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 September 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                       (IRS Employer
    incorporation or organization)                      Identification No.)


                               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: October 17, 2000, 19,535,268

<PAGE>

                         PART I -- FINANCIAL INFORMATION

Item 1. Financial Statements.

                                VHS NETWORK, INC.

                        Consolidated Financial Statements

                               September 30, 2000

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


Balance Sheets                                                      F-1

Statements of Operations                                         F-2 - F-3

Statements of Shareholders' Equity                                  F-4

Statements of Cash Flows                                            F-5

Notes to Financial Statements                                    F-6 - F-16

<PAGE>

                                VHS NETWORK, INC.

                           Consolidated Balance Sheets
                 As of September 30, 2000 and December 31, 1999


                                                    September 30,   December 31,
                                                        2000            1999
                                                    -----------      -----------
                                                     (unaudited)
 ASSETS

     Current Assets

       Cash                                         $    65,124      $       533
       Inventory                                        139,999          139,999
                                                    -----------      -----------

          Total current assets                          205,123          140,532
                                                    -----------      -----------

    Property and Equipment

       Furniture and Equipment                           18,940             --
       Accumulated Depreciation                          (1,419)            --
                                                    -----------      -----------
                                                                          17,521

    Intangible assets, net                            1,001,103             --

    Other Assets

       Other receivables                                 11,717             --
       Prepaids and deposits                             67,774           67,774
                                                    -----------      -----------


               Total assets                         $ 1,303,238      $   208,306
                                                    ===========      ===========


LIABILITIES

    Accounts payable                                $    51,916      $    64,867
    Salaries and wages payable - officers                  --             71,500
    Accrued expenses                                       --             37,000
                                                    -----------      -----------

          Total current liabilities                      51,916          173,367
                                                    -----------      -----------

    Notes payable, related party                        257,027        1,645,868
    Reserve for loss contingencies                      350,000          350,000
                                                    -----------      -----------

                                                        607,027        1,995,868
                                                    -----------      -----------

            Total liabilities                           658,943        2,169,235
                                                    -----------      -----------

 SHAREHOLDERS' EQUITY
     Common stock: 100,000,000
        shares authorized;
        19,535,268 and 10,929,435
    issued and outstanding,
    respectively                                         19,534          10,929
 Preferred stock: 25,000,000
    shares authorized;
    none issued or outstanding                             --              --
 Additional paid-in-capital                           4,678,933       1,231,170
 Accumulated deficit                                 (4,054,172)     (3,203,028)
                                                    -----------     -----------

Total shareholders' equity                              644,295      (1,960,929)
                                                    -----------     -----------

Total liabilities and shareholders' equity          $ 1,303,238     $   208,306
                                                    ===========     ===========


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

                                       F-1

<PAGE>

                                VHS NETWORK, INC.

                      Consolidated Statements of Operations for the three months
   and nine months ended September 30, 2000 and 1999, and

                        the year ended December 31, 1999

                                                    Three months    Nine months
                                                      ended           ended
                                                    September 30,  September 30,
                                                       2000             2000
                                                   ------------    ------------
                                                   (unaudited)      (unaudited)
Income:
       Sales                                       $       --      $       --
                                                   ------------    ------------

 Operating Expenses:
       Agency fees                                        2,861          45,390
       Consulting fees                                   12,815          36,501
       General and administrative                           725          32,654
       Management fees                                   75,000         220,000
       Professional fees                                 10,876          87,577
       Office expense-China                              10,380          39,017
       Amortization of intangible assets                 98,439         180,147
       Depreciation and amortization expense                473           1,419
       Non-recurring expense                               --           216,515
                                                   ------------    ------------

             Total operating expenses                   211,569         859,220
                                                   ------------    ------------

Other (Income) and Expenses:
       Currency exchange (gain)/loss                      1,090             935
       Interest (income)                                 (7,724)         (9,516)
       Interest expense                                     287             505
                                                   ------------    ------------

        Total other (income) and expense                 (6,347)         (8,076)
                                                   ------------    ------------

           Net loss before taxes                        205,222         851,144
                                                   ------------    ------------

           Income taxes                                    --              --
                                                   ------------    ------------

           Net loss                                $    205,222    $    851,144
                                                   ============    ============

Net loss per common share - Basic                  $      0.011    $      0.052
                                                   ============    ============

Weighted average number of
   common shares - Basic                             19,438,747      16,526,242
                                                   ============    ============

Net loss per common share - Diluted                $      0.009    $      0.043
                                                   ============    ============

Weighted average number of
       common shares - Diluted                       23,550,268      19,693,755
                                                   ============    ============



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

                                       F-2
<PAGE>

<TABLE>
<CAPTION>

                                VHS NETWORK, INC.

                      Consolidated Statements of Operations
          for the three months and nine months ended September 30, 2000
                 and 1999, and the year ended December 31, 1999
                                   (continued)

                                                      Three months         Nine months
                                                         ended               ended                Year ended
                                                     September 30,        September 30,           December 31,
                                                           1999               1999                    1999
                                                       -----------          -----------          -----------
                                                     (unaudited)          (unaudited)
<S>                                                    <C>                  <C>                  <C>
 Income:
       Sales                                           $      --            $      --            $      --
                                                       -----------          -----------          -----------

Operating Expenses:
       Agency fees                                           5,250                9,190                9,190
       Salaries and wages payable - officers                  --                   --                 71,500
       Consulting fees                                       2,418                4,505               52,833
       General and administrative                              159                  624                  686
       Management fees                                        --                336,000              336,000
       Professional fees                                    18,168               18,168               18,168
       Office expense-China                                   --                   --                   --
       Depreciation and amortization expense                  --                   --                   --
       Non-recurring expense                                  --                   --                 37,000
                                                       -----------          -----------          -----------

             Total operating expenses                       25,995              368,487              525,377
                                                       -----------          -----------          -----------

Other (Income) and Expenses:
       Currency exchange (gain)/loss                          --                   --                   --
       Interest (income)                                      --                   --                   --
       Interest expense                                       --                   --                   --
                                                       -----------          -----------          -----------

             Total other (income) and expense                 --                   --                   --
                                                       -----------          -----------          -----------

                Net loss before taxes                       25,995              368,487              525,377
                                                       -----------          -----------          -----------

                Income taxes                                  --                   --                   --
                                                       -----------          -----------          -----------

                Net loss                               $    25,995          $   368,487          $   525,377
                                                       ===========          ===========          ===========

Net loss per common share - Basic                      $     0.002          $     0.035          $     0.050
                                                       ===========          ===========          ===========

Weighted average number of
   common shares - Basic                                10,429,435           10,429,435           10,432,175
                                                       ===========          ===========          ===========

Net loss per common share - Diluted                    $     0.002          $     0.034          $     0.048
                                                       ===========          ===========          ===========

Weighted average number of
       common shares - Diluted                          10,984,435           10,885,357           10,864,380
                                                       ===========          ===========          ===========
</TABLE>

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

                                       F-3

<PAGE>

<TABLE>
<CAPTION>

                                VHS NETWORK, INC.

                 Consolidated Statements of Shareholders' Equity
            for the nine months ended September 30, 2000 (unaudited)
                      and the year ended December 31, 1999





                                         Common                 Preferred         Additional    Accumulated
                                         Stock                    Stock         paid-in-capital    Deficit      Total
                              --------------------------   -------------------   -----------    -----------  -----------
                                Shares       Amount        Shares       Amount

<S>                            <C>          <C>            <C>       <C>        <C>           <C>            <C>
Balance December 31, 1998      10,429,435   $    10,429      --      $   --     $ 1,181,670   $(2,677,651)   $(1,485,552)
                              -----------   -----------      --      --------   -----------   -----------    -----------

Common stock issued

  for services                    500,000           500      --          --          49,500          --           50,000

Net loss for the period              --            --        --          --            --        (525,377)      (525,377)
                              -----------   -----------      --      --------   -----------   -----------    -----------

Balance December 31, 1999      10,929,435        10,929      --          --       1,231,170    (3,203,028)    (1,960,929)
                              -----------   -----------      --      --------   -----------   -----------    -----------

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      --          --       3,043,198    (3,306,755)      (248,038)
                              -----------   -----------      --      --------   -----------   -----------    -----------

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              500,000           500      --          --         124,500          --          125,000

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              --            --        --          --            --        (542,195)      (542,195)
                              -----------   -----------      --      --------   -----------   -----------    -----------

Balance  June 30, 2000         18,980,268        18,979      --          --       4,607,988    (3,848,950)       778,017
                              -----------   -----------      --      --------   -----------   -----------    -----------

Common stock issued

  for compensation                555,000           555      --          --          70,945          --           71,500

Net loss for the period              --            --        --          --            --        (205,222)      (205,222)
                              -----------   -----------      --      --------   -----------   -----------    -----------

Balance September 30, 2000     19,535,268   $    19,534      --      $   --     $ 4,678,933   $(4,054,172)   $   644,295
                              ===========   ===========      ==      ========   ===========   ===========    ===========

</TABLE>

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

                                       F-4

                                      VHS NETWORK, INC.

                      Consolidated Statements of Cash Flows
              for the six months ended September 30, 2000 and 1999,
                      and the year ended December 31, 1999
<TABLE>
<CAPTION>

                                                      Nine months     Nine months
                                                         ended           ended        Year ended
                                                      September 30,   September 30,  December 31,
                                                          2000            1999          1999
                                                     --------------  -------------- --------------
                                                      (unaudited)     (unaudited)

<S>                                                 <C>               <C>            <C>
    Net income (loss)                               $  (851,144)      $  (368,487)   $  (525,377)
    Common stock issued for services                     25,750              --           50,000
    Acquisition of Exodus Corporation                   125,000              --             --
    Amortization of intangible assets                   180,147              --             --
    Depreciation and amortization                         1,419              --             --
                                                    -----------       -----------    -----------

                                                       (518,828)         (368,487)      (475,377)


Cash flow from operating activities:
    Changes in assets and liabilities
      Other receivables                             $   (11,717)           11,000    $    11,000
      Accounts payable                                  (12,951)           25,243         24,025
      Salaries and wages payable - officers                --                --           71,500
      Accrued expenses                                  (37,000)             --           37,000
                                                    -----------       -----------    -----------

         Cash flow generated by (used in)
          operating activities                         (580,496)      $  (332,244)   $  (331,852)
                                                    -----------       -----------    -----------

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                        $   220,000           314,194    $   314,194
    Payments on notes

     payable -related party                            (720,973)             --             --
    Proceeds from exercise of warrants                  105,000              --             --
    Proceeds from sale of common stock                1,060,000              --             --
                                                    -----------       -----------    -----------

         Net cash generated by (used in)
          financing activities                          664,027       $   314,194    $   314,194
                                                    -----------       -----------    -----------

         Net increase (decrease) in cash
          and cash equivalents                           64,591           (18,050)       (17,658)

         Balance at beginning of period                     533            18,191         18,191
                                                    -----------       -----------    -----------

         Balance at end of period                   $    65,124       $       141    $       533
                                                    ===========       ===========    ===========


Supplementary disclosure:

    Cash paid for interest                          $       505       $      --      $      --
                                                    -----------       -----------    -----------

    Cash paid for taxes                             $      --         $      --      $      --
                                                    -----------       -----------    -----------

    Conversion of payables into common stock        $    93,500       $      --      $      --
                                                    -----------       -----------    -----------

    Conversion of notes payable - related
     party into common stock                        $   865,868       $      --      $      --
                                                    -----------       -----------    -----------

    Common stock issued for acquisitions            $ 1,306,250       $      --      $      --
                                                    -----------       -----------    -----------

    Common stock issued for services                $    25,750       $      --      $    50,000
                                                    -----------       -----------    -----------
</TABLE>

    The accompanying notes are an integral part of these financial statements

                                       F-5

<PAGE>

                                VHS NETWORK, INC.

                          Notes to Financial Statements

                               September 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.

                                       F-6

<PAGE>

                                VHS NETWORK, INC.

                          Notes to Financial Statements

                               September 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.

                                       F-7

<PAGE>

                                VHS NETWORK, INC.

                          Notes to Financial Statements

                               September 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 September 30, 2000
         and December 31, 1999 were $65,124 and $533, respectively.

         Inventories

         -----------

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

                                       F-8

<PAGE>

                                VHS NETWORK, INC.

                          Notes to Financial Statements

                               September 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.

                                       F-9

<PAGE>

                                VHS NETWORK, INC.

                          Notes to Financial Statements

                               September 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 nine months ended September 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.

                                      F-10

<PAGE>

                                VHS NETWORK, INC.

                          Notes to Financial Statements

                               September 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 nine month period ending September
         30, 2000 were  $44,231 and $45,390,  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 nine  month
         period ended September 30, 2000.

         Goodwill and Other Intangibles

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

         Intangible  assets are recorded at cost.  Goodwill  associated with the
         purchase of China eMall is  amortized on a  straight-line  basis over a
         period of 3 years.

                                      F-11

<PAGE>

                                VHS NETWORK, INC.

                          Notes to Financial Statements

                               September 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
         lithograph  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
         have evaluated the market value of the prints and  determined  that the
         market value of the prints is not below their  acquisition.  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.

4.       INCOME TAXES

         No  provision  for federal and state  taxes has been  recorded  for the
         three and nine month period  ending  September 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 September 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 exercise terms of the warrants.

                                      F-12

<PAGE>

                                VHS NETWORK, INC.

                          Notes to Financial Statements

                               September 30, 2000

         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.

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
         $220,000  in  management  fees  during  the  nine-month  period  ending
         September 30, 2000.

         Amounts due Groupmark  pursuant to this management service agreement as
         of  September   30,  2000  and  December  31,  1999  are  $257,027  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.

                                      F-13

<PAGE>

                                VHS NETWORK, INC.

                          Notes to Financial Statements

                               September 30, 2000

         Transactions with Corporate Officers and Directors

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


         On October 13, 1999 the Board of Directors approved issuance of 370,000
         and 185,000 shares of the Company's common stock to the Chief Executive
         Officer and Chief Financial Officer, respectively. The grants of common
         stock were made in lieu of cash compensation. The total market value of
         the common  stock on the date of grant was  $71,500.  The  shares  were
         issued to these two individuals in July 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.

         The loss reserve is primarily for payroll tax  liabilities  incurred by
         Video Home  Shopping,  Inc.  before its merger VHS  Network,  Inc.  The
         Company may be contingently  liable for amounts  withheld by Video Home
         Shopping,  Inc. from employees' wages for income taxes,  which were not
         remunerated to the Internal Revenue Service.

         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.

                                      F-14

<PAGE>

                                VHS NETWORK, INC.

                          Notes to Financial Statements

                               September 30, 2000

         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.

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
                                              ---------
                                      F-15

<PAGE>

                                VHS NETWORK, INC.

                          Notes to Financial Statements

                               September 30, 2000

         The  intangible   assets  are  being   amortized  over  3  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,  (having a market
         value of $125,000) for all the outstanding shares of Exodus Acquisition
         Corporation.  The  acquisition  was  accounted  for using the  purchase
         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.

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        (180,147)
                                                       ---------
                                                      $1,001,103

         Amortization expense for the three and nine months ending September 30,
         2000 was $98,439 and $180,147, respectively.

11.      Registration Statement

         On  October  26,  2000,  the  Company  filed  an  amended  Registration
         Statement, Form SB-2, pertaining to the sale of 9,657,000 shares of its
         common stock, of which 4,392,500 shares are issued and outstanding, and
         5,265,000  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.

                                      F-16

<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  September  30, 2000.  For the three months ended
September 30, 2000 and the three months ended  September  30, 1999,  VHSN had no
revenues.  Operating Expenses for the three months ended September 30, 2000 were
$211,569 compared with Operating  Expenses of $25,995 for the three months ended
September 30, 1999.  The  difference  in Operating  Expenses is attributed to an
increase in consulting fees,  management fees and the China office expense.  The
increase  in  Operation  Expenses  also  includes  an amount of $98,439  for the
amortization of intangible assets. In August, 2000, VHSN and G.C. Consulting and
Investment  Corp.  decided that it was in VHSN's best  interest to terminate the
consulting  agreement  which  provided for the services of Dr. Gang Chai. It was
determined  that the services of Dr. Chai were not required on a full time basis
however the parties agreed that an  arrangement  would be made to compensate Dr.
Chai for his services that may be required  from time to time by VHSN.  Dr. Gang
remains a director of VHSN.

Results of nine months  ended  September  30,  2000.  For the nine months  ended
September  30, 2000 and the nine months ended  September  30, 1999,  VHSN had no
revenues.  Operating  Expenses for the nine months ended September 30, 2000 were
$859,220 compared with Operating  Expenses of $368,487 for the nine months ended
September  30,  1999.  During  the nine  months  ended  September  30,  1999 the
Operating  Expenses  were mainly  composed of  management  fees of $336,000 that

<PAGE>

accrued  under the  management  agreement  with  Groupmark  Canada  Limited (the
"Management  Agreement").  During  the nine  months  ended  September  30,  2000
management  fees under the Management  Agreement  decreased to $220,000  however
consulting  fees,  general  and  administrative   expenses,   professional  fees
increased.  Operating Expenses for the nine months ended September 30, 2000 also
included China office expenses of $39,017,  amortization of intangible assets of
$180,147  and  a  non-recurring  expense  of  $216,515.

Liquidity  and  Capital

Resources  VHSN achieved no revenues  from  operations in either the 1999 fiscal
year or during the nine months ended September 30, 2000.  During the nine months
ended June 30, 2000 VHSN 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.

The  continued  existence and ability of VHSN to continue as a going concern are
dependent upon its ability to obtain revenues and capital funding as required to
fund its  operations.

Revenues  are  projected  to  commence  during the  current  fiscal  year ending
December 31, 2000.

Changes in Financial Position

Total assets  increased to  $1,303,238 on September 30, 2000 compared with total
assets of  $208,306 on  December  31,  1999.  This  increase in total  assets is
largely due to net  intangible  assets of  $1,001,103  on  September  30,  2000.
Intangible  assets of  $1,181,250  were  acquired on April 12, 2000  through the
acquisition  of all the  issued and  outstanding  common  shares of China  eMall
Corporation  which  was  accounted  for as a  purchase.  The  intangible  assets
acquired included goodwill of $1,081,250.

Total  liabilities  decreased to $658,943 on September  30, 2000  compared  with
total   liabilities  of  $2,169,235  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 $257,027 on September 30,
2000. During the nine months ended September 30, 2000 Groupmark accrued $220,000
in management fees. Groupmark converted $865,868 of the amounts due it under the
Management  Agreement into 2,500,000 shares of VHSN in March,  2000 and received
$720,973 in cash during the nine months ended  September 30, 2000.

The number of issued common shares of VHSN increased from 10,929,435 on December
31, 1999 to  19,535,268 on September 30, 2000.  Shareholders'  equity  increased
from  ($1,960,929)  to  $644,295  during  the first  nine  months of 2000.  This
increase  in  shareholders'  equity in largely due to net  intangible  assets of
$1,001,103  and  the  decrease  in the  amount  owing  to  Groupmark  under  the
Management Agreement.

<PAGE>

                          PART II -- OTHER INFORMATION

Item 1. Legal Proceedings.

None.

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

On July 11, 2000 the Registrant  issued 370,000 common shares to Elwin Cathcart,
Chief Financial  Officer and a director of the Registrant  185,000 common shares
to David Smelskey, a director and officer of the Registrant, in lieu of salary.

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.

        None.


                                   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: November 20, 2000              By: /s/ Elwin Cathcart
-----------------------              ----------------------
                                     Elwin Cathcart
                                     Chief Executive Officer
                                     (principal financial and
                                     accounting officer and duly authorized
                                     signing officer)