<DOCUMENT>
<TYPE>424B3
<SEQUENCE>1
<FILENAME>ss424.txt
<DESCRIPTION>PROSPECTUS
<TEXT>

                                               Filed pursuant to Rule 424(b)(3)
                                               Registration No. 333-333-55426



                                   PROSPECTUS

                              Sitestar Corporation



                       14,850,000 Shares of Common Stock



         The  14,850,000  shares of our common stock,  $.001 par value,  offered
hereby are being  offered from time to time by certain of our security  holders.
Our common stock trades on the Over-the-Counter  Bulletin Board under the symbol
"SYTE".




                  INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
                     SEE "RISK FACTORS" BEGINNING ON PAGE 7.

         The  information in this prospectus is not complete and may be changed.
The selling  security  holders  identified in this prospectus may not sell these
securities  until the  registration  statement  filed  with the  Securities  and
Exchange Commission,  of which this prospectus is a part, is declared effective.
This  prospectus  is  not  an  offer  to  sell  these  securities  and it is not
soliciting an offer to buy these securities in any state where the offer or sale
is not permitted.

                              ---------------------

         Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus  is truthful or  complete.  Any  representation  to the contrary is a
criminal offense.

                                   May 7, 2001




                                       1



<PAGE>





                               TABLE OF CONTENTS
                                                                          PAGE
                                                                          ----

Prospectus Summary.........................................................  3
Selected Consolidated Financial Data.......................................  5
Risk Factors...............................................................  7
Forward-Looking Statements................................................. 23
Use of Proceeds............................................................ 23
Price Range of Our Common Stock............................................ 23
Dividend Policy............................................................ 24
Capitalization............................................................. 25
Plan of Distribution....................................................... 25
Management's Discussion and Analysis of Financial Condition and
  Results of Operations.................................................... 27
Business................................................................... 32
Management................................................................. 57
Principal and Selling Security Holders..................................... 59
Description of Convertible Debentures...................................... 63
Certain Relationships and Related Transactions............................. 65
Description of Capital Stock............................................... 66
Transfer Agent and Registrar............................................... 67
Legal Matters.............................................................. 67
Experts.................................................................... 67
Where You Can Find More Information........................................ 68
Index to Financial Statements.............................................. 69



                                       2



<PAGE>

                               PROSPECTUS SUMMARY

The  following  summary is  qualified  in its  entirety by detailed  information
appearing  elsewhere in this prospectus.  Each prospective  investor is urged to
read this prospectus, and the attached Exhibits, in their entirety.

                                  The Company

               We operate a diverse line of Internet-related businesses designed
to deliver a variety of on-line  solutions to small to medium  sized  businesses
and to  residential  consumers.  We intend to expand our existing  lines through
internal  growth  and the  acquisition  of  related  businesses  and to  further
diversify our lines by acquiring and investing in other emerging  Internet-based
businesses.  Our strategy is to integrate these  businesses into a collaborative
network that leverages our collective knowledge and resources.

Our present businesses include:

        INTERNET ACCESS

               We  offer  dial-up  and  private   Internet  access  services  to
residential  subscribers  and  businesses.  Our services  include  comprehensive
technical  assistance,  large  modem  banks  for  rapid  access  and  high-speed
connectivity.  We presently target customers within secondary markets outside of
major  metropolitan  areas because we believe these markets are  under-served by
the  larger,  national  Internet  service  providers.  Substantially  all of our
present  customers  are in the  mid-Atlantic  region due to our  acquisition  in
December 1999 of Neocom Microspecialists, Inc.

        WEB DEVELOPMENT

          We offer a variety of services which enable our customers to implement
their Internet goals. Our services include:  (1) website design, (2) web hosting
on  equipment  owned  and  administered  by us,  (3)  co-location  services  for
customers  who prefer  access to their  servers  but  require  the  reliability,
security and  performance  of our on-site  facilities,  (4) the design of banner
advertisements   and   consulting   as  to  how  and   where  to  place   banner
advertisements;  and (5)  advising  clients  how to position  their  websites to
improve placement in various Internet search engines.

        E-COMMERCE SERVICES

        --- Internet E-Commerce---

          We design and operate  customized online  "storefronts" for businesses
to enable them to offer and sell merchandise  over the Internet.  Our e-commerce
services  include  secure  online  payment  processing,  technical  support  and
installation  of  additional   e-mail  accounts.   We  presently  operate  three
e-commerce websites:(1) Greattools.com, which offers specialty tool products for
light to heavy industrial applications;  (2) Holland-American.com,  which offers
imported and domestic  specialty  gourmet foods; and (3)  Soccersite.com,  which
offers  soccer-related  merchandise  and apparel.  We derive revenues from these
sites from  commissions  on the sales of  merchandise.  All products are shipped
directly from the fulfillment center.

                                       3
<PAGE>


        --- Portals and Community Web Sites ---

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

        --- Value Added Content ---

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

        We have engaged in our current business  strategy since July 1999. While
we are actively  seeking  acquisition  and investment  opportunities,  we cannot
assure you that we complete  any  additional  acquisitions  or that our strategy
will be successful.



                                       4



<PAGE>


                                  The Offering.

                             SHARES OF COMMON STOCK
                           OFFERED IN THIS PROSPECTUS


COMMON STOCK TO BE SOLD
BY SELLING STOCKHOLDERS  ................................14,850,000 shares



TOTAL SHARES OF COMMON STOCK
TO BE OUTSTANDING
AFTER THE OFFERING        ...............................76,875,158 shares



USE OF PROCEEDS BY THE COMPANY.......................... The Company will not
                                                         receive any proceeds
                                                         from the sale of common
                                                         stock by the selling
                                                         stockholders


OVER-THE-COUNTER BULLETIN BOARD SYMBOL.................  SYTE




                      SELECTED CONSOLIDATED FINANCIAL DATA

         The  following  selected  historical  financial  data should be read in
conjunction with  "Management's  Discussion and Analysis of Financial  Condition
and Results of Operations" and the financial statements, related notes and other
financial  information  included elsewhere in this prospectus.  The consolidated
statements of operations  data for the fiscal years ended  December 31, 1999 and
1998 and the period from June 1, 1997  (inception) to December 31, 1997, and the
consolidated  balance  sheets data as of December 31, 1999,  1998 and 1997,  are
derived from our  consolidated  financial  statements which have been audited by
Merdinger Fruchter Rosen & Corso, P.C. and are included in this prospectus.

        The  selected  data  presented  below for the nine month  periods  ended
September  30, 2000 and 1999 are derived from the  unaudited  statements  of our
company  included  elsewhere  in this  prospectus.  Historical  results  are not
necessarily indicative of future results.

                                       5

<PAGE>


<TABLE>
<CAPTION>
                                             JUNE 1, 1997                      FISCAL YEAR ENDED
                                            (INCEPTION) TO                       DECEMBER 31,
                                            SEPTEMBER 30,   ----------------------------------------------
                                                1997             1998           1999               2000
                                            -------------   -------------   -------------      -----------
CONSOLIDATED STATEMENTS OF OPERATIONS
 DATA:

<S>                                         <C>             <C>             <C>                <C>
Net sales................................   $       -       $     -         $    223,749       $ 1,934,637
Cost of sales............................           -             -              124,859           955,592
                                            -------------   -------------   -------------      -----------
     Gross profit........................           -             -               98,890           979,045
Operating expenses:
     General and administrative..........                        370,650       3,217,247         3,870,022
     Loss From Operations of Business
       Transferred Under Contractual
       Obligation........................        194,069         113,844         239,653            42,233
       Write down of intangible assets                                                           1,860,000
                                            -------------   -------------   -------------      -----------
       Total operating expenses..........        194,069         484,494       3,456,900         5,772,255
                                            -------------   -------------   -------------      -----------
       Operating loss....................        194,069        (484,494)     (3,358,010)       (4,793,210)
Other (expense) income net...............           -              -             (13,679)         (448,277)
                                            -------------   -------------   -------------      -----------
       Net loss..........................   $   (194,069)   $   (484,494)   $ (3,371,689)      $(5,241,487)
                                            =============   =============   =============      ===========
       Net loss attributable to
         common shares...................   $   (194,069)   $   (484,494)   $ (3,371,689)      $(5,241,487)
                                            =============   =============   =============      ===========

Basic and diluted net loss per
 common share............................   $      (0.01)   $      (0.03)   $      (0.18)      $     (0.20)
                                            =============   =============   =============      ===========
Weighted average common
 shares used in determining
 net loss per share......................     16,740,000      17,081,430      18,932,268        26,526,529
                                            =============   =============   =============      ===========
</TABLE>

<TABLE>
<CAPTION>

                                                                                   AT DECEMBER 31,
                                                                  -----------------------------------------------
                                                                  1997           1998          1999          2000
                                                                  ----           ----          ----          ----
CONSOLIDATED BALANCE SHEETS DATA:
 <S>                                                           <C>            <C>          <C>           <C>
 Cash and cash equivalents................................     $    59,306    $   -        $    45,328   $  289,294
 Working capital (deficiency).............................         430,851     (266,063)      (860,227)    (463,295)
 Total assets.............................................       1,126,534      902,311      6,888,733    5,434,993
 Long-term debt...........................................            -           -            606,887      502,846
 Total stockholders' equity (deficiency)..................         433,731     (122,420)     4,252,065    3,238,170
</TABLE>

                                       6



<PAGE>


                                  RISK FACTORS

         An investment in our common stock  involves a high degree of risk.  You
should consider the following  factors carefully before deciding to purchase any
shares of our common stock.

WE HAVE A LIMITED OPERATING HISTORY UPON WHICH YOU MAY EVALUATE US

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

A HIGH PERCENTAGE OF OUR ASSETS ARE INTANGIBLE ASSETS

     The  change  in our  corporate  focus  from a food  holding  company  to an
Internet holding company has resulted in a dramatic change in the composition of
our assets and expenses.  The  intangible  assets  recorded in  connection  with
recent  acquisitions   represent   approximately  %  of  our  total  assets  and
approximately  134% of our  stockholders'  equity at  September  30,  2000.  The
amortization  of these  intangible  assets  likely  will be the  largest  single
expense item in our  statement of  operations.  This material  concentration  of
intangible  assets increases the risk of a large charge to earnings in the event
that the recoverability of these intangible assets is impaired.


OUR BUSINESS DEPENDS UPON THE PERFORMANCE OF OUR OPERATING  DIVISIONS,  WHICH IS
UNCERTAIN.

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

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

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

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

                                       7

<PAGE>


OUR BUSINESS MODEL IS UNPROVEN.

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

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


WE MAY HAVE TO TAKE CERTAIN ACTIONS TO AVOID  REGISTRATION  UNDER THE INVESTMENT
COMPANY ACT OF 1940.

     We believe  that we are  actively  engaged in the  business  of  e-commerce
through  our  network of  operating  companies.  However,  due to a  significant
possibility   that  many  of  our  future   operating   companies   may  not  be
majority-owned  subsidiaries,  changes  in the  value  of our  interests  in our
operating  assets and the income/loss and revenue  attributable to our operating
assets  could  require  us  to  register  as an  investment  company  under  the
Investment  Company  Act  unless  we take  action  to avoid  being  required  to
register.  For  example,  we may be unable to sell  minority  interests we would
otherwise want to sell and may need to sell some assets which are not considered
to be investment securities,  including interests in operating divisions. We may
also have to ensure  that we retain  at least a 25%  ownership  interest  in our
operating  companies after their initial public offerings.  In addition,  we may
have to acquire  additional income or  loss-generating  assets that we might not
otherwise have acquired or may have to forgo  opportunities to acquire interests
in companies  that we would  otherwise want to acquire would be important to our
strategy. It is not feasible for us to register as an investment company because
the Investment  Company Act  regulations are  inconsistent  with our strategy of
actively managing,  operating and promoting  collaboration  among our network of
operating divisions.



                                       8



<PAGE>


FLUCTUATIONS IN OUR QUARTERLY RESULTS MAY ADVERSELY AFFECT OUR STOCK PRICE

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

     *    the operating results of our operating divisions;

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

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

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

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

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

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

     Additionally,  if our operating results in one or more quarters do not meet
securities  analysts' or your expectations,  the price of our common stock could
decrease.


OUR SUCCESS IS  DEPENDENT  ON OUR KEY  PERSONNEL

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

                                       9

<PAGE>


     As of December 31, 2000,  all of our executive  management  personnel  have
worked for us for over one year. However, management of our Neocom and Lynchburg
subsidiary  have operated that Company for several years.  Our efficiency may be
limited while these employees and future employees are being integrated into our
operations.  In addition, we may be unable to find and hire additional qualified
management  and  professional  personnel  to  help  lead  us and  our  operating
divisions.

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


OUR EXPENSES WILL INCREASE AS WE GROW OUR BUSINESS

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

     *    broaden our operating company support capabilities;

     *    explore acquisition  opportunities and alliances with other companies;
          and

     *    facilitate business arrangements among our operating companies.


OUR OPERATING DIVISIONS ARE GROWING RAPIDLY AND WE MAY HAVE DIFFICULTY ASSISTING
THEM IN MANAGING THEIR GROWTH.

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

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

                                       10

<PAGE>


WE FACE COMPETITION FROM OTHER POTENTIAL ACQUIRERS OF E-COMMERCE COMPANIES.

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


OUR SUCCESS COULD BE IMPAIRED BY VALUATIONS PLACED ON INTERNET-RELATED COMPANIES
BY THE FINANCIAL MARKETPLACE

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


WE MAY BE UNABLE TO OBTAIN MAXIMUM VALUE FOR OUR OPERATING COMPANY INTERESTS.

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



                                       11



<PAGE>


                   RISKS INHERENT TO OUR ACQUISITION STRATEGY

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


UNCERTAINTIES ASSOCIATED WITH SELLING ASSETS

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


UNCERTAINTIES OF THE RECOVERABILITY OF INTANGIBLE ASSETS

     As a result of our change in corporate focus from a food holding company to
an Internet  holding  company,  the  composition of our assets and expenses have
dramatically  changed.  With the recent acquisitions of Internet companies,  the
intangible  assets  purchased  as  a  result  of  these  acquisitions  represent
approximately   77%  of  our  total  assets  and   approximately   115%  of  our
stockholders'  equity.  Further  amortization of these intangible assets will be
the largest single expense item in our statement of operations. If we are unable
to recover the costs of these intangible assets,  our financial  performance may
be negatively impacted in the coming periods,  through a write down or write off
of these intangible assets.


                                       12

<PAGE>


WE MAY NOT HAVE OPPORTUNITIES TO ACQUIRE INTERESTS IN ADDITIONAL COMPANIES.

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

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

     *    incompatibility between us and management of the company;

     *    competition from other acquirers of e-commerce companies;

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

     *    the unwillingness of the company to operate with us.

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


OUR RESOURCES AND OUR ABILITY TO MANAGE NEWLY ACQUIRED  OPERATING  COMPANIES MAY
BE STRAINED AS WE ACQUIRE MORE AND LARGER INTERESTS IN E-COMMERCE COMPANIES.

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

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

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

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

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


                                       13

<PAGE>




                  RISKS PARTICULAR TO OUR OPERATING DIVISIONS

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

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

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

     *    lower advertising rates;

     *    slow development of the e-commerce market;

     *    lack of acceptance of its Internet content;

     *    loss of key content providers;

     *    intense competition;

     *    loss of key personnel; and

     *    inability to manage growth.


                                       14

<PAGE>


THE  SUCCESS  OF OUR  OPERATING  DIVISIONS  DEPENDS  ON THE  DEVELOPMENT  OF THE
E-COMMERCE MARKET, WHICH IS UNCERTAIN.

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

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

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

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

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

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

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


OUR OPERATING DIVISIONS MAY FAIL IF THEIR COMPETITORS PROVIDE SUPERIOR INTERNET-
RELATED  OFFERINGS  OR CONTINUE TO HAVE  GREATER  RESOURCES  THAN OUR  OPERATING
COMPANIES HAVE.

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

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

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

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

                                       15

<PAGE>


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

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


DEPENDENCE ON VENDOR RELATIONSHIPS

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



                                       16



<PAGE>


SOME OF OUR  OPERATING  DIVISIONS  MAY BE UNABLE TO  PROTECT  THEIR  PROPRIETARY
RIGHTS AND MAY INFRINGE ON THE PROPRIETARY RIGHTS OF OTHERS.

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


SOURCE OF SUPPLY FOR GREATTOOLS.COM.

     Since 1999, Greattools.com has been operating pursuant to an oral agreement
with Global Sourcing  Group, a power tool  wholesaler  located in Thousand Oaks,
California,  which  supplies 100% of the products sold by the Company in its Web
site.  While  we  anticipate  that we will  continue  operating  under  the oral
agreement,  we intend to enter into a written  exclusive  fulfillment  agreement
with Global Sourcing Group as soon as it is practicable. We intend to enter into
this fulfillment  arrangement to insure that Global Sourcing Group will continue
to source all of the company's products.

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




                                       17



<PAGE>


SOURCE OF SUPPLY FOR HOLLAND-AMERICAN.COM.

     Since September 1999,  Holland-American.com  has been operating pursuant to
an oral agreement with Holland American International  Specialties,  a specialty
foods wholesaler and retailer located in Bellflower,  California, which supplies
100% of the  products  sold by  Holland-American.com  in its Web site.  While we
anticipate that we will continue  operating under the oral agreement,  we intend
to enter into a written  exclusive  fulfillment  agreement with Holland American
International  Specialties as soon as it's practicable.  We intend to enter into
this  fulfillment  arrangement  to assure it could continue to source all of its
products.

     IFCO Group,  LLC,  whose  members  consist of certain of our  shareholders,
including   Frederick  T.   Manlunas,   owns  Holland   American   International
Specialties.  Our Chairman of the Board,  Mr.  Manlunas,  beneficially  owns and
controls 32.75% of the total outstanding membership interest of IFCO Group, LLC.


OUR OPERATING DIVISIONS THAT PUBLISH OR DISTRIBUTE CONTENT OVER THE INTERNET MAY
 SUBJECT US TO LEGAL LIABILITY.

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


OUR OPERATING DIVISIONS' COMPUTER AND COMMUNICATIONS SYSTEMS MAY FAIL, WHICH MAY
DISCOURAGE CONTENT PROVIDERS FROM USING OUR OPERATING DIVISIONS' SYSTEMS.

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

                                       18

<PAGE>


OUR  BUSINESSES MAY BE DISRUPTED IF WE ARE UNABLE TO UPGRADE OUR SYSTEMS TO MEET
INCREASED DEMAND.

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

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


WE MAY NOT BE ABLE TO ATTRACT A LOYAL BASE OF USERS TO OUR WEB SITES.

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


WE MAY BE UNABLE TO ACQUIRE OR MAINTAIN EASILY  IDENTIFIABLE  WEB SITE ADDRESSES
OR PREVENT THIRD PARTIES FROM ACQUIRING WEB SITE ADDRESSES SIMILAR TO OURS.

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

                                       19

<PAGE>


SOME OF OUR OPERATING DIVISIONS ARE DEPENDENT ON BARTER TRANSACTIONS THAT DO NOT
GENERATE CASH REVENUE.

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



                     RISKS RELATING TO THE INTERNET INDUSTRY

CONCERNS  REGARDING  SECURITY  OF  TRANSACTIONS  AND  TRANSMITTING  CONFIDENTIAL
INFORMATION OVER THE INTERNET MAY HAVE AN ADVERSE IMPACT ON OUR BUSINESS.

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

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



                                       20



<PAGE>


RAPID  TECHNOLOGICAL  CHANGES MAY PREVENT OUR OPERATING DIVISIONS FROM REMAINING
CURRENT WITH THEIR TECHNICAL  RESOURCES AND MAINTAINING  COMPETITIVE PRODUCT AND
SERVICE OFFERINGS.

     The markets in which our operating  divisions  operate are characterized by
rapid technological  change,  frequent new product and service introductions and
evolving  industry  standards.  Significant  technological  changes could render
their existing Web site technology or other products and services obsolete.  The
e-commerce market's growth and intense competition  exacerbate these conditions.
If  our  operating  companies  are  unable  to  successfully  respond  to  these
developments or do not respond in a cost-effective way, our business,  financial
condition and operating results will be adversely affected. To be successful, we
must  adapt  to  rapidly   changing   markets  by   continually   improving  the
responsiveness,  services  and  features of our  products  and  services  and by
developing  new  features to meet the needs of our  customers.  Our success will
depend,  in  part,  on our  operating  divisions'  ability  to  license  leading
technologies  useful in their  businesses,  enhance their existing  products and
services  and develop new  offerings  and  technology  that address the needs of
their  customers.   Our  operating  divisions  will  also  need  to  respond  to
technological  advances and emerging industry  standards in a cost-effective and
timely manner.


GOVERNMENT  REGULATIONS AND LEGAL  UNCERTAINTIES  MAY PLACE FINANCIAL BURDENS ON
OUR BUSINESS AND THE BUSINESSES OF OUR OPERATING DIVISIONS.

     As of  October  31,  2000,  there  were  few laws or  regulations  directed
specifically at e-commerce.  However,  because of the Internet's  popularity and
increasing  use,  new  laws  and  regulations  may be  adopted.  These  laws and
regulations  may cover  issues such as the  collection  and use of data from Web
site visitors and related privacy issues, pricing, content,  copyrights,  online
gambling,  distribution and quality of goods and services.  The enactment of any
additional  laws or  regulations  may  impede  the  growth of the  Internet  and
e-commerce,  which could  decrease the revenue of our  operating  companies  and
place  additional  financial  burdens on our business and the  businesses of our
operating divisions.

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


                                       21


<PAGE>

                       RISKS RELATING TO FUTURE OFFERINGS

SHARES  ELIGIBLE  FOR FUTURE SALE BY OUR CURRENT  SHAREHOLDERS  MAY DECREASE THE
PRICE OF OUR COMMON STOCK.

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

OUR COMMON STOCK PRICE IS LIKELY TO BE HIGHLY VOLATILE.

     The market  price for our common  stock is likely to be highly  volatile as
the stock market in general and the market for Internet-related  stocks is such.
The trading prices of many technology and  Internet-related  company stocks have
reached  historical  highs  within  the last  year and have  reflected  relative
valuations  substantially  above historical levels.  During the same period, the
stocks of these  companies have also been highly volatile and have recorded lows
well below such  historical  highs.  We cannot  assure you that our common stock
will trade at the same levels of other Internet  stocks or that Internet  stocks
in general will sustain their current market prices.

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

     *    actual or anticipated  variations in our quarterly  operating  results
          and those of our operating divisions;

     *    new sales  formats  or new  products  or  services  offered by us, our
          operating divisions and their competitors;

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

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

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

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

     *    our capital commitments;

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

     *    sales of our common stock.

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

                                       22

<PAGE>


                           FORWARD-LOOKING STATEMENTS

     Some   of  the   information   contained   in  this   prospectus   contains
forward-looking  statements.  These forward-looking  statements include, but are
not limited to, statements about our industry, plans, objectives,  expectations,
intentions and assumptions and other statements contained in the prospectus that
are not historical  facts.  When used in this  prospectus,  the words  "expect,"
"anticipate,"  "intend,"  "plan,"  "believe,"  "seek,"  "estimate"  and  similar
expressions as well as expressions of "strategy"  "corporate focus," and similar
expressions  are  generally  intended  to identify  forward-looking  statements.
Because these forward-looking statements involve risks and uncertainties, actual
results  may  differ  materially  from  those  expressed  or  implied  by  these
forward-looking statements.


                                 USE OF PROCEEDS

         We will not receive any proceeds  from the sale of the shares of common
stock offered hereby by the selling security holders.


                         PRICE RANGE OF OUR COMMON STOCK

         Our common stock commenced trading on the NASD OTC Bulletin Board under
the  symbol  "IFCO" on October  1998.  In August  1999 we changed  our symbol to
"SYTE." Our Common Stock was traded  over-the-counter  and was quoted on the OTC
Bulletin  Board (symbol  "SYTE") until  December 15, 1999. On December 16, 1999,
our common stock was  temporarily  de-listed  from the NASD OTC  Bulletin  Board
because we had not received  final  comments  from the  Securities  and Exchange
Commission on our Form 10-SB registration  statement.  From December 16, 1999 to
April 16, 2000, our Common Stock was traded  over-the-counter  and was quoted on
the National  Quotations Board's Electronic  Quotation Service "Pink Sheets." On
April 16,  2000,  we resumed  trading on the NASD OTC  Bulletin  Board under the
symbol  "SYTE." On July 14, 1999 we effected a 3-for-1  stock split.  All prices
listed below reflect this split.

         The  following  table  shows the high and low closing bid prices of our
common  stock for the periods  presented.  The  quotations  shown below  reflect
interdealer prices,  without retail mark-up,  mark-down or commissions,  and may
not represent actual transactions.



                                       23



<PAGE>


                                                         High         Low
                                                         -----       ----

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

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


                      2001
     For the period ended March 31, 2001                 $0.21       $0.06

         The closing price of our common stock on April 18, 2001 was $0.065.

         At March 31, 2001, there were  approximately 125 shareholders of record
of our  common  stock.  Within the  holders  of record of our  common  stock are
depositories  such as Cede & Co. that hold shares of stock for  brokerage  firms
which, in turn, hold shares of stock for beneficial owners.


                                 DIVIDEND POLICY

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



                                       24



<PAGE>


                                 CAPITALIZATION


         The following table sets forth our cash position and  capitalization as
of  December  31,  2001.  The  information  set  forth  below  should be read in
conjunction  with our  consolidated  financial  statements and the related notes
included elsewhere in this prospectus.

                                                                   December 31,
                                                                        2000
                                                                   -------------

Cash and cash equivalents......................................... $    289,294
                                                                   =============
Long-term debt....................................................      502,846
                                                                   =============
Stockholders' equity:
   Preferred stock, $.001 par value; authorized 30,000,000
     shares; 0 issued and outstanding..............................         -
     Common stock; $.001 par value; authorized 300,000,000
       shares; issued and outstanding 62,175,638 shares............      62,176
     Additional paid-in capital....................................  12,467,733
     Accumulated deficit..........................................   (9,291,739)
                                                                   -------------
       Total stockholders' equity    .............................    3,238,170
                                                                   -------------
Total capitalization.............................................. $  3,238,170
                                                                   =============


                              PLAN OF DISTRIBUTION


         The selling security  holders and any of their pledgees,  assignees and
successors-in-interest  may, from time to time,  sell any or all of their shares
of our common  stock  being  offered  pursuant to this  prospectus  on any stock
exchange,  market or  trading  facility  on which the  shares  are  traded or in
private  transactions.  These sales may be at fixed or  negotiated  prices.  The
selling security  holders may use any one or more of the following  methods when
selling shares:

         o        ordinary brokerage transactions and transactions in which the
                  broker-dealer solicits purchasers

         o        block trades in which the  broker-dealer  will attempt to sell
                  the shares as agent but may  position  and resell a portion of
                  the block as principal to facilitate the transaction

         o        purchases by a broker-dealer as principal and resale by the
                  broker-dealer for its account

                                       25

<PAGE>


         o        an exchange distribution in accordance with the rules of the
                  applicable exchange

         o        privately negotiated transactions

         o        short sales

         o        broker-dealers  may agree with the selling security holders to
                  sell a specified  number of shares at a  stipulated  price per
                  share

         o        a combination of any of these methods of sale

         o        any other method permitted by applicable law

         The selling  security holders may also sell shares under Rule 144 under
the Securities Act, if available, rather than under this prospectus.

         The selling security holders may also engage in short sales against the
box,  puts and calls and other  transactions  in  securities  of our  company or
derivatives  of our  company  securities  and may  sell  or  deliver  shares  in
connection  with these  trades.  The selling  security  holders may pledge their
shares to their brokers under the margin provisions of customer agreements. If a
selling  security holder defaults on a margin loan, the broker may, from time to
time, offer and sell the pledged shares.

         Broker-dealers  engaged by the selling security holders may arrange for
other  broker-dealers  to  participate  in  sales.  Broker-dealers  may  receive
commissions  or  discounts  from  the  selling  security  holders  (or,  if  any
broker-dealer acts as agent for the purchaser of shares,  from the purchaser) in
amounts to be  negotiated.  The  selling  security  holders do not expect  these
commissions  and  discounts  to  exceed  what  is  customary  in  the  types  of
transactions involved.

         The selling security holders and any  broker-dealers or agents that are
involved  in selling  the shares may be deemed to be  "underwriters"  within the
meaning of the Securities Act in connection with these sales. In such event, any
commissions  received  by these  broker-dealers  or agents and any profit on the
resale  of the  shares  purchased  by  them  may be  deemed  to be  underwriting
commissions or discounts under the Securities Act.

         We  are  required  to  pay  all  fees  and  expenses  incident  to  the
registration of the shares,  including fees and  disbursements of counsel to the
selling  security  holders.  We have agreed to  indemnify  the selling  security
holders against specified  losses,  claims,  damages and liabilities,  including
liabilities under the Securities Act.

                                       26

<PAGE>


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

OVERVIEW

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

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

     Our Internet services subsidiaries began providing Internet services to our
customers  in 1996 by  providing  Internet  access  and  enhanced  products  and
services to small and medium sized  enterprises in selected high growth markets.
We target  primarily  small and medium  sized  enterprise  customers  located in
selected high growth secondary markets.  We currently provide our customers with
Internet access and enhanced  products and services in the mid-Atlantic  area of
the United States. We have designed our comprehensive suite of enhanced products
and services to meet the  expanding  needs of our  customers and to increase our
revenue per customer. The products and services we provide include:

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


                                       27

<PAGE>


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

     On  December   15,   1999,   we  completed   the   acquisition   of  Neocom
Microspecialists,  Inc.,  recently  renamed,  Sitestar.net,  Inc.  ("Neocom") in
exchange for  6,782,353  shares of our common stock for 100% of the  outstanding
shares of  Neocom.  Effective  upon the  closing of the  acquisition,  we issued
4,782,353  shares of our  common  stock and have  reserved  2,000,000  shares of
common  stock  that we have  agreed to issue on the  second  anniversary  of the
acquisition  based on  certain  contingencies.  The  certain  contingencies  are
related to potential unrecorded liabilities.  Of the 6,782,353 shares issued for
Neocom,  900,000 shares were issued in exchange for certain liabilities that the
majority of Neocom's  selling  shareholders had agreed to assume based on a debt
assumption  agreement  executed and delivered at the closing of the acquisition.
In 2000, the purchase agreement was amended so that we assumed the debt that was
originally to be assumed by the selling shareholders in exchange for the 900,000
shares. Neocom is an Internet service provider and Web development company based
in Martinsville,  Virginia.  Neocom provides  Internet access and other Internet
services to approximately 6,000 customers in the Southern Virginia area.

      On  November  22,  2000,  we  acquired of FRE  Enterprises,  Inc.  and FRE
Communications, Inc., both Virginia corporations (collectively doing business as
"Lynchburg.net")  in exchange for 16,583,980 shares of our common stock for 100%
of the outstanding  shares of  Lynchburg.net.  Effective upon the closing of the
acquisition,  we issued  12,437,985 shares of our common stock and have reserved
4,145,995  shares of our common  stock that we have agreed to issue on the third
anniversary  of the  acquisition  based on certain  contingencies.  The  certain
contingencies  are related to  potential  unrecorded  and  unknown  liabilities.
Lynchburg.net  is an Internet  service  provider,  web  development and computer
sales and service company based in Lynchburg, Virginia. As of December 31, 2000,
Lynchburg.net  provided  Internet  access,  computer sales and service and other
Internet  services to  approximately  4,000  customers in the Southern  Virginia
area.

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


                                       28
<PAGE>



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

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

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

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



                                       29

<PAGE>


RESULTS OF OPERATIONS

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

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

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

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

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

      GAIN ON SALE OF ASSETS.  During the year ended  December 31, 2000, we sold
certain assets of our Holland American  International  Specialties and Sitestar,
Inc.  divisions  and  recognized  a gain on such sales of $314,515  and $49,316,
respectively. No such assets sales occurred in 1999.


                                       30
<PAGE>



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

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

LIQUIDITY AND CAPITAL RESOURCES

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

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

      On August 14, 2000,  we issued  another two  convertible  debenture for an
aggregate of $500,000 to the holders of the  above-mentioned  debentures for the
same terms described above. The debenture bears interest at 12% per annum and is
due on August 14, 2001. In connections  with this debenture we have recognized a
financing  cost in  connection  with  the  preferential  conversion  feature  of
$333,333  and  valued  the  250,000  warrants  issued  in  connection  with this
debenture at $13,332 using the  Black-Scholes  model. The expense related to the
warrants will be recognized as financing costs over the term of the debenture.



                                       31
<PAGE>


      During the year ended  December,  31, 2000,  the holder of the  debentures
converted  $243,500 in principal and $36,533 of accrued  interest into 2,342,924
and 652,363,  respectively,  share of the Company's common stock. The holders of
the  debentures  also  intend to convert  the  remaining  principal  and accrued
interest  into  common  stock when we filed a Form SB-2  registering  the shares
underlying the conversion.

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

FORWARD LOOKING STATEMENTS

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


                                    BUSINESS

COMPANY OVERVIEW

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




                                       32
<PAGE>


     o    Internet e-commerce

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

     o    Value-added content

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

     o    Internet Service Providers (ISP)

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

     o    Internet Portals/Community Web sites

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

     o    Strategic investments in internet-related ventures

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

                                       33

<PAGE>


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


COMPANY HISTORY

     We  were incorporated in Nevada under the name of White Dove Systems,  Inc.
in December 1992.

     In  October  1998 we  acquired  all the issued  and  outstanding  shares of
Interfoods  Consolidated,  Inc.,  a  California  corporation,  in  exchange  for
5,580,000 shares of our Common Stock. Interfoods  Consolidated,  Inc., operating
under  the  trade  name of  Holland  American  International  Specialties,  is a
retailer  and  wholesaler  of imported  and domestic  specialty  gourmet  foods.
Holland  American's  product offering ranges from exotic European  delicacies to
mainstream specialty candies,  chocolates and other confectionery  products.  In
connection with this  acquisition , we changed our name from White Dove Systems,
Inc. to Interfoods Consolidated, Inc. in October 1998.

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

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

                                       34

<PAGE>


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

     Effective  December 15, 1999,  we  consummated  the  acquisition  of Neocom
Microspecialists,  Inc.  ("Neocom") in exchange for 6,782,353 shares of Sitestar
Common Stock for 100% of the  outstanding  shares of Neocom.  Effective upon the
closing of the  acquisition,  we issued 4,782,353 shares of our Common Stock and
have reserved  2,000,000  shares of Common Stock that we have agreed to issue on
the second  anniversary of the acquisition based on certain  contingencies.  The
certain  contingencies are related to potential unrecorded  liabilities.  Of the
6,782,353  shares issued for Neocom,  900,000 shares were issued in exchange for
certain  liabilities  that the majority of Neocom's  selling  shareholders  have
agreed to assume based on a debt assumption  agreement executed and delivered at
the closing of the acquisition.

     Neocom is an Internet service provider and Web development company based in
Martinsville,  Virginia.  As of September 30, 2000, (i) Neocom provided Internet
access and other  Internet  services to  approximately  x,xxx  customers  in the
Southern Virginia area.

     Effective  November 22, 2000, we have  consummated  the  acquisition of FRE
Enterprises,  Inc. and FRE  Communications,  Inc.,  both  Virginia  corporations
(collectively  doing  business as  "Lynchburg.net")in  exchange  for  16,583,980
shares  of  Sitestar  Common  Stock  for  100%  of  the  outstanding  shares  of
Lynchburg.net.  Effective  upon  the  closing  of  the  acquisition,  we  issued
12,437,985  shares of our Common  Stock and have  reserved  4,145,995  shares of
Common  Stock  that we have  agreed  to issue on the  third  anniversary  of the
acquisition  based on  certain  contingencies.  The  certain  contingencies  are
related to potential unrecorded and unknown liabilities.  Sitestar used a market
price of $0.20 per share to determine  the amount of shares  issued and reserved
to Lynchburg.net.  The market price was determined by taking the average closing
price of  Sitestar's  common  stock for an eight  day  trading  period  starting
November  6,  2000  and  ending  November  15,  2000.  The  aggregate   purchase
consideration  for  Lynchburg.net  based on the  number  of  shares  issued  and
reserved  multiplied  by  the  average  market  price  of  $0.20  per  share  is
$3,316,796.

                                       35

<PAGE>


    Lynchburg.net is an Internet service provider,  web development and computer
sales and service company based in Lynchburg,  Virginia. As of October 31, 2000,
(i) Lynchburg.net provided Internet access, computer sales and service and other
Internet services to approximately 3,400 customers in the Southern Virginia area
and (ii) its  estimated  revenues for the ten months ended October 31, 2000 were
$1.45 million.  Based on our current  estimates we believe that  Lynchburg.net's
annualized  revenues  would be  approximately  $1.75 million for the fiscal year
ending December 31, 2000.

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


INTERNET INDUSTRY BACKGROUND

MARKET OPPORTUNITY

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


     GROWTH IN BUSINESS USE OF THE INTERNET. We believe that the dramatic growth
in  Internet  usage in  recent  years,  combined  with  enhanced  functionality,
accessibility  and security,  has made the Internet  increasingly  attractive to
businesses as a medium for  communication  and  commerce.  We feel that for many
businesses, the Internet has created a new communication and sales channel which
enables large numbers of geographically dispersed organizations and consumers to
be  reached  quickly  and  cost-effectively.  IDC  estimates  that the number of
consumers  buying goods and services on the Internet  will grow to 128.4 million
in 2002,  and that the total  value of goods  and  services  purchased  over the
Internet will increase from  approximately  $12 billion in 1997 to approximately
$426 billion by 2002.

                                       36


<PAGE>


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

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

     o    DEMAND FOR WEB HOSTING SERVICES.
          Many  businesses are seeking to outsource to ISPs services such as Web
          hosting,  collocation  and file  transfer  protocol  data  storage and
          retrieval.

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

     THE SMALL AND MEDIUM  SIZED  ENTERPRISE  MARKET.  We define  this market as
business  enterprises  having  sales of less than  $20.0  million  per annum and
enterprises having less than 100 employees.  We have specifically targeted small
and medium sized enterprises because:

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

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

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

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

                                       37

<PAGE>


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

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

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


OUR STRATEGY

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


Key elements of our strategy include:

     FOCUS  GROWTH ON  SECONDARY  MARKETS.  We intend  to expand  into  selected
secondary  markets by replicating our regional  network and marketing model. Our
network  architecture  and scalable  sales and  marketing  plans are designed to
allow us to penetrate additional regions rapidly and cost-effectively.

     MARKET A VARIETY OF SERVICES TO NEW AND  EXISTING  CUSTOMERS.  We intend to
offer a  comprehensive  suite of a variety of products  and services to meet the
expanding needs and complexity of our customers' Internet operations allowing us
to increase revenue per customer and maintain a high customer  retention rate by
strengthening relationships with our customers.

                                       38

<PAGE>


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

     STRATEGIC RELATIONSHIPS AND ACQUISITIONS. We intend to enter into strategic
relationships, such as partnerships and joint ventures, and to make acquisitions
to expand our line of enhanced products and services.

     As part of this strategy,  we recently  acquired  Neocom  Microspecialists,
Inc.,  a provider of Web hosting and  co-location  services in the  Mid-Atlantic
region.  This acquisition is consistent with our growth strategy of building our
presence in secondary markets that have  traditionally  been under served by the
larger Internet services  companies.  In addition,  we are also actively seeking
acquisition  opportunities  and/or  candidates in the  Mid-Atlantic  region that
would help us achieve critical mass in terms of our Internet access, development
and hosting customers.


INTERNET INDUSTRY OVERVIEW

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

    Growth in Electronic Commerce
     -----------------------------

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

                                       39

<PAGE>


     o    increasing familiarity with the Internet;

     o    broadening consumer acceptance of online shopping;

     o    increasing   acceptance  on  online   distribution   relationships  by
          businesses;

     o    improved online network security and infrastructure;

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

     o    expanding network bandwidth and access speeds.

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

     Changing Demographics
     ---------------------

     Demographics   from  Mediamark   Research  show  that  Internet  users  are
approximately  twice as likely to have high household  incomes,  college degrees
and management  positions than the overall U.S.  population.  They are also more
likely to be young and single.  Geographically,  Internet  users can be found in
all corners of the U.S., although,  according to researcher Inteco, the level of
Internet use in several major metropolitan areas exceeds the overall U.S.
average.


                                       40



<PAGE>


     Consumer Acceptance
     -------------------

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

     Corporate E-Commerce
     --------------------

     Forrester Research  estimates that by year 2003,  consumers will spend $108
billion to buy goods  online,  while  businesses  will spend $1.3  trillion.  As
expected,  computing  and  electronic  equipment  will remain one of the largest
categories of goods traded between businesses,  reaching $395 billion in revenue
by 2003, while other industries, such as cars and petrochemicals,  will also top
the $150 billion mark. In addition to the $1.3 trillion in  business-to-business
sales of products,  Forrester also reports that online  transactions in business
services will equal $220 billion by 2003.  Michael Putnam of Forrester  Research
states that "Just as the Internet has revolutionized  the goods industries,  the
services industry is going to be reinvented."

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

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


                                       41


<PAGE>


OUR INTERNET SUBSIDIARIES AND SERVICES

Sitestar.net  & Neocom Microspecialists
---------------------------------------

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

                  Internet Access

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


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

                  Web Hosting

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

                  E-commerce

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

                  Co-location

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


                                       42


<PAGE>


                  Website Design

We have  provided  web site design  services  since 1996 and, as of November 30,
2000, have developed web sites for over 350 customers.

                  Banner Development

We also design banner  advertisements  for our customers and, as of November 30,
2000, we have developed 350 banner advertisements.

                  Online Marketing

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

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

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

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

     o    Pricing;

     o    Quality and breadth of products and services;

     o    Ease of use;

     o    Personal customer support and service; and

     o    Brand awareness.


                                       43


<PAGE>


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

     o    Regionally focused operating strategy;

     o    Highly responsive customer support and service;

     o    High performance; and

     o    Competitive pricing.

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

     o    national Internet service providers,  such as PSINet, Inc., Concentric
          Network Corporation, Earthlink, Voyager.net, US Online and OneMain;

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

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

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

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

     o    national  long  distance  carriers  such  as  AT&T  Corporation,   MCI
          WorldCom,  Inc., Qwest  Communications  International  Inc. and Sprint
          Communications Company, L.P.;

     o    regional Bell operating companies and local telephone companies;

     o    providers of free Internet  service,  including  NetZero,  Inc.,  Juno
          Online and MicroWorkz Computer  Corporation;  cable operators or their
          affiliates,   including   At  Home   Corporation   and   Time   Warner
          Entertainment Company, L.P.;

     o    terrestrial wireless and satellite Internet service providers; and

     o    non-profit or educational ISPs.

                                     44

<PAGE>


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

     Recently,  several  national  access  providers have begun to offer dial-up
Internet access for free or at substantial  discounts to prevailing rates, which
may result in significant pricing pressure for dial-up Internet access services.
We also believe that  manufacturers of computer hardware and software  products,
media and  telecommunications  companies  and others will  continue to enter the
Internet services market, which will also intensify competition,  especially for
dial-up access providers.  If we are unable to compete with lower-cost providers
by providing  superior service and support,  our revenues and profit margins may
decline materially, and our ability to attract additional customers may suffer.

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

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


                                       45

<PAGE>

         Acquisition Strategy
         --------------------

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

GOVERNMENT REGULATION

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

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

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

                                       46
<PAGE>


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


Greattools.com
--------------

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

         Greattools.com  is a direct  merchandiser  of specialty  tool  products
designed  for light to heavy  industrial  applications.  We market our  products
under  the name  GreatTools  Direct(TM)  and  maintain  a diverse  product  line
comprised of five  categories:  (1) Power Tools; (2) Cutting Tools; (3) Masonry;
(4) Accessories; and (5) Automotive. The Greattools Direct brand is owned by our
fulfillment center Global Sourcing Group. Our main product and primary source of
revenue is the cordless  drill.  Sales from cordless drill account for about 80%
of our Greattools.com revenues.

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

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

                                       47

<PAGE>


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

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

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

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

                  Direct Response Advertising

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

                  Database Marketing and Catalog Sales

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

                                       48

<PAGE>


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

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

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

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

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

                                       49

<PAGE>


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

          Possible Acquisitions
         --------------------
     If we believe a favorable  opportunity to acquire a retailer of power tools
exists,  we anticipate  that we will enter into  discussions  with the owners of
such businesses  regarding the possibility of an acquisition by the Company.  As
of the date hereof,  we do not have any agreements or pending  acquisitions  and
have  not  entered   into  any  letters  of  intent  with   respect  to  pending
acquisitions.  No  assurance  can be given  that we will  identify  satisfactory
acquisition candidates or, if identified,  that we will be able to consummate an
acquisition on terms acceptable to us.


Holland-American.com
--------------------

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

     Holland American  International  Specialties  created an online division to
respond to the needs of the  emerging  online  specialty  foods  segment.  Since
October 1998,  Holland-American.com  has been an online purveyor of imported and
domestic  specialty  gourmet  foods.  We  sell  specialty   products,   such  as
condiments,  sauces and toppings,  entrees,  prepared  foods and soups,  breads,
pasta, grains and beans, crackers/snacks,  desserts and confections and oils and
vinegar. We intend to increase our sales volume significantly in the next twelve
months once  sufficient  capital  resources  are  available  by  increasing  our
marketing efforts to reach a broader audience.

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

                                       50

<PAGE>


     We believe  that we have  maintained a positive  relationship  with Holland
American  International  Specialties.  As a  result,  we act as their  exclusive
online agent for all their products. We view Holland-American.com as an integral
part of our  e-commerce  strategy  since it gives us an online  presence  in the
emerging specialty gourmet foods industry.


          Specialty Foods Industry
         ------------------------

                  Specialty Food Market Today

     The products we sell are known as "gourmet and specialty  food," defined by
the  industry as a whole as  distinctive  food of high  quality.  This  includes
traditional  gourmet food and  confections.  This category also includes branded
specialty products which are available in specialty restaurants or retail shops.
Our  criteria for  determining  whether to classify a food product as gourmet or
specialty include:

     o    cost of ingredients;

     o    cost of processing;

     o    freshness/perishability;

     o    uniqueness;

     o    newness/cutting edge;

     o    cost of packaging; and

     o    cost of importation/distribution.

     We work closely with our fulfillment center, Holland American International
Specialties, in selecting products for our Web site.

                  Retail Market

     The retail food market  involves  the sale of food  products to  individual
consumers and  households.  The gourmet and specialty food industry is a sizable
segment of the United States retail food market.  Currently,  specialty  food is
principally sold through the following retail channels:

     o    supermarkets;

     o    gourmet and specialty food stores;

                                       51

<PAGE>


     o    mail order catalogs;

     o    department stores;

     o    television shopping channels; and

     o    discount warehouse retailers.

     The  combination of the size of the specialty food market and the growth of
online shopping have created what we believe to be a sizable market opportunity.

                  Wholesale Market

     The wholesale  market  consists of specialty  food  retailers,  gift shops,
caterers,   restaurants   and  other   resellers  of  specialty  food  products.
Traditionally,  suppliers  of specialty  food have  distributed  their  products
either by using a food broker to sell to retailers at  wholesale  prices,  or by
selling  their  products  to  specialty  food  distributors  who in turn sell to
retailers. In these arrangements, food brokers generally receive a commission on
the  wholesale  price and  distributors  generally  purchase  the  product  at a
discount from the supplier's wholesale price. The assortment of specialized food
brokers  and  distributors  that  currently  supports  the  industry  is  highly
fragmented.  As a result, we believe that many retail outlets for specialty food
products  are  underserved  or have  limited  access to these food  brokers  and
distributors.

                  Online opportunity in Specialty Foods

     In both the retail and wholesale markets,  we believe  electronic  commerce
offers  opportunities  to improve the  specialty  food shopping  experience  and
selection.  We believe  traditional  specialty food  businesses face a number of
challenges in providing a satisfying experience:

     o    the specialty food market is highly fragmented with no single dominant
          retailer  or  wholesaler,  and we  estimate  there are at least  5,000
          suppliers throughout the United States;

     o    this fragmentation  leaves both retail and wholesale customers without
          access to a broad base of specialty food products;

     o    distributors  who carry  specialty  food  products  are limited in the
          products they can offer by inventory holding costs, inventory spoilage
          and warehouse size, which restricts the supply and selection available
          for customers;

     o    mail order  catalogs  are not updated as  inventory  level or consumer
          demand changes and are expensive to produce and mail; and

     o    traditional  retail stores have costs  associated  with  occupying and
          operating a physical store and selection is limited by the size of the
          store and inventory considerations.

                                       52

<PAGE>


     We believe  that  sales of gourmet  and  specialty  food over the  Internet
provides a means to address many of these challenges.

        Customers and Marketing

     Specialty foods are value-added, premium-priced items that are specifically
targeting  consumers  who are willing to pay a premium.  The  Company's  primary
target market consists of discriminating  consumers who seek imported  specialty
gourmet foods.

     We also have a potential to market to multiple  secondary target markets in
the wholesale sector. Such potential  customers include corporate  coffeehouses,
restaurant  chains,  gift shops,  supermarkets,  grocery  stores,  institutional
accounts and other specialty stores.

     The  cornerstone  in  our  marketing  strategy  is  the  knowledge  of  our
fulfillment  center's  personnel of the  consumer.  We believe  that  tomorrow's
specialty  food consumer will have a broader age range from teens to elderly and
will be more health  conscious and adventurous  when it comes to specialty foods
products. According to the International Dairy-Deli-Bakery Association's report,
the next  generation  will have aslant toward global  environmentalism,  blurred
political boundaries and cross-cultural values. In terms of the food consumer of
tomorrow,  the report  found that  "clean"  or  "organic"  food will be in great
demand as baby boomers and young people, with their concern for the environment,
do more shopping.

     The development of the Holland-American.com  market potential is predicated
upon the establishment of a diversified product portfolio capable of serving the
different  types  of  imported  specialty  gourmet  food  needs  of  its  target
customers.

     We believe that  convenience  is the driving force  spurring the desires of
America's  specialty  gourmet food product  needs.  Our commitment to carrying a
comprehensive  product line,  making  shopping a fun and easy experience for the
consumer and  shipping  orders in a timely  manner will play a critical  role in
reaching our objectives.

         Competition
         -----------

     We operate in a competitive environment. The industry is dominated by large
regional retail  establishments  such as Whole Foods Market,  Wild Oats,  Trader
Joe's,  Gelson's  and Bristol  Farm that rely  heavily on  aggressive  marketing
campaigns and customer  referrals.  Many of these  traditional  retailers  offer
diverse product lines and competitive pricing. Certain of these competitors such
as Whole  Foods  Market,  Wild Oats and  Bristol  Farms,  market  and sell their
products over the Internet.

                                       53

<PAGE>


     We enjoy two competitive advantages over these larger,  regional firms: (1)
More  diverse  product  lines,  enabling  the Company to act as a  single-source
provider for all the customer's  specialty foods needs;  and (2) the convenience
of online shopping.

         Possible Acquisitions
         --------------------

     We intend to consider  potential  acquisitions  to attempt to increase  our
market share and revenues.  To date, we have not entered into  discussions  with
any specific  acquisition  candidates.  No  assurance  can be given that we will
identify satisfactory acquisition candidates or, if identified,  that we will be
able to consummate an acquisition on terms acceptable to us.


Soccersite.com
--------------

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

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

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

                                        54

<PAGE>


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

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

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

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

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

         Acquisition Strategy
         --------------------
     We believe there are acquisition opportunities among the providers of value
added  information  about the sport of soccer. In furtherance of our acquisition
strategy,  we anticipate  reviewing and conducting  investigations  of potential
acquisitions.  If we believe a favorable  opportunity exists, we anticipate that
we will enter into discussions with the owners of such businesses  regarding the
possibility of an  acquisition by us. As of the date hereof,  we do not have any
agreements or pending  acquisitions  and have entered into any letters of intent
with respect to pending  acquisitions.  No  assurance  can be given that we will
identify satisfactory acquisition candidates or, if identified,  that we will be
able to consummate an acquisition on terms acceptable to us.

                                       55

<PAGE>


FACILITIES

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

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

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

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


EMPLOYEES

As of March  31,  2001,  we  employed  35 full  time  individuals.  We have 7 in
management, 3 in sales and marketing and 25 in administration. Our employees are
not unionized, and we consider our relations with our employees to be favorable.


LEGAL PROCEEDINGS

The Company is not involved in any material pending legal proceedings.



                                       56



<PAGE>

                                   MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information with respect to our directors
and executive officers.

    Name                                Age(1)            Position
---------------                        ------          -------------------
Frederick T. Manlunas                    32            Chairman of the Board and
                                                       Managing Director

Clinton J. Sallee                        28            President and Chief
                                                       Executive Officer

Kevork Zoryan                            27            Director

----------------------


(1) Ages are given as of March 31, 2001


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

CLINTON J. SALLEE has been a Director  of the Company  since May of 1999 and has
served as the Company's  President and Chief Executive  Officer since July 1999.
In 1996, Mr. Sallee founded Sallee Zoryan, a concept  development firm, where he
served as President since inception. Prior to founding Sallee Zoryan, Mr. Sallee
was an  Associate  with  W.E.  Myers &  Company,  a  boutique  investment  bank,
specializing in industry consolidations. Mr. Sallee earned a Bachelor of Science
degree in Business  Administration  from the Marshall  School of Business at the
University of Southern California in 1994.

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

                                       57

<PAGE>

Kevin  Pickard of  Pickard &  Company,  CPA's,  P.C.  is serving as a  financial
consultant to the Company. Pickard & Company, CPA's, P.C. is an accountancy firm
based in Valencia, California.


EXECUTIVE COMPENSATION

                           SUMMARY COMPENSATION TABLE

The following  table  summarizes the  compensation  paid to our chief  executive
officer and each executive  officer with a salary in excess of $100,000 for each
of the last three fiscal years.

<TABLE>
<CAPTION>
                           SUMMARY COMPENSATION TABLE

                                Annual Compensation                                   Long Term Compensation
                      -------------------------------------------------- --------------------------------------------------
                                                             Other        Restricted
                                                             Annual         Stock        Options      LTIP        All Other
Position               Year     Salary ($)    Bonuses($)  Compensation($)  Awards($)     SARs(#)    Payouts ($)  Compensation
--------               ----     ----------    ----------  --------------  -----------    -------    -----------  ------------
<S>                    <C>      <C>           <C>         <C>             <C>            <C>        <C>          <C>
Frederick T.           1998     $ 96,000         --           --              --          --           --           --
Manlunas               1999       91,500         --           --              --          --           --           --
Chairman of the        2000(1)      --           --          268,068          --          --           --           --
Board                  2001      250,000         --           --              --          --           --           --

Clinton J.             1999         --           --                       2,000,000       --           --           --
Sallee                 2000(2)    19,000         --          332,268          --          --           --           --
President & Chief      2001      250,000         --           --              --          --           --           --
Executive Officer
</TABLE>

--------------------
(1)  Mr.  Frederick  Manlunas was awarded  shares in our common stock in lieu of
     cash compensation.

(2)  Mr.  Clinton J.  Sallee was awarded  shares in our common  stock in lieu of
     cash compensation.

     The Company currently has no long-term  compensation,  annuity,  pension or
retirement plans.

DIRECTOR COMPENSATION

     Our directors do not receive any compensation  other than their salaries as
officers of the Company.

                                       58

<PAGE>

BOARD COMMITTEES; COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     Our Board of Directors has not  established  any  committees.  No executive
officer of our company  has served as a director  or member of the  compensation
committee of any other entity whose  executive  officers served as a director of
our company.


                     PRINCIPAL AND SELLING SECURITY HOLDERS

         The following  table sets forth  information  as of March 31, 2001 with
respect  to the  beneficial  ownership  of our  common  stock  both  before  and
immediately following the offering by:

         o    each  person  known  by us to  own  beneficially  more  than  five
              percent, in the aggregate, of the outstanding shares of our common
              stock,

         o    the selling security holders in this offering,

         o    each of our directors and our named executive officers in the
              summary compensation table above, and

         o    all executive officers and directors as group.

         The following calculations of the percentages of outstanding shares are
based on  62,162,277  shares of our common stock  outstanding  as of February 7,
2001. We  determined  beneficial  ownership in accordance  with the rules of the
Securities and Exchange Commission,  which generally require inclusion of shares
over which a person has voting or investment power. Share ownership in each case
includes  shares  issuable upon exercise of outstanding  options and warrants or
conversion  debentures and interest payable thereon that are convertible  within
sixty days of January 15, 2001, as described in the footnotes below.  Percentage
of ownership is calculated  pursuant to Securities and Exchange  Commission Rule
13d-3(d)(i).

         Amounts  shown in the  table as  beneficially  owned by New  Millennium
Capital  Partners  and  AJW  Partners,  LLC  or  the  debenture  investors,  are
determined in part based upon the terms of  convertible  debentures  and related
warrants  held by these two  debenture  investors  as of the date of the  table.
Beneficial  ownership amounts for New Millennium  Capital Partners,  LLC and AJW
Partners, LLC, include shares of common stock underlying the remaining amount of
$774,000 of  convertible  debentures in connection  with our May 2000 and August
2000 debenture offering.

                                       59

<PAGE>


Recent Financing

         In May 2000 AJW Partners,  LLC and New Millennium Capital Partners, LLC
purchased an aggregate of $500,000 of 12% Convertible Debentures and warrants to
purchase,  respectively,  a total of 250,000 and 250,000  shares of common stock
from us in a private placement transaction.  Again in August 2000, AJW Partners,
LLC and New Millennium Capital Partners, LLC purchased an additional $500,000 of
12% Convertible  Debentures and warrants to purchase,  respectively,  a total of
250,000  and  250,000  shares of  common  stock  from us in a private  placement
transaction similar to the terms of the May 2000 private placement.

         The Debentures are convertible  into shares of our common stock, at the
option of the  holder at any time and from time to time  after the date when the
debentures were issued, at a conversion price equal to the lower of (i)$0.70 per
share and (ii)60% of the lowest  three  inter-day  trading  prices of our common
stock  during the twenty  trading days  preceding  the date of  conversion.  The
warrants issued to AJW Partners and New Millennium  Capital Partners II are each
exercisable at an exercise price per share of $0.77.  Interest on the Debentures
is payable on a quarterly basis on March 31, June 30,  September 30 and December
31 of each  year  while  such  debentures  are  outstanding  and on each date of
conversion,  whichever occurs earlier.  Interest may be paid, at our option,  in
cash or common stock. The Debentures are redeemable under certain  circumstances
as stated in the Convertible Debenture.

         Each holder of the Debenture may not convert its securities into shares
of our common stock if after the conversion,  such holders, together with any of
its affiliates,  would beneficially own over 4.999% of the outstanding shares of
our common stock. This restriction may be waived by each holder on not less than
5 days  notice to us.  Since the number of shares of our common  stock  issuable
upon  conversion of the Debentures  will change based upon  fluctuations  of the
market  price of our common  stock  prior to  conversion,  the actual  number of
shares  of our  common  stock  that will be issued  under  the  Debentures,  and
consequently  the number of shares of our common stock that will be beneficially
owned by AJW Partners and New Millennium  Capital  Partners cannot be determined
at this time. Because of this fluctuating characteristic,  we agreed to register
a number of shares of our common  stock that exceeds the number of our shares of
common stock  currently  beneficially  owned by AJW Partners and New  Millennium
Capital  Partners.  The number of shares of our common stock listed in the table
as being  beneficially owned by AJW Partners and New Millennium Capital Partners
includes  the shares of our common  stock that are  issuable to AJW Partners and
New  Millennium  Capital  Partners  subject  to  the  4.999%  limitation,   upon
conversion of their  debentures  and exercise of their  warrants.  However,  the
4.999%  limitation  would not prevent AJW  Partners and New  Millennium  Capital
Partners  from  acquiring  and  selling in excess of 4.999% of our common  stock
through a series of conversions and sales under the debentures and  acquisitions
and sales under the warrants.

                                       60

<PAGE>

         In light of the above discussion  regarding the terms of the debentures
and warrants,  the number of shares shown in the table as beneficially  owned by
each debenture investor represents a good faith estimate of the number of shares
of common stock issuable upon  conversion of the debentures and upon exercise of
the warrants as of the date of the table and has not been  calculated  in strict
compliance with Rule 13d-3.

         We will not receive any of the proceeds  from the sale of the shares of
common  stock  offered by the  selling  security  holders,  but we will  receive
proceeds from the exercise,  if any, of the warrants whose underlying shares are
offered under this prospectus, and we will record a reduction in indebtedness to
the  debenture  investors  upon  conversions,  if any, of the  debentures  whose
underlying  shares  are  offered  under  this  prospectus.  We intend to use any
proceeds we receive for general corporate purposes.

         We have agreed to pay the  expenses,  other than broker  discounts  and
commissions,  if any,  in  connection  with this  prospectus.  We have agreed to
prepare and file all amendments and supplements to the registration statement of
which this prospectus is a part as may be necessary in accordance with the rules
and regulations of the Securities Act of 1933, as amended,  to keep it effective
until the earlier to occur of the following:

         o   The date as of which all shares of common stock  offered under this
             prospectus  may be resold in a public  transaction  without  volume
             limitations or other  material  restrictions  without  registration
             under the Securities Act, including without limitation, pursuant to
             Rule 144 under the Securities Act; and

         o   The date as of which all shares of common stock  offered under this
             prospectus have been resold.


         The number of shares  being  offered by the  selling  security  holders
represents  (i) 200% of the  shares  of common  stock  issuable  to the  selling
security  holders upon  conversion of debentures and as payment of principal and
interest  thereunder  and (ii) the shares of common  stock  issuable  to selling
security  holders  upon  exercise  of warrants  issued to the  selling  security
holders.

         Because the number of shares of common stock  issuable upon  conversion
of the debentures  and as payment of interest  thereon is dependent in part upon
the market  price of the common  stock prior to a  conversion  and is subject to
certain  conversion  limitations  described  elsewhere in this  prospectus,  the
actual  number of shares of common  stock that will then be issued in respect of
such conversions or interest payments and, consequently,  offered for sale under
this  registration  statement,  cannot  be  determined  at  this  time.  We have
contractually  agreed to  include  herein  10,700,000  shares  of  common  stock
issuable upon conversion of the debentures,  payment of interest  thereunder and
exercise  of the  warrants  issued  to the  selling  security  holders  and have
disregarded the conversion limitations for purposes of the table below.

                                       61

<PAGE>
<TABLE>
<CAPTION>
                                                  Shares of Common            Shares of Common
                                                  Stock Beneficially            Stock Being            Shares of Common
     Name and Address of                             Owned Prior              Offered Pursuant       Stock Beneficially Owned
     Beneficial Owner                              to this Offering           to this Prospectus      After this Offering(2)
     -------------------                       ------------------------       ------------------     ------------------------
                                                Number          Percent                               Number      Percent
                                                ------          -------                              ------       ------
<S>                                            <C>              <C>           <C>                    <C>          <C>
Frederick T. Manlunas
16133 Ventura Blvd., Suite 635
Encino, California  91436.............          9,579,805       14.48%              -                 9,579,805   12.46%

Clinton J. Sallee
16133 Ventura Blvd., Suite 635
Encino, California  91436.............          8,410,916       12.71%               -                8,410,916   10.94%

Kevorak Zoryan
16133 Ventura Blvd., Suite 635
Encino, California  91436.............               -            -                  -                   -           -

Pickard & Company
28245 Avenue Crocker, Suite 220
Valencia, California  91355...........            735,000         *              300,000                365,000      *

Frank and Julie Erhartic
7109 Timberlake Road
Lynchburg, VA  24502 .................         12,437,985        18.80%               -              12,437,985   16.18%

AJW Partners, LLC
155 First Street, Suite B
Mineola, NY 11501.....................          4,365,000(1)(3)  4.99%(1)      4,365,000(5)             -            -

New Millenium Capital Partners II, LLC
155 First Street, Suite B
Mineola, NY 11501.....................         10,185,000(1)(4)  4.99%(1)     10,185,000(5)             -            -


All directors and executive
officers as a group
(3 persons)...........................         30,428,706       45.98%               -               30,428,706   39.58%
</TABLE>

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

(1)  Includes  the shares of our common  stock  issuable to AJW Partners and New
Millennium  Capital  Partners  II,  subject  to  the  4.999%  limitation,   upon
conversion of its debentures and exercise of its warrants.

(2)  Assumes  that all of the shares  being  offered  are sold  pursuant to this
     prospectus.

                                       62

<PAGE>


(3)  Represents  1,155,000 shares  currently  owned,  2,960,000 shares of common
     stock  issuable upon  conversion  of debentures  and as payment of interest
     thereon  and  250,000  shares of common  stock  issuable  upon  exercise of
     warrants.

(4)  Represents  2,695,000 shares  currently  owned,  7,240,000 shares of common
     stock  issuable upon  conversion  of debentures  and as payment of interest
     thereon  and  250,000  shares of common  stock  issuable  upon  exercise of
     warrants.


(5)  Pursuant to the Registration  Rights Agreement between us and the debenture
     holders,  we are required to register such number of shares of common stock
     equal to the sum of  (i)200%  of the  number  of  shares  of  common  stock
     issuable  upon  conversion in full of their  debentures,  assuming for such
     purposes that all interest is paid in shares of our common stock,  that the
     Debentures are outstanding  for one year and that such conversion  occurred
     at a price equal to the lesser of (a)$0.70 and (b)60% of the average of the
     lowest three inter-day prices (which need not occur on consecutive  trading
     days) during the ten trading days  immediately  preceding  the closing date
     and (ii)the number of shares of common stock issuable upon exercise in full
     of the warrants.


                      DESCRIPTION OF CONVERTIBLE DEBENTURES

     The securities  being offered by the selling  security  holders  consist of
shares of common  stock that are issuable  upon the  conversion  of  convertible
debentures  and upon the  exercise  of  warrants  that we  issued  in a  private
offering in May 2000.  The debentures  are in the original  principal  amount of
$500,000 and bear interest at a rate of 12% per annum.  The warrants to purchase
an aggregate of 250,000 shares of our common stock at an initial  exercise price
of $0.77 per share.

     In addition,  the securities  being offered by the selling security holders
also  consist  of  common  stock  that  are  issuable  upon  the  conversion  of
convertible  debentures  and upon the  exercise of warrants  that we issued in a
follow-on private offering in August 2000. The additional  debentures are in the
original  principal  amount of $500,000  and bear  interest at a rate of 12% per
annum.  The warrants to purchase an  aggregate  of 250,000  shares of our common
stock at an initial exercise price of $0.77 per share.

     The  debentures  are  convertible  into common stock at a rate equal to the
lowest of $.70 or 60% of the average of the three  lowest  closing bid price for
the common stock during the 20 trading days immediately preceding the conversion
date.


                                       63

<PAGE>

     However, the debentures may not be converted into common stock, nor may the
holder  receive shares in payment of interest,  if the debenture  holder and any
affiliate would, as a result, beneficially own more than 4.999% of our company's
issued and outstanding  shares of common stock.  This limitation could be waived
by the holder as to itself by giving 5 days' prior notice to us.  Further,  as a
separate restriction, a holder may not convert the debentures into common stock,
nor may the holder  receive  shares in payment of interest,  if as a result,  he
together with his affiliates  would  beneficially own in excess of 9.999% of our
company's issued and outstanding common stock. This provision can also be waived
by the holder as to itself by giving 15 days' prior notice to us.  However,  the
conversion  limitations do not preclude a holder from converting and selling all
or a portion of the  outstanding  principal  amount of the debentures that would
result in the beneficial  ownership by such holder of less than 4.999% of 9.999%
(as applicable) of the shares of common stock then  outstanding,  and thereafter
converting and selling an additional  similar  portion of its holdings.  In this
manner such holder could over time receive and sell a number of shares of common
stock in excess of 4.999% or  9.999%  (as  applicable)  of the  shares of common
stock outstanding while never beneficially owning more than 4.999% or 9.999% (as
applicable) at any one time.

     The  number  of  shares  being  offered  by the  selling  security  holders
represents  (i) 200% of the  shares  of common  stock  issuable  to the  selling
security  holders upon  conversion of the  debentures and as payment of interest
thereunder  and (ii) the shares of common  stock  issuable  to selling  security
holders upon exercise of the warrants  issued to the selling  security  holders.
Because the number of shares of common stock  issuable  upon  conversion  of the
debentures  and as payment of  interest  thereon is  dependent  in part upon the
market price of the common  stock prior to a  conversion,  the actual  number of
shares of common  stock that will then be issued in respect of such  conversions
or interest payments and, consequently, offered for sale under this registration
statement,  cannot be determined at this time. We have  contractually  agreed to
include herein 10,700,000 shares of common stock issuable upon conversion of the
debentures,  payment of interest  thereunder and exercise of the warrants issued
to the selling security holders.

     This prospectus does not cover the sale or other transfer of the debentures
or warrants.  If a selling  security holder transfers its debentures or warrants
prior to conversion or exercise,  the  transferee of the  debentures or warrants
may not sell the shares of common stock issuable upon  conversion or exercise of
the  debentures  or  warrants  under the terms of this  prospectus  unless  this
prospectus is appropriately amended or supplemented by us.

     For the period a holder holds our  debentures  or warrants,  the holder has
the  opportunity  to profit from a rise in the market  price of our common stock
without  assuming the risk of  ownership of the shares of common stock  issuable
upon  conversion of the  debentures or exercise of the warrants.  The holders of
the  debentures  and  warrants  may be expected  to  voluntarily  convert  their
debentures or exercise  their  warrants when the conversion or exercise price is
less than the market price for our common stock.  Further, the terms on which we
could obtain  additional  capital  during the period in which the  debentures or
warrants remain outstanding may be adversely affected.

                                       64

<PAGE>

                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

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

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

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

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

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

                                       65

<PAGE>

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

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


                          DESCRIPTION OF CAPITAL STOCK

COMMON STOCK

     We are authorized to issue  300,000,000  shares of common stock,  par value
$0.001 per  share.  Holders of common  stock are  entitled  to one vote for each
share  held of record on all  matters on which the  holders of common  stock are
entitled to vote. There are no redemption or sinking fund provisions  applicable
to the common stock. The outstanding  shares of common stock are, and the common
stock  issuable  pursuant to this  registration  statement will be, when issued,
fully paid and non-assessable.


PREFERRED STOCK

     We are  authorized to issue  30,000,000  shares of "blank check"  preferred
stock,  par value $0.001 per share, in one or more series from time to time with
such designations, rights and preferences as may be determined from time to time
by the Board of Directors,  including, but not limited to (i) the designation of
such series;  (ii) the dividend rate of such series,  the  conditions  and dates
upon which such  dividends  shall be payable,  the relation which such dividends
shall bear to the  dividends  payable on any other class or classes or series of
our  capital   stock  and  whether  such   dividends   shall  be  cumulative  or
non-cumulative;  (iii)  whether  the shares of such  series  shall be subject to
redemption  for cash,  property  or rights,  including  securities  of any other
corporation, by Sitestar or upon the happening of a specified event and, if made
subject to any such redemption,  the times or events, prices, rates, adjustments
and other terms and conditions of such redemption;  (iv) the terms and amount of
any sinking fund  provided for the purchase or  redemption of the shares of such
series (v) whether or not the shares of such series shall be  convertible  into,
or exchangeable  for, at the option of either the holder or Sitestar or upon the
happening of a specified  event,  shares of any other class or classes or of any
other series of the same class of Sitestar's  capital stock and, if provision be
made for the  conversion  or  exchange,  the  times or  events,  prices,  rates,
adjustments  and other terms and  conditions of such  conversions  or exchanges;
(vi) the  restrictions,  if any,  on the  issue  or  reissue  of any  additional

                                       66

<PAGE>

preferred  stock;  (vii) the rights of the  holders of the shares of such series
upon the  voluntary or  involuntary  liquidation,  dissolution  or winding up of
Sitestar; and (viii) the provisions as to voting,  optional and/or other special
rights and preferences,  if any,  including,  without  limitation,  the right to
elect one or more directors.  Accordingly,  the Board of Directors is empowered,
without   stockholder   approval,   to  issue  preferred  stock  with  dividend,
liquidation,  conversion,  voting or other  rights  which  adversely  affect the
voting power or other rights of the holders of the common stock. In the event of
issuance, the preferred stock could be utilized, under certain circumstances, as
a way of  discouraging,  delaying  or  preventing  an  acquisition  or change in
control of Sitestar.


                          TRANSFER AGENT AND REGISTRAR

     The stock  transfer  agent and  registrar  for our common  stock is Pacific
Stock Transfer Company, Las Vegas, Nevada.


                                  LEGAL MATTERS

     Certain  legal  matters with respect to the legality of the Shares  offered
pursuant to this  prospectus  will be passed upon for us by our  counsel,  Sklar
Warren Conway & Williams, LLP, Las Vegas, Nevada.


                                     EXPERTS


     The  consolidated   financial   statements  of  Sitestar   Corporation  and
subsidiaries  for the year ended  December  31, 1999 have been  included in this
prospectus  and in the  registration  statement  in reliance  upon the report of
Merdinger,   Fruchter,   Rosen  &  Corso,  LLP,  independent   certified  public
accountants,  appearing elsewhere in this prospectus,  and upon the authority of
said firm as experts in accounting  and  auditing.  The  consolidated  financial
statements of Sitestar  Corporation and subsidiaries for the year ended December
31, 2000 have also been  included  in this  prospectus  and in the  registration
statement in reliance upon the report of Stonefield Josephson, Inc., independent
certified public accountants,  appearing elsewhere in this prospectus,  and upon
the authority of said firm as experts in accounting and auditing.



                                       67
<PAGE>

                       WHERE YOU CAN FIND MORE INFORMATION

     We have filed with the Securities and Exchange Commission, Washington, D.C.
20549, a  registration  statement on Form SB-2 under the Securities Act of 1933,
and the rules and regulations  enacted under its authority,  with respect to the
common stock offered in this prospectus.  This prospectus,  which  constitutes a
part of the registration statement,  does not contain all of the information set
forth in the registration  statement and its exhibits and schedules.  Statements
contained  in this  prospectus  as to the  contents  of any  contract  or  other
document  referred  to  are  not  necessarily  complete,  and in  each  instance
reference  is made to the full text of the contract or other  document  which is
filed as an exhibit to the registration  statement.  Each statement concerning a
contract or document  which is filed as an exhibit should be read along with the
entire contract or document. For further information regarding us and the common
stock  offered  in this  prospectus,  reference  is  made  to this  registration
statement and its exhibits and schedules. The registration statement,  including
its  exhibits  and  schedules,  may be  inspected  without  charge at the public
reference  facilities  maintained by the  Commission at 450 Fifth Street,  N.W.,
Washington,  D.C. 20549, and at the  Commission's  regional offices located at 7
World Trade Center, 13th Floor, New York, New York 10048 and at Citicorp Center,
50 West Madison Street,  Suite 1400,  Chicago,  Illinois 60661.  Copies of these
documents  may be  obtained  from the  Commission  at its  principal  office  in
Washington, D.C. upon the payment of the charges prescribed by the Commission.

     The  Commission  maintains  a web site  that  contains  reports,  proxy and
information  statements  and  other  information  regarding  issuers  that  file
electronically with the Commission.  The Commission's  address on the World Wide
Web is http://www.sec.gov.

     All  trademarks  or trade  names  referred  to in this  prospectus  are the
property of their respective owners.









                                       68
<PAGE>


Item 7.  Financial Statements


                                      INDEX



                                                                    Page
                                                                    ----
INDEPENDENT AUDITORS' REPORT

   Report on financial statements as of and for the year            F-1
   ended December 31, 2000

   Report on financial statements for the year ended
   December 31, 1999                                                F-2

FINANCIAL STATEMENTS

   Consolidated Balance Sheet as of December 31, 2000               F-3 - F-4

   Consolidated Statements of Operations for the Years
      Ended December 31, 2000 and 1999                              F-5

   Consolidated Statement of Stockholders' Equity for the
      Years Ended December 31, 2000 and 1999                        F-6

   Consolidated Statements of Cash Flows for the Years
      Ended December 31, 2000 and 1999                              F-7 - F-8

   Notes to Consolidated Financial Statements                       F-9 - F-28









                                       69
<PAGE>






                          INDEPENDENT AUDITORS' REPORT


TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
SITESTAR CORPORATION

We  have  audited  the  accompanying  consolidated  balance  sheet  of  Sitestar
Corporation  and   subsidiaries  as  of  December  31,  2000,  and  the  related
consolidated  statements of operations,  stockholders' equity and cash flows for
the  year  ended  December  31,  2000.   These  financial   statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

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

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

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



                                    STONEFIELD JOSEPHSON, INC.
                                    Certified Public Accountants


Santa Monica, California
March 23, 2001


                                      F-1

<PAGE>





                          INDEPENDENT AUDITORS' REPORT


TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
SITESTAR CORPORATION

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

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

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

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





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


Los Angeles, California
April 8, 2000


                                       F-2
<PAGE>



                      SITESTAR CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2000


                                     ASSETS

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


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

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



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







                                      F-3

<PAGE>


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

                      LIABILITIES AND STOCKHOLDERS' EQUITY


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

     Total current liabilities                                        1,693,977

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

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

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

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

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


                                      F-4

<PAGE>

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

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


REVENUE                                            $  1,934,637    $    223,749

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

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

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

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

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

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

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

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

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

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

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

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

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

                                      F-5
<PAGE>

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

                                                     Common Stock          Additional    Note
                                                  ---------------------     Paid-in     Receivable   Accumulated
                                                    Shares       Amount     Capital     Stockholder    Deficit       Total
                                                  ----------   --------   -----------   ---------   ------------  -----------
<S>                                               <C>          <C>        <C>           <C>         <C>           <C>
Balance at December 31, 1998, as restated
  for a 3 to 1 stock split                        18,600,036   $ 18,600   $   609,200   $(71,657)   $ ( 678,563)  $  (122,420)

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

Balance at December 31, 1999                      24,159,826     24,160     8,347,174    (69,017)    (4,050,252)    4,252,065

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

Balance at December 31, 2000                      62,175,638   $ 62,176   $12,467,733   $       -   $(9,291,739)  $ 3,238,170
                                                  ==========   ========   ===========   =========   ============  ===========
</TABLE>



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


                                      F-6

<PAGE>

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

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

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

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

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


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

                                      F-7
<PAGE>

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

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

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

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

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

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING TRANSACTIONS

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

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

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

                                      F-8
<PAGE>


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


NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

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

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

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

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


                                      F-9

<PAGE>


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

NOTE 1 -  ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, continued

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

     Use of Estimates
     ----------------
     The  preparation  of financial  statements  in  conformity  with  generally
     accepted  accounting  principles  requires management to make estimates and
     assumptions  that affect the reported amounts of assets and liabilities and
     disclosures  of  contingent  assets  and  liabilities  at the  date  of the
     financial  statements  and the  reported  amounts of revenue  and  expenses
     during the  reporting  periods.  At December  31,  2000,  the Company  used
     estimates in  determining  the  realization of its customer list and excess
     cost  over  fair  value of  assets  acquired.  The  Company  estimates  the
     recoverability  of these assets by using  undiscounted  cash flows based on
     future  operating  activities.  Actual  results  could  differ  from  these
     estimates.

     Fair Value of Financial Instruments
     -----------------------------------
     For certain of the Company's financial instruments including cash, accounts
     receivable,  marketable securities,  accounts payable and accrued expenses,
     the carrying amounts  approximate fair value due to their short maturities.
     The amounts shown for convertible debentures, capital lease obligations and
     notes payable also  approximate  fair value because current  interest rates
     and terms  offered to the Company for similar  debt are  substantially  the
     same.

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



                                      F-10
<PAGE>


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

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, continued

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

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

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




                                      F-11

<PAGE>


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

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, continued

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

     Intangible Assets
     -----------------
     The Company continually monitors its intangible assets to determine whether
     any impairment has occurred.  In making such  determination with respect to
     these assets, the Company evaluates the performance on an undiscounted cash
     flow basis, of the intangible assets or group of assets, which gave rise to
     an assets carrying amount. Should impairment be identified, a loss would be
     reported to the extent that the  carrying  value of the related  intangible
     asset exceeds the fair value of that intangible  asset using the discounted
     cash flow  method.  The  Company's  intangible  assets  which  consist of a
     customer  list and excess cost over fair value of net assets  acquired  are
     being  amortized  over  three and five  years,  respectively.  Amortization
     expense for the customer list and excess cost over fair value of net assets
     acquired  was  $907,053  and  $617,239,  respectively,  for the year  ended
     December 31,  2000,  and $36,417 and  $23,352,  respectively,  for the year
     ended  December 31,  1999.  During the year ended  December  31, 2000,  the
     Company also wrote down $1,080,00 and $780,000 of the value of its customer
     list and excess cost over fair value of net assets,  respectively,  related
     to its  Internet  operations  of Neocom  Microspecialists,  Inc.  The total
     impairment  loss of  $1,860,000  resulted  from the  decrease in value of a
     subscriber due to competition  and other sources  available to customers to
     access the Internet.

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

                                      F-12
<PAGE>


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

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, continued

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

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

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

     Advertising and Marketing Costs
     -------------------------------
     The  Company  expenses  costs  of  advertising  and  marketing  as they are
     incurred.  Advertising  and marketing  expense for the years ended December
     31, 2000 and 1999 was approximately $19,800 and $11,000, respectively.


                                      F-13
<PAGE>


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

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, continued

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

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

     Investment
     ----------
     In December  1999,  the Company  purchased a 9% equity  interest in Qliq-on
     Corporation  for 160,000  shares of the  Company's  common  stock valued at
     $160,000.  This investment is being accounted for using the cost method. In
     September  2000,  the  Company  purchased  a 4.74%  interest  in a  limited
     liability company for $50,000. This investment is being accounted for using
     the equity method.

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


                                      F-14
<PAGE>


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

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, continued

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

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

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

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

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


                                      F-15
<PAGE>


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

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, continued

     Recently Issued Accounting Pronouncements, continued
     -----------------------------------------

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


NOTE 2 - ACQUISITIONS

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

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

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

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


                                      F-16
<PAGE>


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

NOTE 2 - ACQUISITIONS, continued

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

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

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

           Cash                                                  $      12,963
           Other current assets                                        146,719
           Equipment, net                                              360,096
           Customer list                                             2,622,000
           Excess cost over fair value of net assets acquired        2,862,307
           Other assets                                                 31,614
           Current liabilities                                        (315,705)
           Notes payable                                              (854,407)
           Capital lease obligations                                   (83,234)
                                                                  ------------
           Purchase price                                        $   4,782,353
                                                                   ===========


                                      F-17
<PAGE>


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

NOTE 2 - ACQUISITIONS, continued

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

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

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

          Cash                                                 $     253,385
          Other current assets                                       147,561
          Equipment, net                                              98,710
          Customer list                                              595,000
          Excess cost over fair value of net assets acquired       1,703,741
          Current liabilities                                       (310,800)
                                                               -------------

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




                                      F-18
<PAGE>


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

NOTE 2 - ACQUISITIONS, continued

     Lynchburg.net, continued
     -------------

     The following table presents the unaudited pro forma condensed statement of
     operations  for the year ended  December 31, 2000 and 1999 and reflects the
     results of  operations of the Company as if the  acquisitions  of Sitestar,
     Inc.,  Neocom  Microspecialists,  Inc. and Lynchburg.net had been effective
     January 1, 1999.  The pro forma amounts are not  necessarily  indicative of
     the combined results of operations had the acquisition been effective as of
     that  date,  or of the  anticipated  results  of  operations,  due to  cost
     reductions and operating  efficiencies that are expected as a result of the
     acquisition.

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


NOTE 3 - SALE OF ASSETS

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



                                      F-19
<PAGE>


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

NOTE 3 - SALE OF ASSETS, continued

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

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

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

NOTE 4 - PROPERTY AND EQUIPMENT

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


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

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




                                      F-20
<PAGE>


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

NOTE 5 - NOTE RECEIVABLE - STOCKHOLDER

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

NOTE 6 - CONVERTIBLE DEBENTURES

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

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

     During the year ended  December,  31,  2000,  the holder of the  debentures
     converted  $243,500  in  principal  and  $36,533 of accrued  interest  into
     2,342,924 and 652,363, respectively, shares of the Company's common stock.


                                      F-21
<PAGE>


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


NOTE 7 - NOTES PAYABLE

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

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

         Prime plus 1.5% - Bank note payable in monthly  interest
         and  principal payments of $6,400 and balance due September
         2003. The note is secured by a deed of trust against personal
         residencies of three stockholders and the Company's building.
         Also, the bank has a blanket lien against all other current
         and future assets of Neocom.                                    338,780
                                                                       ---------
         Total                                                           476,820

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

     The future principal maturities of these notes are as follows:

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


                                      F-22
<PAGE>


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


NOTE 8 - COMMITMENTS AND CONTINGENCIES

     The Company leases certain  facilities for its corporate offices and retail
     store under  non-cancelable  operating  leases.  Total rent expense for the
     year  ended   December   31,  2000  and  1999  was  $35,253  and   $23,119,
     respectively. The Company also leases certain equipment under capital lease
     obligations. Future minimum lease payments under non-cancelable capital and
     operating leases with initial or remaining terms of one year or more are as
     follows:

                                                     Capital       Operating
                                                    Leases          Leases
                                                 -------------   -------------
          Year ending December 31,
          2001                                   $      36,922   $      12,684
          2002                                          23,270               -
          2003                                           3,112               -
                                                 -------------   -------------


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

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

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

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



                                      F-23
<PAGE>


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

NOTE 8 - COMMITMENTS AND CONTINGENCIES, continued

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

     In connection with the Neocom acquisition, the Company is required to issue
     an  additional   2,000,000  shares  of  its  common  stock  on  the  second
     anniversary of the acquisition date, if no unforeseen  contingencies arise.
     The  purchase  price will be  adjusted,  when and if, any of the  2,000,000
     shares are issued.

     Lynchburg.net Acquisition
     -------------------------

     In connection with the Lynchburg.net  acquisition,  the Company is required
     to issue an  additional  4,145,995  shares of its common stock on the third
     anniversary of the acquisition date, if no unforeseen  contingencies arise.
     The  purchase  price will be  adjusted,  when and if, any of the  4,145,995
     shares are issued.

NOTE 9 - STOCKHOLDERS' EQUITY

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

     Preferred Stock
     ---------------
     Preferred Stock, any series,  shall have the powers,  preferences,  rights,
     qualifications,  limitations  and  restrictions  as fixed by the  Company's
     Board of Directors  in its sole  discretion.  As of December 31, 2000,  the
     Company's Board of Directors has not issued any Preferred Stock.

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

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


                                      F-24
<PAGE>


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

NOTE 10 - STOCKHOLDERS' EQUITY, continued

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

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

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

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

     During the year ended  December  31,  2000 the  Company  issued  10,049,400
     shares of common stock for professional services valued at $768,588,  which
     was the fair market value (discounted for tradability  restrictions) of the
     share issue based on the closing price of the Company's common stock on the
     date of issuance,  and issued  7,477,685 shares of common stock in exchange
     for $605,559 in debt and  liabilities  and $39,931 for interest  expense of
     which 955,804  shares were for the conversion of $77,559 of advances due to
     an officer of the Company.

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

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


                                      F-25
<PAGE>


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

NOTE 10 - INCOME TAXES

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

                                                    2000              1999
                                             ---------------     -------------
         Federal income tax rate                      34.0%             34.0%
         Effect of net operating loss                (34.0)%           (34.0)%
                                             ---------------     -------------
         Effective income tax rate                     0.0%              0.0%
                                             ==============      ============

     Deferred  tax assets and  liabilities  reflect the net effect of  temporary
     differences  between  the  carrying  amount of assets and  liabilities  for
     financial  reporting  purposes  and amounts  used for income tax  purposes.
     Significant components of the Company's deferred tax assets and liabilities
     at December 31, 2000 are as follows:

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

     At December 31, 2000,  the Company has provided a valuation  allowance  for
     the deferred tax asset since management has not been able to determine that
     the  realization  of that asset is more likely than not.  The net change in
     the valuation allowance for the years ended December 31, 2000 and 1999, was
     an increase of $2,040,000 and $1,145,000,  respectively. Net operating loss
     carry forwards of approximately $9,000,000 expire starting in 2012.

NOTE 11 - RELATED PARTY TRANSACTIONS

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

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


                                      F-26
<PAGE>


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

NOTE 11 - RELATED PARTY TRANSACTIONS, continued

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

NOTE 12 - SEGMENT INFORMATION

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

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

     Summarized  financial  information   concerning  the  Company's  reportable
     segments is shown in the following  table for the years ended  December 31,
     2000 and 1999:

<TABLE>
<CAPTION>
                                December 31, 2000
                              -------------------------------------------------------------------
                               Corporate      Internet     Development    Retail     Consolidated
                             -----------    ------------  ------------   ---------  -------------
      <S>                    <C>            <C>           <C>            <C>        <C>
      Revenue                $         -    $  1,603,204  $    225,836   $ 105,597  $   1,934,637
      Operating loss         $(1,635,933)   $ (3,077,180) $    (79,443)  $    (654) $  (4,793,210)
      Depreciation and
        amortization         $     3,303    $  1,607,489  $      6,994   $     590  $   1,618,376
      Interest expense       $   766,340    $     91,618  $          -   $     (39) $     857,919
      Identifiable assets    $   983,886    $  4,139,412  $     32,880   $ 278,815  $   5,434,993
</TABLE>


                                      F-27
<PAGE>


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


NOTE 12 - SEGMENT INFORMATION, continued

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













                                      F-28
<PAGE>









You should rely only on the  information  contained in this document or to which
we have  referred  you.  We have  not  authorized  anyone  to  provide  you with
information  that is different.  This document may be used only when it is legal
to sell these securities.  The information in this document may only be accurate
on the date of this document.

                            ------------------------

                                TABLE OF CONTENTS

                                                                          PAGE
                                                                          ----
Prospectus Summary.........................................................  3
Selected Consolidated Financial Data.......................................  5
Risk Factors...............................................................  7
Forward-Looking Statements................................................. 23
Use of Proceeds............................................................ 23
Price Range of Our Common Stock............................................ 23
Dividend Policy............................................................ 24
Capitalization............................................................. 25
Plan of Distribution....................................................... 25
Management's Discussion and Analysis of Financial Condition and
  Results of Operations.................................................... 27
Business................................................................... 32
Management................................................................. 57
Principal and Selling Security Holders..................................... 59
Description of Convertible Debentures...................................... 63
Certain Relationships and Related Transactions............................. 65
Description of Capital Stock............................................... 66
Transfer Agent and Registrar............................................... 67
Legal Matters.............................................................. 67
Experts.................................................................... 67
Where You Can Find More Information........................................ 68
Index to Financial Statements.............................................. 69









<PAGE>





                            ------------------------



                                14,850,000 Shares





                              SITESTAR CORPORATION




                                  COMMON STOCK



                                -----------------
                                   PROSPECTUS
                                -----------------



                                   May 7, 2001



                            ------------------------
</TEXT>
</DOCUMENT>