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 June 30, 2000

[  ]     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 incorporation                (IRS Employer
             or organization)                             Identification No.)

                          6705 Tomken Road, Unit 12-14
                          Mississauga, Ontario, Canada
                    (Address of principal executive offices)
                                 (905) 795-9139

                           (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: June 30, 2000, 18,980,260

<PAGE>

                         PART I -- FINANCIAL INFORMATION

Item 1. Financial Statements.

<PAGE>

                                VHS NETWORK, INC.
                        CONSOLIDATED FINANCIAL STATEMENTS

                                  June 30, 2000

<PAGE>

                                VHS NETWORK, INC.
                        Consolidated Financial Statements

                                  June 30, 2000

                                 C O N T E N T S




Balance Sheets                                                        1

Statements of Operations                                            2-3

Statements of Shareholders' Equity                                    4

Statements of Cash Flows                                              5

Notes to Financial Statements                                      6-16


<PAGE>

                                    VHS NETWORK, INC.

                               Consolidated Balance Sheets
                        As of June 30, 2000 and December 31, 1999
<TABLE>
<CAPTION>

                                                              June 30,     December 31,
                                                                2000          1999
                                                            -----------    -----------
                                                             (unaudited)

<S>                                                         <C>            <C>
ASSETS
    Current Assets
       Cash                                                 $   218,095    $       533
       Restricted Cash                                          400,000           --
       Inventory                                                559,997        559,997
                                                            -----------    -----------
          Total current assets                                1,178,092        560,530
                                                            -----------    -----------
    Property and Equipment
       Furniture and Equipment                                   18,940           --
       Accumulated Depreciation                                    (946)          --
                                                            -----------    -----------
                                                                 17,994           --

    Intangible assets, net                                    1,151,719           --

    Other Assets
       Other receivables                                         15,976           --
       Prepaids and Deposits                                     67,774         67,774
                                                            -----------    -----------
               Total assets                                 $ 2,431,555    $   628,304
                                                            ===========    ===========
LIABILITIES
    Accounts payable                                        $    52,431    $    64,867
    Accrued expenses                                               --           37,000
                                                            -----------    -----------
          Total current liabilities                              52,431        101,867
                                                            -----------    -----------
    Notes payable, related party                                707,432      1,645,868
    Reserve for loss contingencies                              350,000        350,000
                                                            -----------    -----------
                                                              1,057,432      1,995,868
                                                            -----------    -----------
            Total liabilities                                 1,109,863      2,097,735
                                                            -----------    -----------
SHAREHOLDERS' EQUITY
    Common stock: 100,000,000 shares authorized;
       18,980,260 and 10,929,435 issued and outstanding,
       respectively                                              18,979         10,929
    Preferred stock: 25,000,000 shares authorized;
       none issued or outstanding                                  --             --
    Additional paid-in-capital                                4,902,986      1,651,168
    Accumulated deficit                                      (3,600,273)    (3,131,528)
                                                            -----------    -----------

            Total shareholders' equity                        1,321,692     (1,469,431)
                                                            -----------    -----------

               Total liabilities and shareholders' equity   $ 2,431,555    $   628,304
                                                            ===========    ===========
</TABLE>


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


                                       1
<PAGE>

                                VHS NETWORK, INC.

                      Consolidated Statements of Operations
      for the three months and six months ended June 30, 2000 and 1999, and
                        the year ended December 31, 1999

                                                Three months     Six months
                                                   ended           ended
                                                  June 30,        June 30,
                                                    2000            2000
                                                ------------    ------------
                                                 (unaudited)    (unaudited)
Income:

       Sales                                    $       --      $       --
                                                ------------    ------------

Operating Expenses:
       Agency fees                                     3,850          42,529
       Consulting fees                                23,686          23,686
       General and administrative                     21,102          31,929
       Management fees                                75,000         120,000
       Professional fees                              93,658         101,701
       Office expense-China                           28,637          28,637
       Depreciation and amortization expense          30,004          30,477
       Non-recurring expense                          91,515          91,515
                                                ------------    ------------
             Total operating expenses                367,452         470,474
                                                ------------    ------------
Other (Income) and Expenses:
       Currency exchange (gain)/loss                    (902)           (155)
       Interest (income)                              (1,694)         (1,792)
       Interest expense                                  162             218
                                                ------------    ------------
             Total other (income) and expense         (2,434)         (1,729)
                                                ------------    ------------
                Net loss before taxes                365,018         468,745
                                                ------------    ------------
                Income taxes                            --              --
                                                ------------    ------------
                Net loss                        $    365,018    $    468,745
                                                ============    ============
Net loss per common share - Basic               $      0.020    $      0.031
                                                ============    ============
Weighted average number of
   common shares - Basic                          18,229,824      15,052,283
                                                ============    ============
Net loss per common share - Diluted             $      0.017    $      0.027
                                                ============    ============
Weighted average number of
       common shares - Diluted                    21,873,268      17,549,781
                                                ============    ============



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


                                       2
<PAGE>

                                VHS NETWORK, INC.

                      Consolidated Statements of Operations
      for the three months and six months ended June 30, 2000 and 1999, and
                  the year ended December 31, 1999 (continued)
<TABLE>
<CAPTION>

                                                Three months  Six months
                                                   ended         ended      Year ended
                                                  June 30,      June 30,    December 31,
                                                    1999         1999          1999
                                                -----------   -----------   -----------
<S>                                             <C>           <C>           <C>
Income:
       Sales                                    $      --     $      --     $      --
                                                -----------   -----------   -----------

Operating Expenses:
       Agency fees                                    3,140         3,940         9,190
       Consulting fees                                 --           2,087        52,833
       General and administrative                        88           465           686
       Management fees                              168,000       336,000       336,000
       Professional fees                               --            --          18,168
       Office expense-China                            --            --            --
       Depreciation and amortization expense           --            --            --
       Non-recurring expense                           --            --          37,000
                                                -----------   -----------   -----------
             Total operating expenses               171,228       342,492       453,877
                                                -----------   -----------   -----------
Other (Income) and Expenses:
       Currency exchange (gain)/loss                   --            --            --
       Interest (income)                               --            --            --
       Interest expense                                --            --            --
                                                -----------   -----------   -----------
             Total other (income) and expense          --            --            --
                                                -----------   -----------   -----------
                Net loss before taxes               171,228       342,492       453,877
                                                -----------   -----------   -----------
                Income taxes                           --            --            --
                                                -----------   -----------   -----------
                Net loss                        $   171,228   $   342,492   $   453,877
                                                ===========   ===========   ===========
Net loss per common share - Basic               $     0.016   $     0.033   $     0.044
                                                ===========   ===========   ===========
Weighted average number of
   common shares - Basic                         10,429,435    10,429,435    10,432,175
                                                ===========   ===========   ===========

Net loss per common share - Diluted             $     0.016   $     0.031   $     0.040
                                                ===========   ===========   ===========
Weighted average number of
       common shares - Diluted                   10,853,348    11,112,236    11,241,517
                                                ===========   ===========   ===========
</TABLE>



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


                                       3
<PAGE>

                                VHS NETWORK, INC.

                    Consolidated Statements of Shareholders'
          Equity for the six months ended June 30, 2000 (unaudited) and
                        the year ended December 31, 1999
<TABLE>
<CAPTION>

                                            Common                 Preferred        Additional
                                            Stock                    Stock          paid-in-     Accumulated
                                     Shares       Amount       Shares     Amount    capital       Deficit       Total
                                   -----------  ----------- ----------- ---------- -----------  ------------ ------------
<S>                                 <C>           <C>       <C>         <C>        <C>           <C>          <C>
 Balance December 31, 1998          10,429,435    $  10,429          -  $       -  $ 1,601,668  $ (2,677,651) $(1,065,554)
                                   -----------  ----------- ----------- ---------- -----------  ------------ ------------

 Common stock issued for
   services                            500,000          500          -          -       49,500            -       50,000

 Net loss for the period                    -            -           -          -           -       (453,877)    (453,877)
                                   -----------  ----------- ----------- ---------- -----------  ------------ ------------

 Balance December 31, 1999          10,929,435       10,929          -          -    1,651,168    (3,131,528)  (1,469,431)
                                   -----------  ----------- ----------- ---------- -----------  ------------ ------------

 Sale of common stock                2,083,333        2,083          -          -      947,917            -       950,000

 Conversion of note payables         2,500,000        2,500          -          -      863,368            -       865,868

 Common stock issued for
   services                              7,500            7          -          -          743            -           750

 Net loss for the period                    -            -           -          -           -       (103,727)    (103,727)
                                   -----------  ----------- ----------- ---------- -----------  ------------ ------------

 Balance  March 31, 2000           15,520,268        15,519          -          -    3,463,196    (3,235,255)     243,460
                                   -----------  ----------- ----------- ---------- -----------  ------------ ------------

 Sale of common stock                  550,000          550          -          -      109,450            -       110,000

 Acquisition of China
  e-mall Corp.                       2,100,000        2,100          -          -    1,179,150            -     1,181,250

 Acquisition of Exodus
  Acquisition Corp.                    500,000          500          -          -         (500)           -            -

 Conversion of debt into
  common stock                          10,000           10          -          -       21,990            -        22,000

 Common stock issued for
    services                            50,000           50          -          -       24,950            -        25,000

 Exercise of warrants                  250,000          250          -          -      104,750            -       105,000

 Net loss for the period                    -            -           -          -           -       (365,018)    (365,018)
                                   -----------  ----------- ----------- ---------- -----------  ------------ ------------

 Balance  June 30, 2000             18,980,268    $  18,979          -  $       -  $ 4,902,986  $ (3,600,273)$  1,321,692
                                   ===========  =========== =========== ========== ===========  ============ ============
</TABLE>


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


                                       4
<PAGE>


                                VHS NETWORK, INC.

                      Consolidated Statements of Cash Flows

                for the six months ended June 30, 2000 and 1999,
                      and the year ended December 31, 1999
<TABLE>
<CAPTION>

                                                      Six months    Six months
                                                        ended          ended        Year ended
                                                       June 30,       June 30,     December 31,
                                                         2000           1999           1999
                                                     -----------    -----------    -----------
                                                                (unaudited)

<S>                                                  <C>            <C>            <C>
    Net income (loss)                                $  (468,745)   $  (342,492)   $  (453,877)
    Depreciation and amortization                         30,477           --             --
                                                     -----------    -----------    -----------
                                                        (438,268)      (342,492)      (453,877)
Cash flow from operating activities:
    Changes in assets and liabilities
       Other receivables                             $   (15,976)        11,000    $    11,000
       Accounts payable                                  (12,436)           518         24,025
       Accrued expenses                                  (15,000)          --           37,000
                                                     -----------    -----------    -----------
         Cash flow generated by (used in)
           operating activities                      $  (481,680)   $  (330,974)   $  (381,852)
                                                     -----------    -----------    -----------
Cash flow from investing activities:
    Purchase of furniture and equipment              $   (18,940)   $      --      $      --
                                                     -----------    -----------    -----------
         Net cash generated by (used in)
           investing activities                      $   (18,940)   $      --      $      --
                                                     -----------    -----------    -----------
Cash flow from financing activities:
    Borrowings under notes payable - related party   $   145,000        314,194    $   314,194
    Payments on notes payable -related party            (217,568)          --             --
    Issuance of common stock for services                 25,750           --           50,000
    Proceeds from exercise of warrants                   105,000           --             --
    Proceeds from sale of common stock                 1,060,000           --             --
                                                     -----------    -----------    -----------
         Net cash generated by (used in)
           financing activities                      $ 1,118,182    $   314,194    $   364,194
                                                     -----------    -----------    -----------
         Net increase (decrease) in cash
           and cash equivalents                          617,562        (16,780)       (17,658)

         Balance at beginning of period                      533         18,191         18,191
                                                     -----------    -----------    -----------
         Balance at end of period                    $   618,095    $     1,411    $       533
                                                     ===========    ===========    ===========
Supplementary disclosure:

    Cash paid for interest                           $       218    $      --      $      --
                                                     -----------    -----------    -----------
    Cash paid for taxes                              $      --      $      --      $      --
                                                     -----------    -----------    -----------
    Conversion of  debt into common stock            $    22,000    $      --      $      --
                                                     -----------    -----------    -----------
    Conversion of notes payable -
       related party into common stock               $   865,868    $      --      $      --
                                                     -----------    -----------    -----------
    Common stock issued for acquisitions             $ 1,181,250    $      --      $      --
                                                     -----------    -----------    -----------
    Common stock issued for services                 $    25,750    $      --      $    50,000
                                                     -----------    -----------    -----------
</TABLE>

    The accompanying notes are an integral part of these financial statements


                                       5
<PAGE>




                                VHS NETWORK, INC.

                          Notes to Financial Statements

                                  June 30, 2000

1.       NATURE OF OPERATIONS

         Company History

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

         VHS Network,  Inc. (the  "Company")  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.  Pursuant to the reverse take-over, the
         sole  shareholder  of  VHS  Network  Inc.,  Groupmark  Canada  Limited,
         received  400,000  shares of the  Company's  common stock and a secured
         promissory note for US$500,000 and became the  controlling  shareholder
         of the Company. In 1998, the promissory note for $500,000 was converted
         into 5,000,000 common shares.

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



                                       6
<PAGE>



                                VHS NETWORK, INC.

                          Notes to Financial Statements

                                  June 30, 2000

1.       NATURE OF OPERATIONS (continued)

         Operations

         ----------

         During  1999,  the  Company has been  repositioning  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  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.



                                       7
<PAGE>



                                VHS NETWORK, INC.

                          Notes to Financial Statements

                                  June 30, 2000

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.

         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 June 30, 2000 and
         December 31, 1999 were $618,095 and $533, respectively.

         Restricted Cash

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

         Restricted  cash  consists  of funds  (certificate  of  deposit  with a
         financial   institution)   assigned   to   Groupmark   Canada   Limited
         ("Groupmark"),  a related party,  to reduce the liability to Groupmark.
         The funds will be released on July 5, 2000.

         Inventories

         -----------

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



                                       8
<PAGE>



                                VHS NETWORK, INC.

                          Notes to Financial Statements

                                  June 30, 2000

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         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.

         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.

         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.

         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.



                                       9
<PAGE>



                                VHS NETWORK, INC.

                          Notes to Financial Statements

                                  June 30, 2000

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         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 consists of net income
         and  unrealized   gains  (losses)  on  available  for  sale  marketable
         securities  and  is  presented  in  the   consolidated   statements  of
         shareholders'  equity and comprehensive  income.  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 Company does not have elements of comprehensive income
         for the three and six months ended June 30, 2000 and for the year ended
         December 31, 1999.

         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.

         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.



                                       10
<PAGE>



                                VHS NETWORK, INC.

                          Notes to Financial Statements

                                  June 30, 2000

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         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 and six month  period  ending June 30,
         2000 were  $1,159 and $1,159,  respectively.  The Company did not incur
         any advertising costs during the year ended December 31, 1999.

         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 did not have any derivative instruments or engage
         in hedging activities during the six month period ended June 30, 2000.

         Goodwill and Other Intangibles

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

         Intangible  assets are  recorded at cost.  Goodwill is  amortized  on a
         straight-line  basis over a period of 10 years.  Other  intangibles are
         amortized on a straight-line basis over a period of 10 years.



                                       11
<PAGE>



                                VHS NETWORK, INC.

                          Notes to Financial Statements

                                  June 30, 2000

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 Company  acquired  these sets of prints in exchange  for  1,399,992
         shares of its common stock  valued at  $559,997.  Starting in May 2000,
         the Company is offering  these prints for sale through its own web site
         and other Internet web sites.

4.       INCOME TAXES

         No  provision  for federal and state  taxes has been  recorded  for the
         three and six month  period  ending June 30, 2000 or for the year ended
         December 31, 1999,  since the Company incurred net operating losses for
         these periods.  Due to the  uncertainty  surrounding the realization of
         deferred  tax assets,  the Company has  recorded a valuation  allowance
         against its net deferred tax asset.

5.       STOCKHOLDERS' EQUITY

         Common Stock

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

         In December  1999,  the Company  commenced a private  placement  of its
         common  shares  under Rule 504 of  Regulation D  promulgated  under the
         Securities  Act of  1933  and  section  203  (t)  of  the  Pennsylvania
         Securities  Act of 1972.  As of June 30,  2000,  the  Company  has sold
         2,583,333 shares for $1,000,000, completing the full offering.

         On April 12, 2000,  the Company sold 550,000 shares of its common stock
         for $110,000,  which included warrants to purchase  1,225,000 shares of
         its common stock at exercise  prices  ranging from $0.35 to $0.95.  All
         warrants expire on or before 180 days from the date of issuance. On May
         3, 2000,  the Company  issued  250,000  shares of its common  stock for
         $105,000 pursuant to the excerise terms of the warrants.

         The Company  has issued  57,500  shares of its common  stock in lieu of
         cash payments for the settlement of liabilities  and services  rendered
         to the Company by various consultants.


                                       12
<PAGE>

6.       STOCK OPTIONS

         In 1997, the Company  granted stock options to two executive  officers.
         The  options  were  granted  at the fair  market  value of the stock as
         determined  by the Board of  Directors.  Stock  options were granted to
         purchase  750,000  common  shares at $0.30 per share.  The  options are
         immediately vested and expire on December 31, 2001.

         In 1998,  the Company  granted stock options to two executive  officers
         and a member of the board. The stock options were  non-qualified  stock
         options. The options were granted at the fair market value of the stock
         as determined by the Board of Directors.  Stock options were granted to
         purchase a total of  1,250,000  common  shares at $0.40 per share.  The
         options are immediately vested and expire on December 31, 2002.

7.       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.  The Company has incurred
         $145,000 in management fees during the six-month period ending June 30,
         2000.

         Amounts due Groupmark  pursuant to this management service agreement as
         of June 30, 2000 and December  31, 1999 are  $707,432  and  $1,645,868,
         respectively.  Groupmark has the option to accept payment by way of the
         Company's  common stock at fair market value in lieu of cash.  In March
         2000,  Groupmark  converted  $865,868  of the  amounts due it under the
         management  service  agreement into  2,500,000  shares of the Company's
         common stock.



                                       13
<PAGE>



                                VHS NETWORK, INC.

                          Notes to Financial Statements

                                  June 30, 2000

8.       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  merged  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. In consideration of the closure of Video Home
         Shopping,  Inc.,  the  Company  continues  to  maintain  a reserve  for
         potential loss contingencies from these operations of $350,000.

         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 raised additional capital,  $1,165,000 during the six months
         ended June 30, 2000,  and 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.



                                       14
<PAGE>



                                VHS NETWORK, INC.

                          Notes to Financial Statements

                                  June 30, 2000

9.       Acquisitions

         Acquisition of China eMall Corporation

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

         On April  12,  2000,  the  Company  completed  the  acquisition  of all
         outstanding  common  shares of China eMall  Corporation,  ("eMall")  an
         e-commerce  company,  through the issuance of  2,100,000  shares of the
         Company's common stock,  which had a market value of $1,181,250.  eMall
         has Preferred  Stock  outstanding  that is  convertible  into 4,015,000
         shares of the Company's  common stock.  The Company has a 100% interest
         in the voting  stock of China eMall  because of this  transaction.  The
         Preferred Stock of eMall is non-voting,  and it is convertible into the
         Company's  common  stock  at the  discretion  of the  holders  of eMall
         Preferred  Stock.  The eMall  Preferred  Stock can be  redeemed  by the
         Company at the  earlier  of:  (a) three  years from the date on which a
         registration  statement  for the Common  shares of the Company is filed
         with the  Securities  and  Exchange  Commission  in the US; or (b) five
         years  from  the  date of  issue,  (April  12,  2000).  The  historical
         operations of eMall before the date of the acquisition were deminimis.

         The  transaction has been accounted for as a purchase and, the purchase
         price has been allocated to the intangible  assets acquired,  including
         domain-name,  acquired work-force, and goodwill. The purchase price was
         allocated as follows:

            Intangible assets

                  Domain name                         $   75,000
                  Workforce                               25,000
                  Goodwill                             1,081,250
                                                       ---------

                  Total                               $1,181,250
                                                       ---------

         The  intangible   assets  are  being  amortized  over  10  years  on  a
         straight-line basis.

         Acquisition of Exodus Acquisition Corporation

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

         In May 2000, the Company merged with Exodus Acquisition Corporation,  a
         California corporation,  and a fully reporting company under regulation
         12(g) of the  Securities  Exchange Act of 1934.  Exodus has no material
         assets or  liabilities.  Under  terms of the  acquisition,  The Company
         issued  500,000  shares  of the  Company's  common  stock  for  all the
         outstanding shares of Exodus Acquisition  Corporation.  The acquisition
         was accounted for using the pooling method of  accounting.  To conclude
         this transaction,  the Company incurred $90,070 in acquisition  related
         expenses.  The  historical  operations  of  Exodus  before  the date of
         acquisition were deminimis.



                                       15
<PAGE>

                                VHS NETWORK, INC.

                          Notes to Financial Statements

                                  June 30, 2000


10.      Intangible Assets

         Intangible assets at June 30, 2000 consist of the following:

                  Domain name                         $   75,000
                  Workforce                               25,000
                  Goodwill                             1,081,250
                                                        -----------
                                                      $1,181,250

                  Less: Accumulated amortization        (29,531)
                                                     -----------
                                                      $1,151,719

         Amortization  expense for the three and six months ending June 30, 2000
         was $29,531 and $29,531, respectively.

11.      Subsequent Events

         On July 10, 2000,  the Company  filed a  Registration  Statement,  Form
         SB-2,  pertaining to the sale of 10,365,834 shares of its common stock,
         of which  4,392,500  shares are issued and  outstanding,  and 5,973,334
         shares are  issuable  upon  exercise  of  options,  warrants  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
         Securities   and  Exchange   Commission  is  currently   reviewing  the
         Registration Statement filing.


                                       16
<PAGE>


Item 2. Management's Discussion and Analysis or Plan of Operation.

Summary

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.

Through  the  recent  acquisition  of China  eMall  Corporation  and  successful
financings  in the first five months of 2000,  the  Registrant  is continuing to
position itself to identify market opportunities in the United States and Canada
in Internet e-commerce and smartCARD loyalty marketing.

The  Registrant'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.  The
Registrant  is committed  to becoming a well  diversified,  globally  integrated
e-commerce  based solutions  provider.  To achieve its goals,  the Registrant is
identifying  prospective  companies  from which it can  acquire  technology  and
proven financial performance through acquisitions or joint ventures.

Results of Operations

Results of three months ended June 30, 2000. Revenues for the three months ended
June 30, 2000 were $0.  Operating  Expenses  for the three months ended June 30,
2000 were $367,452 and Operating Expenses for the six months ended June 30, 2000
were  $470,474.  During the six months ended June 30, 2000 the  Registrant had a
non-recurring   expense  related  to  the  acquisition  of  Exodus   Acquisition
Corporation of $90,000. During the six months ended June 30, 2000 the Registrant
also incurred an expense of $28,637 for the China eMall office expense.

Results of three months ended June 30, 1999. Revenues for the three months ended
June 30, 1999 were $0.  Operating  Expenses  for the three months ended June 30,
1999 were $171,228 and Operating Expenses for the six months ended June 30, 1999
were $342,492.

Liquidity and Capital Resources

The  Registrant  achieved no revenues from  operations in either the 1999 fiscal
year or during the three months ended June 30, 2000. During the six months ended
June 30, 2000 the Registrant  received an aggregate of approximately  $1,165,000
from  investors  through the sale of common  shares made  pursuant to  offerings
exempt from registration including the exercise of outstanding warrants.

                                       17
<PAGE>

Revenues  are  projected  to  commence  during the  current  fiscal  year ending
December  31,  2000.  Changes in Financial  Position  Total assets  increased to
$2,431,555  on June 30, 2000  compared with total assets of $628,304 on December
31,  1999.  This  increase in total assets is largely due to an increase in cash
and restricted cash from $533 on December 31, 1999 to $618,095 on June 30, 2000.
During the six month period ended June 30, 2000 the Registrant raised additional
capital  of  $1,165,000   which  accounted  for  the  increase  in  cash.  Total
liabilities  decreased  to  $1,109,863  on June 30,  2000  compared  with  total
liabilities  of $2,097,735 on December 31, 1999.  The decrease in liabilities is
largely due to the decrease in the note payable to Groupmark Canada Limited from
$1,645,868  on December  31, 1999 to  $707,432 on June 30,  2000.  The number of
issued common shares of the Registrant increased from 10,929,435 on December 31,
1999 to  18,980,260  on June  30,  2000.  Shareholders'  equity  increased  from
($1,469,431) to $1,321,692 during the first six months of 2000.

                          PART II -- OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 2. Changes in Securities/Recent Sales of Unregistered Securities.

On April 12, 2000 pursuant to a share exchange  agreement for the acquisition of
China eMall  Corporation,  the  Registrant  issued  2,100,000  common shares and
further allotted 4,015,000 common shares for issuance on exchange of the Class B
Special Shares of China eMall for common shares of the  Registrant.  The holders
of the Class B Special  Shares can  exchange any or all of their Class B Special
Shares for common  shares of the  Registrant  at any time however if any Class B
Special Shares remain issued and outstanding after the expiration of the earlier
of (A) three years from the date on which a Form SB-2 or similar filing has been
filed with the SEC with respect to the common shares of the  Registrant  and the
SEC has reach a position of no further  comment,  and (B) five years after which
such  Exchangeable  Shares were issued,  then China eMall Corporation may redeem
the Class B Special  Shares on payment of one common share of the Registrant for
each Class B Special  Share.  The 2,100,000  shares were issued in reliance upon
the exemption from registration under Regulation S as follows:

Purchaser                                          Number of Shares
---------                                          ----------------
Gang Chai                                               350,000
Qin Lu Chai                                             350,000
Qing Wang                                               350,000
Tai Xue Shi                                             350,000
Forte Management Corp.                                  700,000

                                       18
<PAGE>

The 4,015,000 Class B Special Shares were issued as follows:

Purchaser                                          Number of Shares
---------                                          ----------------
Gang Chai                                               698,502
Qin Lu Chai                                             698,498
Qing Wang                                               672,000
Tai Xue Shi                                             672,000
Charles He                                             1,274,000


In April,  2000 the Registrant  issued 50,000 common shares to Alexander Stewart
for the  provision of legal  services.  The shares were valued at $0.50 and were
issued in reliance upon the exemption from registration under Regulation S.

In  April,  2000  the  Registrant  completed  a  private  placement  with  Forte
Management Corp. a non-US investor  operating  outside the United States for the
issuance of 550,000  common shares and  1,225,000  share  purchase  warrants for
proceeds of $110,000.  The warrants  have the  following  expirations  dates and
exercise prices.

     Number of Warrants       Expiration Date               Exercise Price
     ------------------       ---------------               --------------
          400,000              June 12, 2000                     $0.35
          500,000              July 11, 2000                     $0.50
           200,00              August 10, 2000                   $0.60
          125,000              October 9, 2000                   $0.95

As of the date hereof  250,000  warrants  have been  exercised  for  proceeds of
$105,000 to the Registrant.

On May 6, 2000 the Registrant  acquired all the issued and outstanding shares of
Exodus   Acquisition   Corporation   pursuant  to  an   Agreement   of  Plan  of
Reorganization  wherein the shareholders of Exodus, BAC Consulting  Corporation,
received 500,000 common shares of the Registrant. The Registrant relied upon the
exemption from registration  under Rule 145 promulgated under the Securities Act
of 1933, as amended.

                                       19
<PAGE>

During this second  quarter the  registrant  also issued 10,000 common shares to
David Johnston in settlement of 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.

None.

Item 6. Exhibits and Reports on Form 8-K.

(a)      Exhibits

         27. Financial Data Schedule

(b)      Reports on Form 8-K.

     On May 15, 2000, May 16, 2000 and June 20, 2000, the Registrant filed Forms
     8-K, 8-K/A and 8-K/A,  respectively,  reporting the  acquisition of all the
     issued and  outstanding  common  shares of Exodus  Acquisition  Corporation
     ("Exodus").  Upon  effectiveness  of  the  acquisition,  pursuant  to  rule
     12g-3(a)  of the  General  Rules  and  Regulations  of the  Securities  and
     Exchange  Commission,  the Registrant became the successor issuer to Exodus
     for reporting  purposes  under the Securities and Exchange Act of 1934 (the
     "Act") and elected to report  under the Act  effective  May 12,  2000.  The
     Registrant filed audited  financial  statements for the year ended December
     31, 1999 and  unaudited  financial  statements  for the three  months ended
     March 31, 2000.

                                   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: August 14, 2000         By: /s/ Elwin Cathcart
---------------------         ----------------------
                              Elwin Cathcart, Chief Executive Officer
                              (principal financial and accounting officer and
                              duly authorized signing officer)