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, 2001

[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

         For the transition period from _________________ to _________________

                        Commission file number 333-42162

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

         FLORIDA                                                 65-0656668
         -------                                                 ----------
(State or other  jurisdiction of                                (IRS Employer
  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:
                     Carbonaro Stewart Kligerman Sugar, LLP
                           390 Bay Street, Suite 1600,
                            Toronto, Ontario, Canada
                               Tel: (416) 368-2500
                               Fax: (416) 368-0909

                      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 13, 2001 19,560,268

<PAGE>

                         PART I -- FINANCIAL INFORMATION

Item 1.  Financial Statements.




                                VHS NETWORK, INC.

                                  CONSOLIDATED
                              FINANCIAL STATEMENTS

               For the three and six months ended June 30, 2001,
                      and the year ended December 31, 2000



<PAGE>


 Consolidated Balance Sheets........................................2

 Consolidated Statements of Operations............................3-4

 Consolidated Statements of Shareholders' Equity....................5

 Consolidated Statements of Cash Flows............................6-7

 Notes to Financial Statements...................................8-19


<PAGE>

                                 VHS NETWORK, INC.

                            Consolidated Balance Sheets
                     As of June 30, 2001 and December 31, 2000
<TABLE>
<CAPTION>
                                                              June 30,     December 31,
                                                                2001           2000
                                                            -----------    -----------
                                                            (unaudited)
<S>                                                         <C>            <C>
ASSETS
    Current Assets
       Cash                                                 $    18,644    $    25,205
       Inventory                                                111,999        111,999
                                                            -----------    -----------

          Total current assets                                  130,643        137,204

    Property and Equipment
       Furniture and Equipment                                   18,940         18,940
       Accumulated Depreciation                                  (5,048)        (1,892)
                                                            -----------    -----------

          Total property and equipment                           13,892         17,048

    Intangible assets, net                                       14,330         18,330

    Other Assets
       Other receivables                                          1,626            761
       Prepaids and deposits                                     67,774         67,774
                                                            -----------    -----------

          Total other assets                                     69,400         68,535
                                                            -----------    -----------

               Total assets                                 $   228,265    $   241,117
                                                            ===========    ===========

LIABILITIES
    Current Liabilities
       Accounts payable                                     $    50,006    $    60,650
                                                            -----------    -----------

          Total current liabilities                              50,006         60,650

    Long Term Liabilities
       Management fees payable, related party                   300,000        150,000
       Advances from related party                               47,775           --
       Notes payable, related party                             182,027        182,027
       Reserve for loss contingencies                           350,000        350,000
                                                            -----------    -----------

          Total long term liabilities                           879,802        682,027
                                                            -----------    -----------

            Total liabilities                                   929,808        742,677

SHAREHOLDERS' EQUITY
    Common stock: 100,000,000 shares authorized;
       19,560,268 and 19,560,268 issued and outstanding,
       respectively                                              19,559         19,559
    Preferred stock: 25,000,000 shares authorized;
       none issued or outstanding                                  --             --
    Additional paid-in-capital                                3,544,408      3,544,408
    Accumulated deficit                                      (4,265,510)    (4,065,527)
                                                            -----------    -----------

            Total shareholders' equity                         (701,543)      (501,560)
                                                            -----------    -----------

               Total liabilities and shareholders' equity   $   228,265    $   241,117
                                                            ===========    ===========
</TABLE>


   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, 2001 and 2000, and
                        the year ended December 31, 2000

                                                 Three months    Six months
                                                    ended           ended
                                                  June 30,        June 30,
                                                    2001            2001
                                                ------------    ------------
                                                 (unaudited)    (unaudited)
Income:
       Sales                                    $     63,215    $    210,099
       Cost of goods sold                            (64,763)       (192,672)
                                                ------------    ------------

             Gross margin                             (1,548)         17,427
                                                ------------    ------------

Operating Expenses:
       Agency fees                                     3,338           4,670
       Consulting fees                                 3,399           3,861
       General and administrative                        662           7,126
       Management fees                                75,000         150,000
       Professional fees                              20,332          31,154
       Office expense-China                            5,515          10,095
       Depreciation and amortization expense           3,578           7,156
       Inventory allowance                              --              --
       Other                                             260             362
       Non-recurring expense                            --              --
                                                ------------    ------------

             Total operating expenses                112,084         214,424
                                                ------------    ------------

Other (Income) and Expenses:
       Currency exchange loss                          1,096           2,986
       Interest (income)                                --              --
       Interest expense                                 --              --
                                                ------------    ------------

             Total other (income) and expense          1,096           2,986
                                                ------------    ------------

                Net loss before taxes                114,728         199,983
                                                ------------    ------------

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

                Net loss                        $    114,728    $    199,983
                                                ============    ============

Net loss per common share - Basic               $      0.006    $      0.010
                                                ============    ============

Weighted average number of
   common shares - Basic                          19,560,268      19,560,268
                                                ============    ============

Net loss per common share - Diluted             $      0.006    $      0.010
                                                ============    ============

Weighted average number of
       common shares - Diluted                    19,560,268      19,560,268
                                                ============    ============


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

                                      - 3 -
<PAGE>

                 VHS NETWORK, INC.

       Consolidated Statements of Operations
           for the three months and six months ended June 30, 2001 and 2000, and
      the year ended December 31, 2000 (continued)
<TABLE>
<CAPTION>
                                                Three months      Six months
                                                   ended             ended       Year ended
                                                  June 30,          June 30,     December 31,
                                                    2000             2000           2000
                                                ------------    ------------    ------------
                                                       (unaudited)           (unaudited)
<S>                                             <C>             <C>             <C>
Income:
       Sales                                    $       --      $       --      $       --
       Cost of goods sold                               --              --              --
                                                ------------    ------------    ------------

             Gross margin                               --              --              --
                                                ------------    ------------    ------------

Operating Expenses:
       Agency fees                                     3,850          42,529          52,557
       Consulting fees                                23,686          23,686          45,640
       General and administrative                     21,102          31,929          32,251
       Management fees                                75,000         120,000         270,000
       Professional fees                              93,658         101,701         150,973
       Office expense-China                           28,637          28,637          44,017
       Depreciation and amortization expense           2,143           2,616           7,562
       Inventory allowance                              --              --            28,000
       Other                                            --              --            23,743
       Non-recurring expense                         216,515         216,515         216,515
                                                ------------    ------------    ------------

             Total operating expenses                464,591         567,613         871,258
                                                ------------    ------------    ------------

Other (Income) and Expenses:
       Currency exchange (gain)/loss                    (902)           (155)         (9,516)
       Interest (income)                              (1,694)         (1,792)            568
       Interest expense                                  162             218             189
                                                ------------    ------------    ------------

             Total other (income) and expense         (2,434)         (1,729)         (8,759)
                                                ------------    ------------    ------------

                Net loss before taxes                462,157         565,884         862,499
                                                ------------    ------------    ------------

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

                Net loss                        $    462,157    $    565,884    $    862,499
                                                ============    ============    ============

Net loss per common share - Basic               $      0.025    $      0.038    $      0.044
                                                ============    ============    ============

Weighted average number of
   common shares - Basic                          18,229,824      15,052,283      19,469,192
                                                ============    ============    ============

Net loss per common share - Diluted             $      0.025    $      0.038    $      0.044
                                                ============    ============    ============

Weighted average number of
       common shares - Diluted                    18,229,824      15,052,283      19,469,192
                                                ============    ============    ============
</TABLE>


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

                                      - 4 -
<PAGE>

                                VHS NETWORK, INC.

       Consolidated Statements of Shareholders' Equity for the six months
                      ended June 30, 2001 (unaudited) and
                        the year ended December 31, 2000
<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, 1999           10,929,435   $    10,929   $       --     $   --     $ 1,231,170   $(3,203,028)   $(1,960,929)
                                   -----------   -----------   ------------   --------   -----------   -----------    -----------

Sale of common stock                 2,633,333         2,633           --         --       1,057,367          --        1,060,000

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

Common stock issued for services        57,500            57           --         --          25,693          --           25,750

Common stock issued for expenses        25,000            25           --         --          22,725          --           22,750

Acquisition of China
 e-mall Corp.                        2,100,000         2,100           --         --          21,900          --           24,000

Acquisition of Exodus
 Acquisition Corp.                     500,000           500           --         --         124,500          --          125,000

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

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

Conversion of wages payable
 to officers into
 common stock                          555,000           555           --         --          70,945          --           71,500

Net loss for the period                   --            --             --         --            --        (862,499)      (862,499)
                                   -----------   -----------   ------------   --------   -----------   -----------    -----------

Balance December 31, 2000           19,560,268        19,559           --         --       3,544,408    (4,065,527)      (501,560)
                                   -----------   -----------   ------------   --------   -----------   -----------    -----------


Net loss for the period                   --            --             --         --            --         (85,255)       (85,255)
                                   -----------   -----------   ------------   --------   -----------   -----------    -----------

Balance March 31, 2001              19,560,268        19,559           --         --       3,544,408    (4,150,782)      (586,815)
                                   -----------   -----------   ------------   --------   -----------   -----------    -----------


Net loss for the period                   --            --             --         --            --        (114,728)      (114,728)
                                   -----------   -----------   ------------   --------   -----------   -----------    -----------

Balance June 30, 2001               19,560,268   $    19,559   $       --     $   --     $ 3,544,408   $(4,265,510)   $  (701,543)
                                   -----------   -----------   ------------   --------   -----------   -----------    -----------
</TABLE>


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

                                      - 5 -
<PAGE>

<TABLE>
<CAPTION>

                                VHS NETWORK, INC.

                      Consolidated Statements of Cash Flows
 for the six months ended June 30, 2001 and 2000, and the year ended December 31, 2000

                                                               Six months     Six months
                                                                 ended           ended       Year ended
                                                                June 30,        June 30,    December 31,
                                                                  2001           2000          2000
                                                              -----------    -----------    -----------
<S>                                                           <C>            <C>            <C>
     Net income (loss)                                        $  (199,983)   $  (565,884)   $  (862,499)
     Adjustments to reconcile net income (loss) to net cash
       provided by (used for) operating activities:
        Issuance of common stock for services                        --           25,750         25,750
        Issuance of common stock for expenses                        --             --           22,750
        Acquisition of Exodus Corporation                            --          125,000        125,000
        Inventory valuation allowance                                --             --           28,000
        Amortization of intangible assets                           4,000          1,670          5,670
        Depreciation                                                3,156            946          1,892
                                                              -----------    -----------    -----------


Cash flow from operating activities:
     Changes in assets and liabilities
        Receivables                                           $      (865)   $   (15,976)   $      (761)
        Accounts payable                                          (10,644)       (12,436)        (4,217)
        Accrued expenses                                             --          (15,000)       (15,000)
                                                              -----------    -----------    -----------

           Cash flow used in operating activities             $  (204,336)   $  (455,930)   $  (673,415)
                                                              -----------    -----------    -----------

Cash flow from investing activities:
     Purchase of furniture and equipment                      $      --      $   (18,940)   $   (18,940)
                                                              -----------    -----------    -----------

           Net cash used in investing activities              $      --      $   (18,940)   $   (18,940)
                                                              -----------    -----------    -----------


Cash flow from financing activities:
     Management fees payable, related party                   $   150,000    $      --      $   150,000
     Borrowings under notes payable, related party                   --          145,000           --
     Payments on notes payable, related party                        --         (217,568)      (597,973)
     Advances from related party                                   85,146           --             --
     Payments on advances from related party                      (37,371)          --             --
     Restricted cash                                                 --         (400,000)          --
     Proceeds from exercise of warrants                              --          105,000        105,000
     Proceeds from sale of stock                                     --        1,060,000      1,060,000
                                                              -----------    -----------    -----------

           Net cash generated by financing activities         $   197,775    $   692,432    $   717,027
                                                              -----------    -----------    -----------

           (Decrease) Increase in cash and cash equivalents        (6,561)       217,562         24,672

           Balance at beginning of year                            25,205            533            533
                                                              -----------    -----------    -----------

           Balance at end of year                             $    18,644    $   218,095    $    25,205
                                                              ===========    ===========    ===========
</TABLE>


    The accompanying notes are an integral part of these financial statements

                                      - 6 -
<PAGE>

<TABLE>
<CAPTION>
                                VHS NETWORK, INC.

                      Consolidated Statements of Cash Flows
 for the six months ended June 30, 2001 and 2000, and the year ended December 31, 2000 (continued)

<S>                                                                  <C>                 <C>                <C>
 Supplementary disclosure:

      Cash paid for interest                                         $              -    $            218   $            568
                                                                    ------------------  ------------------ ------------------

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

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

      Conversion of debt into common stock                           $              -    $         22,000   $              -
                                                                    ------------------  ------------------ ------------------

      Common stock issued for acquisitions                           $              -    $        149,000   $        149,000
                                                                    ------------------  ------------------ ------------------

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

      Common stock issued for services and expenses                  $              -    $         25,750   $         48,500
                                                                    ------------------  ------------------ ------------------
</TABLE>


    The accompanying notes are an integral part of these financial statements

                                      - 7 -
<PAGE>

                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                  June 30, 2001

1.       NATURE OF OPERATIONS

         Company History
         ---------------

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

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

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

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

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


                                      -8-
<PAGE>

                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                  June 30, 2001

1.       NATURE OF OPERATIONS (continued)

         Operations
         ----------

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

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

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


                                       -9-
<PAGE>

                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                  June 30, 2001

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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


         Principles of Consolidation
         ---------------------------

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

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


         Cash and Cash Equivalents
         -------------------------

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


         Concentration of Cash
         ---------------------

         The Company at times  maintains  cash balances in accounts that are not
         fully  federally  insured.  Uninsured  balances as of June 30, 2001 and
         December 31, 2000 were $20,281 and $25,205, respectively.


         Inventories
         -----------

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


                                      -10-
<PAGE>

                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                  June 30, 2001

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         Property and Equipment
         ----------------------

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

         Depreciation  expense for the  three-month  and six month period ending
         June 30,  2001 was  $1,578 and  3,156,  respectively,  and for the year
         ended December 31, 2000 was $1,892.


         Stock-based Compensation
         ------------------------

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


         Income Taxes
         ------------

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


                                      -11-
<PAGE>

                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                  June 30, 2001

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         Foreign Currency Translation
         ----------------------------

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


         Revenue
         -------

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


         Comprehensive Income
         --------------------

         In 1999,  the Company  adopted SFAS No. 130,  "Reporting  Comprehensive
         Income."  SFAS  No.  130   establishes   standards  for  reporting  and
         presentation of  comprehensive  income and its components in a full set
         of  financial  statements.  Comprehensive  income is  presented  in the
         consolidated  statements  of  shareholders'  equity  and  comprehensive
         income,  and consists of net income and  unrealized  gains  (losses) on
         available for sale marketable securities;  foreign currency translation
         adjustments  and  changes  in market  value of futures  contracts  that
         qualify as a hedge;  and  negative  equity  adjustments  recognized  in
         accordance  with  SFAS  87.  SFAS  No.  130  requires  only  additional
         disclosures  in the  consolidated  financial  statements  and  does not
         affect the Company's  financial position or results of operations.  The
         elements of  comprehensive  income for the  three-month  and  six-month
         periods ended June 30, 2001 and 2000,  and the year ended  December 31,
         2000, were de minimis.


         Income (loss) per common share
         ------------------------------

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


                                      -12-
<PAGE>

                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                  June 30, 2001

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         Long-lived assets
         -----------------

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


         Use of Estimates
         ----------------

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


         Advertising Costs
         -----------------

         The  Company   expenses   advertising   costs  as  they  are  incurred.
         Advertising  costs for the three-month and six-month period ending June
         30,  2001  were $615 and for the year  ending  December  31,  2000 were
         $45,390.  The Company did not incur any  advertising  costs  during the
         three-month and six-month period ending June 30, 2000.


         Segments of an Enterprise and Related Information
         -------------------------------------------------

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


                                      -13-
<PAGE>

                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                  June 30, 2001

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         Intangibles
         -----------

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


         Recently Issued Accounting Pronouncements
         -----------------------------------------

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


3.       INVENTORIES

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

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

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


                                      -14-
<PAGE>

                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                  June 30, 2001

4.       INCOME TAXES

         No  provision  for federal and state  taxes has been  recorded  for the
         three and six months periods ended June 30, 2001 and 2000, and the year
         ended  December 31,  2000,  since the Company  incurred  net  operating
         losses for these periods.


5.       RELATED PARTY TRANSACTIONS

         Groupmark Canada Limited
         ------------------------

         In 1997, the Company entered into a management  service  agreement with
         Groupmark Canada Limited ("Groupmark"), of which the Chairman and Chief
         Executive  Officer of the Company is the sole  shareholder.  Under this
         agreement,   Groupmark  provides  the  Company  all  management,  daily
         administrative  functions,  financial and business  advisory  services.
         Groupmark  was  also   contracted   to  assist  in  the   technological
         development  of  the  "SmartCARD."  Contractually,  charges  for  these
         services  are not to exceed  $56,000  per month.  For the three and six
         months ending June 30, 2001, the Company  incurred  management  fees of
         $75,000 and 150,000,  respectively. For the three and six months period
         ending June 30,  2000,  the  Company  incurred  $75,000  and  $120,000,
         respectively.

         Amounts due Groupmark pursuant to this management service agreement and
         other borrowings as of June 30, 2001 and December 31, 2000 are $529,802
         and $332,027, respectively.  Groupmark has the option to accept payment
         by way of the  Company's  common  stock at fair market value in lieu of
         cash.  The Company made payments to Groupmark  totaling  $37,371 during
         the three months ending June 30, 2001


         Transactions with Corporate Officers and Directors
         --------------------------------------------------

         Dr.  Gang Chai,  a member of the Board of  Directors  and the  original
         founder of China e-Mall, is a majority  shareholder in McVicar Minerals
         Corporation.  McVicar Minerals provided services to the Company through
         a consulting agreement.  The Company paid McVicar Minerals Corp. $6,000
         and $2,000 during the three and six month period ending June 30, 2001.


                                      -15-
<PAGE>

                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                  June 30, 2001

6.       COMMITMENTS AND CONTINGENCIES

         Legal
         -----

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


         Video Home Shopping, Inc., a Tennessee Corporation
         --------------------------------------------------

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

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

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

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


                                      -16-
<PAGE>

                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                  June 30, 2001

6.       COMMITMENTS AND CONTINGENCIES (continued)

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

         While  management  views  that  any  liability  in this  regard  is the
         responsibility of the former principal of Video Home Shopping, Inc. and
         is not necessarily the liability of the Company,  out of prudence,  the
         Company has elected to provide a reserve of $350,000 to provide for the
         possibility  of such  liability to the IRS.  Management is currently in
         process of  determining  the course of further  action  regarding  this
         liability.  As of August 10, 2001, the IRS has not notified  Management
         regarding the status of the investigation. Management is in the process
         of achieving resolution regarding this matter.


         Going Concern Uncertainties
         ---------------------------

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

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

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


                                      -17-
<PAGE>

                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                  June 30, 2001

7.       INTANGIBLE ASSETS

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

                  Domain name                             $           24,000
                  Less: Accumulated amortization                      (9,670)
                                                          -------------------

                                                          $           14,330
                                                          ==================

         Amortization  expense for the three and six months ended June,  2001was
         $4,000 and $2,000, respectively. Amortization expense for the three and
         six months ended June 2000 was $1,670 and $0, respectively, and for the
         year ended December 31, 2000, was $5,670.


8.       REGISTRATIONS STATEMENT

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

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


9.       Major Customer

         Revenues  for the  three  and six  months  ending  June 30,  2001  were
         primarily from one customer.


                                      -18-
<PAGE>

                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                  June 30, 2001

10.      Plan of Reorganization

         On May 6, 2001,  the  Company  entered  into an  agreement  and plan of
         reorganization   (the   "Agreement")   with  Branson   Holdings,   Inc.
         ("Branson")  to  acquire  all the  issued  and  outstanding  shares  of
         Branson.  The Agreement  provides that all the  shareholders of Branson
         shall  exchange  all of the  outstanding  shares  of  common  stock  of
         Branson,  constituting  a  total  of  10,072  shares,  for a  total  of
         10,072,000  common shares of VHSN and Branson shall thereafter  operate
         as a wholly-owned  subsidiary of VHSN. One of the conditions  precedent
         to closing is that the board of  directors  of VHSN,  must prior to the
         issuance  of the  10,072,000  common  shares,  authorize  and  effect a
         reverse  stock  split  of 20 to 1 of the  Company's  total  issued  and
         outstanding  shares to bring the total issued and outstanding shares of
         VHSN equal to 978,013 from 19,560,268. On completion of the transaction
         and after giving effect to the issuance of  10,072,000,  there would be
         11,050,013 common shares of VHSN outstanding on a non-diluted basis.

         The Agreement further provides that, on closing, the board of directors
         of VHSN will be reduced to 3, and 2 nominees  of Branson  will be added
         to make a total number of directors of 5.

         The  Management of the Company is continuing to negotiate  with Branson
         regarding this agreement, including the potential of a 20-for-1 reverse
         stock split.  The financial  statements do not include any  adjustments
         that might result from the outcome of these negotiations.


                                      -19-
<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 June 30, 2001.

We had sales in North America of finished goods which we sourced in China.

For the three  months ended June 30, 2001 we had revenues of $63,215 and for the
six months ended June 30, 2000, VHSN had revenues of $210,099.  The gross margin
on sales was a deficit of $1,548.  This  negative  position was due primarily to
returns of merchandise. A significant portion of the revenues received came from
one customer  that were sourced from the website but  negotiated  by local sales
people. We anticipate that future sales will be made to the same customer.

Operating  Expenses  for the three  months  ended  June 30,  2001 were  $112,084
compared with Operating Expenses of $464,591 for the three months ended June 30,
2000. The significantly lower operating expenses for the three months ended June
30, 2001 are attributable to a number of factors. As we have completed the China
eMall and Exodus  acquisitions,  we have not incurred the professional fees that
were  incurred  for the three  month  period  ended June 30, 2000 and which were
associated  with the  acquisitions.  For the three  months  ended June 30,  2001
professional fees were $20,332 and for the three months ended June 30, 2000 they

<PAGE>

were $93,658.  Further, our general office expenses in China have also decreased
to $5,515  from  $28,637  primarily  due to  one-time  set up costs in the China
offices.  We incurred management fees of $75,000 for the three months ended June
30, 2001 and $150,000 for the six months ended June 30, 2001.  These  management
fees cover most administrative and management functions.  Groupmark provides the
administrative  and management  support to us.  Amounts due to Groupmark  Canada
Limited  as of June 30,  2001  were  $529,802  and for  December  31,  2000 were
$332,027.  We had borrowed  $85,146 from Groupmark Canada Limited to finance our
operations.  We made payments of $37,371  during the three months ended June 31,
2001 against that obligation.

Dr. Gang Chai is a member of the Board of Directors and the original  founder of
China  e-Mall  and is also a majority  shareholder  of  McVicar  Minerals  Corp.
McVicar has provided  services to VHSN through a  consulting  agreement  and has
been paid $6,000 and $2,000 during the three and six month period ended June 30,
2001.

Results of the six months ended June 31, 2001.

Revenues for the six month period ended June 30, 2001 were $210,099.  During the
six  month  period  ended  June 30,  2000 we had no  operations  and as a result
revenues  for the six  month  period  ended  June 30,  2000  were $0.

Operating  expenses  for the six  months  ended  June 30,  2001  were  $214,424.
Operating  expenses  for the six months ended June 30, 2000 were  $567,613.  Our
operating  expenses were  significantly  lower for the six months ended June 20,
2001  because  we  did  not  incur  the   non-recurring   expenses   related  to
acquisitions,  nor did we incur the  professional and management fees associated
with the acquisitions.  Professional fees for the six months ended June 30, 2001
were $31,154 and for the six months ended June 30, 2000 they were $101,701.  Our
operating expenses in China decreased to $10,095 from $28,637 for the six months
ended June 30, 2000 because we are no longer  incurring  one-time set up fees of
our office.

Liquidity and Capital Resources

We achieved no revenues from operations in the 2000 fiscal year. Revenues during
the three months ended June 30, 2001 were $63,215 with a deficit of $1,548. This
negative position was due primarily to returns of merchandise.

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

Changes in Financial  Position

There have been no  issuances of stock since  December  31,  2001.  Total assets
decreased to $228,265 on June 30, 2001 compared with total assets of $241,117 on
December 31, 2000. The decrease is due primarily as a result of  depreciation on
assets and depletion of cash reserves.

Total  liabilities  increased to $929,808 on June 30, 2001  compared  with total
liabilities  of $742,677 on December 31, 2000.  The increase is due primarily to
unpaid management fees accrued to date and borrowings to finance operations. The
number of issued common  shares of VHSN was  19,560,268 on December 31, 2000 and
remained  the same on August  13,  2001.  Shareholders'  equity  decreased  from
($501,560) to ($701,543) during the first six months of 2001.

<PAGE>

Future Prospects

For the three months ended June 30, 2001, a significant  portion of our revenues
were  derived  from one  customer.  However,  we also had revenue from three new
clients,  and we are  currently  engaged  in  negotiations  and quotes for other
prospective  clients.  In the past,  our  revenue  was  derived  solely from one
customer.  We believe that the internet web site of VHSN has recently  attracted
increased  exposure and interest.

We are of the view  that  VHSN  has  demonstrated  modest  growth  potential  as
measured against the general  downturn in the  Internet/e-commerce  economy.  We
also  believe  that  growth will  continue,  due in part to  increased  web site
interest and sales efforts.

We are  focused on finding  operational  efficiencies  in the future in order to
minimize our operating deficit.


                          PART II -- OTHER INFORMATION

Item 1.  Legal Proceedings.

None.

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

None.

Item 3.  Defaults Upon Senior Securities

None.

Item 4.  Submission of Matters to a Vote of Security Holders.

None.

Item 5.  Other Information.

On May 6, 2001 VHSN entered into an agreement  and plan of  reorganization  (the
"Agreement") with Branson Holdings,  Inc.  ("Branson") to acquire all the issued
and  outstanding  shares  of  Branson.  The  Agreement  provides  that  all  the
shareholders  of Branson not dissenting  shall  exchange all of the  outstanding
shares of common stock of Branson  constituting  a total of 10,072  shares for a
total of 10,072,000  common shares of VHSN and Branson shall thereafter  operate
as a wholly-owned  subsidiary of VHSN. The essential  terms of the Agreement are
noted in the  10-QSB  of VHSN  filed  for the  quarter  ended  March  31,  2001.

Management  of VHSN has recently put the Branson  Agreement on hold.  Management
has reconsidered  the terms of the Agreement,  in particular the 20 to 1 reverse
stock split, and its impact on shareholders of VHSN. Accordingly,  management is
reviewing all available  options  including  termination  and abandonment of the
Branson Agreement or an amendment of its key terms and conditions.


<PAGE>

Item 6.  Exhibits and Reports on Form 8-K.
                                ---------
(a)      Exhibits

         None.

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: August 13, 2001     By: /s/ Elwin Cathcart
---------------------     ----------------------
                                  Elwin Cathcart, Chief Executive Officer
                                  (principal financial and accounting officer
                                  and duly authorized signing officer)


<PAGE>