10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

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

For the quarterly period ended September 30, 2012

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

For the transition period from ________________ to _______________

000-27763

(Commission file number)

SITESTAR CORPORATION

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

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

7109 Timberlake Road, Lynchburg, VA  24502

(Address of principal executive offices)

(434) 239-4272

(Issuer's telephone number)

N/A

 (Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes [X] No [ ]

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

Large Accelerated Filer [ ] Accelerated Filer [ ] Non-Accelerated Filer (Do not check if a smaller reporting Company) [ ] Smaller Report Company [X]

 Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [X] Yes [ ] No

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

As of November 21, 2012, the issuer had 91,326,463 shares of common stock issued and 74,085,705 outstanding

SITESTAR CORPORATION

Index

		Page Number
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011		4-5
	Condensed Consolidated Statements of Income for the three months ended September 30, 2012 and 2011		6
	Condensed Consolidated Statements of Income for the nine months ended September 30, 2012 and 2011		7
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2012 and 2011		8-9
	Notes to Condensed Consolidated Financial Statements		10-20
Item 2.	Management's Discussion and Analysis		20-28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		28
Item 4.	Controls and Procedures		28
Part II.	OTHER INFORMATION		30
Item 1.	Legal Proceedings		30
Item 1A.	Risk Factors		30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		30
Item 3.	Defaults Upon Senior Securities		30
Item 4	Submission of Matters to a Vote of Security Holders		30
Item 5	Other Information		30
Item 6.	Exhibits		30
SIGNATURES			31

Table of Contents 2

SITESTAR CORPORATION AND SUBSIDIARIES

EXPLANATORY NOTE

This Amendment No. 2 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, initially filed with the Securities and Exchange Commission on November 14, 2012, is being filed to reflect restatements of Sitestar Corporation’s Condensed Consolidated Balance Sheets as of September 30, 2012, and the related Condensed Consolidated Statement of Income and Condensed Consolidated Statement of Cash Flows for the three and nine months then ended (the “Financial Statements”). The restatements reflect the effects of adjustments for the accounting related to various matters detailed in Note 1 to the Financial Statements. These restatements reflect adjustments related to errors in calculation of income tax related accounts including deferred tax assets, income taxes payable, and current and deferred tax expense.  Additionally, our independent auditors advised us to re-evaluate our historical and current practices with respect to recognition of deferred revenue and whether it is being properly recorded in accordance with generally accepted accounting principles in the United States (GAAP), which led to restatements of revenue and general and administrative expenses.

In addition, results for 2011 have been restated with respect to the accounting for such matters where appropriate.

Sitestar Corporation is also revising the discussion under Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 4, Controls and Procedures in order to reflect the effects of these restatements.

Except with respect to these matters, the Financial Statements in this Form 10-Q/A do not reflect any events that have occurred after the 2012 Form 10-Q was originally filed.

Table of Contents 3

PART I. FINANCIAL INFORMATION

Item 1.    Financial Statements

SITESTAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2012 AND DECEMBER 31, 2011

ASSETS

	2012 (Unaudited)		2011
	Restated
CURRENT ASSETS
Cash and cash equivalents	$	45,636	$	17,268
Accounts receivable, net of allowance of $1,916      and $2,586		37,281		53,090
Prepaid expenses		128,885		75,883
Real estate, at cost		2,900,149		2,464,694
Total current assets		3,111,951		2,610,935
PROPERTY AND EQUIPMENT, net		155,395		164,159
CUSTOMER LIST, net of accumulated amortization of $12,308,091 and $12,286,712		12,582		33,961
GOODWILL, net of impairment		1,288,559		1,288,559
DEFERRED TAX ASSETS		212,804		433,550
OTHER ASSETS		265,660		266,180
TOTAL ASSETS	$	5,046,951	$	4,797,344

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

Table of Contents 4

SITESTAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS, continued

SEPTEMBER 30, 2012 AND DECEMBER 31, 2011

LIABILITIES AND STOCKHOLDERS’ EQUITY

	2012 (Unaudited)			2011
	Restated
CURRENT LIABILITIES
Accounts payable	$	45,569		$	71,136
Accrued expenses		42,511			31,433
Deferred revenue		411,990			461,640
Notes payable, current portion		900,615			900,615
Total current liabilities		1,400,685			1,464,824
NOTES PAYABLE – STOCKHOLDERS, less current portion		50,273			95,958
TOTAL LIABILITIES		1,450,958			1,560,782
STOCKHOLDERS' EQUITY
Preferred Stock, $.001 par value, 10,000,000 shares authorized, 0 shares issued and outstanding		—			—
Common stock, $.001 par value, 300,000,000 shares authorized, 91,326,463 shares issued in 2012 and 2011 and 74,085,705 shares outstanding in 2012 and 2011		91,326			91,326
Additional paid-in capital		13,880,947			13,880,947
Treasury stock, at cost, 17,240,758 common shares		(789,518	)		(789,518	)
Accumulated deficit		(9,586,762	)		(9,946,193	)
Total stockholders’ equity		3,595,993			3,236,562
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	5,046,951		$	4,797,344

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

Table of Contents 5

SITESTAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(UNAUDITED)

	2012			2011
	Restated			Restated
REVENUE
Internet	$	688,903		$	894,171
Real estate		34,161			789,411
		723,064			1,683,582
COST OF REVENUE
Internet		370,516			398,778
Real estate		25,669			641,266
		396,185			1,040,044
GROSS PROFIT		326,879			643,538
OPERATING EXPENSES:
Selling general and administrative expenses		164,884			275,676
INCOME FROM OPERATIONS		161,995			367,862
OTHER INCOME (EXPENSES):
Other income (expenses)		(4,058	)		1,207
Interest expense		(1,356	)		(4,880	)
TOTAL OTHER INCOME (EXPENSE)		(5,414	)		(3,673	)
INCOME BEFORE INCOME TAXES		156,581			364,189
INCOME TAXES EXPENSE		(59,938	)		(128,512	)
NET INCOME	$	96,643		$	235,677
BASIC AND DILUTED EARNINGS PER SHARE	$	0.00		$	0.00
WEIGHTED AVERAGE SHARES
OUTSTANDING - BASIC AND DILUTED		74,085,705			74,085,705

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

Table of Contents 6

SITESTAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(UNAUDITED)

	2012			2011
	Restated			Restated
REVENUE
Internet	$	2,241,611		$	2,952,747
Real estate		617,274			789,411
		2,858,885			3,742,158
COST OF REVENUE
Internet		1,208,176			1,385,247
Real estate		468,207			641,266
		1,676,383			2,026,513
GROSS PROFIT		1,182,502			1,715,645
OPERATING EXPENSES:
Selling general and administrative expenses		593,173			1,033,868
INCOME FROM OPERATIONS		589,329			681,777
OTHER INCOME (EXPENSES):
Other income (expenses)		(3,748	)		1,531
Interest expense		(5,404	)		(7,962	)
TOTAL OTHER INCOME (EXPENSE)		(9,152	)		(6,431	)
INCOME BEFORE INCOME TAXES		580,177			675,346
INCOME TAXES (EXPENSE) BENEFIT		(220,745	)		(256,362	)
NET INCOME	$	359,432		$	418,984
BASIC AND DILUTED EARNINGS PER SHARE	$	0.00		$	0.01
WEIGHTED AVERAGE SHARES
OUTSTANDING - BASIC AND DILUTED		74,085,705			74,347,207

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

Table of Contents 7

SITESTAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(UNAUDITED) 

	2012			2011
	Restated			Restated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	359,432		$	418,984
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization expense		30,671			295,385
Allowance for doubtful accounts		(670	)		(1,711	)
Deferred income taxes		220,745			210,919
Decrease in accounts receivable		16,479			28,223
Increase in prepaid expenses		(53,002	)		(58,965	)
Increase in real estate		(435,455	)		(1,468,944	)
Decrease in accounts payable		(25,567	)		(15,565	)
Increase in accrued expenses		11,078			546
Decrease in deferred revenue		(49,650	)		(92,922	)
Decrease in accrued income taxes		—			(90,826	)
Net cash provided by (used in) operating activities		74,061			(774,876	)
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase)  decrease in other assets held for resale		(8	)		2
Purchase of property and equipment		—			(2,000	)
Purchase of non-compete		—			(1,000	)
Purchase of customer list		—			(97,000	)
Net cash used in investing activities		(8	)		(99,998	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable – stockholders		(45,685	)		(17,500	)
Proceeds from notes payable - stockholders		—			224,714
Proceeds from notes payable		—			33,000
Purchase of treasury stock		—			(4,494	)
Net cash provided by (used in) financing activities		(45,685	)		235,720
NET INCREASE (DECREASE) IN CASH AND CASH  EQUIVALENTS		28,368			(639,154	)
CASH AND CASH EQUIVALENTS – BEGINNING OF  PERIOD		17,268			939,328
CASH AND CASH EQUIVALENTS – END OF  PERIOD	$	45,636		$	300,174

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

Table of Contents 8

SITESTAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(UNAUDITED)

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

During the nine months ended September 30, 2012 and 2011, the Company paid income taxes of $101,900 and $256,384 and paid interest expense of approximately $5,000 and $8,000, respectively.

Table of Contents 9

SITESTAR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

NOTE 1-RESTATEMENT OF FINANCIAL STATEMENTS

The Company is restating its condensed consolidated financial statements for the quarters ended September 30, 2012 and 2011 to reflect adjustments for errors in the calculation of income tax related accounts including deferred tax assets, income taxes payable, and current and deferred tax expense balances.  Additionally, during our audit for the year ended December 31, 2012, our independent auditors advised us to re-evaluate our historical and current practices with respect to recognition of deferred revenue and whether it is being properly recorded in accordance with generally accepted accounting principles in the United States (GAAP).  As a result of that review, it was determined that changes in deferred revenue were not being properly classified in the income statement, which has resulted in restatements to revenue and operating expenses.

The following is a summary of the effects of these changes on the Company’s condensed consolidated balance sheets, statements of income and cash flows:

Table of Contents 10

SITESTAR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

NOTE 1-RESTATEMENT OF FINANCIAL STATEMENTS, continued

Consolidated Balance Sheets
As of September 30, 2012	As Previously Reported		Adjustments			As Restated
Prepaid expenses		111,240		17,645			128,885
Deferred tax asset		558,690		(345,886	)		212,804
Total assets		5,375,192		(328,241	)		5,046,951

Consolidated Statements of Income
For the Three Months Ended September 30, 2012	As Previously Reported			Adjustments			As Restated
Revenue internet		666,800			22,103			688,903
Selling general and administrative expenses		142,781			22,103			164,884
Income tax (expense) benefit		(21,415	)		(38,523	)		(59,938	)
Net income		135,166			(38,523	)		96,643
Basic and diluted income per share		.00			.00			.00

For the Nine Months Ended September 30, 2012	As Previously Reported			Adjustments			As Restated
Revenue internet		2,191,961			49,650			2,241,611
Selling general and administrative expenses		543,523			49,650			593,173
Income tax (expense) benefit		(77,363	)		(143,382	)		(220,745	)
Net income		502,814			(143,382	)		359,432
Basic and diluted income per share		.01			(.01	)		.00

Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2012	As Previously Reported			Adjustments			As Restated
Net income		502,814			(143,382	)		359,432
Deferred income taxes		203,917			16,828			220,745
Increase in prepaid expenses		(98,203	)		45,201			(53,002	)
Decrease in accrued income taxes		(81,353	)		81,353			-

Table of Contents 11

SITESTAR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

NOTE 1-RESTATEMENT OF FINANCIAL STATEMENTS, continued

Consolidated Balance Sheets
As of September 30, 2011	As Previously Reported		Adjustments			As Restated
Deferred tax asset		866,042		(342,546	)		523,496
Prepaid expenses		5,162		55,303			60,465
Total assets		5,059,022		(287,243	)		4,771,779
Accrued income taxes		27,278		(27,278	)		55,303
Total current liabilities		1,485,083		(27,278	)		1,457,805

Consolidated Statements of Income
For the Three Months Ended September 30, 2011	As Previously Reported			Adjustments		As Restated
Revenue internet		857,465			36,706		894,171
Selling general and administrative expenses		238,970			36,706		275,676
Income tax (expense) benefit		(250,496	)		121,984		(128,512	)
Net income		113,693			121,984		235,677
Basic and diluted income per share		.00			.00		.00

For the Nine Months Ended September 30, 2011	As Previously Reported		Adjustments			As Restated
Revenue internet		2,859,825		92,922			2,952,747
Selling general and administrative expenses		940,946		92,922			1,033,868
Income tax (expense) benefit		31,876		(288,238	)		(256,362	)
Net income		707,222		(288,238	)		418,984
Basic and diluted income per share		.01		(.00	)		.01

Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2011	As Previously Reported			Adjustments			As Restated
Net income		707,222			(288,238	)		418,984
Increase in prepaid expenses		(3,662)			(55,303)			(58,965)
Deferred income taxes		(103,009	)		313,928			210,919
Decrease in accrued income taxes		(120,439	)		29,613			(90,826	)

Table of Contents 12

NOTE 2 – BASIS OF PRESENTATION

The unaudited condensed consolidated financial statements have been prepared by Sitestar Corporation (the “Company” or “Sitestar”), pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments), which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in annual consolidated financial statements prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP) have been omitted pursuant to such rules and regulations. These financial statements should be read in conjunction with the audited consolidated financial statements and footnotes for the year ended December 31, 2011 included in the Company’s Annual Report on Form 10-K.  The results for the nine months ended September 30, 2012 are not necessarily indicative of the results to be expected for the full year ending December 31, 2012.

NOTE 3 – EARNINGS PER SHARE

GAAP requires dual presentation of basic and diluted earnings per share on the face of the statements of income and requires a reconciliation of the numerators and denominators of the basic and diluted earnings per share calculation. Basic earnings per share are calculated based on the weighted average number of shares of common stock outstanding during each period. Diluted income per share is computed using weighted average shares outstanding adjusted to reflect the dilutive effect of all potential common shares that were outstanding during the period.

For the three months ended September 30, 2012 and 2011:

	2012		2011
Net income available to common shareholders	$	96,643	$	235,677
Weighted average number of common shares		74,085,705		74,085,705
Basic and diluted income per share	$	0.00	$	0.00

For the nine months ended September 30, 2012 and 2011:

	2012		2011
Net income available to common shareholders	$	359,432	$	418,984
Weighted average number of common shares		74,085,705		74,347,207
Basic and diluted income per share	$	0.00	$	0.01

Table of Contents 13

SITESTAR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

NOTE 4 – COMMON STOCK

During the nine months ended September 30, 2012, the Company issued no shares of common stock and repurchased no treasury shares.

NOTE 5 – SEGMENT INFORMATION

The Company has three business units that have been aggregated into three reportable segments: Corporate, Real estate and Internet.

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

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

Summarized financial information concerning the Company's reportable segments is shown in the following tables as of and for the three months ended September 30, 2012 and 2011:

September 30, 2012

	Corporate			Real estate		Internet		Consolidated
Revenue	$	—		$	34,161	$	688,903	$	723,064
Operating income (loss)	$	(9,684	)	$	8,492	$	163,187	$	161,995
Depreciation and amortization	$	—		$	—	$	10,215	$	10,215
Interest expense	$	—		$	—	$	1,356	$	1,356
Real estate	$	—		$	2,900,149	$	—	$	2,900,149
Intangible assets	$	—		$	—	$	1,301,891	$	1,301,891
Total assets	$	—		$	2,900,149	$	2,146,802	$	5,046,951

Table of Contents 14

SITESTAR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

NOTE 5 – SEGMENT INFORMATION, continued

September 30, 2011

	Corporate			Real estate		Internet		Consolidated
Revenue	$	—		$	789,411	$	894,171	$	1,683,582
Operating income (loss)	$	(8,443	)	$	148,145	$	228,160	$	367,862
Depreciation and amortization	$	—		$	—	$	67,559	$	67,559
Interest expense	$	—		$	—	$	4,880	$	4,880
Real estate	$	—		$	1,984,146	$	—	$	1,984,146
Intangible assets	$	—		$	—	$	1,393,020	$	1,393,020
Total assets	$	—		$	1,984,146	$	2,787,633	$	4,771,779

Summarized financial information concerning the Company's reportable segments is shown in the following tables as of and for the nine months ended September 30, 2012 and 2011:

September 30, 2012

	Corporate			Real estate		Internet		Consolidated
Revenue	$	—		$	617,274	$	2,241,611	$	2,858,885
Operating income (loss)	$	(72,981	)	$	149,067	$	513,243	$	589,329
Depreciation and amortization	$	—		$	—	$	30,671	$	30,671
Interest expense	$	—		$	—	$	5,404	$	5,404
Real estate	$	—		$	2,900,149	$	—	$	2,900,149
Intangible assets	$	—		$	—	$	1,301,891	$	1,301,891
Total assets	$	—		$	2,900,149	$	2,787,633	$	4,771,779

September 30, 2011

	Corporate			Real estate		Internet		Consolidated
Revenue	$	—		$	789,411	$	2,952,747	$	3,742,158
Operating income (loss)	$	(35,905	)	$	148,145	$	569,537	$	681,777
Depreciation and amortization	$	—		$	—	$	295,385	$	295,385
Interest expense	$	—		$	—	$	7,962	$	7,962
Real estate	$	—		$	1,984,146	$	—	$	1,984,146
Intangible assets	$	—		$	—	$	1,393,020	$	1,393,020
Total assets	$	—		$	1,984,146	$	2,787,633	$	4,771,779

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SITESTAR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

NOTE 6 – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

No new accounting pronouncement issued or effective during the nine months ended September 30, 2012 has had or is expected to have a material impact on the condensed consolidated financial statements.

NOTE 7 – ACQUISITIONS

NCISP.net

Effective March 1, 2011, the Company entered into an Asset Purchase Agreement pursuant to which it acquired the Internet related assets of NCISP.net, a North Carolina-based Internet Service Provider. The total purchase price was $88,000 representing the fair value of the assets acquired which consisted of a $55,000 cash payment at closing with the remaining balance paid in 6 monthly installments beginning April 2011.

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

Equipment	$	—
Customer list		97,000
Non-compete agreement		1,000
Deferred revenue		(10,000	)
Purchase price	$	88,000

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SITESTAR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

NOTE 8 -- PROVISION FOR INCOME TAXES

The provision for federal and state income taxes for the nine months ended September 30, 2012 and 2011 included the following: 

	2012		2011
Current provision:
Federal	$	—	$	38,260
State		—		7,184
Deferred provision:
Federal		185,854		177,580
State		34,891		33,338
Total income tax provision	$	220,745	$	256,362

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 September 30, 2012 and December 31, 2011 are as follows:

	2012			2011
Accounts receivable	$	1,916		$	2,586
Amortization of Intangible assets		2,633,135			2,853,211
Less valuation allowance		(2,422,247	)		(2,422,247	)
Deferred tax asset	$	212,804		$	433,550

At September 30, 2012 and December 31, 2011, the Company has provided a valuation allowance for a portion of the deferred tax asset that management has not been able to determine that realization is more likely than not. The Company is subject to Federal income taxes as well as income taxes of state jurisdictions. For Federal and state tax purposes, tax years 2008 through 2011 remain open to examination.

Table of Contents 17

SITESTAR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

NOTE 9 – 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 a discounted cash flow basis, of the intangible assets or group of assets.  Should impairment be identified, a loss would be reported to the extent that the carrying value of the related intangible asset exceeds its fair value using the discounted cash flow method.  The Company's customer lists are being amortized over three years. Total amortization expense was $21,907 and $288,836 for the nine months ended September, 30, 2012 and 2011.

NOTE 10 – DEFERRED REVENUE

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

Revenue Recognition

Internet

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

Real Estate

Revenue from real estate is recognized upon closing of the sale, as all conditions for full revenue recognition have been met at that time. All costs associated with the property sold are removed from the consolidated balance sheets and charged to cost of revenue at that time.

Table of Contents 18

SITESTAR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

NOTE 11 - NOTES PAYABLE

Notes payable at September 30, 2012 and December 31, 2011 consist of the following:

	2012			2011
Non-interest bearing amount due on acquisition of USA Telephone.	$	900,615		$	900,615
Totals		900,615			900,615
Less current portion		(900,615	)		(900,615	)
Long-term portion	$	—		$	—

The future principal maturities of these notes are as follows:

Twelve months ending  September 30, 2013	$	900,615
Twelve months ending  September 30, 2014		—
Twelve months ending  September 30, 2015		—
Twelve months ending  September 30, 2016		—
Twelve months ending  September 30, 2017		—
Thereafter		—
Total	$	900,615

NOTE 12 - NOTES PAYABLE – STOCKHOLDERS

Notes payable - stockholders at September 30, 2012 and December 31, 2011 consist of the following: 

	2012		2011
Note payable to officer and stockholder on a line of credit of $750,000 at an annual interest rate of 10%.  The accrued interest and principal are due on January 1, 2014.	$	273	$	45,958
Note payable to stockholder for $50,000 at an annual interest rate of 8% interest.  The accrued interest and principal are due on January 1, 2014.		50,000		50,000
Totals		50,273		95,958
Less current portion		—		—
Long-term portion	$	50,273	$	95,958

Table of Contents 19

SITESTAR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

NOTE 12 - NOTES PAYABLE – STOCKHOLDERS, continued

The future principal maturities of these notes are as follows:

		2011
Twelve months ending June 31, 2013	$	—
Twelve months ending June 30, 2014		50,273
Twelve months ending June 30, 2015		—
Twelve months ending June 30, 2016		—
Twelve months ending June 30, 2017		—
Total		50,273

Item 2.     Management's Discussion and Analysis of Financial Condition and 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, the Company’s ability to expand the Company’s customer base, make strategic acquisitions, general market conditions and competition and pricing.

Although the Company believes the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore, there can be no assurance that the forward-looking statements contained in the report will prove to be accurate.

General

The following discussion and analysis should be read in conjunction with the Company’s consolidated financial statements and related footnotes for the year ended December 31, 2011 included in the Annual Report on Form 10-K.  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.

Table of Contents 20

SITESTAR CORPORATION

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

Overview

Internet

Sitestar is an Internet Service Provider (ISP) that offers consumer and business-grade Internet access, wholesale managed modem services for downstream ISPs and Web hosting.  Sitestar also delivers value-added services including spam, virus and spyware protection, pop-up ad blocking and web acceleration.  The Company maintains multiple sites of operation and provides services to customers throughout the U.S. and Canada.

The products and services that the Company provides include:

·    Internet access services;

·    Web acceleration services;

·    Web hosting services;

The Company’s Internet division markets and sells narrow-band (dial-up and ISDN) and broadband services (DSL, fiber-optic and wireless), and supports these products utilizing its own infrastructure and affiliations.  Value-added services include web acceleration, spam and virus filtering, as well as, spyware protection. Additionally, the Company markets and sells web hosting and related services to consumers and businesses.

Real Estate

The real estate group invests in, refurbishes and markets real estate for resale. The increase in real estate sales marks the beginning of the Company’s efforts to turn investments of excess cash from the Internet division into a new revenue stream. With the increased inventory of real estate investments, the sales should become a more prominent source of revenue.

Table of Contents 21

SITESTAR CORPORATION

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

Results of operations

The following tables show financial data for the nine months ended September 30, 2012.

	Corporate			Internet			Real estate			Total
Revenue	$	—		$	2,241,611		$	617,274		$	2,858,885
Cost of revenue		—			1,208,176			468,207			1,676,383
Gross profit		—			1,033,435			149,067			1,182,502
Operating expenses		72,981			520,192			—			593,173
Income (loss) from operations		(72,981	)		513,243			149,067			589,329
Other income (expense)		—			(9,152	)		—			(9,152	)
Income (loss) before income taxes		(72,981	)		504,091			149,067			580,177
Income taxes (expense) benefit		—			(191,795	)		(28,950	)		(220,745	)
Net income (loss)	$	(72,981	)	$	312,296		$	120,117		$	359,432

Table of Contents 22

SITESTAR CORPORATION

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

The following tables show financial data for the nine months ended September 30, 2011.

	Corporate			Internet			Real estate			Total
Revenue	$	—		$	2,952,747		$	789,411		$	3,742,158
Cost of revenue		—			1,385,247			641,266			2,026,513
Gross profit		—			1,567,500			148,145			1,715,645
Operating expenses		8,443			1,025,425			—			1,033,868
Income (loss) from operations		(8,443	)		542,075			148,145			681,777
Other income (expense)		—			(6,431	)		—			(6,431	)
Income (loss) before income taxes		(8,443	)		535,644			148,145			675,346
Income taxes (expense) benefit		—			(200,129	)		(56,233	)		(256,362	)
Net income (loss)	$	(8,443	)	$	335,515		$	91,912		$	418,984

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

The following tables show a reconciliation of EBITDA to the GAAP presentation of net income for the nine months ended September 30, 2012 and 2011.

Table of Contents 23

SITESTAR CORPORATION

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

For the nine months ended September 30, 2012

	Corporate			Internet			Real estate			Total
EBITDA	$	(72,981	)	$	540,166		$	149,067		$	616,252
Interest expense		—			(5,404	)		—			(5,404	)
Taxes		—			(191,795	)		(28,950	)		(220,745	)
Depreciation		—			(8,764	)		—			(8,764	)
Amortization		—			(21,907	)		—			(21,907	)
Net income (loss)	$	(72,981	)	$	312,296		$	120,117		$	359,432

For the nine months ended September 30, 2011

	Corporate			Internet			Real estate			Total
EBITDA	$	(8,443	)	$	838,991		$	148,145		$	978,693
Interest expense		—			(7,962	)		—			(7,962	)
Taxes		—			(200,129	)		(56,233	)		(256,362	)
Depreciation		—			(11,050	)		—			(11,050	)
Amortization		—			(284,335	)		—			(284,335	)
Net income (loss)	$	(8,443	)	$	335,515		$	91,912		$	418,984

Pursuant to the approval of the board of directors, the Company’s management believes that it is in the best interests of the Corporation to implement a program to purchase (“Purchase Program”), as investments, real estate with the Company’s surplus cash flows. Any real estate purchased pursuant to the Purchase Program will be held as investment until such time or times as the Board of Directors, in its discretion, may deem advisable to sell or otherwise dispose of the property.

The current real estate market presents the unique opportunity to acquire properties at deep discounts from fair market value with the potential for substantial profits. Management evaluates property as it becomes available with respect to the market value versus the acquisition cost, in addition to other conditions that could affect the resale value. Renovations are made as needed to maximize the market appeal and value prior to listing for sale.

Table of Contents 24

SITESTAR CORPORATION

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

Management believes that there is sustainable cash flow potential for the near future in real estate and is actively pursuing the program. As of the balance sheet date, September 30, 2012, the Company has invested approximately $2,900,149 in surplus funds and is continuing the investing process.

NINE MONTHS ENDED SEPTEMBER 30, 2012 COMPARED TO SEPTEMBER 30, 2011 

REVENUE

Total revenue for the nine months ended September 30, 2012 decreased by $883,273 or 23.6% from $3,742,158 for the nine months ended September 30, 2011 to $2,858,885 for the same period in 2012. Internet sales decreased $711,136 or 24.1% from $2,952,747 for the nine months ended September 30, 2011 to $2,241,611 for the same period in 2012. Real estate sales decreased $172,137 or 21.8% from $789,411 for the nine months ended September 30, 2011 to $617,274 for the same period in 2012.

The decrease in Internet sales is attributed to the lack of acquisitions of Internet access and web hosting customers of ISPs. Although the Company continues to sign up new customers, competition from ubiquitous nationwide telecommunications and cable providers threatens significant and sustainable organic growth. To insure continued strength in revenues, the Company has acquired and plans to continue to acquire the assets of additional ISPs, folding them into its operations to provide future revenues. The new real estate division, while sales are down, is preparing properties for the market and is still providing a profitable revenue stream.

COST OF REVENUE

Total costs of revenue for the nine months ended September 30, 2012 decreased by $350,130 or 17.3% from $2,026,513 for the nine months ended September 30, 2011 to $1,676,383 for the same period in 2012.  Cost of Internet revenue decreased $177,071 or 12.8% from $1,385,247 for the nine months ended September 30, 2011 to $1,208,176 for the same period in 2012 as a result of declining revenue. Cost of real estate revenue decreased $173,059 or 27.0% from $641,266 for the nine months ended September 30, 2011 to $468,207 for the same period in 2012. Cost of real estate revenue is a direct result of lower sales while the cost of revenue as a percentage of sales decreased 5.3% from 81.2% for the nine months ended September 30, 2011 to 75.9% for the same period in 2012.

Table of Contents 25

SITESTAR CORPORATION

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

OPERATING EXPENSES

Operating expenses for the nine months ended September 30, 2012 decreased $440,695 or 42.6% from $1,033,868 for the nine months ended September 30, 2011 to $593,173 for the same period in 2012. This decrease is primarily due to lower amortization expense as a result of intangibles being fully amortized.  Amortization expense decreased $262,428 or 92.3% from $284,335 for the nine months ended September 30, 2011 to $21,907 for the same period in 2012.

INCOME TAXES

For the nine months ended September 30, 2012 and September 30, 2011 corporate income tax expenses of $220,745 and $256,362 were incurred.

INTEREST EXPENSE

Interest expense for the nine months ended September 30, 2012 decreased by $2,558 or 32.1% from $7,962 for the nine months ended September 30, 2011 to $5,404 for the same period in 2012.  

SEPTEMBER 30, 2012 COMPARED TO DECEMBER 31, 2011

FINANCIAL CONDITION

Net accounts receivable decreased $15,809 or 29.8% from $53,090 on December 31, 2011 to $37,281 on September 30, 2012.  Investment in real estate increased net $435,455 or 17.7% from $2,464,694 on December 31, 2011 to $2,900,149 on September 30, 2012. Accounts payable decreased by $25,567 or 35.9% from $71,136 on December 31, 2011 to $45,569 on September 30, 2012. Deferred revenue decreased by $49,650 or 10.8% from $461,640 on December 31, 2011 to $411,990 on September 30, 2012 representing decreased volume of customer accounts that have been prepaid. Long-term notes payable to shareholders decreased $45,685 or 47.6% from $95,958 on December 31, 2011 to $50,273 on September 30, 2012.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents totaled $45,636 and $17,268 at September 30, 2012 and at December 31, 2011. EBITDA was $616,252 for the nine months ended September 30, 2012 as compared to $978,693 for the same period in 2011.

Table of Contents 26

SITESTAR CORPORATION

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

The aging of accounts receivable as of September 30, 2012 and December 31, 2011 is as shown:

	2012				2011
Current	$	21,074	57	%	$	33,362	63	%
30 < 60		8,522	23	%		13,123	25	%
60+		7,685	20	%		6,605	12	%
Total	$	37,281	100	%	$	53,090	100	%

OFF-BALANCE SHEET TRANSACTIONS

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

CRITICAL ACCOUNTING POLICY AND ESTIMATES

The Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations section discusses its condensed consolidated financial statements, which have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation.

Table of Contents 27

SITESTAR CORPORATION

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

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

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

None.

Item 4.    Controls and Procedures

In connection with the restatement discussed above in the explanatory note to this Form 10-Q/A and in Note 1 to our financial statements, under the direction of our Chief Executive Officer and Chief Financial Officer, we reevaluated our disclosure controls and procedures.  We identified the following material weaknesses in our internal control over financial reporting:

1. We did not maintain proper segregation of duties for the preparation of our financial statements. Due to the size of our administrative staff, all accounting and reporting functions are handled by a single individual, our Chief Financial Officer, with little or no oversight and review.

2. We did not have adequate policies and procedures in place to provide reasonable assurance that revenues and deferred revenues were being properly recorded in accordance with GAAP. Historically, deferred revenues have been adjusted through our bad debt expense account, rather than through our revenue account. It has been determined that deferred revenue adjustments should properly be recorded through our revenue account to properly reflect revenues earned during the period.

3. We did not have effective review procedures in place to provide reasonable assurance that calculations related to income tax account balances were free of material error. This is largely related to our inability to maintain proper segregation of duties noted above.

As a result of these material weaknesses, we concluded that our disclosure controls and procedures were not effective as of September 30, 2012.

Table of Contents -28-

SITESTAR CORPORATION

In March 2013, management implemented new procedures with regard to the recording of revenues and deferred revenues, and believes these procedures will effectively mitigate the related material weakness. We are currently unable to achieve proper segregation of duties, including sufficient review during our financial reporting close process given the size of our administrative staff. Despite this, management believes that there are no material inaccuracies or omissions of fact in this quarterly report, as amended. However, we cannot provide assurance that we will not, in the future, identify further material weaknesses or significant deficiencies in our internal control over financial reporting that we have not discovered to date.

Changes in Internal Control over Financial Reporting:

Except as noted above, no change in the Company’s internal control over financial reporting occurred during the fiscal quarter ended September 30, 2012, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Table of Contents -29-

SITESTAR CORPORATION

PART II.  OTHER INFORMATION

Item 1.    Legal Proceedings

None

Item 1A.  Risk Factors

Not required for small business.

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

None.

Item 3.    Defaults Upon Senior Securities

None.

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

None.

Item 5.    Other Information

None

Item 6.    Exhibits

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

31.1	Certification of President Pursuant to the Securities Exchange Act of 1934, Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer Pursuant to the Securities Exchange Act of 1934, Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of

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SITESTAR CORPORATION

SIGNATURES

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

SITESTAR CORPORATION

Date: April 19, 2013

By:_/s/ Frank Erhartic, Jr.

Frank Erhartic, Jr.

President, Chief Executive Officer

(Principal Executive Officer and

Principal Accounting Officer)

Date: April 19, 2013

By:_/s/ Daniel A. Judd.

Daniel A. Judd

Chief Financial Officer

(Principal Financial Officer)

Table of Contents 31

EX-31.1

EXHIBIT 31.1

I, Frank R. Erhartic, Jr., certify that:

1. I have reviewed this September 30, 2012 Quarterly Report on Form 10-Q/A of Sitestar Corporation (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s third fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s Board of Directors:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 19, 2013                                                                             

/s/ Frank R. Erhartic, Jr.                                                                       

Frank R. Erhartic, Jr.                                                                       

President and Chief Executive Officer                                               

EX-31.2

Exhibit 31.2

I, Daniel Judd, certify that:

1. I have reviewed this September 30, 2012 Quarterly Report on Form 10-Q/A of Sitestar Corporation (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s third fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s Board of Directors:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 19, 2013                                                              

/s/ Daniel Judd                                                                       

Daniel Judd                                                                       

Chief Financial Officer                                                       

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Sitestar Corporation, (the “Company”) on Form 10-Q/A for the period ending September 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Frank Erhartic, Jr., Chief Executive Officer and President of the Company, and Daniel Judd, Chief Financial Officer of the Company, respectively, certify to our knowledge and in our capacity as officers of the Company, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

/s/ Frank Erhartic, Jr. /s/ Daniel Judd

Frank Erhartic, Jr. Daniel Judd

Chief Executive Officer and President Chief Financial Officer

April 19, 2013

XML

NOTE 12 NOTES PAYABLE STOCKHOLDERS - Maturities of Related Party Debt (Details) (USD $)	Sep. 30, 2012
Related Party Transactions [Abstract]
Twelve months ending March 31, 2013
Twelve months ending March 31, 2014	50,273
Twelve months ending March 31, 2015
Twelve months ending March 31, 2016
Twelve months ending March 31, 2017
Total	$ 50,273

XML

NOTE 8 PROVISION FOR INCOME TAXES - Provision for Federal and State Income Taxes (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Current provision:
Federal				$ 38,260
State				7,184
Deferred provision:
Federal			185,854	177,580
State			34,891	33,338
Total income tax provision	$ 59,938	$ 128,512	$ 220,745	$ 256,362

XML

NOTE 1 RESTATEMENT OF FINANCIAL STATEMENTS - Consolidated Balance Sheets (Details) (USD $)	9 Months Ended		3 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012 As Previously Reported	Sep. 30, 2011 As Previously Reported	Sep. 30, 2012 Adjustments	Sep. 30, 2011 Adjustments	Sep. 30, 2012 As Restated	Sep. 30, 2011 As Restated
Prepaid expenses	$ 53,002	$ 58,965	$ 111,240	$ 5,162	$ 17,645	$ 55,303	$ 128,885	$ 60,465
Deferred tax asset			558,690	866,042	(345,886)	(342,546)	212,804	523,496
Total assets	435,455	1,468,944	5,375,192	5,059,022	(328,241)	(287,243)	5,046,951	4,771,779
Accrued income taxes				27,278		(27,278)
Total current liabilities				$ 1,485,083		$ (27,278)		$ 1,457,805

XML

NOTE 11 NOTES PAYABLE - Maturities of Long Term Debt (Details) (USD $)	Sep. 30, 2012
Debt Disclosure [Abstract]
Twelve months ending September 30, 2013	$ 900,615
Twelve months ending September 30, 2014
Twelve months ending September 30, 2015
Twelve months ending September 30, 2016
Twelve months ending September 30, 2017
Thereafter
Total	$ 900,615

XML

NOTE 4 COMMON STOCK

9 Months Ended

Sep. 30, 2012

Equity [Abstract]

NOTE 4 COMMON STOCK

NOTE 4 – COMMON STOCK

During the nine months ended September 30, 2012, the Company issued no shares of common stock and repurchased no treasury shares.

XML

NOTE 3 EARNINGS PER SHARE - Earnings Per Share (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Earnings Per Share [Abstract]
Net income available to common shareholders	$ 96,643	$ 235,677	$ 359,432	$ 418,984
Weighted average number of common shares	74,085,705	74,085,705	74,085,705	74,347,207
Basic and diluted income per share	$ 0.00	$ 0.01	$ 0.00	$ 0.00

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NOTE 1 RESTATEMENT OF FINANCIAL STATEMENTS (Details Narrative) (USD $)	9 Months Ended
	Sep. 30, 2012
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Adjustment to Net Income from Errors	$ 143,382

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NOTE 5 SEGMENT INFORMATION - Reportable Segments (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Corporate
Revenue
Operating income (loss)	(9,684)	(8,443)	(72,981)	(72,981)
Depreciation and amortization
Interest expense
Real estate
Intangible assets
Total assets
Real Estate
Revenue	34,161	789,411	617,274	617,274
Operating income (loss)	8,492	148,145	149,067	149,067
Depreciation and amortization
Interest expense
Real estate	2,900,149	1,984,146	2,900,149	2,900,149
Intangible assets
Total assets	2,900,149	1,984,146	2,900,149	2,900,149
Internet
Revenue	688,903	894,171	2,241,611	2,241,611
Operating income (loss)	163,187	228,160	513,243	513,243
Depreciation and amortization	10,215	67,559	30,671	30,671
Interest expense	1,356	4,880	5,404	5,404
Real estate
Intangible assets	1,301,891	1,393,020	1,301,891	1,301,891
Total assets	2,146,802	2,787,633	2,146,802	2,787,633
Consolidated
Revenue	723,064	1,683,582	2,858,885	2,858,885
Operating income (loss)	161,995	367,862	589,329	589,329
Depreciation and amortization	10,215	67,559	30,671	30,671
Interest expense	1,356	4,880	5,404	5,404
Real estate	2,900,149	1,984,146	2,900,149	2,900,149
Intangible assets	1,301,891	1,393,020	1,301,891	1,301,891
Total assets	$ 5,046,951	$ 4,771,779	$ 5,046,951	$ 4,771,779

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NOTE 7 ACQUISITIONS - Intangible Assets Acquired (Details) (USD $)	Sep. 30, 2012	Sep. 30, 2011	Mar. 01, 2011
Business Combinations [Abstract]
Equipment
Customer list	12,582	33,961	97,000
Non-compete agreement			1,000
Deferred revenue			(10,000)
Purchase price			$ 88,000

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NOTE 3 EARNINGS PER SHARE

9 Months Ended

Sep. 30, 2012

Earnings Per Share [Abstract]

NOTE 3 EARNINGS PER SHARE

NOTE 3 – EARNINGS PER SHARE

GAAP requires dual presentation of basic and diluted earnings per share on the face of the statements of income and requires a reconciliation of the numerators and denominators of the basic and diluted earnings per share calculation. Basic earnings per share are calculated based on the weighted average number of shares of common stock outstanding during each period. Diluted income per share is computed using weighted average shares outstanding adjusted to reflect the dilutive effect of all potential common shares that were outstanding during the period.

For the three months ended September 30, 2012 and 2011:

	2012		2011
Net income available to common shareholders	$	96,643	$	235,677
Weighted average number of common shares		74,085,705		74,085,705
Basic and diluted income per share	$	0.00	$	0.00

For the nine months ended September 30, 2012 and 2011:

	2012		2011
Net income available to common shareholders	$	359,432	$	418,984
Weighted average number of common shares		74,085,705		74,347,207
Basic and diluted income per share	$	0.00	$	0.00

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NOTE 7 ACQUISITIONS (Details Narrative) (USD $)	Mar. 01, 2011
Business Combinations [Abstract]
Acquisition Purchase Price	$ 88,000
Acquisiton Cash Paid	$ 55,000

XML

Balance Sheets (Unaudited) (USD $)	Sep. 30, 2012	Sep. 30, 2011
CURRENT ASSETS
Cash and cash equivalents	$ 45,636	$ 17,268
Accounts receivable, net of allowance of $1,916 and $2,586	37,281	53,090
Prepaid expenses	128,885	75,883
Real estate, at cost	2,900,149	2,464,694
Total current assets	3,111,951	2,610,935
PROPERTY AND EQUIPMENT, net	155,395	164,159
CUSTOMER LIST, net of accumulated amortization of $12,308,091 and $12,286,712	12,582	33,961
GOODWILL, net of impairment	1,288,559	1,288,559
DEFERRED TAX ASSETS	212,804	433,550
OTHER ASSETS	265,660	266,180
TOTAL ASSETS	5,046,951	4,797,344
CURRENT LIABILITIES
Accounts payable	45,569	71,136
Accrued expenses	42,511	31,433
Deferred revenue	411,990	461,640
Notes payable, current portion	900,615	900,615
Total current liabilities	1,400,685	1,464,824
NOTES PAYABLE STOCKHOLDERS, less current portion	50,273	95,958
TOTAL LIABILITIES	1,450,958	1,560,782
STOCKHOLDERS' EQUITY
Preferred Stock, $.001 par value, 10,000,000 shares authorized, 0 shares issued and outstanding
Common stock, $.001 par value, 300,000,000 shares authorized, 91,326,463 shares issued in 2012 and 2011 and 74,085,705 shares outstanding in 2012 and 2011	91,326	91,326
Additional paid-in capital	13,880,947	13,880,947
Treasury stock, at cost, 17,240,758 common shares	(789,518)	(789,518)
Accumulated deficit	(9,586,762)	(9,946,193)
Total stockholders equity	3,595,993	3,236,562
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 5,046,951	$ 4,797,344

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NOTE 1 RESTATEMENT OF FINANCIAL STATEMENTS

9 Months Ended

Sep. 30, 2012

Organization, Consolidation and Presentation of Financial Statements [Abstract]

NOTE 1 RESTATEMENT OF FINANCIAL STATEMENTS

NOTE 1-RESTATEMENT OF FINANCIAL STATEMENTS

The Company is restating its condensed consolidated financial statements for the quarters ended September 30, 2012 and 2011 to reflect adjustments for errors in the calculation of income tax related accounts including deferred tax assets, income taxes payable, and current and deferred tax expense balances.  Additionally, during our audit for the year ended December 31, 2012, our independent auditors advised us to re-evaluate our historical and current practices with respect to recognition of deferred revenue and whether it is being properly recorded in accordance with generally accepted accounting principles in the United States (GAAP).  As a result of that review, it was determined that changes in deferred revenue were not being properly classified in the income statement, which has resulted in restatements to revenue and operating expenses.

The following is a summary of the effects of these changes on the Company’s condensed consolidated balance sheets, statements of income and cash flows:

Consolidated Balance Sheets
As of September 30, 2012	As Previously Reported		Adjustments			As Restated
Prepaid expenses		111,240		17,645			128,885
Deferred tax asset		558,690		(345,886	)		212,804
Total assets		5,375,192		(328,241	)		5,046,951

Consolidated Statements of Income
For the Three Months Ended September 30, 2012	As Previously Reported			Adjustments			As Restated
Revenue internet		666,800			22,103			688,903
Selling general and administrative expenses		142,781			22,103			164,884
Income tax (expense) benefit		(21,415	)		(38,523	)		(59,938	)
Net income		135,166			(38,523	)		96,643
Basic and diluted income per share		.00			.00			.00

For the Nine Months Ended September 30, 2012	As Previously Reported			Adjustments			As Restated
Revenue internet		2,191,961			49,650			2,241,611
Selling general and administrative expenses		543,523			49,650			593,173
Income tax (expense) benefit		(77,363	)		(143,382	)		(220,745	)
Net income		502,814			(143,382	)		359,432
Basic and diluted income per share		.01			(.01	)		.00

Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2012	As Previously Reported			Adjustments			As Restated
Net income		502,814			(143,382	)		359,432
Increase in deferred income taxes		203,917			16,828			220,745
Increase in prepaid expenses		(98,203	)		45,201			(53,002	)
Decrase in accrued income taxes		(81353	)		81353			-

Consolidated Balance Sheets
As of September 30, 2011	As Previously Reported		Adjustments			As Restated
Deferred tax asset		866,042		(342,546	)		523,496
Prepaid Expenses		5162		55303			60465
Total assets		5,059,022		(287,243	)		4,711,779
Accrued income taxes		27,278		(27278	)		-
Total current liabilities		1,485,083		(27278	)		1,457805

Consolidated Statements of Income
For the Three Months Ended September 30, 2011	As Previously Reported			Adjustments		As Restated
Revenue internet		857,465			36,706		894,171
Selling general and administrative expenses		238,970			36706		275676
Income tax (expense) benefit		(250,496	)		121,984		(128,512	)
Net income		113,693			121,984		235,677
Basic and diluted income per share		.00			.00		.00

For the Nine Months Ended September 30, 2011	As Previously Reported		Adjustments			As Restated
Revenue internet		2,859,825		92,922			2,952,747
Selling general and administrative expenses		940,946		92,922			1,033,868
Income tax (expense) benefit		31,876		(288,238	)		(256,362	)
Net income		707,222		(288,238	)		418,984
Basic and diluted income per share		.01		(.00	)		.01

Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2011	As Previously Reported			Adjustments			As Restated
Net income		707,222			(288,238	)		418,984
Increase in prepaid expense		(3662)			(55303)			(58965)
Increase (decrease) in deferred income taxes		(103,009	)		313,928			210,919
Decrease in accrued income taxes		(120,439	)		29,613			(90826	)

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NOTE 9 INTANGIBLE ASSETS (Details Narrative) (USD $)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization of Intangible Assets	$ 21,907	$ 288,836

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NOTE 8 PROVISION FOR INCOME TAXES (Tables)

9 Months Ended

Sep. 30, 2012

Income Tax Disclosure [Abstract]

Provision for Federal and State Income Taxes

	2012		2011
Current provision:
Federal	$	—	$	38,260
State		—		7,184
Deferred provision:
Federal		185,854		177,580
State		34,891		33,338
Total income tax provision	$	220,745	$	256,362

Components of Income Tax Benefit

	2012			2011
Accounts receivable	$	1,916		$	3,722
Amortization of Intangible assets		2,635,051			2,942,021
Less valuation allowance		(2,422,247	)		(2,422,247	)
Deferred tax asset	$	558,691		$	762,607

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NOTE 11 NOTES PAYABLE - Notes Payable (Details) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Debt Disclosure [Abstract]
Non-interest bearing amount due on acquisition of USA Telephone.	$ 900,615	$ 900,615
Totals	900,615	900,615
Less current portion	(900,615)	(900,615)
Long-term portion

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NOTE 12 NOTES PAYABLE STOCKHOLDERS (Tables)

9 Months Ended

Sep. 30, 2012

Related Party Transactions [Abstract]

Related Party Transactions

	2012		2011
Note payable to officer and stockholder on a line of credit of $750,000 at an annual interest rate of 10%.  The accrued interest and principal are due on January 1, 2014.	$	273	$	45,958
Note payable to stockholder for $50,000 at an annual interest rate of 8% interest.  The accrued interest and principal are due on January 1, 2014.		50,000		50,000
Totals		50,273		95,958
Less current portion		—		—
Long-term portion	$	50,273	$	95,958

Maturities of Related Party Debt

		2011
Twelve months ending June 31, 2013	$	—
Twelve months ending June 30, 2014		50,273
Twelve months ending June 30, 2015		—
Twelve months ending June 30, 2016		—
Twelve months ending June 30, 2017		—
Total		50,273

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NOTE 2 BASIS OF PRESENTATION

9 Months Ended

Sep. 30, 2012

Accounting Policies [Abstract]

NOTE 2 BASIS OF PRESENTATION

NOTE 2 – BASIS OF PRESENTATION

The unaudited condensed consolidated financial statements have been prepared by Sitestar Corporation (the “Company” or “Sitestar”), pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments), which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in annual consolidated financial statements prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP) have been omitted pursuant to such rules and regulations. These financial statements should be read in conjunction with the audited consolidated financial statements and footnotes for the year ended December 31, 2011 included in the Company’s Annual Report on Form 10-K.  The results for the nine months ended September 30, 2012 are not necessarily indicative of the results to be expected for the full year ending December 31, 2012.

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Balance Sheets (Parenthetical) (USD $)	Sep. 30, 2012	Sep. 30, 2011
Statement of Financial Position [Abstract]
Allowance for Doubtful Accounts	$ 1,916	$ 2,586
Accumulated Amortization	$ 2,633,135	$ 12,286,712
Preferred Stock Par Value	$ 0.001	$ 0.001
Preferred Stock Shares Authorized	10,000,000	10,000,000
Preferred Stock Shares Issued	0	0
Preferred Stock Shares Outstanding	0	0
Common Stock Par Value	$ 0.001	$ 0.001
Common Stock Shares Authorized	300,000,000	300,000,000
Common Stock Shares Issued	91,326,463	91,326,463
Common Stock Shares Outstanding	74,085,705	74,085,705
Common Shares Treasury Stock	17,240,758	17,240,758

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NOTE 12 NOTES PAYABLE STOCKHOLDERS

9 Months Ended

Sep. 30, 2012

Related Party Transactions [Abstract]

NOTE 12 NOTES PAYABLE STOCKHOLDERS

NOTE 12 - NOTES PAYABLE – STOCKHOLDERS

Notes payable - stockholders at September 30, 2012 and December 31, 2011 consist of the following: 

	2012		2011
Note payable to officer and stockholder on a line of credit of $750,000 at an annual interest rate of 10%.  The accrued interest and principal are due on January 1, 2014.	$	273	$	45,958
Note payable to stockholder for $50,000 at an annual interest rate of 8% interest.  The accrued interest and principal are due on January 1, 2014.		50,000		50,000
Totals		50,273		95,958
Less current portion		—		—
Long-term portion	$	50,273	$	95,958

The future principal maturities of these notes are as follows:

		2011
Twelve months ending June 31, 2013	$	—
Twelve months ending June 30, 2014		50,273
Twelve months ending June 30, 2015		—
Twelve months ending June 30, 2016		—
Twelve months ending June 30, 2017		—
Total		50,273

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Document and Entity Information	9 Months Ended
	Sep. 30, 2012	Nov. 21, 2012
Document And Entity Information
Entity Registrant Name	SiteStar Corp.
Entity Central Index Key	0001096934
Document Type	10-Q
Document Period End Date	Sep. 30, 2012
Amendment Flag	true
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	No
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		74,085,705
Amendment Description	Restatement of financial statements due to errors.
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2012

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NOTE 1 RESTATEMENT OF FINANCIAL STATEMENTS (Tables)

9 Months Ended

Sep. 30, 2012

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Consolidated Balance Sheets

Consolidated Balance Sheets
For the Quarter Ended September 30, 2012	As Previously Reported		Adjustments			As Restated
Prepaid expenses		111,240		17,645			128,885
Deferred tax asset		558,690		(345,886	)		212,804
Total assets		5,375,192		(328,241	)		5,046,951

Consolidated Statements of Income

Consolidated Statements of Income
For the Quarter Ended September 30, 2012	As Previously Reported			Adjustments			As Restated
Revenue internet		666,800			22,103			688,903
Selling general and administrative expenses		142,781			22,103			164,884
Income tax (expense) benefit		(21,415	)		(38,523	)		(59,938	)
Net income		135,166			(38,523	)		96,643
Basic and diluted income per share		.00			.00			.00

Consolidated Statements of Income
For the Nine Months Ended September 30, 2012	As Previously Reported			Adjustments			As Restated
Revenue internet		2,191,961			49,650			2,241,611
Selling general and administrative expenses		543,523			49,650			593,173
Income tax (expense) benefit		(77,363	)		(143,382	)		(220,745	)
Net income		502,814			(143,382	)		359,432
Basic and diluted income per share		.01			(.01	)		.00

Consolidated Statements of Cash Flows

Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2012	As Previously Reported			Adjustments			As Restated
Net income		502,814			(143,382	)		359,432
Increase in deferred income taxes		203,917			16,828			220,745
Increase in prepaid expenses		(98,203	)		45,201			(53,002	)

Consolidated Balance Sheets
For the Quarter Ended September 30, 2011	As Previously Reported			Adjustments			As Restated
Deferred tax asset		866,042			(342,546	)		523,496
Total assets		5,063,555			(342,546	)		4,721,009
Accrued income taxes		(27,278	)		82,581			55,303
Total current liabilities		1,741,757			82,581			1,824,338

Consolidated Statements of Income
For the Quarter Ended September 30, 2011	As Previously Reported			Adjustments		As Restated
Revenue internet		857,465			36,706		894,171
Selling general and administrative expenses		238,970			74,086		164,884
Income tax (expense) benefit		(250,496	)		121,984		(128,512	)
Net income		113,693			121,984		235,677
Basic and diluted income per share		.00			.00		.00

Consolidated Statements of Income
For the Nine Months Ended September 30, 2011	As Previously Reported		Adjustments			As Restated
Revenue internet		2,859,825		92,922			2,952,747
Selling general and administrative expenses		940,946		92,922			1,033,868
Income tax (expense) benefit		31,876		(288,238	)		(256,362	)
Net income		707,222		(288,238	)		418,984
Basic and diluted income per share		.01		(.01	)		.00

Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2011	As Previously Reported			Adjustments			As Restated
Net income		707,222			(288,238	)		418,984
Increase (decrease) in deferred income taxes		(103,009	)		342,546			239,537
Decrease in accrued income taxes		(81,353	)		(38,091	)		(119,444	)

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Statements of Operations (Unaudited) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
REVENUE
Internet	$ 688,903	$ 894,171	$ 2,241,611	$ 2,952,747
Real estate	34,161	789,411	617,274	789,411
Revenue	723,064	1,683,582	2,858,885	3,742,158
COST OF REVENUE
Internet	370,516	398,778	1,208,176	1,385,247
Real estate	25,669	641,266	468,207	641,266
Cost of Revenue	396,185	1,040,044	1,676,383	2,026,513
GROSS PROFIT	326,879	643,538	1,182,502	1,715,645
OPERATING EXPENSES:
Selling general and administrative expenses	164,884	275,676	593,173	1,033,868
INCOME FROM OPERATIONS	161,995	367,862	589,329	681,777
OTHER INCOME (EXPENSES):
Other income (expenses)	(4,058)	1,207	(3,748)	1,531
Interest expense	(1,356)	(4,880)	(5,404)	(7,962)
TOTAL OTHER INCOME (EXPENSE)	(5,414)	(3,673)	(9,152)	(6,431)
INCOME BEFORE INCOME TAXES	156,581	364,189	580,177	675,346
INCOME TAXES (EXPENSE) BENEFIT	(59,938)	(128,512)	(220,745)	(256,362)
NET INCOME	$ 96,643	$ 235,677	$ 359,432	$ 418,984
BASIC AND DILUTED EARNINGS PER SHARE	$ 0.00	$ 0.01	$ 0.00	$ 0.00
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED	74,085,705	74,085,705	74,085,705	74,347,207

XML

NOTE 7 ACQUISITIONS

9 Months Ended

Sep. 30, 2012

Business Combinations [Abstract]

NOTE 7 ACQUISITIONS

NOTE 7 – ACQUISITIONS

NCISP.net

Effective March 1, 2011, the Company entered into an Asset Purchase Agreement pursuant to which it acquired the Internet related assets of NCISP.net, a North Carolina-based Internet Service Provider. The total purchase price was $88,000 representing the fair value of the assets acquired which consisted of a $55,000 cash payment at closing with the remaining balance paid in 6 monthly installments beginning April 2011.

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

Equipment	$	—
Customer list		97,000
Non-compete agreement		1,000
Deferred revenue		(10,000	)
Purchase price	$	88,000

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NOTE 6 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

9 Months Ended

Sep. 30, 2012

Accounting Changes and Error Corrections [Abstract]

NOTE 6 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

NOTE 6 – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

No new accounting pronouncement issued or effective during the nine months ended September 30, 2012 has had or is expected to have a material impact on the condensed consolidated financial statements.

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NOTE 11 NOTES PAYABLE (Tables)

9 Months Ended

Sep. 30, 2012

Debt Disclosure [Abstract]

Notes Payable

	2012			2011
Non-interest bearing amount due on acquisition of USA Telephone.	$	900,615		$	900,615
Totals		900,615			900,615
Less current portion		(900,615	)		(900,615	)
Long-term portion	$	—		$	—

Maturities of Long Term Debt

Twelve months ending  September 30, 2013	$	900,615
Twelve months ending  September 30, 2014		—
Twelve months ending  September 30, 2015		—
Twelve months ending  September 30, 2016		—
Twelve months ending  September 30, 2017		—
Thereafter		—
Total	$	900,615

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NOTE 3 EARNINGS PER SHARE (Tables)

9 Months Ended

Sep. 30, 2012

Earnings Per Share [Abstract]

Earnings Per Share

	2012		2011
Net income available to common shareholders	$	96,643	$	235,677
Weighted average number of common shares		74,085,705		74,085,705
Basic and diluted income per share	$	0.00	$	0.00

For the nine months ended September 30, 2012 and 2011:

	2012		2011
Net income available to common shareholders	$	359,432	$	418,984
Weighted average number of common shares		74,085,705		74,347,207
Basic and diluted income per share	$	0.00	$	0.00

XML

NOTE 10 DEFERRED REVENUE

9 Months Ended

Sep. 30, 2012

Deferred Revenue Disclosure [Abstract]

NOTE 10 DEFERRED REVENUE

NOTE 10 – DEFERRED REVENUE

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

Revenue Recognition

Internet

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

Real Estate

Revenue from real estate is recognized upon closing of the sale, as all conditions for full revenue recognition have been met at that time. All costs associated with the property sold are removed from the consolidated balance sheets and charged to cost of revenue at that time.

XML

NOTE 8 PROVISION FOR INCOME TAXES

9 Months Ended

Sep. 30, 2012

Income Tax Disclosure [Abstract]

NOTE 8 PROVISION FOR INCOME TAXES

NOTE 8 -- PROVISION FOR INCOME TAXES

The provision for federal and state income taxes for the nine months ended September 30, 2012 and 2011 included the following: 

	2012		2011
Current provision:
Federal	$	—	$	38,260
State		—		7,184
Deferred provision:
Federal		185,854		177,580
State		34,891		33,338
Total income tax provision	$	220,745	$	256,362

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 September 30, 2012 and December 31, 2011 are as follows:

	2012			2011
Accounts receivable	$	1,916		$	2586
Amortization of Intangible assets		2,633,135			2,853,211
Less valuation allowance		(2,422,247	)		(2,422,247	)
Deferred tax asset	$	212,804		$	433,550

At September 30, 2012 and December 31, 2011, the Company has provided a valuation allowance for a portion of the deferred tax asset that management has not been able to determine that realization is more likely than not. The Company is subject to Federal income taxes as well as income taxes of state jurisdictions. For Federal and state tax purposes, tax years 2008 through 2011 remain open to examination.

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NOTE 9 INTANGIBLE ASSETS

9 Months Ended

Sep. 30, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

NOTE 9 INTANGIBLE ASSETS

NOTE 9 – 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 a discounted cash flow basis, of the intangible assets or group of assets.  Should impairment be identified, a loss would be reported to the extent that the carrying value of the related intangible asset exceeds its fair value using the discounted cash flow method.  The Company's customer lists are being amortized over three years. Total amortization expense was $21,907 and $288,836 for the nine months ended September, 30, 2012 and 2011.

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NOTE 11 NOTES PAYABLE

9 Months Ended

Sep. 30, 2012

Debt Disclosure [Abstract]

NOTE 11 NOTES PAYABLE

NOTE 11 - NOTES PAYABLE

Notes payable at September 30, 2012 and December 31, 2011 consist of the following:

	2012			2011
Non-interest bearing amount due on acquisition of USA Telephone.	$	900,615		$	900,615
Totals		900,615			900,615
Less current portion		(900,615	)		(900,615	)
Long-term portion	$	—		$	—

The future principal maturities of these notes are as follows:

Twelve months ending  September 30, 2013	$	900,615
Twelve months ending  September 30, 2014		—
Twelve months ending  September 30, 2015		—
Twelve months ending  September 30, 2016		—
Twelve months ending  September 30, 2017		—
Thereafter		—
Total	$	900,615

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NOTE 8 PROVISION FOR INCOME TAXES - Components of Income Tax Benefit (Details) (USD $)	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2011
Income Tax Disclosure [Abstract]
Accounts receivable	$ 1,916	$ 2,586
Amortization of Intangible assets	2,633,135	2,853,211	12,286,712
Less valuation allowance	(2,422,247)	(2,422,247)
Deferred tax asset	$ 212,804	$ 433,500

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NOTE 7 ACQUISITIONS (Tables)

9 Months Ended

Sep. 30, 2012

Business Combinations [Abstract]

Intangible Assets Acquired

Equipment	$	—
Customer list		97,000
Non-compete agreement		1,000
Deferred revenue		(10,000	)
Purchase price	$	88,000

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NOTE 1 RESTATEMENT OF FINANCIAL STATEMENTS - Consolidated Statements of Income (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Basic and diluted income per share	$ 0.00	$ 0.01	$ 0.00	$ 0.00
As Previously Reported
Revenue internet	$ 666,800	$ 857,465	$ 2,191,961	$ 2,859,825
Selling general and administrative expenses	142,781	238,970	543,523	940,946
Income tax (expense) benefit	(21,415)	(250,496)	(77,363)	31,876
Net income	135,166	113,693	502,814	707,222
Basic and diluted income per share	$ 0.00	$ 0.00	$ 0.01	$ 0.01
Adjustments
Revenue internet	22,103	36,706	49,650	92,922
Selling general and administrative expenses	22,103	36,706	49,650	92,922
Income tax (expense) benefit	(38,523)	121,984	(143,382)	(288,238)
Net income	(38,523)	121,984	(143,382)	(288,238)
Basic and diluted income per share	$ 0.00	$ 0.00	$ (0.01)	$ 0.00
As Restated
Revenue internet	688,903	894,171	2,241,611	2,952,747
Selling general and administrative expenses	164,884	275,676	593,173	1,033,868
Income tax (expense) benefit	(59,938)	(128,512)	(220,745)	(256,362)
Net income	$ 96,643	$ 235,677	$ 359,432	$ 418,984
Basic and diluted income per share	$ 0.00	$ 0.00	$ 0.00	$ 0.01

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Statements of Cash Flows (Unaudited) (USD $)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 359,432	$ 418,984
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization expense	30,671	295,385
Allowance for doubtful accounts	(670)	(1,711)
Decrease in accounts receivable	16,479	28,223
(Increase) in prepaid expenses	(53,002)	(58,965)
Increase in real estate	(435,455)	(1,468,944)
Increase (decrease) in deferred income taxes	220,745	210,919
Decrease in accounts payable	(25,567)	(15,565)
Increase in accrued expenses	11,078	546
Decrease in deferred revenue	(49,650)	(92,922)
Decrease in accrued income taxes		(90,826)
Net cash provided by (used in) operating activities	74,061	(774,876)
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in other assets held for resale	8	(2)
Purchase of property and equipment		(2,000)
Purchase of non-compete		(1,000)
Purchase of customer list		(97,000)
Net cash used in investing activities	(8)	(99,998)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable – stockholders	(45,685)	(17,500)
Proceeds from notes payable - stockholders		224,714
Proceeds from notes payable		33,000
Purchase of treasury stock		(4,494)
Net cash provided by (used in) financing activities	(45,685)	235,720
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	28,368	(639,154)
CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD	17,268	939,328
CASH AND CASH EQUIVALENTS – END OF PERIOD	45,636	17,268
Interest	5,000	8,000
Income taxes	$ 101,900	$ 256,384

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NOTE 5 SEGMENT INFORMATION

9 Months Ended

Sep. 30, 2012

Segment Reporting [Abstract]

NOTE 5 SEGMENT INFORMATION

NOTE 5 – SEGMENT INFORMATION

The Company has three business units that have been aggregated into three reportable segments: Corporate, Real estate and Internet.

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

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

Summarized financial information concerning the Company's reportable segments is shown in the following tables as of and for the three months ended September 30, 2012 and 2011:

September 30, 2012

	Corporate			Real estate		Internet		Consolidated
Revenue	$	—		$	34,161	$	688,903	$	723,064
Operating income (loss)	$	(9,684	)	$	8,492	$	163,187	$	161,995
Depreciation and amortization	$	—		$	—	$	10,215	$	10,215
Interest expense	$	—		$	—	$	1,356	$	1,356
Real estate	$	—		$	2,900,149	$	—	$	2,900,149
Intangible assets	$	—		$	—	$	1,301,891	$	1,301,891
Total assets	$	—		$	2,900,149	$	2,146,802	$	5,046,951

September 30, 2011

	Corporate			Real estate		Internet		Consolidated
Revenue	$	—		$	789,411	$	894,171	$	1,683,582
Operating income (loss)	$	(8,443	)	$	148,145	$	228,160	$	367,862
Depreciation and amortization	$	—		$	—	$	67,559	$	67,559
Interest expense	$	—		$	—	$	4,880	$	4,880
Real estate	$	—		$	1,984,146	$	—	$	1,984,146
Intangible assets	$	—		$	—	$	1,393,020	$	1,393,020
Total assets	$	—		$	1,984,146	$	2,787,633	$	4,771,779

Summarized financial information concerning the Company's reportable segments is shown in the following tables as of and for the nine months ended September 30, 2012 and 2011:

September 30, 2012

	Corporate			Real estate		Internet		Consolidated
Revenue	$	—		$	617,274	$	2,241,611	$	2,858,885
Operating income (loss)	$	(72,981	)	$	149,067	$	513,243	$	589,329
Depreciation and amortization	$	—		$	—	$	30,671	$	30,671
Interest expense	$	—		$	—	$	5,404	$	5,404
Real estate	$	—		$	2,900,149	$	—	$	2,900,149
Intangible assets	$	—		$	—	$	1,301,891	$	1,301,891
Total assets	$	—		$	2,900,149	$	2,146,802	$	5,046,951

September 30, 2011

	Corporate			Real estate		Internet		Consolidated
Revenue	$	—		$	789,411	$	2,952,747	$	3,742,158
Operating income (loss)	$	(35,905	)	$	148,145	$	569,537	$	681,777
Depreciation and amortization	$	—		$	—	$	295,385	$	295,385
Interest expense	$	—		$	—	$	7,962	$	7,962
Real estate	$	—		$	1,984,146	$	—	$	1,984,146
Intangible assets	$	—		$	—	$	1,393,020	$	1,393,020
Total assets	$	—		$	1,984,146	$	2,787633	$	4,771,779

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NOTE 1 RESTATEMENT OF FINANCIAL STATEMENTS - Consolidated Statements of Cash Flows (Details) (USD $)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Increase in prepaid expenses	$ 53,002	$ 58,965
Decrease in accrued income taxes		(90,826)
As Previously Reported
Net income	502,814	707,222
Increase in deferred income taxes	203,917	(103,009)
Increase in prepaid expenses	(98,203)	(3,662)
Decrease in accrued income taxes	(81,353)	(120,439)
Adjustments
Net income	(143,382)	(288,238)
Increase in deferred income taxes	16,828	313,928
Increase in prepaid expenses	45,201	(55,303)
Decrease in accrued income taxes	81,353	29,613
As Restated
Net income	359,432	418,984
Increase in deferred income taxes	220,745	210,919
Increase in prepaid expenses	(53,002)	(58,965)
Decrease in accrued income taxes		$ (90,826)

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NOTE 12 NOTES PAYABLE STOCKHOLDERS - Related Party Transactions (Details) (USD $)	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2011
Related Party Transactions [Abstract]
Note payable to officer and stockholder on a line of credit of $750,000 at an annual interest rate of 10%. The accrued interest and principal are due on January 1, 2014.	$ 273	$ 45,958
Note payable to stockholder for $50,000 at an annual interest rate of 8 % interest. The accrued interest and principal are due on January 1, 2014.	50,000	50,000
Totals	50,273	95,958
Less current portion
Long-term portion	$ 50,273	$ 95,958	$ 95,958

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NOTE 5 SEGMENT INFORMATION (Tables)

9 Months Ended

Sep. 30, 2012

Segment Reporting [Abstract]

Reportable Segments

	Corporate			Real estate		Internet		Consolidated
Revenue	$	—		$	34,161	$	688,903	$	723,064
Operating income (loss)	$	(9,684	)	$	8,492	$	163,187	$	161,995
Depreciation and amortization	$	—		$	—	$	10,215	$	10,215
Interest expense	$	—		$	—	$	1,356	$	1,356
Real estate	$	—		$	2,900,149	$	—	$	2,900,149
Intangible assets	$	—		$	—	$	1,301,891	$	1,301,891
Total assets	$	—		$	2,900,149	$	2,146,802	$	5,046,951

September 30, 2011

	Corporate			Real estate		Internet		Consolidated
Revenue	$	—		$	789,411	$	894,171	$	1,683,582
Operating income (loss)	$	(8,443	)	$	148,145	$	228,160	$	367,862
Depreciation and amortization	$	—		$	—	$	67,559	$	67,559
Interest expense	$	—		$	—	$	4,880	$	4,880
Real estate	$	—		$	1,984,146	$	—	$	1,984,146
Intangible assets	$	—		$	—	$	1,393,020	$	1,393,020
Total assets	$	—		$	1,984,146	$	2,787633	$	4,771,779

Summarized financial information concerning the Company's reportable segments is shown in the following tables as of and for the nine months ended September 30, 2012 and 2011:

September 30, 2012

	Corporate			Real estate		Internet		Consolidated
Revenue	$	—		$	617,274	$	2,241,611	$	2,858,885
Operating income (loss)	$	(72,981	)	$	149,067	$	513,243	$	589,329
Depreciation and amortization	$	—		$	—	$	30,671	$	30,671
Interest expense	$	—		$	—	$	5,404	$	5,404
Real estate	$	—		$	2,900,149	$	—	$	2,900,149
Intangible assets	$	—		$	—	$	1,301,891	$	1,301,891
Total assets	$	—		$	2,900,149	$	2,146,802	$	5,046,951

September 30, 2011

	Corporate			Real estate		Internet		Consolidated
Revenue	$	—		$	789,411	$	2,952,747	$	3,742,158
Operating income (loss)	$	(35,905	)	$	148,145	$	569,537	$	681,777
Depreciation and amortization	$	—		$	—	$	295,385	$	295,385
Interest expense	$	—		$	—	$	7,962	$	7,962
Real estate	$	—		$	1,984,146	$	—	$	1,984,146
Intangible assets	$	—		$	—	$	1,393,020	$	1,393,020
Total assets	$	—		$	1,984,146	$	2,787633	$	4,771779