Nevada
|
88-0397234
|
|
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
(I.R.S.
Employer
Identification
No.)
|
|
7109
Timberlake Rd., Suite 201, Lynchburg,
VA
|
24502
|
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
Large
accelerated filer o
|
Accelerated
filer o
|
|
Non-accelerated
filer o
|
Smaller
reporting company x
|
o
|
Local
and regional ISPs and Computer Companies;
|
o
|
National
Internet Service Providers, such as, AOL, MSN (Microsoft Network) and
EarthLink;
|
o
|
Local,
regional and national broadband cable providers, such as Comcast and Cox
Communications;
|
o
|
Providers
of Web hosting, co-location and other Internet-based business
services;
|
o
|
Computer
hardware and other technology companies that provide Internet connectivity
with their own or other products, including IBM and
Microsoft;
|
o
|
National
telecommunication providers, such as Verizon, AT&T and
Qwest;
|
o
|
Regional
Bell Operating Companies (RBOCs), Competitive Local Exchange Carriers
(CLECs) and other local telephone companies;
|
o
|
Providers
of free or discount Internet service, including United Online’s NetZero
and PeoplePC;
|
o
|
Terrestrial
wireless and satellite providers, such as Clearwire, WildBlue and
HughesNet; and
|
o
|
Non-profit
or educational ISPs.
|
High
|
Low
|
|||||||
2007
|
||||||||
For
the quarter ended March 31, 2007
|
$
|
0.13
|
$
|
0.06
|
||||
For
the quarter ended June 30, 2007
|
$
|
0.13
|
$
|
0.11
|
||||
For
the quarter ended September 30, 2007
|
$
|
0.16
|
$
|
0.10
|
||||
For
the quarter ended December 31, 2007
|
$
|
0.12
|
$
|
0.09
|
||||
2008
|
||||||||
For
the quarter ended March 31, 2008
|
$
|
0.12
|
$
|
0.07
|
||||
For
the quarter ended June 30, 2008
|
$
|
0.11
|
$
|
0.11
|
||||
For
the quarter ended September 30, 2008
|
$
|
0.09
|
$
|
0.08
|
||||
For
the quarter ended December 31, 2008
|
$
|
0.09
|
$
|
0.08
|
Period
|
Total Number of
Shares Purchased
|
Average Price Paid
Per Share ($)
|
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
|
Maximum Number
of Shares That May
Yet Be Purchased
Under the Plans or
Programs
|
||||||||||||
Month
# 1
October
1 through
October
31, 2008
|
- | n/a | - | 10,000,000 | ||||||||||||
Month
# 2
November
1 through
November
30, 2008
|
- | - | - | 10,000,000 | ||||||||||||
Month # 3
December 1 through
December 31, 2008
|
19,500 | $ | 0.06 | 19,500 | 9,980,500 | |||||||||||
Total
|
19,500 | $ | 0.06 | 19,500 | 9,980,500 |
For
the year ended December 31, 2008
|
||||||||||||
|
Corporate
|
Internet
|
Total
|
|||||||||
Revenue
|
$
|
-
|
$
|
10,227,438
|
$
|
10,227,438
|
||||||
Cost
of revenue
|
-
|
3,061,563
|
3,061,563
|
|||||||||
Gross
profit
|
-
|
7,165,875
|
7,165,875
|
|||||||||
Operating
expenses
|
106,268
|
5,701,695
|
5,807,963
|
|||||||||
Income
(loss) from operations
|
(106,268
|
)
|
1,464,180
|
1,357,912
|
||||||||
Other
income (expense)
|
-
|
(128,090
|
)
|
(128,090
|
)
|
|||||||
Income
before income taxes
|
(106,268
|
)
|
1,336,090
|
1,229,822
|
||||||||
Income
taxes
|
(82,015)
|
-
|
(82,015)
|
|||||||||
Net
income (loss)
|
$
|
(24,253
|
)
|
$
|
1,336,090
|
$
|
1,311,837
|
For
the year ended December 31, 2007
|
||||||||||||
Corporate
|
Internet
|
Total
|
||||||||||
Revenue
|
$
|
-
|
$
|
6,567,264
|
$
|
6,567,264
|
||||||
Cost
of revenue
|
-
|
2,244,184
|
2,244,184
|
|||||||||
Gross
profit
|
-
|
4,323,080
|
4,323,080
|
|||||||||
Operating
expenses
|
61,812
|
3,305,098
|
3,366,910
|
|||||||||
Income
(loss) from operations
|
(61,812
|
)
|
1,017,982
|
956,170
|
||||||||
Other
income (expense)
|
-
|
(166,198
|
)
)
|
(166,198
|
)
|
|||||||
Income
before income taxes
|
(61,812
|
)
|
851,784
|
789,972
|
||||||||
Income
taxes
|
-
|
-
|
-
|
|||||||||
Net
income (loss)
|
$
|
(61,812
|
)
|
$
|
851,784
|
$
|
789,972
|
For
the year ended December 31, 2008
|
||||||||||||
|
Corporate
|
Internet
|
Total
|
|||||||||
EBITDA
|
$
|
267,994
|
$
|
4,070,172
|
$
|
4,338,166
|
||||||
Interest
expense
|
-
|
(165,154
|
)
|
(165,154
|
)
|
|||||||
Taxes
|
82,015
|
-
|
82,015
|
|||||||||
Depreciation
|
-
|
(43,570
|
)
|
(43,570
|
)
|
|||||||
Amortization
|
-
|
(2,899,620
|
)
|
(2,899,620
|
)
|
|||||||
Net
income (loss)
|
$
|
350,009
|
$
|
961,828
|
$
|
1,311,837
|
For
the year ended December 31, 2007
|
||||||||||||
|
Corporate
|
Internet
|
Total
|
|||||||||
EBITDA
|
$
|
(61,812
|
)
|
$
|
2,690,974
|
$
|
2,629,162
|
|||||
Interest
expense
|
-
|
(158,734
|
)
|
(158,734
|
)
|
|||||||
Taxes
|
-
|
-
|
-
|
|||||||||
Depreciation
|
-
|
(58,534
|
)
|
(58,534
|
)
|
|||||||
Amortization
|
-
|
(1,621,922
|
)
|
(1,621,922
|
)
|
|||||||
Net
income (loss)
|
$
|
(61,812
|
)
|
$
|
851,784
|
$
|
789,972
|
2008
|
2007
|
|||||||
EBITDA
for the year ended December 31,
|
$
|
4,338,166
|
$
|
2,629,162
|
||||
Interest
expense
|
(165,154
|
)
|
(158,734
|
)
|
||||
Taxes
|
82,015
|
-
|
||||||
Depreciation
|
(43,570
|
)
|
(58,534
|
)
|
||||
Amortization
|
(2,899,620
|
)
|
(1,621,922
|
)
|
||||
Net
income for the year ended December 31,
|
$
|
1,311,837
|
$
|
789,972
|
2008
|
2007
|
|||||||||||||||
Current
|
$ | 433,518 | 58.7 | % | $ | 171,446 | 57.2 | % | ||||||||
30
+
|
159,585 | 21.6 | % | 72,337 | 24.1 | % | ||||||||||
60
+
|
145,721 | 19.7 | % | 56,080 | 18.7 | % | ||||||||||
90
+
|
- | - | % | - | - | % | ||||||||||
Total
|
$ | 738,824 | 100.0 | % | $ | 299,863 | 100.0 | % |
Page
|
|||
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
22
|
||
FINANCIAL
STATEMENTS
|
|||
Consolidated
Balance Sheets as of December 31, 2008 and 2007
|
23-24
|
||
Consolidated
Statements of Income for the Years Ended December 31, 2008 and
2007
|
25
|
||
Consolidated
Statements of Stockholders' Equity for the Years Ended December 31, 2008
and 2007
|
26
|
||
Consolidated
Statements of Cash Flows for the Years Ended December 31, 2008 and
2007
|
27-28
|
||
|
|||
Notes
to Consolidated Financial Statements
|
29-50
|
CURRENT
ASSETS
|
2008
|
2007
|
||||||
Restated
|
||||||||
Cash
and cash equivalents
|
$
|
527,553
|
$
|
232,249
|
||||
Accounts
receivable, net of allowances of $26,764 and $22,641
|
738,824
|
299,863
|
||||||
Prepaid
expenses
|
1,227
|
16,529
|
||||||
Total
current assets
|
1,267,604
|
548,641
|
||||||
PROPERTY
AND EQUIPMENT, net
|
225,212
|
236,782
|
||||||
CUSTOMER
LIST, net of accumulated amortization of $7,943,341 and
$5,237,054
|
4,224,414
|
5,480,635
|
||||||
GOODWILL,
net
|
1,288,559
|
1,288,558
|
||||||
DEFERRED
TAX ASSETS
|
421,031
|
-
|
||||||
OTHER
ASSETS
|
583,637
|
677,267
|
||||||
TOTAL
ASSETS
|
$
|
8,010,457
|
$
|
8,231,883
|
CURRENT
LIABILITIES
|
2008
|
2007
|
||||||
Restated
|
||||||||
Accounts
payable
|
$ | 80,892 | $ | 78,713 | ||||
Accrued
income taxes
|
339,016 | - | ||||||
Accrued
expenses
|
94,882 | 138,021 | ||||||
Deferred
revenue
|
1,157,597 | 1,361,606 | ||||||
Notes
payable, current portion
|
569,372 | 1,268,866 | ||||||
Note
payable - stockholders, current portion
|
- | - | ||||||
Total
current liabilities
|
2,241,759 | 2,847,206 | ||||||
NOTES
PAYABLE, less current portion
|
915,615 | 1,694,836 | ||||||
NOTES
PAYABLE - STOCKHOLDERS, less current portion
|
539,281 | 686,687 | ||||||
TOTAL
LIABILITIES
|
3,696,655 | 5,228,729 | ||||||
STOCKHOLDERS'
EQUITY
|
||||||||
Preferred
Stock, $0.001 par value, 10,000,000 shares authorized, 0 shares issued and
outstanding
|
- | - | ||||||
Common
Stock, $0.001 par value, 300,000,000 shares authorized, 91,326,463 and
91,326,463 shares issued and outstanding
|
91,326 | 91,326 | ||||||
Additional
paid-in capital
|
13,880,947 | 13,880,947 | ||||||
Treasury
Stock, at cost, 8,237,805 and 8,218,305 common shares
|
(64,220 | ) | (63,030 | ) | ||||
Accumulated
deficit
|
(9,594,251 | ) | (10,906,088 | ) | ||||
Total
stockholders' equity
|
4,313,802 | 3,003,155 | ||||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ | 8,010,457 | $ | 8,231,884 |
2008
|
2007
|
|||||||
Restated
|
||||||||
REVENUE
|
$ | 10,227,438 | $ | 6,567,264 | ||||
COST
OF REVENUE
|
3,061,563 | 2,244,184 | ||||||
GROSS
PROFIT
|
7,165,875 | 4,323,080 | ||||||
OPERATING
EXPENSES
|
||||||||
Selling,
general and administrative expenses
|
5,794,321 | 3,236,860 | ||||||
Customer
list impairment
|
13,642 | 130,050 | ||||||
TOTAL
OPERATING EXPENSES
|
5,807,963 | 3,366,910 | ||||||
INCOME
FROM OPERATIONS
|
1,357,912 | 956,170 | ||||||
OTHER
INCOME (EXPENSES)
|
||||||||
Gain
on disposal of assets
|
37,064 | (7,464 | ) | |||||
Interest
expense
|
(165,154 | ) | (158,734 | ) | ||||
TOTAL
OTHER INCOME (EXPENSES)
|
(128,090 | ) | (166,198 | ) | ||||
INCOME
BEFORE INCOME TAXES
|
1,229,822 | 789,972 | ||||||
INCOME
TAXES
|
(82,015 | ) | - | |||||
NET
INCOME
|
$ | 1,311,837 | $ | 789,972 | ||||
BASIC
AND DILUTED INCOME PER SHARE
|
$ | 0.01 | $ | 0.01 | ||||
WEIGHTED
AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED
|
91,326,463 | 87,819,037 |
Common Stock
|
Additional
|
|||||||||||||||||||||||
Paid-in
|
Treasury
|
Accumulated
|
||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Stock
|
Deficit
|
Total
|
|||||||||||||||||||
Restated
|
Restated
|
|||||||||||||||||||||||
Balance
at December 31, 2006
|
88,063,305 | 88,063 | 13,651,157 | (329,977 | ) | (11,696,060 | ) | 1,713,183 | ||||||||||||||||
Repurchase
of acquisition shares
|
(2,000,000 | ) | (2,000 | ) | (198,000 | ) | 200,000 | - | ||||||||||||||||
Issuance
of shares
|
5,263,158 | 5,263 | 427,790 | 66,947 | 500,000 | |||||||||||||||||||
Net
income
|
789,972 | 789,972 | ||||||||||||||||||||||
Balance
at December 31, 2007
|
91,326,463 | $ | 91,326 | $ | 13,880,947 | $ | (63,030 | ) | $ | (10,906,088 | ) | $ | 3,003,155 | |||||||||||
Repurchase
of shares
|
(1,190 | ) | (1,190 | ) | ||||||||||||||||||||
Net
income
|
1,311,837 | 1,311,837 | ||||||||||||||||||||||
Balance
at December 31, 2008
|
91,326,463 | 91,326 | 13,880,947 | (64,220 | ) | (9,594,251 | ) | 4,313,802 |
2008
|
2007
|
|||||||
Restated
|
||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net
income
|
$ | 1,311,837 | $ | 789,972 | ||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
Depreciation
and amortization expense
|
2,943,190 | 1,680,456 | ||||||
Bad
debt expense
|
26,765 | 6,947 | ||||||
(Increase)
decrease in accounts receivable
|
(465,725 | ) | (136,184 | ) | ||||
(Increase)
decrease in prepaid expenses
|
15,302 | 7,147 | ||||||
(Increase)
decrease in deferred income taxes
|
(421,031 | ) | - | |||||
Increase
(decrease) in accounts payable
|
2,179 | (27,101 | ) | |||||
Increase
(decrease) in accrued expenses
|
711,637 | (288,194 | ) | |||||
Increase
(decrease) in deferred revenue
|
(204,009 | ) | 772,840 | |||||
Increase
(decrease) in accrued income taxes
|
(415,761 | ) | - | |||||
Net
cash provided by operating activities
|
3,504,384 | 2,805,883 | ||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Purchases
of property and equipment
|
(32,000 | ) | (21,033 | ) | ||||
Purchase
of customer list
|
(1,450,065 | ) | (5,280,242 | ) | ||||
(Purchase)
sale of assets held for resale
|
296 | 48,833 | ||||||
Purchase
of non-competition agreements
|
(100,000 | ) | (390,000 | ) | ||||
Net
cash used in investing activities
|
(1,581,769 | ) | (5,642,442 | ) | ||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Net
proceeds from notes payable - stockholders
|
- | 23,386 | ||||||
Net
proceeds from notes payable
|
570,803 | 3,411,002 | ||||||
Issuance
of common stock
|
- | 500,000 | ||||||
Purchase
of treasury stock
|
(1,190 | ) | - | |||||
Repayment
of notes payable
|
(2,049,518 | ) | (796,527 | ) | ||||
Repayment
of notes payable – stockholders
|
(147,406 | ) | (198,506 | ) | ||||
Net
cash provided by (used) in financing activities
|
(1,627,311 | ) | 2,939,355 | |||||
NET
INCREASE IN CASH AND CASH EQUIVALENTS
|
295,304 | 102,796 | ||||||
CASH
AND CASH EQUIVALENTS - BEGINNING OF YEAR
|
232,249 | 129,453 | ||||||
CASH
AND CASH EQUIVALENTS - END OF YEAR
|
$ | 527,553 | $ | 232,249 |
Previously
|
Net
|
|||||||||||
Reported
|
Change
|
Restated
|
||||||||||
2008
|
2008
|
2008
|
||||||||||
Total
current assets
|
$ | 1,267,604 | $ | - | $ | 1,267,604 | ||||||
PROPERTY
AND EQUIPMENT, net
|
225,212 | - | 225,212 | |||||||||
CUSTOMER
LIST, net of accumulated amortization of $8,146,728 and
$7,973,341
|
4,224,414 | - | 4,224,414 | |||||||||
GOODWILL,
net of impairment
|
1,288,559 | - | 1,288,559 | |||||||||
DEFERRED
INCOME TAXES
|
421,031 | - | 421,031 | |||||||||
OTHER
ASSETS
|
583,637 | - | 583,637 | |||||||||
TOTAL
ASSETS
|
$ | 8,010,457 | $ | - | $ | 8,010,457 |
CURRENT
LIABILITIES
|
Previously
Reported
|
Net
Change
|
Restated
|
|||||||||
Accrued
income taxes
|
$ | 754,777 | $ | (415,761 | ) | $ | 339,016 | |||||
Total
current liabilities
|
2,657,520 | (415,761 | ) | 2,241,759 | ||||||||
TOTAL
LIABILITIES
|
4,112,416 | (415,761 | ) | 3,696,655 | ||||||||
STOCKHOLDERS’
EQUITY
|
||||||||||||
Accumulated
deficit
|
(10,010,012 | ) | 415,761 | (9,594,251 | ) | |||||||
Total
stockholders' equity
|
3,898,041 | 415,761 | 4,313,802 | |||||||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ | 8,010,457 | $ | - | $ | 8,010,457 |
Previously
Reported
|
Net
Change
|
Restated
|
||||||||||
REVENUE
|
$ | 10,227,438 | $ | - | $ | 10,227,438 | ||||||
COST
OF REVENUE
|
3,061,563 | - | 3,061,563 | |||||||||
GROSS
PROFIT
|
7,165,875 | - | 7,165,875 | |||||||||
OPERATING
EXPENSE
|
5,807,963 | - | 5,807,963 | |||||||||
INCOME
FROM OPERATIONS
|
1,357,912 | - | 1,357,912 | |||||||||
OTHER
INCOME (EXPENSE)
|
(128,090 | ) | - | (128,090 | ) | |||||||
INCOME
BEFORE INCOME TAXES
|
1,229,822 | - | 1,229,822 | |||||||||
INCOME
TAXES
|
333,746 | (415,761 | ) | (82,015 | ) | |||||||
NET
INCOME
|
$ | 896,076 | $ | 415,761 | $ | 1,311,837 | ||||||
BASIC
AND DILUTED INCOME PER SHARE
|
$ | 0.01 | $ | - | $ | 0.01 | ||||||
WEIGHTED
AVERAGE SHARES OUTSTANDING – BASIC AND DILUTED
|
91,326,463 | - | 91,326,463 |
Previously
Reported
|
Net
Change
|
Restated
|
||||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||
Net
income
|
$ | 896,076 | $ | 415,761 | $ | 1,311,837 | ||||||
Increase
(decrease) in accrued income taxes
|
- | (415,761 | ) | (415,761 | ) | |||||||
Net
cash provided by operating activities
|
3,504,384 | (415,761 | ) | 3,504,384 | ||||||||
Net
cash used in investing activities
|
(1,581,769 | ) | - | (1,581,769 | ) | |||||||
Net
cash used in financing activities
|
(1,627,311 | ) | - | (1,627,311 | ) | |||||||
NET
INCREASE IN CAHS AND CASH EQUIVALENTS
|
295,304 | - | 295,304 | |||||||||
CASH
AND CASH EQUIVALENTS – BEGINNING OF YEAR
|
232,249 | 232,249 | ||||||||||
CASH
AND CASH EQUIVALENTS – END OF YEAR
|
$ | 527,553 | $ | - | $ | 527,553 |
2008
|
2007
|
|||||||
Gross
accounts receivable
|
$ | 765,588 | $ | 322,504 | ||||
Less
allowance for doubtful accounts
|
(26,764 | ) | (22,641 | ) | ||||
$ | 738,824 | $ | 299,863 |
2008
|
2007
|
|||||||
Net
income available to common shareholders
|
$ | 1,311,837 | $ | 789,972 | ||||
Weighted
average number of common shares
|
91,326,463 | 87,819,037 | ||||||
Basic
and diluted income per share
|
$ | .01 | $ | .01 |
Customer
list
|
$ | 93,992 | ||
Non-compete
agreement
|
10,000 | |||
Equipment
|
10,000 | |||
Deferred
revenue
|
(5,522 | ) | ||
Purchase
price
|
$ | 108,470 |
2007
|
||||
Net
sales
|
$ | 6,578,433 | ||
Gross
profit
|
$ | 4,334,189 | ||
Selling,
general and administrative expenses
|
$ | 3,372,699 | ||
Net
income
|
$ | 795,292 | ||
Basic
income per share
|
$ | 0.01 |
Accounts
receivable
|
$ | (2,098 | ) | |
Customer
list
|
870,680 | |||
Non-compete
agreement
|
25,000 | |||
Equipment
|
10,000 | |||
Deferred
revenue
|
(101,130 | ) | ||
Purchase
price
|
$ | 802,452 |
2007
|
||||
Net
sales
|
$ | 6,755,755 | ||
Gross
profit
|
$ | 4,448,279 | ||
Selling,
general and administrative expenses
|
$ | 3,443,252 | ||
Net
income
|
$ | 838,829 | ||
Basic
income per share
|
$ | 0.01 |
Accounts
receivable
|
$ | 3,880 | ||
Customer
list
|
58,549 | |||
Non-compete
agreement
|
5,000 | |||
Deferred
revenue
|
(21,800 | ) | ||
Purchase
price
|
$ | 45,629 |
2007
|
||||
Net
sales
|
$ | 6,612,643 | ||
Gross
profit
|
$ | 4,356,581 | ||
Selling,
general and administrative expenses
|
$ | 3,387,871 | ||
Net
income
|
$ | 801,940 | ||
Basic
income per share
|
$ | 0.01 |
Customer
list
|
$ | 4,292,656 | ||
Non-compete
agreement
|
350,000 | |||
Deferred
revenue
|
(892,656 | ) | ||
Purchase
price
|
$ | 3,750,000 |
2007
|
||||
Net
sales
|
$ | 10,307,331 | ||
Gross
profit
|
$ | 7,082,904 | ||
Selling,
general and administrative expenses
|
$ | 5,277,493 | ||
Net
income
|
$ | 1,552,458 | ||
Basic
income per share
|
$ | 0.02 |
Customer
list
|
$ | 62,223 | ||
Non-compete
agreement
|
5,000 | |||
Accounts
receivable
|
2,343 | |||
Deferred
revenue
|
(22,858 | ) | ||
Purchase
price
|
$ | 46,708 |
2007
|
||||
Net
sales
|
$ | 6,660,841 | ||
Gross
profit
|
$ | 4,393,942 | ||
Selling,
general and administrative expenses
|
$ | 3,437,240 | ||
Net
income
|
$ | 788,220 | ||
Basic
income per share
|
$ | 0.01 |
Customer
list
|
$ | 40,512 | ||
Non-compete
agreement
|
5,000 | |||
Accounts
receivable
|
2,328 | |||
Equipment
|
10,000 | |||
Deferred
revenue
|
(12,019 | ) | ||
Purchase
price
|
$ | 45,821 |
2007
|
||||
Net
sales
|
$ | 6,687,100 | ||
Gross
profit
|
$ | 4,392,932 | ||
Selling,
general and administrative expenses
|
$ | 3,411,033 | ||
Net
income
|
$ | 813,583 | ||
Basic
income per share
|
$ | 0.01 |
Customer
list
|
$ | 250,000 | ||
Non-compete
agreement
|
5,000 | |||
Deferred
revenue
|
(25,100 | ) | ||
Purchase
price
|
$ | 229,900 |
2007
|
||||
Net
sales
|
$ | 6,735,367 | ||
Gross
profit
|
$ | 4,457,744 | ||
Selling,
general and administrative expenses
|
$ | 3,394,492 | ||
Net
income
|
$ | 895,010 | ||
Basic
income per share
|
$ | 0.01 |
Customer
list
|
$
|
277,965
|
||
Non-compete
agreement
|
50,000
|
|||
Deferred
revenue
|
(64,208
|
)
|
||
Purchase
price
|
$
|
263,757
|
2007
|
||||
Net
sales
|
$
|
7,006,866
|
||
Gross
profit
|
$
|
4,686,156
|
||
Selling,
general and administrative expenses
|
$
|
3,497,071
|
||
Net
income
|
$
|
1,022,887
|
||
Basic
income per share
|
$
|
0.01
|
Customer
list
|
$
|
15,428
|
||
Non-compete
agreement
|
5,000
|
|||
Accounts
receivable
|
164
|
|||
Equipment
|
2,000
|
|||
Deferred
revenue
|
(4,050
|
)
|
||
Purchase
price
|
$
|
18,542
|
2007
|
||||
Net
sales
|
$
|
6,595,744
|
||
Gross
profit
|
$
|
4,347,045
|
||
Selling,
general and administrative expenses
|
$
|
3,377,211
|
||
Net
income
|
$
|
802,873
|
||
Basic
income per share
|
$
|
0.01
|
Customer
list
|
$
|
380,000
|
||
Non-compete
agreement
|
10,000
|
|||
Equipment
|
20,000
|
|||
Deferred
revenue
|
(50,000
|
)
|
||
Purchase
price
|
$
|
360,000
|
2007
|
||||
Net
sales
|
$
|
6,804,238
|
||
Gross
profit
|
$
|
4,525,501
|
||
Selling,
general and administrative expenses
|
$
|
3,430,786
|
||
Net
income
|
$
|
919,896
|
||
Basic
income per share
|
$
|
0.01
|
Customer
list
|
$
|
530,000
|
||
Non-compete
agreement
|
20,000
|
|||
Deferred
revenue
|
(75,000
|
)
|
||
Purchase
price
|
$
|
475,000
|
2007
|
||||
Net
sales
|
$
|
6,769,137
|
||
Gross
profit
|
$
|
4,507,343
|
||
Selling,
general and administrative expenses
|
$
|
3,416,698
|
||
Net
income
|
$
|
922,095
|
||
Basic
income per share
|
$
|
0.01
|
Equipment
|
$
|
3,000
|
||
Customer
list
|
62,907
|
|||
Non-compete
agreement
|
1,000
|
|||
Deferred
revenue
|
(42,000
|
)
|
||
Purchase
price
|
$
|
24,907
|
2008
|
2007
|
|||||||
Land
|
$
|
10,000
|
$
|
10,000
|
||||
Building
|
213,366
|
213,366
|
||||||
Automobile
|
9,500
|
9,500
|
||||||
Computer
equipment
|
1,161,061
|
1,129,061
|
||||||
Furniture
and fixtures
|
59,862
|
59,862
|
||||||
1,453,789
|
1,421,789
|
|||||||
Less
accumulated depreciation
|
(1,228,577
|
)
|
(1,185,007
|
)
|
||||
$
|
225,212
|
$
|
236,782
|
2008
|
2007
|
|||||||
Bank
note payable in monthly interest and principal payments of $1,784.
Interest is payable prime plus 4.5%, (9.75% as of December 31, 2007).
The note is guaranteed by a stockholder of the Company and secured
by a deed of trust against personal residences of three stockholders.
Also, the bank had a blanket lien against all other current and
future assets of Sitestar.net.
|
- | 58,242 | ||||||
Bank
line of credit issued on April 12, 2007 with a principal limit of
$300,000. Interest is payable at an annual rate of prime plus
.25% (7.50% as of December 31, 2007). The note is secured by a
deed of trust on the Company’s building and is personally guaranteed by
officers and directors of the Company. Since April 2008 the
principal balance has been zero.
|
- | 300,000 | ||||||
Non-interest
bearing amount due on acquisition of AlaNet Internet Services paid in
eleven monthly installments of $4,276 through April 2008.
|
- | 20,807 | ||||||
Non-interest
bearing amount paid on acquisition of N2 the Net payable in eleven monthly
installments of $4,046 through March 2009.
|
11,921 | |||||||
Non-interest
bearing amount paid on acquisition of Donobi payable in twelve monthly
installments of $27,083 through November 2009.
|
257,451 | |||||||
Bank
note payable in twelve monthly interest and principal payments of $30,650.
Interest is payable at an annual rate of 9.25%. The note
is guaranteed by stockholders of the Company and secured by shares of
Company stock owned by the stockholders.
|
- | 322,048 | ||||||
Bank
note payable in twenty four monthly interest and principal payments of
$21,167. Interest is payable at an annual rate of
8.5%. The note is guaranteed by stockholders of the
Company and secured by shares of Company stock owned by the
stockholders.
|
- | 438,264 | ||||||
Bank
bridge note payable on February 1, 2008. Interest is payable at an annual
rate of 8.5%. The note was refinanced on February 21, 2008 at
an annual interest rate of 8.5% and is payable in twelve payments of
$21,760 and is personally guaranteed by stockholders of the Company and
secured by real estate owned by stockholders of the
Company.
|
- | 250,000 | ||||||
Non-interest
bearing amount due on acquisition of USA Telephone payable in thirty six
monthly installments starting January 2008.
|
1,215,615 | 1,574,341 | ||||||
1,484,987 | 2,963,702 | |||||||
Less
current portion
|
(569,372 | ) | (1,268,866 | ) | ||||
Long-term
portion
|
$ | 915,615 | $ | 1,694,836 |
Year
ending December 31, 2009
|
$
|
569,372
|
||
Year
ending December 31, 2010
|
300,000
|
|||
Year
ending December 31, 2011
|
300,000
|
|||
Year
ending December 31, 2012
|
300,000
|
|||
Year
ending December 31, 2013
|
15,615
|
|||
Thereafter
|
-
|
|||
Total
|
$
|
1,484,987
|
2008
|
2007
|
|||||||
Note
payable to officer and stockholder on a line of credit of $750,000 at an
annual interest rate of 10% interest. The accrued interest and
principal are due on January 1, 2010.
|
$
|
379,711
|
$
|
527,117
|
||||
Note
payable to stockholder. The note is payable on January 1, 2010 and bears
interest at an annual rate of 8.0%.
|
104,585
|
104,585
|
||||||
Note
payable to stockholder. The note is payable on January 1, 2010 and bears
interest at an annual rate of 8.0%.
|
54,985
|
54,985
|
||||||
Less
current portion
|
-
|
-
|
||||||
Long-term
portion
|
$
|
539,281
|
$
|
686,687
|
Year
ending December 31, 2009
|
$
|
-
|
||
Year
ending December 31, 2010
|
539,281
|
|||
Year
ending December 31, 2011
|
-
|
|||
Year
ending December 31, 2012
|
-
|
|||
Year
ending December 31, 2013
|
-
|
|||
Total
|
$
|
539,281
|
Year
ended December 31,
|
||||
2009
|
$
|
64,688
|
||
2010
|
59,297
|
|||
Total
|
$
|
123,985
|
2008
|
2007
|
|||||||
Current
provision:
|
||||||||
Federal
|
$ | 288,164 | $ | |||||
State
|
50,852 | - | ||||||
Deferred
provision:
|
||||||||
Federal
|
(357,876 | ) | 422,093 | |||||
State
|
(63,155 | ) | 74,487 | |||||
Valuation
allowance
|
- | (496,580 | ) | |||||
Total
income tax provision
|
$ | (82,015 | ) | $ | - |
2008
|
2007
|
|||||||
Accounts
receivable
|
$
|
19,762
|
9,056
|
|||||
Amortization
of Intangible assets
|
2,953,689
|
$
|
2,177,997
|
|||||
Loss
carry-forward
|
-
|
365,367
|
||||||
Less
valuation allowance
|
2,552,420
|
2,552,420
|
||||||
Deferred
tax asset
|
$
|
421,031
|
$
|
-
|
December
31, 2008
|
||||||||||||
Corporate
|
Internet
|
Consolidated
|
||||||||||
Revenue
|
$
|
-
|
$
|
10,227,438
|
$
|
10,227,438
|
||||||
Operating
income (loss)
|
$
|
(106,268
|
)
|
$
|
1,464,180
|
$
|
1,357,912
|
|||||
Depreciation
and amortization
|
$
|
-
|
$
|
2,943,190
|
$
|
2,943,190
|
||||||
Interest
expense
|
$
|
-
|
$
|
(165,154
|
)
|
$
|
(165,154
|
)
|
||||
Goodwill
|
$
|
-
|
$
|
1,288,559
|
$
|
1,288,559
|
||||||
Identifiable
assets
|
$
|
-
|
$
|
8,010,457
|
$
|
8,010,457
|
December
31, 2007
|
||||||||||||
Corporate
|
Internet
|
Consolidated
|
||||||||||
Revenue
|
$
|
-
|
$
|
6,567,264
|
$
|
6,567,264
|
||||||
Operating
income (loss)
|
$
|
(61,812
|
)
|
$
|
1,017,982
|
$
|
956,170
|
|||||
Depreciation
and amortization
|
$
|
-
|
$
|
1,680,456
|
$
|
1,680,456
|
||||||
Interest
expense
|
$
|
-
|
$
|
(158,734
|
)
|
$
|
(158,734
|
)
|
||||
Goodwill
|
$
|
-
|
$
|
1,288,559
|
$
|
1,288,559
|
||||||
Identifiable
assets
|
$
|
-
|
$
|
8,231,883
|
$
|
8,231,883
|
Name
|
Age
|
Position
|
Director
since
|
|||
Frank
R. Erhartic, Jr.
|
40
|
President,
CEO, Director
|
October
2001
|
|||
Julia
E. Erhartic
|
41
|
Secretary,
Director
|
October
2001
|
|||
Daniel
Judd
|
52
|
CFO,
Director
|
June
2004
|
Director
|
Expiration
of term
|
|
Frank
R. Erhartic, Jr.
|
December
31, 2009
|
|
Julia
Erhartic
|
December
31, 2009
|
|
Dan
Judd
|
December
31, 2009
|
Name and
Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-
Equity Incentive
Plan
Compen-
sation ($)
|
Change in
Pension
Value and
Non-
qualified Deferred
Compen-
sation
Earnings
($)
|
All Other
Compen-
sation ($)
|
Total ($)
|
|||||||||||||||||||||||||
Frank
R, Erhartic, Jr., Principal Executive Officer (PEO)
|
2008
|
97,885 | 97,885 | |||||||||||||||||||||||||||||||
2007
|
72,500 | 72,500 | ||||||||||||||||||||||||||||||||
Daniel
Judd,
Principal
Financial Officer (PFO)
|
2008
|
45,200 | 45,200 | |||||||||||||||||||||||||||||||
2007
|
45,200 | 45,200 | ||||||||||||||||||||||||||||||||
Julie
E. Erhartic, (Officer)
|
2008
|
13,000 | 13,000 | |||||||||||||||||||||||||||||||
2007
|
13,000 | 13,000 |
Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards
|
Estimated Future Payouts
Under Equity Incentive Plan
Awards
|
All Other
Stock
Awards:
Number of
Shares
|
All other
Option
Awards:
Number of
Securities
Under-
|
Exercise
of Base
Price of
Option
|
||||||||||||||||||||||||||||||||||||
Name
|
Grant
Date
|
Threshold
($) |
Target
($) |
Maximum
($)
|
Threshold
($)
|
Target
($)
|
Maximum
(#)
|
Of Stock or
Units (#)
|
Lying
Options (#)
|
Awards
($/Sh)
|
||||||||||||||||||||||||||||||
PEO
|
N/A
|
|||||||||||||||||||||||||||||||||||||||
PFO
|
N/A
|
|||||||||||||||||||||||||||||||||||||||
Officer
|
N/A
|
|
Option Awards
|
Stock Awards
|
||||||||||||||||||||||||||||||||||
Name
|
Number of
securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number of
securities
Underlying
Unexercised
Options (#)
Unexercisable
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Number
of
Shares
of Units
of
Stock
that
have
not
vested
(#)
|
Market
Value of
Shares or
Units of
Stock that
have not
vested ($)
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
other
rights that
have not
vested (#)
|
Equity
Incentive
Plan
Awards
Market
or Payout
Value of
Unearned
Shares,
Units of
other
rights
that have
not
vested
($)
|
|||||||||||||||||||||||||||
PEO
|
N/A
|
|||||||||||||||||||||||||||||||||||
PFO
|
N/A
|
|||||||||||||||||||||||||||||||||||
Officer
|
N/A
|
Name
|
Fees
Earned or
Paid in
Cash ($)
|
Stock
Awards ($)
|
Option
Awards
($)
|
Non-Equity
Incentive Plan
Compensation
($)
|
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings ($)
|
All Other
Compensation
($)
|
Total
($)
|
|||||||||||||||||||||
Frank
R, Erhartic, Jr., Director
|
$ | 0.00 | ||||||||||||||||||||||||||
Daniel
Judd, Director
|
$ | 0.00 | ||||||||||||||||||||||||||
Julie
E. Erhartic, Director
|
$ | 0.00 |
Name and Address of
Beneficial Owner
|
Number of
Shares
Beneficially
Owned (1)
|
Percent
Of Class (2)
|
||||||
Frank
and Julie Erhartic
7109
Timberlake Road
Lynchburg,
VA 24502
|
24,583,980
|
26.92
|
%
|
|||||
Daniel
A. Judd
7109
Timberlake Road
Lynchburg,
VA 24502
|
133,865
|
00.15
|
%
|
|||||
All
directors and officers
As
a group (3 persons)
|
24,717,845
|
27.07
|
%
|
2008
|
2007
|
|||||||
Audit
Fees
|
$
|
52,000
|
$
|
53,000
|
||||
Audit
Related Fees
|
-
|
|||||||
Tax
Fees
|
-
|
|||||||
Total
|
$
|
52,000
|
$
|
53,000
|
Exhibit
|
Description
|
Filed
|
||
3.1(i)
|
Articles
of Incorporation of the Registrant (December 17, 1992)
|
a
|
||
3.1(ii)
|
Amended
Articles of Incorporation (July 29, 1998)
|
a
|
||
3.1(iii)
|
Amended
Articles of Incorporation (October 26, 1998)
|
a
|
||
3.1(iv)
|
Amended
Articles of Incorporation (July 14, 1999)
|
a
|
||
3.1(v)
|
Amended
Articles of Incorporation (July 28, 1999)
|
a
|
||
3.2(i)
|
By-laws
of the Registrant (December 17, 1992)
|
a
|
||
4.2
|
Convertible
Debenture Purchase Agreement dated as of May 11, 2000 between the
investors named therein and the Registrant
|
c
|
||
4.3
|
12%
Convertible Debenture due May 11, 2001 made by the Registrant in favor of
New Millenium Capital Partners II, L.L.C.
|
c
|
||
4.4
|
12%
Convertible Debenture due May 11, 2001 made by the Registrant in favor of
AJW Partners, L.L.C.
|
c
|
||
4.5
|
Stock
Purchase Warrant dated as of May 11, 2000 issued by Registrant to New
Millenium Capital Partners, L.L.C.
|
c
|
||
4.6
|
Stock
Purchase Warrant dated as of May 11, 2000 issued by Registrant to AJW
Partners, L.L.C
|
c
|
||
4.7
|
Registration
Rights Agreement dated as of May 11, 2000 by and between the Registrant
and the investors named therein.
|
c
|
||
10.1
|
Lease
for Corporate Office
|
b
|
||
10.13
|
Statement
of changes in beneficial ownership of securities.
|
k
|
||
10.14
|
Definitive
Purchase Agreement to acquire certain assets of Idacomm, Inc, effective
September 16, 2005.
|
l
|
||
10.15
|
Definitive
Purchase Agreement to acquire Inc, effective January 1,
2006
|
m
|
||
10.16
|
Amendment
to report audited financial statements for Definitive Purchase Agreement
to acquire Inc.
|
n
|
||
10.17
|
Definitive
Purchase Agreement to acquire certain assets of First USA, Inc, effective
July 1, 2006.
|
o
|
||
10.18
|
Definitive
Purchase Agreement to acquire certain assets of OW Holdings, Inc,
effective February 28, 2007.
|
p
|
SCHEDULE
21. LIST OF SUBSIDIARIES
Sitestar.net,
Inc.
FRE
Enterprises, Inc.
Advanced
Internet Services, Inc.
NetRover
Inc.
|
||||
31.1
|
Certification
of Chief Executive Officer Pursuant to the Securities Exchange Act of
1934, Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of
2002.
|
|||
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.
|
q
|
||
32.1
|
Certification
Pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
|
q
|
Signature
|
Title
|
Date
|
||
/s/
Frank Erhartic, Jr.
|
President,
Chief Executive
|
October
8, 2009
|
||
Frank
Erhartic, Jr.
|
Officer,
Director
(Principal
Executive Officer)
|
/s/
Daniel A. Judd
|
Chief
Financial Officer
|
October
8, 2009
|
||
Daniel
A. Judd
|
(Principal
Financial Officer,
Principal
Accounting Officer)
|
/s/
Julie Erhartic
|
Secretary,
Director
|
October
8, 2009
|
||
Julie
Erhartic
|