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

                                   FORM 10-QSB
                                   (Mark One)

        [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001

      [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

       For the transition period from ________________ to _______________

                                    000-27763
                            (Commission file number)

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

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

             15303 VENTURA BLVD., SUITE 1510, SHERMAN OAKS, CA 91403
                    (Address of principal executive offices)

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

              16133 Ventura Boulevard, Suite 635, Encino, CA 91436
              (Former name, former address and former fiscal year,
                         if changed since last report)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 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 [ ]


                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity. As of August 7, 2001 - 81,553,098 shares of Common Stock

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


<PAGE>


                              SITESTAR CORPORATION
                                      Index

                                                                         Page
                                                                        Number

PART I.    FINANCIAL INFORMATION

Item 1.    Financial Statements

           Condensed Consolidated Balance Sheet as of June 30, 2001       2-3

           Condensed Consolidated Statements of Operations for
           the three months ended June 30, 2001 and 2000                   4

           Condensed Consolidated Statements of Operations for
           the six months ended June 30, 2001 and 2000                     5

           Condensed Consolidated Statements of Cash Flows for
           the six months ended June 30, 2001and 2000                     6-7
           Notes to Condensed Consolidated Financial Statements           8-9

Item 2.    Management's Discussion and Analysis of Financial
           Condition and Results of Operations                          10-14

Part II.   OTHER INFORMATION

Item 1.    Legal Proceedings                                              14

Item 2.    Change in Securities and Use of Proceeds                       14

Item 3.    Defaults Upon Senior Securities                                15

Item 4.    Submission of Matters to a Vote of Security Holders            15

Item 5.    Other Information                                              15

Item 6.    Exhibits and Reports on Form 8-K                               15

SIGNATURES                                                                15

Part III.  EXHIBITS


                                       1
<PAGE>


PART I.    FINANCIAL INFORMATION

Item 1.    Financial Statements

                      SITESTAR CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                  JUNE 30, 2001


                                     ASSETS

CURRENT ASSETS
   Cash and cash equivalents                                  $        90,996
   Marketable securities                                              593,000
   Cash deposit for acquisition                                       150,000
   Accounts receivable, net                                           230,541
   Inventory                                                           86,629
   Other current assets                                               345,680
                                                              ---------------

     Total current assets                                           1,496,846

PROPERTY AND EQUIPMENT, net                                           455,506
DEFERRED LOAN COSTS                                                    10,000
CUSTOMER LIST, net                                                    936,466
EXCESS OF COST OVER FAIR VALUE OF
   NET ASSETS ACQUIRED, net                                         1,947,767
INVESTMENTS                                                           210,000
                                                              ---------------

TOTAL ASSETS                                                  $     5,056,585
                                                              ===============








       See the accompanying notes to the consolidated financial statements

                                       2
<PAGE>



                      SITESTAR CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED BALANCE SHEET, Continued
                                  JUNE 30, 2001

                      LIABILITIES AND STOCKHOLDERS' EQUITY


CURRENT LIABILITIES
   Accounts payable and accrued expenses                      $       272,908
   Deferred revenue                                                   118,691
   Convertible debenture                                              564,057
   Note payable - stockholders, current portion                       113,770
   Notes payable, current portion                                      49,124
   Capital lease obligations, current portion                          30,191
                                                              ---------------
       Total current liabilities                                    1,148,741

NOTES PAYABLE - STOCKHOLDERS, less current portion                     43,551
NOTES PAYABLE, less current portion                                   398,071
CAPITAL LEASE OBLIGATIONS, less current portion                        18,106
                                                              ---------------

TOTAL LIABILITIES                                                   1,608,469
                                                              ---------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
   Preferred Stock, $.001 par value, 10,000,000 shares
     authorized, 0 shares issued and outstanding                            -
   Common Stock, $.001 par value, 300,000,000 shares
    authorized, 80,371,696 shares issued and outstanding               80,372
   Additional paid-in capital                                      13,296,931
   Accumulated deficit                                             (9,929,187)
                                                              ----------------

     Total stockholders' equity                                     3,448,116
                                                              ---------------
TOTAL LIABILITIES AND
   STOCKHOLDERS' EQUITY                                       $     5,056,585
                                                              ===============



       See the accompanying notes to the consolidated financial statements

                                       3
<PAGE>


                      SITESTAR CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                FOR THE THREE MONTHS ENDED JUNE 30, 2001 AND 2000

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


REVENUE                                       $       919,959   $       386,783

COST OF REVENUE                                       386,653           196,719
                                              ---------------   ---------------

GROSS PROFIT                                          533,306           190,064

SELLING, GENERAL AND
 ADMINISTRATIVE EXPENSES                            1,081,634           672,844
                                              ---------------   ---------------

LOSS FROM OPERATIONS                                 (548,328)         (482,780)

OTHER INCOME (EXPENSES)
  Gain on sale of assets                                    -           314,515
  Other income                                         13,313                 -
  Increase in market value of marketable
   securities                                          89,446                 -
  Interest expense                                    (65,601)          (65,634)
                                              ---------------   ---------------

LOSS BEFORE INCOME TAXES                             (511,170)         (233,899)

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

NET LOSS                                      $      (511,170)  $      (233,899)
                                              ===============   ===============

BASIC AND DILUTED LOSS PER SHARE              $         (0.01)  $         (0.01)
                                              ===============   ===============

WEIGHTED AVERAGE SHARES
     OUTSTANDING - BASIC AND DILUTED               68,749,662        24,358,223
                                              ===============   ===============



       See the accompanying notes to the consolidated financial statements

                                       4
<PAGE>



                      SITESTAR CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000

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


REVENUE                                       $     1,832,133   $       816,387

COST OF REVENUE                                       714,633           436,385
                                              ---------------   ---------------

GROSS PROFIT                                        1,117,500           380,002

SELLING, GENERAL AND
 ADMINISTRATIVE EXPENSES                            1,813,779         1,346,667

LOSS FROM OPERATIONS OF BUSINESS
 TRANSFERRED UNDER CONTRACTUAL
 OBLIGATIONS                                                -            42,233
                                              ---------------   ---------------

LOSS FROM OPERATIONS                                 (696,279)       (1,008,898)

OTHER INCOME (EXPENSES)
  Gain on sale of assets                                    -           363,831
  Other income                                         96,517                 -
  Increase in market value of marketable
   securities                                         130,688                 -
  Interest expense                                   (168,374)         (103,203)
                                              ---------------   ---------------

LOSS BEFORE INCOME TAXES                             (637,448)         (748,270)

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

NET LOSS                                      $      (637,448)  $      (748,270)
                                              ===============   ===============

BASIC AND DILUTED LOSS PER SHARE              $         (0.01)  $         (0.03)
                                              ===============   ===============

WEIGHTED AVERAGE SHARES
     OUTSTANDING - BASIC AND DILUTED               65,669,261        24,259,024
                                              ===============   ===============

       See the accompanying notes to the consolidated financial statements

                                       5
<PAGE>
<TABLE>
<CAPTION>
                      SITESTAR CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000

                                                            2001           2000
                                                        ------------   ------------
<S>                                                     <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                             $   (637,448)  $   (748,270)
   Adjustments to reconcile net loss
   to net cash used in operating activities:
   Depreciation and amortization expense                     566,928        764,218
   Amortization of debt financing costs                       97,315         51,202
   Gain on the sale of assets                                      -       (363,831)
   Increase in market value of marketable securities        (130,688)             -
   Loss from operations of business transferred
     under contractual arrangements                                -         42,233
   Stock issued in lieu of compensation
      and professional fees                                  450,377        120,000
   Value of common shares cancelled                          (96,517)             -
   Net purchases of marketable securities                    101,499              -
   (Increase) decrease in:
     Accounts receivable                                     (46,686)       (34,016)
     Inventory                                                 6,234              -
     Other assets                                             56,270        (20,194)
   Increase (decrease) in:
     Accounts payable and accrued expenses                  (228,721)        71,931
     Deferred revenue                                       (103,350)        (1,655)
     Advances from stockholder                                     -              -
                                                        ------------   ------------
Net cash provided by (used in) operating activities           35,213       (118,382)
                                                        ------------   -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment                         (7,418)       (21,587)
   Deposit paid for acquisition                             (150,000)             -
   Proceeds from sale of assets                                    -         34,703
                                                        ------------   ------------
Net cash provided by (used in) investing activities         (157,418)        13,116
                                                        -------------  ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Advances from stockholder, net                                  -         24,450
   Proceeds from convertible debenture                             -         500,00
   Payment of loan fees                                            -        (50,000)
   Repayment of notes payable                                (29,625)       (27,906)
   Repayment of notes payable - stockholders                 (30,861)       (14,836)
   Payment on capital lease obligation                       (15,607)       (27,428)
                                                        -------------  -------------
Net cash provided by (used in) financing activities          (76,093)      (404,280)
                                                        -------------  -------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS        (198,298)       299,014
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD              289,294         45,328
                                                        ------------   ------------
CASH AND CASH EQUIVALENTS - END OF PERIOD               $     90,996   $    344,342
                                                        ============   =============
</TABLE>
       See the accompanying notes to the consolidated financial statements

                                       6
<PAGE>


                      SITESTAR CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
           FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000 (continued)

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

During the six months  ended June 30, 2001 and 2000,  the Company paid no income
taxes and interest of approximately $ 33,000 and $44,000, respectively.


NON-CASH INVESTING AND FINANCING TRANSACTIONS:

During the six months ended June 30, 2000, the Company converted $377,372 of the
convertible debenture into 812,353 shares of common stock.

During the six months ended June 30, 2001, the Company converted $192,443 of the
convertible  debenture into 4,581,984  shares of common stock,  issued 2,193,674
shares of common  stock for  professional  services  valued at  $93,377,  issued
7,140,000 shares of common stock for officers' salaries of $357,000 and canceled
1,741,418 shares of common stock valued at $96,517. In addition,  during the six
months ended June 30, 2001, the Company  entered into capital lease  obligations
of $12,253.






















                                       7
<PAGE>


                              SITESTAR CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION

The unaudited Condensed  Consolidated Financial Statements have been prepared by
Sitestar  Corporation  (the "Company" or "Sitestar"),  pursuant to the rules and
regulations of the Securities and Exchange Commission. The information furnished
herein reflects all  adjustments  (consisting of normal  recurring  accruals and
adjustments)  which are,  in the  opinion  of  management,  necessary  to fairly
present the operating results for the respective  periods.  Certain  information
and  footnote  disclosures  normally  present in annual  consolidated  financial
statements prepared in accordance with generally accepted accounting  principles
have been omitted pursuant to such rules and regulations. The results of the six
months ended June 30, 2001 are not  necessarily  indicative of the results to be
expected for the full year ending December 31, 2001. These financial  statements
should be read in conjunction with the Company's  consolidated audited financial
statements  and related  footnotes for the year ended December 31, 2000 included
in the Company's annual report on Form 10-KSB.


NOTE 2 - EARNINGS PER SHARE

In 1997, the Financial  Accounting  Standard Board ("FASB") issued  Statement of
Financial  Accounting Standards ("SFAS") No. 128, "Earnings per Share." SFAS No.
128 replaced the  previously  reported  primary and fully  diluted  earnings per
share with basic and diluted  earnings per share.  Unlike  primary  earnings per
share,  basic  earnings  per share  excludes  any  dilutive  effects of options,
warrants, and convertible securities. Diluted earnings per share is very similar
to the previously  reported fully diluted earnings per share. Basic earnings per
share is computed using the weighted-average number of common shares outstanding
during the period. Common equivalent shares are excluded from the computation if
their effect is  anti-dilutive.  As of June 30, 2001 the Company has outstanding
500,000 warrants to purchase shares of common stock at $0.77.



                                       8
<PAGE>


                              SITESTAR CORPORATION
         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

NOTE 3 - CONVERTIBLE DEBENTURE

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.

As of June  30,  2001,  the  holder  of the  debentures  converted  $435,943  in
principal  and  $36,533  of  accrued   interest  into   6,924,903  and  652,363,
respectively, shares of the Company's common stock.

NOTE 4 - ACQUISITION AND DISPOSITION

On July 1, 2001, the Company acquired Advanced Internet  Services,  Inc. a North
Carolina   corporation   which  is  a   successor   in   interest  to  two  sole
proprietorships  one having the same name as the  corporation and the other with
the name Professional Data Systems  (collectively  "ADVI") for $331,418 worth of
Sitestar  Corporation  common stock;  $150,000 cash and a  non-interest  bearing
promissory  note payable in 24  quarterly  installments  of $48,986.  ADVI is an
internet service provider located in Mt. Airy, North Carolina.

On July 16, 2001 the Company successfully spun off the content services division
of its wholly  owned  subsidiary,  Sitestar.net,  Inc.  into a  separate  public
company, PageActive Holdings Inc. ("PAHI"), focused in content development.  The
Company  owns  90% of  PAHI  and,  therefore,  will  consolidate  the  financial
statements of PAHI.



                                       9
<PAGE>


Item 2.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations

GENERAL

The following  discussion and analysis  should be read in  conjunction  with the
Company's  consolidated  financial statements and related footnotes for the year
ended  December  31, 2000  included  in its Annual  Report on Form  10-KSB.  The
discussion  of results,  causes and trends  should not be construed to imply any
conclusion that such results or trends will necessarily continue in the future.

OVERVIEW

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

o        Internet access services;
o        Web design services;
o        Web hosting services;
o        End to end e-commerce solutions;
o        Online marketing consulting; and
o        Management of mission critical Internet applications.

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

                                       10
<PAGE>

We just recently acquired Advanced Internet  Services,  Inc. ADVI is an internet
service  provider  located in Mt. Airy,  North Carolina.  This  acquisition will
provide us with an expanded geographic  footprint,  broader management depth and
enhanced profitability.

We  successfully  spun off the content  services  division  of our wholly  owned
subsidiary,  Sitestar.net,  Inc.  into a  separate  public  company,  PageActive
Holdings Inc.  focused in content  development.  We own 90% of  PageActive  and,
therefore, will consolidate the financial statements of PageActive.

RESULTS OF OPERATION

Three months Ended June 30, 2001 vs. June 30, 2000
--------------------------------------------------

REVENUES. Revenue for the three months ended June 30, 2001 increased by $533,176
or 137.8% from $386,783 for the three months ended June 30, 2000 to $919,959 for
the same  period in 2001.  The  increase is  attributed  to the  acquisition  of
Lynchburg.net in November 2000 which generated revenue of approximately $405,000
for the three months ended June 30, 2001. The revenue from  Sitestar.net for the
three months ended June 30, 2001 also  increase by  approximately  $128,000 when
compared to the same period in 2000.

COST OF  REVENUES.  Costs of revenue  for the three  months  ended June 30, 2001
increased by $189,934 or 96.6% from $196,719 for the three months ended June 30,
2000 to $386,653 for the same period in 2001. Cost of revenue as a percentage of
revenue  decreased  from 50.9% for the three months ended June 30, 2000 to 42.0%
for the three months ended June 30, 2001.  The decrease is  attributed  to lower
communication  costs. We were able to negotiate lower  communications costs from
our major supplier in the latter half of 2000 which has  significantly  improved
our gross margin.

SELLING,  GENERAL  AND  ADMINISTRATIVE.   Selling,  general  and  administrative
expenses for the three months ended June 30, 2001 increased by $408,790 or 60.8%
from  $672,844 for the three months  ended June 30, 2000 to  $1,081,634  for the
same  period  in  2001.   The  largest   component   of  selling,   general  and
administrative  expenses  is  depreciation  and  amortization  that  amounted to
$382,114  for the three months June 30, 2000 and $285,426 for the same period in
2001. The decrease in depreciation  and amortization is due to the write down of
intangible  assets at  December  31,  2000 of  $1,860,000  related  to assets of
Sitestar.net which has resulted in a decrease in amortization going forward. The
decrease in  amortization  of  intangible  assets at  Sitestar.net  is offset by
increase in amortization of intangible  assets  established with the purchase of
Lynchburg.net in November 2000. Excluding depreciation and amortization, selling
general and  administrative  expenses increased by $505,478 for the three months
ended June 30, 2001 as compared to the same period in 2000. This increase is due
to the operating expenses associated with Lynchburg.net,  officers' salaries and
professional fees.

                                       11
<PAGE>

GAIN ON SALE OF ASSETS.  During the three months June 30,  2000,  we sold all of
the assets related to our international food distribution  business,  also known
as Holland  American  International  Specialties.  We  recognized a gain on such
sales of $314,515. No such assets sale occurred in 2001.

OTHER INCOME. During the three months ended June 30, 2001, a certain stockholder
surrendered a total of 283,856 shares of our common stock valued at $13,313.  We
determined the value of the shares  surrendered based on the market value of the
common stock on the date of surrender.  The  surrendered  shares were originally
issued in connections with our acquisition of Sitestar, Inc. in July 1999.

INCREASE IN VALUE OF MARKETABLE  SECURITIES.  During the three months ended June
30, 2001, we recognized  $89,446 in recognized gains on the increase in value of
marketable  securities.  We have  classified  the  marketable  securities in our
portfolio as trading securities. No such gains were present in 2000.

INTEREST  EXPENSE.  Interest  expense for the three  months  ended June 30, 2001
decreased  by $33 from  $65,634  for the three  months  ended  June 30,  2000 to
$65,601 for the same period in 2001.


Six months Ended June 30, 2001 vs. June 30, 2000
------------------------------------------------

REVENUES. Revenue for the six months ended June 30, 2001 increased by $1,015,746
or 124.4% from $816,387 for the six months ended June 30, 2000 to $1,832,133 for
the same  period in 2001.  The  increase is  attributed  to the  acquisition  of
Lynchburg.net in November 2000 which generated revenue of approximately $785,000
for the six months ended June 30, 2001.  The revenue from  Sitestar.net  for the
six months  ended June 30, 2001 also  increase by  approximately  $230,000  when
compared to the same period in 2000.

COST OF  REVENUES.  Costs of  revenue  for the six months  ended  June 30,  2001
increased  by $278,248 or 63.8% from  $436,385 for the six months ended June 30,
2000 to $714,633 for the same period in 2001. Cost of revenue as a percentage of
revenue decreased from 53.5% for the six months ended June 30, 2000 to 39.0% for
the six  months  ended  June 30,  2001.  The  decrease  is  attributed  to lower
communication  costs. We were able to negotiate lower  communications costs from
our major supplier in the latter half of 2000 which has  significantly  improved
our gross  margin.  In the first  quarter of 2001, we received a credit from our
communications   supplier  of  approximately  $49,700  for  a  retroactive  rate
adjustment.  Without  this  adjustment  cost of revenue for the six months ended
June 30, 2001 as a percentage of revenue would have been 41.7%.

SELLING,  GENERAL  AND  ADMINISTRATIVE.   Selling,  general  and  administrative
expenses for the six months  ended June 30, 2001  increased by $467,112 or 34.7%
from  $1,346,667  for the six months ended June 30, 2000 to  $1,813,779  for the
same  period  in  2001.   The  largest   component   of  selling,   general  and
administrative  expenses  is  depreciation  and  amortization  that  amounted to
$764,218  for the six months June 30, 2000 and  $566,928  for the same period in
2001. The decrease in depreciation  and amortization is due to the write down of
intangible  assets at  December  31,  2000 of  $1,860,000  related  to assets of


                                       12
<PAGE>

Sitestar.net which has resulted in a decrease in amortization going forward. The
decrease in  amortization  of  intangible  assets at  Sitestar.net  is offset by
increase in amortization of intangible  assets  established with the purchase of
Lynchburg.net in November 2000. Excluding depreciation and amortization, selling
general and  administrative  expenses  increased  by $664,402 for the six months
ended June 30, 2001 as compared to the same period in 2000. This increase is due
to the operating expenses associated with Lynchburg.net,  officers' salaries and
professional fees.

GAIN ON SALE OF ASSETS.  During the six months June 30,  2000,  we sold  certain
assets of our Sitestar,  Inc. division and sold all of the assets related to our
international  food  distribution  business,  also  known  as  Holland  American
International  Specialties.  We recognized a gain on both sales of $363,831.  No
such assets sale occurred in 2001.

OTHER INCOME.  During the six months ended June 30, 2001,  certain  stockholders
surrendered  a total of 1,741,418  shares of our common stock valued at $96,517.
We determined the value of the shares  surrendered  based on the market value of
the  common  stock  on the  date  of  surrender.  The  surrendered  shares  were
originally issued in connections with our acquisition of Sitestar,  Inc. in July
1999.

INCREASE IN VALUE OF MARKETABLE SECURITIES. During the six months ended June 30,
2001,  we recognized  $130,688 in  recognized  gains on the increase in value of
marketable  securities.  We have  classified  the  marketable  securities in our
portfolio as trading securities. No such gains were present in 2000.

INTEREST  EXPENSE.  Interest  expense  for the six months  ended  June 30,  2001
increased  by $65,171 or 63.1% from  $103,203  for the six months ended June 30,
2000 to  $168,374  for the  same  period  in 2001.  The  increase  is  primarily
attributed to the amortization of financing cost of $97,315  associated with the
convertible  debentures  offset  by a  reduction  of  interest  expense  at  our
Sitestar.net subsidiary as a result of the pay down of debt.


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.

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<PAGE>

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.

As of June  30,  2001,  the  holder  of the  debentures  converted  $435,943  in
principal  and  $36,533  of  accrued   interest  into   6,924,903  and  652,363,
respectively,  shares  of  the  Company's  common  stock.  The  holders  of  the
debentures also intend to convert the remaining  principal and accrued  interest
into common stock.

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.



Part II.   OTHER INFORMATION

Item 1.    Legal Proceedings

None


Item 2.    Change in Securities and Use of Proceeds

None


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<PAGE>

Item 3.    Defaults Upon Senior Securities

None


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

Not applicable


Item 5.    Other Information

Not applicable


Item 6.    Exhibits and Reports on Form 8-K

(a)      Exhibits

None

(b)      Reports on Form 8-K

None


                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                              SITESTAR CORPORATION



                          By: /s/ Frederick T. Manlunas
                              --------------------------
                              Frederick T. Manlunas
                              Chairman of the Board


Date:  August 13, 2001



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