NEVADA
(State
or other jurisdiction of
incorporation
or organization)
|
88-0397234
(I.R.S.
Employer Identification No.)
|
·
|
Local
and regional ISPs and Computer
Companies;
|
·
|
National
Internet Service Providers, such as, AOL Time Warner, MSN (Microsoft
Network) and EarthLink;
|
·
|
Local,
regional and national broadband providers, such as Adelphia and Cox
Communications;
|
·
|
Providers
of Web hosting, co-location and other Internet-based business
services;
|
·
|
Computer
hardware and other technology companies that provide Internet connectivity
with their own or other products, including IBM and
Microsoft;
|
·
|
National
long distance carriers, such as Qwest and
Sprint;
|
·
|
Regional
Bell operating companies and local telephone
companies;
|
·
|
Providers
of free or discount Internet service, including United Online;
|
·
|
Terrestrial
wireless and satellite ISPs; and
|
·
|
Non-profit
or educational ISPs.
|
|
High
|
Low
|
|||||
2004
|
|
|
|||||
For
the quarter ended March 31, 2004
|
$
|
0.02
|
$
|
0.02
|
|||
For
the quarter ended June 30, 2004
|
$
|
0.01
|
$
|
0.01
|
|||
For
the quarter ended September 30, 2004
|
$
|
0.01
|
$
|
0.01
|
|||
For
the quarter ended December 31, 2004
|
$
|
0.03
|
$
|
0.03
|
|||
2005
|
|||||||
For
the quarter ended March 31, 2005
|
$
|
0.04
|
$
|
0.03
|
|||
For
the quarter ended June 30, 2005
|
$
|
0.03
|
$
|
0.03
|
|||
For
the quarter ended September 30, 2005
|
$
|
0.06
|
$
|
0.05
|
|||
For
the quarter ended December 31, 2005
|
$
|
0.06
|
$
|
0.06
|
PURCHASES
OF EQUITY SECURITIES
|
||||
Period
|
(a)
Total Number of Shares (or Units) Purchased
|
(b)
Average Price Paid per Share (or Unit)
|
(c)
Total Number of Shares (or Units) Purchased as Part of Publicly Announced
Plans or Programs
|
(d)
Maximum Number (or Approximate Dollar Value) of Shares (or Units)
that May
Yet Be Purchased Under the Plans or Programs
|
October
1, 2004
|
1,460,796
|
.01
|
|
|
For
the year ended December 31, 2005
|
||||||||||||||||
|
Corporate
|
Internet
|
Development
|
Retail
|
Total
|
|||||||||||
Revenue
|
$
|
—
|
$
|
3,527,148
|
$
|
—
|
$
|
152,834
|
$
|
3,679,982
|
||||||
Cost
of revenue
|
—
|
974,547
|
—
|
77,911
|
1,052,458
|
|||||||||||
Gross
profit
|
—
|
2,552,601
|
—
|
74,923
|
2,627,524
|
|||||||||||
Operating
expenses
|
60,721
|
1,655,859
|
—
|
83,552
|
1,800,132
|
|||||||||||
Income
(loss) from operations
|
(60,721
|
)
|
896,742
|
—
|
(8,629
|
)
|
827,392
|
|||||||||
Other
income (expense)
|
—
|
(187,278
|
)
|
—
|
—
|
(187,278
|
)
|
|||||||||
Net
income (loss)
|
$
|
(60,721
|
)
|
$
|
709,464
|
$
|
—
|
$
|
(8,629
|
)
|
$
|
640,114
|
||||
|
||||||||||||||||
EBITDA(1)
|
$
|
(60,721
|
)
|
$
|
1,485,833
|
$
|
—
|
$
|
(5,795
|
)
|
$
|
1,419,317
|
|
For
the year ended December 31, 2004
|
|||||||||||||||
|
Corporate
|
Internet
|
Development
|
Retail
|
Total
|
|||||||||||
Revenue
|
$
|
—
|
$
|
2,790,342
|
$
|
81,430
|
$
|
262,432
|
$
|
3,134,204
|
||||||
Cost
of revenue
|
—
|
997,069
|
71,830
|
117,067
|
1,185,966
|
|||||||||||
Gross
profit
|
—
|
1,793,273
|
9,600
|
145,365
|
1,948,238
|
|||||||||||
Operating
expenses
|
71,785
|
1,477,110
|
—
|
82,369
|
1,631,264
|
|||||||||||
Income
(loss) from operations
|
(71,785
|
)
|
316,163
|
9,600
|
62,996
|
316,974
|
||||||||||
Other
income (expense)
|
(34,018
|
)
|
(200,036
|
)
|
—
|
—
|
(234,054
|
)
|
||||||||
Net
income (loss)
|
$
|
(105,803
|
)
|
$
|
116,127
|
$
|
9,600
|
$
|
62,996
|
$
|
82,920
|
|||||
|
||||||||||||||||
EBITDA(1)
|
$
|
(90,001
|
)
|
$
|
786,753
|
$
|
9,600
|
$
|
67,296
|
$
|
773,648
|
2005
|
2004
|
||||||||||||
Current
|
$
|
62,096
|
43.2
|
%
|
$
|
54,677
|
28.4
|
%
|
|||||
30
+
|
47,670
|
33.1
|
%
|
108,087
|
56.2
|
%
|
|||||||
60
+
|
34,151
|
23.7
|
%
|
29,586
|
15.4
|
%
|
|||||||
90
+
|
0
|
0
|
%
|
0
|
0
|
%
|
|||||||
Total
|
$
|
143,917
|
100.0
|
%
|
$
|
192,350
|
100.0
|
%
|
|
Page
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
17
|
|
|
FINANCIAL
STATEMENTS
|
|
|
|
Consolidated
Balance Sheets as of December 31, 2005 and 2004
|
18-19
|
Consolidated
Statements of Operations for the Years Ended December 31, 2005 and
2004
|
20
|
Consolidated
Statements of Stockholders' Equity for the Years Ended December 31,
2005
and 2004
|
21
|
Consolidated
Statements of Cash Flows for the Years Ended December 31, 2005 and
2004
|
22-23
|
|
|
Notes
to Consolidated Financial Statements
|
24-37
|
/s/ Bagell, Josephs & Company, L.L.C. |
Bagell, Josephs & Company, L.L.C. |
Gibbsboro,
NJ
March
24, 2006
|
CURRENT
ASSETS
|
2005
|
2004
|
|||||
Cash
and cash equivalents
|
$
|
36,047
|
$
|
48,533
|
|||
Accounts
receivable, less allowance for doubtful accounts
of
$13,834 and $11,992 as of December 31, 2005 and
December
31, 2004 respectively
|
143,917
|
192,350
|
|||||
Total
current assets
|
179,964
|
240,883
|
|||||
PROPERTY
AND EQUIPMENT, net
|
311,781
|
359,284
|
|||||
CUSTOMER
LIST, net of accumulated amortization of $2,765,104
and
$2,335,566 as of December 31, 2005 and December 31
2004
respectively
|
1,421,170
|
421,659
|
|||||
GOODWILL,
net of impairment
|
1,288,559
|
1,288,559
|
|||||
OTHER
ASSETS
|
289,586
|
143,178
|
|||||
|
|||||||
TOTAL
ASSETS
|
$
|
3,491,060
|
$
|
2,453,563
|
CURRENT
LIABILITIES
|
2005
|
2004
|
|||||
Accounts
payable
|
$
|
193,748
|
$
|
260,499
|
|||
Accrued
expenses
|
178,390
|
141,975
|
|||||
Deferred
revenue
|
321,555
|
366,311
|
|||||
Settlement of convertible debentures
|
—
|
259,734
|
|||||
Notes
payable, current portion
|
959,344
|
323,434
|
|||||
Note
payable - stockholders, current portion
|
242,724
|
124,016
|
|||||
Total
current liabilities
|
1,895,761
|
1,475,969
|
|||||
|
|||||||
NOTES
PAYABLE, less current portion
|
74,847
|
171,482
|
|||||
NOTES
PAYABLE - STOCKHOLDERS, less current portion
|
650,520
|
696,294
|
|||||
|
|||||||
TOTAL
LIABILITIES
|
2,621,128
|
2,343,745
|
|||||
|
|||||||
COMMITMENTS
AND CONTINGENCIES (Note 8)
|
|||||||
|
|||||||
STOCKHOLDERS'
EQUITY
|
|||||||
Preferred
Stock, $0.001 par value, 10,000,000 shares
authorized,
0 shares issued and outstanding
|
—
|
—
|
|||||
Common
Stock, $0.001 par value, 300,000,000 shares
authorized,
86,013,305 and 82,013,304 shares issued and
outstanding on December 31, 2005 and December 31, 2004
respectively
|
86,013
|
82,013
|
|||||
Additional
paid-in capital
|
13,450,207
|
13,334,207
|
|||||
Treasury
Stock, $0.001 par value, 6,218,305 and 6,218,305 common
shares
on December 31, 2005 and December 31, 2004 respectively
|
(129,977
|
)
|
(129,977
|
)
|
|||
Accumulated
deficit
|
(12,536,311
|
)
|
(13,176,425
|
)
|
|||
Total
stockholders' equity
|
869,932
|
109,818
|
|||||
|
|||||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$
|
3,491,060
|
$
|
2,453,563
|
|
2005
|
2004
|
|||||
REVENUE
|
|||||||
Internet
service revenue
|
$
|
3,527,148
|
$
|
2,790,342
|
|||
Retail
revenue
|
152,834
|
262,432
|
|||||
Development revenue
|
-
|
81,430
|
|||||
TOTAL
REVENUE
|
3,679,982
|
3,134,204
|
|||||
|
|||||||
COST
OF REVENUE
|
|||||||
Cost
of Internet service revenue
|
974,547
|
997,069
|
|||||
Cost
of retail revenue
|
77,911
|
117,067
|
|||||
Cost of development revenue
|
-
|
71,830
|
|||||
TOTAL
COST OF REVENUE
|
1,052,458
|
1,185,966
|
|||||
|
|||||||
GROSS
PROFIT
|
2,627,524
|
1,948,238
|
|||||
|
|||||||
OPERATING
EXPENSES
|
|||||||
Selling,
general and administrative expenses
|
1,800,132
|
1,600,877
|
|||||
Write-down
of customer list
|
-
|
30,387
|
|||||
TOTAL
OPERATING EXPENSES
|
1,800,132
|
1,631,264
|
|||||
|
|||||||
INCOME
FROM OPERATIONS
|
827,392
|
316,974
|
|||||
|
|||||||
OTHER
INCOME (EXPENSES)
|
|||||||
Gain
on disposal of assets
|
21,778
|
17,760
|
|||||
Interest
expense
|
(209,056
|
)
|
(233,598
|
)
|
|||
Expense
from financing settlement
|
-
|
(18,216
|
)
|
||||
TOTAL
OTHER INCOME (EXPENSES)
|
(187,278
|
)
|
(234,054
|
)
|
|||
|
|||||||
INCOME
BEFORE INCOME TAXES
|
640,114
|
82,920
|
|||||
|
|||||||
INCOME
TAXES
|
-
|
-
|
|||||
|
|||||||
NET
INCOME
|
$
|
640,114
|
$
|
82,920
|
|||
|
|||||||
BASIC
AND DILUTED INCOME PER SHARE
|
$
|
0.01
|
$
|
0.00
|
|||
|
|||||||
WEIGHTED
AVERAGE SHARES
OUTSTANDING
- BASIC AND DILUTED
|
83,481,798
|
75,619,483
|
|
Common
Stock
|
Additional
|
|
|
|
||||||||||||||
|
|
Paid-in
|
Treasury
|
Accumulated
|
|
||||||||||||||
|
Shares
|
Amount
|
Capital
|
Stock
|
Deficit
|
Total
|
|||||||||||||
|
|
|
|
|
|
|
|||||||||||||
Balances
at December 31, 2003
|
69,109,801
|
$
|
101,594
|
$
|
13,635,272
|
$
|
(681,854
|
)
|
$
|
(13,259,345
|
)
|
$
|
(204,333
|
)
|
|||||
Issuance
of shares per
settlement
of convertible debentures.
|
4,000,000
|
4,000
|
76,000
|
|
80,000
|
||||||||||||||
Cancellation
of shares per redemption agreement
|
*6,218,305
|
(26,266
|
)
|
(525,611
|
)
|
551,877
|
|
-
|
|||||||||||
Cancellation
of shares per sale of Sitestar Applied Technologies’
assets
|
(1,460,796
|
)
|
(1,461
|
)
|
(13,147
|
)
|
(14,608
|
)
|
|||||||||||
Issuance
of shares per
purchase
agreement of Lynchburg.net.
|
4,145,995
|
4,146
|
161,693
|
165,839
|
|||||||||||||||
Net
income
|
-
|
-
|
-
|
-
|
82,920
|
82,920
|
|||||||||||||
Balances
at December 31, 2004
|
82,013,305
|
$
|
82,013
|
$
|
13,334,207
|
$
|
(129,977
|
)
|
$
|
(13,176,425
|
)
|
$
|
109,818
|
||||||
Issuance
of shares per Debt Conversion Agreement
|
4,000,000
|
4,000
|
116,000
|
120,000
|
|||||||||||||||
Net
income
|
640,114
|
640,114
|
|||||||||||||||||
Balance
at December 31, 2005
|
86,013,305
|
$
|
86,013
|
$
|
13,450,207
|
$
|
(129,977
|
)
|
$
|
(12,536,311
|
)
|
$
|
869,932
|
|
2005
|
2004
|
|||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|||||
Net
income
|
$
|
640,114
|
$
|
82,920
|
|||
Adjustments
to reconcile net income to
|
|||||||
net
cash provided by operating activities:
|
|||||||
Depreciation
and amortization expense
|
570,147
|
468,335
|
|||||
Bad
debt expense
|
1,842
|
276,152
|
|||||
Write-down
of customer list
|
-
|
30,387
|
|||||
Expense from financing settlement
|
-
|
18,216
|
|||||
Gain on sale of assets
|
-
|
(17,760
|
)
|
||||
(Increase)
decrease in accounts receivable
|
60,581
|
(91,739
|
)
|
||||
Increase
(decrease) in accounts payable
|
(69,489
|
)
|
30,008
|
||||
Increase
(decrease) in accrued expenses
|
42,076
|
(52,015
|
)
|
||||
Increase
(decrease) in deferred revenue
|
95,245
|
49,526
|
|||||
Increase
(decrease) in contingent liability
|
-
|
(220,000
|
)
|
||||
Net
cash provided by operating activities
|
1,340,516
|
574,030
|
|||||
|
|||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|||||||
Purchases
of property and equipment
|
(7,315
|
)
|
(35,456
|
)
|
|||
Purchase of customer list
|
(250,000
|
)
|
-
|
||||
Purchase of assets held for resale
|
(17,198
|
)
|
|||||
Sale of assets held for resale
|
-
|
12,404
|
|||||
Net
cash used in investing activities
|
(274,513
|
)
|
(23,052
|
)
|
|||
|
|||||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|||||||
Net
proceeds from notes payable - stockholders
|
385,000
|
100,000
|
|||||
Repayment of convertible debentures
|
(259,734
|
)
|
(100,000
|
)
|
|||
Repayment
of notes payable
|
(1,006,029
|
)
|
(164,387
|
)
|
|||
Repayment
of notes payable - stockholders
|
(197,726
|
)
|
(385,922
|
)
|
|||
Net
cash used in financing activities
|
(1,078,489
|
)
|
(550,309
|
)
|
|||
NET
INCREASE (DECREASE) IN CASH
AND
CASH EQUIVALENTS
|
(12,486
|
)
|
669
|
||||
CASH
AND CASH EQUIVALENTS -
BEGINNING
OF YEAR
|
48,533
|
47,864
|
|||||
CASH
AND CASH EQUIVALENTS -
END
OF YEAR
|
$
|
36,047
|
$
|
48,533
|
a)
|
Increase
revenue through mergers and acquisitions and aggressive marketing
of
Internet services in a nationwide
campaign;
|
b) | Continue to cut costs by securing more favorable telecommunications rates; |
c) |
Continue
to cut operating expenses in payroll and related expenses;
and
|
d) | Offering new products to reduce the impairment of intangible assets and expand the Company’s markets. |
|
2005
|
2004
|
|||||
Gross
accounts receivable
|
$
|
157,751
|
$
|
204,342
|
|||
Less
allowance for doubtful accounts
|
(13,834
|
)
|
(11,992
|
)
|
|||
$
|
143,917
|
$
|
192,350
|
|
2005
|
2004
|
|||||
Goodwill,
at beginning of year
|
$
|
1,288,559
|
$
|
1,122,719
|
|||
Goodwill
recognized with issuance of shares of stock
|
—
|
165,840
|
|||||
Goodwill,
at end of year
|
$
|
1,288,559
|
$
|
1,288,559
|
Equipment
|
$
|
41,447
|
||
Customer
list
|
103,707
|
|||
Non-compete
agreement
|
16,369
|
|||
Purchase
price
|
$
|
161,523
|
Equipment
|
$
|
42,689
|
||
Customer
list
|
159,625
|
|||
Non-compete
agreement
|
24,000
|
|||
Deferred
revenue
|
(50,000
|
)
|
||
Purchase
price
|
$
|
176,314
|
|
2005
|
2004
|
|||||
Net
sales
|
$
|
3,679,982
|
$
|
3,279,798
|
|||
Gross
profit
|
2,627,524
|
2,077,321
|
|||||
Selling,
general and administrative
expenses
|
1,800,132
|
1,646,329
|
|||||
Net
income
|
640,114
|
178,848
|
|||||
Basic
income per share
|
$
|
0.01
|
$
|
0.00
|
Equipment
|
$
|
59,755
|
||
Accounts
receivable
|
2,284
|
|||
Customer
list
|
69,706
|
|||
Non-compete
agreement
|
12,000
|
|||
Purchase
price
|
$
|
143,745
|
|
2005
|
2004
|
|||||
Net
sales
|
$
|
3,679,982
|
$
|
3,619,304
|
|||
Gross
profit
|
$
|
2,627,524
|
$
|
2,236,198
|
|||
Selling,
general and administrative expenses
|
$
|
1,800,132
|
$
|
1,681,170
|
|||
Net
income
|
$
|
40,114
|
$
|
285,280
|
|||
Basic
income per share
|
$
|
0.01
|
$
|
0.00
|
|
2005
|
2004
|
|||||
Land
|
$
|
10,000
|
$
|
10,000
|
|||
Building
|
213,366
|
213,366
|
|||||
Automobile
|
9,500
|
9,500
|
|||||
Computer
equipment
|
633,753
|
576,437
|
|||||
Furniture
and fixtures
|
42,909
|
42,909
|
|||||
|
909,528
|
852,212
|
|||||
Less
accumulated depreciation
|
(597,747
|
)
|
(492,928
|
)
|
|||
$
|
311,781
|
$
|
359,284
|
2005
|
2004
|
||||||
Bank
note payable in monthly interest and principal payments of $2,215
and due
on August 6, 2005. Interest is payable at an annual rate of 6.25%.
The note is secured by inventory, equipment and accounts receivable
of Advanced Internet Services, Inc. This note was refinanced March
18, 2004 with monthly principal payments of $2,952 plus interest
at prime
plus .5% (8.75% and 6.75% as
of December 31, 2005 and 2004 respectively).
|
$
|
8,855
|
$
|
44,273
|
|||
Bank
note payable in monthly interest and principal payments of $1,784.
Interest is payable prime plus 4.5%, (11.5% and 9.75% as of December
31,
2005 and 2004 respectively). 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.
|
86,007
|
97,597
|
|||||
Bank
note payable in monthly interest and principal payments of $2,400
and due
November 2008. Interest is payable at an annual rate of prime plus
1.5% (6.75% as
of December 31, 2004). The note was secured by a deed of trust
against personal residences of three stockholders and the Company’s
building. Also, the bank has a blanket lien against all other
current and future assets of Sitestar.net. This note was refinanced
on
February 9, 2004 into a line of credit due on February 1, 2005 with
a
principal limit of $165,000 and daily deposit account sweeps. On
February
1, 2005 and again on February 1, 2006 the note was renewed for another
year. Interest is payable at an annual rate of prime plus .75%
(8.0% and
6.0% as of December 31, 2005 and 2004 respectively). 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.
|
43,158
|
103,880
|
Non-interest
bearing amount due on acquisition of Virginia Link Internet
and Network Management, Inc. and Mount Airy Networks, LLC payable
in
thirty monthly installments of $6,667.
|
75,830
|
144,472
|
|||||
Non-interest
bearing note due on acquisition of Exchange Computers, Inc. and Exis.net,
Inc. payable in twelve monthly installments of $10,000.
|
—
|
104,694
|
|||||
Non-interest
bearing note due on acquisition of Idacomm’s customer base payable in
seven monthly installments of $250,000.
|
820,341
|
—
|
|||||
1,034,191
|
494,916
|
||||||
Less
current portion
|
(959,344
|
)
|
(323,434
|
)
|
|||
Long-term
portion
|
$
|
74,847
|
$
|
171,482
|
Year
ending December 31, 2006
|
$
|
959,344
|
||
Year
ending December 31, 2007
|
11,160
|
|||
Year
ending December 31, 2008
|
11,160
|
|||
Year
ending December 31, 2009
|
11,160
|
|||
Year
ending December 31, 2010
|
11,160
|
|||
Thereafter
|
30,207
|
|||
Total
|
$
|
1,034,191
|
2005
|
2004
|
||||||
Note
payable to officer and stockholder on a line of credit of $750,000
at 10%
interest. The accrued interest and principal are due on December 31,
2008.
|
$
|
603,659
|
$
|
481,709
|
|||
|
|||||||
Note
payable to stockholder assumed in connection with the acquisition
of
Sitestar.net. The note was payable upon demand and bore interest at
9.0% per annum. In February 2004 the terms were changed to 36 monthly
installments at 5.5%.
|
15,909
|
32,375
|
|||||
|
|||||||
Note
payable to stockholders issued as part of the Purchase price of Advanced
Internet Services, Inc. The note is to be repaid in 24 quarterly
installments of $51,078 beginning in September 2001 and is non-interest
bearing. The imputed interest rate for this note is
36%.
|
198,676
|
306,226
|
|||||
Note
payable to stockholder issued in connection to the acquisition of
Idacomm’s customer base. The note is payable on September 14, 2006 and
bears interest at 8.0%.
|
25,000
|
-
|
|||||
Note
payable to stockholder issued in connection to the acquisition of
Idacomm’s customer base. The note is payable on October 13, 2006 and bears
interest at 8.0%.
|
50,000
|
-
|
893,244
|
820,310
|
||||||
Less
current portion
|
(242,724
|
)
|
(124,016
|
)
|
|||
Long-term
portion
|
$
|
650,520
|
$
|
696,294
|
Year
ending December 31, 2006
|
$
|
242,724
|
||
Year
ending December 31, 2007
|
46,861
|
|||
Year
ending December 31, 2008
|
603,659
|
|||
Year
ending December 31, 2009
|
—
|
|||
Year
ending December 31, 2010
|
—
|
|||
Total
|
$
|
893,244
|
Year
ended December
31,
|
|
|||
2006
|
$
|
48,600
|
||
2007
|
— | |||
2008
|
— | |||
Total
|
$
|
48,600
|
2005
|
2004
|
||||||
Federal
income tax rate
|
34.0
|
%
|
34.0
|
%
|
|||
Effect
of net operating loss
|
(34.0
|
)%
|
(34.0
|
)%
|
|||
Effective
income tax rate
|
0.0
|
%
|
0.0
|
%
|
|||
2005
|
2004
|
||||||
Accounts
receivable
|
$
|
4,000
|
$
|
4,000
|
|||
Intangible
assets
|
1,747,000
|
1,747,000
|
|||||
Loss
carry forwards
|
1,298,000
|
1,298,000
|
|||||
Less
valuation allowance
|
(3,049,000
|
)
|
(3,049,000
|
)
|
|||
|
$ | - |
$
|
-
|
December
31, 2005
|
||||||||||||||||
|
Corporate
|
Internet
|
Development
|
Retail
|
Consolidated
|
|||||||||||
Revenue
|
$
|
-
|
$
|
3,527,148
|
$
|
-
|
$
|
152,834
|
$
|
3,679,982
|
||||||
Operating
income (loss)
|
(60,721
|
)
|
896,742
|
-
|
(8,629
|
)
|
827,392
|
|||||||||
Depreciation
and amortization
|
-
|
567,313
|
-
|
2,834
|
570,147
|
|||||||||||
Interest
expense
|
-
|
(209,056
|
)
|
-
|
-
|
(209,056
|
)
|
|||||||||
Goodwill
|
-
|
1,288,559
|
-
|
-
|
1,288,559
|
|||||||||||
Identifiable
assets
|
-
|
3,381,529
|
-
|
109,531
|
3,491,060
|
December
31, 2004
|
||||||||||||||||
|
Corporate
|
Internet
|
Development
|
Retail
|
Consolidated
|
|||||||||||
Revenue
|
$
|
-
|
$
|
2,790,342
|
$
|
81,430
|
$
|
262,432
|
$
|
3,134,204
|
||||||
Operating
income (loss)
|
(71,785
|
)
|
316,163
|
9,600
|
62,996
|
316,974
|
||||||||||
Depreciation
and amortization
|
-
|
452,830
|
-
|
4,301
|
457,131
|
|||||||||||
Interest
expense
|
(15,802
|
)
|
(217,796
|
)
|
-
|
-
|
(233,598
|
)
|
||||||||
Goodwill
|
-
|
1,288,559
|
-
|
-
|
1,288,559
|
|||||||||||
Identifiable
assets
|
-
|
2,366,217
|
-
|
87,346
|
2,453,563
|
ITEM
9.
|
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTER AND CONTROL
PERSONS;
|
Name
|
Age
|
Position
|
Director
since
|
||||
Frank
R. Erhartic, Jr.
|
37 |
President,
CEO, Director
|
October
2001
|
||||
Julia
E. Erhartic
|
38 |
Secretary,
Director
|
October
2001
|
||||
Daniel
Judd
|
49 |
CFO,
Director
|
June
2004
|
|
Other
|
Long-term
|
|||
Name
and
|
Annual
|
Compensation
|
|||
Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Compensation($)
|
Awards
|
Frank
R. Erhartic, Jr.
|
2005
|
67,885
|
—
|
—
|
—
|
Director,
President &
|
2004
|
52,500
|
—
|
—
|
—
|
Chief
Executive Officer
|
|||||
|
|||||
Julie
E. Erhartic
|
2005
|
13,000
|
—
|
—
|
—
|
Director,
Secretary
|
2004
|
13,000
|
—
|
—
|
—
|
Daniel
Judd
|
2005
|
38,846
|
|||
Director,
Chief Financial
|
2004
|
36,350
|
|||
Officer
|
Name
and Address of
Beneficial
Owner
|
Number
of Shares
Beneficially
Owned (1)
|
Percent
Of
Class (2)
|
|
||
Frank
and Julie Erhartic
7109
Timberlake Road
Lynchburg,
VA 24502
|
24,583,980
|
27.92%
|
Daniel
A. Judd
7109
Timberlake Road
Lynchburg,
VA 24502
|
0
|
0%
|
All
directors and officers
As
a group (3 persons)
|
24,583,980
|
27.92%
|
|
Exhibit
|
Description
|
Filed
|
2.1.1
|
Agreement
and Plan of Reorganization, dated October 25, 1998
|
*
|
2.2.1
|
Agreement
and Plan of Reorganization, dated July 27, 1999
|
*
|
2.3
|
Asset
Sale and Agreement re divestiture of Holland American Specialties,
dated
September 30, 1999 *
|
*
|
2.4
|
Asset
Sale and Agreement re divestiture of Sierra Madre Foods, Inc., dated
September 30, 1999
|
*
|
2.5
|
Letter
of Intent to Acquire Eastern Shore Net, dated August 17, 1999
|
*
|
2.6
|
Letter
of Intent to Acquire Neocom Microspecialists, Inc., dated September
2,
1999
|
*
|
2.7
|
Plan
and Agreement of Share Exchange, re acquisition of Neocom
Micro-specialists, Inc., dated December 15, 1999
|
*
|
2.8
|
Neocom
Debt Assumption Agreement dated December 15, 1999
|
*
|
3.1(i)
|
Articles
of Incorporation of the Registrant (December 17, 1992)
|
*
|
3.1(ii)
|
Amended
Articles of Incorporation (July 29, 1998)
|
*
|
3.1(iii)
|
Amended
Articles of Incorporation (October 26, 1998)
|
*
|
3.1(iv)
|
Amended
Articles of Incorporation (July 14, 1999)
|
*
|
3.1(v)
|
Amended
Articles of Incorporation (July 28, 1999)
|
*
|
3.2(i)
|
By-laws
of the Registrant (December 17, 1992)
|
*
|
4.2
|
Convertible
Debenture Purchase Agreement dated as of May 11, 2000 between the
investors named therein and the Registrant
|
***
|
4.3
|
12%
Convertible Debenture due May 11, 2001 made by the Registrant in
favor of
New Millenium Capital Partners II, L.L.C.
|
***
|
4.4
|
12%
Convertible Debenture due May 11, 2001 made by the Registrant in
favor of
AJW Partners, L.L.C.
|
***
|
4.5
|
Stock
Purchase Warrant dated as of May 11, 2000 issued by Registrant to
New
Millenium Capital Partners, L.L.C.
|
***
|
4.6
|
Stock
Purchase Warrant dated as of May 11, 2000 issued by Registrant to
AJW
Partners, L.L.C.
|
***
|
4.7
|
Registration
Rights Agreement dated as of May 11, 2000 by and between the Registrant
and the investors named therein.
|
***
|
10.1
|
Lease
for Corporate Office
|
**
|
10.2
|
Security
Agreement dated as of May 11, 2000 by and between the Registrant
and the
investors named therein.
|
***
|
10.3
|
Stock
Tender and Exchange Agreement, dated November 22, 2000, by and among
Sitestar Corporation and Frank and Julie Erhartic, the owners of
FRE
Enterprises, Inc.
|
****
|
10.4
|
Lease
dated November 22, 2000 for corporate offices
|
#
|
10.5
|
Lease
Agreement dated March 24, 2004
|
#
|
10.7
|
Definitive
Purchase Agreement with Virginia Link Internet, dated June 30,
2004
|
******
|
10.8
|
Definitive
Purchase Agreement with Network Management, Inc., dated June 30,
2004
|
******
|
10.9
|
Definitive
Agreement with Thomas Albanese selling the assets of Sitestar Applied
Technologies, Inc., dated August 31, 2004
|
F
|
10.10
|
Definitive
Purchase Agreement to acquire certain
assets of Exchange Computers/Exis.net, Inc,
effective November 22, 2004
|
F
|
21.1
|
Subsidiaries
of the Registrant
|
F
|
31.1
|
Certification
of Chief Executive 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
|
F
|
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
|
F
|
32.1
|
Certification
Pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002
|
F
|
SITESTAR CORPORATION |
By: /s/ Frank Erhartic, Jr. |
|
Frank
Erhartic,
Jr. President, Chief Executive Officer |
By: /s/ Daniel A. Judd |
|
Daniel
A.
Judd Chief Financial Officer |
Signature
|
Title
|
Date
|
/s/ Frank Erhartic, Jr. | President, Chief Executive | March 30, 2005 |
Frank Erhartic, Jr. |
Officer, Director
(Principal Executive Officer)
|
|
/s/ Daniel A. Judd | Chief Financial Officer | March 30, 2005 |
Daniel A. Judd |
(Principal
Financial Officer,
Principal
Accounting Officer)
|
|
/s/ Julie Erhartic | Secretary, Director | March 30, 2005 |
Julie Erhartic |