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, 2000

                                    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.)

                       16133 Ventura Boulevard, Suite 635,
                     Encino, CA 91436 (Address of principal
                          executive offices) (Zip Code)

                                 (818) 981-4519
                           (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. [ ]

Revenue for the year ended December 31, 2000:  $1,934,637

The  aggregate  market  value  of  the  voting  and  non-voting  stock  held  by
non-affiliates of the registrant at March 31, 2001 was $3,074,649. The number of
shares  outstanding  of the  registrant's  Common Stock as of March 31, 2001 was
66,175,158.

                       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 diversified Internet holding company. Our near term strategy is to
acquire and invest in emerging Internet-based  enterprises to create a broad and
diverse  set of core  Internet  businesses  that  deliver  a  variety  of online
solutions.   In   addition  to   developing   and   integrating   Internet-based
technologies,  our primary  objective  is to create a mix of Internet  operating
companies and Internet-related portfolio investments that will enhance the value
of our current businesses in the following areas:

o        Internet e-commerce

         We design and offer  customized  e-commerce  services which include the
         ability  to  create  and  operate  an  online   "storefront"  and  sell
         merchandise  over the  Internet.  We will also  continue to enhance and
         expand our products and services towards opportunities  surrounding the
         growth of the Internet and the electronic commerce industry.

o        Value-added content

         We have developed and will continue developing content that provide the
         ability  to target  specific  demographics.  We will also  continue  to
         pursue  innovative  niche oriented  value-added  content in segments we
         believe are  underdeveloped  and under-served.  We are actively seeking
         opportunities to develop  innovative ways for consumers to retrieve and
         access information effectively through the Internet.

o        Internet Service Providers (ISP)

         We  offer  a  full  range  of  dial-up   Internet  access  services  to
         residential  subscribers  and dedicated and dial-up  Internet access to
         business  customers  within the secondary  markets of the  mid-Atlantic
         region  which we believe  have been  historically  under-served  by the
         larger, national Internet service providers. We will continue to pursue
         and focus on acquisition  opportunities  within the secondary locations
         in the  mid-Atlantic  region to  further  expand  our  Internet  access
         coverage.

                                       1
<PAGE>

o        Internet Portals/Community Web sites

         We will continue to pursue  innovative  portal and community  web-based
         destinations.  We are actively  seeking to develop  innovative ways for
         consumers to interact  effectively  through the  Internet.  The Company
         designs and offers  customized  packages  which  include the ability to
         change  advertisements  quickly and frequently,  to conduct advertising
         test  campaigns  with rapid  result  delivery  and to track daily usage
         statistics.  The Company has  developed  and will  continue  developing
         software that provides the ability to target ads based on  demographics
         and usage patterns.

o        Strategic investments in Internet-related ventures

         We intend to continue to evaluate new Internet related opportunities to
         further our  investment  in our Internet  strategy and also to seek out
         opportunities  to  increase  shareholder  value.  We are  currently  in
         preliminary  discussions with a number of Internet related  enterprises
         for possible  investment  opportunities.  However, we cannot assure you
         that  we  will  successfully  complete  any of the  investments  we are
         currently evaluating.

     We will  attempt to develop  and refine the  products  and  services of our
existing  businesses  and  businesses  or  assets  we  acquire  with the goal of
significantly  increasing  revenue as new products are commercially  introduced.
Additionally,   we  will  continue  to  pursue  strategic   investments  in  new
Internet-related  opportunities to leverage our existing  assets.  Our operating
strategy  is  to  integrate  our  subsidiaries  and  future  Internet  portfolio
investments into a collaborative network that leverages our collective knowledge
and resources. We will actively explore synergistic  opportunities such as cross
marketing and co-development  efforts within our subsidiaries and investments to
further leverage our resources.


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.

                                       2
<PAGE>

     In July 1999 a partnership  consisting  of 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 all 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. 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.

     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.  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.  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 6,000 customers in the Southern Virginia area.

                                       3
<PAGE>

     Effective  November 22, 2000, we have  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.

    Lynchburg.net is an Internet service provider,  web development and computer
sales and service company based in Lynchburg, Virginia. As of December 31, 2000,
Lynchburg.net  provided  Internet  access,  computer sales and service and other
Internet  services to  approximately  4,000  customers in the Southern  Virginia
area.

     We believe  the  acquisition  of  Lynchburg.net  will  enhance  our primary
strategy of consolidating  small Internet service providers in the rural markets
of the  mid-Atlantic  region by  enlarging  our service  footprint.  This recent
acquisition   increases  our  Internet  access  customer  base  to  over  10,000
subscribers.


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.

     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.

                                       4
<PAGE>

     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.

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.

                                       5
<PAGE>

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.

     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.

                                       6
<PAGE>

     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 of Neocom, a provider of Web hosting
and co-location  services in the  Mid-Atlantic  region and  Lynchburg.net  is an
Internet  service  provider,  web  development  and  computer  sales and service
company based in Lynchburg, Virginia. 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;

     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.

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<PAGE>

     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
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."

                                       8
<PAGE>

     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

Neocom and Lynchburg.net

      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.


                                       9
<PAGE>

      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.

      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.

      Banner Development

      We  also  design  banner  advertisements  for  our  customers  and we have
developed approximately 300 banner advertisements.

      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.

                                       10
<PAGE>

    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.

     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  PSINet,   Inc.,
          ConcentricNetwork Corporation,  Earthlink,  Voyager.net, US Online and
          OneMain;

     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 NetZero Juno Online and
          MicroWorkz Computer Corporation;  cable operators or their affiliates,
          including At Home Corporation and Time Warner;

     o    terrestrial wireless and satellite Internet service providers; and

     o    non-profit or educational ISPs.

                                       11
<PAGE>

     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.
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.


                                       12
<PAGE>

     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.

    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.

                                       13
<PAGE>

    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.



Greattools.com

       Product Offerings
       -----------------
       Greattools.com  is a  direct  merchandiser  of  specialty  tool  products
designed  for light to heavy  industrial  applications.  We market our  products
under the name  Great  Tools  Direct(TM)  and  maintain a diverse  product  line
comprised of five  categories:  (1) Power Tools; (2) Cutting Tools; (3) Masonry;
(4)  Accessories;  and (5)  Automotive.  We offer a  comprehensive  product line
aggregating  approximately 90 different  models of cordless  drills,  batteries,
cutting tools, sanders,  grinders and miscellaneous power tool accessories.  Our
main product and primary source of revenue is the cordless drill.

       All GREAT TOOLS DIRECT products are designed and manufactured in China by
Tehao and Hitachi, two large manufacturers of industrial products,  according to
strict  specifications  determined by our  fulfillment  center.  Our fulfillment
center, Global Sourcing Group, frequently develops innovative design concepts in
an effort  to  improve  and  differentiate  their  product  line  from  existing
competition. Greattools.com is not an exclusive distributor of Tehao and Hitachi
products.

       Our home page features  advertisements,  testimonials  and promotions for
various in-stock  merchandise.  Our in-stock  merchandise is carried entirely by
our  fulfillment  center  at no extra  charge to us.  Greattools.com  acts as an
online   distribution   agent  for  Global  Sourcing  Group.   This  fulfillment
arrangement  with Global  Sourcing  Group  negates any necessity for us to carry
inventory. As part of our fulfillment  arrangement,  Global Sourcing Group ships
all  merchandise  purchased from the  Greattools.com  site directly to customers
eliminating any need for us to maintain costly operational overhead. As a result
of this arrangement,  we don't have to take title to the merchandise we sell and
we don't have to purchase  merchandise  from Global  Sourcing every time we sell
products  online.  Since  Greattools.com  is  merely  an  online  agent  for our
fulfillment center, we only derive our revenues from our agreed upon commissions
earned on each  merchandise  sold and not on the aggregate sales price of a sale
transaction

                                       14
<PAGE>

       The web site provides customers with product  information and the ability
to directly  purchase  products  over the Internet in a secure  environment.  We
maintain a standard  refund  policy to any  consumer  who  purchases a defective
product.  We have a thirty-day money back guarantee wherein we refund or replace
any products within thirty days from purchase.  From inception, we have refunded
on the average less than three percent of our sales.

       Customers and Marketing
       -----------------------
       Our target market  consists of retail  customers  located  throughout the
United States,  Canada and South America.  We target  value-oriented  consumers,
do-it-yourselfers  and  contractors  who use  power  tools  for  light  to heavy
industrial applications. We also target professionals who require tools in their
daily  activity,  such as plumbers,  carpenters,  electricians  and a variety of
other services and repair professionals.

       The  retail  segment  also  includes  consumers  who use power  tools for
household applications.  These include hobbyists, homemakers, students and other
do-it-yourselfers.

       The Company's market  development  strategy is based on several marketing
channels:

       Direct Response Advertising

       We advertise in specialty magazines and consumer  publications, including
Popular Mechanics (circulation:  1,000,000),  American Woodworker  (circulation:
400,000), Wood Magazine (circulation: 650,000), Popular Woodworker (circulation:
220,000)  and  American  How To  (circulation:  750,000).  We believe that these
publications are the most efficient medium to reach its target market.

       Database Marketing and Catalog Sales

       We have  created a database  of  customers  for repeat  sales and special
promotions.  The  database  currently  contains  over 3,500  names.  Each time a
customer  places an order  online,  the  database  is updated  to  reflect  that
customer's  information  and  buying  patterns.  Due to the  database's  sorting
capabilities,  we believe it receives a greater  percentage  of  responses  from
direct mail to the database  targets  than it would  receive from a generic mass
mailing. We repeatedly mail marketing  materials,  catalogs and brochures to our
customers. Our catalog,  produced once a year, lists the products we maintain in
our fulfillment center's warehouse and products our fulfillment center can order
directly  from  Tehao.  The  catalog is mailed to all of the 3,500  names on our
mailing list as well as new  potential  customers  generated by our Web site and
regular advertisements.

       We believe that a large  portion of our potential  success  relies on the
reputation we have created in our "Great Tools Direct" brand name.  However,  we
do not have any  specific  plans to protect  our mark  "Great  Tools  Direct" by
filing a  trademark  application  with the United  States  Patent and  Trademark
office  (PTO).  We have  conducted a  trademark  search on the label Great Tools
Direct that did not result in the discovery of any other commercial entity using
the Great Tools Direct or a substantially similar label in the United States. We
decided that we could better use our limited  capital in  advertising  and other
expenses rather than investing in protecting the Great Tools Direct brand name.

                                       15
<PAGE>

       Power Tools Industry
       --------------------
       Dominated by large home centers and hardware and lumber cooperatives such
as Home Depot,  Loews,  Menard's,  Ace and True Value, the tool market is large,
highly fragmented and  characterized by multiple  channels of distribution.  The
distribution  channels in the power tools market include retail  outlets,  small
distributorships,   national,  regional  and  local  distributors,  direct  mail
suppliers, large warehouse stores and manufacturer's own direct sales forces.

       Products  imported  from  low-cost  labor  countries  have  increased the
competitive  pressures on pricing.  Cost  pressures from more  established  name
brands are providing a focus on high quality, low cost alternatives.  Aggressive
value pricing has redefined the basis for  competition  in many of the Company's
product lines.

       There are many discount  retailers in the industry  offering  products at
competitive  prices and blurring the  distinction  between  wholesale and retail
such as Home Depot,  Menards and Wal-Mart.  Warehouse  clubs and other  category
leaders are  establishing  a new  economic  framework  for the retail  business,
forcing industry  participants to reduce costs.  Major marketers have focused on
value pricing  strategies,  changing the nature of merchandising  throughout the
industry.

       Competition
       -----------
       The power tool market in which we operate is extremely  competitive,  and
we  expect  such  competition  to  intensify  in the  future.  Our  current  and
prospective  competitors  include many large  companies that have  substantially
greater market presence and financial,  technical, marketing and other resources
than we have.  We compete  with many  retailers  and direct  marketers  who sell
merchandise  over the  Internet  and  through  catalogs.  We also  compete  with
traditional  retailers  who sell similar  merchandise  to that sold by us. Those
retailers  usually offer brand name products at prices higher than our products.
As newer and more powerful tools are being  introduced into the market,  intense
competition between  manufacturers has developed.  Companies in the industry are
developing  new  features  to  attract  customers  and tools are  becoming  more
reliable,  efficient  and quiet.  At the same time,  prices  are  becoming  more
competitive as power tool companies are vying to gain market share. Moreover, as
brand delineation  becomes more  challenging,  pricing becomes more competitive,
thus further increasing the drive to gain market share.

                                       16
<PAGE>

       We believe that our ability to compete  successfully  depends on a number
of factors,  including: (1) our ability to continually provide the customer with
value by  offering  quality  products  at prices  lower than the prices  usually
charged for name brand products; and (2) maintaining a flexible product line and
quickly adapting to the changing needs and tastes of the market.

       Possible Acquisitions
       ---------------------
       If we believe a favorable  opportunity exists, we anticipate that we will
enter  into  discussions  with  the  owners  of such  businesses  regarding  the
possibility of an acquisition by the Company.  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.


Soccersite.com

       Product Offerings
       -----------------
       Soccersite.com is a  content-oriented  and e-commerce  Internet site with
over 400 pages of information about the sport of soccer. We provide  traditional
news on recent  professional soccer games, and we allow visitors to post amateur
league and tournament  information  and training  camps. We also provide a forum
for coaches to interact with players and other  coaches.  We also host a special
section  that caters to young  soccer  enthusiasts.  In  addition,  we provide a
search capacity for visitors to explore specific topics. All content information
is provided free of charge to the visitor.

       To capitalize on the retail  opportunities  associated with our web site,
we created SoccerMall, an e-commerce retailer of soccer-related  merchandise and
apparel.  All orders to  SoccerMall  are  fulfilled  directly  by us through our
relationship  with a local  distributor  in  Annapolis,  Maryland.  Our in-stock
merchandise is carried entirely by our fulfillment  center at no extra charge to
us.  Soccersite.com acts as an online distribution agent for the local Annapolis
distributor.  This fulfillment  arrangement with this local distributor  negates
any necessity for us to carry inventory. As part of our fulfillment arrangement,
the local  distributor ships all merchandise  purchased from the  Soccersite.com
site  directly  to  customers  eliminating  any need for us to  maintain  costly
operational  overhead.  As a result of this  arrangement,  we don't have to take
title to the merchandise we sell and we don't have to purchase  merchandise from
the local distributor every time we sell products online.  Since  Soccersite.com
is  merely an  online  agent for our  fulfillment  center,  we only  derive  our
revenues from our agreed upon  commissions  earned on each  merchandise sold and
not on the aggregate sales price of a sale transaction.

                                       17
<PAGE>

       Soccer Industry
       ---------------
       Widely regarded as the world's most popular sport, soccer is growing at a
rapid pace in the United  States.  Largely  attributed to the  expansive  Latino
immigrant fan base,  Southern California has become the epicenter for the soccer
community in North America.  According to the Los Angeles  Times,  attendance at
international  soccer  games  hosted  in Los  Angeles  is up over  200% from its
introduction  in 1997. In comparison to other  professional  Los Angeles  sports
teams, the L.A. Galaxy (Major League Soccer professional team) consistently drew
larger home game crowds than any other local team except the Los Angeles Dodgers
with the local fan base largely  comprised  of members of the Latino  community.
Strategy  Research Corp., a leading industry  association which tracks trends in
the Latino community, estimates the Southern California Latino consumers yield a
collective buying power of $57 billion.

       Customers and Marketing
       -----------------------
       To  date,  we  have  had no  targeted  marketing  campaign.  Nonetheless,
word-of-mouth  advertising and traffic generated by search engines have resulted
in nearly one million visitors to the web site in the past year.

       In addition to retail sales through SoccerMall, we sell advertising space
on the web site to merchants and manufacturers.

       We are currently developing a marketing strategy designed to attract more
consumers to the web site, build greater  advertising  opportunities and further
advance  the sport of soccer.  This  strategy  will  likely  include  sponsoring
amateur  and   professional   soccer  events,   advertising  in  major  industry
publications   and   participating   in   cooperative   ventures  with  industry
associations.

       Competition
       -----------
       There are numerous soccer-related  organizations which have a presence on
the Internet.  Most web sites are retail  e-commerce  websites  offering  soccer
merchandise  and apparel.  There are a smaller  number of web sites that look to
combine a  content-oriented  format with the  convenience  of retail,  including
Soccerweek.com and Soccermadness.com.

       Acquisition Strategy
       --------------------
       We believe  there are  acquisition  opportunities  among the providers of
value  added  information  about  the sport of  soccer.  In  furtherance  of our
acquisition strategy,  we anticipate reviewing and conducting  investigations of
potential  acquisitions.  If we  believe  a  favorable  opportunity  exists,  we
anticipate  that  we  will  enter  into  discussions  with  the  owners  of such
businesses  regarding the  possibility  of an  acquisition by us. As of the date
hereof,  we do not have any agreements or pending  acquisitions and have 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.


                                       18
<PAGE>

                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.

     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.


                                       19
<PAGE>

         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."


         Our Business Model is Unproven
         -------------------------------

     Our strategy is based on an unproven business model. Our operating strategy
is to integrate our subsidiaries and future Internet portfolio  investments into
a collaborative network that leverages our collective knowledge and resources.

     We will actively explore synergistic  opportunities such as cross marketing
efforts  within  our  subsidiaries  and  investments  to  further  leverage  our
resources. Our business model depends on our ability to share information within
our network of operating companies.  If competition develops among our operating
companies,  we may be unable to fully  benefit  from the sharing of  information
within our network of operating  companies.  If we cannot convince  companies of
the value of our business  model,  our ability to attract new companies  will be
adversely affected and our strategy of building a collaborative  network may not
succeed.


         We May Have to Take Certain Actions to Avoid Registration Under the
         --------------------------------------------------------------------
         Investment Company Act of 1940
         ------------------------------

     We believe  that we are  actively  engaged in the  business  of  e-commerce
through  our  network of  operating  companies.  However,  due to a  significant
possibility   that  many  of  our  future   operating   companies   may  not  be
majority-owned  subsidiaries,  changes  in the  value  of our  interests  in our
operating  companies  and  the  income/loss  and  revenue  attributable  to  our
operating  companies could require us to register as an investment company under
the  Investment  Company Act unless we take  action to avoid  being  required to
register.  For  example,  we may be unable to sell  minority  interests we would
otherwise want to sell and may need to sell some assets which are not considered


                                       20
<PAGE>

to be investment securities,  including interests in operating companies. We may
also have to ensure  that we retain  at least a 25%  ownership  interest  in our
operating  companies after their initial public offerings.  In addition,  we may
have to acquire  additional income or  loss-generating  assets that we might not
otherwise have acquired or may have to forgo  opportunities to acquire interests
in companies  that we would  otherwise want to acquire would be important to our
strategy. It is not feasible for us to register as an investment company because
the Investment  Company Act  regulations are  inconsistent  with our strategy of
actively managing,  operating and promoting  collaboration  among our network of
operating companies.


         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.

                                       21
<PAGE>

         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, 2000,  all of our executive  management  personnel  have
worked  for us for  over  one  year.  However,  management  of  our  Neocom  and
Lynchburg.net  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.

     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.


         Our  Operating  Companies  Are Growing  Rapidly and We May Have
         Difficulty Assisting Them in Managing Their Growth

     Our operating companies have grown, and we expect them to continue to grow,
rapidly by adding new  products  and  services  and hiring new  employees.  This
growth is  likely to place  significant  strain  on their  resources  and on the
resources  we allocate  to assist our  operating  companies.  In  addition,  our
management may be unable to convince the future operating  companies  wherein we
have a minority  interest to adopt our ideas for  effectively  and  successfully
managing their growth.

                                       22
<PAGE>

     We may  compete  with some of our future  investors  and  shareholders  and
operating  companies,  and our operating  companies may compete with each other.
Our  current  and  future  operating  companies  and future  Internet  portfolio
investments  may  overlap in their  geographic  coverage.  One of our  operating
subsidiaries or future  portfolio  investments may possibly compete for the same
customers in the same  geographic  region.  In addition,  our current and future
shareholders  may  compete  with us in  terms of their  own  Internet  portfolio
investments  and other  Internet-related  acquisitions.  Some of our  current or
future  shareholders  may engage in their own  investment  activities  which may
directly compete with our own acquisition and investment parameters.


         We Face Competition From Other Potential Acquirers of E-Commerce
         -----------------------------------------------------------------
         Companies
         ----------

     In our attempts to acquire e-commerce  companies,  we face competition from
other capital providers  including publicly traded Internet  companies,  venture
capital companies and large corporations. Many of these competitors have greater
financial resources and brand name recognition than we do. These competitors may
limit our  opportunity to acquire  interests in new operating  companies.  If we
cannot  acquire  interests  in  attractive  companies,  our  strategy to build a
collaborative network of operating companies may not succeed.

         Our Success Could Be Impaired By Valuations Placed on Internet-Related
         -----------------------------------------------------------------------
         Companies By the Financial Marketplace
         ---------------------------------------

     Our strategy involves creating value for our shareholders and the employees
of our operating  companies by helping our operating  companies  grow and access
the  capital   markets.   We  are   therefore   dependent   on  the  market  for
Internet-related  companies in general and for public offerings of those company
in particular. To date, there have been a substantial number of Internet-related
initial public offerings and additional offerings are expected to be made in the
future.  If  the  market  for  Internet-related  companies  and  initial  public
offerings  were to weaken for an  extended  period of time,  the  ability of our
operating companies to grow and access the capital markets will be impaired, and
we may need to provide additional capital to 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.

                                       23
<PAGE>


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.

         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.


                                       24
<PAGE>

         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.

         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.

                                       25
<PAGE>

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.


     The Success of Our Operating Companies Depends on the Development of the
     -------------------------------------------------------------------------
     E-Commerce Market, Which is Uncertain
     --------------------------------------

     All of our  operating  companies  rely on the  Internet  for the success of
their  businesses.  The  development  of the  e-commerce  market is in its early
stages. If widespread commercial use of the Internet does not develop, or if the
Internet  does not develop as an effective  medium for the provision of products
and services, our operating companies may not succeed.

     Our  long-term   success   depends  on  widespread   market-acceptance   of
e-commerce.  A number of factors  could prevent such  acceptance,  including the
following:

     o    the unwillingness of businesses to shift from traditional processes to
          e-commerce processes;

     o    the necessary network  infrastructure  for substantial growth in usage
          of e-commerce may not be adequately developed;

     o    increased  government  regulation or taxation may adversely affect the
          viability of e-commerce;

     o    insufficient availability of telecommunication  services or changes in
          telecommunication  services could result in slower  response times for
          the users of e-commerce; and

     o    concern  and  adverse  publicity  about  the  security  of  e-commerce
          transactions.

                                       26
<PAGE>


     Our Operating Divisions May Fail If Their Competitors Provide Superior
     ----------------------------------------------------------------------
     Internet-Related  Offerings or Continue to Have Greater Resources Than
     -----------------------------------------------------------------------
     Our Operating Divisions Have
     ----------------------------

     Competition  for Internet  products and services is intense.  As the market
for e-commerce  grows, we expect that  competition  will intensify.  Barriers to
entry  are  minimal,  and  competitors  can offer  products  and  services  at a
relatively  low  cost.  Our  operating  divisions  compete  for  a  share  of  a
customer's:

     o    purchasing  budget for  services,  materials  and supplies  with other
          online providers and traditional distribution channels;

     o    dollars spent on consulting services with many established information
          systems and management consulting firms; and

     o    advertising  budget  with online  services  and  traditional  off-line
          media, such as print and trade associations.

     In addition,  some of our operating divisions compete to attract and retain
a critical  mass of buyers and  sellers.  Several  companies  offer  competitive
solutions  that compete with one or more of our operating  companies.  We expect
that  additional  companies will offer  competing  solutions on a stand-alone or
combined basis in the future. Furthermore,  our operating divisions' competitors
may develop Internet  products or services that are superior to, or have greater
market acceptance than, the solutions offered by our operating companies. If our
operating   divisions   are  unable  to  compete   successfully   against  their
competitors, our operating companies may fail.

     Many of our operating divisions' competitors have greater brand recognition
and  greater  financial,  marketing  and  other  resources  than  our  operating
divisions.  This  may  place  our  operating  divisions  at  a  disadvantage  in
responding to their competitors'  pricing  strategies,  technological  advances,
advertising campaigns, strategic partnerships and other initiatives.

         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


                                       27
<PAGE>

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.


         Sources of Supply For Greattools.com
         -------------------------------------

     Since 1999, Greattools.com has been operating pursuant to an oral agreement
with Global Sourcing Group ("GSG"),  a power tool wholesaler located in Thousand
Oaks, California, which supplies 100% of the products sold by the company in its
Web site. While the company  anticipates  that it will continue  operating under
the oral  agreement,  it intends to enter into a written  exclusive  fulfillment
agreement  with GSG as soon as it's  practicable.  The company  intends to enter
into this  fulfillment  arrangement to assure it could continue to source all of
its products.

     Gateway  Holdings,  Inc.  The private  equity fund  managed by our Chairman
Frederick  T.  Manlunas  beneficially  owns  and  controls  14.6%  of the  total
outstanding  shares of Global Sourcing  Group.  We are reliant on Mr.  Manlunas'
relationship with GSG for its Greattools.com's fulfillment needs.

                                       28
<PAGE>

         Our Operating Divisions That Publish or Distribute Content Over the
         -------------------------------------------------------------------
         Internet May Be Subject to Legal Liability
         -------------------------------------------

     Some of our operating  divisions may be subject to legal claims relating to
the content on their Web sites,  or the  downloading  and  distribution  of this
content.  Claims could involve  matters such as defamation,  invasion of privacy
and  copyright  infringement.  Providers of Internet  products and services have
been sued in the past, sometimes successfully, based on the content of material.
In addition,  some of the content  provided by our operating  divisions on their
Web sites is drawn from data compiled by other parties,  including  governmental
and commercial sources, and our operating divisions re-enter the data. This data
may  have  errors.  If any of our  operating  divisions'  Web  site  content  is
improperly  used  or  if  any  of  our  operating   divisions  supply  incorrect
information,  it could  result in  unexpected  liability.  Any of our  operating
divisions that incur this type of unexpected liability may not have insurance to
cover the claim or its insurance  may not provide  sufficient  coverage.  If our
operating  divisions incur  substantial  cost because of this type of unexpected
liability,  the expenses  incurred by our operating  divisions will increase and
their profits, if any, will decrease.


         Our Operating Divisions' Computer and Communications Systems May Fail,
         ----------------------------------------------------------------------
         Which May Discourage Content Providers From Using Our Operating
         ---------------------------------------------------------------
         Divisions' Systems
         ------------------

     All of our  operating  divisions'  businesses  depend on the  efficient and
uninterrupted  operation of their computer and communications  hardware systems.
Any system  interruptions  that cause our operating  divisions'  Web sites to be
unavailable  to Web  browsers  may reduce the  attractiveness  of our  operating
divisions'  Web sites to third party content  providers.  If third party content
providers are unwilling to use our operating divisions' Web sites, our business,
financial   condition  and  operating  results  could  be  adversely   affected.
Interruptions  could  result  from  natural  disasters  as well as  power  loss,
telecommunications failure and similar events.


         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.

                                       29
<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.


         Our Operating Divisions May Not Be Able To Attract A Loyal Base of
         ------------------------------------------------------------------
         Users To Their Web Sites
         ------------------------

     While content is important to all our operating  divisions' Web sites,  our
operating  divisions are particularly  dependent on content to attract business.
Our success  depends  upon the ability of these  operating  divisions to deliver
compelling  Internet content to their targeted users. If our operating divisions
are unable to develop  Internet  content  that  attracts a loyal user base,  the
revenues  and  profitability  of our  operating  divisions  could  be  impaired.
Internet users can freely navigate and instantly  switch among a large number of
Web sites. Many of these Web sites offer original  content.  Thus, our operating
divisions may have difficulty  distinguishing  the content on their Web sites to
attract a loyal base of users.


         Our Operating  Divisions May Be Unable To Acquire Or Maintain Easily
         --------------------------------------------------------------------
         Identifiable Web Site Addresses or Prevent Third Parties From
         -------------------------------------------------------------
         Acquiring Web Site Addresses Similar to Theirs
         ----------------------------------------------

     Some of our operating divisions hold various Web site addresses relating to
their brands. These operating divisions may not be able to prevent third parties
from  acquiring Web site addresses  that are similar to their  addresses,  which
could  adversely  affect the use by businesses of our operating  divisions'  Web
sites. In these  instances,  our operating  divisions may not grow as we expect.
The acquisition and maintenance of Web site addresses  generally is regulated by
governmental agencies and their designees.  The regulation of Web site addresses
in the United States and in foreign countries is subject to change. As a result,
our operating divisions may not be able to acquire or maintain relevant Web site
addresses  in all  countries  where  they  conduct  business.  Furthermore,  the
relationship  between  regulations  governing such addresses and laws protecting
trademarks is unclear.


                                       30
<PAGE>

         Some of Our Operating Divisions Are Dependent On Barter Transactions
         --------------------------------------------------------------------
         That Do Not Generate Cash Revenue
         ---------------------------------

     Our operating  divisions' plans to enter into barter  transactions in which
they  provide   advertising  for  other  Internet   companies  in  exchange  for
advertising for the operating  division.  In a barter  transaction the operating
division  will reflect the sales of the  advertising  received as an expense and
the value of the advertising provided, in an equal amount, as revenue.  However,
barter  transactions  also do not generate  cash  revenue,  which may  adversely
affect the cash flows of some of our operating divisions. Limited cash flows may
adversely affect an operating  company's  abilities to expand its operations and
satisfy its liabilities.


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.


                                       31
<PAGE>

         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
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 Of Our Operating Divisions
         ----------------------------------------------------------------------

     As of  December  31,  2000,  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.


                                       32
<PAGE>

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.


         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.

                                       33
<PAGE>

     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, 2001,  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.


ITEM 2. DESCRIPTION OF PROPERTY

     We lease our principal  executive  offices,  as well as our  administrative
offices,  which are located in a 1,084  square  feet office  facility in Encino,
California  at an annual  rent of  $24,715.20.  This  facility  also  houses our
customer   service,   administrative   and   corporate   center   functions  for
Greattools.com and Soccersite.com. This lease will expire in June 2001.

     We also own a 12,000 square feet office building in Martinsville, Virginia,
which serves as Neocom'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.

      In addition,  we 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.

     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 not involved in any material pending legal proceedings.


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

         Not Applicable


                                       34
<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 September 30, 1998:

                                                       High              Low
                                                       ----              ---
1998
     For the quarter ended December 31, 1998           $1.00            $1.03
1999
     For the quarter ended March 31, 1999              $1.00            $1.03
     For the quarter ended June 30, 1999               $1.00            $1.03
     For the quarter ended September 30, 1999          $0.88            $3.75
     For the quarter ended December 31, 1999           $0.45            $2.19
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

     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 $0.0625 on March 31,  2001.
As of March 31, 2001 we had 125  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.


                                       35
<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, 2000 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 changed our  corporate  focus from that of a food holding  company to an
Internet  holding company with the  acquisition of Sitestar,  Inc. in July 1999.
Soon after  concluding this  acquisition,  we started  focusing on acquiring and
investing in Internet-based enterprises.  Our mission is to develop our Internet
operating subsidiaries and future investments in other Internet enterprises into
highly  focused and successful  stand-alone  Internet  businesses.  We intend to
achieve a fast-track  development  process by tapping the services,  support and
knowledge of individuals  and  organizations  that have extensive  experience in
developing Internet concepts and technologies.

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

     Our Internet services subsidiaries began providing Internet services to our
customers  in 1996 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.

                                       36
<PAGE>

     On  September  30,  1999,  we  sold  all  of  the  assets  related  to  our
international  food  distribution  business,  also  known  as  Holland  American
International Specialties ("HAIS"). The acquirer of the assets was a partnership
with the partners being a group of our stockholders. Given that the sale was not
an  arms-length  transaction,  we had  the  business  valued  by an  independent
appraiser  to  determine  the fair value  purchase  price.  The sales  price was
$900,000,  which is to be paid as follows:  1) $200,000 is to be offset  against
our liability to the a  stockholder,  2) $654,000 for the buyer's  assumption of
all trade, short-term and long-term liabilities, and 3) the remaining $46,000 in
the form of a note  payable in six  annual  installments  of  $15,333  each plus
accrued  interest  at 8% per annum.  We were  required to defer the gain on this
sale until such time as the  purchasers  are able to refinance the debt of HAIS.
During the 2nd quarter of 2000 the  purchasers  were able to refinance  the debt
and we recognized a $314,515 gain on the sale of HAIS.

     On  December   15,   1999,   we  completed   the   acquisition   of  Neocom
Microspecialists,  Inc.,  recently  renamed,  Sitestar.net,  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.  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 had 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 6,000 customers in the Southern Virginia area.

      On  November  22,  2000,  we  acquired 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.
Lynchburg.net  is an Internet  service  provider,  web  development and computer
sales and service company based in Lynchburg, Virginia. As of December 31, 2000,
Lynchburg.net  provided  Internet  access,  computer sales and service and other
Internet  services to  approximately  4,000  customers in the Southern  Virginia
area.

     In January 2000,  the Company sold certain  assets and  liabilities  of its
wholly  owned  subsidiary,  Sitestar,  Inc.  for  $34,703  in  cash  plus a note
receivable  in the amount of $10,000.  The Company  recognized a gain on sale of
these certain assets of $49,316.  The Company retained the "Sitestar"  trademark
and "Sitestar.com" URL.

                                       37
<PAGE>

     Prior to our change in corporate  focus from that of a food holding company
to that of an Internet  holding  company,  we generated all of our revenues from
sales of specialty food products. We have historically derived a majority of our
revenues from small independent specialty food retail customers.  From inception
until July 1999, we generated  revenues  exclusively  from  wholesale and retail
sales of our food  products.  We derived  income from our  wholesale  and retail
sales  from the  excess  of the  wholesale  and  retail  prices we  charged  our
customers  over the  product  costs we paid our  suppliers.  We had a  wholesale
program  in  which  we sold  bulk  quantities  of  specialty  food  products  to
registered retailers at wholesale prices. In this program, we purchased products
from suppliers at a distributor's  discounted  price and derived income from the
difference  between this  discounted  price and the wholesale  price we charged.
Additionally,  our retail customers paid for orders by cash or credit card while
we paid our suppliers on extended terms.  As a result,  we were able to increase
our working capital between the time we received payment for orders and the time
we were required to pay suppliers.

     Our Internet service provider  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.

     We are operating under an oral agreement with our  fulfillment  centers and
have no long-term obligations to continue the relationship with them if we deem,
solely  at our own  discretion,  that it is no longer  in our best  interest  to
continue the current  arrangements.  However,  we intend to  formalize  official
written fulfillment agreements with them as soon as practicable.

     We have a limited  operating  history on which to base an evaluation of our
business and  prospects.  You must consider our prospects in light of the risks,
expenses and  difficulties  frequently  encountered  by companies in their early
stage of development, particularly companies in new and rapidly evolving markets
such as online  commerce.  To address  these  risks,  we must obtain  sufficient
operating capital,  maintain and expand our customer base,  continue to increase
the  products  and  services  we offer,  successfully  implement  our  business,
marketing and promotional  strategies,  continue to develop our order processing
technology,  respond to competitive  developments in the Internet,  and attract,
retain and motivate  qualified  personnel.  We cannot assure you that we will be
successful  in  addressing  these risks and our failure  could be harmful to our
business, prospects, financial condition and results of operations.


                                       38
<PAGE>

RESULTS OF OPERATIONS

Year ended December 31, 2000 versus Year ended December 31, 1999
----------------------------------------------------------------

     REVENUES.  Revenue  for the year  ended  December  31,  2000  increased  by
$1,710,888  or 764.7%  from  $223,749  for the year ended  December  31, 1999 to
$$1,934,637  for the same period in 2000. The  significant  increase in sales is
due to  recognizing  a full year of revenue from our Neocom  subsidiary  in 2000
versus  only 1  month  in  1999  and  the  recognization  of  revenue  from  our
Lynchburg.net  subsidiary  from  November  22,  2000.  With the  acquisition  of
Lynchburg.net our revenues in 2001 are expected to increase substantially

     COST OF  REVENUE.  Cost of  revenue  for the year  ended  December  31 2000
increased by $830,733 or 665.3% from  $124,859  for the year ended  December 31,
1999 to $955,592 for the same period in 2000. The significant increase is due to
the increase in revenue as described  above. Our cost of revenue as a percentage
of sales for the year ended  December 31, 2000 has  decreased to 49.4% from 55.8
in  1999.   This  decrease  is  due  to  an  approximate  20%  decrease  in  our
telecommunications costs of our Neocom subsidiary and the fact that we have been
able to  service  more  customers  for  approximately  the  same  fixed  cost as
incurred.  We expect to  further  reduce our cost of  revenue  by  lowering  the
telecommunication cost of our Lynchburg.net subsidiary.

     SELLING,  GENERAL AND ADMINISTRATIVE.  Selling,  general and administrative
expenses  for the year ended  December  31, 2000  increased by $652,775 or 20.3%
from  $3,217,247 for the year ended December 31, 1999 to $3,870,022 for the same
period in 2000. The increase is due to the expenses of our Neocom subsidiary for
the full year in 2000  versus  only one month in 1999,  and the  expenses of our
Lynchburg.net  subsidiary  from  November 22, 2000. In 1999, we took a charge to
earnings of $2,000,000 related to stock given to our Chief Executive Officer for
compensation.  Included  in  selling,  general  and  administrative  expenses is
amortization of intangible assets of $1,824,292.

     WRITE DOWN OF INTANGIBLE  ASSETS.  During the year ended December 31, 2000,
we wrote down the value of our customer  list and excess of cost over net assets
acquired of our Neocom  subsidiary  in the amount of  $1,080,000  and  $780,000,
respectively. In making such determination we estimated the future cash flow for
our Neocom  subsidiary for the life of the intangible assets which was less that
the carrying value of such intangible  assets.  We then estimated the fair value
of the intangible  assets by calculating  the discounted cash flow of our Neocom
subsidiary and reduced the carrying value of the intangible assets accordingly.

      GAIN ON SALE OF ASSETS.  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 such sales of $314,515  and $49,316,
respectively. No such assets sales occurred in 1999.

      INCREASE IN VALUE OF MARKETABLE SECURITIES. During the year ended December
31, 2000,  we  recognized  $57,520 in realized  gains on the sale of  marketable
securities  and at December 31, 2000, we had  recognized  an unrealized  loss of
$11,709  related to equity  securities  we held at that date. No such gains were
present in 1999.

                                       39
<PAGE>

     INTEREST  EXPENSE.  Interest  expense for the year ended  December 31, 2000
increased by $844,240 or 6,171.8%  from $13,679 for the year ended  December 31,
1999 to $857,919 for the same period in 2000. The significant increase is due to
financing  charges in the amount of $713,750 taken as a result of the preferable
conversion feature associated with the convertible debentures issued in 2000 and
the 500,000 warrants issued with the convertible  debentures.  After taking into
account this financing  charge,  interest expense increased by $131,169 which is
due to  paying  interest  for a full year on the notes  payable  assumed  in the
Neocom acquisition and interest on the convertible debentures.

LIQUIDITY AND CAPITAL RESOURCES

     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.

         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. 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 verses 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. 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.

      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,  share of the Company's common stock. The holders of
the  debentures  also  intend to convert  the  remaining  principal  and accrued
interest  into  common  stock when we filed a Form SB-2  registering  the shares
underlying the conversion.

                                       40
<PAGE>

     We believe  that our existing  cash and cash  equivalents,  and  short-term
investments,  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  e-commerce  business,  including  our ISPs 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.






                                       41
<PAGE>



Item 7.  Financial Statements


                                      INDEX


                                                                           Page
                                                                           ----
INDEPENDENT AUDITORS' REPORT

   Report on financial statements as of and for the year ended              43
   December 31, 2000

   Report on financial statements for the year ended December 31, 1999      44

FINANCIAL STATEMENTS

   Consolidated Balance Sheet as of December 31, 2000                      45-46

   Consolidated Statements of Operations for the Years
      Ended December 31, 2000 and 1999                                      47

   Consolidated Statement of Stockholders' Equity for the
      Years Ended December 31, 2000 and 1999                                48

   Consolidated Statements of Cash Flows for the Years
      Ended December 31, 2000 and 1999                                     49-50

   Notes to Consolidated Financial Statements                              51-70







                                       42
<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,  2000,  and  the  related
consolidated  statements of operations,  stockholders' equity and cash flows for
the  year  ended  December  31,  2000.   These  financial   statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
Sitestar  Corporation and  subsidiaries as of December 31, 2000, and the results
of their consolidated  operations and their consolidated cash flows for the year
ended  December 31, 2000,  in  conformity  with  generally  accepted  accounting
principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going  concern.  As discussed in note 1, the
Company's  recurring  losses  and  negative  cash flow from  operations  and its
negative working capital raise  substantial  doubt about its ability to continue
as a going  concern.  Management's  plans  concerning  these  matters  are  also
discussed in Note 1. The  consolidated  financial  statements do not include any
adjustments that might result from the outcome of this uncertainty.




                                    STONEFIELD JOSEPHSON, INC.
                                    Certified Public Accountants


Santa Monica, California
March 23, 2001



                                       43
<PAGE>




                          INDEPENDENT AUDITORS' REPORT


TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
SITESTAR CORPORATION

We  have  audited  the  accompanying   consolidated  statements  of  operations,
stockholders' equity and cash flows of Sitestar Corporation and Subsidiaries and
for the year  ended  December  31,  1999.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audit.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the results of consolidated  operations and
cash flows of Sitestar  Corporation and subsidiaries for the year ended December
31, 1999, in conformity with generally accepted accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going  concern.  As discussed in note 1, the
Company's  recurring  losses  and  negative  cash flow from  operations  and its
negative working capital raise  substantial  doubt about its ability to continue
as a going  concern.  Management's  plans  concerning  these  matters  are  also
discussed in Note 1. The  consolidated  financial  statements do not include any
adjustments that might result from the outcome of this uncertainty.





                                    MERDINGER, FRUCHTER, ROSEN & CORSO, P.C.
                                    Certified Public Accountants


Los Angeles, California
April 8, 2000




                                       44
<PAGE>





                      SITESTAR CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2000


                                     ASSETS

CURRENT ASSETS
   Cash and cash equivalents                                          $  289,294
   Marketable securities at market                                       563,811
   Accounts receivable, less allowance for
     doubtful accounts of $284,800                                       183,855
   Inventory                                                              92,863
  Other current assets                                                   100,859
                                                                      ----------
     Total current assets                                              1,230,682


PROPERTY AND EQUIPMENT, net                                              508,009
CUSTOMER LIST, net of accumulated amortization
   of $943,470                                                         1,193,530
EXCESS OF COST OVER FAIR VALUE OF
   NET ASSETS ACQUIRED, net of accumulated
   amortization of $640,601                                            2,185,457
OTHER ASSETS                                                             317,315
                                                                      ----------

TOTAL ASSETS                                                          $5,434,993
                                                                      ==========



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




                                       45
<PAGE>




                      SITESTAR CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED BALANCE SHEET, Continued
                                DECEMBER 31, 2000

                      LIABILITIES AND STOCKHOLDERS' EQUITY


CURRENT LIABILITIES
   Accounts payable and accrued expenses                           $    409,629
   Deferred revenue                                                     222,041
   Income taxes payable                                                  92,000
   Convertible debentures                                               756,500
   Note payable - stockholders, current portion                         136,874
   Notes payable, current portion                                        49,124
   Capital lease obligations, current portion                            27,809
                                                                   ------------

     Total current liabilities                                        1,693,977

NOTES PAYABLE - STOCKHOLDERS, less current portion                       51,308
NOTES PAYABLE, less current portion                                     427,696
CAPITAL LEASE OBLIGATIONS, less current portion                          23,842
                                                                   ------------

TOTAL LIABILITIES                                                     2,196,823
                                                                   ------------
COMMITMENTS AND CONTINGENCIES (Note 8)                                     --

STOCKHOLDERS' EQUITY
   Preferred Stock, $.001 par value, 10,000,000 shares
     authorized, 0 shares issued and outstanding                           --
   Common Stock, $0.001 par value, 75,000,000 shares
    authorized, 62,175,638 shares issued and outstanding                 62,176
   Additional paid-in capital                                        12,467,733
   Accumulated deficit                                               (9,291,739)
                                                                   ------------

     Total stockholders' equity                                       3,238,170
                                                                   ------------
TOTAL LIABILITIES AND
   STOCKHOLDERS' EQUITY                                            $  5,434,993
                                                                   ============

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



                                       46
<PAGE>

                      SITESTAR CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

                                                       2000            1999
                                                   ------------    ------------


REVENUE                                            $  1,934,637    $    223,749

COST OF REVENUE                                         955,592         124,859
                                                   ------------    ------------

GROSS PROFIT                                            979,045          98,890
                                                   ------------    ------------

OPERATING EXPENSES:
  Selling general and administrative expenses         3,870,022       3,217,247
  Write down of intangible assets                     1,860,000            --
  Loss from operations of business transferred
     under contractual obligations                       42,233         239,653
                                                   ------------    ------------

          TOTAL OPERATING EXPENSES                    5,772,255       3,456,900
                                                   ------------    ------------

LOSS FROM OPERATIONS                                 (4,793,210)     (3,358,010)
                                                   ------------    ------------

OTHER INCOME (EXPENSES)
  Gain on sale of assets                                363,831            --
  Gain from marketable securities                        45,811            --
  Interest expense                                     (857,919)        (13,679)
                                                   ------------    ------------

          TOTAL OTHER INCOME (EXPENSES)                (448,277)        (13,679)
                                                   ------------    ------------

LOSS BEFORE INCOME TAXES                             (5,241,487)     (3,371,689)

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

NET LOSS                                           $ (5,241,487)   $ (3,371,689)
                                                   ============    ============

BASIC AND DILUTED LOSS PER SHARE                   $      (0.20)   $      (0.18)
                                                   ============    ============

WEIGHTED AVERAGE SHARES
     OUTSTANDING - BASIC AND DILUTED                 26,526,529      18,932,268
                                                   ============    ============


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

                                       47
<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, 1998, as restated
  for a 3 to 1 stock split                        18,600,036   $ 18,600   $   609,200   $(71,657)   $ ( 678,563)  $  (122,420)

Cash contribution                                                             110,275                                 110,275
Issuance of common stock for cash                     53,362         54        49,946                                  50,000
Common stock issued for professional services        564,075        564       548,678                                 549,242
Common stock issued for investment                   160,000        160       159,840                                 160,000
Contribution of Sitestar Inc. 's net asset                                     91,664                                  91,664
Payment on note receivable - stockholder                                                   2,640                        2,640
Shares issued by principal stockholders
    to employee for compensation                                            2,000,000                               2,000,000
Common stock issued in connection with
    acquisition of Neocom Microspecialists, Inc.   4,782,353      4,782     4,777,571                               4,782,353
Net loss                                                                                             (3,371,689)   (3,371,689)
                                                  ----------   --------   -----------  ---------    ------------  -----------

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            (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
                                                  ==========   ========   ===========   =========   ============  ===========
</TABLE>



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


                                       48
<PAGE>



                      SITESTAR CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

                                                         2000            1999
                                                     -----------    -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                          $(5,241,487)   $(3,371,689)
   Adjustments to reconcile net loss
   to net cash used in operating activities:
     Depreciation and amortization expense             1,618,376        118,775
     Write down of intangible assets                   1,860,000           --
     Loss from operations of business transferred
       under contractual arrangements                     42,233        239,653
     Common stock issued for services rendered           768,587        549,242
     Common stock issued for executive salaries          445,836      2,000,000
     Common stock issued for interest expense             39,931           --
     Gain on sale of assets                             (363,831)          --
     Gain recognized on marketable securities            (45,811)          --
     Purchase of marketable securities                  (820,000)          --
     Proceeds from sale of marketable securities         302,000           --
     Charge taken for loan financing costs               713,750           --
   (Increase) decrease in:
     Accounts receivable                                 (15,254)        (2,205)
     Inventory                                            11,793           --
     Other current assets                                 (4,613)       (43,350)
   Increase (decrease) in:
     Accounts payable and accrued expenses               (38,635)       150,398
     Deferred revenue                                      8,305           (733)
     Advances from stockholder                            24,450        194,459
                                                     -----------    -----------

Net cash used in operating activities                   (694,370)      (165,450)
                                                     -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment                    (61,666)        (8,982)
   Purchase of investment                                (50,000)          --
   Cash acquired with acquisition of subsidiaries        253,385         27,026
   Repayment of advances from business transferred
     under contractual arrangements                         --           90,721
   Proceeds from sale of assets                           34,703           --
                                                     -----------    -----------

Net cash provided by investing activities            $   176,422    $   108,765
                                                     -----------    -----------


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

                                       49
<PAGE>


                      SITESTAR CORPORATION AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

                                                        2000             1999
                                                     -----------      ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from convertible debentures              $ 1,000,000      $    --
   Payment of debenture acquisition costs               (110,000)
   Repayment of notes payable                            (63,772)       (56,427)
   Repayment of stockholder loan                         (19,206)         2,640
   Payment on capital lease obligation                   (45,108)        (4,475)
   Proceeds from sale of common stock                       --           50,000
   Capital contribution                                     --          110,275
                                                     -----------      ---------
Net cash provided by financing activities                761,914        102,013
                                                     -----------      ---------
NET INCREASE  IN CASH
   AND CASH EQUIVALENTS                                  243,966         45,328

CASH AND CASH EQUIVALENTS -
   BEGINNING OF PERIOD                                    45,328           --
                                                     -----------      ---------
CASH AND CASH EQUIVALENTS -
   END OF PERIOD                                     $   289,294      $  45,328
                                                     ===========      =========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

During the years ended  December  31, 2000 and 1999,  the Company paid no income
taxes and interest of approximately $82,000 and $14,000, respectively.

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING TRANSACTIONS

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. at $2,487,597; and (5)
canceled  900,000  shares  of  common  stock  which  were  previously  issued in
connection with the acquisition of Neocom valued at $900,000.

During the year ended  December  31,  1999 the Company  (1)  acquired  equipment
totaling  $18,000 with capital lease  obligations;  (2) issued 564,075 shares of
common  stock for  services  valued at $548,678;  (3) issued  160,000  shares of
common stock for a 9% investment in Qliq-on Corporation valued at $160,000;  (4)
issued  4,782,353 shares of common stock for the acquisition of Neocom valued at
$4,782,353;  and a group of stockholders  contributed net assets of $91,664 from
their acquisition of Sitestar Inc. as additional paid-in capital.

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

                                       50
<PAGE>



                      SITESTAR CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


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 Encino, 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 excess cost over
     fair value of net assets acquired 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.

     Basis of Presentation
     ---------------------
     The  accompanying  consolidated  financial  statements  have been  prepared
     assuming that the Company will continue as a going concern. As shown in the
     accompanying  consolidated financial statements,  the Company has recurring
     losses and negative cash flow from  operations and at December 31, 2000 had
     negative  working  capital.  However,  during  the last  half of 2000,  the
     Company  generated  positive  cash  flows  from  operations  and  with  the
     acquisitions of FRE Enterprises, Inc. in November 2000, positive cash flows
     from  operations  are  expected  to  increase.  Although  the Company has a
     working  capital  deficit of $463,295 at December 31, 2000, the convertible
     debentures  of $756,500  are expected to be  converted  into the  Company's
     common  stock upon the  completion  of a Form SB-2  registering  the shares
     underlying the conversion.


                                       51
<PAGE>

                      SITESTAR CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

NOTE 1 -  ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, continued

     Principles of Consolidation
     --------------------------
     The accompanying  consolidated financial statements include the accounts of
     the Company and its wholly owned subsidiaries,  HAIS and Sitestar,  Inc. to
     their respective dates of disposition,  and Neocom  Microspecialists,  Inc.
     and FRE Enterprises,  Inc. from their respective dates of acquisition.  All
     intercompany accounts and transactions have been eliminated.

     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,  2000,  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 including cash, accounts
     receivable,  marketable securities,  accounts payable and accrued expenses,
     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.


                                       52
<PAGE>

                      SITESTAR CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, continued

     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.

     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 year ended  December 31, 2000,
     the Company  recognized $57,520 in realized gains on the sale of marketable
     securities  and at  December  31,  2000,  the  Company  had  recognized  an
     unrealized  loss of $11,709  related to equity  securities  it held at that
     date.

     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.



                                       53
<PAGE>
                      SITESTAR CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, continued

     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.

     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  consist of a
     customer  list and excess cost over fair value of net assets  acquired  are
     being  amortized  over  three and five  years,  respectively.  Amortization
     expense for the customer list and excess cost over fair value of net assets
     acquired  was  $907,053  and  $617,239,  respectively,  for the year  ended
     December 31,  2000,  and $36,417 and  $23,352,  respectively,  for the year
     ended  December 31,  1999.  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 excess cost over fair value of net assets,  respectively,  related
     to its  Internet  operations  of Neocom  Microspecialists,  Inc.  The total
     impairment  loss of  $1,860,000  resulted  from the  decrease in value of a
     subscriber due to competition  and other sources  available to customers to
     access the Internet.

     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.


                                       54
<PAGE>

                      SITESTAR CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

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  itscustomers 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 bill 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, 2000 and 1999 was approximately $19,800 and $11,000, respectively.




                                       55
<PAGE>

                      SITESTAR CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

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 a 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 is being accounted for using the cost method. 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.

     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.



                                       56
<PAGE>
                      SITESTAR CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, continued

     Recently Issued Accounting Pronouncements
     -----------------------------------------
     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
     "Accounting for Derivative  Instruments and Hedging  Activities."  SFAS No.
     133, as amended by SFAS No. 137, is effective  for fiscal  years  beginning
     after June 15, 2000.  SFAS No. 133  requires  the Company to recognize  all
     derivatives as either assets or liabilities  and measure those  instruments
     at fair value. It further provides  criteria for derivative  instruments to
     be  designated  as fair value,  cash flow and foreign  currency  hedges and
     establishes  respective  accounting  standards for reporting changes in the
     fair value of the derivative  instruments.  Upon adoption, the Company will
     be  required  to adjust  hedging  instruments  to fair value in the balance
     sheet and recognize the  offsetting  gains or losses as  adjustments  to be
     reported in net income or other comprehensive  income, as appropriate.  The
     Company is evaluating its expected  adoption date and currently  expects to
     comply with the  requirements  of SFAS 133 in fiscal year 2001. The Company
     does not expect the adoption  will be material to the  Company's  financial
     position or results of  operations  since the  Company  does not believe it
     participates in such activities.

     In June  1999,  the FASB  issued  SFAS No.  136,  "Transfer  of Assets to a
     Not-for-Profit  Organization  or  Charitable  Trust  that  Raises  or Holds
     Contributions  for  Others" and SFAS No. 137,  "Accounting  for  Derivative
     Instruments and Hedging Activities." These statements are not applicable to
     the Company.

     In June  2000,  the FASB  issued  SFAS No.  138,  "Accounting  for  Certain
     Derivative  Instruments and Certain Hedging  Activities."  The Company does
     not expect the adoption of SFAS No. 138 to have a material impact,  if any,
     on its financial position or results of operations.

     In June 2000,  the FASB issued SFAS No. 139,  "Rescission of FASB Statement
     No. 53 and amendments to FASB  Statements No. 63, 89, and 121." The Company
     does not expect the adoption of SFAS No. 138 to have a material impact,  if
     any, on its financial position or results of operations.

     In September 2000, the FASB issued SFAS No. 140,  "Accounting for Transfers
     and Servicing of Financial Assets and Extinguishments of Liabilities." This
     statement is not applicable to the Company.

     In January  2001,  the FASB  Emerging  Issues Task Force  issued EITF 00-27
     effective for convertible debt instruments  issued after November 16, 2000.
     This  pronouncement  requires  the use of the  intrinsic  value  method for
     recognition of the detachable and imbedded  equity  features  included with
     indebtedness,  and requires  amortization of the amount associated with the
     convertibility feature over the life of the debt instrument rather than the
     period for which the instrument first became  convertible.  Inasmuch as all
     debt  instruments  were  entered into prior to November 16, 2000 and all of
     the  debt  discount  relating  to the  beneficial  conversion  feature  was
     previously  recognized and expensed in accordance with EITF 98-5,  there is
     no impact on these  financial  statements.  This EITF  00-27  could  impact
     future financial statements, should the Company enter into such agreements.

                                       57
<PAGE>

                      SITESTAR CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

NOTE 2 - ACQUISITIONS

     Sitestar, Inc.
     --------------
     On July 27, 1999, a group of stockholders  acquired 100% of the outstanding
     common stock of Sitestar,  Inc.,  a Delaware  corporation,  in exchange for
     3,491,428  shares of their issued and  outstanding  shares of the Company's
     common stock.  Simultaneously,  they contributed Sitestar Inc.'s net assets
     to the  Company  with the fair  market  value  of the net  assets  acquired
     credited to additional  paid-in capital on behalf of the  stockholders  who
     purchased  Sitestar,  Inc.  The fair market  value of the  acquisition  was
     determined  by the net  assets  acquired.  The  Company  did not record any
     goodwill since the Company was  essentially a  non-operating  shell holding
     company at this time as a result of the  approval  to sell HAIS on July 15,
     1999. In January 2000,  certain assets and liabilities of this company were
     sold (see Note 3).

     The  transaction  was  accounted  for in a manner  similar  to a pooling of
     interest.  The assets  acquired and  liabilities  assumed is  summarized as
     follows:


                  Cash                                      $         14,063
                  Equipment, net                                      95,579
                  Other assets                                         8,048
                  Current liabilities                                (13,118)
                  Capital lease obligations                          (12,908)
                                                            ----------------

                  Purchase price                            $         91,664
                                                            =================

     Neocom Microspecialists, Inc.
     -----------------------------
     On December 15,  1999,  the Company  completed  the  acquisition  of Neocom
     Microspecialists,  Inc., a Virginia corporation  ("Neocom") in exchange for
     6,782,353  shares of the Company's common stock for 100% of the outstanding
     shares of  Neocom.  Effective  upon the  closing  of the  acquisition,  the
     Company  issued  4,782,353  shares of its common  stock.  In addition,  the
     Company is required to issue an additional  2,000,000  shares of its common
     stock on the second  anniversary  of the  acquisition  date. The shares are
     held back for any potential unrecorded liabilities. Of the 4,782,353 shares
     issued for Neocom,  900,000  shares  were  issued in  exchange  for certain
     liabilities  amounting  to  approximately  $900,000  that the  majority  of
     Neocom's  selling  shareholders  had  agreed  to  assume  based  on a  debt
     assumption agreement. During 2000, the Company and the selling stockholders
     amended the original purchase  agreement whereby the Company agreed assumed
     the  approximately  $900,000 of notes  payable in exchange  for the 900,000
     share the Company's common stock.


                                       58

<PAGE>

                      SITESTAR CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

NOTE 2 - ACQUISITIONS, continued

     Neocom Microspecialists, Inc., continued
     ----------------------------------------
     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 be  attributed  to the customer
     list, which is being amortized over its three-year life, and then to excess
     of cost over fair value of net assets acquired which will be amortized over
     five years.  The  customer  list has been  determined  by  multiplying  the
     current market value per customer times the number of customer purchased at
     the time of the acquisition.

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

           Cash                                                  $      12,963
           Other current assets                                        146,719
           Equipment, net                                              360,096
           Customer list                                             2,622,000
           Excess cost over fair value of net assets acquired        2,862,307
           Other assets                                                 31,614
           Current liabilities                                        (315,705)
           Notes payable                                              (854,407)
           Capital lease obligations                                   (83,234)
                                                                  ------------

           Purchase price                                        $   4,782,353
                                                                   ===========

     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.


                                       59
<PAGE>

                      SITESTAR CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

NOTE 2 - ACQUISITIONS, continued

     Lynchburg.net, continued
     ------------------------
     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 amortized  over its  three-year  life,  and then to excess of cost
     over fair value of net assets  acquired which is amortized over five years.
     The customer list has been  determined by  multiplying  the current  market
     value per  customer  times the number of customer  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, net                                              98,710
          Customer list                                              595,000
          Excess cost over fair value of net assets acquired       1,703,741
          Current liabilities                                       (310,800)
                                                               -------------

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

     The following table presents the unaudited pro forma condensed statement of
     operations  for the year ended  December 31, 2000 and 1999 and reflects the
     results of  operations of the Company as if the  acquisitions  of Sitestar,
     Inc.,  Neocom  Microspecialists,  Inc. and Lynchburg.net had been effective
     January 1, 1999.  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.

                                                     2000           1999
                                                 ------------   ------------
           Net sales                             $  3,282,979   $  3,832,217
           Gross profit                          $  1,971,779   $  1,693,976
           Selling, general, and
             administrative expenses             $  7,172,069   $  6,629,971
           Net loss                              $ (5,649,708)  $ (5,296,335)
           Basic loss per share                  $      (0.16)  $      (0.15)


                                       60
<PAGE>

                      SITESTAR CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

NOTE 3 - SALE OF ASSETS

     On September  30, 1999,  the Company sold all of the assets  related to the
     Company's  international food distribution business,  also known as Holland
     American International  Specialties ("HAIS"). The acquirer of the assets is
     a  partnership  with  the  partners  being a group of  stockholders  of the
     Company.  Given  that  the  sale was not an  arms-length  transaction,  the
     Company had the business  valued by an  independent  appraiser to determine
     the fair value purchase price. The sales price was $900,000, which is to be
     paid  as  follows:  1)  $200,000  is to be  offset  against  the  Company's
     liability to the a stockholder,  2) $654,000 for the buyer's  assumption of
     all trade,  short-term  and  long-term  liabilities,  and 3) the  remaining
     $46,000  in the form of a note  payable  to the  Company  in  three  annual
     installments  of $15,333  each plus accrued  interest at 8% per annum.  The
     Company was  required to defer the gain on this sale until such time as the
     purchasers  are able to refinance the debt of HAIS.  During the 2nd quarter
     of 2000 the purchasers  were able to refinance the debt and the Company has
     recognized a $314,515 gain on the sale of HAIS.

     On January 8, 1999, the Company  acquired for $200,000 a 9% equity interest
     in Sierra Madre Foods,  Inc. ("SMF") formerly known as Queen  International
     Foods ("QIF") a manufacture  and wholesaler of frozen Mexican food products
     such as frozen  burritos  and  chimichangas.  The Company  acquired  its 9%
     interest    from    QIF    bankruptcy    proceedings    along    with   the
     Debtor-in-Possession as its joint venture partners.

     On  September  30,  1999,  the  Company  sold its 9% interest in SMF for an
     amount equal to the Company's investment of $200,000.  The purchaser of the
     assets is a partnership  with the partners being a group of stockholders of
     the Company.  Given that the sale was not an arms-length  transaction,  the
     Company had the business  valued by an  independent  appraiser to determine
     the fair value purchase price. The sales price of $200,000 is to be paid as
     follows:  1) $160,000  for the buyer's  assumption  of debt  related to the
     investment,  and 2) the remaining  $40,000 in the form of a note payable to
     the  Company in three  annual  installments  of $13,333  each plus  accrued
     interest at 8% per annum.

     In January  2000,  the  Company  sold  certain  assets and  liabilities  of
     Sitestar,  Inc. for $34,703 in cash plus a note receivable in the amount of
     $10,000.  The Company  recognized a gain on sale of these certain assets of
     $49,316.  The Company retained the "Sitestar"  trademark and "Sitestar.com"
     URL.



                                       61
<PAGE>


                      SITESTAR CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


NOTE 4 - PROPERTY AND EQUIPMENT

     The cost of property and  equipment  at December 31, 2000  consisted of the
     following:


         Land                                                 $     10,000
         Building                                                  213,366
         Computer equipment                                        341,996
         Furniture and fixtures                                     54,473
                                                              ------------
                                                                   619,835
         Less accumulated depreciation                            (111,826)
                                                              ------------
                                                              $    508,009
                                                              ============

     Depreciation  expense was $94,084 and $59,006 for the years ended  December
     31, 2000 and 1999, respectively.


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.




                                       62
<PAGE>


                      SITESTAR CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

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 are due on May
     1, 2001. 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
     verses 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 options 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.

     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.



                                       63
<PAGE>

                      SITESTAR CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


NOTE 7 - NOTES PAYABLE

     Notes payable at December 31, 2000 consist of the following:

         13.0% - Bank note payable in monthly interest and principal
         payments of $1,784 and balance  due  December  2002.  The
         note is guaranteed  by a stockholder of the Company  and
         secured by a deed of trust against personal  residencies
         of three stockholders and the Company's building. Also,
         the bank has a blanket lien against all other current
         and future assets of Neocom.                                 $  138,040

         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 residencies of three stockholders and the
         Company's building. Also, the bank has a blanket lien
         against all other current and future assets of Neocom.          338,780
                                                                       ---------
         Total                                                           476,820

         Less current portion                                             49,124
                                                                      ----------
         Long-term portion                                            $  427,696
                                                                      ==========

     The future principal maturities of these notes are as follows:

           Year ending December 31,
                2001                                                  $   49,124
                2002                                                     183,008
                2003                                                     244,688
                                                                      ----------
                Total                                                 $  476,820
                                                                      ==========


                                       64
<PAGE>


                      SITESTAR CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


NOTE 8 - 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
     year  ended   December   31,  2000  and  1999  was  $35,253  and   $23,119,
     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,
          2001                                   $      36,922   $      12,684
          2002                                          23,270               -
          2003                                           3,112               -
                                                 -------------   -------------


          Net Minimum Lease Payments                    63,304   $      12,684
                                                                 =============

          Less: Amounts Representing Interest          11,653
                                                 ------------
          Present Value of Net Minimum
            Lease Payments                             51,651
          Less: Current Portion                        27,809
                                                 ------------
          Long-Term Portion                      $     23,842
                                                 ============

     Included in property  and  equipment  is  capitalized  lease  equipment  of
     $152,122 with accumulated amortization of $52,112 at December 31, 2000.

     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.


                                       65
<PAGE>

                      SITESTAR CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

NOTE 8 - COMMITMENTS AND CONTINGENCIES, continued

     Neocom Acquisition
     ------------------

     In connection with the Neocom 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.
     The  purchase  price will be  adjusted,  when and if, any of the  2,000,000
     shares are issued.

     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.
     The  purchase  price will be  adjusted,  when and if, any of the  4,145,995
     shares are issued.


NOTE 9 - 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.

     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, 2000,  the
     Company's Board of Directors has not issued any Preferred Stock.

     Common Stock Splits
     -------------------
     On July 6, 1999, the Company's  Board of Directors  approved a 3-to-1 stock
     split  increasing  the  number  of shares  outstanding  from  6,200,012  to
     18,600,036.  All  applicable  share and per share data  presented have been
     adjusted for the stock splits.

     Common Stock
     ------------
     In August 1999,  three principal  stockholders  of the Company  transferred
     1,926,170 shares of their issued and outstanding  Company common stock to a
     Company employee for compensation. The Company has recorded the transaction
     as compensation  expense and additional  paid-in capital at the fair market
     value of the Company's  common stock on the date of the transfer  which was
     approximately $2,000,000.


                                       66
<PAGE>


                      SITESTAR CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

NOTE 10 - STOCKHOLDERS' EQUITY, continued

     Common Stock, continued
     -----------------------
     On December 15, 1999,  the Company  issued  4,782,353  shares of its common
     stock in connection  with the  acquisition  of Neocom valued at $4,782,353,
     which was the fair market value of the  Company's  common stock at the date
     of acquisition times the number of shares issued.

     On December 27, 1999, the Company issued 160,000 shares of its common stock
     for a 9% investment in Qliq-on  Corporation  valued at $160,000,  which was
     the fair market value of the Company's common stock on the transaction date
     times the number of shares issued.

     During 1999,  the Company sold 53,362 shares of common stock to an investor
     for $50,000 and received  $110,275 as a capital  contribution from existing
     stockholders. Also during 1999, the Company issued 564,075 shares of common
     stock for  services  valued at  $549,242.  The issuance of these shares was
     valued at the fair market value of the  Company's  common stock at the date
     shares were issued.

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

     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 of
     which 955,804  shares were for the conversion of $77,559 of advances due to
     an officer of the Company.

     On November 22, 2000, the Company issued  12,437,985 shares of common stock
     for the acquisition of FRE Enterprises, Inc. 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.


                                       67
<PAGE>
                      SITESTAR CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

NOTE 10 - INCOME TAXES

     The  reconciliation  of the  effective  income  tax  rate  to  the  federal
     statutory rate as of December 31, 2000 and 1999 is as follows:

                                                    2000              1999
                                             ------------------  ---------------
         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, 2000 are as follows:

         Loss carry forwards                                  $   3,348,000
         Less valuation allowance                                (3,348,000)
                                                              -------------
                                                              $           -
                                                              =============

     At December 31, 2000,  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, 2000 and 1999, was
     an increase of $2,040,000 and $1,145,000,  respectively. Net operating loss
     carry forwards of approximately $9,000,000 expire starting in 2012.

NOTE 11 - RELATED PARTY TRANSACTIONS

     Stockholder Advances
     --------------------
     A majority  stockholder of the Company has advanced  $227,609 for operating
     funds.  An officer of  Sitestar,  Inc.  advanced  the  Company  $47,150 for
     operating funds. The advances are non-interest bearing and due on demand.

     Note Payable - Stockholder
     --------------------------
     As part of the acquisition of Neocom, the Company assumed six notes payable
     to the former owners, who are current  stockholders of the Company,  in the
     amount of  $307,388.  During 2000,  two notes  representing  $100,000  plus
     accrued  interest  of $13,398  were  converted  into  107,844  share of the
     Company's common stock. The remaining four notes bear interest ranging from
     8.13% to 10.0%.  Principal  payments on the notes in 2001,  2002,  2003 and
     2004 are $136,874, $19,764, $19,764 and $11,780, respectively.


                                       68
<PAGE>
                      SITESTAR CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

NOTE 11 - RELATED PARTY TRANSACTIONS, continued

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

NOTE 12 - 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  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,
     2000 and 1999:
<TABLE>
<CAPTION>
                                                  December 31, 2000
                              -------------------------------------------------------------------
                               Corporate      Internet     Development    Retail     Consolidated
                             -----------    ------------  ------------   ---------  -------------
      <S>                    <C>            <C>           <C>            <C>        <C>
      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
      Identifiable assets    $   983,886    $  4,139,412  $     32,880   $ 278,815  $   5,434,993
</TABLE>


                                       69

<PAGE>
                      SITESTAR CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


NOTE 12 - SEGMENT INFORMATION, continued

<TABLE>
<CAPTION>
                                                  December 31, 1999
                             --------------------------------------------------------------------
                               Corporate        Internet   Development      Retail   Consolidated
                             -----------    ------------  ------------   ---------  -------------
      <S>                    <C>            <C>           <C>            <C>        <C>
      Revenue                $         -    $    203,138  $     20,611   $       -  $     223,749
      Operating loss         $(3,119,895)   $   (219,310) $    (18,805)  $       -  $  (3,358,010)
      Depreciation and
        amortization         $    42,685    $     75,507  $        583   $       -  $     118,775
      Interest expense       $         -    $     13,679  $          -   $       -  $      13,679
      Identifiable assets    $   853,625    $  5,990,952  $     44,156   $       -  $   6,888,733

</TABLE>












                                       70
<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      32     Chairman of the Board and Managing
                                        Director

     Clinton J. Sallee          28     President and Chief Executive Officer

     Kevorak Zoryan             27     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.

                                       71
<PAGE>

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
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.

KEVORK A.  ZORYAN has been a Director of the  Company  since July of 1999.  From
March 1997 to July 1999, Mr. Zoryan served on the acquisition team of the Morgan
Stanley  Real Estate Fund, a leading  international  private  equity real estate
investment fund. From March 1995 to May 1996, Mr. Zoryan served as an analyst of
the JE Robert Companies, and from June 1993 to February 1995, as a staff analyst
with Ernst & Young. Mr. Zoryan co-founded  Sallee Zoryan, a concept  development
firm in 1996,  and  currently  serves as its Partner.  Mr. Zoryan earned a BS in
Business  Administration  from the Marshall School of Business at the University
of Southern California in 1994. He currently attends the Harvard Business School
as a member of the MBA Class of 2001.

     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, 2000, 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 31, 2000.

<TABLE>
<CAPTION>
                                                                 Other       Long-term
     Name and                                                   Annual      Compensation
Principal Position        Year    Salary ($)    Bonus ($)    Compensation      Awards
------------------        ----    ----------    ---------    ------------   ------------
<S>                       <C>       <C>            <C>            <C>           <C>
Frederick T.              2000      120,000        68              -             -
Manlunas (1)              1999      91,500          -              -             -
Chairman of the           1998      96,000          -              -             -
Board

Clinton J.                2000      120,000      226,200           -             -
Sallee (1)                1999         -            -              -             -
President & Chief         1998         -            -              -             -
Executive Officer
</TABLE>

                                       72
<PAGE>

----------
(1)  In 2000,  Mr.  Manlunas  was paid a cash  salary  of  $6,500  and was given
     5,584,746  shares of our common stock valued at $268,068 as payment for the
     remainder  of his  2000  salary  and  bonus  and for  unpaid  1999 and 1998
     salaries.

(2)  In 2000,  Mr.  Sallee  was paid a cash  salary  of  $13,932  and was  given
     6,584,746  shares of our common stock valued at $332,268 as payment for the
     remainder of his 2000 salary and bonus.


ITEM 11.  SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth certain  information as of December 31, 2000
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)  the 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                    9,579,805                  15.41%
16133 Ventura Blvd., Suite 635
Encino, CA  91436

Clinton J. Sallee                        8,410,916                  13.52%
16133 Ventura Blvd., Suite 635
Encino, CA  91436

Kevorak Zoryan                                  -0-                    *
16133 Ventura Blvd., Suite 635
Encino, CA  91436

Frank and Julie Erhartic                12,437,985                  20.00%
7109 Timberlake Road
Lynchburg, VA  24502

All  directors  and  officers           17,990,721                  28.93%
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 62,175,638  shares of common stock outstanding
     as of December 31, 2000.

                                       73
<PAGE>


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.

         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.

                                       74
<PAGE>

         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.


ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K


                                  EXHIBIT INDEX

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

Exhibit                                  Description                       Filed
-------                                  -----------                       -----

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)    *

                                       75
<PAGE>

Exhibit                                  Description                       Filed
-------                                  -----------                       -----

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)                      *

21        Subsidiaries of the Registrant                                     *

99        Lease for Corporate Office                                         *


     *        Previously filed.
     F        Filed herewith



Reports filed on Form 8-K


      On a Current  Report on Form 8-K filed on  December  7, 2000 we  announced
that effective  November 22, 2000, we have  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 common stock that we have
agreed to issue on the third  anniversary  of the  acquisition  based on certain
contingencies.




                                       76
<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

                                         /s/ FREDERICK T. MANLUNAS
                                     By: -------------------------------
                                         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
---------------------------
   Frederick T. Manlunas        Chairman of the Board           April 16, 2001


   /s/ CLINTON J. SALLEE
---------------------------
     Clinton J. Sallee          President and Chief Executive   April 16, 2001
                                 Officer

   /s/ KEVORAK ZORYAN
---------------------------
       Kevorak Zoryan           Director                        April 16, 2001









                                       77
<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
23.2            Consent of Merdinger Fruchter Rosen & Corso, P.C.                                     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