UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

                     ANNUAL REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

                                    000-27763
                            (Commission file number)

                              SITESTAR CORPORATION
        (Exact name of small business issuer as specified in its charter)

                Nevada                                  88-0397234
     (State or other jurisdiction                      (IRS Employer
   of incorporation or organization)                Identification No.)

           15303 Ventura Boulevard, Suite 1510, Sherman Oaks, CA 91403
               (Address of principal executive offices) (Zip Code)

                                 (818) 380-8180
                           (Issuer's telephone number)

        SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                               TITLE OF EACH CLASS
                          COMMON STOCK, $.001 PAR VALUE

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes [X] No [ ]

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

Revenue for the year ended December 31, 2001:  $3,997,350

The  aggregate  market  value  of  the  voting  and  non-voting  stock  held  by
non-affiliates of the registrant at March 31, 2002 was $1,852,320. The number of
shares  outstanding  of the  registrant's  Common Stock as of March 31, 2002 was
95,624,892.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None

Transitional Small Business Disclosure Format (check one):  Yes [ ]   No [X]

<PAGE>


                                     PART I

     This  Annual   Report  on  Form  10-KSB   contains   statements   that  are
forward-looking, including statements relating to anticipated operating results,
growth,  financial  resources,  the development of new markets, the development,
and  acceptance  of our  business  strategy  and new  applications  for Sitestar
Corporation's existing products. Investors are cautioned that, although Sitestar
believes   that  its   expectations   are  based  on   reasonable   assumptions,
forward-looking  statements  involve  risks and  uncertainties  which may affect
Sitestar 's business  and  prospects,  including  changes in economic and market
conditions,  acceptance  of  Sitestar  's  products,  maintenance  of  strategic
alliances and other factors discussed elsewhere in this Form 10KSB.

ITEM 1. DESCRIPTION OF BUSINESS

Overview

         We are a technology  holding company with a broad strategy of acquiring
and  investing  in  technology  related  enterprises.  Our  primary  strategy is
acquiring and operating small independent  Internet Service Providers ("ISP") in
the rural areas of the mid-Atlantic  region.  Our specific mission is to develop
our operating ISP  subsidiaries  and future ISP  acquisitions  into a successful
collaborative  ISP network.  We intend to achieve this success by harnessing the
synergistic potentials that exists among these acquisitions by consolidating all
the administrative  functions and streamlining the corporate  functions that may
exist with each acquisition.

         In July 1999, we began to implement  our broader  strategy of acquiring
and  investing in emerging  technology-based  enterprises  to create a broad and
diverse  set of core  electronic  businesses  that  deliver a variety  of online
solutions.   In  addition  to  developing   and   integrating   technology-based
enterprises,  our  broader  objective  is to create a mix of Internet  operating
companies and  technology-related  portfolio  investments  that will enhance the
value of our core holdings.

         Our Internet  operating  subsidiaries  provide Internet services to our
customers by  providing  Internet  access and enhanced  products and services to
small and medium sized  enterprises in selected high growth  markets.  We target
primarily  small and medium sized  enterprise  customers and  residential  users
located in selected  high growth  secondary  markets.  We currently  provide our
customers,  which total  approximately  15,000 as of  December  31,  2001,  with
Internet access and enhanced  products and services in the mid-Atlantic  area of
the United States. We have designed our comprehensive suite of enhanced products
and services to meet the  expanding  needs of our  customers and to increase our
revenue per customer.

The products and services we provide include:

     o    Internet access services;

     o    Web design services;

     o    Web hosting services;

     o    End to end e-commerce solutions;

     o    Online marketing consulting; and

     o    Management of mission critical Internet applications.

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<PAGE>

     Our ISP operating  subsidiaries  derive their income from the excess of the
Internet  service prices we charge our customers over the cost of service we pay
our suppliers.  Additionally,  our retail  customers pay for services by cash or
credit card while we pay our suppliers on extended  terms.  As a result,  we are
able to increase  our working  capital  between the time we receive  payment for
services and the time we are required to pay suppliers.  We also generate income
from the  development  of computer  software for  companies  principally  in the
manufacturing  industries  and from  sales  from our  retail  computer  store in
Lynchburg, Virginia.

     Our most recent  acquisition was Advanced Internet  Services,  Inc. (ADVI).
ADVI is an Internet service  provider located in Mt. Airy, North Carolina.  This
acquisition  provided  us  with  an  expanded  geographic   footprint,   broader
management depth and enhanced profitability.

     In July 2001, we successfully spun off the content services division of our
wholly owned  subsidiary,  Sitestar.net,  Inc. into  TriVantage  Group,  Inc., a
separate public company exclusively focused in content development  services. We
owned 90% of TriVantage after the spinoff.  On December 28, 2001, we contributed
the assets of the content  service  division back to  Sitestar.net  and sold the
TriVantage  public  shell.  We  recognized  an  actual  cash gain on the sale of
TriVantage  of  $188,158.  Since we owned the content  service  division for the
entire year either directly or indirectly through TriVantage,  the operations of
this division have been consolidated with our operations for the entire year.

Corporate History

     We were incorporated under the name of White Dove Systems, Inc. in December
1992  under the laws of the State of  Nevada to engage in any  lawful  corporate
activity.

     In  October  1998 we  acquired  all the issued  and  outstanding  shares of
Interfoods  Consolidated,  Inc. ("IFCO"), a California corporation,  in exchange
for 5,580,000 shares of our Common Stock.  IFCO,  operating under the trade name
of Holland  American  International  Specialties  ("HAIS"),  is a  retailer  and
wholesaler  of imported and domestic  specialty  gourmet  foods.  IFCO began its
operations in June 1997 with the purchase of the inventory assets and trade name
of HAIS from an unrelated third party. HAIS' product offering ranges from exotic
European  delicacies  to  mainstream  specialty  candies,  chocolates  and other
confectionery  products.  In connection  with this  acquisition  and in order to
properly  reflect the new corporate  focus,  we changed our name from White Dove
Systems, Inc. to Interfoods Consolidated, Inc. in October 1998.

     In July 1999 a partnership  consisting  of a majority of our  shareholders,
including  our  Executive  Chairman  Mr.  Manlunas,  acquired all the issued and
outstanding shares of Sitestar,  Inc., a Delaware  corporation,  in exchange for
3,491,428 shares of our common stock owned by those  shareholders.  Simultaneous
with the closing of this  transaction,  those  shareholders  contributed all the
issued and outstanding  shares of Sitestar,  Inc. to us as contributed  capital.
Sitestar,  Inc.  is an  Internet  access,  Web  development,  design and hosting
company  formed in 1996 and is based in Annapolis,  Maryland.  This  acquisition
included  Soccersite.com  which is  currently  one of our  operating  divisions.
Soccersite.com was an operating division of Sitestar, Inc. To better reflect our
new primary  corporate  focus as an  Internet  holding  company,  we changed our
corporate name from  Interfoods  Consolidated,  Inc. to Sitestar  Corporation in
July 1999.

                                       3
<PAGE>

     In  August   1999  we   acquired   substantially   all  of  the  assets  of
Greattools.com  in exchange for 49,000 shares of our common  stock.  We acquired
the  assets of  Greattools.com  from  Global  Sourcing  Group,  Greattools.com's
current fulfillment center. Gateway Holdings, Inc., a private investment company
managed  by our  Executive  Chairman  Frederick  Manlunas,  has a  14.6%  equity
ownership  in  Global  Sourcing  Group.  Greattools.com  is an  online  low cost
retailer of power tools.

     Effective  as of  September  30,  1999 we sold the  non-Internet  assets of
Holland  American  International  Specialties to IFCO Group,  LLC, whose members
consist of certain of our  shareholders,  including  Frederick T. Manlunas,  our
Chairman of the Board.  We retained  the assets  consisting  of the Internet web
site  Holland-American.com.  Holland  American  International  Specialties  will
continue to serve as  Holland-American.com's  exclusive  fulfillment center. The
purchase  consideration  of $900,000  was based upon a business  appraisal by an
independent third party appraiser. The consideration included $200,000 which was
to be offset against a liability we had to Mr. Manlunas for services rendered in
connection to the  acquisition of Sitestar,  Inc., the assumption of $654,000 of
liabilities  and a  promissory  note in the  amount of  $46,000.  The note bears
interest  at a rate of 8% per annum,  and is payable in annual  installments  of
$15,333,  and is due and payable on September  30, 2002.  The note is secured by
the  accounts  receivable  and  inventory  of  Holland  American   International
Specialties.

     Effective  December 15, 1999,  we  consummated  the  acquisition  of Neocom
Microspecialists, Inc. ("Neocom") in exchange for 6,782,353 shares of our common
stock for 100% of the outstanding  shares of Neocom.  Effective upon the closing
of the  acquisition,  we issued  4,782,353  shares of our common  stock and have
reserved  2,000,000  shares of common  stock that we have agreed to issue on the
second  anniversary  of the  acquisition  based on  certain  contingencies.  The
certain  contingencies are related to potential  unrecorded  liabilities.  As of
January  2002,   the  remaining   2,000,000  have  been  issued  to  the  former
shareholders  of Neocom.  Of the  6,782,353  shares  issued for Neocom,  900,000
shares were issued in exchange  for  certain  liabilities  that the  majority of
Neocom's selling  shareholders  have agreed to assume based on a debt assumption
agreement executed and delivered at the closing of the acquisition. In 2000, the
purchase  agreement was amended so that we assumed the debt that was  originally
to be assumed by the selling shareholders in exchange for the 900,000 shares.

     Neocom is an Internet service provider and Web development company based in
Martinsville,  Virginia.  Neocom  provides  Internet  access and other  Internet
services to approximately 7,500 customers in the Southern Virginia area.

      Effective  November  22,  2000,  we  consummated  the  acquisition  of FRE
Enterprises,  Inc. and FRE  Communications,  Inc.,  both  Virginia  corporations
(collectively  doing  business as  "Lynchburg.net")  in exchange for  16,583,980
shares of our common stock for 100% of the outstanding  shares of Lynchburg.net.
Effective upon the closing of the acquisition,  we issued  12,437,985  shares of
our common stock and have reserved  4,145,995 shares of our common stock that we
have  agreed  to issue on the  third  anniversary  of the  acquisition  based on
certain  contingencies.  The  certain  contingencies  are  related to  potential
unrecorded and unknown liabilities. We used the market price of our common stock
at the acquisition date to determine the acquisition price of $2,487,597.


                                       4
<PAGE>

    Lynchburg.net is an Internet service provider,  web development and computer
sales and service company based in Lynchburg, Virginia. As of December 31, 2001,
Lynchburg.net  provided  Internet  access,  computer sales and service and other
Internet  services to  approximately  4,500  customers in the Southern  Virginia
area.

    We believe the acquisition of Lynchburg.net enhanced our primary strategy of
consolidating  small  Internet  service  providers  in the rural  markets of the
mid-Atlantic  region  by  enlarging  our  service  footprint.  This  acquisition
increased our Internet access customer base to approximately 12,000 subscribers.

     On July 1, 2001,  we  acquired  100% of the equity and voting  interest  of
Advanced  Internet  Services,  Inc.,  a North  Carolina  corporation  which is a
successor  in interest to two sole  proprietorships  one having the same name as
the  corporation  and  the  other  with  the  name   Professional  Data  Systems
(collectively "ADVI"). ADVI is an Internet service provider located in Mt. Airy,
North Carolina. The purchase price was $965,980,  which consisted of $150,000 in
cash,  6,021,818 of our common shares valued at $301,091 a non-interest  bearing
promissory note for $1,199,990  payable in 24 quarterly  installments of $49,995
and  transaction  costs of $30,000.  However,  due to the  non-interest  bearing
nature of the note,  we imputed a discount  rate of 36% to calculate the present
value of the note.  This  discount  rate is an estimate  of our current  cost of
capital.  Based on this  calculation,  the  present  value  of the  non-interest
promissory note is $484,889.

     We believe the acquisition of ADVI, with about 3,000 subscribers,  enhanced
ours primary strategy of consolidating  small Internet service  providers in the
rural markets of the mid-Atlantic region by enlarging our service footprint.  We
also believe this transaction  opened other acquisition  opportunities for us to
further  increase  our presence in the northern  areas of North  Carolina.  This
recent  acquisition  increased our Internet  access customer base to over 15,000
subscribers. This acquisition included goodwill of $702,642 that was the premium
we paid to have the  opportunity  to  generate  revenues  and  earnings  in this
market.  Furthermore,  this  acquisition  generated  us cost  savings  with  the
integration and consolidation of ADVI's corporate and  administrative  functions
with our existing  infrastructure.  This estimated cost savings,  along with the
accretive  nature of the  transaction  from an operating cash flow  perspective,
will further allow us to enhance our revenue  streams and increase our operating
cash flow.


Internet Industry Background

Market Opportunity
------------------
     Overview.  We believe  that the  Internet  has become an  important  global
medium enabling  growing  numbers of people to obtain and share  information and
conduct  business  electronically.  Its  expanded  use has made the  Internet  a
critical tool for information and communications for many users. We believe that
Internet  access and  enhanced  Internet  services,  including  Web  hosting and
electronic  commerce services,  represent two of the fastest growing segments of
the  telecommunications  services  market.  We believe that the  availability of
Internet access, advancements in technologies required to navigate the Internet,
and the  proliferation of content and  applications  available over the Internet
have attracted a rapidly growing number of Internet users.

                                       5
<PAGE>

     Growth in Business Use of the Internet. We believe that the dramatic growth
in  Internet  usage in  recent  years,  combined  with  enhanced  functionality,
accessibility  and security,  has made the Internet  increasingly  attractive to
businesses as a medium for  communication  and  commerce.  We feel that for many
businesses, the Internet has created a new communication and sales channel which
enables large numbers of geographically dispersed organizations and consumers to
be  reached  quickly  and   cost-effectively.   International  Data  Corporation
estimates that the number of consumers buying goods and services on the Internet
will grow 128.4 million in 2002,  and that the total value of goods and services
purchased over the Internet will increase to approximately $426 billion by 2002.

     We believe  that  businesses  will  increasingly  add a variety of enhanced
services  and  applications  to their  basic  Internet  access,  Web  sites  and
e-commerce  applications  in order to more fully  capitalize on the power of the
Internet.  We feel that these services and applications  will allow them to more
efficiently and securely  communicate  company  information,  expand and enhance
their  distribution   channels,   increase   productivity   through  back-office
automation, ensure reliability and reduce costs. We see opportunities for growth
in the following areas:

     o    Demand for Internet Access Services

          Internet   access   services   represent   the  means  by  which  ISPs
          interconnect  their  customers to the Internet or corporate  Intranets
          and  extranets.  According  to  Forrester  Research,  Internet  access
          revenues  from  businesses  are expected to increase from less than $1
          billion in 1997 to more than $16  billion in 2002.  Due,  in part,  to
          their size, small and medium sized enterprises often seek to outsource
          these services.

     o    Demand for Web Hosting Services

          Many  businesses are seeking to outsource to ISPs services such as Web
          hosting,  collocation  and file  transfer  protocol  data  storage and
          retrieval.

     o    Demand for Secure Private Networks

          We believe  that  concerns  relating to the  security of internal  and
          proprietary information,  data loss and reduced transmission speed has
          led businesses to demand Internet services that include the ability to
          provide electronic security monitoring and threat responses.

     The Small and Medium  Sized  Enterprise  Market.  We define  this market as
business  enterprises  having  sales of less than  $20.0  million  per annum and
enterprises having less than 100 employees.  We have specifically targeted small
and medium sized enterprises because:

     o    We believe that these  enterprises  increasingly  need high-speed data
          and  Internet  connections  to  access  business  information  and  to
          communicate more effectively with employees, customers and vendors.

     o    We believe that a relatively  small  percentage  of these  enterprises
          currently  utilize the  Internet,  but that this number is  increasing
          rapidly.  The small and medium sized enterprise segment is expected to
          be one of the fastest growing segments of the Internet industry.

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<PAGE>

     o    Many of these enterprises lack the resources and expertise to develop,
          maintain and expand,  on a  cost-effective  basis,  the facilities and
          network systems necessary for successful Internet operations.

     o    We believe  that these  enterprises  will prefer an  Internet  service
          provider with locally  based  personnel who are available to assist in
          developing and  implementing  their growing use of the Internet and to
          respond to technical problems in a timely manner.

     o    We believe that these  enterprises rely more heavily on their Internet
          service  provider than larger  enterprises and tend to change Internet
          service providers relatively infrequently.

     Internet Services in Secondary Markets.  Small and medium sized enterprises
are often  concentrated  in  so-called  "secondary  markets" to avoid the higher
costs associated with locating in a metropolitan area. A secondary market is any
market smaller than the 100 most populated U.S. metropolitan  markets.  However,
national  ISPs have  historically  placed their largest  points of presence,  or
POPs, only in or around densely populated major cities. A POP is an access point
at which customers in a traditional ISP network architecture can connect to data
circuits in order to obtain Internet access and other services.  While customers
located  within a few miles from these POPs often  receive cost savings on their
access pricing,  customers  located in secondary markets that are as close as 20
to 75 miles away from these POPs have  typically  been charged higher prices for
Internet access services.

     We believe that small and medium sized  enterprises  located in high-growth
secondary markets are currently underserved by both national and local providers
of  Internet  access  and  related  services.  National  ISPs,  on the one hand,
typically lack the local  presence to provide local support.  Local ISPs, on the
other hand, often lack the requisite scale and resources to provide a full range
of services at acceptable quality and pricing levels.

Our Growth Strategy
-------------------

     Our goal is to be a premier  Internet  company that offers products ranging
from Internet access and a complete suite of Internet products and services to a
variety of e-commerce  platforms targeting small and medium sized enterprises in
our target markets. We would like to offer a variety of business-to-consumer and
business-to-business e-commerce solutions to our customers.

Key elements of our strategy include:

     Focus  Growth on  Secondary  Markets.  We intend  to expand  into  selected
secondary  markets by replicating our regional  network and marketing model. Our
network architecture and scalable sales and marketing plan are designed to allow
us to penetrate additional regions rapidly and cost-effectively.

     Market a Variety of Services to New and  Existing  Customers.  We intend to
offer a  comprehensive  suite of a variety of products  and services to meet the
expanding needs and complexity of our customers' Internet operations allowing us
to increase revenue per customer and maintain a high customer  retention rate by
strengthening relationships with our customers.

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<PAGE>

     Use of  Centralized  Sales and Marketing  Operations.  We intend to use our
centralized  sales and marketing  staff to help implement our regional  strategy
cost-effectively.  We  intend  to hire and  train  additional  local  sales  and
marketing  personnel  within our target  regions to  complement  the core of our
sales and  marketing  staff,  which  will  continue  to be  concentrated  in one
centralized location to maximize efficiency.  These regionally located employees
are intended to add local market  knowledge,  expertise and  familiarity  to our
sales and marketing efforts and allow us to maintain a field presence in each of
our regions, while maximizing our central operations.

     Strategic Relationships and Acquisitions. We intend to enter into strategic
relationships, such as partnerships and joint ventures, and to make acquisitions
to expand our line of enhanced products and services.

     As part of this strategy, we acquired Neocom, a provider of Web hosting and
co-location services in the Mid-Atlantic region. We also acquired Lynchburg.net,
an Internet  service  provider,  web  development and computer sales and service
company  based  in  Lynchburg,  Virginia.  In  addition,  we  acquired  Advanced
Internet, an Internet service provider based in Mt. Airy, North Carolina.  These
acquisitions are consistent with our growth strategy of building our presence in
secondary  markets  that have  traditionally  been  under  served by the  larger
Internet  services  companies.   In  addition,  we  are  also  actively  seeking
acquisition  opportunities  and/or  candidates in the  Mid-Atlantic  region that
would help us achieve critical mass in terms of our Internet access, development
and hosting customers.

Internet Industry Overview

     We believe  that  Internet  commerce is  reshaping  the way  consumers  and
businesses  conduct  business.  According  to  new  projections  from  Forrester
Research,  worldwide  e-commerce  sales will reach as high as $3.2  trillion  in
2003,  representing  nearly 5% of all global sales.  These sales figures include
business-to-business  and  business-to-consumer  sales and EDI (electronic  data
interchange)  orders placed on the Internet,  but exclude the value of financial
transactions.  E-commerce is defined as the trade of goods and services in which
the final order is placed over the Internet.

    Growth in Electronic Commerce

     We feel strongly that the growing popularity of the Internet  represents an
opportunity  for  companies  like  us to take  advantage  of the  potential  for
commercial  transactions conducted online, referred to as electronic commerce or
e-commerce.  International  Data,  Inc., a market research firm,  estimates that
business-to-consumer  commerce  over the Internet  will  increase  from over $12
billion worldwide at the end of 1997 to approximately  $425 billion worldwide by
the end of 2002. In addition,  Jupiter  Communications,  another market research
firm,  predicts that by 2002, 44% of Internet users will make purchases  online,
as compared to an estimated 22% that did so in 1997. Several factors are driving
the growth in both  business to  consumer  and  business to business  electronic
commerce.

These factors include:

     o    increasing familiarity with the Internet;

     o    broadening consumer acceptance of online shopping;

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<PAGE>

     o    increasing   acceptance  on  online   distribution   relationships  by
          businesses; o improved online network security and infrastructure;

     o    the growing base of personal  computers and improved  Internet access;
          and

     o    expanding network bandwidth and access speeds.

     We believe that the  Internet is  particularly  well suited for  promoting,
marketing, selling and distributing merchandise both on a retail and a wholesale
level,  permitting  customers  throughout  the  world to have  direct  access to
suppliers.  Online  stores can  provide  direct  customer  service  and  product
information to a large number of customers at the same time with a substantially
smaller sales staff than traditional stores. Online stores also have the ability
to rapidly and  continually  update such  information.  Internet  merchandisers,
unlike  traditional  stores,  do not  have  the same  expenses  associated  with
operation of physical  stores and  warehouse  facilities,  and can change stores
design without substantial cost. In contrast to catalog merchandisers,  Internet
retailers can react quickly to change product  descriptions,  pricing or product
mix and are not subject to the costs of catalog  publication  and  distribution.
Additionally,  online  merchandisers have the ability to track directly customer
responses and  preferences,  which enables the  merchandisers to customize their
online stores to target specific customer groups and individuals.

     Changing Demographics

     In the  early  days of the  Internet,  users  consisted  mainly  of  young,
technology-savvy  or  upscale  males.  Today,  while the online  population  has
appears  to  have  changed  drastically,   it  remains  a  fairly  elite  group.
Demographics from Mediamark  Research show that Internet users are approximately
twice as likely to have high household  incomes,  college degrees and management
positions  than the  overall  U.S.  population.  They are also more likely to be
young and single. Geographically,  Internet users can be found in all corners of
the U.S., although, according to researcher Inteco, the level of Internet use in
several major metropolitan areas exceeds the overall U.S. average.

     Consumer Acceptance

     We believe  broadening  consumer  acceptance  and retailer  ambitions  will
combine to fuel a rapid growth in online  retail sales and to drive more than 40
million U.S. households to shop online by 2003, producing $108 billion revenues.
According to Forrester Research, online retail sales will account for 6% of U.S.
consumer retail spending in the U.S. by 2003.  Analysts estimate that by the end
of 1998,  nearly 9 million U.S.  households  will have shopped online for travel
services and retail  goods other than  automobiles,  generating  $7.8 billion in
online  sales.  We expect these numbers to grow rapidly over the next five years
as high-speed  Internet  connections  become more popular and consumers overcome
security and privacy concerns and embrace the convenience of Web shopping.

     Corporate E-Commerce

     Forrester Research  estimates that by year 2003,  consumers will spend $108
billion to buy goods  online,  while  businesses  will spend $1.3  trillion.  As
expected,  computing  and  electronic  equipment  will remain one of the largest
categories of goods traded between businesses,  reaching $395 billion in revenue
by 2003, while other industries, such as cars and petrochemicals,  will also top


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<PAGE>

the $150 billion mark. In addition to the $1.3 trillion in  business-to-business
sales of products,  Forrester also reports that online  transactions in business
services will equal $220 billion by 2003.  Michael Putnam of Forrester  Research
states that "Just as the Internet has revolutionized  the goods industries,  the
services industry is going to be reinvented."

     Internet-based  businesses  have  already  created  more  than 200  on-line
marketplaces  for conducting  business-to-business  (B2B)  electronic  commerce.
These  Internet  locations  bring  buyers  and  sellers  together  in a  central
marketplace and, in addition,  provide services such as procurement  management,
financial  settlement  and quality  assurance.  These  services  enhance the B2B
sites'  value to the end  customers  and allow it to become an integral  part of
those customers' business processes.

     By providing a central on-line hub that automates transactions,  aggregates
information,  improves market reach and provides  related  services,  we believe
these B2B sites will help their  participants  reduce  both  product and process
costs. By resolving information-based  inefficiencies,  they act as catalysts to
compress time,  slash costs and improve  processes in ways that were  previously
unimaginable.  Leading  research  firms  estimate  that product and process cost
savings afforded by B2B sites will amount to $57 billion by 2003.

Our Internet Subsidiaries and Services

      Product Offerings
      -----------------

      Internet Access

      We provide  dial-up and private  Internet  access,  design  customized web
sites,  host  customer web sites on our  computer  networks,  and offer  related
e-commerce  services to  individual  and business  subscribers  outside of large
metropolitan areas in the mid-Atlantic region,  particularly  southern Virginia.
We offer  subscribers  comprehensive  technical  assistance,  large  modem banks
providing  rapid  access  to  the  Internet,  and  high-speed  connectivity.  In
addition, our home page web sites serve as regional portals,  offering local and
national news and weather, community resources,  advertising, and links to other
local and national content providers.

      Our Web services help  organizations  and individuals  implement their Web
site goals.  We offer  complete Web hosting  services  that enable  customers to
establish  a Web site  presence  without  maintaining  their own Web servers and
high-speed connectivity to the Internet.

      Web Hosting

      We offer a variety of Web hosting  services  which enable our customers to
establish and maintain a Web site on the Internet  using Web servers and related
equipment owned and administered by us.

      E-commerce

      We  also  provide   electronic   commerce   solutions  for  consumers  and
businesses.  We develop and operate an on-line "storefront" and sell merchandise
over the Internet.

                                       10
<PAGE>

      Co-location

      We offer co-location services, providing telecommunications facilities for
customer-owned  Web servers,  for  customers who prefer to own and have physical
access to their servers but require the reliability, security and performance of
our on-site facilities.

      Website Design

      We have provided web site design  services  since 1996 and have  developed
web sites for approximately 350 customers.

      Online Marketing

      We offer web site  marketing  services  that  continually  build  upon our
customer's  current  search  engine  listing to improve  their  placement in the
different search engines.

          Customers and Marketing

     Our customer base consists  primarily of small and medium sized enterprises
and dial-up customers located in secondary markets.

     We use targeted  marketing and media advertising to develop brand awareness
and  supplement  these  efforts  with our highly  customized  sales  process and
personalized  customer  service.  Through  our  marketing  managers,  we seek to
develop strong customer relationships within local communities.

          Competition

     The  Internet   services   market  is  extremely   competitive  and  highly
fragmented.  We face competition from numerous types of ISPs, including national
ISPs, and anticipate that  competition  will only intensify in the future as the
ISP industry  consolidates.  We believe that the primary  competitive factors in
the Internet services market include:

     o    Pricing;

     o    Quality and breadth of products and services;

     o    Ease of use;

     o    Personal customer support and service; and

     o    Brand awareness.

    We believe that we compete  favorably  based on these factors,  particularly
due to our:

     o    Regionally focused operating strategy;

     o    Highly responsive customer support and service;

     o    High performance; and

     o    Competitive pricing.

                                       11
<PAGE>

     Our  current   competitors   include   many  large   companies   that  have
substantially  greater market  presence,  brand-name  recognition  and financial
resources than we do. Some of our local or regional  competitors  may also enjoy
greater  recognition within a particular  community.  We currently  compete,  or
expect to compete, with the following types of companies:

     o    national Internet service providers,  such as Earthlink,  MSN and AT&T
          Worldnet;

     o    providers  of  Web  hosting,   collocation  and  other  Internet-based
          business services, such as Verio, Inc. and Navisite;

     o    numerous regional and local Internet service providers,  some of which
          have significant market share in their particular market area;

     o    established  on-line service providers,  such as America Online,  Inc.
          and Prodigy;

     o    computer hardware and other technology companies that provide Internet
          connectivity  with  their or  other  products,  including  the IBM and
          Microsoft;

     o    national long distance carriers such as AT&T, MCI WorldCom,  Qwest and
          Sprint;

     o    regional Bell operating companies and local telephone companies;

     o    providers  of free  Internet  service,  including  United  Online  and
          MicroWorkz Computer Corporation;  cable operators or their affiliates,
          including Time Warner;

     o    terrestrial  wireless and satellite Internet service providers;  and o
          non-profit or educational ISPs.

     Many of the major cable companies and some other Internet access  providers
have  begun to offer or are  exploring  the  possibility  of  offering  Internet
connectivity  through the use of cable modems.  Cable  companies,  however,  are
faced  with  large-scale  upgrades  of  their  existing  plant,   equipment  and
infrastructure  in order to support  connections  to the  Internet  backbone via
high-speed  cable  access  devices.  We  believe  that  there is a trend  toward
horizontal  integration  through  acquisitions  or joint ventures  between cable
companies and telecommunications  carriers.  Other alternative service companies
have also announced plans to enter the Internet connectivity market with various
wireless  terrestrial and  satellite-based  service  technologies.  In addition,
several  competitive local exchange carriers and other Internet access providers
have launched  national or regional digital  subscriber line programs  providing
high  speed   Internet   access  using  the  existing   copper  wire   telephone
infrastructure.  Several  of these  competitive  local  exchange  carriers  have
announced  strategic  alliances  with  local,   regional  and  national  service
providers  to provide  broadband  Internet  access.  If we are unable to provide
technologically competitive service, our revenues and profit margins may decline
materially, and our ability to attract additional customers may suffer.

     Recently,  several  national  access  providers have begun to offer dial-up
Internet access for free or at substantial  discounts to prevailing rates, which
may result in significant pricing pressure for dial-up Internet access services.


                                       12
<PAGE>

We also believe that  manufacturers of computer hardware and software  products,
media and  telecommunications  companies  and others will  continue to enter the
Internet services market, which will also intensify competition,  especially for
dial-up access providers.  If we are unable to compete with lower-cost providers
by providing  superior service and support,  our revenues and profit margins may
decline materially, and our ability to attract additional customers may suffer.

      We also believe that new  competitors  will continue to enter the Internet
access market, such as large computer hardware and software companies, media and
telecommunications  entities,  and  companies  that  provide  direct  service to
residential   customers,   including  cable   television   operators,   wireless
communication  companies,  local  and  long  distance  telephone  companies  and
electric utility companies.

      Many of our competitors are larger and have greater financial,  technical,
and operating resources than we do. We cannot assure you of our survival in this
intensely competitive environment.  We will need to distinguish ourselves by our
product and service  knowledge,  our  responsiveness  to our targeted  market of
small to medium  sized  businesses,  our  ability to market and sell  customized
combinations  of products  and services  within our market,  and our capacity to
offer a diverse  Internet  product  line. We also believe that our ability to be
flexible  and to  respond  quickly  in  providing  solutions  to our  customer's
Internet needs will be an advantage over some of our competitors.

         Acquisition Strategy

     Our  strategy is to rapidly  build a base of Internet  subscribers  through
acquisitions and internal growth. We believe there are acquisition opportunities
among the Internet service providers in our geographic target. In furtherance of
our acquisition strategy, we anticipate reviewing and conducting  investigations
of potential acquisitions.  As of the date hereof, we do not have any agreements
or pending  acquisitions  and have not  entered  into any letters of intent with
respect to pending acquisitions. No assurance can be given that we will identify
satisfactory  acquisition candidates or, if identified,  that we will be able to
consummate an acquisition on terms acceptable to us.

Government Regulations

    There  is  currently  only a small  body of laws  and  regulations  directly
applicable  to  access  to or  commerce  on the  Internet.  However,  due to the
increasing  popularity and use of the Internet,  it is possible that a number of
laws and regulations  may be adopted at the  international,  federal,  state and
local levels with respect to the Internet, covering issues such as user privacy,
freedom of  expression,  pricing,  characteristics  and quality of products  and
services,  taxation,  advertising,  intellectual  property  rights,  information
security and the  convergence  of traditional  telecommunications  services with
Internet  communications.  Moreover,  a number of laws and regulations have been
proposed  and are  currently  being  considered  by  federal,  state and foreign
legislatures  with  respect  to these  issues.  The  nature  of any new laws and
regulations and the manner in which existing and new laws and regulations may be
interpreted and enforced cannot be fully determined.



                                       13
<PAGE>

    In addition, there is substantial uncertainty as to the applicability to the
Internet  of  existing  laws  governing  issues  such  as  property   ownership,
copyrights and other intellectual property issues,  taxation,  libel,  obscenity
and personal  privacy.  The vast majority of these laws was adopted prior to the
advent of the Internet and, as a result,  did not  contemplate the unique issues
and environment of the Internet.  Future  developments in the law might decrease
the growth of the Internet, impose taxes or other costly technical requirements,
create  uncertainty in the market or in some other manner have an adverse effect
on the Internet.  These  developments  could, in turn,  have a material  adverse
effect  on  our  business,   prospects,   financial  condition  and  results  of
operations.

    We provide our services  through data  transmissions  over public  telephone
lines and other  facilities  provided  by  telecommunications  companies.  These
transmissions   are  subject  to  regulation   by  the  Federal   Communications
Commission,   state  public  utility   commissions   and  foreign   governmental
authorities.  However,  we are not subject to direct  regulation  by the Federal
Communications   Commission  or  any  other  governmental   agency,  other  than
regulations  applicable  to  businesses  generally.  Nevertheless,  as  Internet
services  and  telecommunications  services  converge  or the  services we offer
expand, there may be increased regulation of our business,  including regulation
by agencies having jurisdiction over telecommunications services.  Additionally,
existing  telecommunications  regulations affect our business through regulation
of the  prices we pay for  transmission  services,  and  through  regulation  of
competition in the telecommunications industry.

    The  Federal  Communications  Commission  has ruled that  calls to  Internet
service  providers are  jurisdictionally  interstate  and that Internet  service
providers  should  not  pay  access  charges  applicable  to  telecommunications
carriers.  Several  telecommunications  carriers are advocating that the Federal
Communications  Commission  regulate  the  Internet  in the same manner as other
telecommunications   services  by  imposing  access  fees  on  Internet  service
providers.  The Federal  Communications  Commission  is examining  inter-carrier
compensation  for  calls to  Internet  service  providers,  which  could  affect
Internet service  providers' costs and consequently  substantially  increase the
costs of communicating  via the Internet.  This increase in costs could slow the
growth of Internet use and thereby decrease the demand for our services.



                FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS

     We  operate in a rapidly  changing  environment  that  involves a number of
risks, some of which are beyond our control.  Forward-looking statements in this
document  and those made from time to time by us are made  pursuant  to the safe
harbor  provisions  of the  Private  Securities  Litigation  Reform Act of 1995.
Forward-looking  statements  concerning the expected future revenues or earnings
or concerning projected plans, performance, product development, product release
or product shipment, as well as other estimates related to future operations are
necessarily  only estimates of future results and there can be no assurance that
actual results will not  materially  differ from  expectations.  We undertake no
obligation to publicly  release the results of any revisions to  forward-looking
statements which may be made to reflect events or circumstances  occurring after
the date such statements were made or to reflect the occurrence of unanticipated
events.

                                       14
<PAGE>


     Factors that could cause actual results to differ  materially  from results
anticipated in forward-looking  statements  include,  but are not limited to the
following:

RISKS PARTICULAR TO SITESTAR CORPORATION

         We Have a Limited Operating History Upon Which You May Evaluate Us
         ------------------------------------------------------------------

     Our new corporate  philosophy was formulated in July 1999. Although we have
grown  significantly  since then, we have a limited operating history upon which
you may evaluate our business and prospects.  We and our wholly owned  operating
companies  are among the many  companies  that have  entered  into the  emerging
e-commerce  market.  All of our  operating  companies are in the early stages of
their development. Our business and prospects must be considered in light of the
risk, expense and difficulties  frequently  encountered by companies in an early
stage of development, particularly companies in new and rapidly evolving markets
such as e-commerce.  If we are unable to effectively  allocate our resources and
help  grow  existing  operating  companies,  our stock  price  may be  adversely
affected  and  we may  be  unable  to  execute  our  strategy  of  developing  a
collaborative network of operating companies.

         A High Percentage of Our Assets Are Intangible Assets
         -----------------------------------------------------

     The  change  in our  corporate  focus  from a food  holding  company  to an
Internet holding company has resulted in a dramatic change in the composition of
our assets and expenses. With the recent acquisitions of Internet companies, the
intangible  assets  purchased  as  a  result  of  these  acquisitions  represent
approximately   62%  of  our  total  assets  and   approximately   104%  of  our
stockholders'  equity at  December  31,  2000.  Further,  amortization  of these
intangible  assets will be the largest  single  expense item in our statement of
operations.  This material concentration of intangible assets increases the risk
of a large  charge to  earnings  in the event that the  recoverability  of these
intangible assets is impaired.

         Our Business Depends Upon the Performance of Our Operating Companies,
         -----------------------------------------------------------------------
Which is Uncertain
------------------

      Economic, governmental,  industry and internal company factors outside our
control affect each of our operating  companies.  If our operating  companies do
not succeed,  the value of our assets will decline.  The material risks relating
to our operating companies include:

     o    lack of the  widespread  commercial  use of the  Internet,  which  may
          prevent our operating companies from succeeding; and

     o    Intensifying  competition  for the products and services our operating
          companies  offer,  which  could  lead  to the  failure  of some of our
          operating companies.

     The other material risks relating to our operating companies are more fully
described below under "Risks Particular to Our Operating Divisions."

                                       15
<PAGE>

         Fluctuations in Our Quarterly Results May Adversely Affect Our Stock
         ---------------------------------------------------------------------
Price
-----

      We expect that our quarterly  results will fluctuate  significantly due to
many factors, including:

     o    the operating results of our operating companies;

     o    changes  in equity  losses  or income  and  amortization  of  goodwill
          related to the  acquisition  or  divestiture of interests in operating
          companies;

     o    changes  in our  methods  of  accounting  for  our  operating  company
          interests,  which may result from changes in our ownership percentages
          of our operating companies;

     o    sales of equity  securities  by our operating  companies,  which could
          cause us to  recognize  gains or losses  under  applicable  accounting
          rules;

     o    the pace of  development  or a decline  in  growth  of the  e-commerce
          market;

     o    intense  competition from other potential  acquirors of B2B e-commerce
          companies,  which could  increase our cost of  acquiring  interests in
          additional  companies,  and  competition  for the goods  and  services
          offered by our operating companies; and

     o    our  ability  to  effectively  manage our growth and the growth of our
          operating  companies  during  the  anticipated  rapid  growth  of  the
          e-commerce market.

     We believe that  period-to-period  comparisons of our operating results are
not meaningful.  Additionally,  if our operating results in one or more quarters
do not meet securities  analysts' or your expectations,  the price of our common
stock could decrease.

         Our Success is Dependent on Our Key Personnel
         ---------------------------------------------

     We believe that our success will depend on continued  employment  by us and
our operating divisions of senior management and key technical personnel. If one
or more members of our senior  management  or our  operating  companies'  senior
management were unable or unwilling to continue in their present positions,  our
business and operations  could be disrupted.  Although,  our management team has
had their own  successes in other  industries,  our senior  management  team has
limited experience in the Internet industry.

     As of December 31, 2001,  all of our executive  management  personnel  have
worked  for  us  for  over  one  year.   However,   management  of  our  Neocom,
Lynchburg.net  and Advanced  Internet  subsidiaries has operated those companies
for several  years.  Our  efficiency  may be limited  while these  employees and
future employees are being integrated into our operations.  In addition,  we may
be unable to find and hire  additional  qualified  management  and  professional
personnel to help lead our operating divisions and us.

                                       16
<PAGE>

     The success of some of our operating companies also depends on their having
highly trained technical and marketing  personnel.  Our operating companies will
need to  continue to hire  additional  personnel  as their  businesses  grow.  A
shortage in the number of trained technical and marketing  personnel could limit
the  ability of our  operating  companies  to increase  sales of their  existing
products and services and launch new product offerings.

         Our Expenses Will Increase As We Grow Our Business
         --------------------------------------------------

     Our expenses will increase as we build an  infrastructure  to implement our
business  model.  For example,  we expect to hire additional  employees,  expand
information  technology  systems and lease more space for our corporate offices.
In addition, we plan to significantly increase our operating expenses to:

     o    broaden our operating company support capabilities;

     o    explore acquisition  opportunities and alliances with other companies;
          and o facilitate business arrangements among our operating companies.

         We May Be Unable to Obtain Maximum Value For Our Operating Company
         -------------------------------------------------------------------
Interests
---------

     We  have  significant  positions  in  our  operating  companies.  While  we
generally do not anticipate selling our interests in our operating companies, if
we were to divest  all or part of them,  we may not  receive  maximum  value for
these positions.  For future operating  companies with publicly traded stock, we
may be unable to sell our interest at then-quoted  market  prices.  Furthermore,
for those  operating  companies  that do not have  publicly  traded  stock,  the
realizable  value of our  interests  may  ultimately  prove to be lower than the
carrying value currently reflected in our consolidated financial statements.

RISKS INHERENT TO OUR ACQUISITION STRATEGY

     We have in the past,  and intend to in the  future,  to expand  through the
acquisition  of  businesses,  technologies,  products and services,  such as the
recent acquisitions of Neocom and Lynchburg.net.  Acquisitions may result in the
potentially dilutive issuance of equity securities, the incurrence of additional
debt,  development  costs and the  amortization of goodwill and other intangible
assets.  Further,  acquisitions involve a number of special problems,  including
difficulty integrating  technologies,  operations and personnel and diversion of
management  attention in connection with both  negotiating the  acquisitions and
integrating the assets.  There can be no assurance that we will be successful in
addressing  such  problems.   In  addition,   growth  associated  with  numerous
acquisitions  places  significant  strain  on  our  managerial  and  operational
resources.  Our future operating results will depend to a significant  degree on
its  ability  to   successfully   manage  growth  and  integrate   acquisitions.
Furthermore,  many of our operating  companies are early-stage  companies,  with
limited  operating  histories  and  limited  or no  revenues;  there  can  be no
assurance that we will be successful in developing such companies.

                                       17
<PAGE>

         Uncertainties Associated With Selling Assets
         --------------------------------------------

     A significant  element of our business plan involves selling,  in public or
private offerings,  portions of the companies it has acquired and developed. Our
ability to engage in any such transactions,  the timing of such transactions and
the amount of proceeds from such  transactions are dependent on market and other
conditions  largely beyond our control.  Accordingly,  there can be no assurance
that we will be able to engage in such  transactions  in the future or that when
we are able to engage in such  transactions they will be at favorable prices. If
we were unable to  liquidate  portions of its  portfolio  companies at favorable
prices,  our business,  financial  condition and results of operations  would be
adversely affected.

         Uncertainties of the Recoverability of Intangible Assets
         --------------------------------------------------------

     As a result of our change in corporate focus from a food holding company to
an Internet  holding  company,  the  composition of our assets and expenses have
dramatically  changed.  With the recent acquisitions of Internet companies,  the
intangible  assets  purchased  as  a  result  of  these  acquisitions  represent
approximately   62%  of  our  total  assets  and   approximately   104%  of  our
stockholders'  equity.  Further  amortization of these intangible assets will be
the largest single expense item in our statement of operations. If we are unable
to recover the costs of these intangible assets,  our financial  performance may
be negatively  impacted in the coming periods  through a write down or write off
of these intangible assets.

         We May Not Have Opportunities to Acquire Interests in Additional
         -----------------------------------------------------------------
Companies
---------

     We may be unable to identify  companies that  complement our strategy,  and
even if we identify a company that complements our strategy, we may be unable to
acquire an interest in the company for many reasons, including:

     o    failure to agree on the terms of the  acquisition,  such as the amount
          or price of our acquired interest;

     o    incompatibility   between  us  and   management  of  the  company;

     o    competition from other acquirers of e-commerce companies;

     o    a lack of capital to acquire an interest in the company; and

     o    the unwillingness of the company to operating with us.

     If we cannot  acquire  interests in attractive  companies,  our strategy to
build a collaborative network of operating companies may not succeed.




                                       18
<PAGE>

         Our  Resources  and Our Ability to Manage Newly  Acquired  Operating
         ----------------------------------------------------------------------
Companies May Be Strained As We Acquire More and Larger Interests in E-Commerce
--------------------------------------------------------------------------------
Companies
---------

     We have acquired, and plan to continue to acquire, significant interests in
both  Business to Consumer and Business to Business  e-commerce  companies  that
complement  our  business  strategy.  In  the  future,  we  may  acquire  larger
percentages or larger interests in companies than we have in the past, or we may
seek to acquire  100%  ownership  of  companies  as we have done in our  initial
stages of development. These larger acquisitions may place significantly greater
strain on our  resources,  ability  to manage  such  companies  and  ability  to
integrate them into our collaborative  network.  Future acquisitions are subject
to the following risks:

     o    Our  acquisitions may cause a disruption in our ongoing support of our
          operating  companies,  distract our management and other resources and
          make it difficult to maintain our standards, controls and procedures.

     o    We may acquire  interests in companies in e-commerce  markets in which
          we have little experience.

     o    We may not be able to facilitate  collaboration  between our operating
          companies and new companies that we acquire.

     o    To fund future  acquisitions we may be required to incur debt or issue
          equity securities, which may be dilutive to existing shareholders.

RISKS PARTICULAR TO OUR OPERATING DIVISIONs

     We and our operating  divisions' result of operations,  and accordingly the
price of its common stock, may be adversely affected by the following factors:

     o    lack of  acceptance  of the Internet as an  advertising  or electronic
          commerce medium;

     o    inability  to  develop  a large  base of  users of its Web  sites  who
          possess demographic characteristics attractive to advertisers;

     o    lower advertising rates;

     o    slow development of the e-commerce market;

     o    lack of acceptance of its Internet content;

     o    loss of key content providers;

     o    intense competition;

     o    loss of key personnel; and

     o    inability to manage growth.


                                       19
<PAGE>

         Dependence on Vendor Relationships
         ----------------------------------

     Our  operating  divisions  are  currently,  and expect to be in the future,
dependent  on a number  of vendor  relationships.  These  relationships  include
arrangements relating to the creation of traffic on our affiliated Web sites and
resulting   generation  of  advertising  and   commerce-related   revenue.   The
termination  of, or the  failure  of such our  affiliated  Web sites to renew on
reasonable  terms,  such  relationships  could  have an  adverse  effect  on our
business, results of operations and financial condition. Our operating divisions
also are generally  dependent on other vendor  relationships  with  advertisers,
sponsors and partners.  Most of these arrangements do not require future minimum
commitments  to use  our  services,  are  often  not  exclusive  and  are  often
short-term or may be terminated at the convenience of the other party. There can
be no assurance  that these  vendors will not reassess  their  commitment to our
operating  divisions  at any time in the  future,  or that they will not develop
their own competitive services or products.  Further,  there can be no assurance
that  the  services  of  these  divisions  will  achieve  market  acceptance  or
commercial  success and  therefore  there can be no assurance  that our existing
relationships  will result in sustained or successful  business  partnerships or
significant revenues for us.

         Some of Our Operating  Divisions May Be Unable to Protect Their
         ----------------------------------------------------------------
Proprietary Rights and May Infringe on the Proprietary Rights of Others
------------------------------------------------------------------------

     Proprietary rights,  particularly in the form of copyrights,  are important
to the success and  competitive  position  of many of our  operating  divisions.
Although our operating divisions seek to protect their proprietary rights, their
actions  may be  inadequate  to protect  any  trademarks,  copyrights  and other
proprietary rights. In addition,  effective  copyright and trademark  protection
may be unenforceable or limited in certain  countries,  and the global nature of
the Internet makes it impossible for some of our operating  divisions to control
the dissemination of their work and use of their services. Some of our operating
divisions  also license  content from third parties and it is possible that they
could become  subject to  infringement  actions based upon the content  licensed
from  those  third   parties.   Our   operating   divisions   generally   obtain
representations  as to the  origin  and  ownership  of  such  licensed  content;
however,  this may not  adequately  protect them.  Any of these claims,  with or
without merit,  could subject our operating  divisions to costly  litigation and
the diversion of their  technical  and  management  personnel.  If our operating
divisions  incur  costly  litigation  and their  personnel  are not  effectively
deployed  the  expenses  and losses  incurred by our  operating  divisions  will
increase and their profits, if any, will decrease.

         Our Business May Be Disrupted If They Are Unable To Upgrade Their
         ------------------------------------------------------------------
Systems To Meet Increased Demand
--------------------------------

     Capacity limits on some of our operating divisions' technology, transaction
processing systems and network hardware and software may be difficult to project
and they may not be able to expand and upgrade their  systems to meet  increased
use.

                                       20
<PAGE>

     As traffic on our  operating  divisions'  Web sites  continues to increase,
they must expand and upgrade their technology,  transaction  processing  systems
and network  hardware and  software.  Our  operating  divisions may be unable to
accurately  project the rate of increase in use of their Web sites. In addition,
our operating  divisions may not be able to expand and upgrade their systems and
network hardware and software capabilities to accommodate increased use of their
Web sites. If our operating divisions are unable to appropriately  upgrade their
systems and network  hardware and software,  the operations and processes of our
operating divisions may be disrupted.

RISKS RELATING TO THE INTERNET INDUSTRY

         Concerns Regarding Security of Transactions and Transmitting
         --------------------------------------------------------------
Confidential  Information Over the Internet May Have An Adverse Impact on
-------------------------------------------------------------------------
Our Business
-------------

     We believe that concern regarding the security of confidential  information
transmitted over the Internet prevents many potential customers from engaging in
online transactions. If our operating divisions that depend on such transactions
do not add sufficient  security features to their future product  releases,  our
operating  divisions'  products may not gain market  acceptance  or there may be
additional legal exposure to them.

     Despite the  measures  some of our  operating  divisions  have  taken,  the
infrastructure  of each  of  them  is  potentially  vulnerable  to  physical  or
electronic  break-ins,  viruses or similar problems. If a person circumvents the
security measures imposed by any one of our operating divisions, he or she could
misappropriate  proprietary  information or cause  interruption in operations of
the operating divisions. Security breaches that result in access to confidential
information  could damage the  reputation of any one of our operating  divisions
and expose the operating division affected to a risk of loss or liability.  Some
of our operating  divisions may be required to make significant  investments and
efforts  to  protect  against  or remedy  security  breaches.  Additionally,  as
e-commerce  becomes more  widespread,  our operating  divisions'  customers will
become more concerned about security.  If our operating  divisions are unable to
adequately  address these  concerns,  they may be unable to sell their goods and
services.

         Rapid  Technological  Changes May Prevent Our Operating  Divisions
         -------------------------------------------------------------------
From Remaining Current With Their Technical  Resources and Maintaining
-----------------------------------------------------------------------
Competitive Product and Service Offerings
------------------------------------------

     The markets in which our operating  divisions  operate are characterized by
rapid technological  change,  frequent new product and service introductions and
evolving  industry  standards.  Significant  technological  changes could render
their existing Web site technology or other products and services obsolete.  The
e-commerce market's growth and intense competition  exacerbate these conditions.
If  our  operating  divisions  are  unable  to  successfully  respond  to  these
developments or do not respond in a cost-effective way, our business,  financial


                                       21
<PAGE>

condition and operating  results will be adversely  affected.  To be successful,
our  operating  divisions  must  adapt  to their  rapidly  changing  markets  by
continually  improving  the  responsiveness,  services  and  features  of  their
products and services and by developing  new features to meet the needs of their
customers. Our success will depend, in part, on our operating divisions' ability
to  license  leading  technologies  useful in their  businesses,  enhance  their
existing  products and services and develop new  offerings and  technology  that
address the needs of their customers.  Our operating divisions will also need to
respond  to  technological   advances  and  emerging  industry  standards  in  a
cost-effective and timely manner.

         Government Regulations and Legal Uncertainties May Place Financial
         ------------------------------------------------------------------
Burdens On Our Business and the  Businesses and the Businesses Of Our Operating
--------------------------------------------------------------------------------
Divisions
---------

     As of  December  31,  2001,  there  were few laws or  regulations  directed
specifically at e-commerce.  However,  because of the Internet's  popularity and
increasing  use,  new  laws  and  regulations  may be  adopted.  These  laws and
regulations  may cover  issues such as the  collection  and use of data from Web
site visitors and related privacy issues, pricing, content,  copyrights,  online
gambling,  distribution and quality of goods and services.  The enactment of any
additional  laws or  regulations  may  impede  the  growth of the  Internet  and
e-commerce,  which could  decrease the revenue of our  operating  divisions  and
place  additional  financial  burdens on our business and the  businesses of our
operating divisions.

     Laws  and  regulations   directly  applicable  to  e-commerce  or  Internet
communications  are becoming  more  prevalent.  For example,  Congress  recently
enacted laws  regarding  online  copyright  infringement  and the  protection of
information  collected online from children.  Although these laws may not have a
direct adverse effect on our business or those of our operating divisions,  they
add to the legal and regulatory burden faced by e-commerce divisions.


RISKS RELATING TO FUTURE OFFERINGS

         Shares Eligible For Future Sale By Our Current Shareholders May
         ----------------------------------------------------------------
Decrease the Price of Our Common Stock
--------------------------------------

     If our shareholders sell substantial amounts of our common stock, including
shares  issued upon the exercise of  outstanding  options,  in the public market
following  future  offerings,  then the market  price of our common  stock could
fall.  Restrictions  under the securities  laws and certain  lock-up  agreements
limit the  number of shares of common  stock  available  for sale in the  public
market.



                                       22
<PAGE>

         Our Common Stock Price Is Likely to Be Highly Volatile
         ------------------------------------------------------

     The market  price for our common  stock is likely to be highly  volatile as
the stock market in general and the market for  Internet-related  stocks and the
stock. The trading prices of many technology and Internet-related company stocks
have seen  significant  declines from their historical highs within past several
months.  The stocks of these  companies  have been  highly  volatile.  We cannot
assure you that our common stock will sustain its current market prices.

     The following factors will add to our common stock price's volatility:

     o    actual or anticipated  variations in our quarterly  operating  results
          and  those of our  operating  divisions;  o new sales  formats  or new
          products or services offered by us, our operating  divisions and their
          competitors;  o changes in our  financial  estimates  and those of our
          operating divisions by securities analysts;

     o    conditions  or trends in the  Internet  industry  in  general  and the
          e-commerce industry in particular;

     o    announcements  by our  operating  divisions and their  competitors  of
          technological innovations;

     o    announcements  by us or our operating  divisions or our competitors of
          significant acquisitions, strategic partnerships or joint ventures;

     o    changes in the market valuations of our operating  divisions and other
          Internet companies;

     o    our capital commitments;

     o    additions or  departures of our key personnel and key personnel of our
          operating divisions; and

     o    sales of our common stock.

     Many of these  factors are beyond our control.  These  factors may decrease
the market price of our common stock, regardless of our operating performance.

EMPLOYEES

     As of March 31, 2002,  we employed 35 full time  individuals.  We have 7 in
management, 3 in sales and marketing and 25 in administration. Our employees are
not unionized, and we consider our relations with our employees to be favorable.






                                       23
<PAGE>


ITEM 2. DESCRIPTION OF PROPERTY

     We lease our principal  executive  offices,  as well as our  administrative
offices,  which are located in a 2,064  square  feet office  facility in Sherman
Oaks,  California at an annual rent of  approximately  $62,500.  This lease will
expire in June 2006.

     We own a 12,000  square feet office  building  in  Martinsville,  Virginia,
which serves as Sitestar.net's  principal  executive  offices.  We acquired this
property along with the  acquisition of Neocom.  This facility  houses  Neocom's
customer service,  administrative  and corporate  functions.  Neocom's principal
noteholders  have a senior lien on the property.  The lien on the property was a
result of the  working  capital  credit  facility  taken by Neocom  against  the
property.   The  bank  note  is  payable  in  monthly   principal  and  interest
installments of $6,400 or $76,800 per annum with the balance due September 2003.

      We also lease a 7,200 square feet office  facility in Lynchburg,  Virginia
which serves as FRE  Enterprises  and Computers By Design's  executive  offices.
This  facility  houses  Lynchburg.net's  customer  service,  administrative  and
corporate functions at an annual rent of $46,200.

      We also lease a 2,500  square feet  office  facility  in Mt.  Airy,  North
Carolina which serves as Advanced  Internet's  executive offices.  This facility
houses  Advance  Internet's  customer  service,   administrative  and  corporate
functions at an annual rent of $6,000.

     Our annual rents are subject to  adjustments.  We  anticipate  that we will
require  additional  space for our ISP  operations as we expand,  and we believe
that we will  be  able to  obtain  suitable  space  as  needed  on  commercially
reasonable terms.


ITEM 3. LEGAL PROCEEDINGS

The Company is involved in certain  legal  proceedings  and claims that arise in
the normal course of business.  Management  does not believe that the outcome of
these matters will have a material  adverse  effect on the  Company's  financial
position or results of operations.


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

         Not Applicable



                                       24
<PAGE>


                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Our common Stock was traded  over-the-counter and was quoted on the OTC
Bulletin  Board (symbol  "SYTE") until  December 15, 1999. On December 16, 1999,
our common stock was  temporarily  de-listed  from the NASD OTC  Bulletin  Board
pending  the  effective  date of our Form  10-SB  registration  statement.  From
December   16,   1999  to  April  16,   2000,   our  common   Stock  was  traded
over-the-counter  and was quoted on the National  Quotations  Board's Electronic
Quotation  Service "Pink  Sheets." On April 16, 2000, we resumed  trading on the
NASD OTC Bulletin Board. On July 14, 1999 we effected a 3-for-1 stock split. All
prices listed below reflect this split.


         Set forth  below are the high and low closing bid prices for our common
stock for each quarterly period commencing January 1, 2000:


                                                       High              Low
                                                       ----              ---
2000
     For the quarter ended March 31, 2000              $1.25            $0.85
     For the quarter ended June 30, 2000               $2.00            $0.56
     For the quarter ended September 30, 2000          $0.91            $0.16
     For the quarter ended December 31, 2000           $0.34            $0.08

2001
     For the quarter ended March 31, 2001              $0.19            $0.06
     For the quarter ended June 30, 2001               $0.07            $0.04
     For the quarter ended September 30, 2001          $0.05            $0.02
     For the quarter ended December 31, 2001           $0.05            $0.02

     Such  quotations  reflect  inter-dealer  prices,  without  retail  mark-up,
markdown or commissions and may not necessarily represent actual transactions.

RECORD HOLDERS

     The closing bid price for our common stock was $0.04 on March 31, 2002.  As
of March 31, 2002 we had 120 shareholders of record.  Additional  holders of our
Common Stock hold such stock in street name with various brokerage firms.

DIVIDENDS

     We have never declared or paid any cash  dividends on our common stock.  We
currently  intend to retain  all  available  funds for use in our  business  and
therefore  does not  anticipate  paying any cash  dividends  in the  foreseeable
future. Any future determination relating to dividend policy will be made at the
discretion  of our Board of  Directors  and will  depend on a number of factors,
including the future earnings,  capital  requirements,  financial  condition and
future  prospects  and such  other  factors as the Board of  Directors  may deem
relevant.


                                       25
<PAGE>

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

GENERAL

      The following  discussion and analysis should be read in conjunction  with
the our  consolidated  financial  statements and related  footnotes for the year
ended  December  31, 2001  included in this Annual  Report on Form  10-KSB.  The
discussion  of results,  causes and trends  should not be construed to imply any
conclusion that such results or trends will necessarily continue in the future.

OVERVIEW

We are a  technology  holding  company with a broad  strategy of  acquiring  and
investing in technology related  enterprises.  Our primary strategy is acquiring
and operating small independent Internet Service Providers in the rural areas of
the  mid-Atlantic  region.  Our specific mission is to develop our operating ISP
subsidiaries and future ISP  acquisitions  into a successful  collaborative  ISP
network.  We intend to  achieve  this  success  by  harnessing  the  synergistic
potentials  that  exists  among  these  acquisitions  by  consolidating  all the
administrative functions and streamlining the corporate functions that may exist
with each acquisition.

In July 1999,  we began to  implement  our  broader  strategy of  acquiring  and
investing in emerging technology-based enterprises to create a broad and diverse
set of core electronic businesses that deliver a variety of online solutions. In
addition  to  developing  and  integrating  technology-based  technologies,  our
broader  objective  is to  create  a mix of  Internet  operating  companies  and
technology-related portfolio investments that will enhance the value of our core
holdings.

Our Internet operating  subsidiaries  provide Internet services to our customers
by providing  Internet  access and  enhanced  products and services to small and
medium sized  enterprises in selected high growth markets.  We target  primarily
small and medium  sized  enterprise  customers  located in selected  high growth
secondary  markets.  We currently provide our customers with Internet access and
enhanced products and services in the mid-Atlantic area of the United States. We
have designed our comprehensive  suite of enhanced products and services to meet
the expanding needs of our customers and to increase our revenue per customer.

The products and services we provide include:

     o    Internet access services;

     o    Web design services;

     o    Web hosting services;

     o    End to end e-commerce solutions;

     o    Online marketing consulting; and

     o    Management of mission critical Internet applications.

Our Internet service provider  operating  subsidiaries  derive their income from
the excess of the Internet  service prices we charge our customers over the cost


                                       26
<PAGE>

of service we pay our  suppliers.  Additionally,  our retail  customers  pay for
services by cash or credit card while we pay our suppliers on extended terms. As
a result,  we are able to  increase  our  working  capital  between  the time we
receive  payment for services and the time we are required to pay suppliers.  We
also generate  income from the  development  of computer  software for companies
principally  in the  manufacturing  industries  and from  sales  from our retail
computer store in Lynchburg, Virginia and Mt. Airy, North Carolina.

On July 1, 2001, we acquired 100% of the equity and voting  interest of Advanced
Internet  Services,  Inc., a North Carolina  corporation which is a successor in
interest to two sole proprietorships one having the same name as the corporation
and the other with the name  Professional  Data Systems  (collectively  "ADVI").
ADVI is an Internet service  provider  located in Mt. Airy, North Carolina.  The
purchase price was $965,980,  which consisted of $150,000 in cash,  6,021,818 of
our common shares valued at $301,091 a non-interest  bearing promissory note for
$1,199,990 payable in 24 quarterly installments of $49,995 and transaction costs
of $30,000.  However,  due to the  non-interest  bearing  nature of the note, we
imputed a discount rate of 36% to calculate the present value of the note.  This
discount  rate is an  estimate of our  current  cost of  capital.  Based on this
calculation, the present value of the non-interest promissory note is $484,889.

We believe the acquisition of ADVI, with about 3,000 subscribers,  enhanced ours
primary strategy of consolidating  small Internet service providers in the rural
markets of the mid-Atlantic  region by enlarging our service footprint.  We also
believe  this  transaction  opened  other  acquisition  opportunities  for us to
further  increase  our presence in the northern  areas of North  Carolina.  This
recent  acquisition  increases our Internet  access customer base to over 15,000
subscribers.  This acquisition included goodwill of $702,642 that is the premium
we paid to have the  opportunity  to  generate  revenues  and  earnings  in this
market.  Furthermore,  this  acquisition  generated  us cost  savings  with  the
integration and consolidation of ADVI's corporate and  administrative  functions
with our existing  infrastructure.  This estimated cost savings,  along with the
accretive  nature of the  transaction  from an operating cash flow  perspective,
will further allow us to enhance our revenue  streams and increase our operating
cash flow.

In July 2001,  we  successfully  spun off the content  services  division of our
wholly owned  subsidiary,  Sitestar.net,  Inc. into  TriVantage  Group,  Inc., a
separate public company exclusively focused in content development  services. We
owned 90% of TriVantage.  On December 28, 2001, we contributed the assets of the
content  service  division back to Sitestar.net  and sold the TriVantage  public
shell.  We recognized an actual cash gain on the sale of TriVantage of $188,158.
Since we owned the content service  division for the entire year either directly
or  indirectly  through  TriVantage,  the  operations of this division have been
consolidated with our operations for the entire year


RESULTS OF OPERATIONS

         The following  tables show  financial data for the years ended December
31,  2001  and  2000.  Operating  results  for any  period  are not  necessarily
indicative of results for any future period.


                                       27
<PAGE>
<TABLE>
<CAPTION>
                                              For the year ended December 31, 2001
                               ---------------------------------------------------------------
                               Corporate      Internet    Development    Retail      Total
                              -----------   -----------   -----------   ---------  -----------
<S>                           <C>           <C>           <C>           <C>        <C>
Revenue                       $         -   $ 3,040,752   $  276,210    $ 680,388  $ 3,997,350
Cost of revenue                         -     1,136,548      185,125      343,715    1,665,388
                              -----------   -----------   -----------   ---------  -----------
Gross profit                            -     1,904,204       91,085      336,673    2,331,962
Operating expenses              1,348,709     1,825,906       82,636      226,189    3,483,440
                              -----------   -----------   -----------   ---------   ----------
Income (loss) from operations  (1,348,709)       78,298        8,449      110,484   (1,151,478)
Other income (expense)             22,649      (136,083)      (8,170)       1,290     (120,314)
                              -----------   -----------   -----------   ---------  -----------
Net income (loss)             $(1,326,060)  $   (57,785)  $      279    $ 111,774  $(1,271,792)
                              ===========   ===========   ==========    =========  ===========

EBITDA(1)                     $(1,142,892)  $   968,416   $   20,427    $ 115,224  $   (38,825)
   Corporate expenses paid
     with common stock            863,506             -            -            -      863,506
   Writedown of investment        160,000             -            -            -      160,000
                              -----------   -----------   -----------   ---------  -----------
Actual cash generated         $  (119,386)  $   968,416   $   20,427    $ 115,224  $   984,681
                              ===========   ===========   ==========    =========  ===========


                                              For the year ended December 31, 2000
                               ---------------------------------------------------------------
                               Corporate      Internet    Development    Retail      Total
                              -----------   -----------   -----------   ---------  -----------

Revenue                       $         -   $ 1,603,204   $  225,836    $ 105,597  $ 1,934,637
Cost of revenue                         -       671,421      238,176       45,995      955,592
                              -----------   -----------   -----------   ---------  -----------
Gross profit                            -       931,783      (12,340)      59,602      979,045
Operating expenses              1,635,933     4,008,963       67,103       60,256    5,772,255
                              -----------   -----------   -----------   ---------  -----------
Income (loss) from operations  (1,635,933)   (3,077,180)     (79,443)        (654)  (4,793,210)
Other income (expense)           (356,698)      (88,018)      (3,600)          39     (448,277)
                              -----------   -----------   -----------   ---------  -----------
Net income (loss)             $(1,992,631)  $(3,165,198)  $  (83,043)   $    (615) $(5,241,487)
                              ===========   ===========   ==========    =========  ===========

EBITDA(1)                     $(1,180,755)  $   393,909   $  (76,049)   $     (64) $  (862,959)
   Corporate expenses paid
     with common stock          1,214,423             -            -            -    1,214,423
                              -----------   -----------   -----------   ---------  -----------
Actual cash generated         $    33,668   $   393,909   $  (76,049)   $     (64) $   351,464
                              ===========   ===========   ==========    =========  ===========
</TABLE>



                                       28
<PAGE>

-------------------
(1) EBITDA  (earnings  before interest,  taxes,  depreciation and  amortization)
consists  of  revenue  less cost of revenue  and  operating  expense.  EBITDA is
provided  because it is a measure  commonly  used by  investors  to analyze  and
compare companies on the basis of operating performance.  EBITDA is presented to
enhance  an  understanding  of our  operating  results  and is not  intended  to
represent  cash flows or results of operations  in accordance  with GAAP for the
periods indicated. EBITDA is not a measurement under GAAP and is not necessarily
comparable with similarly titled measures for other companies. See Liquidity and
Capital  Resource  section  for  further   discussion  of  cash  generated  from
operations.

YEAR ENDED DECEMBER 31, 2001 COMPARED TO DECEMBER 31, 2000

REVENUE. Revenue for the year ended December 31, 2001 increased by $2,062,713 or
106.6% from  $1,934,637  for the year ended  December 31, 2000 to $3,997,350 for
the same period in 2001.  The  increase is  attributed  to the  acquisitions  of
Lynchburg.net  in November 2000 and Advance  Internet in July 2001. The Internet
revenue  generated  by these two  acquisitions  in 2001 was  $1,276,061  and the
retail revenue generated by the Lynchburg.net  acquisition in 2001 was $680,338.
Internet  revenue  for  Sitestar.net  increased  by  $288,412  or  19.5% in 2001
compared to 2000. We expect our Internet  revenue to continue to grow through an
increase in our subscriber base and by future acquisitions.

COST OF REVENUE. Costs of revenue for the year ended December 31, 2001 increased
by  $709,796  or 74.3% from  $955,592  for the year ended  December  31, 2000 to
$1,665,388  for the same  period in 2001.  As a  percentage  of revenue  cost of
revenue has  decreased  from 49.4% to 41.7%.  The  decrease as a  percentage  of
revenue is  principally  due to us being able to decrease  our cost of providing
Internet  access to our  customers by  negotiating  better  agreements  with our
suppliers made possible by the economies of scale gained from  consolidating our
ISP acquisitions.

OPERATING  EXPENSES.  Operating  expenses  for the year ended  December 31, 2001
decreased by $2,288,815 or 39.7% from $5,772,255 for the year ended December 31,
2000 to  $3,483,440  for the same  period  in 2001.  The  largest  component  of
operating  expense is depreciation and amortization  that amounted to $1,618,376
for the year ended  December  31, 2000 and $909,540 for the same period in 2001.
The  decrease  in  depreciation  and  amortization  is due to the write  down of
intangible  assets at  December  31,  2000 of  $1,860,000  related  to assets of
Sitestar.net  resulting in a decrease in amortization  going forward.  Excluding
depreciation and  amortization  and the writedown of intangible  assets in 2000,
operating expenses increased by $280,021 for the year ended December 31, 2001 as
compared  to the same  period in 2000.  This  increase  is due to the  operating
expenses associated with Lynchburg.net and Advanced Internet, officers' salaries
and professional fees.

GAIN ON  DISPOSITION OF ASSETS.  Gain on the  disposition of assets for the year
ended  December 31, 2001  decreased  by $175,673 or 48.2% from  $363,831 for the
year ended December 31, 2000 to $188,158 for the same period in 2000. During the
year ended  December 31, 2000,  we sold certain  assets of our Holland  American
International Specialties and  Sitestar, Inc. divisions and recognized a gain on

                                       29
<PAGE>

such sales of $314,515  and  $49,316,  respectively.  During  2001,  we sold the
public  shell,  TriVantage  Group,  Inc. for a gain of $188,158.  We  originally
purchase  TriVantage Group and contributed  Sitestar.net's  content  development
division to this public company, but later in the year decided to contribute the
content development  division back to Sitestar.net and sell the public shell for
a gain.

OTHER  INCOME.  During the year ended  December 31, 2001,  certain  stockholders
surrendered  a total of 1,741,418  shares of our common stock valued at $96,517.
We determined the value of the shares  surrendered  based on the market value of
the  common  stock  on the  date  of  surrender.  The  surrendered  shares  were
originally issued in connections with our acquisition of Sitestar,  Inc. in July
1999. Also in 2001, we wrote off our investment in Qliq-on  Corporation that was
previously valued at $160,000.

GAIN FROM  MARKETABLE  SECURITIES.  During the year ended  December 31, 2001, we
recognized  $78,436 in gains on the sale of  marketable  securities.  During the
year ended  December 31, 2000 such gains were $45,811.  We have  classified  the
marketable securities in our portfolio as trading securities.

INTEREST  EXPENSE.  Interest  expense  for the  year  ended  December  31,  2001
decreased  by $534,494  from  $857,919  for the year ended  December 31, 2000 to
$323,425  for  the  same  period  in  2001.   This  decrease  was  a  result  of
significantly  lower  loan  amortization  charges  related  to  the  convertible
debenture we issued last year.

LIQUIDITY AND CAPITAL RESOURCES

For the year ended  December 31,  2001,  we  generated  EBITDA at our  operating
subsidiary  level of  $1,104,067.  This  amount  was  offset  by  EBITDA  at the
corporate  level of  $(1,142,892).  However,  at the corporate level we paid for
certain  professional fees and salaries of $152,767 and $710,739,  respectively,
by issuing  shares of our common stock rather than paying  these  expenses  with
cash and had a write off of our investment in Qliq-on  Corporation for $160,000.
After taking into account these  non-cash  expenses at the  corporate  level the
actual net cash spent at the corporate  level was only  $119,386.  The following
table illustrates the actual cash flow generated in 2001:

      EBITDA generated at the operating subsidiary level       $    1,104,067
      EBITDA generated at the corporate level                      (1,142,892)
      Corporate expenses paid with common stock                       863,506
      Write off of investment in Qliq-on                              160,000
                                                               --------------
               Actual cash generated in 2001                   $      984,681
                                                               ==============

Also for the year ended  December 31, 2001, we paid $180,000  (purchase  price -
$150,000 and  transactions  fees -$30,000) in connection with the acquisition of
Advanced  Internet and we paid  $400,000 to repurchase  10,600,000  share of our
common stock from certain investors.

Our  business  plan has  required,  and is  expected  to  continue  to  require,
substantial capital to fund the growth of our operations,  capital expenditures,
and expansion of sales and marketing capabilities and acquisitions.


                                       30
<PAGE>

On May 11, 2000 we issued two convertible  debentures  aggregating $500,000. The
debentures  bear  interest  at 12% per annum and are due on May 1,  2001.  These
convertible  debentures  are currently  callable at anytime since it is past its
maturity date. The debenture  holders can call these  debentures upon sufficient
written  advance notice as agreed upon in the convertible  debenture  agreement.
The debentures are  convertible  into shares of our common stock at a rate equal
to the lowest of $.70 or 60% of the  average  of the three  lowest  closing  bid
prices for our common stock during the 20 trading days immediately preceding the
conversion date. In addition,  we also issued three-year warrants to purchase an
aggregate of 250,000 shares of our common stock at an initial  exercise price of
$0.77 per share. Due to the preferential  conversion feature of these debentures
we have recognized a financing charge of $242,857 (which represents the value of
additional  shares issuable upon conversion at the $.70 conversion  price versus
the number of shares issuable upon conversion at the market value at the date of
issuance).  In addition, the warrants issued in connection with these debentures
have been valued at $121,543 using the Black-Scholes model and such expense will
be recognized as financing costs over the term of the debentures.

On August 14, 2000, we issued another two convertible debenture for an aggregate
of $500,000 to the holders of the above-mentioned  debentures for the same terms
described  above.  The debenture  bears  interest at 12% per annum and is due on
August 14, 2001. These convertible  debentures are currently callable at anytime
since it is past  its  maturity  date.  The  debenture  holders  can call  these
debentures  upon  sufficient  written  advance  notice  as  agreed  upon  in the
convertible  debenture  agreement.  In  connections  with this debenture we have
recognized  a financing  cost in  connection  with the  preferential  conversion
feature of $333,333 and valued the 250,000  warrants  issued in connection  with
this debenture at $13,332 using the Black-Scholes  model. The expense related to
the  warrants  will be  recognized  as  financing  costs  over  the  term of the
debenture.

As of December  31, 2001,  the holder of the  debentures  converted  $513,388 in
principal  and  $90,822 of  accrued  interest  into  13,100,906  and  5,176,365,
respectively, shares of the Company's common stock.

We  believe  that  our  existing  cash  and  cash  equivalents,  and  short-term
investments  and cash  flow  from  operations,  will be  sufficient  to meet our
working capital and capital  expenditure  requirements  for at least the next 12
months.  Additional financing may not be available when needed or, if available,
such financing may not be on terms favorable to our  shareholders or us. If such
sources of  financing  are  insufficient  or  unavailable,  or if we  experience
shortfalls in anticipated revenue or increases in anticipated  expenses,  we may
need to slow down or stop the  expansion of our Internet  Service  Providers and
reduce our marketing and development efforts. Any of these events could harm our
business, financial condition or results of operations.

Forward looking statements

This report contains certain  forward-looking  statements  within the meaning of
Section 27A of the  Securities  Act of 1933, as amended,  and Section 21E of the
Securities Exchange Act of 1934, as amended. Stockholders are cautioned that all
forward-looking  statements  involve risks and  uncertainty,  including  without
limitation,   our  ability  to  expand  our  customer   base,   make   strategic
acquisitions,  general market conditions,  and competition and pricing. Although
we believe the assumptions  underlying the forward-looking  statements contained
herein  are  reasonable,  any  of  the  assumptions  could  be  inaccurate,  and
therefore,  there  can  be no  assurance  that  the  forward-looking  statements
contained in the report will prove to be accurate.
                                       31
<PAGE>


Item 7.  Financial Statements



                                      INDEX


                                                                         Page
                                                                         ----
INDEPENDENT AUDITORS' REPORT

     Report on audited consolidated financial statements                  33

FINANCIAL STATEMENTS

     Consolidated Balance Sheet as of December 31, 2001                   34

     Consolidated Statements of Operations for the Years
        Ended December 31, 2001 and 2000                                  36

     Consolidated Statement of Stockholders' Equity for the
        Years Ended December 31, 2001 and 2000                            37

     Consolidated Statements of Cash Flows for the Years
        Ended December 31, 2001 and 2000                                  38

     Notes to Consolidated Financial Statements                           40















                                       32
<PAGE>






                          INDEPENDENT AUDITORS' REPORT


TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
SITESTAR CORPORATION

We  have  audited  the  accompanying  consolidated  balance  sheet  of  Sitestar
Corporation  and   subsidiaries  as  of  December  31,  2001,  and  the  related
consolidated  statements of operations,  stockholders' equity and cash flows for
each of the two years in the period ended  December 31,  2001.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  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  consolidated  financial  position  of
Sitestar  Corporation and  subsidiaries as of December 31, 2001, and the results
of their  consolidated  operations and their consolidated cash flows for each of
the two  years in the  period  ended  December  31,  2001,  in  conformity  with
accounting principles generally accepted in the United States of America.



                                    /s/ Stonefield Josephson, Inc.
                                    ------------------------------
                                    STONEFIELD JOSEPHSON, INC.
                                    Certified Public Accountants

Santa Monica, California
March 27, 2002







                                       33
<PAGE>



                      SITESTAR CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2001


                                     ASSETS

CURRENT ASSETS
   Cash and cash equivalents                                   $       378,707
   Marketable securities                                                27,248
   Accounts receivable, less allowance for
     doubtful accounts of $465,545                                     423,695
   Inventory                                                            90,000
  Other current assets                                                  91,364
                                                               ---------------

     Total current assets                                            1,011,014

PROPERTY AND EQUIPMENT, net                                            434,102
CUSTOMER LIST, net of accumulated amortization
   of $1,246,767                                                     1,111,233
GOODWILL, net of accumulated amortization
  of $1,115,981                                                      2,412,719
OTHER ASSETS                                                            95,000
                                                               ---------------

TOTAL ASSETS                                                   $     5,064,068
                                                               ===============













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


                                       34
<PAGE>


                      SITESTAR CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED BALANCE SHEET, Continued
                                DECEMBER 31, 2001

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
   Accounts payable and accrued expenses                       $       365,903
   Deferred revenue                                                    162,594
   Line of credit                                                       79,809
   Convertible debentures                                              476,612
   Note payable - stockholders, current portion                        123,078
   Notes payable, current portion                                      187,489
   Capital lease obligations, current portion                           23,492
                                                               ---------------

     Total current liabilities                                       1,418,977

NOTES PAYABLE - STOCKHOLDERS, less current portion                     454,430
NOTES PAYABLE, less current portion                                    222,943
CAPITAL LEASE OBLIGATIONS, less current portion                          9,083
                                                               ---------------

TOTAL LIABILITIES                                                    2,105,433
                                                               ---------------

COMMITMENTS AND CONTINGENCIES (Note 10)                                      -

STOCKHOLDERS' EQUITY
   Preferred Stock, $.001 par value, 10,000,000 shares
     authorized, 0 shares issued and outstanding                             -
   Common Stock, $0.001 par value, 300,000,000 shares
    authorized, 92,904,654 shares issued and outstanding                92,905
   Additional paid-in capital                                       13,429,261
   Accumulated deficit                                             (10,563,531)
                                                               ---------------

     Total stockholders' equity                                      2,958,635
                                                               ---------------
TOTAL LIABILITIES AND
   STOCKHOLDERS' EQUITY                                        $     5,064,068
                                                               ===============











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


                                       35
<PAGE>

                      SITESTAR CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

                                                        2001             2000
                                                    ------------   ------------

REVENUE                                             $  3,997,350   $  1,934,637

COST OF REVENUE                                        1,665,388        955,592
                                                    ------------   ------------

GROSS PROFIT                                           2,331,962        979,045
                                                    ------------   ------------

OPERATING EXPENSES:
  Selling general and administrative expenses          3,483,440      3,870,022
  Write down of intangible assets                              -      1,860,000
  Loss from operations of business transferred
     under contractual obligations                             -         42,233
                                                    ------------   ------------

          TOTAL OPERATING EXPENSES                     3,483,440      5,772,255
                                                    ------------   ------------

LOSS FROM OPERATIONS                                  (1,151,478)    (4,793,210)
                                                    ------------   ------------

OTHER INCOME (EXPENSES)
  Gain on disposition of assets                          188,158        363,831
  Other income (expenses)                                (63,483)             -
  Gain from marketable securities                         78,436         45,811
  Interest expense                                      (323,425)      (857,919)
                                                    -------------  -------------

          TOTAL OTHER INCOME (EXPENSES)                 (120,314)      (448,277)
                                                    -------------  ------------

LOSS BEFORE INCOME TAXES                              (1,271,792)    (5,241,487)

 INCOME TAXES                                                  -              -
                                                    ------------   ------------

NET LOSS                                            $ (1,271,792)  $ (5,241,487)
                                                    ============   ============

BASIC AND DILUTED LOSS PER SHARE                    $      (0.02)  $      (0.20)
                                                    ============   ============

WEIGHTED AVERAGE SHARES
     OUTSTANDING - BASIC AND DILUTED                  75,688,286     26,526,529
                                                    ============   ============


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

                                       36
<PAGE>


<TABLE>
<CAPTION>
                      SITESTAR CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                                                       Common Stock      Additional     Note
                                                -----------------------   Paid-in     Receivable   Accumulated
                                                  Shares        Amount    Capital     Stockholder    Deficit        Total
                                                ----------     --------  ----------   -----------  -----------   ----------
<S>                                             <C>            <C>       <C>          <C>          <C>           <C>
Balance at December 31, 1999                    24,159,826       24,160    8,347,174    (69,017)   (4,050,252)    4,252,065

Common stock issued for professional services   10,049,400       10,049      758,538                                768,587
Common stock issued for debt and interest        7,477,685        7,479      638,011                                645,490
Common stock issued for executive salaries       8,950,742        8,951      436,885                                445,836
Common stock issued in connection with
  acquisition of FRE Enterprises, Inc.          12,437,985       12,437    2,475,160                              2,487,597
Cancellation of common stock outstanding -
  in lieu of assumption of debt                   (900,000)        (900)    (899,100)                              (900,000)
Repayment of note receivable                                                             69,017                      69,017
Financing costs associated with debentures                                   711,065                                711,065
Net loss                                                                                           (5,241,487)   (5,241,487)
                                                ----------     --------  ----------   -----------  -----------   ----------

Balance at December 31, 2000                    62,175,638       62,176   12,467,733          -    (9,291,739)    3,238,170

Common stock issued for professional services    4,098,682        4,099      148,668                                152,767
Common stock issued for debt and interest       15,281,984       15,282      308,895                                324,177
Common stock issued for executive salaries      17,667,950       17,668      693,071                                710,739
Common stock issued in connection with
  acquisition of Advanced Internet
  Services, Inc.                                 6,021,818        6,022      295,069                                301,091
Cancellation of common stock outstanding -
  regarding legal settlement                    (1,741,418)      (1,742)     (94,775)                               (96,517)
Repurchase of shares                           (10,600,000)     (10,600)    (389,400)                              (400,000)
Net loss                                                                                           (1,271,792)   (1,271,792)
                                                ----------     --------  ----------   -----------  -----------   ----------

Balance at December 31, 2001                    92,904,654       92,905   13,429,261           -  (10,563,531)    2,958,635
                                                ==========     ========  ===========  ==========  ============  ============
</TABLE>








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

                                       37
<PAGE>


<TABLE>
<CAPTION>
                      SITESTAR CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

                                                                  2001          2000
                                                              ------------   -----------
<S>                                                           <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                   $ (1,271,792)  $(5,241,487)
   Adjustments to reconcile net loss
   to net cash provided by (used in) operating activities:
     Depreciation and amortization expense                         909,540     1,618,376
     Write down of intangible assets                                     -     1,860,000
     Loss from operations of business transferred under
       contractual arrangements                                          -        42,233
     Common stock issued for services rendered                     152,767       768,587
     Common stock issued for executive salaries                    710,739       445,836
     Common stock issued for interest expense                       54,289        39,931
     Gain on disposition of assets                                (188,158)     (363,831)
     Write off of investment                                       160,000             -
     Common shares canceled                                        (96,517)            -
     Gain recognized on marketable securities                      (78,436)      (45,811)
     Purchase of marketable securities                            (279,200)     (820,000)
     Proceeds from sale of marketable securities                   894,199       302,000
     Charge taken for loan financing costs                         107,315       713,750
   (Increase) decrease in:
     Accounts receivable                                          (207,340)      (15,254)
     Inventory                                                      24,863        11,793
     Other current assets                                          (47,347)       (4,613)
   Increase (decrease) in:
     Accounts payable and accrued expenses                        (144,519)      (38,635)
     Deferred revenue                                              (71,780)        8,305
     Advances from stockholder                                           -        24,450
                                                              ------------   -----------

Net cash provided by (used in) operating activities                628,623      (694,370)
                                                              ------------   -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment                              (15,623)      (61,666)
   Purchase of investment                                          (45,000)      (50,000)
   Purchase of subsidiaries, net of cash acquired                 (131,607)      253,385
   Proceeds from sale of assets                                    245,000        34,703
                                                              ------------   -----------

Net cash provided by (used in) investing activities           $     52,770   $   176,422
                                                              ------------   -----------
</TABLE>


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

                                       38
<PAGE>
<TABLE>
<CAPTION>
                      SITESTAR CORPORATION AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
                                                                   2001          2000
                                                              ------------   -----------
<S>                                                           <C>            <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from convertible debentures                       $         -   $ 1,000,000
   Payment of debenture acquisition costs                               -      (110,000)
   Net proceeds from line of credit                                11,300             -
   Repayment of convertible debenture                             (10,000)            -
   Repayment of notes payable                                     (66,388)      (63,772)
   Repayment of notes payable - stockholders                      (95,563)      (19,206)
   Payment on capital lease obligation                            (31,329)      (45,108)
   Repurchase of common stock                                    (400,000)            -
                                                              ------------  -----------

Net cash provided by (used in) financing activities              (591,980)      761,914
                                                              ------------  -----------
NET INCREASE  IN CASH
   AND CASH EQUIVALENTS                                            89,413       243,966

CASH AND CASH EQUIVALENTS -
   BEGINNING OF PERIOD                                            289,294        45,328
                                                              -----------   -----------
CASH AND CASH EQUIVALENTS -
   END OF PERIOD                                              $   378,707   $   289,294
                                                              ===========   ===========
</TABLE>

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

During the years ended  December  31, 2001 and 2000,  the Company paid no income
taxes and interest of approximately $151,000 and $82,000, respectively.

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING TRANSACTIONS

During the year ended December 31, 2001 the Company (1) issued  4,098,682 shares
of common  stock  for  professional  services  valued at  $152,767;  (2)  issued
15,281,984  shares of common  stock in  exchange  for  $269,888  of  convertible
debentures and $54,289 for interest  expense;  (3) issued  17,667,950  shares of
common stock for executive salaries of $710,739;  (4) issued 6,021,818 shares of
common stock for the acquisition of Advanced Internet  Services,  Inc. valued at
$301,091;  (5) canceled  1,741,418  shares of common stock valued at $96,517 and
(6) entered into capital lease obligations of $12,253.

During the year ended December 31, 2000 the Company (1) issued 10,049,400 shares
of common  stock  for  professional  services  valued at  $768,588;  (2)  issued
7,477,685  shares  of  common  stock  in  exchange  for  $605,559  in  debt  and
liabilities and $39,931 for interest  expense;  (3) issued  8,950,742  shares of
common stock for executive salaries of $445,836; (4) issued 12,437,985 shares of
common stock for the acquisition of FRE Enterprises,  Inc. valued at $2,487,597;
and (5) canceled 900,000 shares of common stock which were previously  issued in
connection with the acquisition of Sitestar.net valued at $900,000.

The  accompanying  notes are an integral  part of these  consolidated  financial
statements
                                       39
<PAGE>


                      SITESTAR CORPORATION AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000


NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

         Organization and Line of Business
         ---------------------------------
         Sitestar Corporation (formerly Interfoods Consolidated,  Inc. and prior
         to  that  was  formerly   known  as  Holland   American   International
         Specialties  ("HAIS")),  (the  "Company"),  began operations on June 1,
         1997, under a partnership agreement, and was incorporated in California
         on  November  4, 1997.  On July 26,  1999,  the  Company  restated  its
         Articles  of  Incorporation  to  change  the  name  of the  Company  to
         "Sitestar  Corporation." The Company was in the international specialty
         foods  distribution  business.  In 1999, through the acquisition of two
         Internet Service  Providers,  the Company changed its focus from a food
         distribution  company to an Internet holding company. The operations of
         the Company's  Internet  subsidiaries  are located in the  Mid-Atlantic
         region of the United States. The Company's  corporate office is located
         in Sherman Oaks, California.

         Mergers
         -------
         The Company is the successor by merger,  which was effective on October
         25, 1998, to White Dove Systems,  Inc., a Nevada corporation  ("WDVE").
         The exchange rate in the  reincorporating  merger was one and one fifth
         shares of WDVE's  common  stock for one share of the  Company's  common
         stock. Due to WDVE's lack of business  activity prior to the merger, no
         goodwill was recorded.

         On March 20, 1998,  HAIS completed a stock purchase  agreement with DHS
         Industries,  Inc. ("DHS") whereby DHS issued  31,942,950  shares of its
         common stock in exchange for all of the issued and  outstanding  common
         stock of HAIS.  The  acquisition  was  accounted  for as a  pooling  of
         interest.  However,  on September  30, 1998 the agreement was rescinded
         and the  stockholders  of HAIS  returned  the  shares  of DHS for their
         shares of HAIS.

         Principles of Consolidation
         ---------------------------
         The  accompanying   consolidated   financial  statements  include   the
         accounts  of the Company  and its wholly  owned  subsidiary,  Sitestar,
         Inc. to the date of  disposition,  and  Neocom  Microspecialists,  Inc.
         (subsequently renamed Sitestar.net,  Inc.), FRE Enterprises,  Inc.  and
         Advanced  Internet  Services,  Inc  from  their  respective  dates   of
         acquisition.  All  intercompany  accounts  and  transactions  have been
         eliminated.



                                       40
<PAGE>

                      SITESTAR CORPORATION AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, continued

         Use of Estimates
         ----------------
         The  preparation of financial  statements in conformity  with generally
         accepted  accounting  principles  requires management to make estimates
         and  assumptions  that  affect  the  reported  amounts  of  assets  and
         liabilities and disclosures of contingent assets and liabilities at the
         date of the financial  statements  and the reported  amounts of revenue
         and expenses  during the reporting  periods.  At December 31, 2001, the
         Company used estimates in determining  the  realization of its customer
         list and excess  cost over fair value of assets  acquired.  The Company
         estimates the recoverability of these assets by using undiscounted cash
         flows based on future operating activities. Actual results could differ
         from these estimates.

         Fair Value of Financial Instruments
         -----------------------------------
         For certain of the Company's financial  instruments,  none of which are
         held for trading, including cash, accounts receivable, accounts payable
         and  accrued  expenses  and  deferred  revenue,  the  carrying  amounts
         approximate fair value due to their short maturities. The amounts shown
         for convertible debentures, capital lease obligations and notes payable
         also  approximate  fair value because current  interest rates and terms
         offered to the Company for similar debt are substantially the same.

         Cash and Cash Equivalents
         -------------------------
         For purposes of the statements of cash flows,  the Company defines cash
         equivalents  as all highly  liquid debt  instruments  purchased  with a
         maturity of three months or less, plus all certificates of deposit.

         Concentration of Credit Risk
         ----------------------------
         Financial  instruments,   which  potentially  subject  the  Company  to
         concentrations   of  credit   risk,   consist  of  cash  and   accounts
         receivables.  The Company  places its cash with high quality  financial
         institutions and at times may exceed the FDIC $100,000 insurance limit.
         The operations of the Company's  Internet  subsidiaries  are located in
         the  Mid-Atlantic  region of the United  States.  The  Company  extends
         credit based on an evaluation of the  customer's  financial  condition,
         generally  without  collateral.  Exposure to losses on  receivables  is
         principally  dependent  on each  customer's  financial  condition.  The
         Company   monitors  its  exposure  for  credit   losses  and  maintains
         allowances for anticipated losses, if required.




                                       41
<PAGE>

                      SITESTAR CORPORATION AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, continued

         Marketable Securities
         ---------------------
         The Company  currently  classifies  all its  marketable  securities  as
         trading,  which are  presented  as current  assets in the  accompanying
         consolidated balance sheet. Securities accounted for as trading include
         investments  in  common  stock of  publicly  traded  companies  and are
         reported at fair value,  adjusted for changes in market value. Realized
         gains and losses and unrealized  holding gains and losses,  net of tax,
         on trading  securities  are included in the  accompanying  consolidated
         statements  of  operations.  Realized  gains or  losses  on the sale of
         securities are  determined  using the  specific-identification  method.
         During  the  years  ended  December  31,  2001 and  2000,  the  Company
         recognized  $78,436  and  $57,520  in  realized  gains  on the  sale of
         marketable securities,  respectively. At December 31, 2000, the Company
         had  recognized  an  unrealized  loss of $11,709  related to marketable
         securities held.

         Inventory
         ---------
         Inventory consists principally of products purchased for resale and are
         stated  at the lower of cost  (determined  by the  first-in,  first-out
         method) or market.

         Property and Equipment
         ----------------------
         Property and  equipment  are stated at cost.  Depreciation  is computed
         using the  straight-line  method based on estimated useful lives from 3
         to 7 years and 39 years for the building.  Expenditures for maintenance
         and repairs are charged to  operations as incurred  while  renewals and
         betterments are capitalized. Gains and losses on disposals are included
         in the results of operations.

         Impairment of Long-Lived Assets
         -------------------------------
         In accordance with Statement of Financial  Accounting Standard ("SFAS")
         No. 121,  "Accounting  for the Impairment of Long-Lived  Assets and for
         Long-Lived Assets to Be Disposed Of",  Long-lived assets to be held and
         used  are  analyzed  for  impairment  whenever  events  or  changes  in
         circumstances  indicate  that the related  carrying  amounts may not be
         recoverable.  The Company  evaluates at each balance sheet date whether
         events  and   circumstances   have  occurred  that  indicate   possible
         impairment.  If there are  indications of impairment,  the Company uses
         future  undiscounted  cash flows of the related asset or asset grouping
         over  the   remaining   life  in  measuring   whether  the  assets  are
         recoverable.  In the event  such  cash  flows  are not  expected  to be
         sufficient to recover the recorded asset values, the assets are written
         down to their estimated fair value. Long-lived assets to be disposed of
         are  reported  at the lower of  carrying  amount or fair value of asset
         less cost to sell.

                                       42
<PAGE>


                      SITESTAR CORPORATION AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, continued

         Intangible Assets
         -----------------
         The Company  continually  monitors its  intangible  assets to determine
         whether any impairment has occurred.  In making such determination with
         respect to these assets,  the Company  evaluates the  performance on an
         undiscounted  cash flow  basis,  of the  intangible  assets or group of
         assets, which gave rise to an assets carrying amount. Should impairment
         be identified, a loss would be reported to the extent that the carrying
         value of the related  intangible  asset  exceeds the fair value of that
         intangible  asset using the discounted cash flow method.  The Company's
         intangible  assets  which  consists of customer  lists and goodwill are
         being amortized over three and five years,  respectively.  Amortization
         expense for the customer  list and goodwill was $303,297 and  $475,380,
         respectively,  for the year ended  December  31, 2001 and  $907,053 and
         $617,239,  respectively,  for the year ended December 31, 2000.  During
         the year ended December 31, 2000, the Company also wrote down $1,080,00
         and  $780,000  of  the  value  of  its  customer   list  and  goodwill,
         respectively,  related  to its  Internet  operations.  The  write  down
         resulted  from the  decrease  in value  of the  subscriber  base due to
         competition  and other  sources  available  to  customers to access the
         Internet.  Amortization  of customer list for the years ended  December
         31,  2002,  2003 and 2004 is  expected  to be  $587,795,  $426,547  and
         $96,891, respectively. In accordance with SFAS No. 142, amortization of
         goodwill will cease effective January 1, 2002.

         Deferred Revenue
         ----------------
         Deferred revenue  represents  collections from customers in advance for
         services not yet performed  and are  recognized as revenue in the month
         service is provided.












                                       43
<PAGE>


                      SITESTAR CORPORATION AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, continued

         Revenue Recognition
         -------------------
         The  Company  recognizes  revenue  related  to  software  licenses  and
         software  maintenance  in  compliance  with the  American  Institute of
         Certified Public Accountants  ("AICPA") Statement of Position No. 97-2,
         "Software Revenue  Recognition." Product revenue is recognized when the
         Company  delivers the product to the customer and the Company  believes
         that  collectibility  is probable.  The Company  usually has agreements
         with its customers to deliver the requested  product for a fixed price.
         Any insignificant  post-contract support obligations are accrued for at
         the time of the sale.  Post-contract  customer  support ("PCS") that is
         bundled  with an initial  licensing  fee and is for one year or less is
         recognized at the time of the initial  licensing,  if collectability of
         the  resulting  receivables  is  probable.  The  estimated  cost to the
         Company to provide  such  services  is minimal  and  historically,  the
         enhancements  offered  during the PCS  period  have been  minimal.  The
         Company sells PCS under a separate  agreement.  The  agreements are for
         one to two years with a fixed number of hours of service for each month
         of the  contract.  The  contract  stipulates a fixed  monthly  payment,
         nonrefundable,  due each month and any service hours incurred above the
         contractual  amount is billed as incurred.  Revenue is recognized under
         these  agreements  ratably over the term of the agreement.  Revenue for
         services rendered in excess of the fixed monthly hours contained in the
         contracts are recognized as revenue as incurred.

         The Company  sells ISP  services  under  annual and monthly  contracts.
         Under the annual  contracts,  the subscriber pays a one-time fee, which
         is recognized as revenue  ratably over the life of the contract.  Under
         the monthly contracts,  the subscriber is billed monthly and revenue is
         recognized ratably over the month.

         Sales of computer  hardware are recognized as revenue upon delivery and
         acceptance of the product by the  customer.  Sales are adjusted for any
         future returns or allowances.

         Advertising and Marketing Costs
         -------------------------------
         The Company  expenses  costs of  advertising  and marketing as they are
         incurred.  Advertising  and  marketing  expense  for  the  years  ended
         December  31,  2001 and 2000 was  approximately  $92,000  and  $19,800,
         respectively.







                                       44
<PAGE>

                      SITESTAR CORPORATION AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, continued

         Income Taxes
         ------------
         The Company  accounts for income taxes in accordance with SFAS No. 109,
         "Accounting  for Income  Taxes".  Deferred  taxes are  provided  on the
         liability  method  whereby  deferred  tax  assets  are  recognized  for
         deductible  temporary  differences,  and deferred tax  liabilities  are
         recognized for taxable temporary differences. Temporary differences are
         the differences  between the reported amounts of assets and liabilities
         and their tax bases.  Deferred  tax assets are  reduced by a  valuation
         allowance  when, in the opinion of  management,  it is more likely than
         not  that  some  portion  or all of the  deferred  tax  assets  will be
         realized.  Deferred  tax assets and  liabilities  are  adjusted for the
         effects of changes in tax laws and rates on the date of enactment.

         Loss Per Share
         --------------
         In accordance with SFAS No. 128,  "Earnings Per Share",  the basic loss
         per common share is computed by dividing  net loss  available to common
         stockholders   by  the  weighted   average   number  of  common  shares
         outstanding. Diluted loss per common share is computed similar to basic
         loss per common  share  except that the  denominator  is  increased  to
         include  the number of  additional  common  shares that would have been
         outstanding  if the potential  common shares had been issued and if the
         additional common shares were dilutive.  The Company has no potentially
         dilutive securities.

         Investment
         ----------
         In December 1999, the Company purchased a 9% equity interest in Qliq-on
         Corporation for 160,000 shares of the Company's  common stock valued at
         $160,000.  This  investment  was  written  off  during  the year  ended
         December 31, 2001 in other income  (expense).  In September  2000,  the
         Company  purchased a 4.74% interest in a limited  liability company for
         $50,000.  This  investment  is being  accounted  for using  the  equity
         method.  In  addition,  in June 2001,  the  Company  purchased  a 4.54%
         interest  in a  partnership  for  $45,000.  This  investment  is  being
         accounted for using the equity method.

         Comprehensive Income
         --------------------
         SFAS No. 130, "Reporting  Comprehensive Income",  establishes standards
         for  the  reporting  and  display  of  comprehensive   income  and  its
         components  in the  financial  statements.  As of December 31, 2000 and
         1999,  the  Company  has no items that  represent  other  comprehensive
         income and,  therefore,  has not  included a schedule of  comprehensive
         income in the consolidated financial statements.



                                       45
<PAGE>
                      SITESTAR CORPORATION AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, continued

         Recently Issued Accounting Pronouncements
         -----------------------------------------
         In June 2001,  the FASB issued SFAS No. 141,  "Business  Combinations."
         SFAS No. 141 requires  that the purchase  method of  accounting be used
         for all business  combinations  initiated after June 30, 2001. Goodwill
         and certain  intangible assets will remain on the balance sheet and not
         be amortized.  On an annual basis,  and when there is reason to suspect
         that their values have been  diminished or impaired,  these assets must
         be tested for impairment,  and writedowns may be necessary. The Company
         adopted  SFAS  No.  141 on July 1,  2001  and  has  accounting  for its
         acquisition  of Advanced  Internet  Services,  Inc.  using the purchase
         method.

         In June  2001,  the FASB  issued  SFAS No.  142,  "Goodwill  and  Other
         Intangible  Assets." SFAS No. 142 changes the  accounting  for goodwill
         from  an   amortization   method   to  an   impairment-only   approach.
         Amortization of goodwill,  including goodwill recorded in past business
         combinations,  will cease upon adoption of this statement.  The Company
         is  required  to  implement  SFAS No.  142 on  January 1, 2002 and as a
         result will not amortize its goodwill. The Company did not amortize the
         goodwill  established  as a  result  of  the  acquisition  of  Advanced
         Internet Services, Inc. on July 1, 2001. In 2001, the Company amortized
         $475,380 of goodwill  related to  acquisition  in prior years that will
         not be amortized after January 1, 2002.

         In October 2001,  the FASB issued SFAS No. 143,  "Accounting  for Asset
         Retirement  Obligations,"  which requires  companies to record the fair
         value of a liability for asset retirement  obligations in the period in
         which they are  incurred.  The statement  applies to a company's  legal
         obligations  associated  with the  retirement of a tangible  long-lived
         asset that results from the acquisition,  construction, and development
         or through the normal operation of a long-lived asset. When a liability
         is initially  recorded,  the company would capitalize the cost, thereby
         increasing the carrying  amount of the related asset.  The  capitalized
         asset  retirement  cost is depreciated  over the life of the respective
         asset  while the  liability  is accreted  to its  present  value.  Upon
         settlement of the liability,  the obligation is settled at its recorded
         amount or the company incurs a gain or loss. The statement is effective
         for fiscal years  beginning  after June 30, 2002.  The Company does not
         expect  the  adoption  to  have a  material  impact  to  the  Company's
         financial position or results of operations.

         In October  2001,  the FASB issued SFAS No.  144,  "Accounting  for the
         Impairment or Disposal of Long-Lived  Assets".  Statement 144 addresses
         the  accounting  and  reporting  for  the  impairment  or  disposal  of
         long-lived assets. The statement provides a single accounting model for
         long-lived  assets  to be  disposed  of.  New  criteria  must be met to
         classify  the  asset as an asset  held-for-sale.  This  statement  also
         focuses  on  reporting  the  effects  of a  disposal  of a segment of a
         business.  This statement is effective for fiscal years beginning after
         December 15,  2001.  The Company does not expect the adoption to have a
         material  impact to the  Company's  financial  position  or  results of
         operations.
                                       46
<PAGE>


                      SITESTAR CORPORATION AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

NOTE 2 - ACQUISITIONS

         Lynchburg.net
         -------------
         On November 22, 2000, the Company  acquired FRE  Enterprises,  Inc. and
         FRE  Communications,  Inc.,  both Virginia  corporations  (collectively
         doing business as "Lynchburg.net") in exchange for 16,583,980 shares of
         our common stock for 100% of the outstanding  shares of  Lynchburg.net.
         Effective  upon the  closing of the  acquisition,  the  Company  issued
         12,437,985 shares of common stock and has reserved  4,145,995 shares of
         common  stock  that the  Company  has  agreed  to  issue  on the  third
         anniversary  of the  acquisition  based on certain  contingencies.  The
         certain  contingencies are related to potential  unrecorded and unknown
         liabilities.  The Company  used the market price of its common stock at
         the acquisition date to determine the acquisition price of $2,487,597.

         The transaction was accounted for by the purchase method of accounting;
         accordingly,  the  purchase  price  has been  allocated  to the  assets
         acquired and liabilities  assumed based on the estimated fair values at
         the date of  acquisition.  The  excess of the  purchase  price over the
         estimated  fair  value  of  tangible  net  assets  acquired  was  first
         attributed  to the customer  list,  which is being  amortized  over its
         three-year  life,  and then to goodwill  which is  amortized  over five
         years. The customer list has been determined by multiplying the current
         market  value per customer  times the number of customers  purchased at
         the time of the acquisition.

         The fair value of assets acquired and liabilities assumed is summarized
         as follows:


             Cash                                           $      253,385
             Other current assets                                  147,561
             Equipment                                              98,710
             Customer list                                         595,000
             Goodwill                                            1,703,741
             Current liabilities                                 (310,800)
                                                            -------------

             Purchase price                                 $    2,487,597
                                                            ==============









                                       47
<PAGE>


                      SITESTAR CORPORATION AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

NOTE 2 - ACQUISITIONS, continued

         Advanced Internet Services, Inc.
         --------------------------------
         On July 1, 2001,  the  Company  acquired  100% of the equity and voting
         interest  of  Advanced  Internet  Services,   Inc.,  a  North  Carolina
         corporation   which   is  a   successor   in   interest   to  two  sole
         proprietorships  one  having the same name as the  corporation  and the
         other with the name  Professional Data Systems  (collectively  "ADVI").
         ADVI  is an  Internet  service  provider  located  in Mt.  Airy,  North
         Carolina. The purchase price was $965,980,  which consisted of $150,000
         in cash,  6,021,818 of the Company's common shares valued at $301,091 a
         non-interest  bearing  promissory  note for  $1,199,990  payable  in 24
         quarterly  installments  of $49,995 and  transaction  costs of $30,000.
         However, due to the non-interest bearing nature of the note, we imputed
         a discount rate of 36% to calculate the present value of the note. This
         discount rate is an estimate of the company's  current cost of capital.
         Based  on this  calculation,  the  present  value  of the  non-interest
         promissory note is $484,889.

         The  Company  believes  the  acquisition  of  ADVI,  with  about  3,000
         subscribers,  will enhance its primary strategy of consolidating  small
         Internet  service  providers in the rural  markets of the  mid-Atlantic
         region by enlarging  our service  footprint.  The Company also believes
         this transaction will open other  acquisition  opportunities  for it to
         further  increase its presence in the northern areas of North Carolina.
         This recent acquisition  increases its Internet access customer base to
         over 15,000 subscribers. This acquisition includes goodwill of $702,642
         that  is the  premium  the  Company  paid to have  the  opportunity  to
         generate  revenues  and  earnings  in this  market.  Furthermore,  this
         acquisition will generate the Company cost savings with the integration
         and consolidation of ADVI's corporate and administrative functions with
         our existing  infrastructure.  This estimated cost savings,  along with
         the accretive  nature of the  transaction  from an operating  cash flow
         perspective,  will  further  allow the  Company to enhance  its revenue
         streams and increase its operating cash flow.

         The transaction was accounted for by the purchase method of accounting;
         accordingly,  the  purchase  price  has been  allocated  to the  assets
         acquired and liabilities  assumed based on the estimated fair values at
         the date of  acquisition.  The  excess of the  purchase  price over the
         estimated  fair  value  of  tangible  net  assets  acquired  was  first
         attributed  to the customer  list,  which is being  amortized  over its
         three-year  life,  and then to goodwill  which is deductible for income
         tax purposes.  The customer list has been determined by multiplying the
         current  market  value  per  customer  times the  number  of  customers
         purchased at the time of the acquisition.



                                       48
<PAGE>


                      SITESTAR CORPORATION AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

NOTE 2 - ACQUISITIONS, continued

         Advanced Internet Services, Inc., continued
         -------------------------------------------
         The fair value of assets acquired and liabilities assumed is summarized
         as follows:

             Cash                                           $       48,393
             Other current assets                                   54,500
             Equipment                                              29,080
             Customer list                                         221,000
             Goodwill                                              702,642
             Other current liabilities                             (21,126)
             Line of credit                                        (68,509)
                                                            --------------

             Purchase price                                 $      965,980
                                                            ==============


         The  following   table  presents  the  unaudited  pro  forma  condensed
         statement of operations  for the years ended December 31, 2001 and 2000
         and  reflects  the  results  of  operations  of the  Company  as if the
         acquisitions of  Lynchburg.net  and ADVI had been effective  January 1,
         2000.  The pro forma  amounts  are not  necessarily  indicative  of the
         combined results of operations had the acquisition been effective as of
         that date, or of the  anticipated  results of  operations,  due to cost
         reductions and operating  efficiencies that are expected as a result of
         the acquisition.

                                                        2001           2000
                                                    ------------   ------------
            Net sales                               $  4,386,606   $  4,485,993
            Gross profit                            $  2,575,819   $  2,752,770
            Selling, general, and administrative
              expenses                              $  3,963,322   $  8,023,212
            Net loss                                $ (1,427,219)  $ (5,728,006)
            Basic loss per share                    $     (0.02)   $     (0.14)









                                       49
<PAGE>


                      SITESTAR CORPORATION AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

NOTE 3 - SALE OF ASSETS

         In January 2000,  the Company sold certain  assets and  liabilities  of
         Sitestar,  Inc. for $34,703 in cash, a note receivable in the amount of
         $10,000  plus an  intercompany  relief of $25,000 for a total  purchase
         price  of  $69,703.  The  Company  recognized  a gain on sale of  these
         certain  assets  of  $49,316.   The  Company  retained  the  "Sitestar"
         trademark and  "Sitestar.com"  URL. Also in 2000, the Company completed
         the sale of its international food distribution business, also known as
         Holland American  International  Specialties.  The Company recognized a
         gain on sale of these certain assets of $314,515.

         On July 16, 2001 the Company successfully spun off the content services
         division of its wholly  owned  subsidiary,  Sitestar.net,  Inc.  into a
         separate publicly-traded company,  PageActive Holdings Inc. The purpose
         of the  spin-off  was to have a  separate  public  company  exclusively
         focused  in  content  development.  Page  Active  changed  its  name to
         TriVantage  Group,  Inc.  ("TVGE") after the spin-off.  On December 28,
         2001,  the  Company  contributed  the  assets  of the  content  service
         division  back to  Sitestar.net  and sold the TVGE  public  shell.  The
         Company recognized an actual cash gain on the sale of TVGE of $188,158.
         Since the Company  owned the content  service  division  for the entire
         year either directly or indirectly through TVGE, the operations of this
         division have been consolidated  with the Company's  operations for the
         entire year.


NOTE 4 - PROPERTY AND EQUIPMENT

         The cost of property and  equipment  at December 31, 2001  consisted of
         the following:


             Land                                           $     10,000
             Building                                            213,366
             Automobile                                            3,000
             Computer equipment                                  305,272
             Furniture and fixtures                              145,153
                                                            ------------
                                                                 676,791
             Less accumulated depreciation                      (242,689)
                                                            ------------

                                                            $    434,102
                                                            ============

         Depreciation  expense  was  $130,863  and  $94,084  for the years ended
         December 31, 2001 and 2000, respectively.



                                       50
<PAGE>


                      SITESTAR CORPORATION AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

NOTE 5 - NOTE RECEIVABLE - STOCKHOLDER

         In 1997,  the Company  purchased for $2,800 the trade name "Wrap-It Up"
         and  operated  the  business  through  April 1998.  In April 1998,  the
         Company sold the business to a stockholder  of the Company for $71,657,
         which was equal to the amount of the  Company's  investment  (which was
         the cost of  inventories  used in the  operations) at the time of sale.
         The sales price was consummated by the stockholder's  issuance,  to the
         Company,  of a  promissory  note for the  full  sales  price.  The note
         receivable  is due on  demand,  and  secured  by  common  stock  of the
         Company,  owned by the stockholder.  During 1999, this note was reduced
         to $69,017 and in 2000, the note was repaid in connection with the sale
         of  HAIS.   The  note   receivable  is  presented  as  a  reduction  to
         stockholders'  equity  in  the  accompanying   consolidated   financial
         statements.

NOTE 6 - CONVERTIBLE DEBENTURES

         On  May  11,  2000,  the  Company  issued  two  convertible  debentures
         aggregating $500,000. The debentures bear interest at 12% per annum and
         were due on May 1, 2001. The debenture holders  voluntarily  decided to
         hold on to the debentures.  The debentures are convertible  into shares
         of the Company's  common stock at a rate equal to the lowest of $.70 or
         60% of the  average  of the three  lowest  closing  bid  prices for the
         Company's common stock during the 20 trading days immediately preceding
         the conversion  date. In addition,  the Company also issued  three-year
         warrants to purchase an aggregate of 250,000  shares of common stock at
         an initial  exercise price of $0.77 per share.  Due to the preferential
         conversion  feature of these  debentures  the Company has  recognized a
         financing charge of $242,857 (which  represents the value of additional
         shares issuable upon conversion at the $.70 conversion price versus the
         number of shares  issuable  upon  conversion at the market value at the
         date of issuance).  In addition, the warrants issued in connection with
         these  debentures have been valued at $121,543 using the  Black-Scholes
         model.   Since  these  debentures  were  convertible  on  issuance  the
         preferential  conversion costs were expensed  immediately and the value
         of the warrant is being  recognized as financing costs over the term of
         the debentures.

         On  August  14,  2000,  the  Company  issued  another  two  convertible
         debenture  aggregating  $500,000 to the holders of the  above-mentioned
         debentures for the same terms described above,  except for the due date
         of August 14, 2001. In  connections  with these  debentures the Company
         has recognized a financing  charge in connection with the  preferential
         conversion  feature of $333,333 and valued the 250,000  warrants issued
         in connection with these debentures at $13,332 using the  Black-Scholes
         model.   Since  these  debentures  were  convertible  on  issuance  the
         preferential  conversion costs were expensed  immediately and the value
         of the options is being  recognized as financing costs over the term of
         the debentures.


                                       51
<PAGE>


                      SITESTAR CORPORATION AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

NOTE 6 - CONVERTIBLE DEBENTURES, Continued

         During the year ended  December 31, 2001,  the holder of the debentures
         converted  $269,888 in principal  and $54,289 of accrued  interest into
         10,757,982 and 4,524,002,  respectively, shares of the Company's common
         stock.  In  addition,  during the year ended  December  31,  2001,  the
         Company  repaid  $10,000 of these  debentures in cash.  During the year
         ended  December  31,  2000,  the  holder  of the  debentures  converted
         $243,500 in principal and $36,533 of accrued  interest  into  2,342,924
         and 652,363, respectively, shares of the Company's common stock.

NOTE 7 - NOTES PAYABLE

         The Company assumed a line of credit in connection with its acquisition
         of ADVI. The line of credit is for $100,000 and bears interest at prime
         plus  0.5%.  The  line  of  credit  is  due  on  May  29,  2002  and is
         collateralized by the inventory,  equipment and accounts  receivable of
         ADVI.

NOTE 8 - NOTES PAYABLE

         Notes payable at December 31, 2001 consist of the following:

         Prime plus 4.5% - Bank note payable in monthly interest
         and principal payments of $1,784 and balance due December
         2002. The note is guaranteed by a stockholders of the
         Company and secured  by a deed of trust against personal
         residences of three stockholders and the Company's
         building. Also, the bank has a blanket lien against all
         other current and future assets of Sitestar.net.             $  138,102

         Prime plus 1.5% - Bank note payable in monthly  interest
         and  principal payments of $6,400 and balance due
         September 2003. The note is secured by a deed of trust
         against personal residences of three stockholders and the
         Company's building. Also, the bank has a blanket lien
         against all other current and future assets of Sitestar.net.    272,330
                                                                      ----------
         Total                                                           410,432

         Less current portion                                            187,489
                                                                      ----------
         Long-term portion                                            $  222,943
                                                                      ==========

         The future principal maturities of these notes are as follows:

           Year ending December 31,
                2002                                                  $  187,489
                2003                                                     222,943
                                                                      ----------
                Total                                                 $  410,432
                                                                      ==========
                                       52
<PAGE>


                      SITESTAR CORPORATION AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

NOTE 9 - NOTES PAYABLE - STOCKHOLDERS

         Notes  payable -  stockholders  at  December  31,  2001  consist of the
         following:

         Note payable to stockholder assumed in connection
         with the acquisition of Sitestar.net.  The note is payable
         upon demand and bears interest at 9.0% per annum.            $   65,961

         Note payable to stockholder  assumed in connection with the
         acquisition of Sitestar.net. The note is payable in monthly
         installments of $2,431 and bears interest at 8.13% per annum.
         Any unpaid principal and interest is due on May 28, 2004         47,357

         Note payable to stockholder issued as part of the purchase
         price for Advanced Internet Services, Inc. The note is to
         be repaid in 24 quarterly installments of $49,995 and is
         non-interest bearing. The imputed interest rate for this
         note is 36%                                                     464,190
                                                                      ----------


         Total                                                           577,508

         Less current portion                                            123,078

         Long-term portion                                            $  454,430
                                                                      ==========

    The future principal maturities of these notes are as follows:

           Year ending December 31,
                2002                                                  $  123,078
                2003                                                      72,513
                2004                                                      82,318
                2005                                                     105,190
                2006                                                     148,545
                2007                                                      45,864
                                                                      ----------

                Total                                                 $  577,508
                                                                      ==========






                                       53
<PAGE>


                      SITESTAR CORPORATION AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

NOTE 10 - COMMITMENTS AND CONTINGENCIES

         The Company  leases certain  facilities  for its corporate  offices and
         retail store under non-cancelable  operating leases. Total rent expense
         for the years ended December 31, 2001 and 2000 was $75,875 and $35,253,
         respectively.  The Company also leases certain  equipment under capital
         lease obligations.  Future minimum lease payments under  non-cancelable
         capital and  operating  leases with initial or  remaining  terms of one
         year or more are as follows:

                                                       Capital      Operating
                                                       Leases         Leases
                                                     -----------   -----------
          Year ending December 31,
          2002                                       $    27,218   $    62,502
          2003                                             8,027        66,252
          2004                                             2,013        70,227
          2005                                                 -        74,441
          2006                                                 -        38,305
                                                     -----------   -----------

          Net Minimum Lease Payments                      37,258   $   311,727
                                                                   ===========

          Less: Amounts Representing Interest             4,683
                                                     ----------
          Present Value of Net Minimum
            Lease Payments                               32,575
          Less: Current Portion                          23,492
                                                     ----------

          Long-Term Portion                          $    9,083
                                                     ==========

         Included in  property and equipment is capitalized  lease  equipment of
         $164,375 with accumulated amortization of $83,762 at December 31, 2001.

         Litigation
         ----------
         The Company is involved in certain  legal  proceedings  and claims that
         arise in the normal  course of  business.  Management  does not believe
         that the outcome of these matters will have a material  adverse  effect
         on the Company's financial position or results of operations.

         Sitestar.net Acquisition
         ------------------------
         In  connection  with  the  Sitestar.net  acquisition,  the  Company  is
         required to issue an additional 2,000,000 shares of its common stock on
         the  second  anniversary  of the  acquisition  date,  if no  unforeseen
         contingencies  arise.  These  2,000,000  shares  were issued in January
         2002.

                                       54
<PAGE>


                      SITESTAR CORPORATION AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

NOTE 10 - COMMITMENTS AND CONTINGENCIES, continued

         Lynchburg.net Acquisition
         -------------------------
         In  connection  with the  Lynchburg.net  acquisition,  the  Company  is
         required to issue an additional 4,145,995 shares of its common stock on
         the  third  anniversary  of  the  acquisition  date,  if no  unforeseen
         contingencies arise.


NOTE 11 - STOCKHOLDERS' EQUITY

         Classes of Shares
         -----------------
         On July 6, 1999, the Company's Articles of Incorporation  authorize the
         issues of up to 85,000,000  shares,  consisting of 10,000,000 shares of
         Preferred  Stock,  which  have a par  value of  $0.001  per  share  and
         75,000,000 shares of common stock, which have a par value of $0.001. In
         2001, the Company's Articles of Incorporation were amended to authorize
         300,000,000 shares of common stock.

         Preferred Stock
         ---------------
         Preferred  Stock,  any  series,  shall  have the  powers,  preferences,
         rights,  qualifications,  limitations and  restrictions as fixed by the
         Company's Board of Directors in its sole discretion. As of December 31,
         2001,  the  Company's  Board of Directors  has not issued any Preferred
         Stock.

         Common Stock
         ------------
         On January 18, 2000 the Company canceled 900,000 shares of common stock
         issued in connection  with the  acquisition of  Sitestar.net  valued at
         $900,000.  These  shares  were  canceled  because  the  Company and the
         Sitestar.net  stockholders  amended  the  original  purchase  agreement
         whereby  the  Company  agreed to assume the  approximately  $900,000 of
         notes  payable that was  originally  to be assumed by the  Sitestar.net
         stockholders in exchange for the 900,000 shares of the Company's common
         stock originally  issued to the  Sitestar.net  shareholders who were to
         assume this debt. The stockholders conveyed their shares to the Company
         in exchange for the assumption of their indebtedness.

         During the year ended December 31, 2000 the Company  issued  10,049,400
         shares of common stock for  professional  services  valued at $768,588,
         which  was  the  fair  market   value   (discounted   for   tradability
         restrictions)  of the share  issue  based on the  closing  price of the
         Company's  common stock on the date of issuance,  and issued  7,477,685
         shares of common stock in exchange for $605,559 in debt and liabilities
         and $39,931 for interest expense.

                                       55
<PAGE>


                      SITESTAR CORPORATION AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

NOTE 11 - STOCKHOLDERS' EQUITY, continued

         Common Stock, continued
         -----------------------
         On November 22, 2000,  the Company issued  12,437,985  shares of common
         stock  for  the  acquisition  of  FRE   Enterprises,   Inc.  valued  at
         $2,487,597.

         On  December  27, 2000 the Company  issued  8,950,742  shares of common
         stock for  executive  salaries of  $445,836,  which was the fair market
         value  (discounted  for  tradability  restrictions)  of the share issue
         based on the closing price of the Company's common stock on the date of
         issuance.

         During  the  year  ended  December  31,  2001,   certain   stockholders
         surrendered  a total of  1,741,418  shares  of common  stock  that were
         cancelled by the Company, valued at $96,517. The Company determined the
         value of the shares surrendered based on the market value of the common
         stock on the date of surrender.  The surrendered shares were originally
         issued in connections  with our  acquisition of Sitestar,  Inc. in July
         1999.

         During the year ended  December 31, 2001 the Company  issued  4,098,682
         shares of common stock for  professional  services  valued at $152,767,
         which  was  the  fair  market   value   (discounted   for   tradability
         restrictions)  of the share  issue  based on the  closing  price of the
         Company's common stock on the date of issuance,  and issued  15,281,984
         shares  of  common  stock  in  exchange  for  $269,888  of  convertible
         debentures and $54,289 for interest expense.

         On July 1, 2001,  the Company issued  6,021,818  shares of common stock
         for the  acquisition  of Advanced  Internet  Services,  Inc.  valued at
         $301,091.

         During the year ended  December 31, 2001 the Company  issued 17,667,950
         shares of common stock for executive salaries of $710,739.

         Also, during the year ended December 31, 2001, the Company  repurchased
         10,600,000  shares  of  common  stock  from  certain  shareholders  for
         $400,000.








                                       56
<PAGE>


                      SITESTAR CORPORATION AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000


NOTE 12 - INCOME TAXES

         The  reconciliation  of  the  effective  income tax rate to the federal
         statutory rate as of December 31, 2001 and 2000 is as follows:

                                                         2001          2000
                                                    -----------     ----------
         Federal income tax rate                          34.0%          34.0%
         Effect of net operating loss                    (34.0)%        (34.0)%
                                                    -----------     ----------
         Effective income tax rate                         0.0%           0.0%
                                                    ===========     ==========

         Deferred tax assets and liabilities reflect the net effect of temporary
         differences  between the carrying  amount of assets and liabilities for
         financial  reporting purposes and amounts used for income tax purposes.
         Significant  components  of  the  Company's  deferred  tax  assets  and
         liabilities at December 31, 2001 are as follows:

         Loss carry forwards                                    $   3,757,200
         Less valuation allowance                                  (3,757,200)
                                                                -------------
                                                                $           -
                                                                =============

         At December  31, 2001,  the Company has provided a valuation  allowance
         for the  deferred  tax  asset  since  management  has not been  able to
         determine  that the  realization of that asset is more likely than not.
         The net change in the valuation  allowance for the years ended December
         31,  2001  and  2000,  was an  increase  of  $409,200  and  $2,040,000,
         respectively.  Net  operating  loss  carry  forwards  of  approximately
         $10,100,000 expire starting in 2012.


NOTE 13 - RELATED PARTY TRANSACTIONS

         The Company  leases its office  building in Lynchburg,  Virginia from a
         stockholder  of the Company on a  month-to-month  basis.  For the years
         ended  December 31, 2001 and 2000,  the Company  paid this  stockholder
         $36,000 and $7,700 for rent on this office building.






                                       57
<PAGE>


                      SITESTAR CORPORATION AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

NOTE 14 - SEGMENT INFORMATION

         The Company has four business  units that have separate  management and
         reporting  infrastructures  that offer different products and services.
         The business units have been aggregated into four reportable  segments:
         Corporate, Internet, Development and Retail. The Corporate group is the
         holding company and oversees the operating of the other business units.
         The   Corporate   group  also   arranges   financing   for  the  entire
         organization.  The Internet group provides Internet access to customers
         in the  Martinsville  and  Lynchburg,  Virginia  and  Mt.  Airy,  North
         Carolina  areas.  The  Development  group  provides  customer  software
         programming to companies,  principally in the manufacturing industries.
         The  Retail  group  operates  a retail  computer  store  in  Lynchburg,
         Virginia as well as providing computer training to customers.

         The Company  evaluates the performance of its operating  segments based
         on income from  operations,  before income taxes,  accounting  changes,
         non-recurring items, and interest income and expense.

         Summarized  financial  information  concerning the Company's reportable
         segments is shown in the following  table for the years ended  December
         31, 2001 and 2000:

<TABLE>
<CAPTION>
                                                  December 31, 2001
                              -------------------------------------------------------------------
                               Corporate      Internet     Development    Retail     Consolidated
                             -----------    ------------  ------------   ---------  -------------
     <S>                     <C>            <C>           <C>            <C>        <C>
     Revenue                 $         -    $ 3,040,752   $    276,210   $ 680,388  $   3,997,350
     Operating income (loss) $(1,348,709)   $    78,298   $      8,449   $ 110,484  $  (1,151,478)
     Depreciation and
       amortization          $     2,706    $   890,117   $     11,977   $   4,740  $     909,540
     Interest expense        $   180,462    $   136,083   $      8,170   $  (1,290) $     323,425
     Goodwill                $         -    $ 2,412,719   $          -   $       -  $   2,412,719
     Identifiable assets     $   519,161    $ 4,407,047   $     30,880   $ 106,980  $   5,064,068


                                                  December 31, 2000
                              -------------------------------------------------------------------
                               Corporate      Internet     Development    Retail     Consolidated
                             -----------    ------------  ------------   ---------  -------------
     Revenue                 $         -    $  1,603,204  $    225,836   $ 105,597  $   1,934,637
     Operating loss          $(1,635,933)   $ (3,077,180) $    (79,443)  $    (654) $  (4,793,210)
     Depreciation and
        amortization         $     3,303    $  1,607,489  $      6,994   $     590  $   1,618,376
     Interest expense        $   766,340    $     91,618  $          -   $     (39) $     857,919
</TABLE>


                                       58
<PAGE>


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

         For the fiscal  years ended  December 31, 1999 and 1998 and the interim
period subsequent to December 31, 1999, the firm of Merdinger, Fruchter, Rosen &
Corso,  P.C. ("MFRC") served as our auditors.  Effective  February 13, 2001, our
Board of Directors approved the change of accountants. On February 13, 2001, our
management  dismissed  MFRC and  engaged  Stonefield  Josephson,  Inc.  of Santa
Monica, California, as our independent public accountants to audit our financial
statements for the fiscal year ended December 31, 2000.

During the period of engagement of MFRC there were no  disagreements  between us
and  MFRC  on any  matter  of  accounting  principles  or  practices,  financial
statement  disclosure,  or auditing scope or procedure,  which disagreements (if
not  resolved  to the  satisfaction  of MRFC)  would  have  caused  MFRC to make
reference  in  connection  with  their  report  to  the  subject  matter  of the
disagreements.  The  accountants'  report on our  financial  statements  for the
fiscal  years  ended  December  31,  1999 and 1998 did not  contain  any adverse
opinion or  disclaimer  of  opinion  and was not  qualified  or  modified  as to
uncertainty or audit scope or accounting principles,  except to express doubt as
to our ability to continue as a going concern.


                                    PART III

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

     The following  table sets forth the name, age and position with the Company
of each officer and director as of the date of this Report.

     Our current directors, executive officers and key employees are as follows:


         Name                     Age             Position
         ----                     ---             --------
 Frederick T. Manlunas            33     Executive Chairman and Director

 Clinton J. Sallee                29     President, Chief Executive Officer and
                                         Director

FREDERICK T. MANLUNAS,  has been a Director of the Company since October of 1998
and has served as the  Company's  Chairman  of the Board  since  July 1999.  Mr.
Manlunas  manages  Gateway  Holdings,  Inc., a private  equity fund based in Los
Angeles since 1995.  Prior to founding  Gateway,  Mr.  Manlunas was an Associate
with Arthur Andersen LLP's Retail  Management  Consulting  division from 1991 to
1995.  Mr.  Manlunas  also serves as Director for  MenuDirect,  Inc., a Delaware
corporation,  and Xcel Medical Pharmacy, a California corporation.  Mr. Manlunas
received a Bachelor of Science degree in Journalism  from Florida  International
University  and he earned a  Masters  of  Business  Administration  degree  from
Pepperdine University.

CLINTON J. SALLEE has been a Director  of the Company  since May of 1999 and has
served as the Company's  President and Chief Executive  Officer since July 1999.
In 1996, Mr. Sallee founded Sallee Zoryan, a concept  development firm, where he
served as President since inception. Prior to founding Sallee Zoryan, Mr. Sallee

                                       59
<PAGE>
was an  Associate  with  W.E.  Myers &  Company,  a  boutique  investment  bank,
specializing in industry consolidations. Mr. Sallee earned a Bachelor of Science
degree in Business  Administration  from the Marshall  School of Business at the
University of Southern California in 1994.

     None of our  directors,  executive  officers or key employees is related to
any other of our directors, executive officers or key employees.

     Pursuant to Section 16 (a) of the Securities  Exchange Act of 1934, and the
rules issued  thereunder,  our directors and executive  officers are required to
file with the Securities and Exchange Commission and the National Association of
Securities Dealers, Inc. reports of ownership and changes in ownership of common
stock and other equity  securities  of the  Company.  Copies of such reports are
required to be  furnished  to us. Based solely on a review of the copies of such
reports furnished to us, or written  representations  that no other reports were
required,  we believe that,  during our fiscal year ended December 31, 2001, all
of our  executive  officers and  directors  complied  with the  requirements  of
Section 16 (a).


ITEM 10.  EXECUTIVE COMPENSATION

     The  following  table  sets  forth  the  annual  compensation  paid  to our
executive officers for the three fiscal years ended December 31st.

<TABLE>
<CAPTION>
                                                                Other       Long-term
     Name and                                                  Annual      Compensation
Principal Position        Year    Salary ($)    Bonus ($)   Compensation($)   Awards
------------------        ----    ----------    ---------    ------------   ------------
<S>                       <C>      <C>          <C>          <C>              <C>
Frederick T.              2001         -          -          239,370           -
Manlunas (1)              2000         -          -          268,068           -
Chairman of the           1999         -          -              -             -
Board

Clinton J.                2001         -          -          239,370           -
Sallee (2)                2000         -          -          311,268           -
President & Chief         1999         -          -              -             -
Executive Officer
</TABLE>

-------------
(1)  Mr. Manlunas  received 7,124,094 shares of our common stock with a value of
      $239,370 in lieu of salary for 2001.

     In 2000, Mr. Manlunas was given 5,584,746 shares of our common stock valued
     at  $268,068  as payment  for his 2000 salary and bonus and for unpaid 1999
     and 1998 salaries.

(2)  Mr. Sallee received 7,124,094 shares of our common stock stock with a value
     of $239,370 in lieu of salary for 2001.

     In 2000, Mr. Sallee was given  6,584,746  shares of our common stock valued
     at $311,268 as payment for his 2000 salary and bonus.

                                       60
<PAGE>

ITEM 11.  SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following  table sets forth certain  information as of January 31, 2002
regarding  the record and  beneficial  ownership of our common stock by: (i) any
individual or group (as that term is defined in the federal  securities laws) of
affiliated individuals or entities who is known by us to be the beneficial owner
of more than five percent of the  outstanding  shares of our common stock;  (ii)
each of our executive  officers and directors;  and (iii) our executive officers
and directors as a group.


Name and Address of                       Number of Shares           Percent
 Beneficial Owner                       Beneficially Owned (1)      of Class (2)
-----------------                       ----------------------      ------------
Frederick T. Manlunas                        19,203,898               20.67%
15303 Ventura Blvd., Suite 1510
Sherman Oaks, CA  91403

Clinton J. Sallee                            17,675,010               19.02%
15303 Ventura Blvd., Suite 1510
Sherman Oaks, CA  91403

Frank and Julie Erhartic                     12,437,985               13.39%
7109 Timberlake Road
Lynchburg, VA  24502

All  directors  and  officers                49,316,893               53.08%
as a  group  (3 persons)

------------
* Less than 1%

(1)  Except as otherwise indicated, we believe that the beneficial owners of our
     common stock listed above,  based on information  furnished by such owners,
     have sole investment and voting power with respect to such shares,  subject
     to community property laws where applicable.

(2)  Percent of class is based on 92,904,654  shares of common stock outstanding
     as of January 31, 2002.


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Effective as of September 30, 1999 we sold the  non-Internet  assets of
Holland  American  International  Specialists to IFCO Group,  LLC, whose members
consist of certain shareholders of the Company, including Frederick T. Manlunas,
our Chairman of the Board. We retained the assets consisting of the Internet web
site  Holland-American.com.  Holland  American  International  Specialties  will
continue to serve as  Holland-American.com's  exclusive  fulfillment center. The
purchase   consideration  for  the  non-Internet   assets  of  Holland  American
International  Specialties was $900,000 and was based upon a business  appraisal
by an independent  third party appraiser.  The  consideration  included $200,000
which was to be offset  against the  Company's  liability  to Mr.  Manlunas  for
services  rendered in  connection  to the  acquisition  of Sitestar,  Inc.,  the
assumption  of $654,000 of  liabilities  and a promissory  note in the amount of
$46,000.  The note bears  interest at a rate of 8% per annum,  and is payable in
annual  installments  of $15,333,  and is due and payable on September 30, 2002.
The note is secured by HAIS' accounts receivable and inventory.

                                       61
<PAGE>

         On September 30, 1999, we sold our minority  equity  interest in Sierra
Madre Foods to IFCO Group, LLC for $200,000.  The  consideration was paid in the
form of assumption of $160,000 of debt related to the investment and the balance
of$40,000 was paid by a promissory note payable in three annual  installments of
$13,334 each.  The note bears  interest at a rate of 8% per annum.  The purchase
consideration was equal to our original investment in January 1999.

         On July 1999, a majority of our  shareholders,  including our Chairman,
Mr. Manlunas, acquired all the issued and outstanding shares of Sitestar, Inc. ,
a Delaware  corporation,  in exchange for  3,491,428  shares of our common stock
owned by those shareholders.  Simultaneous with the closing of this transaction,
those  shareholders  contributed the issued and outstanding  shares of Sitestar,
Inc. to us as contributed capital.  Sitestar, Inc. is a Web development,  design
and hosting company formed in 1996 and is based in Annapolis, Maryland.

         In  August  1999,  we  acquired  substantially  all  of the  assets  of
Greattools.com  in exchange for 49,000 shares of our common  stock.  We acquired
the  assets of  Greattools.com  from  Global  Sourcing  Group,  Greattools.com's
current fulfillment center. Gateway Holdings, Inc., a private investment company
managed by our Chairman  Frederick  Manlunas,  has a 14.6%  equity  ownership in
Global Sourcing Group.

         In January 1999,  Mr.  Manlunas,  a major  stockholder  of the Company,
loaned  $80,300  to the  Company  for use as  working  capital  based on an oral
agreement.  The amounts owed to Mr. Manlunas are not accruing interest,  and are
due and payable  upon demand.  To date,  the Company has made no payments to Mr.
Manlunas in satisfaction of this obligation.

         In  October  2000,  we issued  100,000  shares of our  common  stock to
Clinton J. Sallee, our president and chief executive officer,  valued at $21,000
in lieu of back and  accrued  compensation.  The  issuance  of these  shares was
exempt  from  the  registration  and  prospectus  delivery  requirements  of the
Securities Act of 1933, as amended, pursuant to Section 4(2) thereof.

         In December  2000,  we issued  5,584,746  shares of our common stock to
Frederick Manlunas,  our Executive Chairman,  valued at $268,068 in lieu of back
and  accrued  compensation.  The  issuance  of these  shares was exempt from the
registration and prospectus delivery requirements of the Securities Act of 1933,
as amended, pursuant to Section 4(2) thereof.

         In December  2000,  we issued  6,484,746  shares of our common stock to
Clinton J. Sallee, our president and chief executive officer, valued at $311,268
in lieu of back and  accrued  compensation.  The  issuance  of these  shares was
exempt  from  the  registration  and  prospectus  delivery  requirements  of the
Securities Act of 1933, as amended, pursuant to Section 4(2) thereof.

         In January  2002,  we issued  7,124,094  shares of our common  stock to
Frederick Manlunas,  our Executive Chairman,  valued at $239,370 in lieu of back
and  accrued  compensation.  The  issuance  of these  shares was exempt from the
registration and prospectus delivery requirements of the Securities Act of 1933,
as amended, pursuant to Section 4(2) thereof.

         In January  2002,  we issued  7,124,094  shares of our common  stock to
Clinton J. Sallee, our president and chief executive officer, valued at $239,370
in lieu of back and  accrued  compensation.  The  issuance  of these  shares was
exempt  from  the  registration  and  prospectus  delivery  requirements  of the
Securities Act of 1933, as amended, pursuant to Section 4(2) thereof.

                                       62
<PAGE>

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

(1)    The  following  exhibits are filed as part of this Annual  Report on Form
10-KSB or are incorporated herein by reference:

<TABLE>
<CAPTION>
Exhibit                           Description                                                   Filed
-------                           -----------                                                   -----
<S>       <C>                                                                                   <C>
2.1.1     Agreement and Plan of Reorganization, dated October 25, 1998                             *
2.2.1     Agreement and Plan of Reorganization, dated July 27, 1999                                *
2.3       Asset Sale and Agreement re divestiture of Holland American Specialties, dated
          September 30, 1999                                                                       *
2.4       Asset Sale and Agreement re divestiture of Sierra Madre Foods, Inc., dated
          September 30, 1999                                                                       *
2.5       Letter of Intent to Acquire Eastern Shore Net, dated August 17, 1999                     *
2.6       Letter of Intent to Acquire Neocom Microspecialists, Inc., dated September 2, 1999       *
2.7       Plan and Agreement of Share Exchange, re acquisition of Neocom Micro-specialists,
          Inc., dated December 15, 1999                                                            *
2.8       Neocom Debt Assumption Agreement dated December 15, 1999                                 *
3.1(i)    Articles of Incorporation of the Registrant (December 17, 1992)                          *
3.1(ii)   Amended Articles of Incorporation (July 29, 1998)                                        *
3.1(iii)  Amended Articles of Incorporation (October 26, 1998)                                     *
3.1(iv)   Amended Articles of Incorporation (July 14, 1999)                                        *
3.1(v)    Amended Articles of Incorporation (July 28, 1999)                                        *
3.2(I)    By-laws of the Registrant (December 17, 1992)                                            *
4.1       Lease for Corporate Office                                                               **
4.2       Convertible Debenture Purchase Agreement dated as of May 11, 2000 between the
          investors named therein and the Registrant                                              ***
4.3       12% Convertible Debenture due May 11, 2001 made by the Registrant in favor of New
          Millenium Capital Partners II, L.L.C.                                                   ***
4.4       12% Convertible Debenture due May 11, 2001 made by the Registrant in favor of AJW
          Partners, L.L.C.                                                                        ***
4.5       Stock Purchase Warrant dated as of May 11, 2000 issued by Registrant to New
          Millenium Capital Partners, L.L.C.                                                      ***
4.6       Stock Purchase Warrant dated as of May 11, 2000 issued by Registrant to AJW
          Partners, L.L.C.                                                                        ***
4.7       Registration Rights Agreement dated as of May 11, 2000 by and between the
          Registrant and the investors named therein.                                             ***
4.8       Security Agreement dated as of May 11, 2000 by and between the Registrant and the
          investors named therein.                                                                ***
4.9       Stock Tender and Exchange Agreement, dated November 22, 2000,  by and  among
          Sitestar Corporation and Frank and Julie Erhartic, the owners of FRE Enterprises,
          Inc.                                                                                    ****
21.1      Subsidiaries of the Registrant                                                           F
23.1      Consent of Stonefield Josephson, Inc.                                                    F
99        Lease for Corporate Office                                                               *
</TABLE>


                                      63
<PAGE>
------------------
* Filed as an exhibit to the Registrant's Form-10SB, as amended, initially filed
with the Securities and Exchange Commission on October 22, 1999 and incorporated
herein by reference.

** Filed as an exhibit to the  Registrant's  Form-10SB filed with the Securities
and Exchange Commission on January 7, 2000 and incorporated herein by reference.

*** Filed as an exhibit to the Registrant's  SB-2 Registration  Statement,  File
No. 333-39660, filed on June 20, 2000 and incorporated herein by reference.

**** Filed as an exhibit to the Registrant's Form 8-K, filed on December 7, 2000
and incorporated herein by reference.

F    Filed herewith


(2)   Reports filed on Form 8-K

On a Current Report on Form 8-K filed on November 28, 2001, the Company reported
that it has  repurchased  approximately  10.6 million shares of its common stock
from various shareholders through privately negotiated  transactions.  The stock
repurchase was finalized at the end of business on November 19, 2001.









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<PAGE>


                                   SIGNATURES


         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Action of 1934, as amended,  the registrant has duly caused this Report
to be signed on its behalf by the undersigned, thereunto duly authorized.


                                           SITESTAR CORPORATION

                                   By:     /s/ FREDERICK T. MANLUNAS
                                           -------------------------
                                          Frederick T. Manlunas
                                          CHAIRMAN OF THE BOARD



     Pursuant to the  requirements  of the  Securities  Exchange Act of 1934, as
amended, this Report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.


         Signature                           Title                   Date

 /s/ FREDERICK T. MANLUNAS          Chairman of the Board         April 15, 2002
 -------------------------
   Frederick T. Manlunas


 /s/ CLINTON J. SALLEE            President and Chief Executive   April 15, 2002
--------------------------          Officer
     Clinton J. Sallee






                                       65
<PAGE>

<TABLE>
<CAPTION>
                                  EXHIBIT INDEX

Exhibit                           Description                                                   Filed
-------                           -----------                                                   -----
<S>       <C>                                                                                   <C>
2.1.1     Agreement and Plan of Reorganization, dated October 25, 1998                             *
2.2.1     Agreement and Plan of Reorganization, dated July 27, 1999                                *
2.3       Asset Sale and Agreement re divestiture of Holland American Specialties, dated
          September 30, 1999                                                                       *
2.4       Asset Sale and Agreement re divestiture of Sierra Madre Foods, Inc., dated
          September 30, 1999                                                                       *
2.5       Letter of Intent to Acquire Eastern Shore Net, dated August 17, 1999                     *
2.6       Letter of Intent to Acquire Neocom Microspecialists, Inc., dated September 2, 1999       *
2.7       Plan and Agreement of Share Exchange, re acquisition of Neocom Micro-specialists,
          Inc., dated December 15, 1999                                                            *
2.8       Neocom Debt Assumption Agreement dated December 15, 1999                                 *
3.1(i)    Articles of Incorporation of the Registrant (December 17, 1992)                          *
3.1(ii)   Amended Articles of Incorporation (July 29, 1998)                                        *
3.1(iii)  Amended Articles of Incorporation (October 26, 1998)                                     *
3.1(iv)   Amended Articles of Incorporation (July 14, 1999)                                        *
3.1(v)    Amended Articles of Incorporation (July 28, 1999)                                        *
3.2(I)    By-laws of the Registrant (December 17, 1992)                                            *
4.1       Lease for Corporate Office                                                               **
4.2       Convertible Debenture Purchase Agreement dated as of May 11, 2000 between the
          investors named therein and the Registrant                                              ***
4.3       12% Convertible Debenture due May 11, 2001 made by the Registrant in favor of New
          Millenium Capital Partners II, L.L.C.                                                   ***
4.4       12% Convertible Debenture due May 11, 2001 made by the Registrant in favor of AJW
          Partners, L.L.C.                                                                        ***
4.5       Stock Purchase Warrant dated as of May 11, 2000 issued by Registrant to New
          Millenium Capital Partners, L.L.C.                                                      ***
4.6       Stock Purchase Warrant dated as of May 11, 2000 issued by Registrant to AJW
          Partners, L.L.C.                                                                        ***
4.7       Registration Rights Agreement dated as of May 11, 2000 by and between the
          Registrant and the investors named therein.                                             ***
4.8       Security Agreement dated as of May 11, 2000 by and between the Registrant and the
          investors named therein.                                                                ***
4.9       Stock Tender and Exchange Agreement, dated November 22, 2000,  by and  among
          Sitestar Corporation and Frank and Julie Erhartic, the owners of FRE Enterprises,
          Inc.                                                                                    ****
21.1      Subsidiaries of the Registrant                                                           F
23.1      Consent of Stonefield Josephson, Inc.                                                    F
</TABLE>

* Filed as an exhibit to the Registrant's Form-10SB, as amended, initially filed
with the Securities and Exchange Commission on October 22, 1999 and incorporated
herein by reference.

** Filed as an exhibit to the  Registrant's  Form-10SB filed with the Securities
and Exchange Commission on January 7, 2000 and incorporated herein by reference.

*** Filed as an exhibit to the Registrant's  SB-2 Registration  Statement,  File
No. 333-39660, filed on June 20, 2000 and incorporated herein by reference.

**** Filed as an exhibit to the Registrant's Form 8-K, filed on December 7, 2000
and incorporated herein by reference.

F    Filed herewith


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