided not to continue  with the  business
         operations of Video Home Shopping, Inc.

         The Company has recorded a $350,000  liability for loss  contingencies.
         This reserve was  established  because of a potential  liability of the
         Company to the Internal  Revenue Service (IRS).  Management  discovered
         from  reviewing  the 1996  financial  statements of Video Home Shopping
         Inc., a predecessor  to the Company,  of the nature of this  liability.
         The footnotes to those financial statements stated the following:

         "The Company has  outstanding  payroll  taxes  totaling $ 206,385 as of
         July  31,   1996.   The   outstanding   balance   consists  of  Federal
         Withholdings, Social Security and Medicare taxes and Unemployment taxes
         for the quarters ended  December 31, 1995,  March 31, 1996 and June 30,
         1996. The Company also did not make the necessary  payroll tax deposits
         for the month  ending July 31,  1996.  Management  believes the Company
         will be able to file and  remit the  outstanding  payroll  tax  returns
         during the current period.  As the Internal  Revenue  Service  assesses
         substantial  civil  penalties  and interest for the failure to file and
         remit  payroll  related  taxes,  the total  amount  due could  increase
         significantly..."

         Management  believes  that  these  Federal  Withholding  taxes,  Social
         Security and Medicare taxes,  employer's taxes, and other payroll taxes
         may not have been remitted to date;  however,  the Company has not been
         able to confirm whether payment was made.

                                     - 15 -
<PAGE>



                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                 March 31, 2001

6.       COMMITMENTS AND CONTINGENCIES (continued)

         Furthermore, in March 2000, the Company learned of an IRS investigation
         relating to the affairs of a former  principal  of Video Home  Shopping
         Inc. The Company learned of this investigation from its transfer agent,
         and has not been  contacted by the IRS.  Management of the Company has,
         however,  contacted the IRS for  information and has no indication that
         the   investigation   concerns   the  Company   directly.   Management,
         nevertheless, believes that said IRS investigation may relate, in part,
         to these unpaid Federal Withholding taxes, Social Security and Medicare
         taxes, employer's taxes, and other payroll taxes.

         While  management  views  that  any  liability  in this  regard  is the
         responsibility of the former principal of Video Home Shopping, Inc. and
         is not necessarily the liability of the Company,  out of prudence,  the
         Company has elected to provide a reserve of $350,000 to provide for the
         possibility  of such  liability to the IRS.  Management is currently in
         process of  determining  the course of further  action  regarding  this
         liability.  As of May 15,  2001,  the IRS has not  notified  Management
         regarding the status of the investigation.


         Going Concern Uncertainties

         The accompanying  financial statements have been prepared in conformity
         with  generally  accepted  accounting  principles,   which  contemplate
         continuation  of the Company as a going concern.  However,  the Company
         has experienced recurring operating losses and negative cash flows from
         operations.  The Company's  continued  existence is dependent  upon its
         ability to increase  operating  revenues and/or raise additional equity
         financing.

         In view of these matters,  management  believes that actions  presently
         being taken to expand the  Company's  operations  and to  continue  its
         web-site  development  activity provide the opportunity for the Company
         to  return  to   profitability.   The  continued   focus  on  strategic
         technological   investments  will  improve  the  Company's  cash  flow,
         profitability,  and ability to raise additional  capital so that it can
         meet its strategic objectives.

         Management is currently in the process of negotiating additional equity
         financing with  potential  investors.  The financial  statements do not
         include  any  adjustments  that might  result  from the outcome of this
         uncertainty.

                                     - 16 -
<PAGE>




                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                 March 31, 2001


7.       INTANGIBLE ASSETS

         Intangible assets at March 31, 2000 consist of the following:

                  Domain name                         $           24,000
                  Less: Accumulated amortization                 ( 7,670)
                                                      -------------------

                                                      $           16,330
                                                      ==================

         Amortization  expense for the three months ended March 31, 2001and 2000
         was $2,000 and $0,  respectively,  and for year ended December 31, 2000
         was $5,670.


8.       REGISTRATIONS STATEMENT

         The  Securities  and Exchange  Commission  issued a no further  comment
         letter on February 14, 2001, and the Company's Registration  Statement,
         Form SB-2,  was deemed  effective  as of that date.  This  Registration
         Statement,  Form SB-2,  pertains to the sale of 6,830,812 shares of its
         common stock, of which 3,755,828 shares are issued and outstanding, and
         3,074,984  shares are  issuable  upon  exercise  of  options  and other
         conversion  privileges to acquire common stock. The shares were issued,
         or are issuable upon  conversion or exercise of securities,  which were
         issued, by the Company in private placement transactions.

         The Company  will not receive any  proceeds  upon the sale of shares by
         the  Selling  Securityholders.  However,  this  registration  statement
         relates to the sale of up to  299,230  shares of the  Company's  common
         stock that may be issued in the event of the  exercise  of  outstanding
         options  held by  Selling  Securityholders.  If all such  options  were
         exercised, the Company would receive proceeds of $104,730.

9.       Major Customer

         All of the revenue for the three months ending March 31, 2001 were from
one customer.

                                     - 17 -

<PAGE>

                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                 March 31, 2001


10.      Subsequent Event

On May 6, 2001, the Company entered into an agreement and plan of reorganization
(the  "Agreement") with Branson  Holdings,  Inc.  ("Branson") to acquire all the
issued and outstanding  shares of Branson.  The Agreement  provides that all the
shareholders of Branson shall exchange all of the  outstanding  shares of common
stock  of  Branson,  constituting  a total  of  10,072  shares,  for a total  of
10,072,000  common  shares of VHSN and  Branson  shall  thereafter  operate as a
wholly-owned  subsidiary of VHSN. One of the conditions  precedent to closing is
that the  board  of  directors  of  VHSN,  must  prior  to the  issuance  of the
10,072,000 common shares,  authorize and effect a reverse stock split of 20 to 1
of the Company's total issued and  outstanding  shares to bring the total issued
and outstanding  shares of VHSN equal to 978,013 from 19,560,268.  On completion
of the transaction  and after giving effect to the issuance of 10,072,000  there
would be 11,050,013  common shares of VHSN  outstanding on a non-diluted  basis.
The  Agreement  further  provides that on closing the board of directors of VHSN
will be  reduced to 3 and 2  nominees  of Branson  will be added to make a total
number of  directors  of 5. The  Management  of the  Company  is  continuing  to
negotiate with Branson regarding this agreement, including the potential of a 20
for 1  reverse  stock  split.  The  financial  statements  do  not  include  any
adjustments that might result from the outcome of these negotiations.

                                     - 18 -

<PAGE>


Item 2. Management's  Discussion and Analysis or Plan of Operation.  General The
information  in this  section  should be read  together  with the  consolidated,
unaudited, interim financial statements that are included elsewhere in this Form
10-QSB.  VHSN's  goals and  objectives  are  centered on the ability to identify
technologies and market opportunities in the United States, Canada and abroad in
internet and interactive  media e-commerce and smartCARD loyalty  marketing.  To
achieve  its  goals,  VHSN is  developing  its  supplier  base and its web site,
www.china-emall.com,  so that it will be in a position to attract purchasing and
revenues.  It is at the same  time  investigating  companies  from  which it can
acquire  technology with proven financial  performance,  where joint ventures or
acquisitions may also be possible.
Results of Operations
Results of three months  ended March 31, 2001.  For the three months ended March
31, 2001 VHSN had  revenues of $146,884 and for the three months ended March 31,
2000,  VHSN had no revenues.  The gross  margin on sales was $18,975.  The three
months ended March 31, 2001 marked the commencement of revenues for VHSN. All of
the revenues  received came from one customer that were sourced from the website
but negotiated by local sales people. Management of VHSN anticipates that future
sales will be made to the same customer. Operating Expenses for the three months
ended March 31, 2001 were $102,340 compared with Operating  Expenses of $103,769
for the three months ended March 31, 2000.
Liquidity and Capital Resources
VHSN  achieved no revenues  from  operations  in the 2000 fiscal year.  Revenues
during the three months ended March 31, 2001 were  $146,884  with a gross margin
of $18,975.  The continued  existence and ability of VHSN to continue as a going
concern are dependent  upon its ability to increase  revenues and obtain capital
funding as required to fund its operations.
Changes in Financial Position
Total assets  increased to $251,511 on March 31, 2001 compared with total assets
of $241,117 on December 31, 2000.  The increase is due  primarily as a result of
acquiring inventory.  The inventory consists of patio furniture acquired through
Chinese suppliers.
Total  liabilities  increased to $838,326 on March 31, 2001  compared with total
liabilities  of $742,677 on December  31,  2000.  The increase is due to accrued
management fees to Groupmark.  Canada Limited The number of issued common shares
of VHSN was  19,560,268  on December  31, 2000 and  remained the same on May 11,
2001.  Shareholders'  equity decreased from ($501,560) to ($586,815)  during the
first three months of 2001.

                                     - 19 -
<PAGE>

                          PART II -- OTHER INFORMATION

Item 1. Legal Proceedings.
None.
Item 2.  Changes  in  Securities/Recent  Sales of  Unregistered  Securities.  On
October 19, 2000 VHSN issued an  aggregate of 25,000  common  shares to Patricia
Gajewski,  John O. Beicher and Philip C.  Anderson in partial  settlement  of an
outstanding debt.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
On May 6, 2001 VHSN entered into an agreement  and plan of  reorganization  (the
"Agreement") with Branson Holdings,  Inc.  ("Branson") to acquire all the issued
and  outstanding  shares  of  Branson.  The  Agreement  provides  that  all  the
shareholders  of Branson not dissenting  shall  exchange all of the  outstanding
shares of common stock of Branson  constituting  a total of 10,072  shares for a
total of 10,072,000  common shares of VHSN and Branson shall thereafter  operate
as a wholly-owned  subsidiary of VHSN.  Conditions  precedent to closing for the
benefit of VHSN are:
                                     - 20 -
<PAGE>

(i)  all the  warranties  and  representations  of  Branson  shall  be true  and
correct;

(ii) the  stockholders  of Branson  shall have  approved the  Agreement  and the
acquisition thereunder;

(iii)there  shall  not  be  any   litigation  to  restrain  or  invalidate   the
transactions   contemplated  in  the  Agreement  and  there  shall  not  be  any
governmental  proceeding,  claim or other  litigation  pending or  threatened to
restrain or  invalidate  the exchange,  or which,  if adversely  decided,  could
adversely affect VHSN;

(iv)Branson  shall  have  filed  all tax  returns  and  paid  or made  adequate
provision for the payment of all taxes, fees and assessments;

(v) VHSN  shall  have been given  opportunity  to review and copy tax  returns,
corporate minute book and all other corporate, business and financial records of
Branson; and

(vi) Branson and VHSN shall have exchanged all of the information, Schedules and
Exhibits referred to in the Agreement.  Conditions  precedent to closing for the
benefit of Branson are:
         (i) the Board of Directors of VHSN must  authorize and effect a reverse
stock split of 20 to 1 of VHSN's  total issued and  outstanding  shares to bring
the  total  issued  and  outstanding  shares  of  VHSN  equal  to  978,013  from
19,560,268;
         (ii) all the warranties and  representations  of VHSN shall be true and
correct;
         (iii) there shall not be any  litigation to restrain or invalidate  the
transactions   contemplated  in  the  Agreement  and  there  shall  not  be  any
governmental  proceeding,  claim or other  litigation  pending or  threatened to
restrain or  invalidate  the exchange,  or which,  if adversely  decided,  could
adversely affect Branson; and
         (iv) the shareholders  and/or the directors of VHSN shall have approved
the Agreement and the acquisition thereunder.

The  Agreement  further  provides that on closing the board of directors of VHSN
will be  reduced to 3 and 2  nominees  of Branson  will be added to make a total
number of directors of 5. The  Agreement  may be  terminated or abandoned at any
time prior to the Closing upon the following  conditions:
         (i) by mutual  consent of the Boards of  Directors of VHSN and Branson;
or
         (ii) by the Board of Directors of either VHSN or Branson if in the bona
fide  judgment of such Board there shall have been a material  violation  of any
covenant or agreement  set forth  herein;  or if any warranty or  representation
shall be untrue;  or such Board of Directors  should,  in its bona fide judgment
deem the  acquisition  inadvisable or impractical by reason of any defect which,
in the opinion of counsel for the company whose Board of Directors has made such
a  determination,  constitutes  a material part of its assets or there exists or
there is a threat of material  liability or obligation of such other company not
previously known at the time of this Agreement; or
         (iii)  by  election  of  either  party  in the  event  that  all of the
conditions  precedent  to closing  have not been  complied  with  within 90 days
following  the date hereof,  unless  extended by mutual  consent of the parties.
With respect to  consideration  of this transaction by the shareholders of VHSN,
VHSN shall comply with any and all  requirements of Section 14 of the Securities
Exchange  Act of 1934 as amended,  that are  applicable.  Item 6.  Exhibits  and
Reports on Form 8-K. (a) Exhibits None. 27.  Financial Data Schedule (b) Reports
on Form 8-K. None.

                                    - 21 -
<PAGE>


                                   SIGNATURES
                                   ----------

In accordance with the  requirements of the Exchange Act, the registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.
                                           VHS NETWORK, INC.
                                           (the "Registrant")

Date: May 18, 2001                         /s/ Elwin Cathcart
                                           ------------------
                                               Elwin Cathcart
                                               Chief Executive      Officer
                                               (principal   financial
                                               and accounting officer
                                               and  duly   authorized
                                               signing officer)
                                     - 22 -
<PAGE>