U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-KSB

     [X]    Annual  report  pursuant  to section  13 or 15(d) of the  Securities
            Exchange Act of 1934 for the fiscal year ended December 31, 2000, or

     [ ]    Transition  report pursuant to section 13 or 15(d) of the Securities
            Exchange act of 1934 for the transition period from

                                       to

                         Commission File No. 000-1108028

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

               Florida                                 65-065668
    -------------------------------        ---------------------------------
    (State or other jurisdiction of        (IRS Employer Identification No.)
    incorporation or organization)

                           5170 Dixie Road, Suite 301
                      Mississauga, Ontario, Canada L4W 1E3
                               TEL: (905) 238-9398
                               FAX: (905) 238-9119

Securities registered under Section 12(b) of the Act:  None

Securities registered under Section 12(g) of the Act:  common stock,
$.001 par value.

Check whether the issuer (1) filed all reports  required to be filed by sections
13 or 15(d) of the  Exchange  Act  during  the past 12 months  (or such  shorter
period  that the issuer 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 in this form, and no disclosure will be contained, to the best of
registrant's   knowledge,   in  definitive   proxy  or  information   statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [ ]

The Registrant's revenues for its most recent fiscal year:  $0

The aggregate market value of voting stock held by non-affiliates:  $780,395
                                       1
<PAGE>

As of April 2, 2001, the Registrant had outstanding  19,560,268 shares of common
stock, par value $0.001.

Documents incorporated by reference:  None.

<TABLE>
<CAPTION>

                        TABLE OF CONTENTS

ITEM NUMBER AND CAPTION                                                                 Page
-----------------------                                                                 ----
Part I

<S>                                                                                       <C>
1.   Description of Business                                                              3

2.   Description of Property                                                              8

3.   Legal Proceedings                                                                    8

4.   Submission of Matters to a Vote of Security Holders                                  8

Part II

5.   Market for Common Equity and Related Stockholder Matters                             9

6.   Management's Discussion and Analysis and Plan of Operation                          12

7.   Financial Statements                                                                13

8.   Changes in and Disagreements with Accountants                                       15
     on Accounting and Financial Disclosure

Part III

9.   Directors, Executive Officers, Promoters and Control                                15
     Persons; Compliance with Section 16(a) of the Exchange Act

10.  Executive Compensation                                                              17

11.  Security Ownership of Certain Beneficial Owners and Management                      18

12.  Certain Relationships and Related Transactions                                      21

13.  Exhibits and Reports on Form 8-K                                                    22

Signatures                                                                               23
</TABLE>

                                        2
<PAGE>

FORWARD-LOOKING STATEMENT NOTICE

     When used in this report, the words "may," "will," "expect,"  "anticipate,"
"continue,"   "estimate,"  "project,"  "intend,"  and  similar  expressions  are
intended to identify  forward-looking  statements  within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934 regarding events,  conditions,  and financial trends that may affect the
Company's future plans of operations,  business strategy, operating results, and
financial  position.  Persons  reviewing  this  report  are  cautioned  that any
forward-looking  statements  are not  guarantees of future  performance  and are
subject to risks and uncertainties and that actual results may differ materially
from those included within the forward-looking statements as a result of various
factors.  Such factors are discussed under the headings "Item 1.  Description of
Business,"  and "Item 6.  Management's  Discussion  and  Analysis  of  Financial
Condition and Results of Operations,"  and also include general economic factors
and conditions  that may directly or indirectly  impact the Company's  financial
condition or results of operations.

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

History

Incorporation

VHS Network, Inc. ("VHSN"), a Florida corporation,  was incorporated pursuant to
articles of incorporation dated December 18, 1995, under the name Ronden Vending
Corp.

Acquisition of Video Home Shopping, Inc.

On December  24,  1996 and January 9, 1997,  VHSN (then  called  Ronden  Vending
Corp.) completed a two step merger  transaction that resulted in the acquisition
of Video Home Shopping, Inc. (a Tennessee corporation).  At the time, Video Home
Shopping,  Inc. was a network marketing and distribution company which offered a
wide range of products  and  services to  consumers  through the medium of video
tape. It was intended that video home shopping be the principal  focus of VHSN's
business however after the merger VHSN decided not to continue with the business
operations of Video Home Shopping, Inc. and became inactive.

Name Change

On January 9, 1997,  articles of amendment were filed to change the name of VHSN
from Ronden Vending Corp. to VHS Network, Inc.

Acquisition of VHS Network Inc.

On April 9, 1997,  VHSN  incorporated  VHS  Acquisition,  Inc. as a wholly-owned
subsidiary.  In April,  1997, VHSN completed a transaction  that resulted in the
acquisition of, VHS Network Inc., (a Manitoba, Canada private corporation).  The
sole  shareholder of VHS Network Inc. (the Manitoba  corporation)  was Groupmark

                                       3
<PAGE>



Canada Limited ("Groupmark"). Groupmark received 8,000,000 common shares of VHSN
and a secured  promissory  note for  $500,000  and thus  became the  controlling
shareholder of VHSN. As a result of the  transaction  all the directors of VHSN,
except  Thomas  Roberts  resigned and Elwin D.  Cathcart and David  Smelsky were
appointed directors of VHSN.

Rule 504 Offering (1997/1998)

On or about April 28,  1997,  VHSN,  under its current  management,  commenced a
private  placement  of  its  common  shares  under  Rule  504  of  Regulation  D
promulgated   under  the  Securities  Act  of  1933.  VHSN  raised  proceeds  of
$416,492.50 under this offering.

Share Combination

On November 20, 1997,  the board of directors of VHSN  approved the  combination
(consolidation)  of its issued and outstanding common shares on a basis of 1 new
post-combination   share  for  every  20   pre-combination   shares.  The  share
combination  was effected by a written action of the board of directors  without
shareholder approval and did not require an amendment to the articles.

Acquisition of Lithographic Prints

On May 14, 1998, VHSN issued 1,399,992 common shares to Rogue-Mountain  Corp. in
an arm's length  transaction  for the purchase of inventory for resale valued at
$139,999.  The inventory consists of full colour lithographic prints from a sold
out limited edition release, "The Andover Series" by artist Jim Perleberg. As of
March 31, 2000 none of this inventory has been sold.

Rule 504 Offering (1999/2000)

In December, 1999, VHSN commenced another private placement of its common shares
under Rule 504 of Regulation D promulgated  under the Securities Act of 1933 and
section 203 (t) of the Pennsylvania Securities Act of 1972. VHSN raised proceeds
of $950,000  pursuant to this offering and issued shares for services  valued at
$50,000. This offering terminated in March, 2000.

Business Development

Acquisition of China eMall

On April 12, 2000, VHSN acquired all the issued and outstanding common shares of
China eMall  Corporation,  an Ontario private company.  Although the form of the
transaction  was a purchase of all the issued and  outstanding  common shares of
China eMall,  the substance of the  transaction was a purchase of certain assets
of China  eMall.  China  eMall is an  emerging  business-to-business  e-commerce
internet company.

VHSN  acquired all of the issued and  outstanding  common  shares of China eMall
Corporation  pursuant to a share  exchange  agreement  made between VHSN,  China
eMall Corporation,  Uphill Capital Inc., GDCT Investment Inc., Gang Chai, Qin Lu
Chai, Qing Wang, Tai Xue Shi,  Charles He and Forte Management Corp. (the "Share
Exchange  Agreement").  The  common  shares  of China  eMall  were  held by five
individual   shareholders   and  three   corporations.   Two  of  the  corporate

                                       4
<PAGE>

shareholders,  GDCT  Investment  Limited and Uphill  Capital Inc.,  were holding
companies  whose  only  activities  were  holding  shares of China  eMall.  VHSN
purchased all the issued and outstanding  shares of GDCT Investment  Limited and
Uphill Capital Inc. and thus indirectly  acquired the shares of China eMall held
by these  companies.  The  shareholders  of GDCT  Investment  Limited and Uphill
Capital  Inc.  received  common  shares of VHSN  pursuant to the Share  Exchange
Agreement.  The other corporate  shareholder,  Forte Management Corp.,  received
common shares of VHSN in exchange for its shares of China eMall.

All the  shareholders  of  China  eMall  who are  individuals  (the  "Individual
Vendors")  received Class B Special Shares of China eMall that are  exchangeable
on a one for one basis for common  shares of VHSN for no further  consideration.
In total,  VHSN  issued  2,100,000  common  shares on closing  and has  allotted
4,015,000  common  shares  for  issuance  when the  Class B Special  Shares  are
exchanged  into common shares of VHSN. The holders of the Class B Special Shares
can  exchange any or all of their Class B Special  Shares into common  shares of
VHSN at any time,  however,  if any Class B Special  Shares  remain  issued  and
outstanding after the expiration of the earlier of (a) three years from the date
on which a Form SB-2 or similar  filing has been filed with the SEC with respect
to the common  shares of VHSN and the SEC has  reached a position  of no further
comment,  and (b) five years after which such  Exchangeable  Shares were issued,
then China eMall Corporation may redeem the Class B Special Shares on payment of
one common share of VHSN for each Class B Special Share.

The  transaction  was structured in this way to allow the Individual  Vendors to
postpone  the  realization  of capital  gains tax pursuant to the Income Tax Act
(Canada) on the sale of their China eMall common  shares.  Since the  Individual
Vendors'  common  shares  were  converted  into Class B Special  Shares of China
eMall, any capital gain on the disposition of the China eMall common shares will
be deferred until the Class B Special Shares are converted into common shares of
VHSN.

Acquisition of Exodus

Pursuant  to an  Agreement  and Plan of  Reorganization  dated  May 6, 2000 VHSN
acquired  all the  outstanding  shares  of common  stock of  Exodus  Acquisition
Corporation, a California corporation,  from the shareholder thereof in exchange
for an aggregate of 500,000 shares of common stock of VHSN. The sole shareholder
of Exodus was BAC Consulting Corporation ("BAC Consulting").  There was no prior
relationship   between  VHSN  and  BAC  Consulting  or  the  principals  of  BAC
Consulting.  As a result,  Exodus became a wholly-owned  subsidiary of VHSN. The
acquisition  was intended to qualify as a  reorganization  within the meaning of
Section 368 (a) (1) (B) of the Internal  Revenue Code of 1986, as amended.  Upon
effectiveness of the acquisition, pursuant to Rule 12g-3(a) of the General Rules
and  Regulations  of the  Securities  and Exchange  Commission,  VHSN would have
become  the  successor  issuer  to  Exodus  for  reporting  purposes  under  the
Securities  and Exchange  Act of 1934 (the  "Act").  Exodus has had no operating
history nor any revenues or earnings from  operations  and it has no significant
assets or financial resources.
                                       5
<PAGE>

Business of Issuer

Over the last two years VHSN has positioned itself to identify  technologies and
market  opportunities  in the United  States,  Canada and abroad in Internet and
interactive media electronic commerce and smartCARD loyalty marketing.

China eMall Business

VHSN  recently  acquired  all the common  shares of China eMall  Corporation,  a
corporation  incorporated  pursuant to the Business  Corporations Act (Ontario).
China eMall is an e-commerce  company that intends to provide Internet marketing
and  information  services  to  facilitate  trade  between  Chinese  and western
businesses.  China eMall's primary focus is to establish an on-line  presence to
facilitate the export of Chinese products and services to western consumers.

History

China eMall was incorporated on February 5, 1999 and was established by Dr. Gang
Chai, and two partners,  Dr. Charles He, a computer expert,  and Ms. Qing Wang a
veteran Chinese businesswoman.  In April, 1999, the initial China eMall website,
based on a software platform Intershop, was built and began test functioning. In
August 1999,  China eMall signed an initial  supply  agreement  with  Wangfujing
Department  Store  Ltd.  of China and  supplied  personnel  to assist in product
photo-sampling,  scanning and data inputting,  and an upgraded  version of China
eMall's  website  was  built.  In  November  1999,   China  eMall   contemplated
introducing services in addition to its product line. On April 12, 2000, all the
issued and outstanding common shares of China eMall were acquired by VHSN.

Products - Manufactured Goods

China eMall will offer a complete  spectrum of products that are  catalogued and
organized  under twenty  categories  that appear on the home page of the website
www.china-emall.com as follows:  Agriculture;  Apparel; Arts & Crafts;  Chemical
Industry;   Communications   &   Transportation;   Construction   &  Decoration;
Electronics; Energy & Mineral Resources; Entertainment; Food; Health & Medicine;
Home & Garden; Industrial Supplies;  Jewelry, Clocks & Watches; Office Supplies;
Pet Supplies;  Security;  Sports;  Textiles,  Silk; and Toys. As of December 31,
2000 no sales by the China-eMall business have been made even though the website
can be used as "catalogue"  for off-line  sales.  In January,  2001  China-eMall
had its first sale.

Internet Services

China  eMall also  intends to offer a broad range of China  based  services  and
opportunities  such as business  information  services,  professional  services,
financial services, and travel, immigration, translation and other services.

Business Strategy

China eMall's management intends to establish an e-commerce center to link China
with western business markets using the following strategies:


                                       6
<PAGE>

  Short Term

o        Selecting initial products from brand suppliers;
o        Outsourcing  exporting  duties to  suppliers  and  importing  duties to
         importing agencies;
o        Building up a marketing and sales infrastructure;
o        Identifying and establishing services for western companies; and
o        Marketing China eMall as a brand e-commerce name in North America.

  Long Term

o        Broadening product base;
o        Increasing the proportion of retail purchases;
o        Expanding services; and
o        Using China eMall's web site as a host web site for Chinese businesses.

Competition

The business of China eMall Corporation will compete with the traditional export
market  including  wholesalers  and  distributors as well as with other Internet
wholesalers and distributors, such as meetChina.com.  This industry has a number
of well-established competitors including national, regional and local companies
within and outside China possessing greater financial,  marketing, personnel and
other  resources  than China eMall.  There is no assurance  that the China eMall
will be able to market or sell its  products  and  services if faced with direct
product  and  services  competition  from  these  larger  and  more  established
wholesalers and distributors.

SmartCARD Business

VHSN intends to engage in the sale of computer  chip-based  plastic access cards
that utilize VHSN's proprietary  smartCARD  technology.  This technology enables
the cards to be used for  identification  purposes  and for debit or charge card
purposes.  VHSN intends to focus its marketing efforts on companies that wish to
distribute  these cards to their  customers  as a reward for their  loyalty.  An
example  of a loyalty  program  card is a  department  store  card used to store
information  about previous  purchases by the customer or the  customer's  name,
address, birthday or other personal information.

Groupmark  Canada Limited owns the registered  trade-mark  "smartCARD" in Canada
and has a pending application in the United States. Groupmark Canada has granted
VHSN a  license  to use the  trade-mark  smartCARD  to  manufacture  and  market
smartCARDS world-wide on a non-exclusive basis and to utilize the technology and
other  know-how  related to  smartCARDs,  until  January 1,  2010.  The  license
agreement  also  grants the right to VHSN to permit  others to  manufacture  the
smartCARDs.  Pursuant  to the terms of the  license  agreement  VHSN will pay to
Groupmark  a  royalty  of 5% of  net  sales  of  products  using  the  smartCARD
trade-mark and technology.

Competition

There are several  companies who engineer,  design and market  applications  for
chip-based  cards,  with  greater  financial,  personnel,  marketing  and  sales
resources than VHSN. However, these companies focus the marketing of these cards
for security and debit or charge card  purposes,  whereas VHSN will market these
cards as a loyalty reward to a company's customers.
                                       7
<PAGE>

Suppliers

VHSN's  success as a marketer of e-commerce  products  depends on its ability to
obtain a reliable  source of  products  and then  locate  retailers  who wish to
purchase these products.  There are over a dozen companies that  manufacture the
chip that is used in smartCARDs and several companies that put together the chip
and the  plastic  card to  produce a  smartCARD.  VHSN  believes  it can  obtain
smartCARDS from up to six different suppliers depending on the type of card that
is needed.

Research and Development.

During the last two fiscal years VHSN has spent significant time on research and
development  activities.  VHSN spent approximately $135,000 in 1998 and $115,000
in 1999 on research and development.

Employees

VHSN  employs the services of 5 full time  employees  which are provided to VHSN
through the management services agreement with Groupmark Canada Limited.

ITEM 2.  DESCRIPTION OF PROPERTY

SmartCARD

VHSN does not own any  property,  however on October  1, 2000  Groupmark  Canada
Limited commenced a five year lease of approximately 3,000 square feet of office
space located at 5170 Dixie Road, Suite 301, Mississauga,  Ontario,  Canada. The
rent for the office space is  CDN$47,927  (approximately  $33,000 US) per annum.
The premises and rent are shared with Groupmark  Canada Limited.  The management
services  argument  covers the costs of VHSN's  share of the rent.  It is VHSN's
intention use this location to house both the smartCARD  operation and the China
eMall operation at the same facility.

China eMall

Until  operations  are moved to 5170 Dixie Road,  China eMall  Corporation  will
maintain its office at 56 Temperance Street,  Toronto,  Ontario,  Canada.  China
eMall shares the premises  which is lease by another  tenant on a month to month
basis at the annual rent of  CDN$18,000  (approximately  US$12,250) or CDN$1,500
(approximately US$1,020) per month.

ITEM 3.  LEGAL PROCEEDINGS

VHSN is aware that the  Internal  Revenue  Service  subpoenaed  records from its
transfer agent.  Through  discussions  with the IRS, VHSN has been informed that
the IRS is  investigating  a former  director of a corporation  that merged with
VHSN.

                                       8
<PAGE>

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

No matter was submitted to a shareholder vote for the fourth quarter of the 2000
fiscal year.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

In 1996 the  common  shares of VHSN began  trading on the NASD  Over-the-Counter
Bulletin  Board market and  continued  trading  under the trading  symbol "VHSN"
until, on or about, May 18, 2000 when it continued trading on the Pink Sheets.

The  following  table sets forth high and low bid prices of VHSN's common shares
for 1998, 1999 and 2000 as obtained by the National  Quotation Bureau, LLC or as
otherwise indicated.

                                                         Closing Bid
        --------------------------------------------------------------
        Quarter(1)                                   High $       Low
        --------------------------------------------------------------

        1998

        First Quarter                                1.03         0.13
        Second Quarter                               3.25         0.31
        Third Quarter                                3.44         1.50
        Fourth Quarter                               2.16         0.44

        1999

        First Quarter                                0.88         0.16
        Second Quarter                               0.59         0.13
        Third Quarter                                0.27         0.06
        Fourth Quarter                               0.20         0.12

        2000

        First Quarter(2)                             2.00         0.03
        Second Quarter(2)                            0.80        0.03
        Third Quarter(2)                             0.36        0.08
        Fourth Quarter(2)                            0.12        0.03
        -------------------------------------------------------------

(1)        Each quarter is based on the calendar year
(2)        Prices supplied by VHSN

                                       9
<PAGE>

Holders

As of March 31, 2001 the number of registered holders of record of common shares
was 171.

Dividends

VHSN has not declared any dividends in the last two fiscal years.

RECENT SALES OF UNREGISTERED SECURITIES

In  December,  1999 VHSN  commenced  another  offering  pursuant  to Rule 504 of
Regulation D promulgated  under the Securities Act of 1933 to raise a maximum of
$1,000,000.  On December 20, 1999,  VHSN issued  150,000 common shares to Steven
Rossi and 350,000  common  shares to Kevin  Waltzner  as payment for  consulting
services  rendered to VHSN pursuant to consulting  agreements dated December 20,
1999,  and December 16, 1999,  respectively.  The exemptions  from  registration
relied  on are  provided  by Rule 504 of  Regulation  D,  promulgated  under the
Securities  Act of 1933,  as amended  and  section  203 (t) of the  Pennsylvania
Securities  Act of 1972, as amended.  During the first three months of 2000 VHSN
issued  2,083,333 common shares to Paul Winters at prices of $0.10 and $0.60 for
aggregate  proceeds of  $950,000.  The  purchaser  was  provided  with a private
placement  memorandum,  completed an investor  questionnaire  and a subscription
agreement.  This private  placement was made in reliance on the  exemption  from
registration  provided  by  Rule  504 of  Regulation  D  promulgated  under  the
Securities Act of 1933, as amended (the "Securities Act") and section 203 (t) of
the  Pennsylvania  Securities  Act of 1972, as amended.  Shares sold pursuant to
this 504 offering are summarized below.

          Purchaser                     Number of Shares               Price
          ---------                     ----------------               -----
          Steven Rossi                  150,000                        $0.10
          Kevin Waltzner                350,000                        $0.10
          Paul Winters                  600,000                        $0.10
          Paul Winters                  1,483,333                      $0.60

On April 12, 2000 pursuant to a share exchange  agreement for the acquisition of
China  eMall  Corporation,  VHSN  issued  2,100,000  common  shares and  further
allotted 4,015,000 common shares for issuance on exchange of the Class B Special
Shares of China  eMall for  common  shares of VHSN.  The  holders of the Class B
Special  Shares  can  exchange  any or all of their  Class B Special  Shares for
common  shares of VHSN at any time however if any Class B Special  Shares remain
issued and  outstanding  after the  expiration of the earlier of (A) three years
from the date on which a Form SB-2 or similar filing has been filed with the SEC
with respect to the common shares of VHSN and the SEC has reach a position of no
further comment,  and (B) five years after which such  Exchangeable  Shares were
issued,  then China eMall  Corporation  may redeem the Class B Special Shares on
payment  of one  common  share of VHSN  for  each  Class B  Special  Share.  The
exemption from registration  relied on by VHSN is Regulation S promulgated under
the Securities Act of 1933, as amended.

                                       10
<PAGE>

The 2,100,000 shares were issued as follows:

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

The 4,015,000 Class B Special Shares of China eMall  Corporation  were issued as
follows:

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

In April,  2000 VHSN issued 50,000  common  shares to Alexander  Stewart for the
provision of legal services.  The shares were valued at $0.50 and were issued in
reliance upon the exemption  from  registration  under  Regulation S promulgated
under the Securities Act of 1933, as amended.

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

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

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

In March,  2000 VHSN issued  2,500,000 common shares to Groupmark Canada Limited
in settlement of $865,868 owing under the management  services agreement between
VHSN and  Groupmark.  VHSN relied upon the  exemption  from  registration  under
Regulation S promulgated under the Securities Act of 1933, as amended.

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

                                       11
<PAGE>

On May 5, 2000 VHSN issued  10,000  common  shares to David  Johnston in partial
settlement of an action brought by David Johnston against VHSN.

On October 19, 2000 VHSN issued an aggregate of 25,000 common shares to Patricia
Gajewski,  John O. Beicher and Philip C.  Anderson in partial  settlement  of an
outstanding debt.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS

Summary

The  information  in this section  should be read  together  with the  financial
statements that are included elsewhere in this filing.

Going Concern

VHSN is in the development stage and has generated virtually no revenues and has
not attained profitability.  Its continued existence and its ability to continue
as a going concern are dependent upon its ability to obtain  additional  capital
to fund its operations.

Goals and Objectives

VHSN's goals and objectives are centered on the ability to identify technologies
and market opportunities in the United States, Canada and abroad in Internet and
interactive  media e-commerce and smartCARD  loyalty  marketing.  To achieve its
goals,   VHSN  is   developing   its   supplier   base   and   its   web   site,
www.china-emall.com,  so that it will be in a position to attract purchasing and
revenues.  It is at the same  time  investigating  companies  from  which it can
acquire  technology with proven financial  performance,  where joint ventures or
acquisitions may also be possible.

Cash Requirements

The issuer will need to raise  additional funds in the next 12 months to satisfy
its cash  requirements.  VHSN  intends  to raise  additional  funds  and  pursue
acquisitions with revenue potential.

Employees

VHSN may experience  significant  changes in the number of employees in the next
12 months.

Results of Operations

Results of years ended December 31, 2000 and December 31, 1999
Revenues  for both years ended  December 31, 2000 and December 31, 1999 were $0.
Operating  Expenses increased from $525,377 in 1999 to $871,258 in 2000, largely
due  to an  increase  in  Agency  Fees,  General  and  Administration  Fees  and
Professional Fees.

                                       12
<PAGE>

During the year ended  December 31, 2000,  VHSN has continued to develop its web
site  www.china-emall.com.   In  August,  2000  VHSN  and  G.C.  Consulting  and
Investment  Corp.  decided  that it was in  VHSN's  best  interest  in  order to
conserve cash on hand, to terminate the consulting  agreement which provided for
the services of Dr. Gang Chai. It was  determined  that the services of Dr. Chai
were not  required  on a full time basis  however  both  parties  agreed that an
arrangement would be reached to compensate Dr. Chai for his services that may be
required from time to time by VHSN. Dr. Gang remains a director of VHSN.

Liquidity and Capital Resources

VHSN  achieved no revenues  from  operations  in 2000 or 1999.  During 2000 VHSN
received an aggregate of  approximately  $1,165,000  from investors  through the
sale of common  shares made  pursuant  to  offerings  exempt  from  registration
including the exercise of outstanding warrants.

Revenues  commenced in the tirst quarter of 2001,  and VHSN expects  revenues to
exceed  1,500,000.00  in the  next  12  months.  Revenues  in 1st  Quarter  were
approximately 100,000.00.

Changes in Financial Position

During 2000 VHSN's total assets  increased from $208,306 to $241,117.  In April,
2000 VHSN acquired all the issued and  outstanding  common shares of China eMall
and e-commerce  company.  The China eMall acquisition was substantively an asset
acquisition  (i.e.,  domain  name and a business  plan)  rather  than a business
combination.  China eMall had an absence of historical  revenues or  significant
operating  expenses and no tangible assets or liabilities.  Intangible assets of
China eMall consisted of capitalized  web-site  development  costs,  which had a
book value of $24,000.

During 2000 total  liabilities  decreased  from  $2,169,235 to $742,677 which is
largely due to a decrease in a note payable to Groupmark Canada Limited pursuant
to the management  services agreement between Groupmark and VHSN. Amounts due to
Groupmark pursuant to this management services agreement and other borrowings as
of December 31, 2000 and 1999 were $332,027 and  $1,645,868  respectively.  VHSN
converted  $865,868 of the amounts due to Groupmark into 2,500,000 common shares
of VHSN and also made cash payments of $597,973.

The reserve for loss contingencies for the period ended December 31, 2000 is for
potential payroll tax liabilities  relating to employees of Video Home Shopping,
Inc., (a Tennessee company that was acquired by VHSN in December,  1996) and for
other outstanding  claims. It is not a general  liability  reserve.  There is no
statute of limitations with respect to this potential liability.

The number of issued common shares of VHSN increased from 10,929,435 on December
31, 1999 to 19,560,268 on December 31, 2000. Shareholders' equity increased from
($1,960,929) to ($501,560) during 2000.

ITEM 7. FINANCIAL STATEMENTS

                                VHS NETWORK, INC.

                                  CONSOLIDATED
                              FINANCIAL STATEMENTS

                           December 31, 2000 and 1999

                                       13
<PAGE>


                                 C O N T E N T S

                                VHS NETWORK, INC.

                        Consolidated Financial Statements

                           December 31, 2000 and 1999

Independent Auditor's Report..........................................F-1
Consolidated Balance Sheets...........................................F-2
Consolidated Statements of Operations.................................F-3
Consolidated Statements of Shareholders' Equity.......................F-4
Consolidated Statements of Cash Flows..............................F-5 - F-6
Notes to Financial Statements......................................F-7 - F-22

                                       14
<PAGE>




                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------

Board of Directors VHS NETWORK, Inc.

We have audited the  accompanying  consolidated  balance  sheets of VHS NETWORK,
Inc., a Florida  Corporation,  as of December 31, 2000 and 1999, and the related
consolidated  statements of operations,  shareholders' equity and cash flows for
the  years  then  ended  in  conformity  with  generally   accepted   accounting
principles.  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 audit.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit 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 consolidated  financial statements referred to above present
fairly, in all material respects,  the financial position of VHS Network,  Inc.,
as of December 31, 2000 and 1999, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted  accounting
principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  note 8 to the
financial statements, the Company experienced a significant net loss in the year
ending  December  31,  2000 with losses  incurred  subsequently,  and  generated
negative cash flows from operating  activities.  These matters raise substantial
doubt about the Company's  ability to continue as a going concern.  Management's
plans in  regard to these  matters  are also  described  in note 8. In the event
additional  funds  are  raised,  continuation  of  the  business  thereafter  is
dependent upon the ability of the Company to achieve  sufficient  cash flow. The
accompanying financial statements do not include any adjustments relating to the
recoverability  and  classification of recorded asset amounts or the amounts and
classification  of  liabilities  that might be  necessary  should the Company be
unable to continue as a going concern.

/s/ POHL, MCNABOLA, BERG & COMPANY, LLP
--------------------------------------
    POHL, MCNABOLA, BERG & COMPANY, LLP

March 23, 2001


                                      F-1
<PAGE>
<TABLE>
<CAPTION>

                                VHS NETWORK, INC.

                           Consolidated Balance Sheets
                        As of December 31, 2000 and 1999

                                                                   2000           1999
                                                                -----------    -----------
ASSETS
<S>                                                             <C>            <C>
    Cash                                                        $    25,205    $       533
    Inventory                                                       111,999        139,999
                                                                -----------    -----------
            Total current assets                                    137,204        140,532
                                                                -----------    -----------
    Property and Equipment
        Furniture and Equipment                                      18,940           --
        Accumulated Depreciation                                     (1,892)          --
                                                                -----------    -----------
                                                                     17,048           --
                                                                -----------    -----------
    Intangible assets, net                                           18,330           --
                                                                -----------    -----------
    Other Assets
        Other receivables                                               761           --
        Prepaids and deposits                                        67,774         67,774
                                                                -----------    -----------
                                                                     68,535         67,774
                                                                -----------    -----------
                   Total assets                                 $   241,117    $   208,306
                                                                ===========    ===========
LIABILITIES
    Accounts payable                                            $    60,650    $    64,867
    Salaries and wages payable to officers                             --           71,500
    Accrued expenses                                                   --           37,000
                                                                -----------    -----------
            Total current liabilities                                60,650        173,367
                                                                -----------    -----------
    Management fees payable, related party                          150,000        336,000
    Notes payable, related party                                    182,027      1,309,868
    Reserve for loss contingencies                                  350,000        350,000
                                                                -----------    -----------
            Total long-term liabilities                             682,027      1,995,868
                                                                -----------    -----------
                Total liabilities                                   742,677      2,169,235
                                                                -----------    -----------

    Commitments and contingencies (note 8)

SHAREHOLDERS' EQUITY

    Common stock: 100,000,000 shares
        authorized; 19,560,268 and 10,929,435
        issued and outstanding, respectively                         19,559         10,929
    Preferred stock: 25,000,000 shares authorized;
        none issued or outstanding                                     --             --
    Additional paid-in-capital                                    3,544,408      1,231,170
    Accumulated deficit                                          (4,065,527)    (3,203,028)
                                                                -----------    -----------
                Total shareholders' equity                         (501,560)    (1,960,929)
                                                                -----------    -----------
                   Total liabilities and shareholders' equity   $   241,117    $   208,306
                                                                ===========    ===========
</TABLE>

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

                                      F-2

<PAGE>
                                VHS NETWORK, INC.

                      Consolidated Statements of Operations
                 for the years ended December 31, 2000 and 1999

                                                          2000           1999
                                                     ------------    -----------
Income:
     Sales                                             $    --      $       --
                                                     ------------    -----------
Operating Expenses:
    Agency fees                                           52,557           9,190
    Salaries and wages                                      --            71,500
    Consulting fees                                       45,640          52,833
    General and administrative                            32,251             686
    Management fees                                      270,000         336,000
    Professional fees                                    150,973          18,168
    Office expense - China                                44,017            --
    Depreciation and amortization                          7,562            --
    Inventory allowance                                   28,000            --
    Other                                                 23,743            --
    Non-recurring acquisition expense                    216,515          37,000
                                                    ------------    ------------
            Total operating expenses                     871,258         525,377
                                                    ------------    ------------
Other (Income) and Expenses:
    Interest (income)                                     (9,516)           --
    Interest expense                                         568            --
    Exchange (gain)/loss                                     189            --
                                                    ------------    ------------
            Total other (income) and expense              (8,759)           --
                                                    ------------    ------------
               Net loss before taxes                     862,499         525,377
                                                    ------------    ------------
                Income taxes                                --              --
                                                    ------------    ------------
               Net loss                             $    862,499    $    525,377
                                                    ============    ============
Net loss per common share - Basic                   $      0.044    $      0.050
                                                    ============    ============
Weighted average number of
   common shares - Basic                              19,469,192      10,432,175
                                                    ============    ============
Net loss per common share - Diluted                 $      0.044    $      0.050
                                                    ============    ============
Weighted average number of
    common shares - Diluted                           19,469,192      10,432,175
                                                    ============    ============

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

                                      F-3

<PAGE>

<TABLE>
<CAPTION>

                                VHS NETWORK, INC.

                 Consolidated Statements of Shareholders' Equity
                 for the years ended December 31, 2000 and 1999


                                                   Common           Preferred     Additional
                                                   Stock              Stock        paid-in    Accumulated
                                              Shares     Amount   Shares Amount   -capital     Deficit        Total
                                          ----------   ---------- ------ ------   ----------   ----------    ----------
<S>                                       <C>          <C>         <C>   <C>     <C>          <C>         <C>
Balance December 31, 1998                 10,429,435   $   10,429   --   $--     $     --     1,181,670   $(1,485,552)
                                          ----------   ---------- ------ ------   ----------   ----------    ----------
Common stock issued for services             500,000          500   --    --         49,500         --          50,000
Net loss for the period                         --           --     --    --           --       (525,377)     (525,377)
                                          ----------   ---------- ------ ------   ----------   ----------    ----------
Balance December 31, 1999                 10,929,435       10,929   --    --      1,231,170   (3,203,028)   (1,960,929)
                                          ----------   ---------- ------ ------   ----------   ----------    ----------
Sale of common stock                       2,633,333        2,633   --    --      1,057,367         --       1,060,000
Conversion of note
     payables, related party               2,500,000        2,500   --    --        863,368         --         865,868
Common stock issued for services              57,500           57   --    --         25,693         --          25,750
Common stock issued for expenses              25,000           25   --    --         22,725         --          22,750
Acquisition of China e-mall Corp.          2,100,000        2,100   --    --         21,900         --          24,000
Acquisition of Exodus Acquisition Corp.      500,000          500   --    --        124,500         --         125,000
Conversion of debt into common stock          10,000           10   --    --         21,990         --          22,000
Exercise of warrants                         250,000          250   --    --        104,750         --         105,000
Conversion of wages
     payable to officers
     into common stock                       555,000          555   --    --         70,945         --          71,500
Net loss for the period                         --           --     --    --           --       (862,499)     (862,499)
                                          ----------   ---------- ------ ------   ----------   ----------    ----------
Balance December 31, 2000                 19,560,268   $   19,559   --   $--     $3,544,408   $(4501,560)    $(501,560)
                                          ==========   ========== ====== ======   ==========   ==========    ==========
</TABLE>

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

                                      F-4

<PAGE>

<TABLE>
<CAPTION>

                                VHS NETWORK, INC.

                      Consolidated Statements of Cash Flows
                 for the years ended December 31, 2000 and 1999

                                                                   2000                1999
                                                               -----------         -----------
<S>                                                            <C>                 <C>
 Net income (loss)                                             $  (862,499)        $  (525,377)
 Adjustments to reconcile net income (loss) to net cash
   provided by (used for) operating activities:
 Issuance of common stock for services                              25,750              50,000
   Issuance of common stock for expenses                            22,750                --
  Acquisition of Exodus Corporation                                125,000                --
  Inventory valuation allowance                                     28,000                --
  Amortization of intangible assets                                  5,670                --
  Depreciation                                                       1,892                --
                                                               -----------         -----------
                                                               $  (653,437)        $  (475,377)
Cash flow from operating activities:
 Changes in assets and liabilities
 Receivables                                                   $      (761)        $    11,000
  Prepaid and deposits                                                --                  --
 Accounts payable                                                   (4,217)             24,025
 Salaries and wages payable-officers                                  --                71,500
 Accrued expenses                                                  (15,000)             37,000
 Cash flow used in operating activities                        $  (673,415)        $  (331,852)
 Cash flow from investing activities:
 Purchase of furniture and equipment                           $   (18,940)        $      --
                                                               -----------         -----------
  Net cash used in investing activities
                                                               $   (18,940)        $      --
                                                               -----------         -----------
Cash flow from financing activities:
 Management fees payable, related party                        $   150,000         $      --
 Payments on notes payable, related party                         (597,973)            314,194
 Proceeds from exercise of warrants                                105,000                --
 Proceeds from sale of stock                                     1,060,000                --
                                                               -----------         -----------

 Net cash generated by financing activities                    $   717,027         $   314,194
                                                               -----------         -----------
 (Decrease) Increase in cash and cash equivalents                   24,672             (17,658)
 Balance at beginning of year                                          533              18,191
                                                               -----------         -----------
  Balance at end of year
                                                               $    25,205         $       533
                                                               ===========         ===========
</TABLE>

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

                                      F-5
<PAGE>

<TABLE>
<CAPTION>

                                VHS NETWORK, INC.

                Consolidated Statements of Cash Flows (continued)
                 for the years ended December 31, 2000 and 1999

                                                             2000              1999
                                                           ---------          ------
 Supplementary disclosure:

<S>                                                    <C>                    <C>
Cash paid for interest                                 $   568                $ --
                                                           ---------          ------

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

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

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

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

Common stock issued for services and expenses          $   48,500             $50,000
                                                           ---------          ------
</TABLE>

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

                                      F-6

<PAGE>


                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                December 31, 2000


1.       NATURE OF OPERATIONS

         Company History

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

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

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

         In  April  1997,  the  Company  was  restructured  by way of a  reverse
         take-over involving its wholly owned subsidiary, VHS Acquisition,  Inc.
         a Florida  company,  and VHS  Network  Inc.,  a Manitoba  and  Canadian
         controlled private corporation.  Pursuant to the reverse take-over, the
         sole  shareholder  of  VHS  Network  Inc.,  Groupmark  Canada  Limited,
         received  400,000  shares of the  Company's  common stock and a secured
         promissory note for US$500,000 and became the  controlling  shareholder
         of the Company. In 1998, the promissory note for $500,000 was converted
         into 5,000,000 common shares.

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

                                      F-7
<PAGE>


                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                December 31, 2000

1.       NATURE OF OPERATIONS (continued)

         Operations
         ----------

         During  1999,  the  Company  began  repositioning  itself  to  identify
         technologies and market opportunities in the United States,  Canada and
         abroad in Internet  and  electronic  commerce  interactive  media,  and
         SmartCARD  loyalty  marketing.  The Company will operate and/or develop
         two lines of business as follows:

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

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

                                      F-8
<PAGE>


                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                December 31, 2000

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

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

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

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

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

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

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

         Inventories  are  stated  at the  lower of cost  (first  in,  first out
method) or market.
                                      F-9

<PAGE>


                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                December 31, 2000

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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

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

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

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

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

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

                                      F-10
<PAGE>


                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                December 31, 2000

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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

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

         Revenue
         -------

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

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

         In 1999,  the Company  adopted SFAS No. 130,  "Reporting  Comprehensive
         Income."  SFAS  No.  130   establishes   standards  for  reporting  and
         presentation of  comprehensive  income and its components in a full set
         of financial  statements.  Comprehensive  income consists of net income
         and  unrealized   gains  (losses)  on  available  for  sale  marketable
         securities  and  is  presented  in  the   consolidated   statements  of
         shareholders'  equity and comprehensive  income.  SFAS No. 130 requires
         only additional  disclosures in the consolidated  financial  statements
         and does not  affect the  Company's  financial  position  or results of
         operations.  The elements of  comprehensive  income for the years ended
         December 31, 2000 and 1999 are de minimis.

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

         Income  (loss) per common  share is  computed on the  weighted  average
         number of common or common and  common  equivalent  shares  outstanding
         during each year. Basic  Earnings-per-Share  ("EPS") is computed as net
         income  (loss)  applicable  to  common  stockholders'  divided  by  the
         weighted  average number of common shares  outstanding  for the period.
         Diluted  EPS  reflects  the  potential  dilution  that could occur from
         common shares  issuable  through  stock  options,  warrants,  and other
         convertible  securities when the effect would be dilutive.  The Company
         had no dilutive securities in 2000 and 1999.

                                      F-11
<PAGE>


                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                December 31, 2000

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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

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

         Reclassifications
         -----------------

         Certain amounts in the 1999 financial statements have been reclassified
         to conform to the 2000 presentation.

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

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

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

         The  Company   expenses   advertising   costs  as  they  are  incurred.
         Advertising  costs for the year ending  December  31, 2000 were $45,390
         respectively.  The Company did not incur any  advertising  costs during
         the year ended December 31, 1999.

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

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

                                      F-12
<PAGE>


                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                December 31, 2000

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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

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

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

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


3.       INVENTORIES

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

         The Company  acquired  these sets of prints in exchange  for  1,399,992
         shares of its common stock valued at $139,999 (see note 2). The Company
         will be  offering  these  prints for sale  through its own web site and
         other Internet web sites.

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

                                      F-13
<PAGE>


                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                December 31, 2000

4.       INCOME TAXES

         No  provision  for federal and state  taxes has been  recorded  for the
         years ended December 31, 2000 and 1999,  since the Company incurred net
         operating losses for these years.

         The  provision  for  income  taxes  does not  differ  from the  amounts
         recorded for financial versus tax purposes.

         Deferred income taxes reflect the tax effects of temporary  differences
         between the carrying  amounts of assets and  liabilities  for financial
         reporting purposes and the amounts used for income tax purposes.

         The components of net deferred income tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>

             For the year ended December 31, 2000                  Federal                 State
                                                               ------------------    -------------------
<S>                                                            <C>                   <C>
             Deferred income tax assets:
              Net operating loss carryforwards                 $      1,374,411      $         221,013
              Inventory allowance                                          9,800                  1,540
              Non-deductible reserve                                   (119,000)               (19,250)
              Accrued expenses                                          (24,310)                (3,932)
              Valuation allowance                                    (1,240,901)              (199,371)
                                                               ------------------    -------------------

             Net deferred tax asset                                           -                      -
                                                               ------------------    -------------------

             Deferred income tax liabilities:                                 -                      -
                                                                ------------------    -------------------

                     Net assets                                $              -      $               -
                                                               ==================    ===================

             For the year ended December 31, 1999                  Federal                 State
                                                               ------------------    -------------------
             Deferred income tax assets:
              Net operating loss carryforwards                 $      1,089,029      $         176,167

              Non-deductible reserve                                   (119,000)               (19,250)
              Accrued expenses                                          (24,310)                (3,932)
              Valuation allowance                                      (945,719)              (152,985)
                                                               ------------------    -------------------

             Net deferred tax asset                                           -                      -
                                                               ------------------    -------------------

             Deferred income tax liabilities:                                 -                      -
                                                               ------------------    -------------------

                     Net assets                                $              -      $               -
                                                               ==================    ===================
</TABLE>



                                      F-14

<PAGE>


                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                December 31, 2000

4.       INCOME TAXES (continued)

         Due to the  uncertainty  surrounding  the  realization  of deferred tax
         assets, the Company has recorded a valuation  allowance against its net
         deferred tax asset. The Company has loss carryforwards of approximately
         $1,374,411  from  continuing  operations,  which  may be used to offset
         future United States income taxes,  which begin to expire in 2015.  The
         Company has state loss carryforwards of approximately $221,013.

5.       STOCKHOLDERS' EQUITY

         Common Stock
         ------------

         In December  1999,  the Company  commenced a private  placement  of its
         common  shares  under Rule 504 of  Regulation D  promulgated  under the
         Securities  Act of  1933  and  section  203  (t)  of  the  Pennsylvania
         Securities  Act of 1972. As of September 30, 2000, the Company had sold
         2,083,333 shares for $950,000, completing the full offering.

         On April 12, 2000,  the Company sold 550,000 shares of its common stock
         for $110,000,  which included warrants to purchase  1,225,000 shares of
         its common stock at exercise  prices  ranging from $0.35 to $0.95.  All
         warrants expire on or before 180 days from the date of issuance. On May
         3, 2000,  the Company  issued  250,000  shares of its common  stock for
         $105,000 pursuant to the exercise terms of the warrants.  The remaining
         warrants to  purchase  975,000  shares of the  Company's  common  stock
         expired unexercised.

         The Company  has issued  92,500  shares of its common  stock in lieu of
         cash payments for the settlement of liabilities  and services  rendered
         to the Company by various third parties.

6.       STOCK OPTIONS

         The Company has adopted only the disclosure provisions of SFAS No. 123.
         It applies APB Opinion No. 25 and related interpretations in accounting
         for its stock option plan.  Accordingly,  no compensation cost has been
         recognized  for its stock option plan other than for options  issued to
         outside  third  parties.  If  the  Company  had  elected  to  recognize
         compensation  expense  based  upon the fair value at the grant date for
         awards under this plan consistent  with the  methodology  prescribed by
         SFAS No.  123,  the  Company's  net loss  and loss per  share  would be
         reduced to the pro forma  amounts  indicated  below for the years ended
         December 31:

                                      F-15
<PAGE>


6.       STOCK OPTIONS (continued)
<TABLE>
<CAPTION>

                                                                          2000                   1999
                                                                    ---------------       -----------------
         Net loss

<S>                                                              <C>                   <C>
                     As reported                                 $       (862,499)     $         (525,377)
                     Pro forma                                   $       (862,499)     $         (525,377)
         Basic and diluted loss per common share Basic:

                     As reported                                 $         (0.044)     $            (0.05)
                     Pro forma                                   $         (0.044)     $            (0.05)
                  Diluted:
                      As reported                                $         (0.044)     $            (0.05)
                      Pro forma                                  $         (0.044)     $            (0.05)
</TABLE>


         Options are granted at prices that are equal to the current  fair value
         of the Company's  common stock at the date of grant. The vesting period
         is  usually  four  years or  related  to the  length of the  consulting
         contract  period.  The  Company  did not issue any  options in 2000 and
         1999.

         The fair  value of these  options  was  estimated  at the date of grant
         using the  Black-Scholes  option-pricing  model.  The options  were all
         issued in 1998 and 1997, and they were immediately vested.

         A  summary  of the  status of the  Company's  stock  option  plan as of
         December 31, 2000 and 1999 and changes  during the years ended on those
         dates is presented below:

                                      F-16
<PAGE>

<TABLE>
<CAPTION>

                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                December 31, 2000

6.       STOCK OPTIONS (continued)

                                                                 Weighted                        Weighted
                                                                  Average                         Average
                                                                 Exercise                         Exercise
                                                    2000           price             1999          price
                                                    ----         -----               ----         -----
<S>                                                <C>              <C>             <C>              <C>
         Balance at beginning of year              2,000,000        $0.36           2,000,000        $0.36

         Granted                                           -                                -

         Exercised                                         -                                -

         Forfeited/Cancelled                               -                                -
                                                 ------------                     ------------

         Outstanding at year end                   2,000,000        $0.36           2,000,000        $0.36
                                                 ============                     ============

         Options exercisable at year end           2,000,000        $0.36           2,000,000        $0.36
                                                 ============                     ============

         Weighted   average   fair   value   of        $0.00                            $0.00
         options granted during the year         ============                     ============
</TABLE>



         The remaining  contractual life for options granted to purchase 750,000
         shares of common stock at an exercise price of $0.35 is 12 months.  The
         remaining  contractual  life for options granted to purchase  1,250,000
         shares of common stock at an exercise price of $0.40 is 24 months.  The
         stock options are all non-qualified stock options.

         The  Black-Scholes  option  valuation  model was  developed  for use in
         estimating  the fair  value of traded  options,  which  have no vesting
         restrictions and are fully transferable.  In addition, option valuation
         models require the input of highly subjective assumptions including the
         expected stock price volatility.  Because the Company's  employee stock
         options  have  characteristics  significantly  different  from those of
         traded options, and because changes in the subjective input assumptions
         can materially affect the fair value estimate, in management's opinion,
         the  existing  models  do not  necessarily  provide a  reliable  single
         measure of the fair value of its stock options.

                                      F-17
<PAGE>


                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                December 31, 2000

7.       RELATED PARTY TRANSACTIONS

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

         In 1997, the Company entered into a management  service  agreement with
         Groupmark Canada Limited ("Groupmark"), of which the Chairman and Chief
         Executive  Officer of the Company is the sole  shareholder.  Under this
         agreement,   Groupmark  provides  the  Company  all  management,  daily
         administrative  functions,  financial and business  advisory  services.
         Groupmark  was  also   contracted   to  assist  in  the   technological
         development  of  the  "SmartCARD."  Contractually,  charges  for  these
         services  are not to exceed  $56,000 per month.  The  Company  incurred
         management   fees  of   $270,000   and   $336,000  in  2000  and  1999,
         respectively.

         Amounts due Groupmark pursuant to this management service agreement and
         other  borrowings  as of December  31, 2000 and 1999 are  $332,027  and
         $1,645,868, respectively. Groupmark has the option to accept payment by
         way of the Company's common stock at fair market value in lieu of cash.
         The Company issued  2,500,000 shares of its common stock for settlement
         of  $865,868  due to  Groupmark.  The Company  also made cash  payments
         totaling $597,973 to Groupmark during 2000.

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

         On October 13, 1999 the Board of Directors approved issuance of 370,000
         and 185,000 shares of the Company's common stock to the Chief Executive
         Officer and Chief Financial Officer, respectively. The grants of common
         stock were made in lieu of cash compensation. The total market value of
         the common  stock on the date of grant was  $71,500.  The  shares  were
         issued to these two individuals in July 2000.

8.       COMMITMENTS AND CONTINGENCIES

         Legal
         -----

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

                                      F-18
<PAGE>



                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                December 31, 2000

8.       COMMITMENTS AND CONTINGENCIES (continued)

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

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

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

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

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

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

                                      F-19
<PAGE>


                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                December 31, 2000

8.       COMMITMENTS AND CONTINGENCIES (continued)

         While  management  views  that  any  liability  in this  regard  is the
         responsibility of the former principal of Video Home Shopping, Inc. and
         is not necessarily the liability of the Company,  out of prudence,  the
         Company has elected to provide a reserve of $350,000 to provide for the
         possibility  of such  liability to the IRS.  Management is currently in
         process of  determining  the course of further  action  regarding  this
         liabliltiy.  As of March 23, 2001,  Management has not been notified by
         the IRS regarding the current status of the investigation.

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

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

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

         Management  raised  additional  capital in 2000 and is currently in the
         process of  negotiating  additional  equity  financing  with  potential
         investors. The financial statements do not include any adjustments that
         might result from the outcome of this uncertainty.

9.       ACQUISITIONS

         Acquisition of China eMall Corporation
         --------------------------------------

         On April  12,  2000,  the  Company  completed  the  acquisition  of all
         outstanding  common  shares of China eMall  Corporation,  ("eMall")  an
         e-commerce  company,  through the issuance of  2,100,000  shares of the
         Company's common stock,  which had a market value of $1,181,250.  eMall
         has Preferred  Stock  outstanding  that is  convertible  into 4,015,000

                                      F-20
<PAGE>

                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                December 31, 2000

9.       ACQUISITIONS (continued)

         shares of the Company's  common stock.  The Company has a 100% interest
         in the voting  stock of China eMall  because of this  transaction.  The
         Preferred Stock of eMall is non-voting,  and it is convertible into the
         Company's  common  stock  at the  discretion  of the  holders  of eMall
         Preferred  Stock.  The eMall  Preferred  Stock can be  redeemed  by the
         Company at the  earlier  of:  (a) three  years from the date on which a
         registration  statement  for the Common  shares of the Company is filed
         with the  Securities  and  Exchange  Commission  in the US; or (b) five
         years  from  the  date of  issue,  (April  12,  2000).  The  historical
         operations of eMall before the date of the acquisition were de minimis.

         The eMall  acquisition  transaction was treated as an asset acquisition
         (i.e.,  purchase of a Domain name and a business plan) rather than as a
         business  combination.  eMall has an absence of historical  revenues or
         significant  operating  expenses and no tangible assets or liabilities.
         Intangible assets of eMall consist of capitalized  web-site development
         costs, which had a book value of $24,000.

         The  eMall  acquisition   transaction  has  been  accounted  for  under
         provisions  of SAB 48, and  accordingly  no  intangible  assets  (e.g.,
         goodwill) have been  recorded.  The purchase price is based on the book
         value of the assets  acquired  which were  $24,000 for the  capitalized
         web-site  development  costs. The web-site  development costs are being
         amortized over 3 years on a straight-line basis.

         Acquisition of Exodus Acquisition Corporation
         ---------------------------------------------

         In May 2000, the Company merged with Exodus Acquisition Corporation,  a
         California corporation,  and a fully reporting company under regulation
         12(g) of the  Securities  Exchange Act of 1934.  Exodus has no material
         assets or liabilities,  and had no prior operations. Under terms of the
         acquisition,  The Company issued 500,000 shares of the Company's common
         stock,  (having a market  value of  $125,000)  for all the  outstanding
         shares of Exodus Acquisition Corporation. The acquisition was accounted
         for  using  the  purchase  method  of  accounting.   To  conclude  this
         transaction,  the  Company  incurred  $90,070  in  acquisition  related
         expenses.  The total costs  associated  with the  acquisition of Exodus
         were  $215,070,  and are  classified as  non-recurring  expenses in the
         statement of operations.  There is no goodwill  recorded as a result of
         this acquisition.  The historical  operations of Exodus before the date
         of acquisition were deminimis.

                                      F-21
<PAGE>


10.      INTANGIBLE ASSETS

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

         Domain name                                 $           24,000
         Less: Accumulated amortization                          (5,670)
                                                     -------------------

                                                     $           18,330
                                                     ==================

         Amortization expense for the year ended December 31, 2000 was $5,670.

11.      REGISTRATIONS STATEMENT

         During 2000, the Company filed their Registration Statement, Form SB-2,
         pertaining  to the sale of  6,830,812  shares of its common  stock,  of
         which 3,755,828 shares are issued and outstanding, and 3,074,984 shares
         are issuable  upon exercise of options,  warrants and other  conversion
         privileges  to acquire  common  stock.  The shares were issued,  or are
         issuable upon conversion or exercise of securities,  which were issued,
         by the Company in private  placement  transactions.  The Securities and
         Exchange  Commission issued a no further comment letter on February 14,
         2001, and the  registration  statement was deemed  effective as of that
         date.

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

                                      F-22
<PAGE>

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

During  the last two  fiscal  years the  accountant  for VHSN has not  resigned,
declined to stand for re-election or been dismissed.  However, VHSN was required
to change from its  Canadian  auditor to a Certified  Public  Accountant  in the
United  States in  preparation  of  becoming a  reporting  company in the United
States.

Exodus Acquisition  Corporation,  a wholly-owned  subsidiary of VHS, changed its
principal  accountant  from  Weinberg & Company,  P.A.  to Berg & Company in the
current  fiscal  year in  connection  with the  purchase  of all the  issued and
outstanding shares of Exodus by VHS on May 6, 2000.

Weinberg & Company was formally notified on September 19, 2000 that Exodus would
no longer require their services as principal accountant. The report of Weinberg
&  Company  on the  financial  statements  of  Exodus as of  February  24,  2000
contained no adverse  opinion or disclaimer of opinion nor was it modified as to
uncertainty,  audit  scope,  or  accounting  principles.  The decision to change
accountants was recommended by the shareholder of Exodus.

There were no disagreements with the former accountant of Exodus.

                                    PART III

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

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

Elwin D. Cathcart

Mr.  Cathcart,  age 73, has been a director and Chief Executive  Officer of VHSN
since April 1997.  Over the last 5 years,  Mr. Cathcart has also been serving as
Chairman and Chief  Executive  Officer of Groupmark  Canada  Limited,  a private
marketing company  specializing in direct mail service products which he founded
in 1970.  From 1970 to 1972,  Mr.  Cathcart  served as President of the Canadian
Direct Mail  Marketing  Association,  a Toronto based company he helped found in
1969, and where he continues to serve in an advisory  capacity as a Life Member.
From 1960 to 1970, Mr.  Cathcart served as National Sales Manager for Canada and
then became  National Sales Manager for the United States,  for a private direct
mail marketing  company known as R.L. Polk & Co., located in Detroit,  Michigan.
Mr.  Cathcart  has served on the board of  several  public  companies  including


                                       15
<PAGE>


Equity  Investment  Corp., a financial  marketing  company;  TelSoft Mobile Data
Inc., a company  which  purchased  priority  software for  Motorola;  The Equity
Group, a holding  company for Equity  Investments  Corp. and TelSoft Mobile Data
Inc.; and Pacific Gold Corp., a west coast mining company. Mr. Cathcart attended
Riverdale  College  from  1942  to 1943  and  received  a  Bachelors  Degree  in
Industrial Design from Ontario College of Art in 1950.

Thomas Roberts

Mr. Roberts,  age 64, has been a director of VHSN since December,  1996. For the
past 37  years  he has been an  accountant  in  private  practice.  Mr.  Roberts
attended Alberson  Graughon College and the University of Alabama  Birmingham in
1954 and 1955, respectively.

David Smelsky

Mr.  Smelsky,  age 42, has been an officer  and a director  of VHSN since  April
1997. Mr. Smelsky was the Chief  Financial  Officer of Groupmark  Canada Limited
from November  1994 to October 1999.  Since October 1999 he has been the Manager
of Finance and  Administration  for Halton Hills Hydro  Commission.  Mr. Smelsky
received his certificate as Certified Management Accountant of Ontario in 1985.

Gang Chai

Dr. Chai,  age 41,  obtained his Bachelor and Masters in  geoscience  from China
University in 1987 and 1985,  respectively.  After moving to Canada in 1987, Dr.
Chai  attended  University  of Toronto  where he  received a Ph.D.  in  economic
geology in 1992.  Dr.  Chai has been a director  of VHSN since  April 12,  2000.
Prior to founding  China eMall  Corporation in 1994, Dr. Chai worked for private
Canadian companies, and both the Ontario and federal governments.  Dr. Chai is a
director and Chief Executive  Officer of McVicar Minerals Ltd., which he founded
in 1997. McVicar Minerals Ltd. trades on the Canadian Venture Exchange under the
symbol MVR.


Compliance with s. 16 (a) of The Exchange Act

VHSN has not been  furnished  with Form 3, Form 4 or Form 5 for Elwin  Cathcart,
Gang Chai, David Smelsky or Thomas Roberts.



                                       16
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION

Summary Compensation Table

The following table provides certain summary information concerning compensation
paid to or accrued by the Chief Executive  Officer and the Secretary of VHSN for
services  rendered to VHSN during the last three  years.  No  executive  officer
earned more than $100,000 in each of the last three years.

<TABLE>
<CAPTION>

Table 5
 ----------------------- ------- ----------------------------------- -------------------------
                                        Annual Compensation             Long Term Compensation
          Name                                                               Awards
          And                                        Other          Restricted     Securities
       Principal                                     Annual           Stock        Underlying
       Position           Year    Salary   Bonus  Compensation        Awards        Options
                                    ($)     ($)      ($)               ($)            (#)
 ----------------------- ------- ----------------------------------- -------------------------
<S>                       <C>        <C>    <C>       <C>               <C>         <C>
   Elwin D. Cathcart      1997       0      0         0                 0           250,000
   CEO and President      1998       0      0         0                 0           750,000
                          1999       0      0        (1)                0                 0
                          2000       0      0         0                 0                 0
----------------------- ------- ----------------------------------- --------------------------

   David Smelsky          1997       0      0         0                 0           250,000
   Secretary              1998       0      0         0                 0           250,000
                          1999       0      0        (2)                0                 0
                          2000       0      0         0                 0                 0
----------------------- ------- ----------------------------------- --------------------------
</TABLE>

(1)   Elwin D.  Cathcart  received  370,000  common shares in lieu of salary for
      services valued at $0.13 per common share.

(2)   David  Smelsky  received  185,000  common  shares  in lieu of  salary  for
      services valued at $0.13 per common share.

During the years ended December 31, 1998 and 1999 VHSN accrued  amounts owing to
Groupmark Canada Limited  ("Groupmark") of $672,000 and $336,000,  respectively,
pursuant to a management services agreement (the "Management Agreement").  Elwin
D. Cathcart and David Smelsky were both employees of Groupmark  during the years
ended  December  31,  1998 and 1999,  and  provided  services  to VHSN under the
Management  Agreement  (however  David  Smelsky  ceased  being  an  employee  of
Groupmark in October 1999). During 1998 approximately CDN$80,000 (or $55,000 US)
can be  attributed  to the  services  of Elwin  D.  Cathcart  and  approximately
CND$40,000  (or $25,000 US) can be attributed to the services of David  Smelsky.
During 1999  approximately  CDN$46,000  (or $30,000 US) can be attributed to the
services of Elwin D. Cathcart and  approximately  CND$23,000 (or $15,000 US) can
be attributed to the services of David Smelsky.

Dr.  Gang  Chai,  a  director  of VHSN and one of the  founders  of China  eMall
Corporation,  was compensated for services provided to VHSN through an agreement
between himself,  his consulting  company,  G.C. Consulting and Investment Corp.
and VHSN for a period from April,  2000 until August,  2000 when services  under
his consulting agreement and payment therefor terminated. The total compensation
paid pursuant to Dr. Chai's  consulting  agreement,  including  $6,150.00 for an
earlier  termination  fee,  was  $32,800.00.  Dr.  Chai and  VHSN are  currently
negotiating a new arrangement for the services provided by Dr. Chai.

                                       17
<PAGE>

OPTIONS GRANTED

The following  table shows  options to purchase  common shares of VHSN that were
granted to the directors and officers of VHSN during the years indicated below.

<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------
                                    Number of       % of Total
                                   Securities        Options
                                   Underlying       Granted to    Exercise or Base   Expiration Date
                                     Options        Employees        Price($/Sh)
        Name            Year       Granted(#)     In Fiscal Year
----------------------------------------------------------------------------------------------------
<S>                     <C>             <C>             <C>            <C>            <C>
Elwin Cathcart          2000            0               0                N/a              N/a
                        1999            0               0                N/a              N/a
                        1998         750,000           60%              0.40          Dec.31,2002
                        1997         250,000           28%              0.35          Dec.31,2001
----------------------------------------------------------------------------------------------------
David Smelsky           2000            0               0                N/a              N/a
                        1999            0               0                N/a              N/a
                        1998         250,000           20%              0.40          Dec.31,2002
                        1997         250,000           28%              0.35          Dec.31,2001
----------------------------------------------------------------------------------------------------
Thomas Roberts          2000            0               0                N/a              N/a
                        1999            0               0                N/a              N/a
                        1998         250,000           20%              0.40          Dec.31,2002
                        1997         250,000           28%              0.35          Dec.31,2001
----------------------------------------------------------------------------------------------------
Gang Chai               2000            0               0                N/a              N/a
----------------------------------------------------------------------------------------------------
</TABLE>

AGGREGATE OPTION GRANTS IN LAST FISCAL YEAR

None of the options  granted to officers and  directors  have been  exercised as
shown in th  following  table  below.  At  December  31,  2000 no  options  were
"in-the-money" which means that the market price of the shares of VHSN was lower
than the exercise price of the options.

<TABLE>
<CAPTION>

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

                                                         Number of Securities      Value of Unexercised
                                                        Underlying Unexercised     In-the-Money Options
                             Shares                    Options at December 31,        at December 31,
                           Acquired on      Value                2000                     2000
          Name            Exercise (#)    Realized                                     Exercisable/
                                                             Exercisable/            Unexercisable ($)
                                                          Unexercisable ($)
----------------------------------------------------------------------------------------------------------

<S>                             <C>           <C>            <C>                           <C>
 Elwin D. Cathcart              0             0              1,000,000/0                   0/n/a
----------------------------------------------------------------------------------------------------------
 David Smelsky                  0             0               500,000/0                    0/n/a
----------------------------------------------------------------------------------------------------------
 Thomas Roberts                 0             0               500,000/0                    0/n/a
----------------------------------------------------------------------------------------------------------
</TABLE>

ITEM 11. SECURITIY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Directors and Officers

The  following  table sets forth  certain  information  regarding the number and
percentage of shares of VHSN's common stock  beneficially  owned or deemed to be
owned by the officers and directors of VHSN,  individually  and as a group based
on 19,560,268  common shares  outstanding on January 4, 2001. VHSN believes that
the  individuals  listed  below have the sole  power to vote and  dispose of the
number of shares set forth  opposite  their  respective  names unless  otherwise
indicated. No preferred shares are outstanding as of the date hereof.

                                       18
<PAGE>

<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------
  Title of Class   Name and Address of Beneficial    Amount and Nature of        Percentage
                                Owner                  Beneficial Owner           of Class
---------------------------------------------------------------------------------------------
<S>                <C>                                   <C>                         <C>
                   Elwin D.                              9,270,000(1)                47.3%
  Common           Cathcart
                   1400 Dixie Road
                   Mississauga, Ontario L5E 3E1
---------------------------------------------------------------------------------------------
  Common           Gang Chai                             1,048,502(2)                 5.3%
                   89 Drewry Avenue
                   Toronto, Ontario M2M 1E1
---------------------------------------------------------------------------------------------
  Common           David                                   685,000(3)                 3.5%
                   Smelsky
                   RR#4 Rockwood, Ontario
                   Canada  N0B 2K0
---------------------------------------------------------------------------------------------
  Common           Thomas                                  500,000(4)                 2.5%
                   Roberts
                   P.O. Box 128
                   Fayette AL  35555
=============================================================================================
  Common           All officers and directors as           11,503,502                58.8%
                   a Group (4 individuals)
---------------------------------------------------------------------------------------------
</TABLE>

(1)   Consists of 7,900,000  common  shares owned by  Groupmark  Canada  Limited
      which is a wholly owned  corporation of Elwin D. Cathcart;  370,000 common
      shares  held  directly  by Elwin  D.  Cathcart  and  options  to  purchase
      1,000,000  common shares granted to Elwin D. Cathcart  (750,000 options at
      an exercise price of $0.40 expiring  December 31, 2002 and 250,000 options
      at an exercise price of $0.35 expiring December 31, 2001).

(2)   Consists of 350,000  common  shares and  conversion  privileges of Class B
      Special  Shares of China eMall  Corporation,  into 698,502  common shares.
      VHSN  acquired  China  eMall  Corporation  pursuant  to a  share  exchange
      agreement  wherein the  shareholders of China eMall  including,  Dr. Chai,
      received  Class B  Special  Shares  of China  eMall  Corporation  that are
      exchangeable on a one for one basis into common shares of VHSN.

(3)   Consists of options to purchase  500,000 common shares (250,000 options at
      an exercise price of $0.40 expiring  December 31, 2002 and 250,000 options
      at an exercise  price of $0.35  expiring  December  31,  2001) and 185,000
      common shares.

(4)   Consists of options to purchase  500,000 common shares (250,000 options at
      an exercise price of $0.40 expiring  December 31, 2002 and 250,000 options
      at an exercise price of $0.35 expiring December 31, 2001).

Shareholders Owning Over 5%

The  following  table sets forth  certain  information  regarding the number and
percentage  of shares of VHSN's  common stock owned or deemed to be owned by any
person  known by VHSN to be the  beneficial  owner of more than five  percent of
VHSN's common shares based upon 19,560,268 common shares  outstanding on January
4, 2001. VHSN believes that the individuals  listed below have the sole power to
vote and  dispose of the number of shares set forth  opposite  their  respective
names.

                                       19
<PAGE>

<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------
                                                          Amount and Nature
     Shares        Name and Address of Beneficial Owner  of Beneficial Owner      Percentage
                                                                                   of Class
---------------------------------------------------------------------------------------------
<S>                                                         <C>                      <C>
     Common        Elwin D.                                 9,270,000(1)             47.3%
                   Cathcart
                   1400 Dixie Road
                   Mississauga, Ontario
                   Canada L5E 3E1
---------------------------------------------------------------------------------------------
     Common        Rogue-Mountain Corp.                       1,259,993              6.4%
                   (8) 13065 Riverdale
                   Drive NW  Coon Rapids, MN
                   55448

---------------------------------------------------------------------------------------------
     Common        Forte Management Corp. (9)               1,500,000(2)             7.6%
                   Buckingham Square, Penthouse
                   West Bay Road, SMB
                   P.O. Box 1159GT
                   West Bay Road, SMB
                   Grand Cayman, Cayman Islands, BWI

---------------------------------------------------------------------------------------------
     Common        Charles He                             1,274,000(3) (10)          6.5%
                   56 Temperance Street, Suite 501
                   Toronto, Ontario
                   Canada, M5H 3V5
---------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------
                                                          Amount and Nature
     Shares        Name and Address of Beneficial Owner  of Beneficial Owner      Percentage
                                                                                   of Class
---------------------------------------------------------------------------------------------
<S>                                                       <C>          <C>           <C>
     Common        Gang Chai                              1,048,502(4) (10)          5.4%
                   89 Drewry Avenue
                   Toronto, Ontario
                   Canada  M2M 1E1
---------------------------------------------------------------------------------------------
     Common        Qin Lu Chai                            1,048,498(5) (10)          5.3%
                   89 Drewry Avenue
                   Toronto, Ontario
                   Canada  M2M 1E1
---------------------------------------------------------------------------------------------
     Common        Qing Wang                              1,022,000(6) (10)          5.2%
                   18 Hollywood Ave.
                   Suite 900
                   North York, Toronto
                   Canada   M4P 2B1
---------------------------------------------------------------------------------------------
     Common        Tai Xue Shi                            1,022,000(7) (10)          5.2%
                   18 Hollywood Ave.
                   Suite 900
                   North York, Toronto
                   Canada   M4P 2B1
---------------------------------------------------------------------------------------------
</TABLE>

(1)  Consists of 7,900,000 common shares owned by Groupmark Canada Limited which
     is a wholly owned  corporation  of Elwin D.  Cathcart,  370,000  issued and
     outstanding common shares held by Elwin D. Cathcart and options to purchase
     1,000,000  shares  granted  to Elwin D.  Cathcart  (750,000  options  at an
     exercise price of $0.40 expiring  December 31, 2002 and 250,000  options at
     an exercise price of $0.35 expiring December 31, 2001).
(2)  Consists of 1,500,000 issued and outstanding common shares.
(3)  Consists of conversion  privileges of 1,274,000  Class B Special  Shares of
     China eMall Corporation exchangeable into 1,274,000 common shares of VHSN.


                                       20
<PAGE>

(4)  Consists of  conversion  privileges  of 698,502  Class B Special  Shares of
     China eMall Corporation exchangeable into 698,502 common shares of VHSN and
     350,000 common shares of VHSN.
(5)  Consists of  conversion  privileges  of 698,498  Class B Special  Shares of
     China eMall Corporation exchangeable into 698,498 common shares of VHSN and
     350,000 common shares of VHSN.
(6)  Consists of  conversion  privileges  of 672,000  Class B Special  Shares of
     China eMall Corporation exchangeable into 672,000 common shares of VHSN and
     350,000 common shares of VHSN.
(7)  Consists of  conversion  privileges  of 672,000  Class B Special  Shares of
     China eMall Corporation exchangeable into 672,000 common shares of VHSN and
     350,000 common.
(8)  The principal  beneficial owner of Rogue-Mountain  Corp. is David Sorensen.
     The transfer  agent for VHSN shows  Rogue-Mountain  Corp. as the registered
     owner  of  1,259,993  common  shares  however  VHSN has  been  informed  by
     Rogue-Mountain  Corp. that it is only the beneficial owner of approximately
     50,000  common  shares.
(9)  The principal  beneficial owners of Forte Management Corp. are Leif Bristow
     of Toronto, Ontario and Alexander Bristow of Bali.
(10) VHSN  acquired  China  eMall  Corporation  pursuant  to  a  share  exchange
     agreement  wherein the shareholders of China eMall received Class B Special
     Shares of China eMall that are  exchangeable  on a  one-for-one  basis into
     common shares of VHSN for no further consideration.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Groupmark Canada Limited Management Agreement

Groupmark Canada Limited,  a significant  shareholder of VHSN is wholly owned by
Elwin D. Cathcart,  a director of VHSN.  Groupmark provides executive management
personnel and services to VHSN pursuant to an agreement  made between  Groupmark
and VHSN in April  1997  (the  "Management  Agreement").  Under  the  Management
Agreement Groupmark provides  management,  daily administration  functions,  and
financial and business advisory services to VHSN.  Groupmark was also contracted
to  assist  in the  technological  development  of  smartCARD.  Pursuant  to the
Management  Agreement,  charges for these services are not to exceed $56,000 per
month.  During 1998 VHSN accrued a debt of $672,000  payable to Groupmark Canada
Limited and during 1999 VHSN  accrued a debt of  $336,000  payable to  Groupmark
Canada  Limited  for  such  services.   On  December  31,  1999  $1,645,868  was
outstanding  and  during  the  first 6  months  of 2000 an  additional  $120,000
accrued.  During the first 6 months of 2000, VHSN issued 2,500,000 common shares
to Groupmark in settlement of $865,868 and paid  Groupmark  $192,568 in cash. As
of June 30,  2000  $707,432  was  outstanding  under the  Management  Agreement.
Outstanding  balances under the  Management  Agreement  accrue without  interest
however Groupmark has the option to accept payment by way of VHSN's common stock
at fair market value in lieu of cash.

Gang Chai Consulting Agreement

Until August,  2000, Dr. Gang Chai had been providing services to VHSN through a
consulting  agreement made between G.C.  Consulting and  Investment  Corp.  (the
"Consultant"),  Gang Chai and VHSN (the "Consulting Agreement"). Pursuant to the
Consulting  Agreement,  VHSN agreed to pay to the  Consultant  during the term a
monthly fee of CDN $7,833.34 (approximately US$5,330), plus applicable goods and
services  tax,  payable  on the  first  day of each  month  for the  term of the
Consulting  Agreement,  the  initial  term of which is one  year.  In the end of
August, 2000 the Consulting  Agreement was terminated pending  re-negotiation by
the parties. Dr. Chai however still serves as a director and officer of VHSN.

                                       21
<PAGE>

ITEM 13. EXHIBITS AND REPORTS

EXHIBIT INDEX

2.1      Agreement  and Plan of  Reorganization  between VHS  Network,  Inc. and
         Exodus Acquisition Corporation, dated May 6, 2000.*
3.1      Articles of Incorporation for VHS Network, Inc.*
3.2      Articles of Merger for VHS Network,  Inc. (Exhibit A referred to in the
         Articles of Merger of VHS Network, Inc. is filed as a separate document
         as Exhibit 10.6 hereof)*
3.3      Articles of Amendment for VHS Network, Inc.*
3.4       By-laws of VHS Network, Inc.*
4.1      Specimen Stock Certificate.*
10.1     Share Exchange  Agreement made April 12, 2000 among VHS Network,  Inc.,
         China eMall  Corporation,  Gang Chai, Qin Lu Chai, Uphill Capital Inc.,
         Charles He, Qing Wang and Forte Management Corp.*
10.2     Licence  Agreement  between  Groupmark  Canada Limited and VHS Network,
         Inc. dated January 1, 2000.*
10.3     Management Services Agreement between VHSN and Groupmark Canada Limited
         dated April 1997.*
10.4     Agreement  and Plan of Merger  dated as of December 26, 1996 made among
         Ronden Vending Corp.,  Ronden  Acquisition,  Inc., Video Home Shopping,
         Inc. (a  Tennessee  corporation),  Progressive  Media  Group,  Inc. and
         Pamela Wilkerson.*
10.5     Agreement  and Plan of Merger  dated as of December  30,  1996  between
         Ronden Vending Corp. and Ronden Acquisition, Inc.*

10.6     Agreement  and Plan of  Reorganization  dated  April 10, 1997 among VHS
         Network, Inc. and VHS Acquisition, Inc. and VHS Network (Canada), Inc.*
10.7     Schedules to Exhibit 10.1*
16.1     Letter from Weinberg & Company.*
21.1     List  of  subsidiaries,  jurisdiction  of  incorporation  and  business
         names.*
23.1     Consent of Berg & Company, LLP.
27.1      Financial Data Schedule.

* Previously  filed with the  Company's  SB-2  Registration  Statement  that was
effective February 14, 2001.

                                       22
<PAGE>

                                   SIGNATURES
                                   ----------

In  accordance  with  section 13 or 15(d) of the Exchange  Act,  the  registrant
caused this report to be signed on its behalf by the  undersigned,  thereto duly
authorized on the 2nd day of April, 2001.

                         VHS NETWORK, INC.

                         Per: /s/ Elwin Cathcart
                                  -----------------
                                  Elwin Cathcart, Chief Executive Officer

In  accordance  with the Exchange  Act,  this report was signed by the following
persons in the capacities and on the dates stated:

Dated: April 2, 2001               /s/ Elwin Cathcart
                                   ------------------
                                       Elwin Cathcart, Director, Chairman and
                                       Chief Executive Officer

Dated: April 2, 2001               /s/ David Smelsky
                                   -----------------
                                       David Smelsky, Director and Secretary

Dated: April 2, 2001               /s/ Thomas Roberts
                                   ------------------
                                       Thomas Roberts, Director


                                       23
<PAGE>