FORM 10-KSB

SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549



|[X]   | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended - June 30, 2004
|----- | ------------------------------------------------------------------------------------------------------------------------------
|OR    |                                                                                                                               
|[   ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934                                     
|      | For the transition period from                                                                                                

Commission file number 333-70836

VMH VIDEOMOVIEHOUSE.COM INC.



|BRITISH COLUMBIA                                               | N/A                          
|-------------------------------------------------------------- | -----------------------------
|(State or other jurisdiction of incorporation or organization) | (Employer Identification No.)

#14 - 34368 Manufacturer's Way
Abbotsford, British Columbia V2S 7M1
CANADA   V2S 7M1
(Address of principal executive offices, including zip code.)

(604) 852-1806
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

| | Title of each class | Name of each exchange on which registered
| | ------------------- | -----------------------------------------
| | None                | None                                     

Securities registered pursuant to Section 12(g) of the Act:

| | Title of each class | Common Stock
| | ------------------- | ------------

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
Yes [X]     No [   ]

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by referenced in Part III of this Form 10-KSB or any amendment to this Form 10-KSB [   ]





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State issuer's revenues for its most fiscal year June 30, 2004:  $1,452,384.

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of June 30, 2004: $0.01.  No market currently exists for the Company's common stock.

State the number of shares outstanding of each of the issuer's classes of common equity, as of September 16, 2004: 22,432,757.

We make forward-looking statements in this document. Our forward-looking statements are subject to risks and uncertainties. You should note that many factors, some of which are described in this section or discussed elsewhere in this document, could affect our company in the future and could cause our results to differ materially from those expressed in our forward-looking statements. Forward-looking statements include those regarding our goals, beliefs, plans or current expectations and other statements regarding matters that are not historical facts. For example, when we use the words "believe," "expect," "anticipate" or similar expressions, we are making forward-looking statements. We are not required to release publicly the results of any revisions to these forward-looking statements we may make to reflect future events or circumstances.



























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PART I

ITEM 1.   DESCRIPTION OF THE BUSINESS

We were incorporated in the province of British Columbia on August 24, 1989 as Flamingos Beach Resort, Inc.  In August 1999, we changed our name to VMH VideoMovieHouse.com Inc. and become operational on May 15, 2001. We sell videos, Digital Video Disks - DVDs and Compact Disk - CDs on the Internet.

From incorporation in August 1989 until August 1999, the Company's only operation consisted of developing an Internet web-site.  The web-site was developed by our president and our former president.  Before we were sold to First American Scientific Corp. our only activity was the development of the Internet web-site.  After the sale to First American Scientific we



| | * | improved the web-site                                            
| | - | -----------------------------------------------------------------
| | * | added 20,000 titles with cross-indexing to the data basis        
| | * | improved graphics and site interactivity                         
| | * | began the broadcast a full length feature film                   
| | * | designed a sales/inventory tracking software                     
| | * | set up a full warehouse with 12,000 video tapes/DVDs in inventory
| | * | established a secure site credentials for credit care purchases  
| | * | established accounts with suppliers                              
| | * | established a computerized tracking system for orders            
| | * | launched the web site for full operation                         
| | * | established several sub-distributorships                         

Related Events

On August 9, 2002, the Securities and Exchange Commission declared our Form SB-2 Registration Statement effective.

On September 1, 2002, we spun off 14,221,750 shares of common stock to shareholders of First American Scientific Corp. ("FASC"), our then parent corporation.

Operating Concept

We purchase new and used videos, DVDs and CDs at wholesale costs and resell them in our on line Internet store.  Our web site is www.videomoviehouse.com for our US customers and www.vidoemoviehouse.ca for our Canadian customers. Our objective is acquire videos, DVDs and CDs from suppliers based upon customer orders, thereby limiting the amount of product held in  inventory.  Because of customer demand for our tapes, DVDs, and CDs, we have established an inventory in order to meet the demand for our tapes, DVDs and CDs.  The following sets for the price range for our new and used video tapes, DVDs, and CDs.





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|            | New | Used          
|----------- | --- | --------------
|Video Tapes | $   | 9.99 -  $69.99
|DVDs        | $   | 11.99 - $39.99
|CDs         | $   | 11.99 - $29.99

Convenient Shopping Experience.

Our online store provides customers with an easy-to-use web site. The web site is available 24 hours a day, seven days a week and may be reached on-line from anywhere there is internet access. Our online store enables us to deliver a broad selection of products to customers in rural or other locations that do not have convenient access to physical stores. We also make the shopping experience convenient by categorizing our products into easy-to-shop departments. With respect to videos and DVDs we have categories of adventure, drama, comedy, as well as a full selection of new releases.  With respect to CDs, we do not carry any inventories at the present time.  We intend to carry an inventory of CDs in the future when market conditions allow us to do so.

Customer Service

We provide a customer service department via e-mail and toll-free telephone number 1-888-825-1187, where consumers can resolve order and product questions. Furthermore, we insure consumer satisfaction by offering a money back guaranty.

Shopping at the Online Store

We believe that the sale of videos, DVDs and CDs on the Internet can offer attractive benefits to consumers. These include enhanced selection, convenience, quality, ease-of-use, depth of content and information, and competitive pricing.  Key features of our online store include:

Browsing

Our online store offers consumers with a several subject areas and special features arranged in a simple, easy-to-use format intended to enhance product selection.  By clicking on a category names, the consumer moves directly to the home page of the desired category and can view promotions and featured products.

Selecting a Product and Checking Out.

To purchase products, consumers simply click on the "add to cart" button to add products to their virtual shopping cart. Consumers can add and subtract products from their shopping cart as they browse around our online store, prior to making a final purchase decision, just as in a physical store.  To execute orders, consumers click on the "checkout" button and, depending upon whether the consumer has previously shopped at our online store are prompted to supply shipping details online. We also offer consumers a variety of gift wrapping and shipping options during the checkout process. Prior to finalizing an order by clicking the "submit" button, consumers are shown their total charges along with the various options chosen at which point consumers still have the ability to change their order or cancel it entirely.





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Paying

To pay for orders, a consumer must use a credit card, which is authorized during the checkout process, but which is charged when the customer's items are shipped from our distribution facility. Our online store uses a security technology that works with the most common Internet browsers and makes it virtually impossible for unauthorized parties to read information sent by its consumers. We also offer our customers a money-back return policy.

Our Internet Technology

Our Internet software is proprietary and not protected by any patents. As such, a competitor could copy it and start operations identical to ours.

Source of Videos, DVDs and CDs

We sell both new and used videos, DVDs and CDs. Our new videos, DVDs and CDs are purchased from a number of sources, including ROW,  Costco Wholesale Division, Hip Interactive, Lionsgate Films, Koch, and others.  Our used products inventory consists mainly of used VHS tapes and is gradually being reduced because the market for used VHS has decreased dramatically with the onset of DVDs.

We purchase product based upon orders we  have received and anticipate. Mark-ups on new products range from 15% to 30%, while mark-ups on used products can run as high as 200% depending upon the scarcity of titles and the prudence of our buyers.

At the present time we do not rent our products.  We have initiated steps to enter the on-line DVD rental market sometime in early 2005.  A fully functional DVD rental website is now in final development stages and beta testing is underway.  Revenue will be derived from monthly subscription fees.

Competition

Currently, we compete with distributors, wholesalers and retailers in the sale of VHS tapes, DVDs and CDs.   We will be competing with companies such as Netlix and Games N Flix, Walmart and Blockbuster directly in the on-line DVD rental market. Competition is intense and many - if not most sellers and renters of DVD products have more capital than we do.

Many wholesalers and retailers are rapidly entering the on-line sales marketplace. We anticipate further competition in the on-line DVD rental marketplace as well.  As an on-line, we offer 25,000 titles.  Non-online stores, such as Blockbuster, are limited to 2,500 titles per store.  On-line stores do away with the need of driving to the video store, paying late fees or arriving at a video store and not finding something suitable to watch.





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Some companies are coming to the realization that to stay in tune with today's economic realities - an Internet presence is a must. As such, the electronic commerce market is continuing to grow and is becoming more competitive.  We expect  on-line competition to continue to intensify in the future. Thus, there is no assurance that we will be able to maintain a competitive position against current or future competitors - particularly those with greater financial, marketing, service, technical and other resources. Failure to maintain a competitive position within the market could have a material adverse effect on our business, financial condition and results of operations. There can be no assurance that we will be able to compete successfully against current and future competitors, and competitive pressures faced by us may have a material adverse effect on our business, financial condition and results of operations.

Marketing

Currently we advertise on our web site and use search engines such as Google to direct traffic to our site.  In the future, we plan to offer affiliate programs, advertise on cable television, in newspapers and on the radio.  Plans are underway to link both the DVD rental web-site and our existing sales web-site together to offer a truly one stop movie shopping experience. We currently have distribution links set up with E-bay/Half.com and Amazon.com in North America. Potential customers can order products through these links or connect directly to our website. The company is contemplating entrance into the U.K. and European marketplace by marketing of its DVDs via Amazon.UK and EBAY in the foreseeable future. Also the company plans to launch  on-line DVD rentals into the European market - once the North American launch proves successful.

Insurance

We do not maintain any insurance at this time.

Employees and Employment Agreements

At present, we have 6 full-time employees and two part-time employees. We have no employment agreements with any officers, directors or employees. We presently do not have pension, health, annuity, insurance, profit sharing or similar benefit plans; however, we may adopt such plans in the future. There are presently no personal benefits available to any employees. Further staffing will be needed once the on-line rental division is operational. Management has identified and interviewed various candidates for management positions in the company and intends to add key individuals which bring experience, marketing and industry knowledge to the company.

Our Offices

We lease 4,000 square feet of office and warehouse space located at #14 - 34368 Manufacturer's Way, Abbotsford, British Columbia, Canada V2S 7M1. Our telephone number is (604) 852-1806. We lease our offices from Sumas Land Corp. pursuant to a written five year lease agreement. Our monthly rental is US$1,100. We are actively looking for suitable warehouse space in the Bellingham, Washington area to locate our planned rental division. The sales division will remain at our present location in Abbotsford.





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Risks Factors

1. Because our auditors have issued a going concern opinion and because our officers and directors will not loan any money to us, we may not be able to achieve our objectives and may have to suspend or cease operations.
2. We have a limited operating history and have losses which we expect to continue into the future. If the losses continue we will have to suspend operations or cease operations.
3. If we don't raise additional capital we may go out of business.
4. We have conducted limited in-house market research, but there is uncertainty about the demand for our products.
5. Because we are small and do not have much capital, we must limit our operations.
6. Because we have no insurance, we may have to cease operations if we suffer any losses or are sued for any reason.





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1. Because the SEC imposes additional sales practice requirements on brokers who deal in our shares which are penny stocks, some brokers may be unwilling to trade them.  This means that you may have difficulty in reselling your shares and may cause the price of the shares to decline.
2. Because there is no public trading market for our common stock, you may not be able to resell your stock.

ITEM 2.   DESCRIPTION OF PROPERTIES.

We lease 4,000 square feet ofoffice and warehouse space located at #14 - 34368 Manufacturer's Way, Abbotsford, British Columbia, Canada V2S 7M1.  Our telephone number is (604) 852-1806.  We lease our offices from Sumas Land Corp. pursuant to a written three year lease agreement.  Our monthly rental is US$1,100.  During the fiscal year ending June 30, 2004, we paid US$17,617 for rent.

ITEM 3.   LEGAL PROCEEDINGS.

We are not a party to any pending litigation and none is contemplated or threatened.

ITEM 4.   SUBMISSION OR MATTERS TO A VOTE OF SECURITY HOLDERS.

There were no matters submitted to the shareholders during 2004.

PART II

ITEM 5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS.

No market exists for our securities and there is no assurance that a regular trading market will develop, or if developed, that it will be sustained.  We will attempt to have our shares listed for trading on the Bulletin Board owned by the National Association of Securities Dealers, Inc.  Individuals seeking to buy or sell stock may list quotations, through their brokers, on the Pink Sheets. A shareholder in all likelihood, therefore, will be unable to resell the securities referred to herein should he or she desire to do so unless the shares are eventually so listed.  Furthermore, it is unlikely that a lending institution will accept our securities as pledged collateral for loans unless a regular trading market develops.





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We have no outstanding options or warrants, or other securities convertible into, common equity. Of the 22,432,757 shares of common stock outstanding as of September 16, 2004, all are free trading with the exception of 5,610,000 shares issued to our officers and directors, which may only be resold in compliance with Rule 144 of the Securities Act of 1933 with the exception of the one year holding period contained therein.

At June 30, 2004, there were 537 holders of record.

Dividends

We have not declared any cash dividends, nor do we intend to do so. We are not subject to any legal restrictions respecting the payment of dividends, except that they may not be paid to render us insolvent.  Dividend policy will be based on our cash resources and needs and it is anticipated that all available cash will be needed for our operations in the foreseeable future.

Section 15(g) of the Securities Exchange Act of 1934

Our company's shares are covered by Section 15(g) of the Securities Exchange Act of 1934, as amended that imposes additional sales practice requirements on broker/dealers who sell such securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouses). For transactions covered by the Rule, the broker/dealer must make a special suitability determination for the purchase and have received the purchaser's written agreement to the transaction prior to the sale. Consequently, the Rule may affect the ability of broker/dealers to sell our securities and also may affect your ability to sell your shares in the secondary market.

Section 15(g) also imposes additional sales practice requirements on broker/dealers who sell penny securities. These rules require a one page summary of certain essential items. The items include the risk of investing in penny stocks in both public offerings and secondary marketing; terms important to in understanding of the function of the penny stock market, such as "bid" and "offer" quotes, a dealers "spread" and broker/dealer compensation; the broker/dealer compensation, the broker/dealers duties to its customers, including the disclosures required by any other penny stock disclosure rules; the customers rights and remedies in causes of fraud in penny stock transactions; and, the NASD's toll free telephone number and the central number of the North American Administrators Association, for information on the disciplinary history of broker/dealers and their associated persons.

Securities authorized for issuance under equity compensation plans

We have one equity compensation plan.  It is our 2003 Incentive Stock Option Plan.  The Plan provides for the issuance of stock options for services rendered to us.  The board of directors is vested with the power to determine the terms and conditions of the options.  The plan includes 5,000,000 shares.  To date option to purchase 4,810,000 shares have been granted and all options have been exercised, leaving 190,000 shares available for issuance under the plan.





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|                      |                         |                      | Number of securities        
|--------------------- | ----------------------- | -------------------- | ----------------------------
|                      | Number of securities to | Weighted-average     | remaining available for     
|                      | be issued upon exercise | exercise price of    | future issuance under equity
|                      | of outstanding options, | outstanding options, | compensation plans          
|                      | warrants and rights     | warrants and rights  | (excluding securities       
|Plan category         | (a)                     | (b)                  | reflected in column (a)) (c)
|Equity compensation   |                         |                      |                             
|plans approved by     |                         |                      |                             
|security holders      | 0                       |                      | 0                           
|                      |                         |                      |                             
|Equity compensation   |                         |                      |                             
|plans not approved by |                         |                      |                             
|securities holders    |                         |                      |                             
|                      | 2003 Plan               | 0                    |                             
|                      |                         |                      |                             
|Total                 | 0                       |                      | 0                           

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.

We are in our fourth year of business generating revenue from sales of video tapes, DVDs. and CDs over the internet. Our web site is www.videomoviehouse.com for our US customers and www.videomoviehouse.ca for our Canadian customers. We do not deal in pornographic material. The web site has been in full operation for approximately three years.  Sales for this year were approximately US$1.45 million compared to sales of US$1.78 million for last year. This represents a decrease of 8% in 2004 as compared to 2003.   We are still incurring operating losses but continue to work on improving the efficiency of our systems. If these operating losses continue over an extended period of time, we may not have sufficient capital to meet our ongoing costs, and may be unable to continue to operate. We are continually adjusting our pricing strategies, our purchasing strategies, and our shipping procedures in order to achieve profitability. Our sales volumes are largely influenced by the availability of on hand inventory to a great degree and steps should be taken to increase inventory levels and thus increase sales.

Our auditors have issued a going concern opinion. This means that they are uncertain as to us being able to continue as an on-going business for the next twelve months. This is because our expenses still exceed revenues. Accordingly, we must raise cash from sources other than revenue in order to meet our ongoing financial obligations and to enable the company to move ahead with future expansion plans. We are aware of this, and are considering all our options. Management intends to seek additional capital from new equity securities offerings which will, if successful, provide funds needed to increase liquidity, fund future growth, and fully implement expansion plans. However, there is no assurance that the company will raise the required capital. If the company is unable to raise the required capital, then it will assess its future business viability





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Liquidity and Capital Resources

Current assets as of June 30, 2004 were $340,244 and current liabilities were $345,802.  This compares to June 30, 2003 current assets of $179,755 and current liabilities of $162,667.  This significant change is due mainly to an increase in inventory needed to fulfill increased demand.  We now employ eight staff members and are open for business 24 hours per day. We are still experiencing strain on our cash flow as sales growth has caused the need for more highly skilled and better paid staff, more equipment and higher inventory levels. Additional capital has been provided by way of short terms loans and salary deferment from our officers, but this is unlikely to continue.

As of June 30, 2004, we had $50,022 cash on hand, receivables of $64,254 and inventory of $225,968. This is compared to cash of $16,107 , receivables of $46,111 and inventory of $117,537 on June 30, 2003. Accounts receivable are from merchant VISA sales are usually collected within fifteen days and sales tax receivable is generally received within 90 days. If current sales levels are sustained, we should have sufficient working capital to maintain our operations in the short term, but we will still need to raise additional capital to stabilize the business, increase our sales and press ahead with expansion plans.. We are considering plans to raise funds, either by way of loans, sale of stock or a combination of both. Other than from operations, we have not identified any long-term sources of liquidity, or implemented any plan to raise additional capital. There is no assurance, even if we implemented such plans, that we will be able to sell stock or borrow any money in the future.

Results of Operations

Total sales this year were $1,452,384 compared to $1,779,049 for last year, down by 8%. Gross profit ratio overall this year was 46% compared to 41% last year. This 5% improvement in gross profit margin again can be attributed to more efficient inventory management systems being put into place during the year and the total revamping of the product mix which commenced in the first quarter.  Sales for the fourth quarter this year were $560,898 compared to sales of $ 366,938 for the fourth quarter last year, up by 58%. Gross profit ratio for the fourth quarter this year was 56%.  Both the sales growth and improvement in gross profit ratio are the direct result of changes in the product mix and more efficient inventory management practices.  Operating expenses declined to $ 886,542 this year - down 15% from $1,006,964 last year. This decrease in operating expenses was brought about largely because of many new cost saving measures and efficiencies being brought into play during the fiscal year - one of which included a reduction of $49,535 in payroll costs.  Although total losses fell to $204,282, from last years losses of $288,221, a significant injection of new capital will be required during the next 12 months to increase revenues and fund future expansion and diversification plans.

Total sales decreased this year by 8%, largely in the first quarter, due to the need of making significant changes in product mix and the revenue losses associated with making such a change. We began the elimination of high ticket, slow selling, low margin products like mainstream VHS tapes in favor of higher margin / faster selling - rare and hard to find VHS movies. Concurrently, we started the dramatic revamping of our inventory mix in favor of the more popular - faster selling - although lower margin DVD.  Until this juncture our sales ratio was approximately 80% VHS vs. 20% DVD and our overall sales volumes were steadily declining. Today DVD sales make up about 80% of our sales volume and sales volumes are steadily





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increasing.  Existing VHS sales still remain profitable, offering exceedingly high margins on rare and out of print movies but VHS market share continues to shrink due to the onset of the new and more popular DVD.  Our experiences mirror what is happening in the video industry as a whole.  The company has and will continue to seek out high margin close- out VHS products being offered by the studios for resale as needed but the main focus is now DVDs.

Another contributing factor in our over 8% decline in sales was poor service and the insufficient supply system of one of the company's main suppliers, which also largely effected the first quarter. This situation has since been rectified by the replacement of the distributor and the totally revamping of our inventory to feature mainly DVD products.

We continue to expand our exposure to the market place, advertise to attract more traffic to our web-site and to seek out new sources of revenue.  The company believes that it has identified the on-line DVD rental market as such a source of future revenue. The company has gained much of the experience needed to operate successfully in the DVD on-line rental marketplace by virtue of its operation of an on-line video mail order business for now going onto 4 years. Our management's previous experience in the operation of non-Internet video rental stores before entry into the on-line video sales market will also aid in this diversification process.

We are experiencing a steadily rising demand for new DVD products, while sales of VHS tapes is rapidly diminishing. The market for used VHS tapes has all but disappeared with the exception of rare and hard to find movies (both new and used) which still sell at a premium. This shift in sales mix has required an adjustment in our purchasing and marketing strategies. We continue to adapt to this ever changing marketplace by adding popular and profitable new DVD titles to our offerings on a daily basis.   At present, we are heavily dependent on sales generated through other web sites such as Amazon and Half.com. We are vulnerable to the extent that, should the selling policies of these organizations change, we could experience a significant drop in sales. We are aware of this, and are working diligently towards diversification of our sources of revenue. The addition of the on-line DVD rental business as a new revenue source is a step towards this,   what we see as a natural and much needed diversification.

Inflation

Inflation has not been a factor effecting current operations, and is not expected to have any material effect on operations in the near future.

Foreign Operations

We rent office and warehouse space in Abbotsford, British Columbia, Canada which will serve as the corporate and administrative offices, as well as the warehousing and shipping center of the sales division.  Our server and database are stored at a separate location from for our sales division. The company plans to locate its on-line rental division in the Bellingham, Washington area as soon as it becomes economically feasible.





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Recent Accounting Pronouncements

In May 2003, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity" (hereinafter "SFAS No. 150"). SFAS No. 150 establishes standards for classifying and measuring certain financial instruments with characteristics of both liabilities and equity and requires that those instruments be classified as liabilities in statements of financial position. Previously, many of those instruments were classified as equity. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003 and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The Company has determined that there was no financial statement impact from the adoption of this statement.

In April 2003, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities" (hereinafter "SFAS No. 149"). SFAS No. 149 amends and clarifies the accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". This statement is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The adoption of SFAS No. 149 is not expected to have an impact on the financial position or results of operations of the Company.

ITEM 7.   FINANCIAL STATEMENTS.

TABLE OF CONTENTS



|INDEPENDENT AUDITOR'S REPORT  | F-1                                        
|----------------------------- | -------------------------------------------
|FINANCIAL STATEMENTS          |                                            
|                              | Balance Sheets                             
|                              | Statements of Operations                   
|                              | Statement of Stockholders' Equity (Deficit)
|                              | Statements of Cash Flows                   
|NOTES TO FINANCIAL STATEMENTS | F-6                                        













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Board of Directors
VMH VideoMovieHouse.com Inc.
Vancouver, British Columbia 
CANADA



Report of Independent Registered Public Accounting Firm

We have audited the accompanying balance sheets of VMH VideoMovieHouse.com Inc., a British Columbia corporation, as of June 30, 2004 and 2003 and the related statements of operations, cash flows, and stockholders' equity for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of VMH VideoMovieHouse.com Inc. as of June 30, 2004 and 2003, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 2, the Company has sustained losses since inception and has limited cash resources.  These factors raise substantial doubt about the Company's ability to continue as a going concern. Realization of a major portion of the assets is dependent upon the Company's ability to meet its future financing requirements and the success of future operations. Management's plans regarding those matters are described in Note 2.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.



|/s/ Williams & Webster, P.S.
|----------------------------
|Williams & Webster, P.S.    
|Certified Public Accountants
|Spokane, Washington         
|September 2, 2004           







F-1

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|VMH VideoMovieHouse.com Inc.              
|------------------------------------------
|Balance Sheets                            
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|ASSETS                                    
|CURRENT ASSETS                            
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|PROPERTY AND EQUIPMENT                    
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|OTHER ASSETS                              
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|TOTAL ASSETS                              
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|LIABILITIES AND STOCKHOLDERS' EQUITY      
|CURRENT LIABILITIES                       
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|LONG-TERM LIABILITIES                     
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|COMMITMENTS AND CONTINGENCIES             
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|STOCKHOLDERS' EQUITY                      
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|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY





The accompanying notes are an integral part of these financial statements.
F-2

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|VMH VideoMovieHouse.com Inc.               
|-------------------------------------------
|Statements of Operations                   
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|REVENUES                                   
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|COST OF GOODS SOLD                         
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|GROSS PROFIT                               
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|EXPENSES                                   
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|LOSS FROM OPERATIONS                       
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|OTHER INCOME (EXPENSES)                    
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|LOSS BEFORE INCOME TAXES                   
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|INCOME TAXES                               
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|NET LOSS                                   
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|BASIC AND DILUTED NET LOSS PER COMMON SHARE
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|WEIGHTED AVERAGE NUMBER OF BASIC AND       
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The accompanying notes are an integral part of these financial statements.
F-3

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|VMH VideoMovieHouse.com Inc.                          
|------------------------------------------------------
|Statement of Stockholders' Equity                     
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|Balance, June 30, 2002                                
|                                                      
|Payment of liabilities recorded as contributed capital
|                                                      
|Fractional shares issued in stock exchange            
|                                                      
|Shares issued for management bonus                    
|                                                      
|Shares issued for loan repayment and cash             
|                                                      
|Shares issued for loan repayment                      
|                                                      
|Shares issued for expenses                            
|                                                      
|Shares issued for services                            
|                                                      
|Shares issued for payment of consulting fees          
|                                                      
|                                                      
|Net loss for the year ended June 30, 2003             
|                                                      
|Balance, June 30, 2003                                
|                                                      
|Shares issued for services                            
|                                                      
|                                                      
|Shares issued for retirement of debt                  
|                                                      
|                                                      
|Net loss for the year ended                           
|                                                      
|                                                      
|Balance, June 30, 2004                                

The accompanying notes are an integral part of these financial statements.
F-4

-17-

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|VMH VideoMovieHouse.com Inc.             
|-----------------------------------------
|Statements of Cash Flows                 
|                                         
|                                         
|                                         
|CASH FLOWS FROM OPERATING ACTIVITIES     
|                                         
|                                         
|                                         
|                                         
|                                         
|                                         
|                                         
|                                         
|                                         
|                                         
|                                         
|                                         
|                                         
|                                         
|                                         
|                                         
|Net cash used by operating activities    
|                                         
|CASH FLOWS FROM INVESTING ACTIVITIES     
|                                         
|                                         
|Net cash used  by investing activities   
|                                         
|CASH FLOWS FROM FINANCING ACTIVITIES     
|                                         
|                                         
|                                         
|Net cash provided by financing activities
|NET INCREASE (DECREASE) IN CASH          
|CASH - Beginning of period               
|CASH - End of period                     
|SUPPLEMENTAL CASHFLOW DISCLOSURES        
|                                         
|                                         
|NON-CASH TRANSACTIONS                    
|                                         
|                                         
|                                         
|                                         
|                                         
|                                         
|                                         

The accompanying notes are an integral part of these financial statements.
F-5

-18-

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|VMH VideoMovieHouse.com Inc.     
|---------------------------------
|Notes to the Financial Statements
|June 30, 2004                    

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

VMH VideoMovieHouse.com Inc. (originally Flamingos Beach Resort Inc.) was incorporated in the Province of British Columbia on March 7, 1989.

VMH VideoMovieHouse.com Inc. (hereinafter "VMH" or "the Company") has developed an internet sales site designed to sell videos, CDs, DVDs and books and, as technology advancements permit, to become a virtual video rental store. VMH possesses domain names, a web page, and technology for the sale of videos, DVD's, and CD's through the Internet.

In September 1999, the Company entered into an agreement with First American Scientific Corp. a Nevada corporation, whereby First American Scientific Corp. acquired 100% of the common shares of VMH in return for cash consideration of $250,000. In September 2002, the Company completed a spin-off whereby VMH became an independent, publicly reporting entity.  See Note 5.

The Company's year-end is June 30th.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of VMH is presented to assist in understanding the Company's financial statements.  The financial statements and notes are representations of the Company's management, which is responsible for their integrity and objectivity.  These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.

Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  This basis of accounting contemplates the recovery of the Company's assets and the satisfaction of its liabilities in the normal course of operations.

As shown in the accompanying financial statements, the Company has incurred an accumulated deficit of $747,495 through June 30, 2004 and has limited cash resources.  Although revenues for the year ended June 30, 2004 were $1,452,384, the Company still sustained a loss from operations of $204,282.  These factors raise substantial doubt about the Company's ability to continue as a going concern.

Management plans to undertake a comprehensive review of its ongoing business to substantially increase sales through current channels and develop new sales opportunities.

Management has established plans designed to increase the sales of the Company's products by advertising its products in newspapers, radio and television commercials and via e-mail in the British Columbia area and has established inbound links





F-6

-19-

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|VMH VideoMovieHouse.com Inc.     
|---------------------------------
|Notes to the Financial Statements
|June 30, 2004                    

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Going Concern (continued)
that connect directly to its website from Amazon.com and Half.com.

Management intends to seek additional capital from new equity securities offerings which will, if successful, provide funds needed to increase liquidity, fund internal growth and fully implement its business plan.  However, there is no assurance that the Company will raise the required capital.  If the Company is unable to raise the required capital, then it will assess its future business viability.

The Company's financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

Accounting Method
The Company uses the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.

Advertising Expenses
Advertising expenses consist primarily of costs incurred in the design, development, and printing of Company literature and marketing materials.  The Company expenses all advertising expenditures as incurred.  The Company's advertising expenses were $19,060 and $2,654, for the years ended June 30, 2004 and 2003, respectively.

Loss Per Share
In June 1999, the Company adopted Statement of Financial Accounting Standards Statement (SFAS) No. 128, "Earnings Per Share."  Basic earnings (loss) per share is computed using the weighted average number of common shares outstanding.  Diluted net loss per share is the same as basic net loss per share as there are no common stock equivalents.

Derivative Instruments
The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (hereinafter "SFAS No. 133"), as amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB No. 133", and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities", and SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities".  These statements establish accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging



F-7

-20-

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|VMH VideoMovieHouse.com Inc.     
|---------------------------------
|Notes to the Financial Statements
|June 30, 2004                    

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Derivative Instruments (Continued)
activities. They require that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value.

If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is recognized in income in the period of change.

Historically, the Company has not entered into derivatives contracts to hedge existing risks or for speculative purposes.  At June 30, 2004, the Company has not engaged in any transactions that would be considered derivative instruments or hedging activities.

Cash and Cash Equivalents
For purposes of its statement of cash flows, the Company considers all short-term debt securities purchased with a maturity of three months or less to be cash equivalents.

Fair Value of Financial Instruments
The carrying amounts for cash, accounts receivable, accounts payable and accrued liabilities approximate their fair value.

Concentration of Risk
The Company maintains its cash accounts in primarily one commercial bank in Vancouver, British Columbia, Canada.  The Company's cash accounts are business checking accounts in Canadian and United States dollars.  The United States dollar account is not insured.

Foreign Currency Translation
The Company's functional currency is U.S. dollars.  Assets and liabilities of the Company's operations are translated into U.S. dollars at the period-end exchange rates, and revenue and expenses are translated at the average exchange rates during the period.  Exchange differences arising on translation are disclosed as a separate component of shareholders' equity.  Realizedgains and losses from foreign currency transactions are reflected in the Company's results of operations.

Provision for Taxes
Income taxes are provided based upon the liability method of accounting pursuant to Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (hereinafter "SFAS No.109"). Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities

F-8

-21-

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|VMH VideoMovieHouse.com Inc.     
|---------------------------------
|Notes to the Financial Statements
|June 30, 2004                    

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Provision for Taxes (Continued)
and their financial reporting amounts at each year-end. A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the "more likely than not" standard imposed by SFAS No. 109 to allow recognition of such an asset.

At June 30, 2004 and June 30, 2003, the Company had net deferred tax assets of approximately $254,000 and $180,000, respectively, principally arising from net operating loss carryforwards for income tax purposes, which were calculated using a 34% average Canadian tax rate. As management of the Company cannot determine that it is more likely than not that the Company will realize the benefit of the net deferred tax asset, a valuation allowance equal to the net deferred tax asset has been recorded at each reporting date. The change in the deferred tax asset valuation allowance from June 30, 2003 to June 30, 2004 was $74,000.

The significant components of the deferred tax asset at June 30, 2004 and June 30, 2003 were approximately as follows:



|                                       |   | June 30,  |   | June 30, 
|-------------------------------------- | - | --------- | - | ---------
|                                       |   | 2004      |   | 2003     
|Net operating loss carryforward        | $ | 747,000   | $ | 540,000  
|                                       |   |           |   |          
|Deferred tax asset                     | $ | 254,000   | $ | 180,000  
|Deferred tax asset valuation allowance | $ | (254,000) | $ | (180,000)

At June 30, 2004, the Company has net operating loss carryforwards of approximately $747,000 that begin to expire in the year 2020.

Use of Estimates
The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses.  Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements.  Accordingly, upon settlement, actual results may differ from estimated amounts.

Compensated Absences
Employees of the Company's office in Vancouver, B.C. are entitled, by Canadian law, to paid time off equal to four percent of their wages. At June 30, 2004, the accrued amount is approximately $4,200.

Inventory
Inventories, consisting of products available for sale, are recorded using the specific-identification method and valued at the lower of cost or market value.  Inventory at June 30, 2004 and June 30, 2003 consists of videos for resale at a cost of $225,968 and $117,537, respectively.

F-9

-22-

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|VMH VideoMovieHouse.com Inc.     
|---------------------------------
|Notes to the Financial Statements
|June 30, 2004                    

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Revenue Recognition
The Company's policies on revenue and cost recognition are stated in Note 6.

Impaired Asset Policy
In August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (hereinafter "SFAS No. 144").  SFAS No. 144 replaces SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."  This standard establishes a single accounting model for long-lived assets to be disposed of by sale, including discontinued operations. SFAS No. 144 requires that these long-lived assets be measured at the lower of carrying amount or fair value less cost to sell, whether reported in continuing operations or discontinued operations. In complying with this standard, the Company reviews its long-lived assets quarterly to determine if any events or changes in circumstances have transpired which indicate that the carrying value of its assets may not be recoverable.  The Company determines impairment by comparing the undiscounted future cash flows estimated to be generated by its assets to their respective carrying amounts.

The Company does not believe any adjustments are needed to the carrying value of its assets at June 30, 2004.

Website Development
Effective January 1, 2000, the Company adopted SOP 98-1 as amplified by EITF 00-2, "Accounting for Web Site Development Costs."  In accordance with this early adoption, the Company has capitalized $126,155 in website development costs.  These capitalized costs were amortized over three years.

Comprehensive Income
In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (hereinafter "SFAS No. 130").  SFAS No. 130 establishes standards for reporting and displaying comprehensive income, its components and accumulated balances.  SFAS No. 130 is effective for periods beginning after December 15, 1997. The Company adopted this accounting standard, and its adoption had no effect on the Company's financial statements and disclosures.

Recent Accounting Pronouncements
In May 2003, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity" (hereinafter "SFAS No. 150"). SFAS No. 150 establishes standards for classifying and measuring certain financial instruments with characteristics of both liabilities and equity and requires that those instruments be classified as liabilities in statements of financial position. Previously, many of those instruments were classified as equity. SFAS No. 150 is effective for financial instruments entered

F-10

-23-

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|VMH VideoMovieHouse.com Inc.     
|---------------------------------
|Notes to the Financial Statements
|June 30, 2004                    

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recent Accounting Pronouncements (Continued)
into or modified after May 31, 2004 and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The Company has determined that there was no financial statement impact from the adoption of this statement.

In April 2003, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities" (hereinafter "SFAS No. 149"). SFAS No. 149 amends and clarifies the accounting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities."  This statement is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The adoption of SFAS No. 149 is not expected to have an impact on the financial position or results of operations of the Company.

In December 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure" (hereinafter "SFAS No. 148").  SFAS No. 148 amends SFAS No. 123, "Accounting for Stock-Based Compensation," to provide alternative methods of transition for a voluntary addition. The statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosure in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results.  The provisions of the statement are effective for financial statements for fiscal years ending after December 15, 2002. The Company currently reports stock issued to employees under the rules of SFAS 123. Accordingly, there is no change is disclosure requirements due to SFAS 148.

NOTE 3 - PROPERTY AND EQUIPMENT

Equipment is recorded at cost before accumulated depreciation.  Depreciation is provided using the straight-line method over the estimated useful lives of the assets.  The useful lives of equipment for purposes of computing depreciation is three to fifteen years.  Depreciation expense for the years ended June 30, 2004 and 2003 was $9,360 and $9,419, respectively.

The Company evaluates the recoverability of property and equipment when events and circumstances indicate that such assets might be impaired.  The Company determines impairment by comparing the undiscounted future cash flows estimated to be generated by these assets to their respective carrying amounts.  Maintenance and repairs are expensed as incurred.  Replacements and betterments are capitalized.  The cost and related reserves of assets sold or retired are removed from the accounts, and any resulting gain or loss is reflected in results of operations. The following table sets forth the Company's principal categories of property and equipment:

F-11

-24-

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|VMH VideoMovieHouse.com Inc.     
|---------------------------------
|Notes to the Financial Statements
|June 30, 2004                    

NOTE 3 - PROPERTY AND EQUIPMENT (Continued)



|                              |   | June 30, |   | June 30,
|----------------------------- | - | -------- | - | --------
|                              |   | 2004     |   | 2003    
|                              |   |          |   |         
|Office equipment              | $ | 30,957   | $ | 30,957  
|Leasehold improvements        |   | 20,858   |   | 20,858  
|Less accumulated depreciation |   | (20,496) |   | (11,148)
|Total Property and Equipment  | $ | 31,319   | $ | 40,667  

NOTE 4 - INTANGIBLES

Technology and website are recorded at cost before accumulated amortization. Amortization is provided using the straight-line method over the estimated useful lives of the assets, which is three years. Amortization expense for technology and website for the years ended June 30, 2004 and 2003 was $125,397 and $125,385, respectively.

The following is a summary of technology and website:



|                                  |                   | June 30, |           | June 30,
|--------------------------------- | ----------------- | -------- | --------- | --------
|                                  |                   | 2004     |           | 2003    
|Website                           | $                 | 126,155  | $         | 126,155 
|                                  | Less amortization |          | (126,155) |         
|                                  |                   | -        |           | 42,063  
|                                  |                   |          |           |         
|Technology assets                 |                   | 250,000  |           | 250,000 
|                                  | Less amortization |          | (250,000) |         
|                                  |                   | -        |           | 83,334  
|Total website and technology, net |                   |          |           |         
|                                  | of amortization   | $        | -         | $       

NOTE 5 - COMMON STOCK

The Company has 200,000,000 shares of no par common stock authorized.

In September 1999, the Company sold all its outstanding shares of common stock to First American Scientific Corp. for $250,000 cash.  See Note 1.

F-12

-25-

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|VMH VideoMovieHouse.com Inc.     
|---------------------------------
|Notes to the Financial Statements
|June 30, 2004                    

NOTE 5 - COMMON STOCK  (Continued)

Upon acquisition by First American Scientific Corp. ("FASC"), the Company had one share of stock outstanding.  Although FASC continued to pay expenses through contributions of capital, no additional shares were issued.  On September 20, 2001, the Company's board of directors approved a forward split of 13,243,500 to one.  Per-share amounts in the accompanying financial statements have been adjusted for the split.  This was subsequently modified as of December 20, 2001 to be 14,222,750 to equal the shares necessary to distribute to FASC shareholders.

On June 11, 2001, the Company's board of directors recommended and approved a motion that VMH VideoMovieHouse.com Inc. spin off into its own separate fully reporting company.  In August 2002, the Company finalized its registration with the Securities and Exchange Commission to become a separate reporting entity.  In September 2002, the Company issued 14,222,750 shares of common stock in accordance with the spin-off agreement. An additional seven shares of common stock were issued to complete the stock exchange.

During the year ended June 30, 2004, the Company issued from options: 100,000 shares as payment for services with a fair market value of $5,000 and 3,400,000 shares in consideration for retirement of debt with a fair market value of $90,000.

During the year ended June 30, 2003, the Company issued from options: 2,000,000 shares of common stock as payment for compensation with a fair market value of $20,000; 1,160,000 shares of common stock as payment for services with a fair market value of $58,000; 150,000 shares of common stock for expenses with a fair market value of $7,500; 100,000 shares of common stock for legal services with a fair market value of $5,000; and 1,300,000 shares of common stock for consulting fees with a fair market value of $65,000.

NOTE 6 - REVENUE AND COST RECOGNITION

The Company recognizes revenue for product sales when there is a mutually executed sales contract, when the products are shipped and title passes to customers, when the contract price and terms are fixed, and when collectibility is reasonably assured.  All Internet sales are paid via credit card and are considered immediately collectible.

Cost of sales consists of the purchase price of products sold, inbound and outbound shipping charges, handling costs and packaging supplies.

The Company has sub-distributor relationships with Amazon.com and Half.com. When the Company acts as the subdistributor, it records accounts receivable for funds to be transferred to VMH's bank account.  The transfer of funds usually takes four to fourteen days.



F-13

-26-

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|VMH VideoMovieHouse.com Inc.     
|---------------------------------
|Notes to the Financial Statements
|June 30, 2004                    

Economic Dependency
During the fiscal years ended June 30, 2004 and 2003, approximately 97%  the Company's sales are through Amazon.com and Half.com.

NOTE 7- RELATED PARTY TRANSACTIONS

First American Scientific Corp, the Company's previous parent, paid liabilities for the Company which have been recorded as contributed capital. One of the Company's officers has paid expenses on behalf of the Company in the amounts of $7,532 at June 30, 2004.

NOTE 8 - NOTES PAYABLE

On October 28, 2002, the Company issued a $50,000 unsecured demand note with a 10% interest rate and a stated date of maturity of June 30, 2003.  Cash of $5,000 and the loan balance were applied to exercise options to purchase of 1,100,000 shares of common stock on June 13, 2003.

On June 30, 2003, the Company converted accrued wages and expenses due to a former officer to an unsecured demand note in the amount of $60,449 with a 6% interest rate and no stated date of maturity. Subsequently, on July 25, 2003, the note was sold to a finance company and secured by all the Company's assets under a general security agreement in the B.C. Personal Property Registry. During the period ending December 31, 2003, an additional $8,789 of cash and interest

was added to the note for a balance of $69,238.

During the period ending June 30, 2004, 3,000,000 shares of the Company's common stock were issued as consideration for retirement of $60,000 of the aforementioned debt.  The remaining balance of the note was cancelled by termination of a letter of credit.

On June 25, 2004, the Company issued a $19,500 unsecured demand note with a 12% interest rate and a stated maturity date of December 25, 2004.  The note was issued in consideration for consulting services received.

The Company has an operating line of credit with its Canadian Bank for $22,500.  The interest rate is prime plus 3.5%.  At June 30, 2004 the balance on this line of credit is $14,028.

NOTE 9 - COMMITMENTS AND CONTINGENCIES

Operating Leases
The Company has a five-year lease agreement, which began on May 1, 2002, for office and warehouse space.  The rent for this space is approximately $1,185 per month.  The Company also pays a variable "top up" for its share of taxes and common area costs. Rent expense for the years ended June 30, 2004 and 2003 was $17,617 and $15,953, respectively.

F-14

-27-

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|VMH VideoMovieHouse.com Inc.     
|---------------------------------
|Notes to the Financial Statements
|June 30, 2004                    

Following is a summary of projected lease payments for the next five fiscal years:



|2005 | $ | 15,600
|---- | - | ------
|2006 |   | 15,600
|2007 |   | 13,000
|2008 |   | -     

NOTE 9 - COMMITMENTS AND CONTINGENCIES (Continued)

General Security Aggreement on Company Assets
See Note 8.

NOTE 10 - COMMON STOCK OPTIONS

On June 13, 2003, the Company's board of directors approved the VMH VideoMovieHouse.com 2003 Nonqualified Stock Option Plan. This plan allows the Company to distribute up to 5,000,000 options of common stock shares to officers, directors, employees and consultants through the authorization of the Company's board of directors at an average exercise price of $0.033 per share.

On March 24, 2004, the Company's board of directors approved the VMH VideoMovieHouse.com 2004 Nonqualified Stock Option Plan. This plan allows the Company to distribute up to 5,000,000 options of common stock shares to officers, directors, employees and consultants through the authorization of the Company's board of directors at an exercise price of up to $0.25 per share.

The following is a summary of the Company's open stock option plans:



|                       |  |                  |  |                   |  | Number of      
|---------------------- |  | ---------------- |  | ----------------- |  | ---------------
|                       |  |                  |  |                   |  | securities     
|                       |  | Number of        |  |                   |  | remaining      
|                       |  | securities to be |  |                   |  | available for  
|                       |  | issued upon      |  | Weighted-average  |  | future issuance
|Equity compensation    |  | exercise of      |  | exercise price of |  | under equity   
|plans not approved by  |  | outstanding      |  | outstanding       |  | compensation   
|shareholders           |  | options          |  | options           |  | plans          
|2003 Stock Option Plan |  | -                |  | -                 |  | 290,000        
|2004 Stock Option Plan |  | -                |  | -                 |  | 500,000        
|Total                  |  | -                |  | -                 |  | 790,000        



F-15

-28-

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|VMH VideoMovieHouse.com Inc.     
|---------------------------------
|Notes to the Financial Statements
|June 30, 2004                    

During the year ended June 30, 2003, the Company granted 2,000,000 common stock options for compensation at the exercise price of $0.01 and 2,710,000 common stock options for services at the exercise price of $0.05. The stock options were exercised immediately upon granting.  At June 30, 2003, 290,000 common stock options remain in the 2003 Nonqualified Stock Option Plan.

NOTE 10 - COMMON STOCK OPTIONS (Continued)

During the year ended June 30, 2004, the Company granted 3,400,000 common stock options in consideration for debt retirement at exercise prices ranging from $0.02 to $0.08 per share valued at $90,000 and 100,000 options as payment for consulting services valued at $5,000.  These options were immediately exercised.

The following is a summary of the status of fixed options outstanding at June 30, 2004:



|                           |  |             |   | Weighted
|-------------------------- |  | ----------- | - | --------
|                           |  |             |   | Average 
|                           |  | Number of   |   | Exercise
|                           |  | Shares      |   | Price   
|                           |  |             |   |         
|Outstanding, July 1, 2002  |  | -           | $ | -       
|Granted                    |  | 4,710,000   |   | 0.03    
|Exercised                  |  | (4,710,000) |   | 0.03    
|Outstanding, June 30, 2003 |  | -           |   | -       
|Granted                    |  | 3,500,000   |   | 0.03    
|Exercised                  |  | (3,500,000) |   | 0.03    
|Outstanding, June 30, 2004 |  | -           | $ | -       

NOTE 11 - CONCENTRATIONS

The Company's revenues are derived predominantly from Amazon.com and Half.com sales via the Internet.











F-16

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ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 8A.   CONTROLS AND PROCEDURES

(a)     Evaluation of Disclosure Controls and Procedures:  Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports filed under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based upon and as of the date of that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports the Company files and submits under the Exchange Act is recorded, processed, summarized and reported as and when required.

(b)     Changes in Internal Control over Financial Reporting:  There were no changes in the Company's internal control over financial reporting identified in connection with the Company evaluation of these controls as of the end of the period covered by this report that could have significantly affected those controls subsequent to the date of the evaluation referred to in the previous paragraph, including any correction action with regard to significant deficiencies and material weakness.

There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any significant deficiencies or material weaknesses of internal controls that would require corrective action.

ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

The name, age and position held by our directors and officers is as follows:





-30-

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|Name and Address      | Age | Position(s)                                       
|--------------------- | --- | --------------------------------------------------
|Steven Gaspar         | 53  | President, Principal Executive Officer, Treasurer,
|33677 Wildwood Drive  |     | Principal Financial Officer and a member of the   
|Abbotsford, B.C.      |     | Board of Directors                                
|Canada V2S 1S2        |     |                                                   
|                      |     |                                                   
|James Carroll         | 54  | Chief Operating Officer and a member of the Board 
|40218 Wells Line Road |     | of Directors                                      
|Abbotsford, B.C.      |     |                                                   
|Canada V3G 2K7        |     |                                                   

Background of Officers and Directors

Since August 31, 2002, Mr. Gaspar has been the president, chief executive officer, treasurer, chief financial officer and a member of the board of directors.  From March 1996 until September 1997, Mr. Gaspar, was the owner/operator of  two retail video stores in Abbotsford, British Columbia, Canada.  In October 1997, he was a partner in a chain of retail five stores, called Movies, Movies, located in the Vancouver area. In September 1999, Mr. Gaspar, became our general manager and played an instrumental role in our development and implementation.

On April 1, 2004, Mr. Carroll was appointed to our board of directors and on July 2, 2004, Mr. Carroll was appointed our chief operating officer.   From February 1992 until August 2003 Simbatang Financial Services Ltd. President and sole owner. Company assisted clients in obtaining mortgage financing. The Mr. Carroll also did consulting through this company to assist individuals and companies with financial and banking needs. He also provided management recommendations to various businesses.

Involvement in Certain Legal Proceedings

We have no legal proceedings during the past five years, no present or former director, executive officer or person nominated to become a director or an executive officer has been the subject matter of any legal proceedings, including bankruptcy, criminal proceedings, or civil proceedings.  Further, no legal proceedings are known to be contemplated by governmental authorities against any director, executive officer and person nominated to become a director.

Compliance with Section 16 (a) of the Exchange Act

We file reports pursuant to Section 15(d) of the Securities Exchange Act of 1934 and accordingly are not subject to the reporting requirements of Section 16(a) of the Exchange Act.





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Audit Committee and Charter

We have an audit committee and audit committee charter.  Our audit committee is comprised of all of our officers and directors.  None of directors are deemed independent.  All directors also hold positions as our officers.  A copy of our audit committee charter is filed as an exhibit to this report.  Our audit committee is responsible for: (1) selection and oversight of our independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters; (3) establishing procedures for the confidential, anonymous submission by our employees of concerns regarding accounting and auditing matters; (4) engaging outside advisors; and, (5) funding for the outside auditory and any outside advisors engagement by the audit committee.

Audit Committee Financial Expert

We have no financial expert.  We believe the cost related to retaining a financial expert at this time is prohibitive.  Further, because of our limited operations, we believe the services of a financial expert are not warranted.

Code of Ethics

We have adopted a corporate code of ethics.  We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code.

Disclosure Committee and Charter

We have a disclosure committee and disclosure committee charter.  Our disclosure committee is comprise of all of our officers and directors.  The purpose of the committee is to provide assistance to the Chief Executive Officer and the Chief Financial Officer in fulfulling their responsibilities regarding the identification and disclosure of material information about us and the accuracy, completeness and timeliness of our financial reports.

ITEM 10.   EXECUTIVE COMPENSATION.

The following table sets forth information with respect to compensation we paid to our chief executive officer and the other highest paid executive officers (the Named Executive Officer) during the three most recent fiscal years.





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Summary Compensation Table



|                        |      |        |                     |         |            | Long Term Compensation
|----------------------- | ---- | ------ | ------------------- | ------- | ---------- | ----------------------
|                        |      |        | Annual Compensation | Awards  | Payouts   
|(a)                     |      | (b)    | (c)                 | (d)     | (e)        | (f)                   
|                        |      |        |                     | Other   |            | Securities            
|                        |      |        |                     | Annual  | Restricted | Underlying            
|Name and Principal      |      |        |                     | Compens | Stock      | Options/              
|Position                | Year | Salary | Bonus               | ation   | Award(s)   | SARs                  
|                        |      |        |                     |         |            |                       
|Steven Gaspar           | 2004 | 52,000 | -                   | -       | -          | -                     
|President               | 2003 | 52,000 | -                   | -       | -          | 2,210,000             
|                        | 2002 | 48,000 | -                   | -       | -          | -                     
|                        |      |        |                     |         |            |                       
|James Carroll           | 2004 | -      | -                   | -       | -          | -                     
|Chief Operating Officer | 2003 | -      | -                   | -       | -          | -                     
|                        | 2002 | -      | -                   | -       | -          | -                     
|                        |      |        |                     |         |            |                       
|Calvin Kantonen         | 2004 | -      | -                   | -       | -          | -                     
|President               | 2003 | -      | -                   | -       | -          | -                     
|(resigned 8/02)         | 2002 | -      | -                   | -       | -          | -                     

There are no stock option, retirement, pension, or profit sharing plans for the benefit of our officers and directors, other than our 2003 Incentive Stock Option Plan.  Under this Plan, the board of directors is vested with discretionary authority to grant options to persons furnishing services to us.  There were 5,000,000 shares in the plan.  4,810,000 shares have been issued as a result of the exercise of options.  190,000 shares remain in the plan.

Future Compensation of Our Officers

For the fiscal year ending June 30, 2005, we intend to pay Mr. Gaspar a salary of $52,000 per annum and issue him options to acquire 10,000,000 shares of common stock at an exercise price of $0.01 per share and Mr. Carroll a salary of $52,000 per annum and issue him options to acquire 10,000,000 shares of common stock at an exercise price of $0.01 per share.

Option/SAR Grants

No individual grants of stock options, whether or not in tandem with stock appreciation rights known as SARs and freestanding SARs have been made to any executive officer or any director since our inception, accordingly, no stock options have been exercised by any of the officers or directors since we were founded other than as disclosed above.

Long-Term Incentive Plan Awards

We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance to occur over a period longer than one fiscal year, whether such performance is measured by reference to our financial performance, our stock price, or any other measure.





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Compensation of Directors

We do not have any plans to pay our directors any money.  The directors did not receive any other compensation for serving as members of the board of directors. There are no contractual arrangements with any member of the board of directors.

We do not expect to pay any salaries to our officers except Messrs. Gaspar and Carroll as noted herein until such time as we generate sufficient revenues to do so.

Indemnification

Pursuant to our Articles of Incorporation, we may indemnify an officer or director who is made a party to any proceeding, including a law suit, because of his position, if he acted in good faith and in a manner he reasonably believed to be in our best interest. In certain cases, we may advance expenses incurred in defending any such proceeding. To the extent that the officer or director is successful on the merits in any such proceeding as to which such person is to be indemnified, we must indemnify him against all expenses incurred, including attorney's fees. With respect to a derivative action, indemnity may be made only for expenses actually and reasonably incurred in defending the proceeding, and if the officer or director is judged liable, only by a court order. The indemnification is intended to be to the fullest extent permitted by the laws of the province of British Columbia.

Regarding indemnification for liabilities arising under the Securities Act of 1933, as amended, which may be permitted to directors or officers pursuant to the foregoing provisions, we are informed that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy, as expressed in the Act and is, therefore, unenforceable.

ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND  MANAGEMENT.

Security Ownership of Certain Beneficial Owners

The following table sets forth, as of September 16, 2003, the beneficial shareholdings of persons or entities holding five percent or more of our common stock, each director individually, each named executive officer and all of our directors and officers as a group. Each person has sole voting and investment power with respect to the shares of common stock shown, and all ownership is of record and beneficial.









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|Number and Address         |                  |                        
|-------------------------- | ---------------- | -----------------------
|Beneficial Owner [1]       | Number of Shares | Percentage of Ownership
|                           |                  |                        
|Steven Gaspar              | 2,385,000        | 10.63%                 
|33677 Wildwood Drive       |                  |                        
|Abbotsford, B.C.           |                  |                        
|Canada   V2S 1S2           |                  |                        
|                           |                  |                        
|James Carroll              | -0-              | 0.00%                  
|40218 Wells Line Road      |                  |                        
|Abbotsford, B.C.           |                  |                        
|Canada   V3G 2K7           |                  |                        
|                           |                  |                        
|All Officers and Directors | 2,385,000        | 10.63%                 
|as a Group (2 Persons)     |                  |                        

Future Sales by Existing Stockholders

All issued shares of common stock issued to date are immediately resalable subject only to limitations imposed on insiders under Rule 144.

Changes in Control

To the knowledge of management, there are no present arrangements or pledges of securities of our company which may result in a change in control of our company.

ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Our former president, sold the one share of our common stock to First American Scientific Corp. in August 1999, in consideration of $250,000.  At the time of the sale of our share to First American, he was not affiliated with First American Scientific Corp.

We approved a 13,243,500-for-1 stock split on September 20, 2001 and amended the stock split to 14,000,000-for-1 on December 20, 2001 and a further amended the stock split to 14,400,000-for-1 on March 30, 2002.

On June 27, 2003, 2,000,000 shares of common stock were issued to Steven Gaspar at a purchase price of $0.01 per share or a total of $20,000.  On the same date 210,000 shares were issued to Steven Gaspar in consideration of forgiveness of a debt in the amount of $10,500.  All shares were issued pursuant to our Form S-8 Registration Statement.





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ITEM 13.   EXHIBITS AND REPORTS ON FORM 8-K.

Reports on Form 8-K

No Form 8-Ks have been filed since inception.

Exhibits

The following Exhibits are incorporated herein by reference from the Registrant's Form SB-2 Registration Statement filed with the Securities and Exchange Commission, SEC file #333-70836 on October 3, 2001. Such exhibits are incorporated herein by reference pursuant to Rule 12b-32:



|Exhibit No. | Document Description                                                 
|----------- | ---------------------------------------------------------------------
|            |                                                                      
|3.1         | Articles of Incorporation.                                           
|3.2         | Amended Articles of Incorporation.                                   
|3.3         | Amended Articles of Incorporation.                                   
|3.4         | Special Resolution.                                                  
|3.5         | Board Resolution authorizing split on 9/20/01.                       
|3.6         | Board Resolution authorizing amended split on 12/20/01.              
|3.7         | Board Resolution authorizing spin-off.                               
|3.8         | Memorandum of Articles authorizing 20,000,000 shares of common stock.
|3.9         | Board resolution authorizing amended split at 3/30/02.               
|4.1         | Specimen Stock Certificate.                                          
|10.1        | Agreement with Amazon.com.                                           
|10.2        | Agreement with Half.com.                                             
|99.1        | Form F-X.                                                            

The following Exhibits are incorporated herein by reference from the Registrant's Form S-8 Registration Statement filed with the Securities and Exchange Commission, SEC file #333-106444 on June 25, 2003. Such exhibits are incorporated herein by reference pursuant to Rule 12b-32:



|Exhibit No. | Description                         
|----------- | ------------------------------------
|            |                                     
|10.1        | 2003 Nonqualified Stock Option Plan.

The following Exhibits are incorporated herein by reference from the Registrant's Form 10-KSB filed with the Securities and Exchange Commission,  on September 25, 2003. Such exhibits are incorporated herein by reference pursuant to Rule 12b-32:



|Exhibit No. | Description                 
|----------- | ----------------------------
|            |                             
|14.1        | Code of Ethics              
|99.1        | Audit Committee Charter     
|99.2        | Disclosure Committee Charter

The following exhibits are filed with this report:



|Exhibit No. | Description                                                                                                                                                                                       
|----------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |                                                                                                                                                                                                   
|23.1        | Consent of Williams & Webster, P.S.                                                                                                                                                               
|31.1        | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-15(e) and Rule 15d-15(e), promulgated under the Securities and Exchange Act of 1934, as amended.
|32.1        | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer and Chief Financial Officer).                     



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ITEM 14.   PRINCIPAL ACCOUNTING FEES AND SERVICES

Williams and Webster, P.S., Certified Public Accountants, are the Company's independent auditors to examine the financial statements of the Company for the fiscal year ending June 30, 2004.  Williams & Webster, P.S. has performed the following services and has been paid the following fees for these fiscal years.

Audit Fees

Williams & Webster, P.S. was paid aggregate fees of approximately $26,000 for the fiscal year ended June 30, 2004 and approximately $22,000 for the fiscal year ended June 30, 2003 for professional services rendered for the audit of the Company's annual financial statements and for the reviews of the financial statements included in the Company's quarterly reports on Form 10-QSBs during these fiscal years.

Audit-Related Fees

Williams & Webster P.S. was not paid additional fees for the fiscal year ended June 30, 2004 and June 30, 2003 for assurance and related services reasonably related to the performance of the audit or review of the Company's financial statements.

Tax Fees

Williams & Webster, P.S. was not paid any aggregate fees for the fiscal year ended June 30, 2004 and for the fiscal year ended June 30, 2003 for professional services rendered for tax compliance, tax advice and tax planning.  This service was not provided.

All Other Fees

Williams & Webster, P.S. was paid no other fees for professional services during the fiscal years ended June 30, 2004 and June 30, 2003.





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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 5th day of October, 2004.



| | VMH VIDEOMOVIEHOUSE.COM INC.
| | ----------------------------
| | (Registrant)                
| |                             
| | BY:                         
| |                             

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the Registrant and in the capacities.



|Signatures        | Title                                                                         | Date     
|----------------- | ----------------------------------------------------------------------------- | ---------
|                  |                                                                               |          
|/s/ Steven Gaspar | President, Principal Executive Officer,                                       | 10/5/2004
|Steven Gaspar     | Treasurer, Principal Financial Officer and a member of the Board of Directors |          
|                  |                                                                               |          
|/s/ James Carroll | Chief Operating Officer and a member                                          | 10/5/2004
|James Carroll     | of the Board of Directors                                                     |          





















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