**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-Q**




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




**For
      the quarterly period ended September 30, 2008**




o    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**
              (State
                or other jurisdiction of
              incorporation
                or organization)
            
            **88-0397234**
              (I.R.S.
                Employer Identification No.)




**7109
      Timberlake Road, Lynchburg, VA  24502**


(Address
      of principal executive offices)




**(434)
      239-4272**


(Issuer's
      telephone number)


N/A


(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 of 1934 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
xNo
o





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      the definitions of “large accelerated filer,” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act.




Large
      Accelerated Filer o Accelerated
      Filer o Non-Accelerated Filer
      (Do not check if a smaller reporting Company) o Smaller Report Company x




Indicate
      by check mark whether the registrant is a shell company (as defined by Rule
      12b-2 of the Exchange Act).


Yes
oNo
x









**SITESTAR
      CORPORATION**




Index




Page
                  NumberPART
                  I. FINANCIAL INFORMATIONItem
                  1. Financial StatementsCondensed
                  Consolidated Balance Sheets as of September 30, 2008 (unaudited)
                  and
                  December 31,2007
                  (audited)
              
              
              3-4Condensed
                  Consolidated Statements of Income for the three months ended September
                  30,
                  2008 and 2007 (unaudited)
              
              
              5Condensed
                  Consolidated Statements of Income for the nine months ended September
                  30,
                  2008 and 2007 (unaudited)
              
              
              6Condensed
                  Consolidated Statements of Cash Flows for the nine months ended
                  September
                  30, 2008 and 2007 (unaudited)
              
              
              7-8Notes
                  to unaudited Condensed Consolidated Financial Statements
              
              
              9-27Item
                  2. Management's Discussion and Analysis
              
              
              28-35Item
                  3. Controls and Procedures
              
              
              35-36Part
                  II. OTHER INFORMATION
              
              
              37Item
                  1. Legal Proceedings
              
              
              37Item
                  2. Unregistered Sales of Equity Securities and Use of Proceeds
              
              
              37Item
                  3. Defaults Upon Senior Securities
              
              
              37Item
                  4. Submission of Matters to a Vote of Security Holders
              
              
              37Item
                  5. Other Information
              
              
              37Item
                  6. Exhibits
              
              
              37-38SIGNATURES
              
              
              39




2





**PART
      I. FINANCIAL INFORMATION**




**Item
      1.****Financial
      Statements**




**SITESTAR
      CORPORATION AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


**SEPTEMBER
      30, 2008 AND DECEMBER 31, 2007**




**ASSETS**




2008
            
            2007(Unaudited)
            
            (Audited)CURRENT
                ASSETSCash
                and cash equivalents
            
            $
            289,195
            
            $
            232,249Accounts
                receivable, net of allowance of $53,690and
                $22,641
            
            
            682,519
            
            
            299,863Prepaid
                expenses
            
            
            1,445
            
            
            16,529Total current assets
            
            
            973,159
            
            
            548,641PROPERTY
                AND EQUIPMENT, net
            
            
            237,743
            
            
            236,782CUSTOMER
                LIST, net of accumulatedamortization
                of $7,279,031 and $5,237,054
            
            
            4,373,981
            
            
            5,480,635GOODWILL,
                net of impairment
            
            
            1,288,559
            
            
            1,288,559OTHER
                ASSETS
            
            
            605,214
            
            
            677,267TOTAL
                ASSETS
            
            $
            7,478,656
            
            $
            8,231,884




See
      the
      accompanying notes to the unaudited condensed consolidated financial
      statements.




3





**SITESTAR
      CORPORATION AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS, continued**


**SEPTEMBER
      30, 2008 AND DECEMBER 31, 2007**




**LIABILITIES
      AND STOCKHOLDERS’ EQUITY**




2008
            
            2007(Unaudited)
            
            (Audited)CURRENT
                LIABILITIESAccounts
                payable
            
            $
            22,408
            
            $
            78,713Accrued
                expenses
            
            
            106,349
            
            
            138,021Deferred
                revenue
            
            
            1,265,030
            
            
            1,361,606Notes
                payable
            
            
            458,879
            
            
            1,268,866Total
                current liabilities
            
            
            1,852,666
            
            
            2,847,206NOTES
                PAYABLE, less current portion
            
            
            990,615
            
            
            1,694,836NOTES
                PAYABLE - STOCKHOLDERS, less current portion
            
            
            539,281
            
            
            686,687TOTAL
                LIABILITIES
            
            
            3,382,562
            
            
            5,228,729STOCKHOLDERS'
                EQUITYPreferred
                Stock, $.001 par value, 10,000,000 sharesauthorized,
                0 shares issued and outstanding
            
            
            —
            
            
            —Common
                stock, $.001 par value, 300,000,000 sharesauthorized,
                91,326,463 and 91,326,463 shares issued andoutstanding
                on September 30, 2008 December 31,2007 respectively
            
            
            91,326
            
            
            91,326Additional paid-in capital
            
            
            13,880,947
            
            
            13,880,947Treasury stock, $.001 par value, 2,955,147 common shareson
                September 30,  2008 and December 31, 2007
            
            
            (63,030
            )
            
            (63,030
            )Accumulated
                deficit
            
            
            (9,813,149
            )
            
            (10,906,088
            )Total
                stockholders’ equity
            
            
            4,096,094
            
            
            3,003,155TOTAL
                LIABILITIES AND STOCKHOLDERS' EQUITY
            
            $
            7,478,656
            
            $
            8,231,884




See
      the
      accompanying notes to the unaudited condensed consolidated financial
      statements.




4




**SITESTAR
      CORPORATION AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF INCOME**


**FOR
      THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007**


**(UNAUDITED)**




2008
            
            2007REVENUE
            
            $
            2,485,294
            
            $
            1,481,886COST
                OF REVENUE
            
            
            709,708
            
            
            472,842GROSS
                PROFIT
            
            
            1,775,586
            
            
            1,009,044OPERATING
                EXPENSES:Selling
                general and administrative expenses
            
            
            1,351,087
            
            
            782,606INCOME
                FROM OPERATIONS
            
            
            424,499
            
            
            226,438OTHER
                INCOME (EXPENSES)
            
            
            (32,439
            )
            
            (41,694
            )INCOME
                BEFORE INCOME TAXES
            
            
            392,060
            
            
            184,744INCOME
                TAXES
            
            
            —
            
            
            —NET
                INCOME
            
            $
            392,060
            
            $
            184,744BASIC
                AND DILUTED EARNINGS PER SHARE
            
            $
            0.00
            
            $
            0.00WEIGHTED
                AVERAGE SHARESOUTSTANDING
                - BASIC AND DILUTED
            
            
            91,326,463
            
            
            88,063,305




See
      the
      accompanying notes to the unaudited condensed consolidated financial
      statements.





5




**SITESTAR
      CORPORATION AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF INCOME**


**FOR
      THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007**


**(UNAUDITED)**




2008
            
            2007REVENUE
            
            $
            7,644,538
            
            $
            4,450,600COST
                OF REVENUE
            
            
            2,097,509
            
            
            1,403,848GROSS
                PROFIT
            
            
            5,547,029
            
            
            3,046,752OPERATING
                EXPENSES:Selling
                general and administrative expenses
            
            
            4,335,119
            
            
            2,336,151INCOME
                FROM OPERATIONS
            
            
            1,211,910
            
            
            710,601OTHER
                INCOME (EXPENSES)
            
            
            (118,971
            )
            
            (127,769
            )INCOME
                BEFORE INCOME TAXES
            
            
            1,092,939
            
            
            582,832INCOME
                TAXES
            
            
            —
            
            
            —NET
                INCOME
            
            $
            1,092,939
            
            $
            582,832BASIC
                AND DILUTED EARNINGS PER SHARE
            
            $
            0.01
            
            $
            0.01WEIGHTED
                AVERAGE SHARESOUTSTANDING
                - BASIC AND DILUTED
            
            
            91,326,463
            
            
            88,063,305




See
      the
      accompanying notes to the unaudited condensed consolidated financial
      statements.




6





**SITESTAR
      CORPORATION AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**FOR
      THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007**


**(UNAUDITED)**





2008
            
            2007CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                income
            
            $
            1,092,939
            
            $
            582,832Adjustments
                to reconcile net income to net cash provided by operating
                activities:Depreciation
                and amortization expense
            
            
            2,223,989
            
            
            1,011,012Bad
                debt expense
            
            
            31,048
            
            
            7,987(Increase)
                decrease in:Accounts
                receivable
            
            
            (413,704
            )
            
            (87,599
            )Prepaid
                expenses
            
            
            15,084
            
            
            (7,836
            )Increase
                (decrease) in:Accounts
                payable
            
            
            (56,305
            )
            
            (60,196
            )Accrued
                expenses
            
            
            (31,673
            )
            
            (256,564
            )Deferred
                revenue
            
            
            (96,576
            )
            
            (40,301
            )Net
                cash provided by operating activities
            
            
            2,764,802
            
            
            1,149,335CASH
                FLOWS FROM INVESTING ACTIVITIES:Other
                assets held for resale
            
            
            1,081
            
            
            36,538Purchase
                of property and equipment
            
            
            (32,000
            )
            
            (21,033
            )Purchase
                of non-compete
            
            
            (80,000
            )
            
            (40,000
            )Purchase
                of customer list
            
            
            (935,322
            )
            
            (987,585
            )Net
                cash (used in) investing activities
            
            
            (1,046,241
            )
            
            (1,012,080
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Net
                proceeds from notes payable
            
            
            559,729
            
            
            818,337Repayment
                of notes payable - stockholders
            
            
            (147,406
            )
            
            (198,506
            )Repayment
                of notes payable
            
            
            (2,073,938
            )
            
            (576,097
            )Net
                cash provided by (used in) financing activities
            
            
            (1,661,615
            )
            
            43,734NET
                INCREASEIN
                CASH AND CASH EQUIVALENTS
            
            
            56,946
            
            
            180,989CASH
                AND CASH EQUIVALENTS - BEGINNING OF PERIOD
            
            
            232,249
            
            
            129,453CASH
                AND CASH EQUIVALENTS - END OF PERIOD
            
            $
            289,195
            
            $
            310,442





See
      the
      accompanying notes to the unaudited condensed consolidated financial
      statements.





7




**** **SITESTAR
      CORPORATION AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**FOR
      THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
      (continued)**


**(UNAUDITED)**




**SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATION** **:**




During
      the nine months ended September 30, 2008 and 2007, the Company paid no income
      taxes and paid interest expense of approximately  $ 145,000
      and $119,000, respectively.




**NON-CASH
      INVESTING AND FINANCING TRANSACTIONS:**




During
      the nine months ended September 30, 2008, the Company issued
      no
      shares of common stock.





During
      the nine months ended September 30, 2008, the Company recognized no impairment
      to customer list.





8




**SITESTAR
      CORPORATION**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**





**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 (SEC). 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 GAAP have been omitted pursuant
      to such rules and regulations. These financial statements should be read in
      conjunction with the audited consolidated financial statements and footnotes
      for
      the year ended December 31, 2007 included in the Company’s Annual Report on Form
      10-KSB.  The results for the nine months ended September 30, 2008 are not
      necessarily indicative of the results to be expected for the full year ending
      December 31, 2008.





**NOTE
      2 - EARNINGS PER SHARE**




The
      Financial Accounting Standards (FAS) No. 128, "Accounting for Earnings Per
      Share" requires dual presentation of basic and diluted earnings per share on
      the
      face of the statements of income and requires a reconciliation of the numerators
      and denominators of the basic and diluted earnings per share calculation. Basic
      earnings per share are calculated based on the weighted average number of shares
      of common stock outstanding during each period. Diluted income per share is
      computed using weighted average shares outstanding adjusted to reflect the
      dilutive effect of all potential common shares that were outstanding during
      the
      period.





For
      the
      three months ended September 30, 2008 and September 30, 2007:




2008
            
            2007Net
                income available to common shareholders
            
            $
            392,060
            
            $
            184,744Weighted
                average number of common shares
            
            
            91,326,463
            
            
            88,063,305Basic
                and diluted income per share
            
            $
            0.00
            
            $
            0.00





For
      the
      nine months ended September 30, 2008 and September 30, 2007:




2008
            
            2007Net
                income available to common shareholders
            
            $
            1,092,939
            
            $
            582,832Weighted
                average number of common shares
            
            
            91,326,463
            
            
            88,063,305Basic
                and diluted income per share
            
            $
            0.01
            
            $
            0.01




9





**SITESTAR
      CORPORATION**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**





**NOTE
      3 - COMMON STOCK**




During
      the nine months ended September 30, 2008, the Company issued no
      shares
      of common stock.




**NOTE
      4 - SEGMENT INFORMATION**





The
      Company has two business units that have been aggregated into two reportable
      segments: Corporate and Internet.





The
      Corporate group is the holding company and oversees the operation of the other
      business units. The Corporate group also arranges financing for the entire
      organization. The
      Company’s Internet group consists of multiple sites of operation and services
      customers throughout the U.S. and Canada.





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 three months ended September 30, 2008 and
      2007:





September 30,
      2008




Corporate
            
            Internet
            
            ConsolidatedRevenue
            
            $
            —
            
            $
            2,485,294
            
            $
            2,485,294Operating
                Income (loss)
            
            $
            (19,185
            )
            $
            443,684
            
            $
            424,499Depreciation
                and amortization
            
            $
            —
            
            $
            737,703
            
            $
            737,703Interest
                expense
            
            $
            —
            
            $
            34,069
            
            $
            34,069Intangible
                assets
            
            $
            —
            
            $
            5,998,095
            
            $
            5,998,095Total
                assets
            
            $
            —
            
            $
            7,478,656
            
            $
            7,478,656





September 30,
      2007




Corporate
            
            Internet
            
            ConsolidatedRevenue
            
            $
            —
            
            $
            1,481,886
            
            $
            1,481,886Operating
                Income (loss)
            
            $
            (9,593
            )
            $
            236,031
            
            $
            226,438Depreciation
                and amortization
            
            $
            —
            
            $
            351,742
            
            $
            351,742Interest
                expense
            
            $
            —
            
            $
            33,768
            
            $
            33,768Intangible
                assets
            
            $
            —
            
            $
            3,389,475
            
            $
            3,389,475Total
                assets
            
            $
            —
            
            $
            4,314,519
            
            $
            4,314,519





10




**SITESTAR
      CORPORATION**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**





Summarized
      financial information concerning the Company's reportable segments is shown
      in
      the following table for the nine months ended September 30, 2008 and
      2007:




**NOTE
      4 - SEGMENT INFORMATION, continued**





September 30,
      2008




Corporate
            
            Internet
            
            ConsolidatedRevenue
            
            $
            —
            
            $
            7,644,538
            
            $
            7,644,538Operating
                Income (loss)
            
            $
            (88,893
            )
            $
            1,300,803
            
            $
            1,211,910Depreciation
                and amortization
            
            $
            —
            
            $
            2,223,989
            
            $
            2,223,989Interest
                expense
            
            $
            —
            
            $
            144,587
            
            $
            144,587Intangible
                assets
            
            $
            —
            
            $
            5,998,095
            
            $
            5,998,095Total
                assets
            
            $
            —
            
            $
            7,478,656
            
            $
            7,478,656





September 30,
      2007




Corporate
            
            Internet
            
            ConsolidatedRevenue
            
            $
            —
            
            $
            4,450,600
            
            $
            4,450,600Operating
                Income (loss)
            
            $
            (53,320
            )
            $
            763,921
            
            $
            710,601Depreciation
                and amortization
            
            $
            —
            
            $
            1,011,025
            
            $
            1,011,025Interest
                expense
            
            $
            —
            
            $
            118,950
            
            $
            118,950Intangible
                assets
            
            $
            —
            
            $
            3,389,475
            
            $
            3,389,475Total
                assets
            
            $
            —
            
            $
            4,314,519
            
            $
            4,314,519





**NOTE
      5 - RECENTLY ISSUED ACCOUNTING PROUNCEMENTS**





In
      February 2007, the Financial Accounting Standard Board (FASB) issued FASB
      Statement No. 159, The Fair Value Option for Financial Assets and Financial
      Liabilities (“FAS 159”). FAS 159 permits companies to choose to
      measure, on an instrument-by-instrument basis, financial instruments and certain
      other items at fair value that are not currently required to be measured at
      fair
      value. The Company believes it will not have a material impact on its financial
      position or on the results of operations.





In
      December 2007, the FASB issued FASB Statement No. 141, Business Combinations
      (“FAS 141”). This Statement establishes principles and requirements for how the
      acquirer recognizes and measures in its financial statements the identifiable
      assets acquired, the liabilities assumed, and any non-controlling interest
      in
      the acquiree, r ecognizes
      and measures the goodwill acquired in the business combination or a gain from
      a
      bargain purchase, determines what information to disclose. This
      Statement applies prospectively to business combinations for which the
      acquisition date is on or after the beginning
      of the first annual reporting period beginning on or after December 15, 2008.
      The Company may not apply it before that date. The Company is currently
      evaluating the effect the adoption of FAS No. 141, but believes it will not
      have a material impact on its financial position or on the results of
      operations.





11





**SITESTAR
      CORPORATION**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**




**NOTE
      5 - RECENTLY ISSUED ACCOUNTING PROUNCEMENTS, continued**




In
      December 2007, the FASB issued FASB Statement No. 160, Non-controlling Interests
      in Consolidated Financial Statements (“FAS 160”). T his
      Statement establishes accounting and reporting standards that require the
      ownership interests in subsidiaries held by parties other than the parent be
      clearly identified, labeled and presented in the consolidated statement of
      financial position. This
      Statement is effective for fiscal years, and interim periods within those fiscal
      years, beginning on or after December 15, 2008. The Company is currently
      evaluating the effect the adoption of FAS No. 160, but believes it will not
      have a material impact on its financial position or on the results of
      operations.




In
      March
      2008, the FASB issued FASB No. 161, D isclosures
      about Derivative Instruments and Hedging Activities—an amendment of FASB
      Statement No. 133. FASB
      Statement No. 133, Accounting for Derivative Instruments and Hedging Activities,
      does not provide adequate information about how derivative and hedging
      activities affect an entity’s financial position, financial performance and cash
      flows. Accordingly, this Statement requires enhanced disclosures about an
      entity’s derivative and hedging activities and thereby improves the transparency
      of financial reporting. This Statement is effective for financial statements
      issued for fiscal years and interim periods beginning after November 15, 2008.
      The Company is currently evaluating the effect the adoption of FASB
      No. 161, but believes it will not have a material impact on its financial
      position or on the results of operations.




In
      May
      2008, the FASB issued FASB Statement No. 162, The
      Hierarchy of Generally Accepted Accounting Principles. This
      Statement identifies the sources of accounting principles and the framework
      for
      selecting the principles to be used in the preparation of financial statements
      of nongovernmental entities that are presented in conformity with GAAP in the
      United States (the GAAP hierarchy). The Board concluded that the GAAP hierarchy
      should reside in the accounting literature established by the FASB and is
      issuing this Statement to achieve that result. This Statement is effective
      60
      days following the SEC’s approval of the Public Company Accounting Oversight
      Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity
      With Generally Accepted Accounting Principles. The Company is currently
      evaluating the effect the adoption of FASB No. 162, but believes it will
      not have a material impact on its financial position or on the results of
      operations.




12





**SITESTAR
      CORPORATION**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**





**NOTE
      5 - RECENTLY ISSUED ACCOUNTING PROUNCEMENTS, continued**




In
      May
      2008, the FASB issued FASB Statement No. 163, Accounting
      for Financial Guarantee Insurance Contracts—an interpretation of FASB Statement
      No. 60.  This
      Statement clarifies how Statement 60 applies to financial guarantee insurance
      contracts, including the recognition and measurement to be used to account
      for
      premium revenue and claim liabilities. These clarifications will increase
      comparability in financial reporting of financial guarantee insurance contracts
      by insurance enterprises. This Statement requires expanded disclosures about
      financial guarantee insurance contracts. This Statement is effective for
      financial statements issued for fiscal years beginning after December 15, 2008,
      and all interim periods within those fiscal years. The
      Company is currently evaluating the effect the adoption of FASB No. 163,
      but believes it will not have a material impact on its financial position or
      on
      the results of operations.




**NOTE
      6 - ACQUISITIONS**





**Magnolia
      Internet Services**




Effective
      February 1, 2007, the Company entered into an Asset Purchase Agreement pursuant
      to which it acquired the Internet related assets of Magnolia Internet Services,
      Inc., an Arkansas Internet Service Provider (ISP). The total purchase price
      was
      $113,812 representing the fair value of the assets acquired which consisted
      of a
      $12,000 cash payment at closing with the balance paid in eleven equal monthly
      payments beginning March 2007.





The
      definitive agreement states that in the event that actual annualized revenue
      differs more than three percent from estimates used at closing, the purchase
      price will be adjusted accordingly. The purchase price has been adjusted down
      to
      $108,470. The following table summarizes the estimated fair values of assets
      acquired and liabilities assumed at the date of acquisition. Sitestar has
      assessed the valuations of certain intangible assets as represented
      below.





Customer
                list
            
            $
            93,992Non-compete
                agreement
            
            
            10,000Equipment
            
            
            10,000Deferred
                revenue
            
            
            (5,522
            )Purchase
                price
            
            $
            108,470





Because
      the acquisition of Magnolia Internet Services was consummated on February 1,
      2007, there are limited results of operations of this company for the nine
      months ended September 30, 2007 included in the accompanying September 30,
      2008
      and 2007 consolidated financial statements.





13





**SITESTAR
      CORPORATION**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**





**NOTE
      6 - ACQUISITIONS, continued**





The
      following table presents the unaudited pro forma condensed statement of
      operations for the nine months ended September 30, 2007 and reflects the results
      of operations of the Company as if the acquisition of Magnolia Internet Services
      had been effective January 1, 2007.  The pro forma amounts are not
      necessarily indicative of the combined results of operations had the
      acquisitions 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 acquisitions.





2007Net
                sales
            
            $
            4,529,448Gross
                profit
            
            $
            3,104,007Selling,
                general and administrative expenses
            
            $
            2,382,876Net
                income
            
            $
            593,362Basic
                income per share
            
            $
            0.00





**OW
      Holdings, Inc.**




Effective
      February 28, 2007, the Company entered into an Asset Purchase Agreement pursuant
      to which it acquired the Internet related assets of OW Holdings, Inc., an ISP
      having customers throughout the Rocky Mountain region. The total purchase price
      was $900,000 representing the fair value of the assets acquired which consisted
      of a $600,000 cash payment at closing and the balance which was paid in ninety
      days. The purchase price has been adjusted down to $802,452. The following
      table
      summarizes the estimated fair values of assets acquired and liabilities assumed
      at the date of acquisition. Sitestar has assessed the valuations of certain
      intangible assets as represented below.





Accounts
                receivable
            
            $
            (2,098
            )Customer
                list
            
            
            870,680Non-compete
                agreement
            
            
            25,000Equipment
            
            
            10,000Deferred
                revenue
            
            
            (101,130
            )Purchase
                price
            
            $
            802,452





Because
      the acquisition of OW Holdings, Inc. was consummated on February 28, 2007,
      there
      are limited results of operations of this company for the nine months ended
      September 30, 2007 included in the accompanying September 30, 2008 and 2007
      consolidated financial statements.





14





**SITESTAR
      CORPORATION**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**





**NOTE
      6 - ACQUISITIONS, continued**





The
      following table presents the unaudited pro forma condensed statement of
      operations for the nine months ended September 30, 2007 and reflects the results
      of operations of the Company as if the acquisition of OW Holdings had been
      effective January 1, 2007.  The pro forma amounts are not necessarily
      indicative of the combined results of operations had the acquisitions 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
      acquisitions.





2007Net
                sales
            
            $
            5,209,531Gross
                profit
            
            $
            3,602,862Selling,
                general and administrative expenses
            
            $
            2,675,326Net
                income
            
            $
            799,767Basic
                income per share
            
            $
            0.01





**AlaNet
      Internet Services**




Effective
      June 21, 2007, the Company entered into an Asset Purchase Agreement pursuant
      to
      which it acquired the Internet related assets of AlaNet Internet Services,
      Inc.,
      an Alabama ISP. The total purchase price was $51,306 representing the fair
      value
      of the assets acquired which consisted of a $4,275 cash payment at closing
      and
      the balance was paid in eleven monthly installments beginning July 2007. The
      purchase price has been adjusted down to $45,629.





The
      following table summarizes the estimated fair values of assets acquired and
      liabilities assumed at the date of acquisition. Sitestar has assessed the
      valuations of certain intangible assets as represented below.





Accounts
                receivable
            
            $
            3,880Customer
                list
            
            
            58,549Non-compete
                agreement
            
            
            5,000Deferred
                revenue
            
            
            (21,800
            )Purchase
                price
            
            $
            45,629





Because
      the acquisition of AlaNet Internet Services was consummated on June 21, 2007,
      there are limited results of operations of this company for the nine months
      ended September 30, 2007 included in the accompanying September 30, 2008 and
      2007 consolidated financial statements.





15




**SITESTAR
      CORPORATION**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**





**NOTE
      6 - ACQUISITIONS, continued**





The
      following table presents the unaudited pro forma condensed statement of
      operations for the nine months ended September 30, 2007 and reflects the results
      of operations of the Company as if the acquisition of AlaNet had been effective
      January 1, 2007.  The pro forma amounts are not necessarily indicative of
      the combined results of operations had the acquisitions 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
      acquisitions.





2007Net
                sales
            
            $
            4,514,803Gross
                profit
            
            $
            3,093,501Selling,
                general and administrative expenses
            
            $
            2,366,960Net
                income
            
            $
            588,201Basic
                income per share
            
            $
            0.01





**United
      Systems Access, Inc.**




Effective
      November 1, 2007, the Company entered into an Asset Purchase Agreement pursuant
      to which it acquired the Internet related assets of United Systems Access,
      Inc.
      (d/b/a USA Telephone), a corporation with its headquarters in Maine. The total
      purchase price was $3,750,000 representing the fair value of the assets acquired
      which consisted of a $1,000,000 cash payment at closing with a second $1,000,000
      in 30 days with the remaining balance due in 36 monthly installments beginning
      January 2008. Net post closing collections on account and vendor payments of
      $684,385 by USA Telephone was offset against the balance due USA Telephone
      on
      the purchase note.





The
      following table summarizes the estimated fair values of assets acquired and
      liabilities assumed at the date of acquisition. Sitestar has assessed the
      valuations of certain intangible assets as represented below.





Customer
                list
            
            $
            4,292,656Non-compete
                agreement
            
            
            350,000Deferred
                revenue
            
            
            (892,656
            )Purchase
                price
            
            $
            3,750,000





Because
      the acquisition of USA Telephone was consummated effective November 1, 2007,
      there are no results of operations of this company for the nine months ended
      September 30, 2007 included in the accompanying September 30, 2008 and 2007
      consolidated financial statements.





16





**SITESTAR
      CORPORATION**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**





**NOTE
      6 - ACQUISITIONS, continued**





The
      following table presents the unaudited pro forma condensed statement of
      operations for the nine months ended September 30, 2007 and reflects the results
      of operations of the Company as if the acquisition of USA Telephone had been
      effective January 1, 2007. The pro forma amounts are not necessarily indicative
      of the combined results of operations had the acquisitions 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
      acquisitions.





2007Net
                sales
            
            $
            7,902,949Gross
                profit
            
            $
            5,547,936Selling,
                general and administrative expenses
            
            $
            4,084,383Net
                income
            
            $
            1,248,993Basic
                income per share
            
            $
            0.01





**Comcation,
      Inc.**




Effective
      March 1, 2008, the Company entered into an Asset Purchase Agreement pursuant
      to
      which it acquired the Internet related assets of Comcation, Inc., a Pennsylvania
      ISP. The total purchase price was $38,500 representing the fair value of the
      assets acquired which consisted of a $9,135 cash payment at closing with the
      remaining balance paid in 5 monthly installments beginning April 2008.





The
      following table summarizes the estimated fair values of assets acquired and
      liabilities assumed at the date of acquisition. Sitestar has assessed the
      valuations of certain intangible assets as represented below.





Customer
                list
            
            $
            62,223Non-compete
                agreement
            
            
            5,000Accounts
                receivable
            
            
            2,343Deferred
                revenue
            
            
            (22,858
            )Purchase
                price
            
            $
            46,708





Because
      the acquisition of Comcation was consummated effective March 1, 2008, there
      are
      limited results of operations of Comcation in the consolidated financial
      statements for the nine months ended June 30, 2007 and 2008.





17





**SITESTAR
      CORPORATION**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**





**NOTE
      6 - ACQUISITIONS, continued**





The
      following table presents the unaudited pro forma condensed statement of
      operations for the nine months ended September 30, 2007 and reflects the results
      of operations of the Company as if the acquisition of Comcation had been
      effective March 1, 2007.  The pro forma amounts are not necessarily
      indicative of the combined results of operations had the acquisitions 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
      acquisitions.





2007Net
                sales
            
            $
            4,523,560Gross
                profit
            
            $
            3,105,172Selling,
                general and administrative expenses
            
            $
            2,396,973Net
                income
            
            $
            578,146Basic
                income per share
            
            $
            0.01





**N2
      the Net, LLC**




Effective
      April 1, 2008, the Company entered into an Asset Purchase Agreement pursuant
      to
      which it acquired the Internet related assets of N2 the Net, LLC, a Tennessee
      ISP. The total purchase price was $48,156 representing the fair value of the
      assets acquired which consisted of a $3,650 cash payment at closing with the
      remaining balance due in 11 monthly installments beginning May 2008. The
      purchase price has been subsequently adjusted down to $45,821.





The
      following table summarizes the estimated fair values of assets acquired and
      liabilities assumed at the date of acquisition. Sitestar has assessed the
      valuations of certain intangible assets as represented below.





Customer
                list
            
            $
            40,512Non-compete
                agreement
            
            
            5,000Accounts
                receivable
            
            
            2,328Equipment
            
            
            10,000Deferred
                revenue
            
            
            (12,019
            )Purchase
                price
            
            $
            45,821





Because
      the acquisition of N2 the Net was consummated effective April 1, 2008, there
      are
      limited results of operations of Comcation in the consolidated financial
      statements for the nine months ended September 30, 2007 and 2008.





18





**SITESTAR
      CORPORATION**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**





**NOTE
      6 - ACQUISITIONS, continued**





The
      following table presents the unaudited pro forma condensed statement of
      operations for the nine months ended September 30, 2007 and reflects the results
      of operations of the Company as if the acquisition of N2 the Net had been
      effective April 1, 2007.  The pro forma amounts are not necessarily
      indicative of the combined results of operations had the acquisitions 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
      acquisitions.





2007Net
                sales
            
            $
            4,539,957Gross
                profit
            
            $
            3,123,453Selling,
                general and administrative expenses
            
            $
            2,358,558Net
                income
            
            $
            635,545Basic
                income per share
            
            $
            0.01





**Dial
      Assurance, Inc.**




Effective
      May 1, 2008, the Company entered into an Asset Purchase Agreement pursuant
      to
      which it acquired the Internet related assets of Dial Assurance, Inc., a
      Georgia-based wholesale managed modem solution provider. The total purchase
      price was $229,900 representing the fair value of the assets acquired which
      consisted of a $100,000 cash payment at closing with the remaining balance
      due
      in 6 monthly installments beginning June 2008.





The
      following table summarizes the estimated fair values of assets acquired and
      liabilities assumed at the date of acquisition. Sitestar has assessed the
      valuations of certain intangible assets as represented below.





Customer
                list
            
            $
            250,000Non-compete
                agreement
            
            
            5,000Deferred
                revenue
            
            
            (25,100
            )Purchase
                price
            
            $
            229,900





Because
      the acquisition of Dial Assurance was consummated effective May 1, 2008, there
      are limited results of operations of Dial Assurance in the consolidated
      financial statements for the nine months ended September 30, 2007 and 2008.




19




**SITESTAR
      CORPORATION**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**





**NOTE
      6 - ACQUISITIONS, continued**





The
      following table presents the unaudited pro forma condensed statement of
      operations for the nine months ended September 30, 2007 and reflects the results
      of operations of the Company as if the acquisition of Dial Assurance had been
      effective May 1, 2007.  The pro forma amounts are not necessarily
      indicative of the combined results of operations had the acquisitions 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
      acquisitions.





2007Net
                sales
            
            $
            4,559,317Gross
                profit
            
            $
            3,136,695Selling,
                general and administrative expenses
            
            $
            2,375,950Net
                income
            
            $
            630,932Basic
                income per share
            
            $
            0.01





**United
      Systems Access, Inc.**




Effective
      May 1, 2008, the Company entered into an Asset Purchase Agreement pursuant
      to
      which it acquired certain broadband digital subscriber line (DSL) accounts
      and
      related assets of United Systems Access, Inc., (d/b/a USA Telephone), a
      corporation with its headquarters in Maine. The net purchase price was $297,965
      representing the fair value of the assets acquired which consisted of a $130,000
      cash payment at closing with the remaining balance paid in 60 days from closing.
      The purchase price has been subsequently adjusted down to $263,757.





The
      following table summarizes the estimated fair values of assets acquired and
      liabilities assumed at the date of acquisition. Sitestar has assessed the
      valuations of certain intangible assets as represented below.





Customer
                list
            
            $
            277,965Non-compete
                agreement
            
            
            50,000Deferred
                revenue
            
            
            (64,208
            )Purchase
                price
            
            $
            263,757





Because
      the acquisition of was consummated effective May 1, 2008, there are limited
      results of operations of USA Telephone in the consolidated financial statements
      for the nine months ended September 30, 2007 and 2008.





20




**SITESTAR
      CORPORATION**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**





**NOTE
      6 - ACQUISITIONS, continued**





The
      following table presents the unaudited pro forma condensed statement of
      operations for the nine months ended September 30, 2007 and reflects the results
      of operations of the Company as if the acquisition of USA
      Telephone had been
      effective May 1, 2007.  The pro forma amounts are not necessarily
      indicative of the combined results of operations had the acquisitions 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
      acquisitions.





2007Net
                sales
            
            $
            4,736,895Gross
                profit
            
            $
            3,294,869Selling,
                general and administrative expenses
            
            $
            2,412,143Net
                income
            
            $
            754,957Basic
                income per share
            
            $
            0.01





**AdaNet**




Effective
      June 1, 2008, the Company entered into an Asset Purchase Agreement pursuant
      to
      which it acquired the Internet related assets of AdaNet, an Oklahoma-based
      Internet Service Provider. The total purchase price was $20,667 representing
      the
      fair value of the assets acquired which consisted of a $3,836 cash payment
      at
      closing with the remaining balance due in 5 monthly installments beginning
      July
      2008. The purchase price has been subsequently adjusted down to
      $18,542.





The
      following table summarizes the estimated fair values of assets acquired and
      liabilities assumed at the date of acquisition. Sitestar has assessed the
      valuations of certain intangible assets as represented below.





Customer
                list
            
            $
            15,428Non-compete
                agreement
            
            
            5,000Accounts
                receivable
            
            
            164Equipment
            
            
            2,000Deferred
                revenue
            
            
            (4,050
            )Purchase
                price
            
            $
            18,542





Because
      the acquisition of AdaNet was consummated effective June 1, 2008, there are
      limited results of operations of AdaNet in the consolidated financial statements
      for the nine months ended September 30, 2007 and 2008.





21





**SITESTAR
      CORPORATION**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**





**NOTE
      6 - ACQUISITIONS, continued**





The
      following table presents the unaudited pro forma condensed statement of
      operations for the nine months ended September 30, 2007 and reflects the results
      of operations of the Company as if the acquisition of AdaNet had been effective
      June 1, 2007.  The pro forma amounts are not necessarily indicative of the
      combined results of operations had the acquisitions 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
      acquisitions.





2007Net
                sales
            
            $
            4,468,567Gross
                profit
            
            $
            3,062,688Selling,
                general and administrative expenses
            
            $
            2,340,661Net
                income
            
            $
            593,590Basic
                income per share
            
            $
            0.01





**Velocity
      West, Inc.**




Effective
      August 1, 2008, the Company entered into an Asset Purchase Agreement pursuant
      to
      which it acquired the Internet related assets of Velocity West, Inc., a
      Texas-based ISP and wholesale managed modem solution provider. The total
      purchase price was $360,000 representing the fair value of the assets acquired
      which consisted of a $100,000 cash payment at closing with the remaining balance
      due in 12 monthly installments beginning September 2008.





The
      following table summarizes the estimated fair values of assets acquired and
      liabilities assumed at the date of acquisition. Sitestar has assessed the
      valuations of certain intangible assets as represented below.





Customer
                list
            
            $
            400,000Non-compete
                agreement
            
            
            10,000Deferred
                revenue
            
            
            (50,000
            )Purchase
                price
            
            $
            360,000





Because
      the acquisition of Velocity West was consummated effective August 1, 2008,
      there
      are limited results of operations of Velocity West in the consolidated financial
      statements for the nine months ended September 30, 2007 and 2008.





22





**SITESTAR
      CORPORATION**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**





**NOTE
      6 - ACQUISITIONS, continued**





The
      following table presents the unaudited pro forma condensed statement of
      operations for the nine months ended September 30, 2007 and reflects the results
      of operations of the Company as if the acquisition of Velocity West had been
      effective August 1, 2007.  The pro forma amounts are not necessarily
      indicative of the combined results of operations had the acquisitions 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
      acquisitions.





2007Net
                sales
            
            $
            4,610,600Gross
                profit
            
            $
            3,192,871Selling,
                general and administrative expenses
            
            $
            2,366,598Net
                income
            
            $
            694,560Basic
                income per share
            
            $
            0.01





**ISP
      Holding Company, LLC**




Effective
      November 1, 2008, the Company entered into an Asset Purchase Agreement pursuant
      to which it acquired the Internet related assets of ISP Holding Company, LLC
      d/b/a DONOBi Internet Services, a Washington-based Internet Service Provider.
      The total purchase price was $475,000 representing the fair value of the assets
      acquired which consisted of a $150,000 cash payment at closing with the
      remaining balance due in 12 monthly installments beginning December
      2008.





The
      following table summarizes the estimated fair values of assets acquired and
      liabilities assumed at the date of acquisition. Sitestar has assessed the
      valuations of certain intangible assets as represented below.





Customer
                list
            
            $
            530,000Non-compete
                agreement
            
            
            20,000Deferred
                revenue
            
            
            (75,000
            )Purchase
                price
            
            $
            475,000





Because
      the acquisition of DONOBi Internet Services was consummated effective November
      1, 2008, there are no results of operations of ISP Holding Company in the
      consolidated financial statements for the nine months ended September 30, 2007
      and 2008.





23




**SITESTAR
      CORPORATION**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**





**NOTE
      7 - PROVISION FOR INCOME TAXES**





Income
      taxes are provided for the tax effects of transactions reported in the financial
      statements and consist of taxes currently due. Deferred taxes related to
      differences between the basis of assets and liabilities for financial and income
      tax reporting will either be taxable or deductible when the assets or
      liabilities are recovered or settled. The difference between the basis of assets
      and liabilities for financial and income tax reporting are not material
      therefore, the provision for income taxes from operations consist of income
      taxes currently payable.





The
      nature of the timing difference generating the deferred tax asset, are the
      accumulated net operating loss carry forwards that can be applied towards
      mitigating future tax liabilities of the Company. The Company has established
      a
      valuation account at the full value of the tax deferred asset as of September
      30, 2008 and December 31, 2007. The Company’s operations have generated federal
      and state income taxes payable which have been offset by the operating loss
      carry forwards. The Company does not have an effective tax rate due to the
      Company’s lack of taxable income to date.





At
      September 30, 2008 and December 31, 2007, the Company had accumulated deficits
      of $9,813,149 and $10,906,088, available to offset future taxable
      income . The
      Company established valuation allowances equal to the full amount of the
      deferred tax assets due to the uncertainty of the operating losses in future
      periods.





There
      was
      no provision for income taxes for the nine months ended September 30, 2008
      and
      2007.





**NOTE
      8 - 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.  Should impairment
      be identified, a loss would be reported to the extent that the carrying value
      of
      the related intangible asset exceeds its fair value using the discounted cash
      flow method.  The Company's customer lists are being amortized over three
      years. Amortization expense was $2,192,950 and $965,513 for the nine months
      ended September 30, 2008 and 2007.





**NOTE
      9 - DEFERRED REVENUE**





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




**Revenue
      Recognition**




24





**SITESTAR
      CORPORATION**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**





**NOTE
      9 -** **DEFERRED
      REVENUE, continued**





The
      Company sells Internet services under annual and monthly contracts.  Under
      the annual contracts, the subscriber pays a one-time annual 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 for the
      period the service relates. Sales of computer hardware are recognized as revenue
      upon delivery and acceptance of the product by the customer. Sales are adjusted
      for any returns or allowances.





**NOTE
      10 - NOTES PAYABLE**




Notes
      payable at September 30, 2008 and December 31, 2007 consist of the
      following:


2008
              
              2007Bank
                  note payable in monthly interest and principal payments of $1,784.
                  Interest is payable prime plus 4.5%, (9.75% as of December 31,
                  2007).
                   The note is guaranteed by a stockholder of the Company and secured
                  by a deed of trust against personal residences of three stockholders.
                   Also, the bank has a blanket lien against all other current and
                  future assets of Sitestar.net.
              
              $
              —
              
              $
              58,242Bank
                  line of credit reissued on April 12, 2008 with a principal limit
                  of
                  $300,000. Interest is payable at an annual rate of prime plus .25%
                  (7.50%
                  as of December 31, 2007). The note is secured by a deed of trust
                  on the
                  Company’s building and is personally guaranteed by officers and directors
                  of the Company.
              
              
              —
              
              
              300,000Non-interest
                  bearing amount due on acquisition of AlaNet Internet Services payable
                  in
                  eleven monthly installments of $4,276 through April 2008.
              
              
              —
              
              
              20,807Bank
                  note payable in twelve monthly interest and principal payments
                  of $30,650.
                  Interest is payable at an annual rate of 9.25%.  The note is
                  guaranteed by officers and directors of the Company and secured
                  by shares
                  of Company stock owned by the officers and directors of the
                  Company.
              
              
              —
              
              
              322,048Bank
                  note payable in twenty four monthly interest and principal payments
                  of
                  $21,167. Interest is payable at an annual rate of 8.5%.  The note is
                  guaranteed by officers and directors of the Company and secured
                  by shares
                  of Company stock owned by officers and directors of the
                  Company.
              
              
              —
              
              
              438,264
  25
  SITESTAR
        CORPORATION **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
          30, 2008**
 
 **NOTE
          10 - NOTES PAYABLE** **,
          continued**
  Bank
                  bridge note originally payable on February 1, 2008. Interest is
                  payable at
                  an annual rate of 8.5%. The note was refinanced on February 21,
                  2008 at an
                  annual interest rate of 8.5% and is payable in twelve payments
                  of $21,760
                  and is personally guaranteed by officers and directors of the Company
                  and
                  secured by real estate owned by officers and directors of the
                  Company.
              
              
              —
              
              
              250,000Non-interest
                  bearing amount due on acquisition of USA Telephone payable in monthly
                  installments of $25,000 starting January 2008.
              
              
              1,290,615
              
              
              1,574,341Non-interest
                  bearing amount due on acquisition of N2theNet payable in eleven
                  monthly
                  installments of $4,046 starting May 2008.
              
              
              23,522
              
              
              —Non-interest
                  bearing amount due on acquisition of Dial Assurance payable in
                  six monthly
                  installments of $21,650 starting June 2008
              
              
              34,141
              
              
              —Non-interest
                  bearing amount due on acquisition of AdaNet payable in five monthly
                  installments of $3,836 starting July 2008
              
              
              3,866
              
              
              —Non-interest
                  bearing amount due on acquisition of USA Telephone payable in 60
                  days from
                  closing.
              
              
              50,292
              
              
              —Non-interest
                  bearing amount due on acquisition of Velocity West payable in twelve
                  monthly installments of $21,667 starting September 2008.
              
              
              47,058
              
              
              —Less
                  current portion
              
              
              (458,879
              )
              
              (1,268,866
              )Long-term
                  portion
              
              $
              990,615
              
              $
              1,694,836


26





**SITESTAR
      CORPORATION**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**





**NOTE
      10 - NOTES PAYABLE** **,
      continued**





The
      future principal maturities of these notes are as follows:




Twelve
                months ending September 30, 2009
            
            $
            458,879Twelve
                months ending September 30, 2010
            
            
            990,615Twelve
                months ending September 30, 2011
            
            
            —Twelve
                months ending September 30, 2012
            
            
            —Twelve
                months ending September 30, 2013
            
            
            —Thereafter
            
            
            —Total
            
            $
            1,449,494





**NOTE
      11 - ALLEVIATION OF GOING CONCERN**





At
      September 30, 2007, the Company reported that it had a working capital
      deficiency of $566,269. This condition raised substantial doubt about the
      Company's ability to continue as a going concern at that time.




The
      Company had income from operations for each of the two years ended December
      31,
      2007 of $956,170 and $1,179,677. The Company also had positive cash flows from
      operations of $2,805,883 and $2,465,289 for the two years ended December 31,
      2007. In addition, the Company projects positive cash flows for the next twelve
      months. With this positive trend of operating income, cash flows, and projected
      cash flow over the next twelve months, the Company’s management considers the
      facts and circumstances, which raised substantial doubt about the Company’s
      ability to continue as a going concern, to be alleviated.





The
      Company also plans to continue to increase revenue by acquiring customers in
      target markets at competitive prices and selling value-added products and
      services to the existing customer base to maximize average revenue per user
      (ARPU). The Company will continue to reduce overall operating expenses by
      leveraging economies of scale, deployment of new technologies, and reducing
      supplier costs by securing more favorable rates and terms through wholesale
      partnerships and other methods.





**NOTE
      12 -SUBSEQUENT EVENTS**





On
      October 22, 2008, the Company issued a press release announcing a stock
      repurchase program that authorizes the repurchase of up to 10,000,000 shares
      of
      the Company’s common stock. The shares will be purchased on the open market at
      prevailing prices or in privately negotiated transactions.




27





**SITESTAR
      CORPORATION**





**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, 2007 included in the 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**




The
      Company is a national Internet Service Provider and computer services company
      offering a broad range of services to business and residential customers.
 In November 2003, the Company announced the launch of the national dial-up
      Internet service that made service available in thousands of cities throughout
      the United States.  This expanded service features web acceleration, e-mail
      acceleration and pop-up ad blocking. Spam and virus filtering are also included.
       The Company utilizes Company owned infrastructure, as well as, third party
      affiliations that allow it to expand its network and services to most of the
      United States.





The
      products and services that the Company provides include:


**·**
              Internet
                  access services;


**·**
              Web
                  acceleration services;


**·**
              Web
                  hosting services;


**·**
              End-to-end
                  e-commerce solutions; and


**·**
              Toner
                  and ink cartridge remanufacturing
                  services.





The
      Company’s Internet division consists of multiple sites of operation and services
      customers throughout the U.S. and Canada. Sitestar products include narrow-band
      (dial-up) services, broadband services (ISDN, DSL, fiber-optic, satellite,
      cable
      and wireless) and the Company supports these products utilizing Company owned
      infrastructure and third party affiliations. Value-added services include web
      acceleration, spam and virus filtering, as well as, spyware
      protection.





The
      Company’s web hosting and related services provide a way to help businesses
      market their products and services over the Internet.





Through
      its Internet division, the Company sells and manufactures computer systems,
      computer hardware, computer software, networking services, repair services
      and
      toner and ink cartridge remanufacturing services from the Lynchburg, Virginia
      location.





28





**SITESTAR
      CORPORATION**





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





The
      Company is a factory authorized service center for many national-brand computer
      equipment companies. The Company’s toner and ink cartridge remanufacturing
      service utilizes empty toner cartridges and remanufactures them to provide
      savings to customers over buying brand new cartridges. This service is available
      locally and nationwide.





The
      Company’s computer programming and consulting services help companies automate
      their businesses.  The Company sold the assets of the programming division
      on





August
      31, 2004 while retaining the rights to the new product that automates certain
      functions of crisis centers throughout the nation.





**Results
      of operations**





The
      following tables show financial data for the nine months ended September 30,
      2008 and 2007. Operating results for any period are not necessarily indicative
      of results for any future period.





For
                the nine months ended September 30, 2008 (unaudited)Corporate
            
            Internet
            
            TotalRevenue
            
            $
            —
            
            $
            7,644,538
            
            $
            7,644,538Cost
                of revenue
            
            
            —
            
            
            2,097,509
            
            
            2,097,509Gross
                profit
            
            
            —
            
            
            5,547,029
            
            
            5,547,029Operating
                expenses
            
            
            88,893
            
            
            4,246,226
            
            
            4,335,119Income
                (loss) from operations
            
            
            (88,893
            )
            
            1,300,803
            
            
            1,211,910Other
                income (expense)
            
            
            —
            
            
            (118,971
            )
            
            (118,971
            )Net
                income (loss)
            
            $
            (88,893
            )
            $
            1,181,832
            
            $
            1,092,939





29




**SITESTAR
      CORPORATION**





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





For
                the nine months ended September 30, 2007 (unaudited)Corporate
            
            Internet
            
            TotalRevenue
            
            $
            —
            
            $
            4,450,600
            
            $
            4,450,600Cost
                of revenue
            
            
            —
            
            
            1,403,848
            
            
            1,403,848Gross
                profit
            
            
            —
            
            
            3,046,752
            
            
            3,046,752Operating
                expenses
            
            
            53,320
            
            
            2,282,831
            
            
            2,336,151Income
                (loss) from operations
            
            
            (53,320
            )
            
            763,921
            
            
            710,601Other
                income (expense)
            
            
            —
            
            
            (127,769
            )
            
            (127,769
            )Net
                income (loss)
            
            $
            (53,320
            )
            $
            636,152
            
            $
            582,832





EBITDA
      (Earnings Before Interest, Taxes, Depreciation and Amortization) consists of
      revenue less cost of revenue and operating expense.  EBITDA is provided
      because it is a measure commonly used by investors to analyze and compare
      companies on the basis of operating performance. EBITDA is presented to enhance
      an understanding of the Company’s operating results and is not intended to
      represent cash flows or results of operations in accordance with GAAP for the
      periods indicated. EBITDA is not a measurement under GAAP and is not necessarily
      comparable with similarly titled measures for other companies. See the Liquidity
      and Capital Resource section for further discussion of cash generated from
      operations.





The
      following tables show a reconciliation of EBITDA to the GAAP presentation of
      net
      income for the nine months ended September 30, 2008 and 2007.




For
                the nine months ended September 30, 2008Corporate
            
            Internet
            
            TotalEBITDA
            
            $
            (88,893
            )
            $
            3,550,408
            
            $
            3,461,515Interest
                expense
            
            
            —
            
            
            (144,587
            )
            
            (144,587
            )Taxes
            
            
            —
            
            
            —
            
            
            —Depreciation
            
            
            —
            
            
            (31,039
            )
            
            (31,039
            )Amortization
            
            
            —
            
            
            (2,192,950
            )
            
            (2,192,950
            )Net
                income (loss)
            
            $
            (88,893
            )
            $
            1,181,832
            
            $
            1,092,939




30




**SITESTAR
      CORPORATION**





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




For
                the nine months ended September 30, 2007Corporate
            
            Internet
            
            TotalEBITDA
            
            $
            (53,320
            )
            $
            1,766,127
            
            $
            1,712,807Interest
                expense
            
            
            —
            
            
            (118,950
            )
            
            (118,950
            )Taxes
            
            
            —
            
            
            —
            
            
            —Depreciation
            
            
            —
            
            
            (45,512
            )
            
            (45,512
            )Amortization
            
            
            —
            
            
            (965,513
            )
            
            (965,513
            )Net
                income (loss)
            
            $
            (53,320
            )
            $
            636,152
            
            $
            582,832





**NINE
      MONTHS ENDED SEPTEMBER 30, 2008 COMPARED TO SEPTEMBER 30, 2007
      (Unaudited)**




**REVENUE** .





Revenue
      for the nine months ended September 30, 2008 increased by $3,193,938 or 71.8%
      from $4,450,600 for the nine months ended September 30, 2007 to $7,644,538
      for
      the same period in 2008. Internet sales increased primarily due to the addition
      of Internet customers from the asset acquisition of USA Telephone. This
      acquisition, for the nine months ended September 30, 2008, yielded approximately
      $3,452,000 in additional net revenues. This increase from acquisitions was
      offset by additional attrition to broadband service. Sitestar focuses on
      marketing and selling Internet access to second-tier markets where broadband
      is
      not prevalent. The Company’s strategy is to leverage operational economies of
      scale to provide dial-up service in these markets where it will continue to
      be
      the core method for connecting to the Internet.





While
      Sitestar is currently adding customers through promotional marketing campaigns,
      this method for strong and sustainable growth is threatened by competition
      from
      nationally-known ISPs and discount dial-up providers, as well as, from the
      future introduction of broadband services. To increase its dial-up base, the
      Company plans to continue to acquire ISPs in these target markets.




**COST
      OF REVENUE** .





Costs
      of
      revenue for the nine months ended September 30, 2008 increased by $693,661
      or
      49.4% from $1,403,848 for the nine months ended September 30, 2007 to $2,097,509
      for the same period in 2008.  This increase is due to telecommunications
      expenses associated with the acquisitions of additional customers. It also
      reflects the economies of an increased customer base as indicated by decrease
      in
      the cost of revenue percentage by 4.1% from 31.5% for the nine months ended
      September 30, 2007 to 27.4% for the same period in 2008.





31





**SITESTAR
      CORPORATION**





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





**OPERATING
      EXPENSES.**




Operating
      expenses for the nine months ended September 30, 2008 increased $1,998,968
      or
      85.6% from $2,336,151 for the nine months ended September 30, 2007 to $4,335,119
      for the same period in 2008.  Amortization expense increased $1,227,437 or
      127.1% from $965,513 for the nine months ended September 30, 2007 to $2,192,950
      for the same period in 2008.  This increase is due to the acquisition of
      customer bases. Bad debt expenses increased $698,304 or 185.7% from $375,962
      for
      the nine months ended September 30, 2007 to $1,074,266 for the same period
      in
      2008. Corporate expenses of $88,893 for the nine months ended September 30,
      2008
      consisted primarily of professional fees. Corporate expenses of $53,320 for
      the
      nine months ended September 30, 2007 consisted primarily of professional
      fees.




**GAIN
      ON SALE OF ASSETS** .





A
      gain
      was recognized on the sale of the assets of Sitestar Applied Technologies,
      Inc.
      to Servatus Development, LLC of $19,551 and $10,761 for the nine months ended
      September 30, 2008 and 2007.  This represents, per the Definitive Purchase
      Agreement between the parties, 20% of the gross revenue of Servatus Development,
      LLC for the nine months ended September 30, 2008 and 2007.





**INTEREST
      EXPENSE** .





Interest
      expense for the nine months ended September 30, 2008 increased by $25,637 or
      17.7% from $118,950 for the nine months ended September 30, 2007 to $144,587
      for
      the same period in 2008.  This increase is a result of acquiring debt to
      finance the acquisition of additional customers.





**JUNE
      30, 2008 (Unaudited) COMPARED TO DECEMBER 31, 2007
      (Audited)**





**FINANCIAL
      CONDITION.**





Net
      accounts receivable increased $382,656 or 127.6% from $299,863 on December
      31,
      2007 to $682,519 on September 30, 2008.  This increase is substantially due
      to the addition of customers from acquisitions. Due to the slow moving nature
      of
      inventory, management has reclassified it on the balance sheets from current
      assets to other assets held for resale which decreased by $1,081 or 01.5% from
      $70,739 on December 31, 2007 to $69,658 on September 30, 2008. Accounts payable
      decreased by $56,305 or 71.5% from $78,713 on December 31, 2007 to $22,408
      on
      September 30, 2008. Accrued expenses decreased by $31,672 or 22.9% from $138,021
      on December 31, 2007 to $106,349 on September 30, 2008. Deferred revenue
      decreased by $96,576 or 07.1% from $1,361,606 on December 31, 2007 to $1,265,030
      on September 30, 2008 representing increased volume of customer accounts that
      have been prepaid. The current portion of notes payable decreased $809,987
      or
      63.8% from $1,268,866 on December 31, 2007 to $458,879 on September 30, 2008.
      This is substantially due to the curtailment of a line of credit of $300,000
      and
      the early payoff of $1,068,554 of debt as of December 31, 2007. Long-term notes
      payable decreased $704,221 or 41.6% from $1,694,836 on December 31, 2007 to
      $990,615 on September 30, 2008. This decrease is the result of servicing term
      notes and the early payoff of term notes payable. Long-term notes payable to
      stockholders decreased $147,406 or 21.5% from $686,687 on December 31, 2007
      to
      $539,281 on September 30, 2008.




32





**SITESTAR
      CORPORATION**





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





**LIQUIDITY
      AND CAPITAL RESOURCES**




Cash
      and
      cash equivalents totaled $289,195 and $232,249 at September 30, 2008 and at
      December 31, 2007. EBITDA was $3,461,515 for the nine months ended September
      30,
      2008 as compared to $1,712,807 for the same period in 2007.


2008
              
              2007EBITDA
                  for the nine months ended September 30,
              
              $
              3,461,515
              
              $
              1,712,807Interest
                  expense
              
              
              (144,587
              )
              
              (118,950
              )Taxes
              
              
              —
              
              
              —Depreciation
              
              
              (31,039
              )
              
              (45,512
              )Amortization
              
              
              (2,192,950
              )
              
              (965,513
              )Net
                  income for the nine months ended September 30,
              
              $
              1,092,939
              
              $
              582,832




The
      aging
      of accounts receivable as of September 30, 2008 and December 31, 2007 is as
      shown:





2008
            
            2007Current
            
            $
            363,882
            
            
            53
            %
            $
            171,446
            
            
            57
            %30
                < 60
            
            
            167,165
            
            
            25
            %
            
            72,337
            
            
            24
            %60
                +
            
            
            151,472
            
            
            22
            %
            
            56,080
            
            
            19
            %Total
            
            $
            682,519
            
            
            100
            %
            $
            299,863
            
            
            100
            %





At
      September 30, 2007, the Company reported that it had a working capital
      deficiency of $566,269. This condition raised substantial doubt about the
      Company's ability to continue as a going concern at that time. The Company
      had
      income from operations for each of the two years ended December 31, 2007 of
      $956,170 and $1,179,677. The Company also had positive cash flows from
      operations of $2,805,883 and $2,465,289 for the two years ended December 31,
      2007. In addition, the Company projects positive cash flows for the next twelve
      months. With this positive trend of operating income, cash flows and projected
      cash flow over the next twelve months, the Company’s management considers the
      facts and circumstances, which raised substantial doubt about the Company’s
      ability to continue as a going concern, to be alleviated.





33




**SITESTAR
      CORPORATION**





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




The
      Company also plans to continue to increase revenue by acquiring customers in
      target markets at competitive prices and selling value-added products and
      services to the existing customer base to maximize average revenue per user
      (ARPU). The Company will continue to reduce overall operating expenses by
      leveraging economies of scale, deployment of new technologies, and reducing
      supplier costs by securing more favorable rates and terms through wholesale
      partnerships and other methods.




**OFF-BALANCE
      SHEET TRANSACTIONS**




The
      Company is not a party to any off-balance sheet transactions.




**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, the Company’s ability to expand the Company’s customer base, make
      strategic acquisitions, general market conditions and competition and
      pricing.





Although
      the Company believes 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.





34




**SITESTAR
      CORPORATION**





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





**CRITICAL
      ACCOUNTING POLICY AND ESTIMATES**





The
      Company’s Management’s Discussion and Analysis of Financial Condition and
      Results of Operations section discusses its condensed consolidated financial
      statements, which have been prepared in accordance with accounting principles
      generally accepted in the United States of America as promulgated by the Public
      Company Accounting Oversight Board. The preparation of these financial
      statements requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities at the date of the financial statements and the reported amount
      of
      revenues and expenses during the reporting period. On an ongoing basis,
      management evaluates its estimates and


judgments,
      including those related to revenue recognition, accrued expenses, financing
      operations, and contingencies and litigation. Management bases its estimates
      and
      judgments on historical experience and on various other factors that are
      believed to be reasonable under the circumstances, the results of which form
      the
      basis for making judgments about the carrying value of assets and liabilities
      that are not readily apparent from other sources. Actual results may differ
      from
      these estimates under different assumptions and conditions. The most significant
      accounting estimates inherent in the preparation of the Company’s financial
      statements include estimates as to the appropriate carrying value of certain
      assets and liabilities which are not readily apparent from other sources. These
      accounting policies are described at relevant sections in this discussion and
      analysis and in the condensed consolidated financial statements included in
      this
      quarterly report.




**Item
      3.    Controls and Procedures**





The
      Company has evaluated the effectiveness of the disclosure controls and
      procedures and internal controls over financial reporting as of September 30,
      2008. This evaluation was carried out under the supervision and with the
      participation of the Company’s management, including the Principal Executive
      Officer and Principal Financial Officer. Based on this evaluation, these
      officers have concluded that the disclosure controls and procedures are
      effective. There were no changes in internal control over financial reporting
      during the last fiscal quarter ended September 30, 2008 that materially
      affected, or is reasonably likely to materially affect internal control over
      financial reporting.





Disclosure
      controls and procedures and internal controls over financial reporting are
      designed to ensure that information required to be disclosed by the Company
      in
      the reports that the Company file or submit under the Exchange Act is recorded,
      processed, summarized and reported, within the time periods specified in the
      SEC’s rules and forms.  Disclosure controls and procedures include, without
      limitation, controls and procedures designed to ensure that information required
      to be disclosed by the Company in the reports that the Company file under the
      Exchange Act is accumulated and communicated to the Company management,
      including Principal Executive Officer and Principal Financial Officer, as
      appropriate, to allow timely decisions regarding required disclosure.





35





**SITESTAR
      CORPORATION**




**Disclosure
      Controls and Internal Control over Financial Reporting**





Company
      management is responsible for establishing and maintaining adequate internal
      control over the Company’s financial reporting. Management did not use a
      framework to conduct the required evaluation of the effectiveness of the
      Company’s internal control over financial reporting since, in the view of
      management, comparison with a framework was unwarranted because the size of
      the
      Company's current operations are such that management is aware of all current
      transactions.





An
      evaluation was conducted under the supervision and with the participation of
      the
      Company's management, including the President (Principal Executive Officer)
      and
      Chief Financial Officer (Principal Accounting and Financial Officer), of the
      effectiveness of the design and operation of the Company's disclosure controls
      and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange
      Act) as of the quarter ended September 30, 2008 covered by this quarterly report
      on Form 10-Q.





**Inherent
      Limitations of the Effectiveness of Internal Control**





A
      control
      system, no matter how well conceived and operated, can provide only reasonable,
      not absolute, assurance that the objectives of the internal control system
      are
      met. Because of the inherent limitations of any internal control system, no
      evaluation of controls can provide absolute assurance that all control issues,
      if any, within a company have been detected.





The
      Company's management, including the President (Principal Executive Officer)
      and
      Chief Financial Officer (Principal Accounting and Financial Officer), confirm
      that there was no change in the Company's internal control over financial
      reporting during the quarter ended June 30, 2008 that has materially affected,
      or is reasonably likely to materially affect, the Company's internal control
      over financial reporting.




36





**SITESTAR
      CORPORATION**





**PART
      II.  OTHER INFORMATION**




**Item
      1.     Legal Proceedings**





On
      January 16, 2008, Sitestar filed a complaint against Frederick T. Manlunas
      in
      the Superior Court of the State of California, County of Orange, Case No. 30
      2008 00101457, for breach of written contract and specific performance
      regarding shares in Sitestar that Mr. Manlunas failed to provide to Sitestar
      under the Stock Redemption Agreement, and declaratory relief regarding the
      parties' respective duties and rights


under
      the
      Stock Redemption Agreement and Secured Note. On May 28, 2008, Mr. Manlunas
      filed
      a cross-complaint against Sitestar for reformation, breach of contract,
      negligent misrepresentation, and fraudulent inducement, alleging damages of
      $148,692. Trial is scheduled for January 26, 2009.





A
      complaint was filed in Belmont County, Ohio that alleges there was a breach
      of
      the agreement for the purchase and sale of Internet Service Provider accounts
      dated July 1, 2006. The Complaint alleges the Company defaulted upon its
      obligation under the contract and owes First USA, Inc. the sum of approximately
      $150,000.




**Item
      2.     Unregistered Sales of Equity Securities and use of
      Proceeds**




None.




**Item
      3.     Defaults Upon Senior Securities**




None.




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




None.




**Item
      5.     Other Information**




None




**Item
      6.     Exhibits**




(a)
             The following are filed as exhibits to
      this form 10-Q:





31.1
      Certification of President Pursuant to the Securities Exchange Act of 1934,
      Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.





37




**SITESTAR
      CORPORATION**





**PART
      II.  OTHER INFORMATION, continued**




31.2
      Certification of Chief Financial Officer Pursuant to the Securities Exchange
      Act
      of 1934, Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.





32
      Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
      906 of the Sarbanes-Oxley Act of 2002




38




**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
                CORPORATIONDate:
              November14,
              2008
            By:
            /s/
              Frank Erhartic, Jr.Frank
              Erhartic, Jr.President,
                Chief Executive Officer
              (Principal
                Executive Officer and
              Principal
                Accounting Officer)




Date:
              November14,
              2008
            By:
            /s/
              Daniel A. Judd.Daniel
              A. JuddChief
                Financial Officer
              (Principal
                Financial Officer)




39