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


                                FORM 10-KSB/A(2)
                                ----------------

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

                                December 31, 2002

                         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)

                           1400 Dixie Road, Suite 305
                      Mississauga, Ontario, Canada L5E 3E1
                               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:  $34,412.00

The aggregate market value of voting stock held by non-affiliates: $

As of April 15, 2003, the Registrant had outstanding 37,345,268 shares of common
stock, par value $0.001.

Documents incorporated by reference:  None.

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                 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This report includes "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. For example, statements included in this report regarding our financial
position,   business   strategy  and  other  plans  and  objectives  for  future
operations, and assumptions and predictions about future product demand, supply,
manufacturing,  costs,  marketing  and pricing  factors are all  forward-looking
statements.   When  we  use  words  like  "intend,"   "anticipate,"   "believe,"
"estimate,"  "plan" or "expect," we are making  forward-looking  statements.  We
believe that the assumptions and expectations  reflected in such forward-looking
statements  are  reasonable,  based on  information  available to us on the date
hereof,  but we cannot assure you that these  assumptions and expectations  will
prove to have been correct or that we will take any action that we may presently
be planning.  We have disclosed  certain  important factors that could cause our
actual results to differ materially from our current  expectations  elsewhere in
this report. You should understand that forward-looking  statements made in this
report are  necessarily  qualified by these factors.  We are not  undertaking to
publicly  update or  revise  any  forward-looking  statement  if we  obtain  new
information or upon the occurrence of future events or otherwise.



                                     PART I

Item 1.           Description of the Business

Corporate History

Incorporation

VHS Network, Inc. ("VHSN"), a Florida corporation,  was incorporated on 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 that 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 completion of 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, the we filed a certificate  of amendment to our  certificate
of  incorporation  to change the company's name from Ronden Vending Corp. to VHS
Network, Inc.


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Acquisition of VHS Network Inc.

 On April 9, 1997, the principals of VHSN  incorporated a Florida  company named
VHS Acquisition,  Inc. as a wholly owned subsidiary of VHSN. 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  Canada Limited  ("Group mark").
Group Mark received 400,000  (8,000,000  pre-combination)  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  Smells was
appointed directors of VHSN.

Acquisition of China eMall

On April 12, 2000, VHSN acquired the entire issued and outstanding common shares
of common stock of China eMall Corporation  ("China eMall"),  an Ontario Private
company.  China eMall is an emerging  business-to-business  e-commerce  Internet
Company.  VHSN acquired the entire 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").  All the  shareholders  of  China  eMall  who are
individuals (the Individual Vendors") received class B shares ("Class B Shares")
of China eMall that are exchangeable on a one for one basis for common shares of
VHSN for no additional consideration.

In total,  VHSN issued  2,100,000  common  shares upon  closing and has reserved
4,015,000  shares of its common stock for  issuance  when the Class B shares are
exchanged  into  common  shares of VHSN.  The  holders of the Class B shares can
exchange  any or all of their Class B Shares  into common  shares of VHSN at any
time,  however,  if any Class B 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 may
redeem the Class B Shares on payment of one common  share of VHSN for each Class
B Share.

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  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.

Branson Holdings, Inc.

On May 6, 2001, the Company entered into an agreement and plan of reorganization
(the  "Agreement") with Branson  Holdings,  Inc.  ("Branson") to acquire all the
issued and outstanding  shares of Branson.  The Agreement  provides that all the
shareholders of Branson shall exchange all of the  outstanding  shares of common
stock  of  Branson,  constituting  a total  of  10,072  shares,  for a total  of
10,072,000  common  shares of VHSN and  Branson  shall  thereafter  operate as a
wholly-owned  subsidiary of VHSN. One of the conditions  precedent to closing is
that the  board  of  directors  of  VHSN,  must  prior  to the  issuance  of the
10,072,000  common shares  authorize and effect a reverse stock split of 20 to 1
of the Company's total issued and  outstanding  shares to bring the total issued


                                       3
<PAGE>


and outstanding  shares of VHSN equal to 978,013 from 19,560,268.  On completion
Of the transaction  and after giving effect to the issuance of 10,072,000  there
would be 11,050,013  common shares of VHSN  outstanding on a non-diluted  basis.
The  Agreement  further  provides that on closing the board of directors of VHSN
will be  reduced to 3 and 2  nominees  of Branson  will be added to make a total
number of directors of five. On July 26, 2001 VHSN terminated its agreement with
Branson and no shares were issued by VHSN as part of the transaction.


Acquisition of TrueNet Enterprise, Inc.

On December 1, 2001 VHSN  acquired all of the issued and  outstanding  shares of
TrueNET  Enterprise,  Inc.  (300  shares of common  stock)  in  exchange  for an
aggregate of 3,200,000 shares of the common stock of VHSN. VHS Network purchased
from the selling  stockholders  of Truenet  (John  Salowski,  Jeff  McMillan and
Regional Hose and Equipment Ltd.) the outstanding  shares of Truenet in exchange
for (I)  3,000,000  shares  of VHSN,  (ii)  200,000  shares of VHSN  payable  to
Regional Hose in exchange for the release by Regional Hose of debt owed to it by
Truenet and (iii) the right to purchase  2,274,000  shares of common  stock from
Group mark Canada  Limited  (at various  purchase  prices  ranging  from $.04 to
$.40per  share)  which  is a  shareholder  of VHSN  and is  controlled  by Elwin
Cathcart,  VHSN's Chief Executive Officer. Pusuant to the terms of the agreement
John  Salowski  and Jeff R.  Mcmillan are to be  President  and Chief  Operating
officer  respectively of VHSN at annual  compensation off CDN$85,000  (Salowski)
and CDN$75,000  (McMillan).  The principles of TrueNET Enterprise Inc. were arms
length sellers and have had no previous  relationship  with VHSN. Its principles
or any of its affiliates.  TrueNET  Enterprise,  Inc. has developed a management
software  product for the wholesale  distribution  business  which is unique and
proprietary  to  them.  This  business  will be  carried  on as a  wholly  owned
subsidiary of VHSN.

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

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.  Through our subsidiary, China eMall, we serve as
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.  In August 1999,
China eMall's 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.

Pursuant to the terms of the  purchase  and sale  agreement  between VHS Network
Inc. and China eMall,  it was required  that the Ontario  Securities  Commission
approve the exchange of shares  between the parties.  Such approval was required
due to the fact that  China-eMall was a private Ontario Company and VHS Networks
Inc. was a non-reporting  issuer in Ontario.  The Ontario Securities  Commission
approved such exchange on January 25, 2002.

Products  Manufactured Goods

China eMall will offer a complete  spectrum of products  that are  catalogue and
organized  under twenty  categories that appear on the home page of our Internet
Web site  located at  www.china-eMall.com.  Such product  categorizes,  include,
agriculture;  apparel;  arts  and  crafts;  chemicals;   communication  revises;
transportation;  construction and decoration items; electronics; energy& mineral
resources; entertainment; food; health and medicine; home and garden; industrial
supplies;  jewelry,  clocks and watches;  office supplies;  pet supplies;  sport
supplies;  textiles; silk; and toys. For the fiscal year ended December 31, 2002
China eMall generated no revenue.


                                       4
<PAGE>


Internet Services

China  eMall also  intends to offer a broad range of China  based  services  and
opportunities  such as business  information  services,  professional  services,
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:

Selecting initial products from brand suppliers;
Outsourcing  exporting  duties to suppliers  and  importing  duties to importing
agencies;  Building up a marketing  and sales  infrastructure;  identifying  and
establishing  services for western  companies;  and  Marketing  China eMall as a
brand  e-commerce name in North America.  Using China eMall's web site as a host
web site for Chinese businesses.

China eMall Competition

The business of China eMall  Corporation  competes with the  traditional  export
market  including  wholesalers  and  distributors as well as with other Internet
wholesalers  and  distributors.  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 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 is also a provider of computer chip-based plastic access cards that utilize
VHSN's  proprietary smart CARD 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  ("Groupmark"),  a wholly owned corporation of Elwin D.
Cathcart,  owns the registered trademark "smartCARD" in Canada and has a pending
trademark  application  with the  United  States  Patent and  Trademark  Office.
Groupmark  Canada has granted VHSN a license to use the trademark  Smart CARD to
manufacture  and market smart CARDS  worldwide on a  non-exclusive  basis and to
utilize the technology and other know-how  related to smart CARD,  until January
1, 2010. The license agreement also grants the right to VHSN to permit others to
manufacture the smart CARD.  Pursuant to the terms of the license agreement VHSN
will pay to Group mark a royalty of 5% of net sales of products  using the smart
CARD trademark and the smart CARD technology.

Smart CARD 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. Companies who design and market applications for chip based
cards may include, but not be limited to, Gemplus,  Schlumberge,  Motorola,  and
Toshiba.  Certain of the Company's  competitors have substantially  greater name
recognition  and  market  acceptance  of their  products  and  technologies.  In
addition,  certain of these competitors are already established in the chip card
market.  No  assurance  can be given  that the  Company's  competitors  will not
develop new  technologies or enhancements to existing  products or introduce new
products that will offer  superior price or  performance  features.  The Company
expects its competitors to offer new and existing  products at prices  necessary
to gain or retain market share.


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<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 by a prospective customer.

Customers

For the fiscal year ended December 31, 2002 smartCARDS generated no revenues.

Research and Development.

For the fiscal year ended  December 31,  2002,  VHSN spent no monies on research
and development of its smartCARD technology.

Employees  VHSN  employs 2 full time  individuals,  which are  provided  to VHSN
through the management  services  agreement with Groupmark  Canada Limited.  See
"Certain Relationships and Related Transactions".

Intellectual  Property  Rights

The Company does not have any trademark or patent right or applications pending.
The  Company  does  maintain  the  rights  to the  following  Internet  Web site
addresses: www.VHSN.net , www.Trunet.net and http://www.china.emall.com/


RISK FACTORS

An investment in our common stock is  speculative  in nature and involves a high
degree of risk. You should carefully  consider the following risks and the other
information  contained in this prospectus  before  investing in the common stock
offered hereby.  The price of our common stock could decline due to any of these
risks, and you could lose all or part of your investment.  You also should refer
to the other  information  included in this prospectus,  including the financial
statements and related notes.
If any of the events  described  below were to occur,  our business,  prospects,
financial  condition or results of  operations  or cash flow could be materially
adversely  affected.  When we say that  something  could or will have a material
adverse  effect  on it,  we mean that it could or will have one or more of these
effects.

WE HAD LOSSES IN THE FISCAL YEARS ENDED DECEMBER 31,2002.

We had a loss of $702,832 for the year ended  December  31,2002.  Our operations
are  subject to the risks and  competition  inherent in the  establishment  of a
business  enterprise.  There can be no assurance that future  operations will be
profitable.  We may not  achieve  our  business  objectives  and the  failure to
achieve such goals would have an adverse impact on us.

WE WILL NEED TO RAISE  ADDITIONAL  FUNDS IN THE FUTURE FOR OUR OPERATIONS AND IF
WE ARE  UNABLE TO  SECURE  SUCH  FINANCING,  WE MAY NOT BE ABLE TO  SUPPORT  OUR
OPERATIONS.

We will need additional funds to develop our operations.  We may seek additional
capital through

         o    an offering of our equity securities,

         o    an offering of debt securities, or

         o    by obtaining financing through a bank or other entity.

We have not  established  a limit as to the  amount  of debt we may incur and we
have not adopted a ratio of our equity to debt  allowance.  If we need to obtain
additional financing, the financing may not be available from any source, or may
not be available on terms  acceptable  to us. Any future  offering of securities
may not be  successful.  We may not be able to  continue  to  operate  if we are
unable to obtain additional capital when needed.


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THE LOSS OF OUR KEY EMPLOYEES MAY ADVERSELY AFFECT OUR GROWTH OBJECTIVES.

Our success in achieving our growth  objectives  depends upon the efforts of our
top management team including the efforts of Elwin Cathcart, our Chief Executive
officer, as well as other of our management members. The loss of the services of
any of these  individuals  may have a material  adverse  effect on our business,
financial condition and results of operations.  We can give no assurance that we
will be able to maintain and achieve our growth objectives should we lose any or
all of these individuals' services.


OUR BUSINESS MAY NOT BE ABLE TO CONTINUE TO OPERATE IF THE  CONTINUED USE OF THE
INTERNET DECLINES.

Our  future  success  depends  on  continued  growth in the use of the  Internet
because we primarily  use  Internet-based  technology  to create our business to
business  services.  If  businesses  do  not  consider  the  Internet  a  viable
commercial medium, our client base may not develop. The adoption of the Internet
for commerce and communications, particularly by those individuals and companies
that  have   historically   relied  upon  alternative   means  of  commerce  and
communication,  generally requires the understanding and acceptance of a new way
of conducting business and exchanging information. In addition, our business may
be indirectly  impacted if the number of users of the Internet does not increase
or if commerce over the Internet does not become more accepted and widespread.

CHANGES IN  GOVERNMENT  REGULATION  COULD  DECREASE OUR REVENUE AND INCREASE OUR
COSTS CAUSING OUR REVENUES, IF ANY, TO DECLINE.

The laws governing the Internet  remain largely  unsettled,  even in areas where
there has been some legislative  action.  It may take years to determine whether
and how  existing  laws  such as those  governing  intellectual  property,  data
protection,  libel and taxation apply to the Internet and Internet  advertising.
Any  legislation  enacted  or  regulation  issued  could  dampen  the growth and
acceptance  of  the  digital  marketing  industry.  Our  business,   results  of
operations and financial condition could be materially and adversely affected by
the adoption or modification of laws or regulations relating to our business.

WE MAY, IN THE FUTURE,  ISSUE ADDITIONAL  SHARES OF OUR COMMON STOCK WHICH WOULD
REDUCE INVESTORS PERCENT OF OWNERSHIP AND MAY DILUTE OUR SHARE VALUE.

Our Certificate of Incorporation  authorizes the issuance of 100,000,000  shares
of common stock, par value $.001 per share,  and 25,000,000  shares of preferred
stock.  The future  issuance of all or part of our remaining  authorized  common
stock may result in  substantial  dilution in the percentage of our common stock
held by our then  existing  shareholders.  We may value any common or  preferred
stock issued in the future on an arbitrary  basis.  The issuance of common stock
for future  services or  acquisitions  or other  corporate  actions may have the
effect of diluting the value of the shares held by our investors, and might have
an adverse effect on any trading market for our common stock.


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SHARES ELIGIBLE FOR FUTURE SALE MAY ADVERSELY AFFECT THE MARKET.

As of April 14,  2003,  the Company had  37,345,268  shares of its Common  Stock
issued  and  outstanding   28,263,594  of  which  the  Company  believes  to  be
"restricted  securities".  Rule 144 provides,  in essence, that a person holding
"restricted  securities"  for a period of one year may sell only an amount every
three months  equal to the greater of (a) one percent of a company's  issued and
outstanding  shares,  or (b) the average  weekly volume of sales during the four
calendar weeks preceding the sale. The amount of "restricted securities" which a
person who is not an affiliate of our company may sell is not so limited,  since
non-affiliates  may sell  without  volume  limitation  their shares held for two
years if there is adequate current public information  available  concerning our
company. In such an event, "restricted securities" would be eligible for sale to
the public at an earlier  date.  The sale in the public market of such shares of
Common Stock may adversely affect prevailing market prices of our Common Stock.

SINCE WE HAVE NOT PAID ANY DIVIDENDS ON OUR COMMON STOCK AND DO NOT INTEND TO DO
SO IN THE FORESEEABLE  FUTURE, A PURCHASER OF OUR COMMON STOCK WILL ONLY REALIZE
AN ECONOMIC GAIN ON HIS OR HER INVESTMENT FROM AN  APPRECIATION,  IF ANY, IN THE
MARKET PRICE OF OUR COMMON STOCK.

We have never paid, and have no intentions in the foreseeable future to pay, any
cash  dividends on our common stock.  Therefore an investor in our common stock,
in all  likelihood,  will only realize a profit on his  investment if the market
price of our common stock increases in value.

THE  APPLICATION  OF THE "PENNY STOCK  REGULATION"  COULD  ADVERSELY  AFFECT THE
MARKET PRICE OF OUR COMMON STOCK

Our  securities may be deemed a penny stock.  Penny stocks  generally are equity
securities  with a price of less  than  $5.00 per share  other  than  securities
registered  on certain  national  securities  exchanges  or quoted on the NASDAQ
Stock Market, provided that current price and volume information with respect to
transactions  in such  securities  is  provided by the  exchange or system.  Our
securities  may be subject to "penny stock rules" that impose  additional  sales
practice  requirements  on  broker-dealers  who sell such  securities to persons
other than established  customers and accredited investors (generally those with
assets in excess of $1,000,000 or annual income  exceeding  $200,000 or $300,000
together  with their  spouse).  For  transactions  covered by these  rules,  the
broker-dealer must make a special suitability  determination for the purchase of
such  securities  and have  received  the  purchaser's  written  consent  to the
transaction prior to the purchase. Additionally, for any transaction involving a
penny stock, unless exempt, the "penny stock rules" require the delivery,  prior
to the  transaction,  of a  disclosure  schedule  prescribed  by the  Commission
relating to the penny stock  market.  The  broker-dealer  also must disclose the
commissions payable to both the broker-dealer and the registered  representative
and current quotations for the securities.  Finally,  monthly statements must be
sent disclosing  recent price information on the limited market in penny stocks.
Consequently, the "penny stock rules" may restrict the ability of broker-dealers
to sell our  securities and may have the effect of reducing the level of trading
activity of our common stock in the secondary  market.  The  foregoing  required
penny stock  restrictions  will not apply to our  securities if such  securities
maintain a market price of $5.00 or greater.  We can give no assurance  that the
price of our securities will reach or maintain such a level.

UNCERTAINTY AS TO THE CONTINUATION OF THE COMPANY AS A GOING CONCERN

     The audited  financial  statements of the Company for the fiscal year ended
December  31,  2002,  reflect  an  accumulated  net  loss of  $5,247,353.  These
conditions raise  substantial doubt about the Company's ability to continue as a
going concern if sufficient  additional  funding is not acquired or  alternative
sources of capital developed to meet the Company's working capital needs.

IN THE FUTURE,  THE  AUTHORIZATION  OF OUR  PREFERRED  STOCK MAY HAVE AN ADVERSE
EFFECT ON THE RIGHTS OF HOLDERS OF OUR COMMON STOCK.

We may, without further action or vote by our shareholders,  designate and issue
additional  shares of our preferred  stock. The terms of any series of preferred
stock,  which may include  priority  claims to assets and  dividends and special


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voting rights,  could adversely affect the rights of holders of the common stock
and thereby reduce the value of the common stock.  The  designation and issuance
of preferred  stock favorable to current  management or shareholders  could make
the possible  takeover of us or the removal of our management more difficult and
discharge  hostile  bids  for  control  of us which  bids  might  have  provided
shareholders with premiums for their shares.

Item 2.           Description of the Property

VHSN  does not own any  property.  VHSN  currently  works  out of  office  space
provided  by  its  major  shareholder  E.  Cathcart.  VHSN  believes  that  this
arrangement is adequate for its current and  immediately  foreseeable  operating
needs.  VHSN does not have any policies  regarding  investments  in real estate,
securities or other forms of property


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.

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 1996
financial  statements of Video Home Shopping Inc., a predecessor to the Company,
of the nature of this  liability.  The footnotes to those  financial  statements
stated the following:

"The Company has outstanding payroll taxes totaling $206,385 as of July31, 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  Withholdings 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.

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

 From time to time,  VHSN may be involved as a plaintiff or defendant in various
legal actions arising in the normal course of business. VHSN does not anticipate
any material liability as a result of such litigation.


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

No matter was submitted to a shareholder vote for the 2002 fiscal year.


                                       9
<PAGE>


                                     PART 11

Item 5.  Market for Common Equity and Related Stockholders Matters

Market Information

 VHSN's common stock has been quoted on the OTC Bulletin  Board under the symbol
"VHSN" since February 14, 2001,  prior to which,  our securities  were traded on
the National  Quotation Bureau's Pink Sheets. The following table sets forth the
range  of high  and low bid  quotations  of our  common  stock  for the  periods
indicated.  The prices represent inter-dealer  quotations,  which do not include
retail  markups,  markdowns  or  commissions,   and  may  not  represent  actual
transactions.
<TABLE>
<CAPTION>

- ---------------------------------------------------------------------------------------------------
Quarter                    High $      Low  $        High  $     Low  $          High  $    Low  $
- ---------------------------------------------------------------------------------------------------

                           Fiscal Year - 2000*       Fiscal Year - 2001          Fiscal Year - 2002
                           -------------------       ------------------          ------------------
<S>                           <C>       <C>             <C>      <C>               <C>      <C>
First Quarter                 2.00      0.03            0.08     0.06              0.140    0.045
Second Quarter                0.80      0.03            0.08     0.06              0.065    0.025
Third Quarter                 0.36      0.08            0.07     0.03              0.033    0.006
Fourth Quarter                0.12      0.03            0.08     0.025             0.006    0.003
</TABLE>

* For the  fiscal  year  stated,  the  common  stock of VHSN was  traded  on the
National Quotation Bureaus' Pink Sheets.

Holders

As of April 14, 2003 VHSN had 37,345,268 shares of its common stock outstanding.
The number of registered  holders of record of common  shares was  approximately
187.

Dividends

VHSN has never declared or paid any cash  dividends on our capital  stock.  VHSN
intends to retain  future  earnings,  if any,  to finance the  expansion  of its
business  and does not  expect  to  declare  or pay any  cash  dividends  in the
foreseeable future.

Recent Sales of Unregistered Securities

During the fiscal year ended December 31, 2002, VHSN did not issue  unregistered
securities.

Item 6.  Management's Discussion and Analysis or Plan of Operation

The  following  discussion  of the  financial  condition,  changes in  financial
position and results of operations of VHSN for the years ended December 31, 2002
and 2001 should be read in  conjunction  with,  and is qualified in its entirety
by, the financial  statements of VHSN including the attached  notes.  Historical
results of  operations,  percentage  relationships  and any  trends  that may be
inferred there from are not necessarily  indicative of the operating  results of
any future period.

Forward Looking Statements

WHEN USED IN THIS ANNUAL REPORT ON FORM 10-KSB AND IN OUR OTHER FILINGS WITH THE
SEC, IN OUR PRESS RELEASES AND IN ORAL  STATEMENTS MADE WITH THE APPROVAL OF ONE
OF OUR AUTHORIZED EXECUTIVE OFFICERS, THE WORDS OR PHRASES "WILL LIKELY RESULT",


                                       10
<PAGE>


"PLANS", "WILL CONTINUE", "IS ANTICIPATED",  "ESTIMATED", "EXPECT", "PROJECT" OR
"OUTLOOK"  OR  SIMILAR  EXPRESSIONS  (INCLUDING  CONFIRMATIONS  BY  ONE  OF  OUR
AUTHORIZED EXECUTIVE OFFICERS OF ANY SUCH EXPRESSIONS MADE BY A THIRD PARTY WITH
RESPECT TO US) ARE INTENDED TO IDENTIFY "FORWARD-LOOKING  STATEMENTS" WITHIN THE
MEANING OF THE  PRIVATE  SECURITIES  LITIGATION  REFORM ACT OF 1995.  WE CAUTION
READERS NOT TO PLACE UNDUE RELIANCE ON ANY SUCH STATEMENTS, EACH OF WHICH SPEAKS
ONLY AS OFTHE DATE  MADE.  SUCH  STATEMENTS  ARE  SUBJECT  TO CERTAIN  RISKS AND
UNCERTAINTIES,  INCLUDING BUT NOT LIMITED TO OUR HISTORY OF LOSSES,  OUR LIMITED
OPERATING  HISTORY,  OUR  NEED FOR  ADDITIONAL  FINANCING,  RAPID  TECHNOLOGICAL
CHANGE,  AND AN  UNCERTAIN  MARKET,  THAT COULD CAUSE  ACTUAL  RESULTS TO DIFFER
MATERIALLY  FROM  HISTORICAL   EARNINGS  AND  THOSE  PRESENTLY   ANTICIPATED  OR
PROJECTED. FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
CONTEMPLATED  BY SUCH  FORWARD-LOOKING  STATEMENTS  INCLUDE,  AMONG OTHERS,  THE
FACTORS  DESCRIBED  BELOW AND IN THE  DESCRIPTION  OF  BUSINESS  SECTION OF THIS
ANNUAL REPORT. WE UNDERTAKE NO OBLIGATION TO RELEASE PUBLICLY  REVISIONS WE MADE
TO ANY FORWARD-LOOKING  STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES  OCCURRING
AFTER  THE  DATE  OF SUCH  STATEMENTS.  ALL  WRITTEN  AND  ORAL  FORWARD-LOOKING
STATEMENTS  MADE AFTER THE DATE OF THIS ANNUAL REPORT AND/OR  ATTRIBUTABLE TO US
OR PERSONS  ACTING ON OUR BEHALF ARE  EXPRESSLY  QUALIFIED IN THEIR  ENTIRETY BY
THIS DISCUSSION.

Significant Accounting Estimates and Policies

The discussion and analysis of our financial condition and results of operations
is based upon our  financial  statements  that have been  prepared in accordance
with  accounting  principles  generally  accepted  in  the  United  States.  The
preparation  of these  financial  statements  requires us to make  estimates and
judgments that affect the reported amounts of assets,  liabilities,  revenue and
expenses,  and related  disclosure of contingent  assets and liabilities.  On an
on-going  basis,  we will  evaluate our  estimates  including  the allowance for
doubtful  accounts,  the sale ability and  recoverability  of inventory,  income
taxes and contingencies. We will base our estimates on historical experience and
on  various  other  assumptions  that we  believe  to be  reasonable  under  the
circumstances,  the results of which form our basis for making  judgments  about
the carrying values of assets and liabilities that are not readily apparent from
other sources.  Actual results may differ from these  estimates  under different
assumptions or conditions.

As part of the process of preparing our financial statements, we are required to
estimate our income  taxes.  This process  involves  estimating  our current tax
exposure together with assessing temporary  differences resulting from differing
treatment of items for tax and accounting purposes.  These differences result in
deferred tax assets and liabilities. We must then assess the likelihood that our
deferred tax assets will be recovered  from future taxable  income,  and, to the
extent we believe  that  recovery is not likely,  we must  establish a valuation
allowance.  To the extent that we  establish a valuation  allowance  or increase
this  allowance in a period,  we must include a tax  provision or reduce our tax
benefit in the statements of  operations.  We will use our judgment to determine
our provision or benefit for income taxes,  deferred tax assets and  liabilities
and any  valuation  allowance  recorded  against  our net  deferred  tax assets.
However, various factors may cause those assumptions to change in the near term.

We cannot  predict what future laws and  regulations  might be passed that could
have a material  effect on our results of operations.  We will assess the impact
of significant changes in laws and regulations on a regular basis and update the
assumptions and estimates used to prepare our financial  statements when we deem
it necessary.

We have determined the significant principles by considering accounting policies
that involve the most complex or subjective  decisions or assessments.  Our most
significant  accounting  policies are those related to revenue  recognition  and
accounting for stock-based compensation.

                                       11
<PAGE>

Revenue  Recognition.   Our  revenue  recognition  policies  are  based  on  the
requirements of SEC Staff Accounting  Bulletin No. 101,  Revenue  Recognition in
Financial Statements.

Revenue  from sales of services is generally  recognized  during the period when
the services are rendered.

Accounting for Stock-Based Compensation.  We intend to apply the disclosure-only
provisions  of  SFAS  No.  123,  Accounting  for  Stock-Based  Compensation.  In
accordance with the provisions of SFAS 123, we will apply Accounting  Principles
Board Opinion No. 25,  Accounting  for Stock Issued to  Employees,  and will use
related  interpretations  in accounting for stock option plans.  We will account
for stock issued to  non-employees in accordance with the provisions of SFAS 123
and the Emerging Issues Task Force consensus in Issue No. 96-18,  Accounting for
Equity  Instruments  That are Issued to Other Than Employees for Acquiring or in
Conjunction  with  Selling,  Goods or Service.  Generally,  under APB 25, if the
option  exercise  price for a fixed  award to an  employee  is equal to the fair
value of the  common  stock at the date of the  grant of the  stock  option,  no
compensation  expense is recorded.  Under SFAS 123 and EITF 96-18, the amount of
compensation  expense that is recorded is based on an option pricing model which
incorporates such factors as the expected  volatility of future movements in the
price of the underlying stock, risk-free interest rates, the term of the options
and any  dividends  expected  to be paid.  As a result,  under SFAS 123 and EITF
96-18,  we would  generally  expect to record a greater  amount of  compensation
expense than under APB 25.

Segment Reporting.  We have adopted SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related  Information." SFAS 131 requires companies to disclose
certain information about reportable segments. Based on the criteria within SFAS
131, we have  determined  that we currently  have only one  reportable  segment,
technology operations and related services.

Goals and Objectives

VHSN's  goals and  objectives  are  centered on its  ability to identify  market
opportunities in technology and products related to its e-commerce objectives in
the United  States,  Canada and abroad.  To achieve these  objectives  VHSN must
compete  with many other well  established  organizations  in the  Internet  and
related  fields.  It is the intention of VHSN to continue to acquire  technology
and joint venture/  strategic  alliances where possible,  to help it achieve its
goals.

Cash Requirements

The Company intends to raise  additional  funds over the next year from sales of
its securities to satisfy its cash requirements.

Liquidity and Capital Resources

VHSN  achieved  revenues of $ 32,412 in the current  fiscal year and as a result
did not reach its objective of  liquidity.  The Company will continue to rely on
investor funding until revenue and profitability are achieved.


Results of Operations

Results of years ended December 31, 2002 and December 31, 2001

Revenue for the current year ended December  31,2002 was $ 32,412 as compared to
$163,000 in the year 2001.  Operating  Expense increased from $505,115 in fiscal
2001 to $768,415 in the current  fiscal  year.  This  increasae  of $261,300 was
primarily due to the write down and allowances of $321,060  partially  offset by
reductions of management fees, and office and general expense.  Other income and
expenses  included a foreign exchange gain of $43,714 compared to $2,183 for the
previous year.


                                       12
<PAGE>

For the current  year ended  December  31,  2002,  assets  were NIL  compared to
$281,845 for the  previous  year.  Inventory  consisting  of unsold  printed art
reproductions  were written off,  intangible  assets  consisting of software and
domain name were written  off.  Furniture  and fixtures  discarded in the office
relocation  were written off. Total  liabilities  increased  from  $1,166,374 in
fiscal 2001 to $1,362547 for the year ended December 31, 2002.  Accounts payable
and accrued charges  increased by $131,163 due to the acquisition of TrueNet and
advances  from  related  parties  increased  from  $$430,135  in fiscal  2001 to
$583,765 in 2002 reflecting management fees charged the company by GroupMark.


Item 7.  Financial Statements

The company's financial statements are attached hereto on Pages F-1 through F-16
and incorporated herein.


Item 8.  Changes  In  and  Disagreements  With  Accountants  on  Accounting  and
         Financial Disclosure

On  February  12,  2002,  PMB &  Company,  LLP  ("PMB")  was  dismissed  as  the
independent  accountant  for the  Company.  The  Company's  Board  of  Directors
approved the dismissal of PMB.

The Company engaged Gary R. Brown, Chartered Accountants  ("Brown"),  as its new
independent accountants as of February 18, 2002. Prior to such date, the Company
did  not  consult  with  Brown  regarding  (i)  the  application  of  accounting
principles to a specified  transaction,  either completed or proposed,  (ii) the
type of audit opinion that might be rendered by Brown on the Company's financial
statements,  or (iii) any other  matter that was the  subject of a  disagreement
between  the  Company  and its  auditor  (as  defined in Item  304(a)(1)(iv)  of
Regulation S-B and its related instructions) or a reportable event (as described
in Item 304(a) (1)(iv) of regulation S-B).

On March 15, 2003, Gary R. Brown, Chartered Accountants ("Brown"), was dismissed
as the independent  accountant for the Company. The Company's Board of Directors
approved the dismissal of Brown.

The Company engaged SF Partnerships ("FSP"), as its new independent  accountants
as of March 15, 2003.  Prior to such date,  the Company did not consult with FSP
regarding  (i)  the   application  of  accounting   principles  to  a  specified
transaction,  either completed or proposed,  (ii) the type of audit opinion that
might be rendered by FSP on the  Company's  financial  statements,  or (iii) any
other matter that was the subject of a disagreement  between the Company and its
auditor  (as defined in Item  304(a)(1)(iv)  of  Regulation  S-B and its related
instructions)  or a reportable  event (as  described  in Item 304(a)  (1)(iv) of
regulation S-B).



Item 9.  Directors,   Executive   Officers,   Promoters  and  Control   Persons:
         Compliance wit Section 16(a) of the Exchange Act

Directors, Executive Officers, Promoters, and Control Persons

Our directors and executive officers are as follows:


Name                       Age      Title
- ------------               ------   ------------------------------

Elwin D. Cathcart          76       Chief Executive Officer and Director
Thomas Roberts             66       Director
David Smelsky              44       Secretary  and  Director
Gang Chai                  43       Director

                                       13
<PAGE>

VHSN's  directors  hold  office  until the next annual  meeting of VHSN's  stock
holders  or until  their  successors  are duly  elected  and  qualified.  VHSN's
executive  officers  serve at the pleasure of the Board of Directors.  Set forth
below  is a  summary  description  of  the  principal  occupation  and  business
experience of VHSN's directors and executive officers for at least the last five
years.


Elwin D.  Cathcart.  Elwin  Cathcart  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. Mr.  Cathcart also serves as chief  executive
office of the Company's  subsidiary China eMall. 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  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.  Thomas Roberts 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 has been a Secretary  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.  From October 1999 until  November
2000 he was the Manager of Finance  and  Administration  for Halton  Hills Hydro
Commission and since November 2000 has been working for Vision  Logistics  Group
Inc. as Chief  Financial  Officer.  Mr.  Smelsky  received  his  certificate  as
Certified Management Accountant of Ontario in 1985.

Gang Chai. Dr Chai has been served as one of our directors since April 2000. Dr.
Chai also serves as President of the Company's  subsidiary China eMall. Dr. Chai
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 15, 2000.  Dr. Chai  founded  China
eMall Corporation. 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.



INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS

VHSN is not aware of any material legal  proceedings  that have occurred  within
the past five years concerning any director, director nominee, or control person
which involved a criminal conviction,  a pending criminal proceeding,  a pending
or concluded  administrative or civil proceeding limiting one's participation in
the securities or banking industries,  or a finding of securities or commodities
law violations.

                                       14
<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.

Executive Compensation

All  executive  officers for  services in all  capacities  to VHSN  received the
following compensation during the fiscal year ended December 31, 2002.
<TABLE>
<CAPTION>
                                                                  Long-term Compensation(1)
                                                               ---------------------------------
                                      Annual compensation              Awards          Payouts
                                  ---------------------------  ----------------------- ---------
Name and Principal                                     Other                Securities               All
                                                       Annual  Restricted   Underlying             Other
                                                      Compen-    Stock       Options/    LTIP      Compen-
Position                  Year     Salary    Bonus    sation   Awards(3)      Sars       Payouts   sation
------------------------  -----    -------   -------  -------------------- ----------- --------- ---------

<S>                       <C>         <C>       <C>       <C>       <C>         <C>        <C>       <C>
 Elwin Cathart            2002       -0-       -0-       -0-       -0-         -0-        -0-       -0-
 CEO                      2001       -0-       -0-       -0-       -0-         -0-        -0-       -0-

John Salowski             2002     13,800      -0-       -0-       -0-         -0-        -0-       -0-
 Former President         2001      4,600      -0-       -0-       -0-         -0-        -0-       -0-
</TABLE>


- -----------------------
(1) VHSN  does  not  currently  provide  any  contingent  or  deferred  forms of
compensation arrangements, annuities, pension or retirement benefits.

Committees of the Board of Directors

VHSN  does not  have an  audit  committee,  compensation  committee,  nominating
committee,  or an executive  committee of the Board of  Directors.  The Board of
Directors plans to establish various committees in the future.

Compliance with Section 16(a) of the Securities Exchange Act

Section  16(a) of the  Exchange  Act  requires  VHSN's  executive  officers  and
directors,  and  persons  who  beneficially  own more than ten percent of VHSN's
equity  securities,  to file reports of ownership and changes in ownership  with
the Securities and Exchange Commission. Officers, directors and greater than 10%
percent  shareholders are required by SEC regulation to furnish VHSN with copies
of all Section 16(a) forms they file.

Based on its review of the copies of such forms  received by it,  VHSN  believes
that during the year ended  December  31,  2002,  all such  filing  requirements
applicable to its officers and directors were complied with.

                                       15
<PAGE>

Benefit Plans

VHSN does not have any pension plan,  profit  sharing plan, or similar plans for
the benefit of its officers, directors or employees. However, VHSN may establish
such plans in the future.

Director and Officer Indemnification and Limitations on Liability

If in the  judgment of a majority of the entire Board of  Directors,  (excluding
from such majority any director under  consideration for  indemnification),  the
criteria set forth in 607.0850(1) or (2), Florida  Statutes,  as then in effect,
have been met, then the  corporation  shall  indemnify  any  director,  officer,
employee or agent thereof,  whether current or former,  together with his or her
personal  representatives,  devisees  or heirs,  in the manner and to the extent
contemplated  by 607.0850.  as then in affect,  or by any successor law thereto.

Section 1. General.
(a) To the fullest extent  permitted by law and  consistent  with the principles
set forth in Section 1(c) below, the Corporation  shall indemnify any person who
is or was a  party,  or is  threatened  to be made a party,  to any  threatened,
pending or completed  action,  suit or other type of  proceeding  (other than an
action  by or in  the  right  of  the  Corporation),  whether  civil,  criminal,
administrative,  investigative or otherwise,  and whether formal or informal, by
reason of the fact  that such  person is or was a  director  or  officer  of the
Corporation  or is or  was  serving  at the  request  of  the  Corporation  as a
director,  officer,  trustee or fiduciary of another  corporation,  partnership,
joint venture, trust (including without limitation an employee benefit trust),or
other enterprise. (b) To the fullest extent permitted by law and consistent with
the  principles  set forth in  Section  1(c)  below,  the  Corporation  shall be
entitled  but shall not be  obligated  to  indemnify  any person who is or was a
party,  or is  threatened  to be made a party,  to any  threatened,  pending  or
completed  action,  suit or other type of proceeding (other than an action by or
in the  right of the  Corporation),  whether  civil,  criminal,  administrative,
investigative  or otherwise,  and whether  formal or informal,  by reason of the
fact that such person is or was an employee or agent of the Corporation or is or
was serving at the request of the Corporation as an employee or agent of another
corporation,  partnership,  joint venture,  trust or other  enterprise.  (c) Any
person for whom  indemnification is required or authorized under Section 1(a) or
Section  1(b) above shall be  indemnified  against all  liabilities,  judgments,
amounts paid in settlement,  penalties,  fines (including an excise tax assessed
with respect to any employee  benefit plan) and expenses  (including  attorneys'
fees,  paralegals'  fees and court costs)  actually and  reasonably  incurred in
connection with any such action, suit or other proceeding,  including any appeal
thereof. Indemnification shall be available only if the person to be indemnified
acted in good faith and in a manner such person reasonably believed to be in, or
not opposed to, the best interests of the  Corporation  and, with respect to any
criminal action or proceeding,  had no reasonable cause to believe such person's
conduct  was  unlawful.  The  termination  of any  such  action,  suit or  other
proceeding by judgment,  order, settlement or conviction, or upon a plea of nolo
contendere or its equivalent,  shall not, of itself,  create a presumption  that
the person did not act in good faith and in a manner that such person reasonably
believed to be in, or not opposed to, the best interests of the  Corporation or,
with respect to any  criminal  action or  proceeding,  had  reasonable  cause to
believe that such person's conduct was unlawful.

Section 2. Actions by or in the Right of the Corporation.
(a) To the fullest extent  permitted by law and  consistent  with the principles
set forth in Section 2(c) below, the Corporation  shall indemnify any person who
is or was a  party,  or is  threatened  to be made a party,  to any  threatened,
pending or  completed  action,  suit or other  type of  proceeding  (as  further
described in Section 1 of this Article VI) by or in the right of the Corporation
to procure a judgment  in its favor by reason of the fact that such person is or
was a director or officer of the Corporation or is or was serving at the request
of the  Corporation  as a director,  officer,  trustee or  fiduciary  of another


                                       16
<PAGE>

corporation,  partnership, joint venture, trust or other enterprise. -13- (b) To
the fullest extent permitted by law and consistent with the principles set forth
in Section  2(c)  below,  the  Corporation  shall be  entitled  but shall not be
obligated to indemnify any person who is or was a party,  or is threatened to be
made a party, to any threatened, pending or completed action, suit or other type
of  proceeding  (as further  described in Section 1 of this Article VI) by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that such person is or was an employee or agent of the Corporation or is or
was serving at the request of the Corporation as an employee or agent of another
corporation,  partnership,  joint venture,  trust or other  enterprise.  (c) Any
person for whom  indemnification is required or authorized under Section 2(a) or
Section 2(b) above shall be indemnified against expenses  (including  attorneys'
fees,  paralegals'  fees and court  costs) and amounts  paid in  settlement  not
exceeding, in the judgment of the Board of directors,  the estimated expenses of
litigating the action, suit or other proceeding to conclusion, that are actually
and  reasonably  incurred in  connection  with the defense or settlement of such
action, suit or other proceeding,  including any appeal thereof. Indemnification
shall be available only if the person to be indemnified  acted in good faith and
in a manner  such  person  reasonably  believed to be in, or not opposed to, the
best  interests  of  the   Corporation.   Notwithstanding   the  foregoing,   no
indemnification  shall be made  under  this  Section 2 in  respect of any claim,
issue or matter as to which such  person  shall have been  adjudged to be liable
unless,  and only to the extent that,  the court in which such  action,  suit or
other  proceeding  was brought,  or any other court of  competent  jurisdiction,
shall determine upon application that, despite the adjudication of liability but
in view of all  the  circumstances  of the  case,  such  person  is  fairly  and
reasonably  entitled to indemnification  for such expenses that such court shall
deem proper.

Section 3. Determination that Indemnification Is Proper.
Indemnification  pursuant to Section 1 or Section 2 of this  Article VI,  unless
made under the  provisions  of Section 6 of this Article VI or unless  otherwise
made pursuant to a  determination  by a court,  shall be made by the Corporation
only  as  authorized  in  the  specific  case  upon  a  determination  that  the
indemnification  is proper in the circumstances  because the indemnified  person
has met the  applicable  standard of conduct set forth in Section 1 or Section 2
of this Article VI. Such determination  shall be made under one of the following
procedures:  (a) by the  Board  of  Directors  by a  majority  vote of a  quorum
consisting  of  directors  who were not  parties  to the  action,  suit or other
proceeding  to which the  indemnification  relates;  (b) if such a quorum is not
obtainable  or,  even  if  obtainable,  by  majority  vote of a  committee  duly
designated  by the  Board  of  Directors  (the  designation  being  one in which
directors  who are parties  may  participate)  consisting  solely of two or more
directors not at the time parties to such action, suit or other proceeding;  (c)
by  independent  legal  counsel  (i)  selected  by the  Board  of  directors  in
accordance with the requirements of subsection (a) or by a committee  designated
under subsection (b) or (ii) if a quorum of the directors cannot be obtained and
a committee cannot be designated, selected by majority vote of the full Board of
Directors  (the  vote  being  one  in  which   directors  who  are  parties  may
participate);  or (d) by the  stockholders  by a majority  vote of a quorum -14-
consisting of  stockholders  who were not parties to such action,  suit or other
proceeding  or,  if  no  such  quorum  is  obtainable,  by a  majority  vote  of
stockholders  who were not  parties to such  action,  suit or other  proceeding.


Section 4. Evaluation and Authorization.
Evaluation   of  the   reasonableness   of   expenses   and   authorization   of
indemnification  shall be made in the same manner as is  prescribed in Section 3
of this Article VI for the determination  that  indemnification  is permissible;
provided,  however,  that if the determination as to whether  indemnification is
permissible is made by independent legal counsel,  the persons who selected such
independent legal counsel shall be responsible for evaluating the reasonableness
of  expenses  and  may  authorize  indemnification.

Section  5.  Prepayment  of Expenses.
Expenses (including attorneys' fees,  paralegals' fees and court costs) incurred
by a director or officer in defending a civil or criminal action,  suit or other
proceeding  referred  to in Section 1 or  Section 2 of this  Article VI shall be
paid by the Corporation in advance of the final  disposition  thereof,  but only
upon receipt of an  undertaking  by or on behalf of such  director or officer to
repay such  amount if such  person is  ultimately  found not to be  entitled  to
indemnification  by the  Corporation  pursuant to this  Article  VI.

Section 6.  Obligation to Indemnify.
To the extent that a director or officer  has been  successful  on the merits or
otherwise  in defense of any  action,  suit or other  proceeding  referred to in
Section 1 or Section 2 of this Article VI, or in the defense of any claim, issue
or matter therein,  such person shall, upon application,  be indemnified against
expenses (including attorneys' fees,  paralegals' fees and court costs) actually
and reasonable incurred by such person in connection therewith.

                                       17
<PAGE>

Section 7. Nonexclusivity and Limitations.
The  indemnification  and  advancement  of  expenses  provided  pursuant to this
Article VI shall not be deemed  exclusive  of any other rights to which a person
may be  entitled  under any law,  By-law,  agreement,  vote of  stockholders  or
disinterested  directors,  or  otherwise,  both as to  action  in such  person's
official  capacity and as to action in any other  capacity  while holding office
with the  Corporation.  Such  indemnification  and advancement of expenses shall
continue  as to any person who has ceased to be a director  or officer and shall
inure to the benefit of such person's  heirs and personal  representatives.  The
Board of Directors may, at any time,  approve  indemnification of or advancement
of expenses to any other  person  that the  Corporation  has the power by law to
indemnify.  In all cases  not  specifically  provided  for in this  Article  VI,
indemnification  or advancement of expenses shall not be made to the extent that
such indemnification or advancement of expenses is expressly prohibited by law.

Section 8. Continuation of Indemnification Right.
(a) The right of indemnification  and advancement of expenses under this Article
VI for directors and officers  shall be a contract  right inuring to the benefit
of the directors and officers entitled to be indemnified hereunder. No amendment
or repeal of this Article VI shall  adversely  affect any right of such director
or officer existing at the time of such amendment or repeal. Indemnification and
advancement  of expenses as provided for in this article VI -15- shall  continue
as to a person who has ceased to be a director or officer and shall inure to the
benefit of the heirs,  executors and  administrators of such person.  (b) Unless
expressly  otherwise  provided when authorized or ratified by this  Corporation,
indemnification   and  advancement  of  expenses  that  have  been  specifically
authorized and approved by the  Corporation  for a particular  employee or agent
shall continue as to a person who has ceased to bean employee or agent and shall
inure to the benefit of the heirs,  executors and administrators of such person.
(c) For  purposes  of this  Article  VI,  the term  "corporation"  includes,  in
addition to the resulting  corporation,  any constituent  corporation (including
any constituent of a constituent) absorbed in a consolidation or merger, so that
any person who is or was a director or officer of a constituent corporation,  or
is or was serving at the  request of a  constituent  corporation  as a director,
officer,   employee,   agent,  trustee  or  fiduciary  of  another  corporation,
partnership,  joint venture, trust or other enterprise,  is in the same position
under this Article VI with respect to the resulting or surviving  corporation as
such person would have been with respect to such constituent  corporation if its
separate existence had continued.

Section 9. Insurance.
The Corporation may purchase and maintain  insurance on behalf of any person who
is or was a director,  officer, employee or agent of the Corporation,  or who is
or was  serving  at the  request  of the  Corporation  as a  director,  officer,
trustee, fiduciary, employee or agent of another corporation, partnership, joint
venture,  trust or other  enterprise.  Such  insurance  may cover any  liability
asserted against such person and incurred by such person in any such capacity or
arising out of such person's  status as such,  whether or not the Corporation is
obligated  to or would  have the power to  indemnify  such  person  against  the
liability under Section 1 or Section 2 of this Article VI

These  limitations  of liability do not apply to claims  arising  under  federal
securities laws and does not affect the availability of equitable  remedies such
as injunctive relief or rescission.

Insofar as indemnification  for liabilities arising under the Securities Act may
be permitted to directors, officers, and controlling persons of VHSN pursuant to
the  foregoing  provisions,  or  otherwise,  VHSN has been  advised  that in the
opinion of the  Commission  such  indemnifications  is against  public policy as
expressed in the Securities Act and, is, therefore, unenforceable.

We have no indemnification  agreements with persons who are directors,  officers
or employees of VHSN.

                                       18
<PAGE>


Employment Agreements

    The Company does not have any employment agreement with its employees.




Item 11. Security Ownership of Certain Beneficial Owners and Management

         The following  table sets forth certain  information  as of the date of
this Report regarding the beneficial  ownership of our common stock held by each
of our executive officers and directors, individually and as a group and by each
person who beneficially owns in excess of five percent of the common stock.

         The number of shares of common stock  beneficially owned by each person
or entity is  determined  under the rules  promulgated  by the SEC.  Under those
rules, beneficial ownership includes any shares as to which the person or entity
has sole or shared voting power or investment power and shares which that person
or entity has the right to acquire  within sixty days after April 15, 2003.  The
inclusion  in this  section of any  shares  deemed  beneficially  owned does not
constitute an admission by that person of beneficial  ownership of those shares.
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.
                                       19


<PAGE>
<TABLE>
<CAPTION>

                                            Number  of  shares  of     Percent  of
                                            common  stock              common  stock
                                            beneficially               beneficially
Name  of                                    owned  or  right           owned  or  right
Beneficial Owner                            to  direct  vote(*)        to  direct  vote (*)
- --------------------                     -----------------------    --------------------

<S>                                             <C>                       <C>
Elwin  D. Cathcart                             19,020,000(1)             50.9%
Director
1400  Dixie Road
Mississauga, Ontario L5E 3E1

Gang Chai                                       1,000,000(2)              2.7%
89 Drewry Avenue
Toronto, Ontario  M2M 1E1

David Smelsky                                   1,250,000(3)              3.3%
Director
RR#4  Rockwood,
Ontario  Canada  N0B 2K

Thomas Roberts                                  1,000,000(2)              2.7%
Director
P.O. Box 128 Fayette AL 35555

John Salowski                                   1,250,000                 3.3%
Former president and director
31 Linden Crescent
Brampton
Ontario Canada

GroupmarkCanada Limited(1)                     19,020,000(1)             50.9%
1400 Dixie Road
Mississauga, Ontario L5E 3E1


All officers and directors
as  a  Group  (4  persons)                  22,270,000(1)(2)(3)(4)       59.6%
- -------------
</TABLE>

(*)  Such  figures  are  based  upon  37,345,268  shares  of  our  common  stock
outstanding  as of April 15,  2002.  The shares of VHSN  common  stock  reported
herein does not include shares issuable upon the exercise of options.  Except as
otherwise  noted in these  footnotes,  the nature of  beneficial  ownership  for
shares reported in this table is sole voting and investment power.

(1) Includes a) 15,900,000 common shares owned by Groupmark Canada Limited which
is a wholly owned  corporation  of Elwin D.  Cathcart,  (b) 870,000 shares owned
directly by Elwin  Cathcart  (c)  options  held  directly  by Elwin  Cathcart to
purchase  500,000 shares of VHSN common stock  exercisable at $.05 per share and
that expire on December  31, 2006 , (d) and 500,000  shares of VHSN common stock
exercisable at $.05 per share and that expire on December 31, 2004.

(2) Includes an option to purchase (a) 250,000 shares of VHSN common stock at an
exercise price of $.05 which expires on December 31, 2006 and (b) 250,000 shares
of VHSN common stock at an exercise  price of $.05 which expires on December 31,
2004.

                                       20
<PAGE>


(3) Includes an option to purchase  250,000  shares of VHSN common stock at $.05
expiring  on December  31,2004;  and  250,000  shares of VHSN
common stock owned directly by the named shareholder.



(4)  Includes  an  option  to  purchase  250,000  shares  of VHSN  common  stock
exercisable at $.05 which expires on December 31, 2004.


The  following  table  sets forth  information  with  respect to the  beneficial
ownership of VHSN's Common Stock by each shareholder who beneficially  owns more
than five percent (5%) of its Common  Stock,  the number of shares  beneficially
owned by each and the percent of outstanding  Common Stock so owned of record as
of December 31, 2002.  It is believed by VHSN that all persons  listed have sole
voting and  investment  power with respect to their shares,  except as otherwise
indicated.

                                        Shares of           Percent
                           Title of    Outstanding       Beneficially
Names and Addresses         Class      Common Stock         Owned
- ------------------------   --------   ---------------   ---------------

GroupmarkCanada Limited    Common      19,020,000            37.2%


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. The Company  incurred  management fees of $250,000 and
$210,000 in 2002 and 2001, respectively.  Amounts due Groupmark pursuant to this
management  service  agreement and other  borrowings as of December 31, 2002 and
2001 are $765,792 and $612,162,  respectively.  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.

         On December  1, 2001 VHSN  acquired  all of the issued and  outstanding
shares of TrueNET Enterprise,  Inc. (300 shares of common stock) in exchange for
an  aggregate  of  3,200,000  shares of the common  stock of VHSN.  VHS  Network
purchased from the selling stockholders of Truenet (John Salowski, Jeff McMillan
and  Regional  Hose and  Equipment  Ltd.) the  outstanding  shares of Truenet in
exchange for (i) 3,000,000 shares of HSN, (ii) 200,000 shares of VHSN payable to
Regional  Hose in exchange for the release by Regional Hose of debt out to it by
Truenet and (iii) the right to purchase  2,274,000  shares of common  stock from
Groupmark  Canada Limited (at various  purchase prices ranging from $.04 to $.40
per share) which is a shareholder  of VHSN and is controlled by Elwin  Cathcart,
VHSN's Chief Executive Officer.

                                       21
<PAGE>


Item 13.          Exhibits and Reports on Form 8-K

(a) The  following  documents  are filed as part of this  Annual  Report on Form
10-KSB:

(1) Financial Statements

(2) Exhibits

Exhibit  No.                            Description
-------------                           -----------


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.
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 15, 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.*
10.8**   Form of Acquisition  Agreement between the Company and TrueNET
         Enterprise, Inc.


- -----------------
*  Previously  filed as an exhibit to the  Company's  Registration  Statement on
   Form SB2 filed with the Commission.

**  Previously  filed as an exhibit to the  Company's  Annual Report for 2001 on
Form 10-KSB


(b) Reports on Form 8-K




                                       22

<PAGE>

                                   SIGNATURES

In accordance with the  requirements of the Exchange Act, the registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.


                            VHS NETWORK, INC.
                           (Registrant)


Date: July 25, 2003          /s/ Elwin Cathcart
                            ------------------------------------
                                Elwin Cathcart
                                Principal Executive Officer
                                and Principal Financial Officer


                                       23
<PAGE>

                      CERTIFICATION PURSUANT TO SECTION 302
                        of the SARBANES-OXLEY ACT OF 2002


         I,  Elwin D.  Cathcart,  Principle  Accounting  Officer  and  Principle
Executive Officer of VHS Network, Inc., hereby certify that:

1. I have reviewed this annual report on Form 10-KSB/A of VHS Network, Inc.;

2.  Based on my  knowledge,  this  annual  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. I am responsible for  establishing  and maintaining  disclosure  controls and
procedures  (as  defined  in  Exchange  Act Rules  13a-14  and  15d-14)  for the
registrant and I have:

         a.  designed  such  disclosure  controls and  procedures to ensure that
         material  information   relating  to  the  registrant,   including  its
         consolidated  subsidiaries,  is made known to me by others within those
         entities, particularly during the period in which this annual report is
         being prepared;

         b. evaluated the effectiveness of the registrant's  disclosure controls
         and  procedures as of a date within 90 days prior to the filing date of
         this annual report (the "Evaluation Date"); and

         c. concluded that the Company's  disclosure controls and procedures are
         effective for gathering,  analyzing and disclosing the  information the
         Company is  required  to  disclose  in the  reports it files  under the
         Securities Exchange Act of 1934.

5. I have disclosed,  based on my most recent  evaluation,  to the  registrant's
auditors and to the audit  committee  of  registrant's  board of  directors  (or
persons performing the equivalent function):

a. all significant  deficiencies in the design or operation of internal controls
which  could  adversely  affect the  registrant's  ability  to record,  process,
summarize and report  financial data and have  identified  for the  registrant's
auditors any material weaknesses in internal controls; and b. any fraud, whether
or not  material,  that  involves  management  or  other  employees  who  have a
significant role in the registrant's internal controls; and

6. I have concluded that there have been no significant changes in the Company's
internal controls or in other factors, which could significantly affect internal
controls subsequent to the date the Company carried out its evaluation.


Dated: July 9, 2003


                                            Elsin D. Cathcart
                                          --------------------------------------
                                   By:      Elwin D. Cathcart
                                   Title:   Principle Accounting Officer and
                                            Principle Executive Officer




                                       24



<PAGE>




                               VHS NETWORK, INC.

                        CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2002 AND 2001






                                    CONTENTS

Independent Auditors' Report                                       F-1, F-1A

Consolidated Balance Sheets                                        F-2

Consolidated Statements of Stockholders' Deficit                   F-3

Consolidated Statements of Operations                              F-4

Consolidated Statements of Cash Flows                              F-5

Notes to Consolidated Financial Statements                    F6 - F16


<PAGE>




                                 Gary R. Brown
                      5405 Eglinton Avenue West, Suite 104
                            Toronto, Ontario, CANADA
                                    M9C 5K6
                                Ph 416-695-7070

                          INDEPENDENT AUDITOR'S REPORT


TO  THE  BOARD  OF  DIRECTORS  OF  VHS  NETWORK,  INC.

     I have audited the accompanying consolidated balance sheets of VHS Network,
Inc.,  a  Florida  Corporation,  as  of  December  31,  2001,  and  the  related
consolidated  statements of operations,  shareholders' equity and cash flows for
the year then ended in conformity with generally accepted accounting principles.
These financial  statements are the responsibility of the Company's  management.
My responsibility  is to express an opinion on these financial  statements based
on my audits.

     I  conducted  my audits in  accordance  with  generally  accepted  auditing
standards.  Those standards  require that I 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.
I believe that my audits provide a reasonable basis for my opinion.

     In my 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, 2001 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 6 to the
financial statements, the Company experienced a significant net loss in the year
ending  December 31, 2001,  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.

     The  financial  statements  as at  December  31, 2000 and for the year then
ended were audited by other auditors who expressed an opinion with  reservation,
regarding the  substantial  doubt about the  Company's  ability to continue as a
going  concern,  as similarly  outlined in the current  year's Notes 6 and 8, in
their report dated March 23, 2001.



April  1,  2002                                  /s/ Gary  R.  Brown
                                                 CHARTERED  ACCOUNTANT



                                      F-1
<PAGE>

                              SF Partnership, LLP
                               The Madison Centre
                          4950 Yonge Street, Suite 400
                        Toronto, Ontario, CANADA M2N 6K1
                                Ph 416-250-1212

                          INDEPENDENT AUDITORS' REPORT


To the Stockholders of
VHS Network, Inc.

         We have audited the consolidated balance sheet of VHS Network,  Inc. as
at December 31, 2002 and the related  consolidated  statements of  stockholders'
deficit,  operations  and cash flows for the year then  ended.  These  financial
statements   are  the   responsibility   of  the   company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audit.

         We conducted our audit in accordance with auditing standards  generally
accepted in the United States of America.  Those standards  require that we plan
and  perform  an audit to obtain  reasonable  assurance  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 consolidated
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  our audit  provides 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 the VHS
Network,  Inc. as at December 31, 2002 and the results of its operations and its
cash  flows for the year then ended in  accordance  with  accounting  principles
generally accepted in the United States of America.

         The accompanying  consolidated  financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
2a) to the financial statements,  the Company experienced a significant net loss
in the year ending December 31, 2002, and has negative  working capital and cash
flows from operations. These factors raise substantial doubt about the Company's
ability to continue  as a going  concern.  Management's  plans  regarding  these
matters are also described in Note 2a). The consolidated financial statements do
not include any adjustments that might result from these plans.

         The consolidated  financial  statements as at December 31, 2001 and for
the year then ended were audited by another  firm of auditors  who  expressed an
opinion with  reservation,  regarding the substantial  doubt about the Company's
ability to continue as a going concern in their report dated April 1, 2002.

                                              /S/ "SF Partnership, LLP"
                                              -------------------------
                                                   SF Partnership, LLP
Toronto, Canada                                    CHARTERED ACCOUNTANTS
April 10, 2003




                                      F-1A
<PAGE>




<TABLE>
<CAPTION>

VHS NETWORK, INC.
Consolidated Balance Sheets
December 31, 2002 and 2001

                                                                            2002             2001
                                                                         ----------        --------
                                     ASSETS
Current
<S>                                                                    <C>             <C>
    Cash                                                               $       --      $      1,157
    Accounts receivable                                                        --            17,793
    Inventory (note 3)                                                         --            96,304
                                                                         ----------        --------
Total Current Assets                                                           --           115,254
Property and Equipment, Net (note 4)                                           --            26,741
Intangible Assets, Net (note 5)                                                --           139,850
                                                                         ----------        --------
Total Assets                                                           $       --      $    281,845
                                                                         ==========        ========

                                 LIABILITIES AND
                            STOCKHOLDERS' DEFICIENCY
Current Liabilities
    Bank indebtedness                                                  $        116    $       --
    Accounts payable and accrued charges                                    246,639         115,476
    Bank Loan Payable                                                          --            88,736
                                                                         ----------        --------
Total Current Liabilities                                                   246,755         204,212
Notes Payable, Related Party (note 6)                                       182,027         182,027
Advances from Related Party (note 7)                                        583,765         430,135
Reserve for Loss Contingencies (note 10)                                    350,000         350,000
                                                                         ----------        --------
Total Long-Term Liabilities                                               1,362,547       1,166,374
                                                                         ----------        --------
Stockholders' Deficit (note 8)
      Common stock, $0.001 par value; 100,000,000 shares authorized;     37,345,268
        common shares (2001 - 22,785,268) issued and
        outstanding                                                          37,344          22,784
      Preferred stock; 25,000,000 shares authorized; none issued or
        outstanding
      Additional paid-in capital                                          3,847,462       3,637,208
      Accumulated deficit                                                (5,247,353)     (4,544,521)
                                                                         ----------        --------
Total Stockholders' Deficit                                              (1,362,547)       (884,529)
                                                                         ----------        --------

Total Liabilities and Stockholders' Deficit                            $       --      $    281,845
                                                                         ==========        ========
</TABLE>

APPROVED ON BEHALF OF THE BOARD


       ------------------------------------     -------------------------------
       Director                                 Director



<PAGE>





                                      F-2
<PAGE>



<TABLE>
<CAPTION>

VHS NETWORK, INC.
Consolidated Statements of Stockholders' Deficit
Years Ended December 31, 2002 and 2001





                                                          Common     Additional
                                                          Stock        Paid-In      Accumulated
                                            Shares       Par Value     Capital       Deficit
                                          ----------    ----------    ----------    ----------

<S>                                       <C>          <C>           <C>           <C>
Deficit - December 31, 2000               19,560,268   $    19,559   $ 3,544,408   $(4,065,527)

Settlement of debt                            25,000            25          --            --
Acquisition of TrueNet Enterprise Inc.     3,200,000         3,200        92,800          --
Net loss for the year                           --            --            --        (478,994)
                                          ----------    ----------    ----------    ----------

Deficit - December 31, 2001               22,785,268        22,784     3,637,208    (4,544,521)

Payment of director fees                   1,250,000         1,250        46,750          --
Payment of consulting services             1,295,000         1,295        51,504          --
Acquisition of China eMall
   Class "B" shares                        4,015,000         4,015          --            --
Partial settlement of GroupMark debt       8,000,000         8,000       112,000          --
Net loss for the year                           --            --            --        (702,832)
                                          ----------    ----------    ----------    ----------

Deficit - December 31, 2002               37,345,268        37,344     3,847,462    (5,247,353)
                                          ==========    ==========    ==========    ==========
</TABLE>


                                      F-3
<PAGE>





<TABLE>
<CAPTION>

VHS NETWORK, INC.
Consolidated Statements of Operations
Years Ended December 31, 2002 and 2001



                                                                 2002            2001
                                                              ----------      ----------
<S>                                                         <C>             <C>
Sales                                                       $     32,412    $    163,537

Cost of Sales                                                     12,543         139,599
                                                              ----------      ----------

Gross Margin                                                      19,869          23,938
                                                              ----------      ----------

Operating Expenses
    Management fees                                              250,000         288,220
    Writedown of assets                                          239,061            --
    Inventory allowance                                           81,999          30,000
    Consulting fees                                               59,764            --
    Director fees                                                 48,000            --
    Salaries and benefits                                         34,253          11,460
    Professional fees                                             18,685         117,894
    Office and general                                            10,623          30,775
    Agency Fees                                                    9,169          10,911
    Automobile                                                     4,924            --
    Interest and bank charges                                      4,756             972
    Occupancy costs                                                3,877            --
    Advertising and promotion                                      1,304            --
    Depreciation                                                    --            14,883
                                                              ----------      ----------

Total Operating Expenses                                         766,415         505,115
                                                              ----------      ----------

Operating Loss                                                  (746,546)       (481,177)

Other Income
    Foreign exchange gain                                         43,714           2,183
                                                              ----------      ----------

Net Loss                                                    $   (702,832)   $   (478,994)
                                                              ==========      ==========

Loss per weighted average number of shares
outstanding - basic and diluted                             $     (0.022)   $     (0.021)
                                                              ==========      ==========

Weighted average number of shares - basic and outstanding     31,919,852      22,785,268
                                                              ==========      ==========
</TABLE>


                                      F-4
<PAGE>

<TABLE>
<CAPTION>


VHS NETWORK, INC.
Consolidated Statements of Cash Flows
Years Ended December 31, 2002 and 2001



                                                                                    2002         2001
                                                                                  ---------    ---------
<S>                                                                               <C>          <C>
Cash Flows from Operating Activities
    Net loss                                                                      $(702,832)   $(478,994)
    Adjustments to reconcile net loss to net cash used in operating activities:
      Amortization of intangible assets                                                --          8,000
      Issuance of common stock for expenses and debt                                220,799           25
      Issuance of common stock for acquisition of Class 'B' China eMall shares        4,015         --
      Depreciation                                                                     --          6,883
      Prepaids and deposits                                                            --         68,535
      Writedown of assets                                                           239,061         --
      Inventory valuation allowance                                                  81,999       30,000
      Decrease in accounts receivable                                                17,793       15,077
      Decrease (Increase) in inventory                                               14,305       (4,171)
      Increase in accounts payable and accrued charges                              131,163       52,511
                                                                                  ---------    ---------

                                                                                      6,303     (302,134)
                                                                                  ---------    ---------

Cash Flows from Investing Activities
    Purchase of TrueNet Enterprise Inc.                                                --        (96,000)
    Addition of Assets                                                              (72,470)        --
                                                                                  ---------    ---------

                                                                                    (72,470)        --
                                                                                  ---------    ---------

Cash Flows from Financing Activities
    Advances from related party                                                     153,630      280,135
    Proceeds from stock issuance                                                       --         96,000
    Decrease in bank loan                                                           (88,736)      (2,049)


                                                                                     64,894      374,086


Net Decrease in Cash                                                                 (1,273)     (24,048)

Cash - beginning of  year                                                             1,157       25,205
                                                                                  ---------    ---------

Cash - end of year                                                                $    (116)   $   1,157
                                                                                  =========    =========


Supplemental Disclosure of Non-Cash Transactions:
    Common stock issued for acquisitions                                          $   4,015    $  96,000
    Common stock issued for debt and expenses                                       220,799       25,000
    Inventory valuation allowance                                                    81,999       30,000
    Writedown of assets                                                             239,061         --


</TABLE>


                                      F-5
<PAGE>




VHS NETWORK, INC.
Notes to Consolidated Financial Statements
December 31, 2002 and 2001


1.    Nature of Business

      Company History

      VHS Network, Inc. ("the Company") was incorporated in the State of Florida
      on  December  18,  1995 under the trade name of 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.   became  the  surviving
      Corporation  of the  merger.  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  tapes.
      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 the merger  between  the Company and its wholly
      owned subsidiary Ronden Acquisition,  Inc. This step completed the forward
      triangular merger between Video Home Shopping,  Inc., Ronden  Acquisition,
      Inc. and the Company.

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

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

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

      On  December 1, 2001,  the Company  acquired  all the  outstanding  common
      shares of TrueNet Enterprise Inc., an Ontario private company.

      Operations

      The Company is continuing to  reposition  itself to identify  technologies
      and market  opportunities in the United States,  Canada and abroad in such
      areas  as  the  Internet,  electronic  commerce,  interactive  media,  and
      SmartCARD loyalty marketing. The Company will operate and/or develop these
      lines of business as well as seek other joint  ventures and alliances with
      third parties.


                                      F-6
<PAGE>


VHS NETWORK, INC.
Notes to Consolidated Financial Statements
December 31, 2002 and 2001

2.    Summary of Significant Accounting Policies

      a)    Going Concern

            These  financial  statements  have been prepared in accordance  with
            accounting  principles  generally  accepted in the United  States of
            America with the assumption that the Company will be able to realize
            its assets and  discharge  its  liabilities  in the normal course of
            business.

            The Company has suffered  operating  losses  during the current year
            and has a negative working capital and a net capital deficiency that
            raises  doubt as to its  ability  to  continue  as a going  concern.
            Management  expects that the Company will be in a position to obtain
            the working  capital  financing  required  to support  its  business
            operations.  The Company's continued existence as a going concern is
            dependent  upon  its  ability  to  attain  and  maintain  profitable
            operations and to obtain the necessary financing.

            Under the above circumstances,  the Company has decided to writedown
            all of their assets and liabilities to their fair values.

      b)    Unit of Measurement

            United  States  of  America  currency  is being  used as the unit of
            measurement in these financial statements.

            Monetary  assets and liabilities  denominated in foreign  currencies
            are translated into U.S.  dollars at the exchange rates in effect at
            the balance sheet date and  non-monetary  assets and  liabilities at
            the  exchange  rate  in  effect  at the  time  of the  transactions.
            Revenues  and  expenses   denominated  in  foreign   currencies  are
            translated using the average  exchange rates  prevailing  throughout
            the  year.   Realized   gains  and  losses  from  foreign   currency
            translations  are  included  in other  comprehensive  income for the
            period.

      c)    Principals of Consolidation

            The consolidated  financial  statements  include the accounts of the
            company and all of its subsidiary  companies.  Intercompany accounts
            and  transactions  have  been  eliminated  on  consolidation.  These
            consolidated  financial  statements  reflect all adjustments,  which
            are, in the opinion of management, necessary for a fair presentation
            of the results for the interim periods.

      d)    Use of Estimates

            In preparing  the  company's  financial  statements,  management  is
            required to make estimates and assumptions  that affect the reported
            amounts of assets and  liabilities and the disclosures of contingent
            assets and liabilities at the dates of the financial statements, and
            the reported  amounts of revenues and expenses  during the reporting
            periods. Actual results could differ from those estimates.


                                      F-7
<PAGE>



VHS NETWORK, INC.
Notes to Consolidated Financial Statements
December 31, 2002 and 2001

2. Summary of Significant Accounting Policies (cont'd)

      e)    Fair Value of Financial Instruments

            The  carrying  amounts  reflected  in the  balance  sheets for cash,
            accounts receivable,  bank indebtedness,  accounts payable and notes
            payable   approximate   their  fair  values,   except  as  otherwise
            indicated.

      f)    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.

      g)    Concentration of Cash

            The Company at times  maintains  cash  balances in accounts that are
            not fully federally insured. The company has a bank loan, secured by
            the  assets  of  a  subsidiary   and   guaranteed   by  a  group  of
            shareholders.

      h)    Inventory

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

      i)    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.  During the year,  all property
            and equipment were written down as described in Note 2a).

      j)    Long-lived Assets

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

                                      F-8
<PAGE>


VHS NETWORK, INC.
Notes to Consolidated Financial Statements
December 31, 2002 and 2001
2. Summary of Significant Accounting Policies (cont'd)

      k)    Comprehensive Income

            In 1999, the Company adopted SFAS No. 130, "Reporting  Comprehensive
            Income."  SFAS No.  130  establishes  standards  for  reporting  and
            presentation  of  comprehensive  income and its components in a full
            set of financial  statements.  Comprehensive  income is presented in
            the   consolidated    statements   of   shareholders'   equity   and
            comprehensive  income,  and  consists  of net income and  unrealized
            gains (losses) on available for sale marketable securities;  foreign
            currency  translation  adjustments  and  changes in market  value of
            future  contracts  that  qualify  as a hedge;  and  negative  equity
            adjustments  recognized  in  accordance  with SFAS 87.  SFAS No. 130
            requires only additional  disclosures in the consolidated  financial
            statements and does not affect the Company's  financial  position or
            results of  operations.  The resulting  comprehensive  income (loss)
            form  adopting  the above  SFAS No.  130,  during  the  years  ended
            December 31, 2002 and 2001 have been "Nil".

      l)    Revenue Recognition

            Sales  are  recorded  for  products  upon  shipment  of  product  to
            customers  and transfer of title under  standard  commercial  terms.
            Revenue from services is recorded when the service is performed.

      m)    Income Taxes

            The  Company  accounts  for income  taxes  pursuant to SFAS No. 109,
            "Accounting  for Income Taxes".  Deferred tax assets and liabilities
            are recorded for differences between the financial statement and tax
            basis of the assets and  liabilities  that will result in taxable or
            deductible amounts in the future based on enacted tax laws and rates
            applicable to the periods in which the  differences  are expected to
            affect taxable income.  Valuation  allowances are  established  when
            necessary to reduce deferred tax assets to the amount expected to be
            realized.  Income tax expense is  recorded  for the amount of income
            tax payable or refundable  for the period  increased or decreased by
            the change in deferred tax assets and liabilities during the period.

      n)    Stock Based Compensation

            The Company enters into  transactions in which goods or services are
            the consideration  received for the issuance of equity  instruments.
            The value of these  transactions  are  measured and  accounted  for,
            based on the fair value of the equity instrument issued or the value
            of the services, whichever is more reliably measurable. The services
            are expensed in the periods during which the services are rendered.


                                      F-9
<PAGE>



VHS NETWORK, INC.
Notes to Consolidated Financial Statements
December 31, 2002 and 2001
2. Summary of Significant Accounting Policies (cont'd)


      o)    Net Loss per Common Share

            The  Company  calculates  net loss per share  based on SFAS No. 128,
            "Earnings  Per Share".  Basic loss per share is computed by dividing
            net loss attributable to common stockholders by the weighted average
            number  of  common  shares  outstanding.  Diluted  loss per share is
            computed similar to basic loss per share except that the denominator
            is increased to include the number of additional  common shares that
            would have been  outstanding if the potential common shares had been
            issued and if the additional common shares were dilutive.

      p)    Reclassifications

            Certain   amounts  in  the  2000  financial   statements  have  been
            reclassified to conform to the 2001 presentation

      q)    Recent Accounting Pronouncements

            In March 2000,  the Financial  Accounting  Standards  Board ("FASB")
            issued  FASB   Interpretation   No.  44,   "Accounting  for  Certain
            Transactions  Involving Stock Compensation" (FIN 44), which contains
            rules  designed  to clarify  the  application  of APB 25. FIN 44 was
            effective  for the Company on July 1, 2000.  The  adoption of FIN 44
            did not have an impact to the earnings and financial position of the
            Company.

            In December  1999,  the  Securities  and Exchange  Commission  (SEC)
            issued Staff Accounting  Bulletin No. 101,  "Revenue  Recognition in
            Financial  Statements" (SAB 101),  which clarifies  certain existing
            accounting  principles for the timing of revenue recognition and its
            classification  in the  financial  statements.  The SEC  delayed the
            required  implementation date of SAB 101 by issuing Staff Accounting
            Bulletins No. 101A,  "Amendment:  Revenue  Recognition  in Financial
            Statements," and No. 101B, "Second Amendment: Revenue Recognition in
            Financial  Statements,"  in March and June 2000,  respectively.  The
            adoption  of SAB 101 did not  have an  impact  to the  earnings  and
            financial position of the Company.

            In June  1998,  the  FASB  issued  SFAS  No.  133,  "Accounting  for
            Derivative   Instruments  and  Hedging  Activities."  SAFS  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.

            In June 2001, the FASB issued SFAS No. 141, "Business  Combinations"
            under  which all  acquisitions  subsequent  to June 30, 2001 must be
            accounted for under the purchase method of accounting.  The adoption
            of SFAS No.  141 did not have an effect on the  Company's  financial
            position or results of operations.


                                      F-10
<PAGE>


VHS NETWORK, INC.
Notes to Consolidated Financial Statements
December 31, 2002 and 2001

2. Summary of Significant Accounting Policies (cont'd)

      q) Recent Accounting Pronouncements (cont'd)

            In June 2001,  the FASB  issued SFAS No.  142,  "Goodwill  and Other
            Intangible Assets". SFAS No. 142 changes the accounting for goodwill
            from  an  amortization   method  to  an  impairment-only   approach.
            Amortization  of  goodwill,  including  goodwill  recorded  in  past
            business  combinations,  will cease upon adoption of this statement.
            The  Company is  required to  implement  the SFAS No. 142  effective
            October  1, 2002 only and  consequently  does not have any impact on
            the current year financial  position or results of operations of the
            Company.

            In June 2001,  the FASB issued SFAS No. 143,  "Accounting  for Asset
            Retirement  Obligations".  SFAS 143 establishes accounting standards
            for  recognition  and  measurement  of a liability  for the costs of
            asset retirement obligations.  Under SFAS 143, the costs of retiring
            an  asset  will be  recorded  as a  liability  when  the  retirement
            obligation arises, and will be amortized over the life of the asset.
            The company does not have any asset retirement obligations.

            In August  2001,  the FASB  issued  SFAS No.  144,  "Accounting  for
            Impairment  or Disposal of  Long-Lived  Assets".  SFAS 144 addresses
            financial accounting and reporting for the impairment or disposal of
            long-lived assets and discontinued operations.  The adoption of SFAS
            No. 144 did not have an effect on the Company's  financial  position
            or results of operations.


3.    Inventory

      On April 29,  1998,  the  Company  acquired  approximately  32,000 sets of
      printed art  reproductions.  Each set consists of four  full-color  prints
      from "The Andover Series" by artist Jim Perleberg.  Each image has a title
      narrative  printed in the margin and is  re-signed,  in the plate,  by the
      artist.  The Company was  unsuccessful in selling these prints through its
      own web site and other  internet web sites,  as a result,  the prints have
      been written off at the year-end.

                                      F-11
<PAGE>


VHS NETWORK, INC.
Notes to Consolidated Financial Statements
December 31, 2002 and 2001


4.    Property and Equipment, Net

                                                        2002          2001
                                                     Accumulated   Accumulated
                              Cost    Amortization      Cost      Amortization
------------------------------------------------------------------------------

 Furniture and equipment     $   -    $    -      $  35,520      $   8,779
------------------------------------------------------------------------------

 Net carrying amount                  $    -                     $  26,741

      Depreciation  expenses for the years ended December 31, 2002 and 2001 were
      Nil and $6,887 respectively. During the year the Company wrote off all its
      property and equipment as described in Note 2a).


5.    Intangible Assets, Net

                                                        2002          2001
                                                     Accumulated   Accumulated
                              Cost    Amortization      Cost      Amortization
------------------------------------------------------------------------------

      Software               $   -    $    -      $ 129,520      $  13,670
      Domain name                -         -         24,000            -
-------------------------------------------------------------------------------
                             $   -    $    -      $ 153,520      $  13,670
-------------------------------------------------------------------------------

      Net carrying amount
                                      $    -                     $ 139,850

      Amortization  expenses for the years ended December 31, 2002 and 2001 were
      Nil and $8,000  respectively.  During the year the  Company  wrote off all
      their intangible assets as described in Note 2a).


6.    Notes Payable, Related Party

      These notes payable are owed to Groupmark  Canada  Limited  ("Groupmark"),
      whose  Chairman  and Chief  Executive  Officer of the  Company is the sole
      shareholder.  The  amounts  payable are non  interest  bearing and have no
      specified terms of repayment.

                                      F-12
<PAGE>


VHS NETWORK, INC.
Notes to Consolidated Financial Statements
December 31, 2002 and 2001

7.    Advances from Related Party

      Groupmark Canada Limited

      In 1997,  the company  entered into a management  service  agreement  with
      Groupmark Canada Limited ("Groupmark"), whose 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 $250,000 and $210,000 in
      2002 and 2001, respectively.

      Amounts due Groupmark  pursuant to this management  service  agreement and
      other  borrowings  as of  December  31,  2002 and 2001  are  $583,765  and
      $430,135, respectively.  Groupmark has the option to accept payment by way
      of the Company's common stock at fair market value in lieu of cash.


8.    Capital Stock

      During the year, common stock were issued as follows:

      a)    In February  2002, the Company  issued  1,250,000  shares to various
            directors  of the Company  for  service  rendered by the board for a
            value of $48,000.

      b)    In February 2002, the Company issued  1,295,000  shares for services
            rendered for a value of $52,799.

      c)    In January 2002, the Company issued 4,015,000 shares in exchange for
            Class  'B'  shares  of China  eMall,  on a one for one  basis for no
            additional consideration.

      d)    In July 2002,  the  Company  issued  8,000,000  shares to  Groupmark
            Canada,  a related  party,  for  partial  settlement  of debt  worth
            $120,000.

                                      F-13
<PAGE>


VHS NETWORK, INC.
Notes to Consolidated Financial Statements
December 31, 2002 and 2001

9.    Stock Options and Conversions

      The  Company has adopted  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 have remained the
      same for pro forma amounts as indicated below for the years ended December
      31.

                                                               2002        2001

      Net loss
        As reported
            $
            (702,832)
            $(478,994)
        Pro forma                                          (702,832)  (478,994)

      Basic and diluted loss per common share Basic:
          As reported                                        (0.022)    (0.021)
          Pro forma                                          (0.022)    (0.021)

      Diluted:
          As reported                                        (0.022)    (0.021)
          Pro forma                                          (0.022)    (0.021)

      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 2002 and no  options
      expired.

      The fair value of these  options was  estimated at the date of grant using
      the   Black-Scholes   option-pricing   model.   The  options  issued  were
      immediately vested.

                                      F-14
<PAGE>

<PAGE>
VHS NETWORK, INC.
Notes to Consolidated Financial Statements
December 31, 2002 and 2001

9. Stock  Options and  Conversions  (cont'd)


   A summary of the status of the Company's stock option plan as of December 31,
   2002 and 2001 and changes  during the years ended on those dates is presented
   below.


                                   Number                   Number
                                of  Stock                 of  Stock
                                 Options                   Options
                                   2002     Price/Option    2001    Price/Option
         ----------------------------------------------------------------------
Balance at beginning of year
                                 2,500,000    $ 0.22      2,000,000      $0.36

Granted                                --       --        1,250,000      0.05

Forfeited/cancelled/expired            --       --          750,000      0.38

Outstanding at year end           2,500,000    0.22       2,500,000      0.22

Options exercisable at year end   2,500,000   0.22        2,500,000      0.22

      The  contractual  life for options  granted in 2001 to purchase  1,250,000
      shares of common  stock at an  exercise  price of $0.05 is 36 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 12 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  that are 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.


10.   Comparative Figures

      The prior year  figures  have been  restated  to  conform  to the  current
      presentation of the financial statements.

                                      F-15
<PAGE>

VHS NETWORK, INC.
Notes to Consolidated Financial Statements
December 31, 2002 and 2001
11.   Legal Proceedings

      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) as a result of actions by
      the former  principal of Video Home  Shopping  Inc.  which have lead to an
      investigation   by  the  IRS.  The  Company  has  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 unpaid Federal  Withholding  taxes,
      Social Security and Medicare taxes,  employer's  taxes,  and other payroll
      taxes and out of prudence, the Company has elected to provide a reserve of
      $350,000.

                                      F-16
<PAGE>