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

                                   FORM 10-KSB

                                 Amendment No. 1

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

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

                                       to

                         Commission File No. 000-1108028

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

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

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

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

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

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

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B in this form, and no disclosure will be contained, to the best of
registrant's   knowledge,   in  definitive   proxy  or  information   statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [ ]

The  Registrant's  revenues for its most recent  fiscal year:  $0 The  aggregate
market value of voting stock held by non-affiliates: $780,395

                                       1
<PAGE>

As of March 31, 2001, the Registrant had outstanding 19,560,268 shares of common
stock, par value $0.001.

Documents incorporated by reference: None.

                                TABLE OF CONTENTS

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


1.   Description of Business                                             3

2.   Description of Property                                             8

3.   Legal Proceedings                                                   9

4.   Submission of Matters to a Vote of Security Holders                 9

Part II

5.   Market for Common Equity and Related Stockholder Matters            9

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

7.   Financial Statements                                               14

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

Part III

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

10.  Executive Compensation                                             17

11.  Security Ownership of Certain Beneficial Owners and Management     19

12.  Certain Relationships and Related Transactions                     22

13.  Exhibits and Reports on Form 8-K                                   23

Signatures                                                              24

                                       2
<PAGE>

FORWARD-LOOKING STATEMENT NOTICE

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

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

History

Incorporation

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

Acquisition of Video Home Shopping, Inc.

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

Name Change

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

Acquisition of VHS Network Inc.

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

                                       3
<PAGE>

Rule 504 Offering (1997/1998)

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

Share Combination

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

Acquisition of Lithographic Prints

On May 14, 1998, VHSN issued 1,399,992 common shares to Rogue-Mountain  Corp. in
an arm's length  transaction  for the purchase of inventory for resale valued at
$139,999.  The inventory consists of full colour lithographic prints from a sold
out limited edition release, "The Andover Series" by artist Jim Perleberg. As of
March 31, 2001 none of this inventory has been sold.

Rule 504 Offering (1999/2000)

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

Business Development

Acquisition of China eMall

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

                                       4
<PAGE>

VHSN  acquired all of the issued and  outstanding  common  shares of China eMall
Corporation  pursuant to a share  exchange  agreement  made between VHSN,  China
eMall Corporation,  Uphill Capital Inc., GDCT Investment Inc., Gang Chai, Qin Lu
Chai, Qing Wang, Tai Xue Shi,  Charles He and Forte Management Corp. (the "Share
Exchange  Agreement").  The  common  shares  of China  eMall  were  held by five
individual   shareholders   and  three   corporations.   Two  of  the  corporate
shareholders,  GDCT  Investment  Limited and Uphill  Capital Inc.,  were holding
companies  whose  only  activities  were  holding  shares of China  eMall.  VHSN
purchased all the issued and outstanding  shares of GDCT Investment  Limited and
Uphill Capital Inc. and thus indirectly  acquired the shares of China eMall held
by these  companies.  The  shareholders  of GDCT  Investment  Limited and Uphill
Capital  Inc.  received  common  shares of VHSN  pursuant to the Share  Exchange
Agreement.  The other corporate  shareholder,  Forte Management Corp.,  received
common shares of VHSN in exchange for its shares of China eMall.

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

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

Acquisition of Exodus

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

                                       5
<PAGE>

Business of Issuer

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

China eMall Business

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

History

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

Products - Manufactured Goods

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

                                       6
<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,
financial services, and travel, immigration, translation and other services.

Business Strategy

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

  Short Term

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

  Long Term

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

Competition

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

SmartCARD Business

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

                                       7
<PAGE>

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

Competition

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

Suppliers

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

Research and Development.

VHSN spent  approximately  115,000 in 1999 and $40,000 in 2000 on  research  and
development.

Employees

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

ITEM 2.  DESCRIPTION OF PROPERTY

                                       8
<PAGE>

SmartCARD

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

China eMall

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


ITEM 3.  LEGAL PROCEEDINGS

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


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

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

                                     PART II


ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

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

                                       9
<PAGE>

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

                                                Closing Bid
         ----------------------------------------------------
         Quarter(1)                         High $      Low $
         ----------------------------------------------------
         1998
         First Quarter                      1.03        0.13
         Second Quarter                     3.25        0.31
         Third Quarter                      3.44        1.50
         Fourth Quarter                     2.16        0.44

         1999
         First Quarter                      0.88        0.16
         Second Quarter                     0.59        0.13
         Third Quarter                      0.27        0.06
         Fourth Quarter                     0.20        0.12

         2000
         First Quarter(2)                   2.00        0.03
         Second Quarter(2)                  0.80        0.03
         Third Quarter(2)                   0.36        0.08
         Fourth Quarter(2)                  0.12        0.03
         -----------------------------------------------------
         (1)  Each quarter is based on the calendar year
         (2)  Prices supplied by VHSN

Holders

As of March 31, 2001 the number of registered holders of record of common shares
was approximately 170.

Dividends

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

Recent Sales of Unregistered Securities

In  December,  1999 VHSN  commenced  another  offering  pursuant  to Rule 504 of
Regulation D promulgated  under the Securities Act of 1933 to raise a maximum of
$1,000,000.  On December 20, 1999,  VHSN issued  150,000 common shares to Steven
Rossi and 350,000  common  shares to Kevin  Waltzner  as payment for  consulting
services  rendered to VHSN pursuant to consulting  agreements dated December 20,
1999,  and December 16, 1999,  respectively.  The exemptions  from  registration
relied  on are  provided  by Rule 504 of  Regulation  D,  promulgated  under the
Securities  Act of 1933,  as amended  and  section  203 (t) of the  Pennsylvania

                                       10
<PAGE>

Securities  Act of 1972, as amended.  During the first three months of 2000 VHSN
issued  2,083,333 common shares to Paul Winters at prices of $0.10 and $0.60 for
aggregate  proceeds of  $950,000.  The  purchaser  was  provided  with a private
placement  memorandum,  completed an investor  questionnaire  and a subscription
agreement.  This private  placement was made in reliance on the  exemption  from
registration  provided  by  Rule  504 of  Regulation  D  promulgated  under  the
Securities Act of 1933, as amended (the "Securities Act") and section 203 (t) of
the  Pennsylvania  Securities  Act of 1972, as amended.  Shares sold pursuant to
this 504 offering are summarized below.

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

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

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

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

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

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

                                       11
<PAGE>

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

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

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

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

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

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

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

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

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

Summary

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

                                       12
<PAGE>

Going Concern

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

Goals and Objectives

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

Cash Requirements

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

Employees

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

Results of Operations

Results of years ended December 31, 2000 and December 31, 1999 Revenues for both
years ended December 31, 2000 and December 31, 1999 were $0. Operating  Expenses
increased from $525,377 in 1999 to $871,258 in 2000,  largely due to an increase
in Agency Fees, General and Administration Fees and Professional Fees. Legal and
accounting fees increased substantially in 2000 in connection with VHSN becoming
a reporting company.

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

                                       13
<PAGE>

Liquidity and Capital Resources

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

Revenues  commenced in the first  quarter of 2001 and VHSN  expects  revenues to
exceed $1,500,000 in the next 12 months.

Changes in Financial Position

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

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

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

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


ITEM 7.  FINANCIAL STATEMENTS

                                       14
<PAGE>

                                VHS NETWORK, INC.
                                  CONSOLIDATED
                              FINANCIAL STATEMENTS

                           December 31, 2000 and 1999
<PAGE>

                                 C O N T E N T S
                                VHS NETWORK, INC.

                        Consolidated Financial Statements
                           December 31, 2000 and 1999



Independent Auditor's Report..........................................F-1

Consolidated Balance Sheets...........................................F-2

Consolidated Statements of Operations.................................F-3

Consolidated Statements of Shareholders' Equity.......................F-4

Consolidated Statements of Cash Flows..............................F-5 - F-6

Notes to Financial Statements......................................F-7 - F-23
<PAGE>

                          INDEPENDENT AUDITORS' REPORT


Board of Directors VHS NETWORK, Inc.


We have audited the  accompanying  consolidated  balance  sheets of VHS NETWORK,
Inc., a Florida  Corporation,  as of December 31, 2000 and 1999, and the related
consolidated  statements of operations,  shareholders' equity and cash flows for
the  years  then  ended  in  conformity  with  generally   accepted   accounting
principles.  These financial  statements are the responsibility of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audit.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial position of VHS Network,  Inc.,
as of December 31, 2000 and 1999, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted  accounting
principles.

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




POHL, MCNABOLA, BERG & COMPANY, LLP
March 23, 2001

                                       F-1
<PAGE>

<PAGE>


                                VHS NETWORK, INC.

                           Consolidated Balance Sheets
                        As of December 31, 2000 and 1999
<TABLE>
<CAPTION>
                                                                   2000           1999
                                                                -----------    -----------
ASSETS
<S>                                                             <C>            <C>
    Cash                                                        $    25,205    $       533
    Inventory                                                       111,999        139,999
                                                                -----------    -----------
            Total current assets                                    137,204        140,532
                                                                -----------    -----------
    Property and Equipment
        Furniture and Equipment                                      18,940           --
        Accumulated Depreciation                                     (1,892)          --
                                                                -----------    -----------
                                                                     17,048           --
                                                                -----------    -----------
    Intangible assets, net                                           18,330           --
                                                                -----------    -----------
    Other Assets
        Other receivables                                               761           --
        Prepaids and deposits                                        67,774         67,774
                                                                -----------    -----------
                                                                     68,535         67,774
                                                                -----------    -----------
                   Total assets                                 $   241,117    $   208,306
                                                                ===========    ===========
LIABILITIES
    Accounts payable                                            $    60,650    $    64,867
    Salaries and wages payable to officers                             --           71,500
    Accrued expenses                                                   --           37,000
                                                                -----------    -----------
            Total current liabilities                                60,650        173,367
                                                                -----------    -----------
    Management fees payable, related party                          150,000        336,000
    Notes payable, related party                                    182,027      1,309,868
    Reserve for loss contingencies                                  350,000        350,000
                                                                -----------    -----------
            Total long-term liabilities                             682,027      1,995,868
                                                                -----------    -----------
                Total liabilities                                   742,677      2,169,235
                                                                -----------    -----------

    Commitments and contingencies (note 8)

SHAREHOLDERS' EQUITY

    Common stock: $0.001 par value: 100,000,000 shares
        authorized; 19,560,268 and 10,929,435
        issued and outstanding, respectively                         19,559         10,929
    Preferred stock: 25,000,000 shares authorized;
        none issued or outstanding                                     --             --
    Additional paid-in-capital                                    3,544,408      1,231,170
    Accumulated deficit                                          (4,065,527)    (3,203,028)
                                                                -----------    -----------
                Total shareholders' equity                         (501,560)    (1,960,929)
                                                                -----------    -----------
                   Total liabilities and shareholders' equity   $   241,117    $   208,306
                                                                ===========    ===========
</TABLE>



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

                                       F-2
<PAGE>


                                VHS NETWORK, INC.

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

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



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

                                       F-3
<PAGE>


                                VHS NETWORK, INC.

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

<TABLE>
<CAPTION>
                                                   Common           Preferred     Additional
                                                   Stock              Stock         paid-in    Accumulated
                                              Shares     Amount   Shares Amount    -capital    Deficit         Total
                                          ----------   ---------- ------ ------   ----------   ----------     ----------

<S>                                       <C>          <C>        <C>    <C>     <C>          <C>           <C>
Balance December 31, 1998                 10,429,435   $   10,429   --   $--     $     --     1,181,670     $(1,485,552)
                                          ----------   ---------- ------ ------   ----------   ----------     ----------
Common stock issued for services             500,000          500   --    --         49,500         --            50,000

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



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

                                       F-4
<PAGE>


                                VHS NETWORK, INC.

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

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

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

                                   (continued)



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

                                       F-5
<PAGE>

                                VHS NETWORK, INC.

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

<TABLE>
<CAPTION>
                                                             2000              1999
                                                           ---------          ------
Supplementary disclosure:

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

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

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

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

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

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



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

                                       F-6
<PAGE>

                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                December 31, 2000

1.   NATURE OF OPERATIONS

     Company History

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

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

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

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

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

                                       F-7
<PAGE>

                               VHS NETWORK, INC.

                          Notes to Financial Statements
                                December 31, 2000

1.   NATURE OF OPERATIONS (continued)

     Operations

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

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

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

                                       F-8
<PAGE>

                               VHS NETWORK, INC.

                          Notes to Financial Statements
                                December 31, 2000

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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


     Principles of Consolidation

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


     Cash and Cash Equivalents

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


     Concentration of Cash

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


     Inventories

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

                                       9
<PAGE>

                               VHS NETWORK, INC.

                          Notes to Financial Statements
                                December 31, 2000

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     Property and Equipment

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

     Depreciation expense was $1,892 in 2000.


     Stock-based Compensation

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


     Income Taxes

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

                                       F-10
<PAGE>

                               VHS NETWORK, INC.

                          Notes to Financial Statements
                                December 31, 2000

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     Foreign Currency Translation

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


     Revenue

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


     Comprehensive Income

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


     Income (loss) per common share

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

                                       F-11
<PAGE>

                               VHS NETWORK, INC.

                          Notes to Financial Statements
                                December 31, 2000

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     Long-lived assets

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


     Reclassifications

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


     Use of Estimates

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


     Advertising Costs

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


     Foreign Currency Translation

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

                                       F-12
<PAGE>

                               VHS NETWORK, INC.

                          Notes to Financial Statements
                                December 31, 2000

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     Intangibles

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


     Recently Issued Accounting Pronouncements

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


3.   INVENTORIES

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

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

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

                                       F-13
<PAGE>

                               VHS NETWORK, INC.

                          Notes to Financial Statements
                                December 31, 2000

4.   INCOME TAXES

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

     The  provision  for income taxes does not differ from the amounts  recorded
     for financial versus tax purposes.  The net effective tax rate is zero, and
     the income tax benefit is offset by the corresponding valuation allowance.

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

     The  components of net deferred  income tax assets and  liabilities  are as
     follows:

<TABLE>
<CAPTION>

<S>                                                            <C>                   <C>
             For the year ended December 31, 2000                  Federal                 State
                                                               ------------------    -------------------

             Deferred income tax assets:
              Net operating loss carryforwards                 $      1,330,661      $         221,013
              Inventory allowance                                         9,800                  1,540
              Non-deductible reserve                                   (119,000)               (19,250)
              Accrued expenses                                          (24,310)                (3,932)
              Valuation allowance                                    (1,197,151)              (199,371)
                                                               ------------------    -------------------

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

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

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

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

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

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

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

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

                                       F-14
<PAGE>

                               VHS NETWORK, INC.

                          Notes to Financial Statements
                                December 31, 2000

4.   INCOME TAXES (continued)

     Due to the uncertainty  surrounding the realization of deferred tax assets,
     the Company has recorded a valuation allowance against its net deferred tax
     asset. The Company has loss carryforwards of approximately  $3,893,000 from
     continuing  operations,  which may be used to offset  future  United States
     income taxes, which begin to expire in 2015.


5.   STOCKHOLDERS' EQUITY

     Common Stock

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

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

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


6.   STOCK OPTIONS

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

                                       F-15
<PAGE>

                               VHS NETWORK, INC.

                          Notes to Financial Statements
                                December 31, 2000

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

                                                                         2000                   1999
                                                                    ---------------       -----------------
<S>                                                              <C>                   <C>
         Net loss
                     As reported                                 $       (862,499)     $         (525,377)
                     Pro forma                                   $       (862,499)     $         (525,377)
         Basic    and diluted loss per common share Basic:
                     As reported                                 $         (0.044)     $            (0.05)
                     Pro forma                                   $         (0.044)     $            (0.05)
                  Diluted:
                      As reported                                $         (0.044)     $            (0.05)
                      Pro forma                                  $         (0.044)     $            (0.05)
</TABLE>


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

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

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

                                       F-16
<PAGE>

                                VHS NETWORK, INC.

                          Notes to Financial Statements
                                December 31, 2000


<PAGE>

6.   STOCK OPTIONS (continued)

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

         Granted                                           -                                -

         Exercised                                         -                                -

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

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

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

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

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

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

                                       F-17
<PAGE>

                               VHS NETWORK, INC.

                          Notes to Financial Statements
                                December 31, 2000

7.   RELATED PARTY TRANSACTIONS

     Groupmark Canada Limited

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

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


     Transactions with Corporate Officers and Directors

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

     Dr. Gang Chai, a member of the Board of Directors and the original  founder
     of China  e-Mall,  provided  management  services to the Company  through a
     consulting   agreement  with  G.C.  Consulting  and  Investment  Corp.  The
     agreement was terminated in August 2000.  The Company paid G.C.  Consulting
     and Investment Corp. $26,650 in 2000.

                                       F-18
<PAGE>

                               VHS NETWORK, INC.

                          Notes to Financial Statements
                                December 31, 2000

8.   COMMITMENTS AND CONTINGENCIES

     Legal

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


     Video Home Shopping, Inc., a Tennessee Corporation

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

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

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

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

                                       19
<PAGE>

                               VHS NETWORK, INC.

                          Notes to Financial Statements
                                December 31, 2000

8.   COMMITMENTS AND CONTINGENCIES (continued)

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

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


     Going Concern Uncertainties

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

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

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

                                       F-20
<PAGE>

                               VHS NETWORK, INC.

                          Notes to Financial Statements
                                December 31, 2000

9.   ACQUISITIONS

     Acquisition of China eMall Corporation

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


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

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

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

                                       F-21
<PAGE>

                               VHS NETWORK, INC.

                          Notes to Financial Statements
                                December 31, 2000

9.   ACQUISITIONS (continued)


     Acquisition of Exodus Acquisition Corporation

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



10. INTANGIBLE ASSETS

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

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

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

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

                                       F-22
<PAGE>

                               VHS NETWORK, INC.

                          Notes to Financial Statements
                                December 31, 2000

11.  REGISTRATIONS STATEMENT

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

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

                                       F-23
<PAGE>

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

                                       15
<PAGE>

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

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

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

There were no disagreements with the former accountant of Exodus.


                                    PART III


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

Directors, Executive Officers, Promoters, and Control Persons

Elwin D. Cathcart

Mr.  Cathcart,  age 75, has been a director and Chief Executive  Officer of VHSN
since April 1997.  Over the last 5 years,  Mr. Cathcart has also been serving as
Chairman and Chief  Executive  Officer of Groupmark  Canada  Limited,  a private
marketing company  specializing in direct mail service products which he founded
in 1970.  From 1970 to 1972,  Mr.  Cathcart  served as President of the Canadian
Direct Mail  Marketing  Association,  a Toronto based company he helped found in
1969, and where he continues to serve in an advisory  capacity as a Life Member.
From 1960 to 1970, Mr.  Cathcart served as National Sales Manager for Canada and
then became  National Sales Manager for the United States,  for a private direct
mail marketing  company known as R.L. Polk & Co., located in Detroit,  Michigan.
Mr.  Cathcart  has served on the board of  several  public  companies  including
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.

                                       16
<PAGE>

Thomas Roberts

Mr. Roberts,  age 65, has been a director of VHSN since December,  1996. For the
past 37  years  he has been an  accountant  in  private  practice.  Mr.  Roberts
attended Alberson  Graughon College and the University of Alabama  Birmingham in
1954 and 1955, respectively.

David Smelsky

Mr.  Smelsky,  age 43, has been an officer  and a director  of VHSN since  April
1997. Mr. Smelsky was the Chief  Financial  Officer of Groupmark  Canada Limited
from November 1994 to October 1999. 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,  age 42,  obtained his Bachelor and Masters in  geoscience  from China
University in 1987 and 1985,  respectively.  After moving to Canada in 1987, Dr.
Chai  attended  University  of Toronto  where he  received a Ph.D.  in  economic
geology in 1992.  Dr.  Chai has been a director  of VHSN since  April 12,  2000.
Prior to founding  China eMall  Corporation in 1994, Dr. Chai worked for private
Canadian companies, and both the Ontario and federal governments.  Dr. Chai is a
director and Chief Executive  Officer of McVicar Minerals Ltd., which he founded
in 1997. McVicar Minerals Ltd. trades on the Canadian Venture Exchange under the
symbol MVR.

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

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

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.

                                       17
<PAGE>

<TABLE>
<CAPTION>

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

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

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

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

Amounts  due to  Groupmark  Canada  Limited  pursuant to a  management  services
agreement  (the  "Management  Agreement")  as of December 31, 1999 and 2000 were
$1,645,868  and  $332,027  respectively.  Elwin D.  Cathcart  was an employee of
Groupmark  during the years  ended  December  31,  1999 and 2000,  and  provided
services to VHSN under the Management  Agreement  (David Smelsky ceased being an
employee of Groupmark in October 1999). During 1998 approximately CDN$80,000 (or
$55,000  US)  can be  attributed  to the  services  of  Elwin  D.  Cathcart  and
approximately  CND$40,000  (or $25,000 US) can be  attributed to the services of
David  Smelsky.  During  1999  approximately  CDN$46,000  (or $30,000 US) can be
attributed to the services of Elwin D. Cathcart and approximately CND$23,000 (or
$15,000 US) can be  attributed  to the  services of David  Smelsky.  During 2000
approximately  CDN$38,000  (or $25,000 US) can be  attributed to the services of
Elwin D. Cathcart

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

                                       18
<PAGE>

OPTIONS GRANTED

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

<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------
                                    Number of       % of Total
                                   Securities        Options
                                   Underlying       Granted to    Exercise or Base   Expiration Date
                                     Options        Employees        Price($/Sh)
        Name            Year       Granted(#)     In Fiscal Year
----------------------------------------------------------------------------------------------------

<S>                     <C>             <C>             <C>             <C>           <C>
Elwin Cathcart          2000            0               0                N/a              N/a
                        1999            0               0                N/a              N/a
                        1998         750,000           60%              0.40          Dec.31,2002
                        1997         250,000           28%              0.35          Dec.31,2001
----------------------------------------------------------------------------------------------------
David Smelsky           2000            0               0                N/a              N/a
                        1999            0               0                N/a              N/a
                        1998         250,000           20%              0.40          Dec.31,2002
                        1997         250,000           28%              0.35          Dec.31,2001
----------------------------------------------------------------------------------------------------
Thomas Roberts          2000            0               0                N/a              N/a
                        1999            0               0                N/a              N/a
                        1998         250,000           20%              0.40          Dec.31,2002
                        1997         250,000           28%              0.35          Dec.31,2001
----------------------------------------------------------------------------------------------------
Gang Chai               2000            0               0                N/a              N/a
----------------------------------------------------------------------------------------------------
</TABLE>

AGGREGATE OPTION GRANTS IN LAST FISCAL YEAR

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

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
                                                         Number of Securities      Value of Unexercised
                                                        Underlying Unexercised     In-the-Money Options
                             Shares                    Options at December 31,        at December 31,
                           Acquired on      Value                2000                     2000
          Name            Exercise (#)    Realized            Exercisable/            Exercisable/
                                                           Unexercisable ($)        Unexercisable ($)
----------------------------------------------------------------------------------------------------------
<S>                             <C>           <C>            <C>                           <C>
 Elwin D. Cathcart              0             0              1,000,000/0                   0/n/a
----------------------------------------------------------------------------------------------------------
 David Smelsky                  0             0               500,000/0                    0/n/a
----------------------------------------------------------------------------------------------------------
 Thomas Roberts                 0             0               500,000/0                    0/n/a
----------------------------------------------------------------------------------------------------------
</TABLE>

ITEM 11. SECURITIY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

                                       19
<PAGE>

Directors and Officers

The  following  table sets forth  certain  information  regarding the number and
percentage of shares of VHSN's common stock  beneficially  owned or deemed to be
owned by the officers and directors of VHSN,  individually  and as a group based
on 19,560,268  common shares  outstanding on March 31, 2001.  VHSN believes that
the  individuals  listed  below have the sole  power to vote and  dispose of the
number of shares set forth  opposite  their  respective  names unless  otherwise
indicated. No preferred shares are outstanding as of the date hereof.

<TABLE>
<CAPTION>

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

(1)   Consists of 7,900,000  common  shares owned by  Groupmark  Canada  Limited
      which is a wholly owned  corporation of Elwin D. Cathcart;  370,000 common
      shares  held  directly  by Elwin  D.  Cathcart  and  options  to  purchase
      1,000,000  common shares granted to Elwin D. Cathcart  (750,000 options at
      an exercise price of $0.40 expiring  December 31, 2002 and 250,000 options
      at an exercise price of $0.35 expiring December 31, 2001).
(2)   Consists of 350,000  common  shares and  conversion  privileges of Class B
      Special  Shares of China eMall  Corporation,  into 698,502  common shares.
      VHSN  acquired  China  eMall  Corporation  pursuant  to a  share  exchange
      agreement  wherein the  shareholders of China eMall  including,  Dr. Chai,
      received  Class B  Special  Shares  of China  eMall  Corporation  that are
      exchangeable on a one for one basis into common shares of VHSN.
(3)   Consists of options to purchase  500,000 common shares (250,000 options at
      an exercise price of $0.40 expiring  December 31, 2002 and 250,000 options
      at an exercise  price of $0.35  expiring  December  31,  2001) and 185,000
      common shares.
(4)   Consists of options to purchase  500,000 common shares (250,000 options at
      an exercise price of $0.40 expiring  December 31, 2002 and 250,000 options
      at an exercise price of $0.35 expiring December 31, 2001).

                                       20
<PAGE>

Shareholders Owning Over 5%

The  following  table sets forth  certain  information  regarding the number and
percentage  of shares of VHSN's  common stock owned or deemed to be owned by any
person  known by VHSN to be the  beneficial  owner of more than five  percent of
VHSN's common shares based upon  19,560,268  common shares  outstanding on March
31, 2001. VHSN believes that the individuals listed below have the sole power to
vote and  dispose of the number of shares set forth  opposite  their  respective
names.


<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
                                                          Amount and Nature       Percentage
     Shares        Name and Address of Beneficial Owner  of Beneficial Owner       of Class
---------------------------------------------------------------------------------------------
<S>                <C>                                    <C>          <C>           <C>
     Common        Elwin D.                                 9,270,000(1)             47.3%
                   Cathcart
                   1400 Dixie Road
                   Mississauga, Ontario
                   Canada L5E 3E1
---------------------------------------------------------------------------------------------
     Common        Rogue-Mountain Corp.                       1,259,993              6.4%
                   (8) 13065 Riverdale
                   Drive NW  Coon Rapids, MN
                   55448
---------------------------------------------------------------------------------------------
     Common        Forte Management Corp. (9)               1,500,000(2)             7.6%
                   Buckingham Square, Penthouse
                   West Bay Road, SMB
                   P.O. Box 1159GT
                   West Bay Road, SMB
                   Grand Cayman, Cayman Islands, BWI
---------------------------------------------------------------------------------------------
     Common        Charles He                             1,274,000(3) (10)          6.5%
                   56 Temperance Street, Suite 501
                   Toronto, Ontario
                   Canada, M5H 3V5
---------------------------------------------------------------------------------------------
     Common        Gang Chai                              1,048,502(4) (10)          5.4%
                   89 Drewry Avenue
                   Toronto, Ontario
                   Canada  M2M 1E1
---------------------------------------------------------------------------------------------
     Common        Qin Lu Chai                            1,048,498(5) (10)          5.3%
                   89 Drewry Avenue
                   Toronto, Ontario
                   Canada  M2M 1E1
---------------------------------------------------------------------------------------------
     Common        Qing Wang                              1,022,000(6) (10)          5.2%
                   18 Hollywood Ave.
                   Suite 900
                   North York, Toronto
                   Canada   M4P 2B1
---------------------------------------------------------------------------------------------
     Common        Tai Xue Shi                            1,022,000(7) (10)          5.2%
                   18 Hollywood Ave.
                   Suite 900
                   North York, Toronto
                   Canada   M4P 2B1
---------------------------------------------------------------------------------------------
</TABLE>

                                       21
<PAGE>

(1)  Consists of 7,900,000 common shares owned by Groupmark Canada Limited which
     is a wholly owned  corporation  of Elwin D.  Cathcart,  370,000  issued and
     outstanding common shares held by Elwin D. Cathcart and options to purchase
     1,000,000  shares  granted  to Elwin D.  Cathcart  (750,000  options  at an
     exercise price of $0.40 expiring  December 31, 2002 and 250,000  options at
     an exercise price of $0.35 expiring December 31, 2001).
(2)  Consists of 1,500,000 issued and outstanding common shares.
(3)  Consists of conversion  privileges of 1,274,000  Class B Special  Shares of
     China eMall Corporation exchangeable into 1,274,000 common shares of VHSN.
(4)  Consists of  conversion  privileges  of 698,502  Class B Special  Shares of
     China eMall Corporation exchangeable into 698,502 common shares of VHSN and
     350,000 common shares of VHSN.
(5)  Consists of  conversion  privileges  of 698,498  Class B Special  Shares of
     China eMall Corporation exchangeable into 698,498 common shares of VHSN and
     350,000 common shares of VHSN.
(6)  Consists of  conversion  privileges  of 672,000  Class B Special  Shares of
     China eMall Corporation exchangeable into 672,000 common shares of VHSN and
     350,000 common shares of VHSN.
(7)  Consists of  conversion  privileges  of 672,000  Class B Special  Shares of
     China eMall Corporation exchangeable into 672,000 common shares of VHSN and
     350,000 common.
(8)  The principal  beneficial owner of Rogue-Mountain  Corp. is David Sorensen.
     The transfer  agent for VHSN shows  Rogue-Mountain  Corp. as the registered
     owner  of  1,259,993  common  shares  however  VHSN has  been  informed  by
     Rogue-Mountain  Corp. that it is only the beneficial owner of approximately
     50,000 common shares.
(9)  The principal  beneficial owners of Forte Management Corp. are Leif Bristow
     of Toronto, Ontario and Alexander Bristow of Bali.
(10) VHSN  acquired  China  eMall  Corporation  pursuant  to  a  share  exchange
     agreement  wherein the shareholders of China eMall received Class B Special
     Shares of China eMall that are  exchangeable  on a  one-for-one  basis into
     common shares of VHSN for no further consideration.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Groupmark Canada Limited Management Agreement

Groupmark Canada Limited,  a significant  shareholder of VHSN is wholly owned by
Elwin D. Cathcart,  a director of VHSN.  Groupmark provides executive management
personnel and services to VHSN pursuant to an agreement  made between  Groupmark
and VHSN in April  1997  (the  "Management  Agreement").  Under  the  Management
Agreement Groupmark provides  management,  daily administration  functions,  and
financial and business advisory services to VHSN.  Groupmark was also contracted
to  assist  in the  technological  development  of  smartCARD.  Pursuant  to the
Management  Agreement,  charges for these services are not to exceed $56,000 per
month.  During 1999 VHSN accrued a debt of $336,000  payable to Groupmark Canada
Limited for such services and during 2000 Groupmark  accrued  $270,000 under the
Management  Agreement.  On December 31, 1999 $1,645,868 was outstanding.  During
2000, VHSN issued 2,500,000 common shares to Groupmark in settlement of $865,868
and paid  Groupmark  $597,973 in cash.  As of December  31,  2000  $332,027  was
outstanding  under the Management  Agreement and other  borrowings.  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.

                                       22
<PAGE>

Gang Chai Consulting Agreement

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

ITEM 13. EXHIBITS AND REPORTS

EXHIBIT INDEX

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

                                       23
<PAGE>

10.5     Agreement  and Plan of Merger  dated as of December  30,  1996  between
         Ronden Vending Corp. and Ronden Acquisition, Inc.*
10.6     Agreement  and Plan of  Reorganization  dated  April 10, 1997 among VHS
         Network, Inc. and VHS Acquisition, Inc. and VHS Network (Canada), Inc.*
10.7     Schedules to Exhibit 10.1*
16.1     Letter from Weinberg & Company.*
21.1     List  of  subsidiaries,  jurisdiction  of  incorporation  and  business
         names.*

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





                                   SIGNATURES
                                   ----------

In  accordance  with  section 13 or 15(d) of the Exchange  Act,  the  registrant
caused this report to be signed on its behalf by the  undersigned,  thereto duly
authorized on the 20th day of April, 2001.

                         VHS NETWORK, INC.

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

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

Dated: April 20, 2001              /s/ Elwin Cathcart
                                   ------------------
                                       Elwin Cathcart, Director, Chairman and
                                       Chief Executive Officer

Dated: April 20, 2001              /s/ David Smelsky
                                   -----------------
                                       David Smelsky, Director and Secretary

Dated: April 20, 2001              /s/ Thomas Roberts
                                   ------------------
                                       Thomas Roberts, Director

                                       24
<PAGE>